Insurance Flashcards

Question

Actual Cash Value = ACV

Answer 1

When losses are settled on a replacement cost basis, no deduction is made for depreciation. Under ACV, losses are settled under replacement cost less depreciation. For exam purposes, the dwelling (structure) will be covered under replacement cost coverage and personal property (contents) on an actual cash value basis

Answer 2

Part A - Liability (limited to third parties) Part B - medical payments Part C - uninsured motorists Part D - damage to the covered auto

Answer 3

can be written on eligible vehicles owned and leases by an individual or by a husband or wife living in the same household. vehicle rented to others as a public or livery conveyance is not eligible and must be insured under a commercial policy. eligible vehicles include private passenger automobiles such as cars, vans, and sport utility vehicles. vans and pickups are ineligible for coverage if they are used for transportation or delivery of god and materials.

Answer 4

Provides protection agains judgments and covered exposures resulting from bodily injury and property damage liability deemed to have been caused by the insured (BI/PD)

Answer 5

Provides payments for the reasonable and necessary medical expenses of an insured as a result of an automobile accident only expenses for medical services rendered within 3 years of the date of an accident are covered Covered for Med Pay named insured, spouse, and any family member occupying auto or when struck by a pedestrian any other person who is injured while occupying covered auto

Answer 6

insurer agrees to pay compensatory damages that an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury. The coverage applies to claims for medical expenses, lost wages, and pain/suffering but does not include punitive or exemplary damages. Insured for uninsured motorist coverage as follows: Named Insured and any family member Any other person who occupies a covered auto Any person who is entitled to recover damages due to injury to a person described above Special NOTE! UM is liability protection, not medical payments

Answer 7

Collision: Defined as "the upset of your covered auto or its impact with another vehicle or object" Other than collision: breakage of glass, or loss caused by the following: falling objects, fire, theft, explosion, earthquake, hail, water flood riot or civil commotion windstorm, contact with birds or animals. Towing: is covered under collision and other than collision

Answer 8

For exam, almost always a correct answer, since it is a smart coverage Provides liability coverage (BI/PD) for catastrophic legal claims or judgments Requirement policy owner to carry certain underlying coverage or specified minimum amounts Note: Professional acts are specifically Excluded

Answer 9

any act committed with the intent to cause personal injury or property damage damage to property owned by the insured business pursuits and workers compensation obligations rendering of or failure to render professional services (malpractice) directors' and officers' activities workers' compensation obligations

Answer 10

designated for small-to-medium-size businesses policy is packing that has real property, contents, and liability protection Professionally liability is specifically excluded

Answer 11

Malpractice: substandard conduct results in bodily injury (dr or dentist) Errors and Omissions (e&o): substandard conduct results in property damage or monetary damages such as loss of money (fin planner, lawyers, accts, ins agents)

Answer 12

unlimited medical expenses including occupational disease benefits; no deductibles disability income (total and partial); tax free; equal to employee's average weekly pay death benefits payable to family member Rehabilitation - (medical and vocational) can be referred to as absolute liability

Answer 13

1st - The insured pays a calendar-year deductible (ie: $250 or more). 2nd - The insurance carrier pays a calendar-year coinsurance (normally 80%), and the insured pays a remainder (normally 20%) f the next medical expenses. 3rd: After a client pays his/her portion of the stop-loss limits (breakpoint), the company pays 100%

Answer 14

Most deductibles are fixed dollar amounts that apply separately to each person. Some carriers apply a limit to the number of deductibles a family may have to satisfy (limit of three). Each family member pay an individual deductible.

Answer 15

Foot care, dental care, glass hearing aids, most immunizations except one flu shot per year Emergency care outside the U.S. (except for Canada, Mexico, caribbean, u.s. territory waters)

Answer 16

Capitation: a monthly fee is paid to the provider. in return, the individual receives virtually all the medical care required during the year. Gatekeeper: Care is managed by a primary physician who is responsible for determining what care is received and when the individual should be referred to specialists.

Answer 17

HMO: provider pays monthly fee regardless of service rendered (capitation) out-of-network care not covered at all PPO: provider pays for actual services rendered Out-of-netowrk partially covered (usually 70%) Point of service (POS) plans: hybrid arrangement combining aspect of an HMO,PPO, and a comprehensive major medical plan

Answer 18

MUST HAVE 20 FULL/PART-TIME EMPLOYEES Coverage must be offered to: terminated employees and dependent continuation period up to 18 mo (voluntary or involuntary termination change from full time to part time), spouses and other dependents continuation period up to 36 mo (EE death, divorce, legal separation, or eligibility for Medicare), Children of employees continuation period-up to 36 months (loss of depended status (marriage) reaching dependency age limit specified by plan

Answer 19

prevents job lock no pre-existing condition exclusion if an employee was covered by the prior employer's health plan for 12 months or more and less than 63 days elapsed since he/she lost coverage under the prior employer's plan.

Answer 20

must have an HDHP to qualify to open an account distributions tax-free if used for health care contributions not spent are carried forward in the owners name and are portable unused assets become property of named beneficiary upon death distributions for non-medical ordinary income taxable plus 10% penalty if under 65. both employers and employee can contribute **note** over the counter drugs do not qualify for 2011 going forward.

Answer 21

Solely employer-funded | REimburses employees for substantiated medical expenses up to a maximum dollar amount per coverage period

Answer 22

Owner Occupation - Best definition for insured Modified any occupation Split definition - own then modified any occupation (social security definition) loss of income

Answer 23

noncancellable "noncan": continuous term policy guaranteeing the insured's right to maintain the policy at the stated premium Guaranteed renewable: continuous right to maintain the policy but the insurer may increase the premium by class of insureds

Answer 24

acts like a deductible the longer then waiting period, the lower the premium older policies written for 30 days current policies written for 90 days

Answer 25

the individual owns the contract and pay the premium. 1) premiums are not deductible, 2) benefits are tax free tot he employee The employee owns the contract and the employer pays the entire premium under a bonus arrangement like section 162 disability ins. Premiums are deductible by the employer as a bonus, benefits are tax free t the employee The employee own the contract, and the emplyer pay the entire premium under a salary continuation plan. 1) the premiums are deductible by the employer 2) benefits are taxable to the employee

Answer 26

Can deduct the premiums paid for coverage for a partner or a greater than 2% shareholder of an S Corporation as a deductible business expenses The deduction is based on the premium cost being included in the taxable income of the partner/shareholder as conduit income Proceeds are excludable from taxable income because the partner/shareholder pays premium with after-tax money.

Answer 27

Disability waiver of premium - whole life, universal, and variable universal life Guaranteed purchases option (guaranteed insurability opiton) Accidental death

Answer 28

Patient admission conditions Condition must require skilled nursing hospitalized at least three days in a row admitted within a short time from leaving the hospital care is for condition previously cared for in hospital professional certifies admission

Answer 29

Insurance company controls investment return Assets part of general account 1) whole life 2) Universal life

Answer 30

Client Controls Investment Return Assets part of separate account 1) Variable Life 2) Variable Universal Life

Answer 31

Advantages: Provides permanent protection, level premium, combines savings (cash value) with protection Disadvantages: Must be paid for lifetime (or limited-pay), Higer than term at the beginning, not flexible to meet changing needs (limited to nonforfeiture options)

Answer 32

``` Automatic premium loan grace period incontestable clause reinstatement clause misstatement of age clause suicide clause ```

Answer 33

``` CRAPO Cash Reduced paid up Accumulate with interest Paid-up additions One-year term/5th dividend ```

Answer 34

Cash Paid up reduced Amount Extended term

Answer 35

``` Cash Pure life/single life Refund Period certain Specified income/period Interest only ```

Answer 36

Viatication: payments refers to the sale of a terminally ill person's life insurance policy to a business firm that specializes in such transactions Life Settlement: describes a transaction involving an insured who is not terminally or chronically ill and is generally over age 65

Answer 37

entered into after June 21 1988 fails to meet the "seven pay test" (includes all single premium policies) distributions/withdrawals are taxed LIFO (interest-first rule) distributions under 59 1/2 also subject to 10% federal penalty (if not disabled) death benefit is tax-free

Answer 38

If the death benefit increases by $150,000 or less and the insured has guaranteed insurability (no proof of insurability), the policy will NOT lose its grandfathered (non MEC) status. If the policy increases by ANY amount and the insured must prove insurability, the policy MAy lose its grandfathered (non MEC) status.

Answer 39

if a policy is transferred from one owner to another for valuable consideration (typically money), the income tax exclusion is lost (like a vatical). The 3 main exceptions to this rule are the following: a sale or transfer to the insured a sale or transfer to a partner or partnership in which the insured is a partner a corporation in which the insured is a shareholder or officer

Answer 40

Life - life - OK Life - annuity - OK Annuity Contract - annuity contract - OK Annuity - LIFE (NO)

Answer 41

Stock Redemption: no step-up in cost basis to remaining owner, premium is not deductible, death benefit is income tax-free Cross-purchase: step-up in basis to remaining owner, premium is not deductible, death benefit is income tax-free

Answer 42

EndoRsement Method: EmployeR is the owneR Employee is not a shareholder Collateral aSSignment Method: employee is owner Employee is a Shareholder Employee aSSigns the policy

Answer 43

investment amount/expected return x#of months = % exclusion lump sum payouts LIFO - interest first rule ordinary income plus 10% penalty under 59 1/2 NOTE: Prior to 1982 taxed FIFO (principle first rule)

Answer 44

Medical expense account must be used by march 15th or forfeited to company (use it or lose it) not subject to income (FICA, FUTA) Health FSA may not be used to reimburse an employee's premium paid for other health plan (MSA, HSA, and LTC) . NOT reimb for LTC healthcare is unlimited, dependent care FSA is limited to 5000 and must be used by year end note- over the counter drugs no longer qualify in 2011 or thereafter

Answer 45

healthcare premiums insurance premiums on non-discriminatory group life policy up to $50,000 Company car for working conditions only commuter -highway vehicle and transit pass 125/mo occasional overtime meal money, cab fare, theater ticket or sporting event tickets, discounts on services limited to 20%of selling price charged customers

Answer 46

Health insurance premiums paid for self-employed, partners, and more than 2% owners of S corporation are taxable income 100% is deductible as an adjustment to income on the front of the 1040. this can include all types of health insurance programs.

Answer 47

``` Retention = coinsurance avoidance = take a cab rather than drive transfer = high limit insurance reduction = wearing seatbelt diversification= storing inventory at several locations ```

Answer 48

HO-2 broad form of all coverage HO-3 open perils for coverages ABD, ho-3 is more comprehensive

Answer 49

contents are covered under open form

Answer 50

Indemnity = being made whole, not making a profit Insurable interest = proper must be an incentive, life to necessarily to have insurable interest. no claim if property is sold

Answer 51

Key person of the company Stock purchases agreement NQ deferred compensation NOT cross purchase agreement = indiv/owners own it.

Answer 52

a gambling contract - outcome affected by chance, # of dollars given up is unequal

Answer 53

Cash Pure Life and Life refund specific period income interest only

Answer 54

Insuring Agreement = the part that spells out the basic PROMISE of the INSURANCE COMPANY Conditions = This part spells out the detail the DUTIES and RIGHTS of BOTH parties = ex: notice of loss requirement

Answer 55

original costs are immaterial

Answer 56

Insurance Carried / Insurance required X Loss - Deductible = amt paid by insurance amt required = Replacement cost X coinsurance

Answer 57

1,000,000 - 200,000 = 800,000 = FMV 90% of 800,000 700,000/720,000 * Loss (700,000) - deductible (2,000) = 678,556