Insurance

Question 1

Rev. Insurance 1-2 A company can neither purchase nor own a life insurance policy in which of the following circumstances? Insuring the life of a key employee, funding a stock purchase agreement, funding a non qualified deferred comp, funding a cross purchase buy sell agreement?

Answer 1

Funding a cross purchase buy sell agreement.
The employer has no insurance interest in a cross a cross purchase.

Question 2

Rev insurance What is not covered under Kathy’s homeowners policy?

Question 3

Rev Ins An employee, while at work attacks a customer. The owner of the business will be held liable under which of the following? Strict, absolute, general liability or intentional tort?

Answer 3

General liability. Think of absolute liability as wild animals or Workmans comp…

Question 4

Rev. In’s What would a business owner purchase to package together real property, contents and general liability protection?

Answer 4

BOP Business owners policy

Question 5

Rev Ins How many employees do you need to have to have Cobra come into play?

Answer 5

20 for atleast half of the prior year

Question 6

Rev Ins an employer has 15 full time and 10 part time employees. However only 9 are covered under the company health plan. Will the 9 employees be covered by cobra?

Answer 6

No the 10 part timers have to make up for the 5 needed full time employees. Unlikely that it will make the 20 requirement with only 10 part timers.

Question 7

Rev Ins if an employee of a company with 28 employees voluntarily terminated but wasn’t taking the company health insurance. Would he qualify for cobra?

Answer 7

No, must be participating

Question 8

Rev Ins Does cobra cover group dental and vision? Disability?

Answer 8

Yes, no on disability

Question 9

Rev. Ins Client was laid off. Covered under company health plan. What are he and his family’s cobra options?

Answer 9

Can continue coverage for 18 months

Question 10

Rev Ins An individual in a HSA becomes eligible for Medicare. Does she become ineligible as a participant?

Answer 10

Mere eligibility for Medicare doesn’t preclude HSA contributions. An individual once enrolled in Medicare Part A and B may not contribute to a HSA

Question 11

Rev Ins Are insurance premiums qualified medical expenses?

Answer 11

Only certain insurance premiums such as COBRA and qualified long term care insurance are qualified medical expenses.

Question 12

Rev Ins. A trial attorney lost his voice over a year ago. Now works as a law researcher at the firm. Mad cuz his disability policy isn’t paying out. Why?

Answer 12

Loss of speech could be a presumptive disability. Could be a loss of income policy. Policy could be a modified any occ policy.

Question 13

Rev Ins which is more expensive to have on a policy. Non can or guaranteed renewable? Why

Answer 13

Non can is more expensive. Guaranteed renewable can increase the premium on the class of insureds…

Question 14

Rev ins Lori age 49 needs life insurance for 25 years, then wants to borrow or withdraw the cash value from the policy over her retirement years , keeping the policy in force. Which of the following best suits her needs? Endowment, VUL, Single premium variable life, universal life

Answer 14

Variable Life.

Question 15

Rev ins Martha borrowed substantially against her whole life policy. She is concerned about the reduced benefit due to the loan. Which dividend option should she elect? Paid up, extended term, reduced paid up, 5th dividend

Answer 15

5th dividend. Extra one year term

Question 16

Rev ins Howie and frank enter into a cross purchase buy sell agreement for both life and disability. Current basis is $1k. Company valued at 1 million. If Howie becomes totally disabled and dies. Who gets paid and by who? Tax consequences and cost basis?

Answer 16

Frank receives 500k income tax free. Franks basis would be 501k if he sold HF for 1 million. Howie would receive 500k in cash not dividends from Frank

Question 17

Rev Ins How long of a waiting period does SIS have?

Answer 17

5 months, but a disabled person generally must wait 12 months because social security won’t pay if disability is less than 12 months.

Question 18

Rev Ins what are the 6 daily activities ADLs?

Answer 18

Eating, bathing, dressing, transferring from bed to chair, using the toilet, and maintenance continence. Cognitive impairment like Alzheimer’s and strokes, brain damage would count.

Question 19

Rev ins What is the qualified long term care dollar amount limitation?

Answer 19

50-61 1,760
61-70 4710

Question 20

Rev ins what is the look back rules for Medicaid?

Answer 20

5 yr look back. Anything given away in the last 5 years is brought back as an asset. Also ineligible if have more than 700k in home equity.

Question 21

Rev Ins What are the dividend options?

Answer 21

CRAPO
Cash, reduction of premiums, Accumulated with interest, Purchase paid up additions, one year term (5th dividend)

Question 22

Rev. Ins what are the non forfeiture options?

Answer 22

Cash, reduced paid up insurance, paid up term/extended term

Question 23

Rev ins. Taxation of whole life surrender.

Answer 23

Cash value above cost basis at the time of surrender.

Question 24

Rev Ins. Sam purchased a whole life policy years ago. Currently the policy’s values are as follows. Face amount 100k, premiums 2k, dividend 1200, cash value 35k, paid up additions 30k, cash value of paid up addition 20k.
What is his death benefit? What would his surrender amount be?

Answer 24

DB = face amount + paid up additions = 130k
Surrender = cash value + cash value paid up additions = 55k

Question 25

Rev Ins. Whole life policy cash value 50k, premiums billed 35k, outstanding loan 30k, dividends reducing premium 15k. If he surrenders, what will the insurance company pay? What is the taxable amount?

Answer 25

20k cash pay out (subtract loan) 30k …premiums paid less dividends received then subtracted from cash value.

Question 26

Rev. Ins What is the transfer for value rule, how does it effect taxation.

Answer 26

Makes death proceeds taxable. Transfers that are not jeapordized are 1. Transfer to the insured 2. Transfer to a partner of the insured 3. Transfer to a corporation in which the insured is a shareholder or an officer 4. Transfer pursuant to a divorce agreement ICDeadPpl

Question 27

Rev. Insurance what are the rules for converting life to life life to annuity and annuity to life?

Answer 27

Life - annuity ladder Set up a ladder in your head. Can go life down to annuity, life to life, but not float up from annuity to life.

Question 28

Rev Ins. Describe when is life insurance given considered a gift and when it’s a sale?

Answer 28

When gifted to family members for no consideration (money) it’s considered a taxable gift but no impact on transfer for value. When it’s sold to a family member no impact on gift taxes but does have transfer for value issues.

Question 29

Rev ins buy sell agreement. Who is owner, insured, bene.

Answer 29

Stock redemption - Corp, (one of the owners), Corp Cross purchased- one stockholder, other stockholder, 1st owner

Question 30

Ins. Cost basis impacts on both buy sell agreements.

Answer 30

Stock redemption- Corp buys out the other shareholder, so the other owners don’t get stepped up. Cross purchase- owner buys out the other owner so he gets a step up.

Question 31

Rev Ins Split Dollar plan. Owner, insured, bene?

Answer 31

Endorsement - Employer, Employee, Employer first to the extent of the premiums and then the employees family. Assignment- Employee, Employee, Employee assigns the policy. If he dies, the company gets whatever they gave/loaned the employee. Collateral assignment is much better for the employee because they have full control.

Question 32

Ins - What are the two areas of FSA? What can you put in? Carry forward?

Answer 32

Healthcare- 3,200, use it or lose it. Can carry forward 640 or 2.5 month grace period. Dependent Care-Employer “could” put money in. 5000 max deferral. For kids under 13. Hard use it or lose it.

Question 33

Ins. What can’t be included in a VEBA?

Answer 33

Deferred comp

Question 34

Ins. Clients are married. Both in 60s. Will need 1 million for estate taxes. Husband has high blood pressure, diabetes and obese. Wide is healthy. What’s the best insurance policy? Adjustable life on wife, level term on wife, first to die on both using variable universal, survivorship life using a universal life policy, whole life on wife?

Answer 34

Survivorship life using a universal policy.

Question 35

Ins what is guaranteed renewability?

Answer 35

The policy owner has the right to renew the policy.

Question 36

Ins. What is a survivorship/second to die policy usually used for?

Answer 36

Pay estate taxes

Question 37

Ins. For Medicare insurance, how could someone receive benefits if under 65?

Answer 37

Potentially if disabled.

Question 38

Ins. Client owns apartment building FMV 1 mill. Value is 800k. Insured for 640k with 90% coinsurance requirement and 2,500 deductible. What amount of the claim is paid by the fosters in the fire damages are 102,500?

Answer 38

13,888 (answer the question)

Question 39

Ins when does the 50k group life insurance exclusion from taxable income apply?

Answer 39

In a non discriminatory plan

Question 40

Ins How is a group life policy of 120k taxed at death of insured?

Answer 40

Table 1 coverage over 50k minus the amount paid would be taxable income.

Question 41

Ins. Can someone reassign their group term life? How would it impact estate taxes?

Answer 41

Yes, if it’s over 3 years then it’s not includable in estate.

Question 42

Ins describe a split dollar plan.

Answer 42

Life insurance arrangement under which the employer and an EXECUTIVE share costs and benefits of a life insurance policy.

Question 43

Ins What is BOE insurance and how does a self employed policy differ from C and S Corp?

Answer 43

Policy covers ongoing costs of operating a business while the business owner is totally disabled. Could be 1-2 years. Self employed deductible as business expense and proceeds are taxable. S/C Corp can’t deduct premiums and disability income is tax free.