Insurance Flashcards
Perils
The actual cause of loss
Ex: fire, wind, tornado
Hazard
Condition that increases likelihood of loss occurring
- moral, morale, physical
Principle of indemnity
Compensation to extend of loss, can’t profit
Subrogation clause
- can’t receive compensation from both insurer and third party for the same claim
Express authority
Written document, agency agreement
Implied authority
Not expressly given, but needed to carry out expressed authority
Apparent authority
Client reasonably believed agent has authority (no contract)
Dividend options for whole life insurance
Cash
Reduce future premiums
Accumulate at interest
Paid-up permanent additions (purchase of)
One-year term insurance additions (purchase of)
Life insurance settlement options
Lump sum
Interest only
Annuity payments
Exceptions to transfer for value rule (taxable to transferee when proceeds exceed basis)
Transfer to:
- insured
- business partner of insured
- partnership of insured
- corporation in which insured is shareholder
- results in carryover basis from gift
Tax consequences at surrender for cash value
CSV - premiums = ordinary income
Taxation of annuity withdrawals
Before 1982 - FIFO
After 1982 - LIFO
Eligibility for LTC insurance
Chronically ill - 2 of 6 ADLs for at least 90 days
Substantial cognitive impairment
Qualified long-term care policy
- premiums tax-deductible and benefits tax-free
- must have: no surrender value, limited to qualified LTC services, use dividends to increase premiums, meet consumer protection laws, doesn’t pay for expenses covered under Medicare
Social Security reduction in benefits
Reduce by 5/9 for each month, for first three years a worker retired early (20% max)
Reduce by 5/12 for each month beyond three years (30% max)
