Insurance Flashcards
Risk: high severity, high frequency
avoidance
- most serious type of risk
Risk: low severity, high frequency
retention/reduction
- minimal financial loss, too expensive to insure
Risk: high severity, low frequency
insurance
- ‘tree falls on house’
- financial loss could be severe, but doesn’t happen often
Risk: low severity, low frequency
retention/reduction
- minor injuries, illnesses, car door dings
Emergency Fund (>, =, <) Deductible
> , =
Peril definition
actual cause of loss
Hazard definition
increase types of perils happening
- physical
- moral
- morale
Adverse Selection definition
unhealthy
- more likely to claim
Principle of Indemnity
cannot profit from insurance
Subrogation Clause
cannot gain money from both insurance and 3rd party
Replacement cost
good
- FMV of replacement property with new materials of like kind
Actual Cash Value
depreciated (not good)
- essentially replacement cost - depreciation
Agreed Upon Value
typically used for art, antiques
- appraisal
Coinsurance formula for home insurance
[amount coverage purchased / (replacement cost * .8)] x (loss - deductible)
Rating Agencies list
AM Best’s
Moody’s
AM Best’s high/low
- high (A++, A/A-)
- low (C/C, D)
Moody’s high/low
- high (Aaa, Aa1/Aa2)
- low (B1/B2/B3 to Caa)
Insurance Regulation definition
- regulation at state level
- legislative branch
- judicial branch
- Executive/State Insurance Commissioner
Legislative Branch definition
- provides for licensing of agents
- enacts laws & requirements for doing business in particular state
Judicial Branch definition
- rules on constitutionality of laws passed by legislative branch
- renders decisions & interpretations regarding policy terms
Executive/State Insurance Commissioner
- administers, interprets and enforces insurance laws
- member of NAIC
Capital Needs Approach definition
- income needs, educations & retirement funding
Human Life Value Approach definition
- amount of income earned - amount consumed by insured
Capital Retention
- TVM
- not invade capital
- use as income generator
Income retention
- TVM
- use up all account
- maintain income level
Income multiplier
- multiple of income
Dividend Options (CRAPO)
- Cash
- Reduce future premiums
- Accumulate at interest
- Paid-up permanent additions (purchase of)
- One-year term insurance aditions (purchase of)
Taxation: life insurance for life insurance
tax free
Taxation: life insurance for annuity
tax free
Taxation: annuity for life insurance
taxable
Taxation: annuity for annuity
tax free
Taxation on withdrawal from annuity: pre-1982
FIFO
Taxation on withdrawal from annuity: after-1982
LIFO
Patient Protection & Affordable Care Act (PPACA)
- requires most US citizens/legal residents to have health insurance
- guarantee issue & renewability
- covers dependents up to 26 yrs old
- prohibit lifetime limits & annual limits on coverage
PPACA employer requirements
- 50+ full time EE
- must offer affordable coverage
- penalty fee of $4,320 per EE excluding first 30 EE from assessment
PPACA Plan categories for coinsurance
- Bronze 60% costs
- Silver 70% costs
- Gold 80% costs
- Platinum 90% costs
Preferred Provider Organizations (PPOs)
- flexible to see doctors outside of network
- more expensive
Health Maintenance Organization (HMOs)
- cheaper
- only coverage IN network
- primary care physician
Health insurance provisions
- non-cancelable policies
- guaranteed renewable policy
Non-cancelable policy
- health insurance provision
- more expensive
- continuous
- premium fixed
- right to renew until specific age/number of years
Guaranteed renewable policy
- health insurance provision
- typical through ER
- insurance company allowed to adjust premiums
COBRA requirements
- ER who offers group health plan
- has at least 20 full time EE
Long term care coverage options (7)
- skilled nursing (nursing home/phsycian ordered)
- intermediate nursing (occasional nursing care/physician ordered)
- custodial care (assistance with eating, dressing, bathing, etc)
- home health care (in-home nursing/necessary assistance)
- assisted living (apartment style living with healthcare services)
- adult day care (daily assistance while spouse/family works)
- hospice care (terminally ill, at home, hospital or nursing facility)
LTC variables: Elimination period
deductible (shorter time = more expensive)
LTC variables: Daily benefit
$100-$200
LTC variables: Benefit period
how long (3-5yrs)
LTC Qualified requirements
- no surrender value
- limited to qualified LTC services
- use dividends to reduce future premiums/increase benefits
- meet customer protection laws
- doesn’t pay for expenses covered under Medicare
LTC: > 70yrs old maximum deduction amount
$5,960
- portion of LTC premiums are tax deductible subject to medical deduction of 7.5% AGI
DI: Any Occupation
- cheapest
- hardest to qualify
- considered disabled if insured cannot perform duties of ‘Any Occupation’
DI: Own Occupation
- most expensive
- highly specialized field
- considered disabled if insured cannot perform duties of his ‘Own Occupation’
DI: Modified Any Occupation
- considered disabled if unable to perform duties of gainful occupation they’re reasonably fitted by education, experience, training, and prior economic status
DI: Split Definition
- begins with own occupation, and moves into modified any occupation
- ‘pay 5 yrs, then switch’
HO Insurance: Section 1 Coverages
- A: Dwelling
- B: Other Structures
- C: Personal Property
- D: Loss of Use
HO Insurance: Section 2 Coverages
- E: Personal Liability
- F: Medical Payments to Others
HO Insurance: Basic Named Perils (SLW FVVVHEART)
*one word descriptions
- smoke
- lightning
- windstorm
- fire
- vehicles
- vandalism
- volcano
- hail
- explosion
- aircraft
- riot
- theft
HO Insurance: Broad Named Perils (FAS-FWD)
*multi-word descriptions
- falling objects
- accidental overflow of water (not flood)
- sudden bursting of appliances
- freezing of system/appliance
- weight of snow/ice/sleet
- damage from electrical current
HO Policies General Exclusions
- movement of ground
- ordinance of law
- damage from water (flood/water from underground and sewer backup)
- war/nuclear hazard
- power failure
- intentional act
- neglect
HO-1 Basic Form
only covers basic named perils
HO-2 Broad Form
basic and broad named perils
HO-3 Special Form
- coverage on dwelling and other structures on open perils basis (coverage against all physical loss other than those specifically excluded)
- personal property covered on named-peril basis (can endorse for open perils and recommended)
HO-4 Contents Broad Form
- 4 RENT
- protection for furniture, clothes, and other personal property against same perils as HO-2
HO-5 Comprehensive Form
- always recommended
- dwelling & personal property covered on open peril basis
HO-6 Unit Owners Form
- condos
- basic & broad named perils
- no building coverage
- personal property coverage same named perils as HO-2
- endorsements can be added (provide open peril on items/personal property/loss of unit rental/assessment coverage)
HO-8 Modified Form
- historic
- covers repair rather than replacement cost
- basic perils covered
- cover losses to structures where jreplacement cost for home exceeds market price for home
HO-1 Coverage Summary
- coverage A-D = basic
HO-2 Coverage Summary
- coverage A-D = broad
HO-3 Coverage Summary
- coverage A & B = Open
- coverage C = Broad
- coverage D = Open/Broad
HO-4 Coverage Summary
- coverage A&B = N/A
- coverage C&D = Broad
HO-6 Coverage Summary
- coverage A = Broad
- coverage B = N/A
- coverage C&D = Broad
HO-8 Coverage Summary
- coverage A-D = Basic
Inland Marine definition
- specialty items
- coverage usually included in HO as scheduled endorsement (scheduled floater)
- personal furs/jewelry/silverware/camera/fine art/antiques, etc
PAP Part A: Liability Coverage
- for being sued
- covers you, any family member, any person using car with your permission
- coverage: bodily damage per person/per occurrence/property damage per occurance (50/100/50)
PAP Part B: Medical Payments
- covers you, any family member, or other person occupying vehicle
- you or family as a pedestrian struck by an auto
- coverage: per person/per occurrence basis ($5,000 limit per person, four persons in car = $20,000 limit)
Collision
- protects against accident involving another car
- running off road
- into creek/lake/tree/wall
Comprehensive or Other Than Collision
- falling objects
- fire
- theft
- windstorm
Negligence on part of the injured party: Contributory
persons negligent actions contributed to loss
- CANNOT recover
Negligence on part of the injured party: Comparative
persons negligent actions contributed to loss
- CAN recover portion of loss from other negligent party
OASDI is ___% (both ER & EE) up to wage base $_____
- 6.2% each (12.4% total)
- $160,200 (2023)
Medicare is ___% (both ER & EE) on unlimited amount of wages
- 1.45% each (2.9% total)
Additional Medicare Tax of __% (EE) on income in excess of $_____ single or $_____ MFJ
- 0.9%
- single $200,000
- MFJ $250,000
Social Security: PIA Reduction of benefits if retire early
- reduced 5/9 for each month for first 3 yrs that worker retires early
- reduced 5/12 for each month > 3 yrs
*** used jointly (if retired 5 yrs early, then 5/9 for first 3 yrs, then 5/12 for other 2 yrs)
Social Security: PIA Increase in benefits when delay taking benefits
- born 1943 or later has yearly increase of 8% (simple interest i.e. 8% first yr delay, 16% second yr delay)
Social Security: PIA Increase in benefits monthly
- born 1943 or later monthly rate increase of 2/3 of 1%
Social Security Disability definition
- disability expected to last 12 months OR
- disability will result in death AND cannot perform duties of any occupation
- severe physical/mental impairment expected to prevent worker from performing substantial work for at least 1 yr/result in death
- depends on credits earned/when disabled
SS: Fully Insured
must earn 40 quarters of coverage (10yrs)
- 1 quarter = $1,640 wages
SS: Covered Disability if age 31+ requirements
fully insured (40 quarters)
- earned 20 quarters in last 10 yrs
SS: Covered Disability if age 24-31 requirements
1/2 calendar quarters elapsed sincer worker reached age 21
- If at age 27 you become disabled, you would need 12 work credits in the past six years (between age 21 and age 27)
SS: Covered Disability if age 21-24 requirements
6 quarters earned
SS Benefits: 1st Hurdle
$25,000 (single)
- $32,000 (MFJ)
SS Benefits: 2nd Hurdle
$34,000 (single)
- $44,000 (MFJ)
Medicare Definition
federal health insurance for 65+
- auto enroll if receiving SS at 65
- not receiving SS at 65 - MUST enroll 3 months before/after
Medicare Part A covers
Hospital Insurance (covers places)
- inpatient hospital care
- skilled nursing care following covered hospital stay
- home health care
- hospice
- semi-private rooms
- meals
- operating & recovery room
- lab tests
- X-rays
Medcare Part A doesn’t cover
custodial services
Medicare Part A summary
free part
- no monthly pay while using
- deductible $1,600 per benefit period (1st 60 days)
- coinsurance doubles
– $400/day for 61-90 days, $800/day for 91-150 days
– $200/day skilled nursing (21-100 days) - first 20 days covered 100%
Medicare Part B summary
- pays 80% approved charges (coinsurance)
- no max out of pocket
- monthly cost
- auto enroll unless opt out
Medcare Part B doesn’t cover
dental care, dentures
- cosmetic surgery
- hearing aids
- eye exams
- routine physical exams
Medicare Part C summary
medicare advantage/medicare managed care plan
- must have part A & B
- monthly premium
- covered emergency & urgent care
- may provide extra benefits like dental care, eyeglasses, wellness programs
Medicare Part D summary
drugs
- usually monthly premium
- deductible and coinsurance amount
Res Ipsa Loquitor
- the thing speaks for itself
- no need to prove negligence
Parol Evidence Rule
- once contract is placed in written form, all previous/prior understandings of verbal contract is not allowed to contradict written contract
Estoppel
- right has been waived
- company will be stopped from denying claim
Waiver provision
- company representatives cannot change the contract
