Insurance Flashcards
Short term disability benefits begin on the ________ day after an accident and on the ________ day of an illness.
- *1s**t.
- *8t**h.
What is the dollar amount of long-term care insurance that can live inside of a cafeteria plan?
$0.
LT care insurance cannot live inside a cafeteria plan.
What method of handling risk is insurance?
Insurance is considered to be a risk transfer.
Risk transfers (or the use of insurance) is appropriate when the frequency is low but the severity is high.
What clause would prevent a provider from voiding coverage due to a misstatement of age after a specified period of time has passed?
Incontestability clause.
What is the minimum size for group term?
10.
Do not confuse this with the minimum for COBRA coverage (20).
What type of life insurance policy would be appropriate for an individual who wants flexibility in payments/coverage, and also wants the ability to control their investments?
Variable universal life.
Is split dollar life insurance considered to be a fringe benefit?
Yes.
This can also be used in a buy-sell agreement.
What is the highest level of care available where patients are seen regularly by a physician?
Skilled nursing care.
What are three characteristics that limit an insurer’s liability?
- *1. Dedu**ctibles.
- *2. Coin**surance.
- *3.** An insured interest (collateral).
Increasing whole life insurance while decreasing term life insurance describes what?
Group paid up life insurance.
What should you remember when calculating a client’s obligation for group term insurance above $50,000?
Multiply by 12 to determine the annual cost.
Assume a client has $80,000 of employer provided term life insurance, the table 1 rate is $.15 per unit. How much in reportable income will be due?
$80,000 - $50,000 = $30,000 | $30,000 / 1,000 = 30 | (coverage units) | 30 x $.15 = $4.50.
You may see an option on the exam that is $4.50. This is incorrect. To arrive at the correct answer, you would need to multiply by 12 ($54).
The period of time an insured must wait before an illness is covered under a disability plan is called ________?
The probation period.
Coverage F would not cover ________?
- *Contra**ctors of the insured.
- *Thi**nk cleaning services, plumbers, electricians, etc.
When an individual covered by a whole life policy passes, do heirs receive the cash value as well as the death benefit?
The cash value amount is not added to the death benefit.
Important to know when asked what the payout would be after passing. Example: a policy with a $75,000 cash value and a $500,000 death benefit would pay $500,000 at death. Not $575,000.
What is the incidental benefit rule for term life insurance in a defined benefit plan?
100Xmonthlyretirementbenefit.
Life insurance benefits are incidental if the benefit is no more than 100 times the monthly annuity benefit.
How long does COBRA coverage last in the event of a divorce?
36 months.
What is the difference between a moral hazard and a morale hazard?
The difference is intent.
A moral hazard is when an insured intentionally seeks to gain from their insurance company (filing false claim). A morale hazard is when someone is indifferent to their actions (driving recklessly).
When converting a term policy to a permanent policy, what age will be used to determine premiums?
The age at conversion.
While this seems intuitive, the exam may include other options that seem reasonable to throw you off, such as the age of the insured at the time of the original application.
Cash surrender values are not found in what type of plan?
Qualified long-term care polices.
Premiums on a renewable term life insurance policy will ________?
Increase annually.
Guaranteed renewable insurance does not guarantee a ________?
Level premium.
What type of plan provision has the most liberal continuation policy?
Non-cancelable provisions.
What value should you use when calculating the appropriate insurance amount?
Replacement value.
Right of the insured to be “made whole” is consistent with what principle?
Principle of indemnity.
What type of insurance would be beneficial if a business is interrupted due to a delay from an outside provider?
Contingent business interruption insurance.
How many perils are covered under broad coverage?
18 named perils.
How long is the Medicaid lookback period?
60 months (5 years). Includes gifts given during this time.
What organization provides accreditation for state insurance regulatory offices?
The National Association of Insurance Commissioners (NAIC).
________ are typically associated with health/life insurance while ________ are typically associated with property and casualty insurance.
- *Rid**ers.
- *Endors**ements.
When must an insurable interest exist in a life insurance policy?
At inception of the policy.
1033 exchanges are what type of exchanges?
- *Involu**ntary exchanges.
- *Eit**her due to disaster or eminent domain.
How many perils are covered under open peril coverage?
All perils are covers EXCEPT those that are specifically excluded.
Major medical will not pay for ________ if the client is not getting better?
Custodial care.
How does a change in occupation provision work?
It allows the insurer to make adjustments to an insureds benefits due to a change in occupation.
Example: An insured’s premiums increase to compensate for a occupational change that involves more risk.
How many perils are covered under basic coverage?
12 named perils.
Which disability polices are more expensive, integrated or non-integrated disability policies.
Non-integrated disability polices are more expensive.
What percent of a death benefit is paid out to the surviving spouse in a second-to-die life insurance policy?
0%.
Second-to-die policies pay out when the second person on the policy passes. These types of policies are typically less expensive than two separate policies.
This type of agent represents a policy holder rather than an agency or agencies.
A insurance broker.
Who controls the investments in a variable universal life policy?
The insured.
Variable universal life does not guarantee a ________?
Minimum cash value.
Are hearing aids covered under Medicare Part B?
No.
Would your personal auto policy cover you during a business trip?
No.
The inclusion amount is designed to ________?
Smooth out the lease vs. depreciation amount.
An ________ would provide coverage against perils that are not covered under a standard insurance policy?
Insurance endorsement.
This type of whole life policy has its cash value invested in marketable securities rather than cash and cash equivalents.
Variable whole life insurance.
A taxable event occurs when an individual exchanges a ________ policy for an ________.
- *Li**fe insurance
- *Annu**ity
A transfer of a modified endowment contract (MEC) to a life insurance police will ________?
Not remove its status as a MEC.
What branch of government is responsible for enforcing state insurance code rulings?
The executive branch of government.
