Insurance Flashcards
DIVIDEND OPTIONS
Remember that dividends are CRAP-O = Cash option, Reduce premiums, Accumulate at interest, Paid-up additions, and Term (one year)
Nonforfeiture Options
Cash Surrender Value
- Insured receives the accumulated cash value when terminating the life insurance policy. The cash surrender value is the cash value surrender charges.
Reduced Paid-up Insurance
- insured receives the cash value in the form of a paid-up policy with a smaller face amount
Extended Term Insurance
- The insured receives the cash value in the form of a paid-up term policy for a specified duration, with the same face amount as the original policy.
Tax Deductibility of premiums
Keep the at deductibility of premiums straight. Premiums are not deductible for the insourced, but premiums are deductible by the employer for group life insurance and those premiums are taxable income to the employee.
Taxation of Annuities
Don’t worry about the exact date of August 14, 1982. Just know that for annuities after 1982 and premature withdrawals, the withdrawals receives LIFO tax treatment. Any annuities prior to 1982 receives FIFO tax treatment.
Catch-up Contributions for HSA
Remember that the catch-up contributions for HSAs is for those 55 and older, not the typical 50 and over we see for IRA catch-up contributions
NON-QUALIFIED MEDICAL EXPENSES DISTRIBUTIONS
Remember that the penalty for non-qualified medical expense distributions ends at 65, not 59 1/2 like the rules for qualified plans and IRAs.
HIPAA and Affordable Care Act
Although the Affordable Care Act prevents policies from containing preexisting condition clauses for policies issued after September 2010, we are still advising students to be familiar with HIPAA rules in the event the topic appears on the exam.
Cobra Coverage
Memorize the 18 months for a reduction in hours or normal termination and that all others are 36 months. If the CFP Board tests any event other than a reduction in hours or normal termination, then it will be 36 months.
Taxation of Disability
Tax implications
Perils
Basic and Broad policies are “named perils” polices. Losses resulting from perils not specifically “named” are not covered. An open perils (or “all risks”) policy covers “all perils” except those that are specifically excluded.
Rule of Thumb
A “rule of thumb” is that covered losses must result from something that is “sudden and accidental.” Losses associated with neglect and intentional acts of the insured are not covered.
Coinsurance Formula:
(Amount of insurance carried/Coinsurance Requirement) x Amount of Loss = Insurance Amount
Trick to remember Coinsurance formula: Insurance I have, divided by the insurance I should have (80% of the replacement cost), times the loss, minus deductible, equals the insurance amount
Other Structures
Other structures that are used for business purposes are not covered under a homeowners policy. Separate business coverage must be obtained for these structures.
Umbrella Policy
A client without an Umbrella policy, or with one to low to meet the underlying policy limits, is considered to have deficiency in their plan that needs to be addressed.
Ways Social Security is reduced:
Know the ways that retirement benefits can be reduced or taxed
Social Security Children
Medicare Part B
Not covered
Long Term Care
LTC - Qualified Requirements
Basic Perils
Broad Name Perils
Homeowner Policies
Summary of HO Forms
Watercraft
Collision vs Comprehensive
PLUP - Personal Liability Umbrella Policy
Reduction of Benefits
Increase in Benefits
Definition of Disability
Summary Of Beneficiries
Taxation of Social Security
Medicare Part A
Medicare Part B exclusion
Exam Tip - Remember HO Policies
