Insurance Flashcards

Question

Assumption of risk

Answer 1

Skiing, stock car races

Answer 2

Jay walking, being drunk

Answer 3

A is 20% negligent, B is 80%

Answer 4

Calculating life insurance needs Uses annuitization to provide needed income but leaves no money at end of planned for period

Answer 5

Calculating life insurance needs Uses interest only, so the original capital is still left at the end of income period Also called capital retention or interest only

Answer 6

A.M. Best: A++ to F Standard and Poor: AAA to CCC

Answer 7

Coverage: A B C D A- dwelling and attached structures B- structures separated from dwelling (detached garage, fences) C- contents and personal property D- loss of use

Answer 8

Coverage: E F E- liability F- medical payments

Answer 9

- animals, birds, or fish - motorized land vehicles and aircraft - property of roomers, boarders and other tenants - property contained in an apartment regularly rented or held for rental to others by the insured (unless specifically endorsed)

Answer 10

WHARVES/FLT Windstorm, hail, aircraft, riot, vandalism, vehicles, explosions, smoke, fire, lightning, theft

Answer 11

Basic plus RAF rupture of a system, artificially generated electricity, falling objects, freezing of plumbing

Answer 12

Basic for all (A B C D)

Answer 13

Home Broad for all (A B C D)

Answer 14

Home A- open B- open 10% A C- broad 50% A DA- open 30% A

Answer 15

Home A- open B- open 10% A C- open 50% A D- open 30% A

Answer 16

Older home Basic for all (A B C D)

Answer 17

Renters None for A and B C- broad D- broad 30% C

Answer 18

Condo owner A and B can have some coverage C- open D- broad 50% C

Answer 19

Mobile home

Answer 20

Earthquake Flood Neglect Intentional loss Ordinance/law Power failure War Nuclear hazard Sink hole is a covered peril for the exam

Answer 21

Replacement cost coverage Replacement cost ✖️ coinsurance percentage

Answer 22

Replacement Cost coverage (Insurance carried➗insurance required) ✖️ loss ➖ deductible

Answer 23

- be owned by an individual or husband and wife living in the same household - be a private passenger automobile - not to be used as a public or livery conveyance - not be rented to others

Answer 24

Part A- limited to third parties Part B- medical payments Part C- uninsured/ underinsured motorists Part D- damage to the covered auto

Answer 25

- any vehicle shown in the declaration page - any of the following you acquire during the policy period: private passenger auto, pickup truck, panel truck, van -no coverage for pickup truck or van or panel truck used in a business (need commercial policy) - any trailer you own listed on declaration page - any auto or trailer you do not own while used as a temporary substitute for any vehicle described above because of a breakdown, repair, servicing, loss or destruction

Answer 26

The named insured and any family member who: - suffers bodily injury caused by accident while occupying the covered auto - if while a pedestrian are struck by any motor vehicle designed for use on public roads, or by a trailer Other persons while occupant of the insured’s auto (passengers)

Answer 27

Promises to pay the amount an injured insured could have collected from the uninsured driver if the driver had carried auto liability insurance. Covered person includes: - named insured and any family member - any other person occupying the insured’s covered auto - any person, for damages that person is entitled to recover because of injury to a person above this is liability protection, not medical payments

Answer 28

breakage of glass loss caused by: - falling objects - fire - theft - explosion - earthquake - windstorm - hail - water - flood - riot/civil commotion - contact with birds or animals

Answer 29

* usually a correct answer - provides liability coverage (BI/PD) for catastrophic legal claims - requires policy owner to carry certain underlying coverage of specified minimum amounts - professional acts are specifically excluded

Answer 30

Professional liability Bodily injury (doctors, dentist)

Answer 31

Professional liability Monetary damages (financial advisors, lawyers, accountants, insurance agents, etc.)

Answer 32

- unlimited medical expenses - disability income (tax free) - death benefits - rehab (medical and vocational) - absolute liability

Answer 33

- routine foot care, glasses, hearing aids and dental work - emergency care outside the US (some exceptions for Canada, Mexico, and the Caribbean)

Answer 34

1. Benefits are limited- pays all of first 20 days of skilled care and everything over a specified amount per day for next 80 days of skilled care (max 100 days) 2. This limited benefit is subject to substantial restrictions: - pays for skilled care only - admission to a nursing home must follow within 30 days of a hospital stay of 3 days or more - patient’s condition must be expected to improve

Answer 35

Provider paid monthly fee regardless of services rendered (capitation) Out of network care not covered at all

Answer 36

Provider paid for actual services rendered Out of network partially covered (usually 70%)

Answer 37

Must have 20 full/part time employees - Voluntary or involuntary termination- up to 18 months - Employee’s death, divorce, legal separation or eligibility for Medicare- up to 36 months - loss of dependent status- up to 36 months

Answer 38

- used in conjunction with HDHP - distributions tax free if used for health care - contributions not spent are carried forward in owner’s name and are portable - unused assets become property of named beneficiaries upon death - distributions for non-medical are ordinary income taxable plus 20% penalty if under 65

Answer 39

1. Own occupation- best definition for insured 2. Modified any occupation 3. Split definition-own then modified 4. Any occupation (social security definition) 5. Loss of income

Answer 40

Disability Income Policy Continuance Provision Continuous term policy guaranteeing the insured’s right to maintain the policy at the stated premium

Answer 41

Disability Income Policy Continuance Provision Continuous right to maintain the policy, but the insurer may increase the premium by class of insureds

Answer 42

- premiums are not deductible - benefits are tax free for the employee

Answer 43

- premiums are deductible by the employer as a bonus - benefits are tax free to the employee

Answer 44

- premiums are deductible by the employer - benefits are taxable to the employee

Answer 45

- low risk tolerance - insurance company controls investment return - assets part of general account 1. Whole life 2. Universal life

Answer 46

- client controls investment return - assets part of separate account 1. Variable life 2. Variable universal life

Answer 47

CRAPO - cash - reduced premiums - accumulate with interest - paid up additions - one year term/5th dividend

Answer 48

CEP - cash - extended term - paid up reduced amount

Answer 49

- cash - pure life/single life - refund - period certain - specified income/period - interest only

Answer 50

- entered into after June 21 1988 - fails to meet the “seven pay test” (included all single premium policies) - distributions/withdraws are taxed LIFO (interest first) - distributions under 59.5 also subject to 10% federal penalty tax (if not disabled) - death benefit is tax free

Answer 51

If the death benefit increases by $150k or less and the insured has guaranteed insurability (no proof of insurability), the policy will not lose its grandfather (non MEC) status If the policy increases by any amount and the insured must provide insurability, the policy may lose its grandfather (non MEC) status

Answer 52

If an interest in a life insurance policy is transferred for valuable consideration (not a gift), the proceeds in excess of the consideration paid for the policy, combined with any premiums paid by the owner, are taxable as ordinary income. Exceptions to the rule: 1. Sale or transfer to the insured 2. Sale or transfer to a partner or partnership in which the insured is a partner 3. Corporation where the insured is a shareholder or officer 4. Divorce

Answer 53

Life to life= ok Life to annuity = ok Annuity to annuity= ok Annuity to life= NO NO NO

Answer 54

No step up in cost basis Entity is owner and beneficiary

Answer 55

Step up in basis Individual owner is owner and beneficiary

Answer 56

Employer is the owner Employee is not a shareholder Deferred compensation

Answer 57

Employee is the owner Employee is a shareholder Employee assigned the policy Deferred compensation

Answer 58

Basis➗payout = tax free

Answer 59

LIFO- interest first value Ordinary income + 10% penalty under 59.5

Answer 60

- must be used by March 15 or forfeited to company (use it or lose it-medical only. Depending care must use by 12/31) - not subject to income tax, FICA, FUTA - health FSA may not be used to reimburse an employee premiums paid for other health plans (MSA, HSA, LTC) - expenses for LTC services cannot be reimbursed under health FSA, but other medical expenses can be reimbursed

Answer 61

- health care premiums - insurance premiums on non-discriminatory group life policy up to $50,000 - company car for working conditions only - employer provided transit passes ($300/month cap) or parking ($300/month cap) - occasional overtime meal money, cab fare, theater or sporting event ticket - discounts on services limited to 20% of selling price charged customers

Answer 62

- health insurance premiums paid for self-employed, partners, and more than 2% owners of S corp are taxable income - 100% is deductible as an adjustment to income on the front of the 1040 - this can include all types of health insurance programs

Answer 63

For figuring out how much the insured owes, make sure to subtract the deductible from the claim Ex: claim is $5k, deductible is $1k, coinsurance is 80/20% 1. $5k - $1k = $4k 2. $4k x 20% = $800 3. $800 + $1k= $1,800 insured person pays

Answer 64

Base benefit + (SIS - social security)

Answer 65

First 20 days- fully paid by Medicare Days 21-100- copayment is required. Insured pays $200 per day and insurance pays above the $200 per day After 100 days- insured (patient) pays the full cost

Answer 66

- cash it in - take a reduced amount of paid up whole life - take a paid up term (extended term) insurance policy - use APL to cover the premium (if elected by the policyholder in the application) - annuitize the cash value

Answer 67

1. Net cash value + loan = total cash value 2. Total cash value - premiums= ordinary income OR 1. Surrender value - (premiums - dividends) = amount taxable A surrender policy is taxed as ordinary income

Answer 68

When the client sells his policy to a viatical company It is a transfer for value that will subject the beneficiary to income tax on the proceeds. The death benefit paid to the viatical company will be subject to income tax above basis

Answer 69

No they are not deductible

Answer 70

As ordinary income in that year

Answer 71

Annuitant received fixed payments

Answer 72

When paid as a bonus to an employee (the employee owns the contract)

Answer 73

Life insurance and health insurance have conversion features Short term disability and long term disability do not have conversion features

Answer 74

2.5 months for a health FSA No grace period for a dependent care FSA

Answer 75

$3,050 for health FSA $5,000 for dependent care FSA

Answer 76

- health insurance premiums - cosmetic items - cosmetic surgery - items that can improve general health (too broad)

Answer 77

- expires when the first person dies - when the first person dies, the other person receives the benefit and the policy ceases - it is less expensive than buying 2 level premium policies

Answer 78

- protection for estate tax liability - means second to die - premium is usually less than a premium for the healthy person alone

Answer 79

For term policies If the policy lapses, you can submit a policy reinstatement form You will have to pay any premiums in arrears but will maintain the premium of the original policy

Answer 80

It is always smart to have an emergency fund to hold you over for a long waiting period especially if you are a spender

Answer 81

If it seems the client likely can’t afford higher premiums (like whole life), term is suitable - key words can be financial edge If they have to fund multiple other insurances (like disability or fund retirement) finding all these dollars to fund everything will be difficult

Answer 82

Relatively small costs for emergency room treatments are covered under medical payments

Answer 83

If being sued, the liability section would likely provide a benefit

Answer 84

1. Building value x 90% coinsurance= insurance required 2. Insurance carried ➗ insurance required = 4 point decimal 3. 4 point decimal ✖️ damage = insurance 4. Insurance - deductible= insurance coverage 5. Damage - insurance coverage = insured pay amount

Answer 85

1. coinsurance ✖️replacement cost 2. If answer 1 Is below the coverage then you do: damage - deductible

Answer 86

Excluded from homeowner policies

Answer 87

1. Purchase price - land = actual home value 2. Actual home value ✖️coinsurance = insured amount If insured amount is less than insurance coverage then it is sufficient coverage - if more than insurance coverage then it is not enough

Answer 88

Covered under “other than collision”

Answer 89

- total permanent disability benefits - rehabilitation benefits - occupational disease benefits

Answer 90

Wise investment choice can help reduce the premium rating (out of pocket cost)

Answer 91

The greater of the cash value or the premiums paid by the employer

Answer 92

If the parent buys the policy and is the owner it does not expire when the kid turns 18. The parent will always be the owner and have control

Answer 93

death benefit + paid up additions Cash value ceases at insured’s death

Answer 94

(Claim - deductible) ✖️ coinsurance Make sure to check what the maximum deductible is- sometimes it’s only for 2 deductibles

Answer 95

- group health can be converted to an individual policy - group life can only be converted to a permanent policy, not term - group disability is not convertible

Answer 96

The actual animal itself is not covered but any economic loss related to the animal is covered

Answer 97

Not a key person policy It’s an employee-benefit type policy application of life insurance

Answer 98

The disability benefits will be excluded from the employee’s income The bonus is taxable so the benefits are tax free

Answer 99

Employer paid sick pay benefit

Answer 100

Covers property that moves from location to location

Answer 101

Medicare part B

Answer 102

Continuous right to maintain policy but insurer may increase premium Less expensive than a non-can policy

Answer 103

Keep disability policy in force after age 65 and still working

Answer 104

Based on purchasing an amount of life insurance equal to individual’s future income-earning ability

Answer 105

Allows you to buy 1 policy and cover 2 people Less expense than buying 2 term polcies

Answer 106

Term insurance isn’t practical

Answer 107

Company pays premiums and benefits are taxable

Answer 108

Violating a statue

Answer 109

Signing a waiver

Answer 110

Basis = viatical purchase price + premiums paid New basis is tax free to the viatical company Death benefit - new basis = taxed at ordinary income

Answer 111

Insurer = insurance company (Medical expenses - deductible) x coinsurance Do not add back deductible for the insurer

Answer 112

A is 20% and B is 80%

Answer 113

- included in life insurance contract - insurer will not contest policy after its in force for a specific period- usually 2 years Exceptions: - no insurable interest at inception of policy - intent to murder - healthy person impersonating applicant in the medical policy