Insurance Flashcards
Are disability benefits taxable to owner of a s corp?
NO!!! On exam!!
Homeowners insurance Coverage C
Personal property
Covered anywhere in the world
Boats and trailers are limited to $1000
Is it true that qualified LTC policies must be non-cancelable?
No, they MUST be guaranteed renewable
Homeowners insurance Coverage D
Loss of use
Additional living expenses arising from damage to property
What does absolute assignment mean?
Insured gives up right to change beneficiary
Are distributions from HSA tax free
No, unless she’s for qualifying medical expenses
In conjunction with a major medical insurance policy, what does the term breakpoint mean?
Insurer begins to pay 100% of all medical expenses
For how many days does the COBRA election last?
60 days after the actual notice of event to the qualified beneficiary by the plan administrator
If a spouse drops coverage for healthcare to join Medicare, how long can family go on COBRA?
36 months
What is part D of auto insurance?
Collision/ other than collision
2 reasons life insurance policy can become a MEC
Increase in DB 150k or more
If have to prove insurability
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?
The 5th dividend will buy an amount of one year of term insurance equal to the outstanding loan
Why do you have non-forfeiture options?
Trying to keep policy in force
Don’t want to forfeit it
Tort
Wrongful act other than a breach of contract for which a civil action may be brought against the tortfeasor
Regarded as a crime
Homeowners insurance Coverage e
Personal liability
“Enemies”
What is the time frame for a disability qualifying event under COBRA?
29 M
What is included and excluded from coverage A
Dwelling
Ex: garage, deck, fence
Land is excluded
Homeowners insurance Coverage b
Other structures
Swimming pool, detached garage, fence, patio
What is the required percentage for commercial buildings vs homes for replacement value?
Commercial-90%
Homes-80%
Subrogation
When an insurer pays a claim, it takes over the legal rights it’s insured has against the negligent 3rd party
What is part c for auto insurance?
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
What is part b for auto insurance
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
What is part a of auto insurance
BI/PD- liability coverage
Provides protection against judgements and covered exposures resulting from bodily injury and property damage caused by insured
Are life insurance proceeds subject to tax when gifted
No
Do ratings need to be included in illustration and are they important compared to other included factors?
Rating is not required and not as important as features, provisions and options
Does a universal life policy have guaranteed cash value?
No
Can qualified LTC policies have cash value?
No
What is covered under “other than collision”
Breakage of glass Missles Falling objects Fire, theft, larceny Flood Earthquake Explosion Windstorm Hail Vandalism Riot Bird/animal
What are the non forfeiture options
Cash or loan value
Reduced paid up insurance
Paid up term insurance/extended term
What does residual disability coverage provide?
Provides less than the total disability benefit for the policies maximum benefit period
Collateral source rule
You can collect money from the person at fault
What are the 4 principles that support indemnity
Insurable interest
Concept of actual cash value
Other insurance
Subrogation
When are distributions of dividends taxable in a life insurance contract
They are received in cash
They are used to reduce premium
They are used to pay off a policy loan
What are the insurance dividend options?
CRAPO
Cash option Reduction of premiums Accumulated with interest Purchase paid up additions One year term/5th dividend
What clauses are automatically included in disability insurance
Presumptive disability
Continuance provision
*included at no extra cost
What are the settlement options for life insurance
Cash Interest only Fixed period Fixed installments 4 life income options
The reason to purchase insurance is to provide protection from what?
Risk
If someone is an uninsurable risk, under what principle will the company refuse them?
Adverse selection
A high deductible reduces what?
Premium
If someone is trying to reduce premiums what kind of risk is that?
Retention
What kind of life insurance has an APL provision
Only whole life
What kind of insurance policies have non-forfeiture options?
Only permanent policies
When does coverage begin for conditional receipt
As of the date of the application, provided the applicant was found to be insurable
How long are medical expenses covered for workers comp
There are no limits on time or amount
Is there a time limit on the transfer for value rule
No! There is no 3 year gifting limit
What is HO-7
Mobile home
Unilateral
Only one party is bound, the insured makes no promise
Adhesion
Contract is accepted as is, it is not negotiated
Aleatory
Number of dollars given up is unequal
Outcome is uncertain
Principle of indemnity
The insurer generally seeks to reimburse the insured for approximately the amount lost, no more and no less
Parts of an insurance contract
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
Unintentional tort
Negligence or carelessness
Attractive nuisance
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
Negligence per se
A situation where the standard of care is set by a statute
Violation of a statute
Ex: school zone, cross walk
Absolute liability
Extra hazardous condition which results in losses to others
Ex: workers comp, keeping wild animals, blasting
Strict liability
Limited to manufacturers and distributors of defective products
Ex: Firestone tires, Ford motor company, product liability
Vicarious liability
Occurs when one person is held liable for negligent behaviors of another person
Also called respondent superior
Ex: principals responsible for their agents
Assumption of risk
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
Contributory negligence
Any negligence on the part of the injured party, even though slight, defeats the claim
Ex: jaywalking, driving while drunk
Comparative negligence
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%
Last clear chance
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
Negligences vs defenses
Negligences: attractive nuisance, negligence per se, strict liability, absolute liability, vicarious liability
Defenses: assumption of risk, contributory, comparative, last clear chance
Types of life insurance needs analysis
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
Property excluded under homeowners insurance coverage c
Animals, birds, fish
Motorized land vehicles and aircraft
Property of roomers/boarders/tenants
Property contained in an apartment regularly rented
Homeowners insurance coverage F
Medical payments to others
NOT for family members
Is a sinkhole a covered peril for the exam?
Yes! If it does damage to property
HO-8
Old home that may have structural problems or construction defects (open foundation)
What percent is coverage B, C and D of coverage A for an HO-3?
B-10%
C-50%
D-30%
Examples: If coverage A is 250k B will be 25k and D will be 75K
How do split limits work on coverage limits
Per person/per occurrence/property damage
General liability
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
What is covered under workers comp
Medical expenses without limit on time and money
Disability income with short waiting period
Death benefits payable to family members
Rehabilitation benefits
What type of benefits are covered under Medicare part A?
Hospital care
Care in nursing home or extended care facility
Home health services
Hospice
What does Medicare part B cover?
Physician services
Home health services
Diagnostic tests
All outpatient services or a participating hospital
How much does Medicare cover for skilled nursing care
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
Is group disability covered under COBRA?
No!
Deductible amounts for qualified LTC
Age 51-60 $1,690/yr
Age 61-70 $4,510/yr
How is a viatical company taxed when the insured dies?
Ordinary income
How are life settlements taxed?
Long term capital gains
Where would a notice of loss be found in an insurance policy
Conditions
Is a duty of the insured
What is non cancelable
Premiums will not increase
What is guaranteed renewable
Individual can keep policy on force by paying the premiums, but the premiums may increase
Conditionally renewable
Allows policy to continue beyond age 65
Health reimbursement account
Used only by c corps
Funded ONLY by employer
Reimbursed employee for substantial medical expenses up to a maximum amount
Can a business take a loan on a whole life policies that covers key employees?
Yes, but limited to 50k and it is deductible
What percentage does Medicare part b cover for approved charges for doctor services (co-payment)?
80% after the deductible has been met (no stop loss)
What drugs does Medicare part b cover
Oral anti cancer drugs
Certain drugs for hospice enrollees
Certain drugs that can’t be self administered
What does Medicare NOT cover
Foot care
Eye care
Glasses
Hearing aids
Dental work
Emergency care outside of US
What is the age at which insurance policies generally endow?
100 or 121
How do you calculate insurance need under capital retention?
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
For a guaranteed renewable and non cancelable policy, which one is less expensive?
Guaranteed renewable
This is bc with a guaranteed renewable, the premiums can increase. With a non cancelable, they cannot
Are disability benefits taxable to the employee under a 162 bonus?
NO!
What happens if someone intentionally/fraudulently misstates material information for life insurance
Policy will be rescinded and will not be paid
Are dividends used to buy paid up additions treated as income first distributions under a MEC?
No
If income from a trust is used to purchase life insurance on the grantor, how is it taxed?
This is a grantor trust and is taxed to the grantor
Can an HSA pay for LTC premiums?
Yes, the HSA can pay for qualified LTC premiums
*there are age based limitations
Is a missing wedding ring covered under an HO-3 policy?
Only if theft is involved
Do you have coverage a for an HO-6 policy?
Limited basis (typically 1-5k), could be named perils
Depends on the condo association
Can both the employer and eligible person contribute to a MSA in the same year?
No
What is the limit for silver in property insurance coverage?
Internal limit of $2500 in coverage for theft only
What is the limit of coverage for gold coins in property insurance coverage?
$200
Under Medicare part b, what shots are covered at no cost to the patient?
Annual flu shot
Pneumonia
What is APL?
Automatic premium loan
This will pay the premium if it remains unpaid beyond the grace period
What is a disability waiver of premium
Insurer will pay the premium for the life of the contract with no future premium notices if they are seriously injured
Reinstatement provision
You have to provide proof of insurability to reinstate the policy if it lapses
Where do the forfeited funds from an FSA go?
Used to defray future administrative expenses of the FSA itself
How much does an HO-15 endorsement cover for collectible coins?
5k
When should you apply for Medicare benefits?
Prior to turning 65 so you have Medicare on your 65th birthday
What may happen if you delay your Medicare application later than 65
May result in permanent increases in Medicare part b monthly premium
How is the monthly Medicare part b premium calculated?
Medicare enrollees AGI TWO years prior
With Medicare part a what costs are involved
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
Medicare part b premium cost
$170.10
Medicare part b deductible
$233/yr