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Insurance Flashcards

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1
Q

Are disability benefits taxable to owner of a s corp?

A

NO!!! On exam!!

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2
Q

Homeowners insurance Coverage C

A

Personal property

Covered anywhere in the world

Boats and trailers are limited to $1000

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3
Q

Is it true that qualified LTC policies must be non-cancelable?

A

No, they MUST be guaranteed renewable

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4
Q

Homeowners insurance Coverage D

A

Loss of use

Additional living expenses arising from damage to property

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5
Q

What does absolute assignment mean?

A

Insured gives up right to change beneficiary

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6
Q

Are distributions from HSA tax free

A

No, unless she’s for qualifying medical expenses

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7
Q

In conjunction with a major medical insurance policy, what does the term breakpoint mean?

A

Insurer begins to pay 100% of all medical expenses

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8
Q

For how many days does the COBRA election last?

A

60 days after the actual notice of event to the qualified beneficiary by the plan administrator

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9
Q

If a spouse drops coverage for healthcare to join Medicare, how long can family go on COBRA?

A

36 months

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10
Q

What is part D of auto insurance?

A

Collision/ other than collision

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11
Q

2 reasons life insurance policy can become a MEC

A

Increase in DB 150k or more

If have to prove insurability

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12
Q

If there is a loan on your life insurance policy, for dividend options, If you are concerned with a reduced benefit, why would you choose 5th dividend over paid up additions?

A

The 5th dividend will buy an amount of one year of term insurance equal to the outstanding loan

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13
Q

Why do you have non-forfeiture options?

A

Trying to keep policy in force

Don’t want to forfeit it

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14
Q

Tort

A

Wrongful act other than a breach of contract for which a civil action may be brought against the tortfeasor

Regarded as a crime

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15
Q

Homeowners insurance Coverage e

A

Personal liability

“Enemies”

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16
Q

What is the time frame for a disability qualifying event under COBRA?

A

29 M

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17
Q

What is included and excluded from coverage A

A

Dwelling

Ex: garage, deck, fence

Land is excluded

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18
Q

Homeowners insurance Coverage b

A

Other structures

Swimming pool, detached garage, fence, patio

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19
Q

What is the required percentage for commercial buildings vs homes for replacement value?

A

Commercial-90%

Homes-80%

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20
Q

Subrogation

A

When an insurer pays a claim, it takes over the legal rights it’s insured has against the negligent 3rd party

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21
Q

What is part c for auto insurance?

A

Uninsured motorist

Insurer pays compensatory damages that insured is entitled to recover from owner of uninsured vehicle because of BODILY INJURY

This is liability protection NOT medical payments

individuals covered:
Named insured, spouse, family members
Any other occupant if the covered auto
Any other person entitled to damages bc of bodily injury

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22
Q

What is part b for auto insurance

A

Medical payments

Provides payment for reasonable/necessary medical expenses of insured

Covered persons:
Named insured
Spouse
Family members while occupying vehicle
Any person injured while occupying vehicle
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23
Q

What is part a of auto insurance

A

BI/PD- liability coverage

Provides protection against judgements and covered exposures resulting from bodily injury and property damage caused by insured

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24
Q

Are life insurance proceeds subject to tax when gifted

A

No

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25
Q

Do ratings need to be included in illustration and are they important compared to other included factors?

A

Rating is not required and not as important as features, provisions and options

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26
Q

Does a universal life policy have guaranteed cash value?

A

No

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27
Q

Can qualified LTC policies have cash value?

A

No

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28
Q

What is covered under “other than collision”

A 
Breakage of glass
Missles
Falling objects
Fire, theft, larceny
Flood
Earthquake
Explosion
Windstorm
Hail
Vandalism
Riot
Bird/animal
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29
Q

What are the non forfeiture options

A

Cash or loan value

Reduced paid up insurance

Paid up term insurance/extended term

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30
Q

What does residual disability coverage provide?

A

Provides less than the total disability benefit for the policies maximum benefit period

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31
Q

Collateral source rule

A

You can collect money from the person at fault

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32
Q

What are the 4 principles that support indemnity

A

Insurable interest
Concept of actual cash value
Other insurance
Subrogation

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33
Q

When are distributions of dividends taxable in a life insurance contract

A

They are received in cash
They are used to reduce premium
They are used to pay off a policy loan

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34
Q

What are the insurance dividend options?

A

CRAPO

Cash option
Reduction of premiums
Accumulated with interest
Purchase paid up additions
One year term/5th dividend
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35
Q

What clauses are automatically included in disability insurance

A

Presumptive disability
Continuance provision
*included at no extra cost

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36
Q

What are the settlement options for life insurance

A 
Cash
Interest only
Fixed period
Fixed installments 
4 life income options
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37
Q

The reason to purchase insurance is to provide protection from what?

A

Risk

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38
Q

If someone is an uninsurable risk, under what principle will the company refuse them?

A

Adverse selection

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39
Q

A high deductible reduces what?

A

Premium

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40
Q

If someone is trying to reduce premiums what kind of risk is that?

A

Retention

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41
Q

What kind of life insurance has an APL provision

A

Only whole life

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42
Q

What kind of insurance policies have non-forfeiture options?

A

Only permanent policies

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43
Q

When does coverage begin for conditional receipt

A

As of the date of the application, provided the applicant was found to be insurable

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44
Q

How long are medical expenses covered for workers comp

A

There are no limits on time or amount

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45
Q

Is there a time limit on the transfer for value rule

A

No! There is no 3 year gifting limit

46
Q

What is HO-7

A

Mobile home

47
Q

Unilateral

A

Only one party is bound, the insured makes no promise

48
Q

Adhesion

A

Contract is accepted as is, it is not negotiated

49
Q

Aleatory

A

Number of dollars given up is unequal

Outcome is uncertain

50
Q

Principle of indemnity

A

The insurer generally seeks to reimburse the insured for approximately the amount lost, no more and no less

51
Q

Parts of an insurance contract

A

DDICE

Declaration page-factual statements that identify specific person or promise

Definitions-explanation of key policy terms

Insuring Agreements-the basic promise of the insurance company

Conditions-the duties and rights of both parties

Exclusions-circumstance when the insurer will not pay

52
Q

Unintentional tort

A

Negligence or carelessness

53
Q

Attractive nuisance

A

Situation in which a high degree or care is imposed on the land occupier for certain conditions of the land

Ex: swimming pool, vacant lot

54
Q

Negligence per se

A

A situation where the standard of care is set by a statute

Violation of a statute

Ex: school zone, cross walk

55
Q

Absolute liability

A

Extra hazardous condition which results in losses to others

Ex: workers comp, keeping wild animals, blasting

56
Q

Strict liability

A

Limited to manufacturers and distributors of defective products

Ex: Firestone tires, Ford motor company, product liability

57
Q

Vicarious liability

A

Occurs when one person is held liable for negligent behaviors of another person

Also called respondent superior

Ex: principals responsible for their agents

58
Q

Assumption of risk

A

If one person understands the danger in an activity yet nevertheless voluntarily chooses to encounter it, another party cannot be held liable

Ex: skiing, stock car races

59
Q

Contributory negligence

A

Any negligence on the part of the injured party, even though slight, defeats the claim

Ex: jaywalking, driving while drunk

60
Q

Comparative negligence

A

Any degree of negligence on the part of the insured party does not defeat the claim but is used to mitigate damages payable by the other party

Ex: A is 20% negligent, B is 80%

61
Q

Last clear chance

A

Any contributory negligence of the third party will not bar recovery if the other party, immediately prior to the accident, had a last clear chance to prevent the accident but failed to seize the chance

Ex: road rage

62
Q

Negligences vs defenses

A

Negligences: attractive nuisance, negligence per se, strict liability, absolute liability, vicarious liability

Defenses: assumption of risk, contributory, comparative, last clear chance

63
Q

Types of life insurance needs analysis

A

Capital utilization approach

  • uses annuitization to provide needed income
  • leaves no money at end of term

Capital needs approach

  • factors interest only so original capital is left at the end of the income term
  • also called capital retention
64
Q

Property excluded under homeowners insurance coverage c

A

Animals, birds, fish
Motorized land vehicles and aircraft
Property of roomers/boarders/tenants
Property contained in an apartment regularly rented

65
Q

Homeowners insurance coverage F

A

Medical payments to others

NOT for family members

66
Q

Is a sinkhole a covered peril for the exam?

A

Yes! If it does damage to property

67
Q

HO-8

A

Old home that may have structural problems or construction defects (open foundation)

68
Q

What percent is coverage B, C and D of coverage A for an HO-3?

A

B-10%
C-50%
D-30%

Examples: If coverage A is 250k B will be 25k and D will be 75K

69
Q

How do split limits work on coverage limits

A

Per person/per occurrence/property damage

70
Q

General liability

A

A company is liable if a member of the public or the property of others is harmed by an activity of the owner or an employee

71
Q

What is covered under workers comp

A

Medical expenses without limit on time and money

Disability income with short waiting period

Death benefits payable to family members

Rehabilitation benefits

72
Q

What type of benefits are covered under Medicare part A?

A

Hospital care

Care in nursing home or extended care facility

Home health services

Hospice

73
Q

What does Medicare part B cover?

A

Physician services

Home health services

Diagnostic tests

All outpatient services or a participating hospital

74
Q

How much does Medicare cover for skilled nursing care

A

Pays all of first 20 days and everything over $194.50 for next 80 days (max of 100 days)

For coverage to apply patient must be expected to improve (not Alzheimer’s)

Coverage must fall within 30 days of a 3 day hospital stay

75
Q

Is group disability covered under COBRA?

A

No!

76
Q

Deductible amounts for qualified LTC

A

Age 51-60 $1,690/yr

Age 61-70 $4,510/yr

77
Q

How is a viatical company taxed when the insured dies?

A

Ordinary income

78
Q

How are life settlements taxed?

A

Long term capital gains

79
Q

Where would a notice of loss be found in an insurance policy

A

Conditions

Is a duty of the insured

80
Q

What is non cancelable

A

Premiums will not increase

81
Q

What is guaranteed renewable

A

Individual can keep policy on force by paying the premiums, but the premiums may increase

82
Q

Conditionally renewable

A

Allows policy to continue beyond age 65

83
Q

Health reimbursement account

A

Used only by c corps

Funded ONLY by employer

Reimbursed employee for substantial medical expenses up to a maximum amount

84
Q

Can a business take a loan on a whole life policies that covers key employees?

A

Yes, but limited to 50k and it is deductible

85
Q

What percentage does Medicare part b cover for approved charges for doctor services (co-payment)?

A

80% after the deductible has been met (no stop loss)

86
Q

What drugs does Medicare part b cover

A

Oral anti cancer drugs

Certain drugs for hospice enrollees

Certain drugs that can’t be self administered

87
Q

What does Medicare NOT cover

A

Foot care

Eye care

Glasses

Hearing aids

Dental work

Emergency care outside of US

88
Q

What is the age at which insurance policies generally endow?

A

100 or 121

89
Q

How do you calculate insurance need under capital retention?

A

Divide annual income you are replacing by rate of return. Then add 1 more year of income

**if inflation is included in question subtract inflation from rate of return and that is the percentage you use for calculation

90
Q

For a guaranteed renewable and non cancelable policy, which one is less expensive?

A

Guaranteed renewable

This is bc with a guaranteed renewable, the premiums can increase. With a non cancelable, they cannot

91
Q

Are disability benefits taxable to the employee under a 162 bonus?

A

NO!

92
Q

What happens if someone intentionally/fraudulently misstates material information for life insurance

A

Policy will be rescinded and will not be paid

93
Q

Are dividends used to buy paid up additions treated as income first distributions under a MEC?

A

No

94
Q

If income from a trust is used to purchase life insurance on the grantor, how is it taxed?

A

This is a grantor trust and is taxed to the grantor

95
Q

Can an HSA pay for LTC premiums?

A

Yes, the HSA can pay for qualified LTC premiums

*there are age based limitations

96
Q

Is a missing wedding ring covered under an HO-3 policy?

A

Only if theft is involved

97
Q

Do you have coverage a for an HO-6 policy?

A

Limited basis (typically 1-5k), could be named perils

Depends on the condo association

98
Q

Can both the employer and eligible person contribute to a MSA in the same year?

A

No

99
Q

What is the limit for silver in property insurance coverage?

A

Internal limit of $2500 in coverage for theft only

100
Q

What is the limit of coverage for gold coins in property insurance coverage?

A

$200

101
Q

Under Medicare part b, what shots are covered at no cost to the patient?

A

Annual flu shot

Pneumonia

102
Q

What is APL?

A

Automatic premium loan

This will pay the premium if it remains unpaid beyond the grace period

103
Q

What is a disability waiver of premium

A

Insurer will pay the premium for the life of the contract with no future premium notices if they are seriously injured

104
Q

Reinstatement provision

A

You have to provide proof of insurability to reinstate the policy if it lapses

105
Q

Where do the forfeited funds from an FSA go?

A

Used to defray future administrative expenses of the FSA itself

106
Q

How much does an HO-15 endorsement cover for collectible coins?

A

5k

107
Q

When should you apply for Medicare benefits?

A

Prior to turning 65 so you have Medicare on your 65th birthday

108
Q

What may happen if you delay your Medicare application later than 65

A

May result in permanent increases in Medicare part b monthly premium

109
Q

How is the monthly Medicare part b premium calculated?

A

Medicare enrollees AGI TWO years prior

110
Q

With Medicare part a what costs are involved

A

There is no premium

Subject to a flat deductible of $1,556

Subject to copay from days 61-90 at $389 and 91 and beyond at $778

111
Q

Medicare part b premium cost

A

$170.10

112
Q

Medicare part b deductible

A

$233/yr

CFP (10 decks)

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