Insurance Flashcards
Medicare Eligibility
All persons age 65+ who are entitled to social security or railroad retirement benefits
All disabled beneficiaries receiving SS disability benefit for at least 2 years
Medicare Part A
Ambulance or Admitted to Hospital
- Hospital Care
- Hospice Care
- Nursing Home Care or Extended Facility
- Home Health Care
must pay cost for first 3 pints of blood or donate
Medicare Part B
Regular Care
- Medical insurance (part b) is voluntary.
- Physician Services / home health services / diagnostics / outpatient services at participating hospitals
- Medicare pays 80% of costs (NO STOP LOSS)
- Covers drugs that can not be self-administered
- One flu shot and one annual wellness check up (want to know how much they will have to pay out)
Part B premiums increase with AGI (looked at 2 years in arrears); watch out as RMD’s can cause prices to rise
Medicare Part D
Drugs
- Must have A & B
- Can always buy later on
Expenses That Medicare Does Not Cover
- Foot, Eye, Dental, Hearing Aids (things elderly need)
- Emergency care outside of US, Canada, Mexico, and Caribbean (not covered in international waters)
Delaying Medicare Part B
You are able to delay enrollment in Medicare Part B at 65 if you are covered by health insurance by a company with 20+ employees
- Regular insurance is primary insurance (group policy pays first)
Must sign up for Part B 8 months after leaving company to not have a penalty
Less than 20 employees: must sign up for Part B at 65 or need to wait for open enrollment and are assessed permanent 10% penalty
Skilled Nursing Home (Part A)
Skilled nursing home coverage for 100 days (Medicare covers everything for the first 20 days and then everything over $200 the next 80 days)
Strict: skilled care only / must follow a 3 day admission within 30 days / patient must be expected to improve (NOT LTC)
Exam Question: Need to know first 20 days 100% covered; next 80 days partially covered over certain amount and that everything after 100 days is not covered
COBRA Provisions
Group or self-funded with 20 or more employees (part time is half) must provide continuation benefits
18 months: Voluntary or forced termination
36 Months: Death, Divorce (only spouse), Age 26, Medicare Eligibility, Marriage
28 Months: Disability
can not elect COBRA if you are not covered under the health insurance plan
Cost can be normal amount plus 2% or a total 102%
Health Savings Account (HSA)
- Need a HDHP as well
- Contributions are tax deductible or pre-tax (payroll deduction not subject to FICA and FUTA but after tax deductions are)
- Contributions are not subject to FICA or FUTA
- Can pay for LTC and Medicare premiums (Not allowed under FSA)
- Can pay for prescription drugs
- OTC Drugs
65+ treat like IRA, can be transferred to spouse on tax free basis upon death
Qualified HSA Funding Distribution (QHFD)
QHFD consists of a direct transfer from IRA to HSA (no tax or penalty)
CAN NOT transfer more than amount you can transfer for the year (reduced by any amount you have already made for the year)
Can only do 1 time (unless move from single to family)
Flexible Spending Account (FSA)
- Part of a cafeteria plan under code section 125
- Contributions are not subject to income tax, FICA or FUTA
- Potential for grace period (extra 2 1/2 months to spend) OR carryover ($610) - Medical FSA Only
Medical FSA: $3,050
- NO reimbursement for premiums of other health plans (NO LTC)
**Dependent Care FSA: $5,000*
- eligible expense reduce dependent care tax credit (coordination) - subtract FSA amount from dependent care expenses and multiply by 20%
- BOTH spouses must earn income (unless disabled or a student)
- If spouse earns less than $5,000 then the benefit is limited to what the spouse earned
Definition of Disability
The best definition is OWN occupation - inability to engage in own occupation
Modified Own Occupation = inability to engage in any occupation for which he/she is qualified by reason of training, education, or experience
Split Definition = combination of own and any
Loss of Income = pays benefits based on economic loss following a disability (could be a reason you dont get paid, make more now doing something else)
Presumptive Disability
Provides benefits due to loss of sight, hearing, speech, both hands, both feet, or one hand and one foot (two limbs)
not every policy has this clause
Benefit Period, Elimination Period & Amount of Coverage
Disability policy’s typically end at age 65
Elimination Period = time to get paid. Typically 90 days
Most policy’s cover 50 to 60 percent of earnings. More earnings less coverage.
Watch out for policy’s that are coordinated with Social Security, different than SSI benefit (reduces base)
When are disability benefits paid?
Benefits are paid 30 days in arrears… 90 day wait then get paid on 120th day
Disability Policy Riders
Residual Benefit Rider = Benefits proportional to the amount of income lost and payable for the same duration as total disability
Partial Disability Rider = Benefit is usually 50% of total disability benefit with a maximum pay period of 3-6 months
Disability Waiver of Premium = may wave premiums if insured becomes totally disabled for a specified minimum period of time (90 days or longer) - group does not have this premium
Social Security Substitute = pays additional amount until social security kicks in
- Won’t reduce the base amount
- Social Security kicks in after 5 months and pays in the 6th
Taxation of Disability Benefits
Individual owns and pays premium
- Paid with after tax dollars / tax-free benefits
Employee owns the contracts:
- Employer Pays (section 162 bonus): premiums are deductible by the employers as compensation / employee pays benefits with money after tax / benefits are tax fee
- Employee is still taxed on compensation received (no fully tax free)
Employer Pays (Salary Continuation): Premiums are deductible by the employer / paid with pre-tax dollars / benefits are taxable to the employee
S-Corporation OWNER
- S-Corps and Partnerships can deduct premiums paid for more than 2% owners
- Flows through
- always tax free
watch for split plans where employer pays half and employee pays the other (just calculate)
Group Short Term Disability Coverage
- Group policy’s are cheaper and have simpler underwriting than individual policies (typically dual definition)
- Short term benefits: may start immediately for accidents or 8th day for sickness. last 13, 26, or 52 weeks
Long-Term Care Insurance
- Premiums paid and non covered expenses can be deducted if itemizing and over 7.5% AGI limit*
*deduction amount is subject to dollar limitations based on age - Part of the premium is deductible as self-employed health insurance if have schedule c income
Just know dollar amount deductible is limited by age
Premiums on Non-Tax Qualified LTC (NTQ LTC) are not deductible
Short-Term / Low Cost / No Cash Value/ Not Permanent Insurance
Term Insurance
- Annual Renewable Term (ART) - Premiums increase annually
- Level Term - Premiums are level for specific period
- Re-entry Provision - re-qualify for term through abbreviated underwriting
- Decreasing Term - used for mortgages (the more you pay down mortgage less insurance needed) - level premium (not decreasing)
- First-to-Die/Joint Life - buy-sell / mortgage protection
Long Term Insurance Need / Permanent Insurance / Cash Value
Low Risk: General Account
- Whole Life: level premium, cash value
- Universal Life: adjustable premium, flexibility
Higher Risk: Separate Account
- Variable Life: Premium is Fixed
- Variable Universal Life (UVL): Premiums flexible
Single life = replace income or pay off debt
Survivorship or Second-to-Die = estate liquidity (should not need at first death due to marital deduction)
Types of Homeowner Policy’s
