Insurance Flashcards
Negligence per se
Situation where standard of care is set by statute (school zones, crosswalks)
Strict Liability
Generally limited to manufactures and distributors of products found to be defective. Examples include Romain lettuce with E. coli bacteria cars found defective.
Absolute Liability
An extra hazardous condition which results and losses to others. Examples include keeping of wild animals and blasting.
Vicarious Liability
When one person is held liable for the negligent behavior of another person. Examples include a branch manager at the broker dealer who is responsible for the representatives and a manager at an insurance company who is responsible for the agents.
Contributory Negligence
Any negligence on the part of the injured party, although slight defeats the claim. Examples include jaywalking and driving while drunk.
Last clear chance
Any contributory negligence of the injured party will not bar recovery of damages if the other party, immediately prior to the accident, had a last chance to prevent the accident, but failed to do so. For example, road rage.
Needs Analysis: Capital Utilization
• factors annuitization to fund future income needed, but leaves no money at the end of the anticipated distribution period.
• what’s needed until end of plan, get insurance for that
Needs Analysis: Capital Retention (cap pres)
• this method presumes that only interest is distributed. The original capital is still left at the end of the income period.
Disability Income insurance
Disability carriers will typically issue only about 50% to 60% of earned income. This may be improved by adding group disability coverage after the individual policy has been issued.
Perils
Basic (WHARVVES/FLT): windstorm, hail, aircraft, riot, vandalism, vehicle,explosions, smoke, fire, lightning, theft.
Broad (RAF): Basic + rupture of system, artificially generated electricity and falling items
Exclusions to Homeowners Insurance
OPENN WIF: Ordinance of law, power failure, earthquake, nuclear or neglect, war, intentional, flood
Business owners policy (BOP)
The business owners policy is for small to medium-size businesses. The normal policy is a package that provides real property contents and liability protection. Professional liability is specifically excluded. The premium is deductible to the business.
Malpractice insurance
Appropriate, where the substandard conduct may result in bodily injury, for example, for physicians or dentists
Errors and omissions insurance
Appropriate, where the substandard conduct may result in property damage. Such situations include damage to intangible property, such as loss of money professionals who carry errors in admissions and insurance include lawyers, insurance agents, stockbrokers, and financial planers.
Health maintenance organizations (HMO)
A wide range of comprehensive healthcare services to a group of subscribers and return for payment and delivery features for a fixed premium.
Disadvantages: having to go through a gatekeeper the subscriber is not covered when he or she uses a provider other than the HMO. Subscribers are required to obtain their care from providers who are affiliated with the HMO.
Preferred provider organizations (PPO)
Represent a group of healthcare providers, contracting with insurance companies, third-party administrators, or others to provide medical care services at a reduced fee. PPO’s differ from HMO’s and two major respects:
1) healthcare providers in the PPO are generally paid on a fee for service basis as needed
2) employees are not required to use practitioners or facilities of the PPO. They can go outside of the network, but benefits are generally reduced relative to benefits. Paid for network provided care. For this reason deductibles will be higher.
COBRA: the consolidated omnibus budget reconciliation act
Employers, providing group or self funded health coverage are required to offer terminated employees. The right to buy continued health coverage identical. Small companies (fewer than 20 employees for at least half of the prior year) are also exempt from the federal legislation.
Both full and part time are counted to determine whether our plan is subject.
Each part-time employee counts as a fraction of an employee.
1) Termination, change from FT to PT: Up to 18 months
2) Employee’s death, divorce, legal separation or eligibility for Medicare: up to 36 months
3) Loss of dependent status: 36 months
Parts of Insurance Contract
DDICE
1) Declaration page- identify person and property
2) Definitions-explain terms
3) Insuring Agreement-promise of insurance company
4) Conditions- duties and rights
5) Exclusions- insurer won’t pay
Participating versus non-participating insurance policy
A participating policy pays an annual dividend to the policyholder. It charges larger premiums. If the extra premium is not used, it is returned to the policyholder as a dividend tax-free.
In a non-participating policy, the company retains the profits for its shareholders.
Medicare Part A
Part A:
1) hospital care
2) Care in a nursing home (LIMITED- 20 first days after 3 days in hospital. Then, next 80 days after specified amount)
3) home health services
4) care in a hospice
Medicare Part B
Part B: Medical Insurance (VOLUNTARY + premium paid)
1) Physicians Service
2) Home health services
3) Diagnostic Test
4) All Outpatient services of a hospital
Medicare usually pays 80% after deductible
Medicare Part D
Part D: DRUGS
MUST have Medicare A & B. Is additional premium.
Disability Tidbits
-SS waiting period is five months.
-Policies written today pay benefits to age 65 but can have shorter duration
Disability Provisions
-residual benefits rider: benefits are proportional to the income, lost and payable for the same duration as the policies maximum benefit period
-Partial disability rider: benefit is usually 50% of total disability benefit. The maximum period is limited usually 3 to 6 months while the insured recuperates.
-Waiver of premium provision: may wave premium if the insured policyholder becomes totally disabled and the disability lasts for some specified minimum. 90 days or longer.
-Social insurance substitute benefit: extra benefit until Social Security pays. Buying insurance on being denied Social Security disability benefit..
Long Term Care Insurance
- premiums paid in unreimbursed expenses for qualified long-term care services are deductible as itemized medical expenses
- Deductions are subject to the 7 1/2% of AGI floor
- Deduction is subject to dollar amounts limited based on age: 51-60 ($1,760) and 61-70 ($4,710)
Qualified longevity annuity contract (QLAC)
A deferred fixed annuity funded from an IRA or qualified retirement plan design designed to keep the client or spouse from outliving their retirement savings.
They provide a guaranteed monthly stream of income later in life.
The longer you defer the start date the higher your payments will be.
QLACs can defer income tax by reducing RMDs
Annuity Taxation
Contracts issued after August 13, 1982, our tax last in first out
Withdrawals prior to age 59 1/2 are subject to ordinary income tax plus a 10% premature, withdraw penalty
Contributions before 1982 remain first and first out
Life Settlement
Describes a transaction involving an insured who is not terminally or chronically ill and is generally age 65 or above.
Someone selling their life insurance .
Text as part of the settlement and will be treated as long-term gain.
