Insurance

Question 1

HSA funding from an IRA

Answer 1

You can without penalty but you still pay tax on the IRA distribution

Question 2

HSA contributions allowed?

Answer 2

$8,300k + $1k for 55+
The HDHP has a minimum deductible and a maximum out of pocket

Question 3

LTC pays for support in various places:

Answer 3

In home (cheapest)
ADC
ALF
Nursing home care (most expensive)

Question 4

Partnership LTC

Answer 4

You can take your premiums and add those onto the Medicaid limits

Question 5

Modified Own Occupation

Answer 5

Starts out as own occ but stops paying when you can do anything else

Question 6

Social Security Disability. How can you claim and how much is taxable?

Answer 6

It’s any occ but they won’t pay unless you can claim you’re out for 12+ months or if you’ll die. Plus there’s a 5 month waiting period and 85% of it is taxable.

Question 7

Universal life

Answer 7

Flexible premiums
Premiums > term b/c it builds CV

Question 8

Universal life Option A

Answer 8

Death benefit remains level

Question 9

Universal life Option B

Answer 9

Death benefit is the FV + CV

Question 10

Universal life investment categories

Answer 10

Fixed, Variable (thru subaccounts), Indexed
Subaccounts aren’t subject to creditors

Question 11

Whole Life

Answer 11

Guaranteed premiums, death benefit, CV
Most expensive

Question 12

Whole Life - Variable

Answer 12

You pay extra and build a CV, not subject to creditors. Investment your CV through a sub account: variable or indexed

Question 13

How can life insurance dividends be paid out?

Answer 13

Cash
Reduce premium
Accumulate
Paid up additions (buy a small policy added to original amount)
One year term policy

Question 14

Life insurance termination: extended term

Answer 14

Use the CV to buy a term policy, keeping the death benefit the same, the term will be the plug. When the term is over, the insurer may allow the policy to be reinstated

Question 15

Life insurance termination: reduced paid up

Answer 15

Keep the CV but reduce the DB. No more premiums. DB moves closer to the CV.

Question 16

Automatic premium loan

Answer 16

If you can’t pay your life insurance premiums, you can get a loan from your CV. The loan is deducted from your DB.

Question 17

Modified Endowment Contract (MEC) penalties

Answer 17

If you take money out before 59.5, distribution is LIFO. Earnings are taxed at ord inc and there’s a 10% penalty on earnings distribution.

Question 18

Viatical settlement rules for dying

Answer 18

You gotta be terminally ill (die < 24 mos) or chronically ill (2 of 6). If you’re terminal you can use the funds tax free. If your chronic, only the funds you use for LTC is tax free.

Question 19

Viatical settlement rules for company

Answer 19

Any death benefit over basis is taxable.

Question 20

Buy/Sell: Cross purchase

Answer 20

N x (N-1)
Death benefits pass tax free to surviving owners + increase in basis

Question 21

Buy/Sell: Entity Purchase

Answer 21

Company buys the policies on the owners
Company gets paid when one dies, no step up in basis for the owners.

Question 22

Buy/Sell Wait & See

Answer 22

Business gets first rights
Owners get next rights if biz only buys 0-49%.
Then business must buy the rest

Question 23

How can annuities be invested?

Answer 23

Fixed
Variable (subaccounts)
Indexed

Question 24

Annuity Exclusion Allowance

Answer 24

Applies for taxation when AT $ is in an annuity. Tax free part of a distribution = basis / (annual payment x life expectancy)

Question 25

Annuity withdrawals

Answer 25

Taxable at ord inc. Plus 10% penalty if before 59.5 unless you’re dead/disabled, or you take equal payments over 5 years.
Earnings come out first (LIFO).

Question 26

Annuity taxation

Answer 26

Earnings and PT contributions are taxed at ordinary income.

Question 27

Homeowners Types

Answer 27

HO2: Home and contents (named perils)
HO3: Home & contents (open perils) + structure (named perils)
HO5: HO3 but open perils for all
HO4: For renters, contents only
HO6: Condos
HO8: Modified. Older/Historic homes

Question 28

Homeowners Insurance: Section 1 Property

Answer 28

A: House
B: Barn (10% of A)
C: Contents (50% of A)
D: Displacement (20% of A)

Question 29

Homeowners Insurance: Section 2 Liability

Answer 29

E: exposure to legal (personal liability)
F: funding for fees (medical payments)

Question 30

Homeowners Coinsurance

Answer 30

In order to be paid in full from a partial loss you have to be covered for 80%+ of the replacement cost. If not, payout formula is
[(Did Have/ 80% of replacement value) X Loss Amount] - deductible

Question 31

Auto insurance Part A

Answer 31

Liability. Either single limit (1 $ cap for all) or
Split: bodily injury, all bodily injuries, property damage)

Question 32

Auto insurance Part D

Answer 32

Collision (damage caused by accident or hitting stationary objects)
Comprehensive (all others including animals, theft, vandalism, falling tree branches, weather)

Question 33

Do you pay a deductible to repair the guy’s car you hit?

Answer 33

No