Insurance

Question 1

What are important criteria for selecting an insurer?

Answer 1

1) Policy types offered
2) A.M. Best rating

NOT things like whether they use agents or brokers, or the history of the company

Question 2

Backing into a care while parking is considered what type of liability?

Answer 2

Unintentional negligence

Question 3

Keeping dangerous pets is what type of liability?

Answer 3

Absolute Liability

Question 4

What coverage provides for you hitting a prize bull, then being sued by rancher?

Answer 4

Hit bull = Other than collision
Being Sued = BI/PD under Part A, Liability

Question 5

What are 2 ways to determine appropriate amount of life insurance?

Answer 5

1) Needs Analysis: Compares needs due to premature death with resources available
2) Human Life Value: The PV of the presumed income lost by dependents as a result of the insured’s death - does not account for other resources available

Question 6

What are the functions and purposes of NAIC?

Answer 6

1) Oversees state accreditation program
2) Promotes law and regulation uniformity
3) Transmits information to regulators
4) Protects the interest of policy owners while preserving state regulations

Question 7

A Health FSA CANNOT pay:

Answer 7

1) Health insurance premiums
2) Cosmetic items, incl cosmetic surgery
3) Items that improve “general health” (too broad)

Question 8

When are dividends from a MEC taxable?

Answer 8

1) Cash distribution
2) Used to pay premiums
3) Used to pay off a policy loan
**2 and 3 are used like cash, therefore taxable

Question 9

When are dividends from a MEC not taxable?

Answer 9

1) Used to purchase paid up additions
2) Kept w/ ins co to accumulate interest (but interest is taxable)

Question 10

Skilled Nursing Facility coverage by Medicare

Answer 10

Medicare pays 1st 20 days in full
then patient has a deductiblfe of $194.50/day

Question 11

Skilled Nursing Facility coverage by Medicare

Answer 11

• Medicare pays 1st 20 days in full
• then patient has a deductible of $194.50/day for days 21-200
• If 101+ days, patient pays 100%

Question 12

Implied Authority

Answer 12

Agent shows signs or evidence of authority, such as rate books

Question 13

Apparent Authority

Answer 13

Authority an agent appears to have because of actions of the past

Question 14

Who pays for the insurance in a Buy-Sell agreement for:
1) S-Corp
2) Partnership

Answer 14

1) Corp buys ins
2) Partner buys ins

Question 15

Auto ins
- If driver sued, what portion of insurance covers?

Answer 15

BI/PD - Liability

Question 16

If ER offers a legal services plan, is it taxable or nontaxable to EE?

Answer 16

Benefits are taxable to EE
(and premiums are tax deductible by ER)

Question 17

Health Reimbursement Arrangement (HRA)

Answer 17

ER funded, reimburses EEs for substantiated medical expenses up to a max $ amt
- B/c ER sets limits, can be inexpensive

Question 18

Purchase of Life insurance is protection against what?

Answer 18

Risk

Question 19

If a person has expensive collection - jewelry, furs, cars - how should they be covered on insurance policy?

Answer 19

On a “Valued” basis, not replacement value

Question 20

Non-qualified annuity - determining how much of payout is tax free

Answer 20

1) Monthly payment x life expectancy in months = Expected lifetime return
2) (Original Investment amount / Expected lifetime return) x monthly payment = non-taxable portion of payment

Question 21

What type of insurance offers an APL?

Answer 21

APL = Automatic Premium Loan
- Only available on Whole Life