Insurance Flashcards
HSA funding from an IRA
You can without penalty but you still pay tax on the IRA distribution
HSA contributions allowed?
$8,300k + $1k for 55+
The HDHP has a minimum deductible and a maximum out of pocket
LTC pays for support in various places:
In home (cheapest)
ADC
ALF
Nursing home care (most expensive)
Partnership LTC
You can take your premiums and add those onto the Medicaid limits
Modified Own Occupation
Starts out as own occ but stops paying when you can do anything else
Social Security Disability. How can you claim and how much is taxable?
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.
Universal life
Flexible premiums
Premiums > term b/c it builds CV
Universal life Option A
Death benefit remains level
Universal life Option B
Death benefit is the FV + CV
Universal life investment categories
Fixed, Variable (thru subaccounts), Indexed
Subaccounts aren’t subject to creditors
Whole Life
Guaranteed premiums, death benefit, CV
Most expensive
Whole Life - Variable
You pay extra and build a CV, not subject to creditors. Investment your CV through a sub account: variable or indexed
How can life insurance dividends be paid out?
Cash
Reduce premium
Accumulate
Paid up additions (buy a small policy added to original amount)
One year term policy
Life insurance termination: extended term
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
Life insurance termination: reduced paid up
Keep the CV but reduce the DB. No more premiums. DB moves closer to the CV.
Automatic premium loan
If you can’t pay your life insurance premiums, you can get a loan from your CV. The loan is deducted from your DB.
Modified Endowment Contract (MEC) penalties
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.
Viatical settlement rules for dying
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.
Viatical settlement rules for company
Any death benefit over basis is taxable.
Buy/Sell: Cross purchase
N x (N-1)
Death benefits pass tax free to surviving owners + increase in basis
Buy/Sell: Entity Purchase
Company buys the policies on the owners
Company gets paid when one dies, no step up in basis for the owners.
Buy/Sell Wait & See
Business gets first rights
Owners get next rights if biz only buys 0-49%.
Then business must buy the rest
How can annuities be invested?
Fixed
Variable (subaccounts)
Indexed
Annuity Exclusion Allowance
Applies for taxation when AT $ is in an annuity. Tax free part of a distribution = basis / (annual payment x life expectancy)
Annuity withdrawals
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).
Annuity taxation
Earnings and PT contributions are taxed at ordinary income.
Homeowners Types
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
Homeowners Insurance: Section 1 Property
A: House
B: Barn (10% of A)
C: Contents (50% of A)
D: Displacement (20% of A)
Homeowners Insurance: Section 2 Liability
E: exposure to legal (personal liability)
F: funding for fees (medical payments)
Homeowners Coinsurance
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
Auto insurance Part A
Liability. Either single limit (1 $ cap for all) or
Split: bodily injury, all bodily injuries, property damage)
Auto insurance Part D
Collision (damage caused by accident or hitting stationary objects)
Comprehensive (all others including animals, theft, vandalism, falling tree branches, weather)
Do you pay a deductible to repair the guy’s car you hit?
No
