Insurance Concepts Flashcards

Question

Term to 100

Answer 1

pay average amount between now and age 100 (paid up). no non forfeiture clauses. only insurance. no policy loans, no csv. usually used when late estate plan is required. term life can be switched to permanent policy.

Answer 2

GIB (purchased for kids sometimes. will allow them to purchase larger insurance in future without underwriting, but higher premiums). ADAD - loss within 365 of accident Advance of death benefit - in case of critical illness premium coverage in case of disability. Common exclusions - impaired driving, acts of ware, suicide, self inflicted injuries, poisonous gas, under influence of drugs, flying on private aircraft, loss for medical treatment, poisonous substance ingestion, illegal activities,

Answer 3

15k for funeral, 20k for cementery services. 12k saved for funeral and 19k for cementery = 31k total. funeral expenses of 25k = 38k total savings - 19k -12k = 7k taxable.

Answer 4

EI can be paid up to 26 weeks (55% of benefits up to limit) taxable (2 week waiting period) CPP-long term disabilities, taxable. Workers comp. - tax free replacement of 85-90% of after tax income, up to about 6k per month, short waiting period. issues arise when income is over 80k -90k or so.

Answer 5

WI 1-15 day waiting period - benefit paid for 15-104 weeks. tax free, pay usually about 66.7% of salary) after tax income. as high as about 4k per week. can be taxable if employer pays for it, then covers 75% of salary. LTD - replace 67-75% in most cases. may ask for 60% on the test. non evidence maximums are lower than regular benefits. NEMs refer to the maximum amount paid for someone who hasnt undergone medical underwriting. Usually paid under own occupation for 2 years, then switches to any occupation.

Answer 6

usually not covered under group contract for 1-2 years (in the beginning)

Answer 7

50% for very high earners, 60% for 60k-120k, 70% earning 40k-60k.

Answer 8

Own - covered if you can;t work your job. usually turns to regular/any occupation after 2 years. any - covered if you can't work any job regular - covered if you can't work in job that fits within skills, education, experience. will receive top up if it pays less than previous job, up to the face amount of contract.

Answer 9

residual - self employed earning between 20-80% of pre-disability income partial - wage earner earning between 20-80% of income these are optional definitions of disability and not all contracts include them. Disability benefits paid 30 days in arrears presumptive benefits - you return to work despite loss of sight, limbs, hearing, speech ,etc. will still pay full benefit

Answer 10

waiver of premium (common), return of premium (between 50-100%), COLA, coverage enhancements (no medical underwriting, may be financial underwriting), medical consults

Answer 11

no underwriting usually, unless they originally decline membership, add optional coverage or go above non evidence maximums. exclusions or limitations for ltd benefits. many have conversion privilege, can take coverage after leaving without medical underwriting. That being said, you're lumped in with smokers or people with presumably poor health (since those are most likely to convert coverage)

Answer 12

beneficiary needs to sign to be taken off. means policy can't be altered without beneficiary consent. for separations, let person receiving support own policy and

Answer 13

after separation or divorce (regardless of irrevocability). dependents could make claim.

Answer 14

it has to be the beneficiary

Answer 15

proceeds can be used to create a disability trust. if theres a successful challenge of the will, would precious estate assets need to be sold to create liquidity? If insurance is there, this is less of an issue.

Answer 16

insurance regulators/legislation has handling as described previously but no set way to handle mistakes. to be handled between insured and insurer (adjust coverage or change premiums)

Answer 17

suicide in first 2 years. may add an exclusion for a specific activity insurer doesnt like. if you dont lie at the time of underwriting, the policy should pay.

Answer 18

organ donation, service in army, self harm,

Answer 19

90-180 days

Answer 20

revocable, have to explicitly ask for irrevocable. which requires beneficiary to sign to change. irrevocable can't change their rights to the death benefit amount. should have contingent beneficiary.

Answer 21

anyone, corp, trust etc

Answer 22

owner is different from life insured

Answer 23

the most recent document wins. if the will overrides, it should make direct reference to the policy. pretty clear in insurance legislation

Answer 24

not confidential, probate is charged, open to creditors

Answer 25

inexpensive

Answer 26

premiums paid, csv (growth is certain, std dev is 0), death benefit, how long you're paying premiums for

Answer 27

insurer's expenses (marketing, underwriting, compliance, admin), mortality costs (a lot gets paid here in early years, net amount at risk), policy reserve (as this is built, lower commitment to mortality costs. in non par, this is insurers business).

Answer 28

absorb about 8-10 years of premiums due to surrender charges

Answer 29

stop paying premiums when policy reserve is equal to death benefit (sometimes never)

Answer 30

blend the cost of insurance, investments will pay for insurance in later years as costs rise (stop paying premiums when pv of policy reserve is equal to death benefit)

Answer 31

costs comparable to 1 year term life policy costs, not premiums)

Answer 32

tested continually to ensure they can pay death benefits, there's regulatory restrictions in place

Answer 33

investments, cost of insurance, expenses. anything left over after other 2 is allocated to investments. yrt (premiums for insurance are cheaper in the beginning and increase over time) makes sense in limited situations where policy holder is willing to fund the investment portion aggressively. can work out better if you get solid returns and using policy primarily for investment character. (going to use leverage). need appropriate assumptions around investment returns. only if you're maxed out in registered accounts. doc engineer, etc. has some non reg

Answer 34

professional has 200k csv at retirement, uses csv as collateral loan, interest can be capitalized and is deducted from death benefit paid if still owed at death (insured retirement plan)

Answer 35

more flexibility in premiums

Answer 36

buy more perm insurance

Answer 37

may be framed as portion of total investment. not comparable directly to other investments because if you invest 1k in the policy, you don;t earn a 6% dividend on 1k. its on the amount after costs of insurance

Answer 38

no csv, level death benefit, pay bare minimum cost of insurance, permanent insurance. paid up between 96 and 100. Works with couple in late 60s or 70s whove done an estate freeze and know exactly what it will cost to die. joint and last to die t100 will offer favourable pricing.

Answer 39

what risk does it address, what does it cost, chances it gets used, does it increase chance they buy what they need.

Answer 40

guaranteed insurability benefit (no medical underwriting for more insurance), inflation protection,

Answer 41

how does cash flow change (increases to needs and reductions due to the other person being gone). pension contributions important to consider, childcare costs, transportation, meals, etc. payoff debt, take time off work?

Answer 42

usually covers for about 2 years then goes to any occupation.

Answer 43

85% of after tax income (punishment is worse if you're in a higher tax bracket). ltd insurance reduced by other forms of disability income and regular income (with residual benefits). Use a benefit schedule to avoid paying premiums for benefits you can't fully receive due to the max. ex. 66% up to 70k and 40% on income over that.

Answer 44

retirement savings rider, creditor disability insurance.

Answer 45

professionals (doctors engineers), self-employed, low risk occupation, high motivation, working indoors, no heavy machinery. they get the best coverage at the lowest costs, because they are unlikely to have claims and return to work is very likely. 2 year own occupation (more common) or lifetime. coverage for both injury and illness 24hr coverage. strong effort to return to work, lots of underwriting.

Answer 46

maybe own occ isnt available. regular occ covers if you can't return to a job that is within your range of skills, education or experience. contracts are messy. reg occupation tops you up to pre-disability income if you return to work. regular occupation covers office workers, minimal heavy equipment, indoor work, planner, engineer, accountant. skilled work. inury and illness coverage, riders may be available to bump up a class.

Answer 47

heavy equipment, outdoor work ,driving, dangerous environment, physical risk (esthitican or hair dresser), unstable or erratic income. injury only, illness only, non occ only, no soft tissue claims, no mental health claims, sell a monthly benefit, underwrite income at time of claim. riskiest group. has least options and worst coverage.

Answer 48

business owner, tax deductible, lower premiums, fixed and contractual expenses, deductible business expense, limited benefit period, taxable when received but can be offset by expenses

Answer 49

90-120 days waiting, benefit until age 65. no point in lifetime insurance really, that means you're insuring retirement. you can use a shorter benefit period but whats the risk/discount payoff. is it worth it?

Answer 50

cpp disability, ei, auto policy, workers comp, provincial disability, group coverage (assumes 1/3 of claims will be under workers comp), individual coverage.

Answer 51

1-8 day waiting period, 15-52 weeks of coverage (normall closer to 15). regular occ, claims are generally easy. employer paid means taxable, and you receive 75%. short list of exclusions.

Answer 52

66.7% non-taxable im employee pays. 75% if employer pays. 2 year own occupation then any occupation. 1/3 of claims end at 2 year mark pre-existing condition limitations - (for treatment or diagnosis within 90-180 days of start date), claim would be denied in 1st 1-2 years after coverage starts (related to that condition). there can be exclusions for mental health, self-inflicted, act of war, commission of a crime, hazardous activities

Answer 53

no medical underwriting usually around 3k. 6k-8k for plan max. if premiums arent paid on bonuses/ot, that income wont be reflected in coverage

Answer 54

can rollover policy to child or grandchild (or parent) without taxable event if the child/grandchild is the life insured. beneficiary can be changed by policy holder

Answer 55

not common. usually only done with business lending and farm lending. premium is deductible if its for investment, from authorized lender, required as condition of the loan. can deduct ncpi or premiums paid, whichever is lower. grandchilds estate is automatically beneficiary when they receive it and child is automatically beneficiary until they change it.

Answer 56

prescription drugs, dental (except emergencies), chiro, massage, naturopath, ambulance, air ambulance, vision care (except minors and seniors), elective/experimental surgery (usually not covered under private or public), out of province/country (see later point)

Answer 57

insurer has a 70% targeted loss ratio. if expected costs are 1800, premiums will be 2600. family can pay premiums in individual policy and they are eligible for medical expense tax credit. group plan and health spending account both allow employer to deduct premiums and employee (can be self employed) receives tax free benefit

Answer 58

generic drugs only, limits to certain coverages, dispensing fee, fee schedule for dental, pre-defined list of drugs to be covered, max coverages for dental, vision etc in given year

Answer 59

small groups (less than 5), join the plan late (unless there is a material change in circumstance ie child/marriage), exceeds

Answer 60

new - ages of employees, marital status, children, employee earnings, industry, geography

Answer 61

contractors, part time, seasonal, non residents of canada (some carriers may offer this). must be employed full time, paying premiums, out of probation, active at work, completed enrollment paperwork

Answer 62

life (1x, 2x, 3x, salary) can convert to individual, taxable benefit. suicide is exclusion (maybe) a d and d - lots of exclusions, rarely pays, taxable benefit critical illness - 15k-50k - sometimes 2.5k-5k for dependents, taxable benefit, some convertible products dependent life - 10k for spouse, 5k for children HSA, no taxable benefit, $250-5k. Wellness account - taxable benefit employee assistance - non taxable, counselling cost plus - iffy from tax perspective non taxable in theory