Insurance Flashcards

1
Q

What is excluded from Umbrella liability coverage?

A
  • Intentional Acts
  • Your own stuff
  • Business pursuits
  • Worker’s comp obligation
  • Malpractice
  • D&O activity
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2
Q

What does each category of split limit auto coverage cover?

(A/B/C)

A

A - Limit for any ONE injured body

B - Limit for ALL injured bodies

C - Limit for ALL property damage

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3
Q

Auto Policy Coverage Categories

A

“Let Me Understand Dis”

A - Liability
B - Medical pmts
C - Uninsured motorist
D - Damage to auto

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4
Q

Insurance Non-forfeiture options

A
  • Cash; cash value (-) loan
  • Reduced Paid-up; lower DB
  • Paid-up Term; same DB, less time
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5
Q

What are common benefits under a Cafeteria Plan?

A
  • Term life (x2 salary)
  • Medical Insurance
  • Disability
  • 401k
  • FSA
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6
Q

Medicare B Exclusions

A
  • Eyes, ears, mouth
    • Dental, eyeglass exam, hearing exam
  • Shots (1 free flu/yr; 1 free pneumonia/yr)
  • Rx
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7
Q

What does Medicare B cover?

A

A - Dr. Services
B - Tests, Transfusion, Infusion, PT
C - Outpatient
D - Unlimited home health service
E - Preventative Care
F - Counseling (drug, depression)

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8
Q

HO - 2 Coverage

A

ALL BROAD

A - Dwelling
B - Structure
C - Property
D - Loss of Use

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9
Q

What is excluded in Sec II of a HO policy?

(Liability Exclusions)

A
  • Boats > 50hp or >26ft
  • Aircraft
  • Vehicles & Rec Vehicles off property
  • Someone eligible for worker’s comp
  • Activity from a biz
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10
Q

HO Sec I Exclusions

A

“OPENN WIF”

  • Ordinance (law)
  • Power Failure
  • Earthquake
  • Nuclear
  • Neglect
  • War
  • Intentional
  • Flood

SINKHOLE COVERED IF HOUSE DAMAGED

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11
Q

What does Medicare A cover?

A

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

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12
Q

What is excluded from Commercial Umbrella liability coverage?

A

Professional Liability

  • Error/Omission (financial dmg.)
  • Malpractice (bodily dmg.)
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13
Q

Capital Retention Life Insurance Formula

A

(Annual Income need/ROR) + 1st year of income need = Total Life Insurance Needed

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14
Q

HO - 4

A

Renters Policy “Broad city rented”

C - Broad
D - Broad (30% of C)

No A
No B

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15
Q

Basic HO Coverage

A

“WHARVES FLT”

  • Wind
  • Hail
  • Aircraft
  • Riot
  • Vandalism
  • Explosion
  • Smoke
  • Fire
  • Lightening
  • Theft
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16
Q

Annuity Exclusion Ratio Formula

A
  1. Monthly PMT x Life Expectancy (in Mo.) = Expected Return
  2. TTL Premium Paid / Expected Return = Exclusion Ratio

NOTE: Annuity PMT x Ex. Ratio = TAX-FREE AMT

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17
Q

HO - 6

A

Condo Owner

A - Limited (loss assessment)
C - Open
D - Broad (50% of C)

No B
YES $5k loss assessment coverage

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18
Q

HO - 8

A

Old House

BASIC

A - Dwelling
B - Structure
C - Property
D - Loss of Use

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19
Q

What is Broad HO Coverage?

A

*Basic coverage +

“RAFF”

  • Rupture of a system
  • Artificial Generated Electricity
  • Falling Objects
  • Freezing Pipe

*Basic:
- Wind
- Hail
- Aircraft
- Riot
- Vandalism
- Explosion
- Smoke

  • Fire
  • Lightening
  • Theft
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20
Q

HO - 5

A

A - Open
B - Open 10% of A
C - Open 50% of A
D - Open 30% of A

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21
Q

HO - 3

A

A - Open
B - Open 10% of A
C - Broad 50% of A
D - Open 30% of A

HO - 5 with worse Property coverage

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22
Q

What is covered in HO Sec I

A

A - Dwelling
B - Structure
C - Property
D - Loss of Use

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23
Q

Real Property Loss Formula

A
  1. Replacement cost x coinsurance % = Required Insurance
  2. [(Ins. Carried/ Required Insurance) x Loss] - Deductible = Amt. Paid by Insurance
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24
Q

ACV Property Loss Rule

A

IF:
Insurance carried is < 80% of replacement cost

THEN:
Use GREATER of:
- ACV
- Amt. Paid by Insurance (Real prop loss formula)

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25
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
26
HO - 1
BASIC A - Dwelling B - Structure C - Property D - Loss of Use
27
What does a Business Owner's Policy (BOP) 1. Cover 2. Exclude
1. Covers - Real property - Contents - Liability (medical pmt) 2. Excludes - Professional Liability
28
Negligence
"All Nice Students Avoid Violence” - Attractive Nuisance: pool on property - Negligence per se: violate a statute - Strict liability: product recall, pet bites someone - Absolute liability: worker's comp - Vicarious liability: insurance co. to agent
29
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
30
COBRA Coverage
Job-related: 18 months Non-Job-related: 36 months +11 Months if disabled within 60 days of event
31
PPO Keys
- Pay per service - Not required to stay in network - Higher deductible than HMO
32
HMO Keys
- Monthly fee - Gatekeeper primary care physician - Not covered out of network
33
Medicare Supplemental for CFP
Adding Medicare Supplemental is almost always the right answer if asked
34
PAP "Other Than" Collision Coverages
- Glass - Wind - Hail - Animal - Riot - Vandalism - Earthquake - Explosion - Falling Objects - Fire - FLOOD - Theft
35
HO - 15
Rider to add additional coverage to personal property Add HO - 3
36
HO Sec II
E - Personal Liability (E = Esquire. getting sued) F - Medical (F = First Aid)
37
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
38
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
39
Insurable Risk Characteristics
- Big enough group of similar risks - Loss is definite & measurable - Loss is accidental - Loss not catastrophic to Insurance Co.
40
When is a company required to offer COBRA?
- Offer group or self-funded health coverage - > 20 Employees (FT & PT)
41
HSA Keys
- DEDUCTIBLE (Employer & Employee) - YES Qualified LTC premiums - Non-qual. dist = 20% penalty - TOD tax-free to spouse, ord. inc. to non-spouse
42
Health Reimbursement Arrangement Keys
C-CORP ONLY! - 100% Employer-funded - Employer reimburses employee for medical expenses
43
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
44
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
45
Social Insurance Substitute Benefit (SIS)
- Disability rider to protect against Social Security disability claim - If SS pays full disability claim, SIS does not pay
46
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 Note: Sec 162 "Bonus", Group plan "Salary continuation"
47
Partnership Disability Premium Benefit/Taxation
Partner or >2% S-Corp owner: - Premium: Business deductible - Benefit: Tax-free
48
Medicare Skilled Nursing Coverage
Day 1-20 = 100% Medicare Day 21-100 = Co-pay Day 101+ = 100% Patient
49
Human Life Value Analysis
- Considers PV of lost income for dependents - No other assets are considered (existing life insurance, investments)
50
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
51
Automatic Premium Loan
- If elected, cash value will pay lapsed premiums - Remaining cash value and DB will be reduced
52
Reinstatement Clause
- If policy lapses, you can continue coverage - Conditions: - Proof of insurability - Pay missed premiums in arrears - Pay interest charged on missed premiums
53
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"
54
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)
55
Whole Life Surrender Taxation
When surrendered: (Cash Value + CV of Paid-up Add) - Cost Basis = Ordinary income
56
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
57
Health FSA Keys
- Employee pre-tax deferral limit of $3,200 - NO LTC - NO FICA - Plan may have 2.5mo grace period or $640 rolling balance NOT BOTH - Cont. not included income
58
Home Replacement Cost
80% of Home value net of land
59
Unholy Trinity - LI
Three different people are: Owner, Insured, Bene - DB is treated as taxable gift to bene since owner had rights to value (could have changed bene)
60
ACV Formula
ACV = Replacement cost - Depreciation If no depreciation info given, ACV is wrong answer!
61
Worker's Comp Benefits
TAX-FREE - Medical expenses - NO deductible, co-pay, time/$ limits - Disability income - short wait, limited benefit (66% of comp) - DB to family - Rehab: Medical & Vocational
62
SSDI Elimination Period
5 months. - Paid month 6
63
Disability Insurance Provisions
- Residual benefits: PMT = % of income lost - Partial disability = Partial PMT if less than total disability - Waiver of premium = No premium due if ttl disability for long time - SIS = covers gap (if any) in SSDI benefit
64
When are LTC Premiums tax deductible
- Qualified LTC policy - Part of itemized deductions (over 7.5% AGI; age-based cap) SE - no AGI limit, still age-capped
65
NO Insurance 1035 when...
- Annuity → Life - If insured changes
66
Whole Life Keys
LOW RISK TOLERANCE - Fixed premium/guaranteed DB - Cash value grows at guaranteed rate - Dividends paid if participating - Loans available against cash value
67
Universal Life Keys
LOW RISK TOLERANCE - Flexible premiums/adjustable DB - Cash value grows at declared rate - Policy will lapse if costs exceed cash value
68
Variable Life Keys
HIGH RISK TOLERANCE - FIXED premiums - Cash value in subaccounts (market risk) - Min. DB Guarantee - No guaranteed cash value
69
Variable Universal Life Keys
HIGH RISK TOLERANCE - FLEXIBLE premiums/adjustable DB - Cash value in subaccounts (market risk) - Min. DB Guarantee - No guaranteed cash value
70
Viatical Taxation
Insured: - SALE PRICE = TAX FREE (INCLUDED IN GROSS ESTATE) - DB = NOT IN GROSS ESTATE Viatical Co: - Ordinary income on gain: DB (-) SALE PRICE
71
Transfer for value rule
IF: Policy transferred for something of value (cash, property, services, etc.) THEN: DB is taxable
72
Transfer for value exceptions
- To the insured - To a partnership - To a Corp (insured is officer/shareholder) - Divorce decree
73
MSA
No new after 2005 - Contributions deductible (don't have to itemize) - Cont. made by employer/employee but not both in same yr - Employer cont. not included as employee income
74
Medicare B Premium/Deductible Keys
- YES monthly premium - $240/yr deductible 20% co-pay after - Premiums tax deductible! - 100% for SE - Sched A if itemized (over 7.5% AGI)
75
Medicare A Premium/Deductible Keys
- NO premium - In-patient care: - flat deductible - Day 1-60 = NO copay - Day 61+ = YES copay
76
Medicare D Keys
- Cover outpatient drugs - Must have Part A and B - Flat deductible, then copay
77
Life Settlement Taxation
Premium (-) COI = BASIS Sale (-) Basis = GAIN Cash Value (-) Premium = ORD INC. Gain (-) Ord Inc. = LTCG
78
MEC Taxation
- Withdrawal/Loan are LIFO + 59 1/2 penalty - Cash dividends taxed as ord inc.
79
BOE Taxation
Covers ongoing biz cost at owner disability - SE: Premium deductible; benefit taxable - C or S Corp: Premium NOT deductible; benefit TAX-FREE (excluded from gross income)
80
VEBA Keys
Employer-funded trust for employee benefits - Contribution tax-deductible - Earning in trust = tax-free - Health benefits to employees = tax-free - Non-health benefits = taxable
81
Employee Taxable Benefits
- Pre-paid legal service - Vision plan - Group permanent premiums - Group term premiums over $50k DB - 162 Bonus
82
Endorsement v Assignment Split-dollar
- Endorsement: Employee taxed on COI, not on premiums - Assignment: Employee taxed on loan interest, not on premiums