INSURANCE Flashcards
What is the collateral source rule
The collateral source rule allows that damages for bodily injury can be assessed against the negligent party even when the injured person recovers the amount of his or her loss from other sources.
Name the 4 parts to HO Insurance Policy, what they cover and amount covered
Part A - Dwelling = 100%
Part B - Other Structures = 10%
Part C - Personal Property = 50%
Part D - Loss of use = 20%
Name the parts to Personal Auto Insurance Policy (PAP) and what they cover
Coverage A: Liability for Property Damage
Coverage B: Personal Liability - bodily injury
individual/incident/property damage
Coverage C:
Coverage D: D1 - Collision
D2 - Other Than Collision - Comprehensive
What are the primary components of an insurance contract
Insuring Agreement
Declarations
Endorsements
Conditions
What does a contract of indemnity imply
Indemnity means the insured should be restored to the same financial position occupied before the insured’s loss. For example, an actual cash-value settlement would consider depreciation and is an example of the principle of indemnity.
What are the different forms of insurance policies and what are each used for
HO-1 = narrowest homeowners insurance coverage that is limited to a specific list of 11 named perils.
HO-2 = Broad form = HO-1, plus two extra perils: damage from falling objects and water damage from accidental overflow of plumbing; heating, ventilation and air conditioning (HVAC); and household appliances. Covers dwelling and structures under named perils with contents coverage up to 50% of dwelling
HO-3 = Special form - covers almost any peril (open perils) except those specifically excluded (such as earthquake, flood, landslide or mudslide, nuclear accident and sinkhole) and cover personal belongings in the home against named perils listed in the policy, contents coverage up to 50% of dwelling
HO-4 = Contents Broad - Commonly referred to as “renters insurance,” this policy form covers personal property in a rented home or apartment.
HO-5 = Comprehensive - Similar to HO-3, any peril losses are covered unless specifically called out for exclusion. Is more comprehensive and covers personal property for almost every peril, unless the item is explicitly excluded. The depth of the coverage makes this policy cost more than others.
HO-6 = Unit Owners - Are designed as insurance for condo owners and co-op tenant owners.
HO-8 = Modified - Is designed for older homes that have a replacement cost that exceeds the actual FMV of the home; often historical homes
What are the categories of business general liability
We can categorize business general liability exposures as follows:
Direct Liability
Vicarious Liability
Contractual Liability
Names the 4 sections of Medicare and what they cover
Part A = hospital, skill nursing, hospice care
Part B = Non hospital medical costs - dr visits
Part C = Combines Part A (Hospital Insurance) and Part B (Medical Insurance) and most plans cover prescription drugs. Combo plans (like HMO/PPOs)
Part D = Drugs, Prescriptions
Which type of liability insurance covers a financial advisor for damages awarded a client due to advisor negligence in business dealings with the client?
Errors and omissions insurance
Which optional feature of an individual disability income insurance policy allows for a larger amount of additional coverage to be added to a policy at a specified age, after a specified number of years, or at after specific life event, such as marriage?
Guaranteed Insurability Option. The insured does not have to prove health insurability but must qualify financially for the increased benefit.
How long is the the Medicaid “look back” period for calculation of assets
Property transferred to individuals, charities, or a trust within 60 months of application for Medicaid is considered as owned by the applicant and must be disclosed.
What is the stop loss limit and how is it calculated
The stop-loss limit is the amount of total expenses after payment of the deductible to which the insured’s portion of the coinsurance will result in reaching the Max Out Of Pocket costs.
The following calculation to determine the stop-loss limit:
(MOOP - Deductible) ÷ Insured’s Coinsurance Percentage
What is the triple-trigger theory relative to establishing liability and the elements of each
If several insurance policies were in force when a developing injury is in progress, all the insurers would be responsible for providing coverage. This is called the triple-trigger theory.
- Exposure:The insurer whose policy was in force when the first exposure to hazardous substance occurred.
- Manifestation:The insurer whose policy was in force when the disease was first recognized.
- Exposure-in-residence period:The insurer whose policy was in force when the disease developed.
What is vicarious liability
Vicarious liability is an indirect liability that arises when a firm hires an independent subcontractor, who in turn injures a third party. This liability can be extend to intentional wrongs acts done by employees or agents of an organization that cause harm to a third party. These include actions such as assault and battery.
What is a presumptive disability clause
It is common to include a definition ofpresumptive disabilityin policies that provide benefits for total disability.
Under a presumptive disability clause, an insured is always considered totally disabled, even if he is at work, if sickness or injury results in the loss of the sight of both eyes, the hearing of both ears, the ability to speak, or the use of any two limbs.
How do disability contracts define disability?
Disability contracts typically define disability in one of three ways (unable to do version of current occupation):
* Own occupation definition, which is usually referred to as “own occ.” (ie,,,disability restricts precise occupation ie..surgeon)
* Modified own occupation, with a time limit (e.g. 2 years) on “own occ” protection. (2 yrs own occupation then any occupation after that)
* Any gainful occupation definition, which is commonly, if somewhat inaccurately, called “any occ.” (ie..disability restricts any job)
What is Completed Operations Insurance
Completed Operations Insurance covers claims from injuries arising after a service is rendered and the property’s control is returned to the owner.
To be categorized as a qualified LTCi policy, which features must be included?
- Be guaranteed renewable
- Not provide a cash value for any reason other than upon full surrender or death of the insured
- Other than at full surrender or death, any dividends or refund may only be used to reduce future premiums or increase future benefits.
- Generally, policies must not pay for services that would be covered by Medicare, unless Medicare is specified as a secondary payer.
What factors must be in place for a qualified accelerated death benefit
The insured must be terminally ill.
The reduction of the remaining face value of coverage is limited.
The cash value of the remaining death benefit may not be reduced.
What are requirements for tax treatment of viatical settlements
- Terminally ill individuals may use all proceeds tax free
- Chronically ill individuals may use to cover medical expenses for long term care tax free but any other non medical use will be taxed as ordinary income at tax rate
How many life insurance policies must be purchased under a partnership cross purchase plan
- Thecross-purchase planis where each partner or shareholder can purchase life insurance on every other partner or shareholder.
With a cross-purchase plan, the number of policies needed is equal to:
n x (n - 1), where n equals the number of partners or shareholders.
- Theentity planis where the partnership or corporation can purchase the insurance on each partner or shareholder.
With an entity plan, the number of policies needed is equal to the number of partners or shareholders.
When annuitizing a life insurance contract, how do you determine the amount that is not-taxable for current period
Use the exclusion ratio to determine the portion of each annuity payment that represents a return of basis (tax-free amount).
Exclusion Ratio:
(Basis in Contract ÷ Expected Total Payments - annuity payment * periods of payment) x Annuity Payment Amount = Return of Basis.
eg: Rosalita had paid $150,000 of premium payments into the contract. The expected annual annuity payment is $22,500 for 16 years.
($150,000 ÷ [$22,500 x 16]) x $22,500
($150,000 ÷ $360,000) x $22,500 = $9,375 (tax-free return of basis)
If the insured forgets to pay the premium or decides to end the contract, the grace period provides _______ to pay the premium without forfeiting any contractual rights and no questions asked.
31 days
“If the insured forgets to pay the premium or decides to end the contract, the grace period provides 31 days to pay the premium without forfeiting any contractual rights and no questions asked”
What are the key features of credit life insurance
Credit life insurance is often sold in conjunction with a major purchase.
It typically is much more expensive than traditional term life insurance.
The premium does not increase each year and
The benefit decreases each year to coincide with the outstanding loan balance.