Insurance Flashcards
What is excluded from Umbrella liability coverage?
- Intentional Acts
- Your own stuff
- Business pursuits
- Worker’s comp obligation
- Malpractice
- D&O activity
What does each category of split limit auto coverage cover?
(A/B/C)
A - Limit for any ONE injured body
B - Limit for ALL injured bodies
C - Limit for ALL property damage
Auto Policy Coverage Categories
“Let Me Understand Dis”
A - Liability
B - Medical pmts
C - Uninsured motorist
D - Damage to auto
Insurance Non-forfeiture options
- Cash; cash value (-) loan
- Reduced Paid-up; lower DB
- Paid-up Term; same DB, less time
What are common benefits under a Cafeteria Plan?
- Term life (x2 salary)
- Medical Insurance
- Disability
- 401k
- FSA
Medicare B Exclusions
- Eyes, ears, mouth
- Dental, eyeglass exam, hearing exam
- Shots (1 free flu/yr)
- Rx
What does Medicare B cover?
A - Dr. Services
B - Tests, Transfusion, Infusion, PT
C - Outpatient
D - Unlimited home health service
E - Preventative Care
F - Counseling (drug, depression)
HO - 2 Coverage
ALL BROAD
A - Dwelling
B - Structure
C - Property
D - Loss of Use
What is excluded in Sec II of a HO policy?
(Liability Exclusions)
- Boats > 50hp or >26ft
- Aircraft
- Someone eligible for worker’s comp
- Vehicles & Rec Vehicles off property
- Activity from a biz
HO Sec I Exclusions
“OPENN WIF”
- Ordinance (law)
- Power Failure
- Earthquake
- Nuclear
- Neglect
- War
- Intentional
- Flood
What does Medicare A cover?
A - ≤ 150 Day Hospital stay
After Hospital Stay:
B - ≤ 100 days Skilled Nursing Home
C - Unlimited home health service
D - Hospice
E - Blood AFTER 1st 3 Pints
What is excluded from Commercial Umbrella liability coverage?
Professional Liability
- Error/Omission (financial dmg.)
- Malpractice (bodily dmg.)
Capital Retention Life Insurance Formula
(Annual Income need/ROR) + 1st year of income need = Total Life Insurance Needed
HO - 4
Renters Policy “4 Rent”
C - Broad
D - Broad (30% of C)
No A
No B
Basic HO Coverage
“WHARVES FLT”
- Wind
- Hail
- Aircraft
- Riot
- Vandalism
- Explosion
- Smoke
- Fire
- Lightening
- Theft
Annuity Exclusion Ratio Formula
- Monthly PMT x Life Expectancy (in Mo.) = Expected Return
- TTL Premium Paid / Expected Return = Exclusion Ratio
NOTE: Annuity PMT x Ex. Ratio = TAX-FREE AMT
How is disability premium/benefit taxed?
- Employee owns, Employee pays
- No deduction
- Tax-free benefit - Employee owns, Employer pays (Sec. 162)
- Employer deduction
- Tax-free benefit - Employee owns, Employer pays (group plan)
- Employer deduction
- Taxable benefit
Note: Sec 162 “Bonus”, Group plan “Salary continuation”
HO - 6
Condo Owner
C - Open
D - Broad (50% of C)
No A
No B
HO - 8
Old House
BASIC
A - Dwelling
B - Structure
C - Property
D - Loss of Use
What is Broad HO Coverage?
“RAFF”
*Basic coverage +
- Rupture of a system
- Artificial Generated Electricity
- Falling Objects
- Freezing Pipe
*Basic:
- Wind
- Hail
- Aircraft
- Riot
- Vandalism
- Explosion
- Smoke
- Fire
- Lightening
- Theft
HO - 5
A - Open
B - Open 10% of A
C - Open 50% of A
D - Open 30% of A
HO - 3
A - Open
B - Open 10% of A
C - Broad 50% of A
D - Open 30% of A
HO - 5 with worse Property coverage
What is covered in HO Sec I
A - Dwelling
B - Structure
C - Property
D - Loss of Use
Property Loss Formula
- Replacement cost x coinsurance % = Required Insurance
- [(Ins. Carried/ Required Insurance) x Loss] - Deductible = Amt. Paid by Insurance
ACV Property Loss Rule
IF:
Insurance carried is < 80% of replacement cost
THEN:
Use GREATER of:
- ACV
- Amt. Paid by Insurance
Note: ACV = Replacement cost - Depreciation
What is excluded in Sec I part C of a HO policy?
- Pets/Animals
- Motor vehicles/Aircraft
- Property belonging to renters
- Your property in a space you rent out
HO - 1
BASIC
A - Dwelling
B - Structure
C - Property
D - Loss of Use
What does a Business Owner’s Policy (BOP)
1. Cover
2. Exclude
- Covers
- Real property
- Contents
- Liability (medical pmt) - Excludes
- Professional Liability
Negligence
“All Nice Students Avoid Violence”
- Attractive Nuisance: pool on property
- Negligence per se: violate a statute
- Strict liability: product recall
- Absolute liability: worker’s comp
- Vicarious liability: pet owner who bites someone
Defense against Negligence
- Assumed Risk: knew skiing was risky
- Contributory Negligence: jaywalking while hit
- Comparative Negligence: 40% your fault
- Last Chance: could have swerved but didn’t
COBRA Coverage
Job-related: 18 months
Non-Job-related: 36 months
+11 Months if disabled within 60 days of event
PPO Keys
- Pay per service
- Not required to stay in network
- Higher deductible than HMO
HMO Keys
- Monthly fee
- Gatekeeper primary care physician
- Not covered out of network
Medicare Supplemental for CFP
Adding Medicare Supplemental is almost always the right answer if asked
PAP “Other Than” Collision Coverages
- Glass
- Falling Objects
- Fire
- Theft
- Earthquake
- Wind
- Hail
- Vandalism
- Riot
- Explosion
- Animal collision
- FLOOD
HO - 15
Rider to add additional coverage to personal property
Add HO - 3
HO Sec II
E - Personal Liability (getting sued)
F - Medical (Think First Aid)
Parts of an Insurance Contract
“DICE”
Declarations: Facts about interested parties
Definitions: Key terms
Insurance Agreement: Promises of Insurance Co.
Conditions: Rights/duties of both parties
Exclusions: When Insurance Co. won’t pay
Risk Management Technique Suitability
High Severity/Low Frequency - Transfer
High Severity/High Frequency - Avoidance
Low Severity/Low Frequency - Retention
Low Severity/High Frequency - Retention/Reduction
Insurable Risk Characteristics
- Big enough group of similar risks
- Loss is definite & measurable
- Loss is accidental
- Loss not catastrophic to Insurance Co.
When is a company required to offer COBRA?
- Offer group or self-funded health coverage
- > 20 Employees (FT & PT)
HSA Keys
- Have High Deductible Health Plan
- Contributions are deductible (Employer & Employee)
- Non-qual. distribution = 20% penalty
- TOD tax-free to spouse, ord. inc. to non-spouse
Health Reimbursement Arrangement Keys
100% Employer-funded
Employer reimburses employee for medical expenses
Total Disability Designations
Own-occupation: Can’t perform your job
- Highest premium
Modified own/any: Can’t perform job within your experience/skill set
Split: Own-occupation in 1st phase, Modified in 2nd phase
Disability Continuance Provisions
Noncancelable:
- Can’t lose coverage from claims
- Premium is fixed
Guaranteed Renewable:
- Can’t lose coverage from claims
- Premium may go up
Social Insurance Substitute Benefit
(SIS)
- Disability rider to protect against Social Security disability claim
- If SS pays full disability claim, SIS does not pay
Disability Premium/Benefit Taxation
Employee pays:
- Premium: Deductible
- Benefit: Tax-free
Employer pays (Bonus/Sec 162):
- Premium: Employer deductible
- Benefit: Tax-free
Employer pays (Salary continuation/Group Plan):
- Premium: Employer Deductible
- Benefit: TAXABLE
Partnership Disability Premium Benefit/Taxation
Partner or >2% S-Corp owner:
- Premium: Business deductible
- Benefit: Tax-free
Medicare Skilled Nursing Coverage
Day 1-20 = 100% Medicare
Day 21-100 = Co-pay
Day 100+ = 100% Patient
Human Life Value Analysis
- Considers PV of lost income for dependents
- No other assets are considered (existing life insurance, investments)
LI Contract Provisions
(No Added Premium)
- APL: Lapsed premium paid from cash value, reduces policy values
- Grace period: Have 30days extra to pay premium
- Reinstatement clause: Can continue coverage after a lapse, with some conditions
- Misstatement of age: Ins. Co. will adjust age and then DB
- Incontestability clause: After 2yr. policy is yours (except for fraud)
- Suicide clause: DB not paid out if suicide within 2yr of issue
Automatic Premium Loan
- If elected, cash value will pay lapsed premiums
- Remaining cash value and DB will be reduced
Reinstatement Clause
- If policy lapses, you can continue coverage
- Conditions:
- Proof of insurability
- Pay missed premiums in arrears
- Pay interest charged on missed premiums
LI Dividend Options
“CRAPO”
- Cash: Paid to insured tax-free
- Reduced premium: Dividend applied to premium amt.
- Accumulate with interest: Stays with insurance co.
- Interest paid is taxable
- Paid-up: purchases small amt. of additional policy
- One-year term: purchases one year of term
- “5th Dividend option”
LI Non-forfeiture Options
- Cash: Cash value paid at surrender
- Reduced Paid-up: Cash value applied to smaller policy DB, no more premiums
- Paid-up Term: Cash value buys a term policy. DB doesn’t change
LI Settlement Options
- Cash: Lump sum paid to bene
- Interest: Temporary hold of DBl, interest paid only
- Interest is taxable
- Fixed period: Up to 30yrs
- Fixed amount
- Life Income: Same options available as annuity (straight life, joint life, period certain, life w/ period certain)
Whole Life Taxation
When surrendered:
Cash Value > Cost Basis = Ordinary income
Dependent Care FSA Keys
- Max. Tax-free reimbursement of $5000/yr
- Only available for two working spouses
- One spouse ok if other is disabled/student
- Tax-free reimbursement reduced eligible expense for dependent care credit
Health FSA Keys
- Employee pre-tax contribution limit of $3,200
- No tax-free benefits for LTC
- Plan may have 2.5mo grace period to use balance
or - $640 rolling balance
NOT BOTH
