Insurance Flashcards
Individual Practice Association (IPA)
- HMO model under which the subscribers have the greatest flexibility
- made up of physicians who have own office locations
- fee for service contracts
inland marine
coverage included in homeowners policy as scheduled endorsement/floater
protects property when it’s away from home
“personal articles floater”
- personal furs
- jewelry/silverware
- golf equipment
- camera, art, antiques, stamp/coins, musical inst, wedding presents
Insurance on Watercraft
only covers what’s permanently attached (i.e. NOT fishing poles)
HO-3 covers boat up to 25HP (small)
Who needs a PLUP?
Everyone
You could be vicariously liable for others
BAP
Business Auto Policy
CLUP
Commercial Liability Umbrella Policy
Personal Auto Policy
Liability Coverage
Medical Payments
Uninsured Motorist
Damage to your auto
Duties after an accident
General provisions
Let’s MUD Down in Georgia
conditional receipt
temporary insurance coverage, contingent on applicant’s ability to present evidence of insurability
Disability Insurance Taxation
Prem paid by ER
Benefit Taxed to EE regardless of of other income
Selling Insurance out of state
only if licensed
Medicaid Coverage Calculation
Assets/monthly care cost = month delay +
Gifts made/monthly care cost = months delay
unholy trinity
owner, insured, benef all different
If insured dies, results in taxable gift from owner to benef
National Association of Insurance Commissioners (NAIC)
- accredit state regulatory offices
- indirectly in exchange of info and prep of recs
NO-direct involvement, do not assure uniformity, do not regulate state commissioners
human life value
- average annual earnings prior to retire
- cost of self-maint
- RWLE
- Approp capitalization rate
NOT-specific like annual SS benefits after retire
fine arts and antiques
appraised
not replacement cost or actual cash value
Annuities: premature distribution penalty tax
Immediate Annuities - NO
Deferred Annuities - YES
Custodial Nursing Home Coverage
LTC if coverage is broad
Medicaid
Medicare - NO
Private Medical - NO (unless convalescent)
Coverage for Home
80% of home replacement cost (not land)
Liability for Owner on Agent’s actions
Owner ratifies/approves agent’s actions when they utilize funds/product
Change of Occupation Provision
permits insurer to decrease benefit in instance when insured takes on more hazardous job, reflecting what current premium would provide under new risk
What effect will a job change resulting in increase risk have on disability coverage?
annuitant
person receiving annuity
stock redemption buy/sell agreement
- must have a corporation as a party to the contractual agreement
- NO effect on cost basis
- versus cross purchase agreement
Life Insurance Conversion
Term to Whole/CV/Permanent
Variable
Investor NOT Company chooses invesetments
identification of level of care
being established when a person is deemed to need skilled care, intermediate care, or custodial care
Characteristic of Group Term Life Insurance
- minimum group size 10, unless specific req met
- NO medical exam required
- coverage amts may be based on salary level, NOT job class or length of service
- death benef payout can be installments or lump sum
direct recognition programs used with life insurance policies
Any amount of cash that is removed from the policy is reflected in a decrease in the amount of dividends and interest paid on that policy
mutual life insurance companies
- owned by policy holders
- pay out profits in either dividends or reduced premiums
Most/Least ways to secure Long-term care coverage
Good
- Continuing Care Retirement Communities
- Association Arrangements
- Disability Income Policy Rider (converts Disability into LTC)
Bad
- Life Insurance Policy Rider, diminshed coverage that one will need at some point
Insurance Needs
Depends on age, family, net worth
Health carries a lot of weight
Karen’s employer has a non-contributory indemnity health plan. The plan has a $250 deductible with 90/10 coinsurance and out-of-pocket limit is $10,000. Karen has the following medical expenses: - $75 for a visit to her family physician - $350 for ultrasound - $3,800 surgeon’s fees How much will Karen have to pay this year?
Karen’s total medical expenses are $4,225 ($75 + $350 + $3,800). She must pay the deductible of $250 plus 10% × ($4,225 - $250) = $647.50
COBRA must provided covered EE
- ER has terminated health plan
- EE terminated for incompetence
NOT provided
- ER out of business
- EE terminated for gross misconduct
fully insured group health insurance plan
- all benefits from a comprehensive medical expense pln are ALWAYS tax free to EE when ER pays deductible
- premiums always deductible to ER
- when self-funded (discriminatory), some or all benefits taxable to KE
- Accidental Death and Dismemberment (AD&D) tax free
skilled nursing care
under long term care, highest level of care provision calling for services where residents are seen regulary by physicians
irrevocable beneficiaries of life insurance
- same rights as policy owner
- insured/owner must secure permission from irrevocable benef with regard to activitity or dispositive change
settlement vs nonforfeiture options vs dividend options
settlement - how can i take my DB?
- lump sum
- interest only
- annuity (fixed amt, life income, fixed period, life income w/period certain, joint/last survivor)
nonforfeiture - surrender/terminate
- cash
- single prem paid up life insurance policy
- extended term insurance
dividend options - during life, CRAPO
- cash
- reduce future prem
- accumulate interest
- paid up permanent additions
- One-year term addition
life insurance death benefits: income tax and gross estate
generally income tax free
included in gross estate
group model of HMO
“network model”
has a gatekeeper
staff model HMO
corporation and medical staff members including doctors, nurses and clerical staff are EEs of HMO
has a gatekeeper
“group major medical”
out of pocket
risk mgmt strategies
- installing sprinklers
- wearing protective clothing
- establishing general partnership
- incorporating
- health insurance deductibles
- carrying auto insurance
- not taking job on oil rig
- risk reduction
- risk reduction
- risk sharing
- risk sharing
- risk retention
- risk transfer
- risk avoidance
risk management strategies
- low frequency - low severity
- low frequency - high severity
- high frequency - low severity
- high frequency - high severity
- retention
- transfer (insurance)
- retention/reduction (non-insurance transfer)
- avoidance
“unbundled” life insurance
universal, flexible
aleatory
random, uncertain
insured - pays 1 prem gets big payout
insurer - receives 100 prem, never pays out
Insurer can refuse payment of claim based on time
incontestable clause
suicide clause
negligence per se
act itself constitues negligence, no burden to prove (i.e. drunk driving)
collateral source rule
the person who commits the tort will not benefit or be relieved of obligation and responsibility just because the victim has insurance
guaranteed renewable
premiums can be changed as long as it’s done for entire rate class
Insurance Needs Analysis Approaches
- Needs approach
- multiple of earnings approach
- income replacement method
- human life approach
blackout period
period after youngest child leaves home
dependency period
“critical period”
period prior to children turning 18
life insurance: reinstatement clause
- All activity must occur ‘during’ the available period and not ‘after’ the specified period.
- The policy must not have been surrendered.
- A new incontestable period begins upon renewal and reinstatement of the policy and the insured must attest to the fact that there has been no change in the insured’s health
- During a specified period, the policy owner may reinstate a lapsed policy upon payment of past-due premiums and proof of insurability.
state insurance commissioners and insurance regulation
- executive, enforce
- determine if insurer meets requirements to obtain license
- conduct financial investigations of insurers operating w/in state
state courts and insurance regulation
- judicial
- rule on constitutionality of insurance laws
- render decisions/interpretations on meaning of policy terms
state legislature and insurance
responsible for proposal of bills and passage of legislation that governs the conduct of insurance organizations and their business
split dollar life insurance
- business use
- Stock redemption plans can be funded by split-dollar life insurance.
- ONLY portion funded by company’s actual contributions are subject to company’s creditors
- The insurance premium AND death benefit of a split-dollar life insurance policy is generally divided between the employee and the employer.
contigent business interruption insurance
vs
business interruption insurance
covers direct effect interrpution when disrupition occurs with business you do not own (customer, supplier)
…with your own business
insurance policy: declaration section
insured’s name
insurance policy: coverage section
perils against which the insurer will provide coverage
entire contract clause
policy and the application attached make up the insurance agreement
common disaster clause
provides for policy disposition in the event of a common death of the insured and primary beneficiary
dynamic risk
static risk
core of risk resides in the change in the environment caused by changing human condition
NOT insurable
NOTsignificantly affected by the business environment and which remains constant over time
insurable
refund annuity
refunds unused portion of principal
pure life annuity
only pays during life of one person and stops pmts when that person dies
inland marine insurance
protects against property losses to goods in transit.
ocean marine insurance
protects against property losses while travelling on water
modified no fault coverage
injured parties do not give up the right to sue, but simply refrain from such action until either a dollar threshold or a verbal threshold is reached
split limit liability coverage
$250,000/$600,000
if personally liable, company will pay up to $250,000 per person or $600,000 total for liability
per person/per accident
insurance adjuster
- Assist the insured in the preparing the proof-of-loss statement.
- Determine whether there was a loss covered by the policy.
insurance underwriter
classifies loss as standard, substandard, or ineligible
collateral assignment
temporary transfer of some or all of the ownership rights whereby such rights revert to the assignor upon satisfaction of agreed-upon conditions.
absolute assignment
irrevocable transfer of all ownership rights which can be accomplished through a sale or gift.
split definition of disability
‘Own occupation‘ changing to‘modified any occupation’
At first, the insured is considered disabled if he or she cannot perform his/her specific occupation. After a period of time (usually 2 to 3 years), the definition is broadened to include any occupation to which the insured is fit to undertake based education or training (modified).
termination of disability income insurance benefits
- insured has returned to work
- max benefit period reached
still continued if company cancels policy
disability insurance: probation period
included in a Disability Income policy, is the time the insured must wait after the issue of the policy before specified conditions will be covered.
35 year old
“fully insured” for disability under social security
40 quarters (or periods) in total to be eligible for benefits, and of these, 20 quarters must have occurred in the 40 quarters immediately before becoming disabled.
home insurance formula
coverage
fmv x coinsurance % X loss (- deductible)
HO-3
Special Form and provides open peril coverage on both dwelling and appurtenant structures
Comprehensive Personal Liability (CPL) policy
- part of standard ISO homeowners policy or stand alone
- NOT used to cover E&O or business pursuits
no-fault auto insurance: Verbal Threshold
law suits may be allowed when there is a fatal injury
no such thing as “pure no fault”
Commerical General Liability Contract
NO other structures coverage
Requisites for Insurable Risk
- NOT Catastrophic risk to insurer
- Homogeneous - large number of similar exposures
- Accidental (insured)
- Determinable and measurable
CHAD has Insurable Risk
Elements of valid contract
- Consideration - promise for premium
- Offer and Acceptance - sign valid contract
- Legal competency of all - 18+ unless cosigned, mentally competent
- Lawful purpose - legal activities
COALL
Life Insurance Types
Taxation of Annuities - Withdrawals
pre-82 - FIFO
post-82 - LIFO
Patient Protection and Affordable Care Act (PPACA)
out of pocket limit
Long Term Care - Tax Benefits
premiums tax deductible and benefits tax free if “qualified”…
- no surrender value
- limited to qualified ltc services
- use dividends to reduce future prem or inc benef
- meet consumer protection laws
- does NOT pay for expenses covered under Medicare
benefit - tax free if qualified
premium - deductible based on age
>70 years old - $5430 max deduction
Summary of HO Forms
Reduction of Social Security Benefits: Early Retirement
5/9 per month for first 36months
5/12 per month beyond 36months
permanent reduction
Summary of Social Security Benef
Group Long Term Care Plan
- premiums paid by ER excluded from EE income
- Benefits received tax-free by EE
- NO prem deduction limit for ER
- LTC insurance CANNOT be included in cafeteria plan
- LTC can be reimbursed by FSA
Medicare Advantage
- works like HMO, PPO, POS
- provides coverage beyond A and B…covers vision, dental, hearing, maybe cosmetic
- coverage is regional, only emergencies outside of coverage area
