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CFP - Review Cards > Insurance Live Review > Flashcards

Insurance Live Review Flashcards

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CFP® flashcards
1
Q

Risk vs peril vs hazard

A

risk - condition in which there is a probability of loss
peril - the cause
hazard - increases chance of loss

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2
Q

characteristics of insurable risk

A

large number of homogeneous exposure units
loss must be definite and measurable
must be fortuitous or accidental
must not be catastrophic (to insurer)

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3
Q

principle of indemnity

A

insurer reimburses the insured for approximately the amount lost, no more and no less

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4
Q

unilaterial

A

only one party is bound; the insured makes no promised

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5
Q

adhesion

A

“as is” - contact is not negotiated

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6
Q

aleatory

A

number of dollars given up is unequal

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7
Q

Parts of the insurance contract

A

DDICE
Declarations
Definitions
Insuring agreements
Conditions
Exclusions

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8
Q

attractive nuisance

A

high degree of care is imposed on the land occupier for certain conditions on the land
example swimming pool

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9
Q

negligence per se

A

standard of care is set by a statute
ex: school zone, cross walk

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10
Q

absolute liability

A

extra hazardous condition
ex: keeping of wild animals

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11
Q

strict liability

A

generally limited to manufacturers
ex: firestone tires

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12
Q

vicarious liability

A

respondent superior
one person is hled liabile for the negligent behavior of another person
ex: principals responsible for their agents

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13
Q

capital utilization

A

ANNUITIZATION to provide needed income
no money at the end of the presumed term

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14
Q

human value life

A

amount of life insurance determined to be purchased by the human life value
based on earning ability
DOES NOT consider other resources available to provide for income and cash needs

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15
Q

capital needs approach

A

factors interest only, so the original capital is still left at the end of the income period

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16
Q

insurance company rating service

A

AM Best
Standard & Poors

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17
Q

Homeowners parts

A

A - dwelling and attached structures
B - separate structures
C - Contents/personal property
D - Loss of use
E - Liability
F - medical payments to others

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18
Q

sinkholes on the exam

A

sinkholes are a covered peril on the exam

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19
Q

Replacement cost vs ACV

A

ACV is replacement value less depreciation
replacement cost is generally recommended

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20
Q

property loss calculation

A

(insurance carried/insurance required) x loss
less deductible
if they don’t give you a %, use 80%

21
Q

auto insurance parts

A

A - liability
B - medical payments
C - uninsured motorist
D - Damage to your auto

22
Q

what is specifically excluded with umbrella?

A

professional acts

23
Q

Malpractice vs E&O

A

malpractice is for bodily injury
E&O is for property damage

24
Q

medicare skilled nursing

A

pays all of the first 20 days of skilled care
everything over a specified amount per day for the next 80 days (max of 100 days)

25
Q

HRA keys

A

ONLY for C Corporations
solely employer funded

26
Q

Disability insurance non cancellable

A

guarantees right to maintain policy at the stated premium

27
Q

Guaranteed renewable

A

less expensive than non can because insurer may increase the premium

28
Q

(diability) what if the EE owns the contract, and the ER pays the entire premium under a bonus arrangement?

A

Example: section 162
ER deducts the premium
EE recognizes premium in income
benefits are tax free to the EE

29
Q

what types of company structure have more complicated disability tax rules?

A

partnership or S corporation
CAN deduct the premiums paid for coverage
deduction is based on premium cost being included in the taxable income
disability insurance benefits are then excludable from taxable income

30
Q

universal life/variable universal A vs B

A

A = level death benefit
B = increasing DB plus cash value

31
Q

APL

A

automatic premium loan
the company automatically will pay the premium and charge it against the cash value

32
Q

reinstatement

A

specified time period
proof of insurability

33
Q

conversion

A

exchange term for permanent
NO evidence of insurability required

34
Q

dividend options - life insurance

A
  1. cash
  2. reduce premium
  3. accumulated with interest
  4. paid up additions
  5. one year term
35
Q

settlemt options (other than cash, these are annuity options)

A

cash
refund
pure life
specified period
period certain and life
specified income

36
Q

Nonforfeiture options

A

cash
paid up reduced amount
extended term/paid up term

37
Q

life settlement

A

insured who is not terminally or chronically ill
generally > 65
Look for LTCG

38
Q

key EE life insurance

A

business owns and is beneficiary
premium are nondeductible
EE has no incidents of ownership

39
Q

exceptions to the transfer for value rule with life insurance

A

-to the insured
-to a partner or a partnership in which the insured is a partner
-corporation in which the insured is a shareholder or officer
-incident to a divorce

40
Q

taxation on annuities

A

LIFO
withdrawals prior to 59 1/2 are subject to ordinary income tax plus 10% penalty

41
Q

taxation of group life insurance

A

an EE is not taxed on premiums paid < $50k in coverage

42
Q

dependent group life

A

coverage on the lives of the EE spouse and dependents is not included in the $50k exemption
only $2k is tax free

43
Q

notes on group disability

A

cheaper
simpler underwriting
usually a more liberal definition of total disability

44
Q

Taxation on group disability benefits

A

ER generally pays 100% of premium
Benefits received by EE are taxable income

45
Q

FSA grace period vs carryover

A

ER can use one, not both
Grace period allows workers an extra 2 1/2 months to spend (until 3/15)
Carryover allows up to $640 to be rolled over

46
Q

Dependent care FSA

A

Max $5,000
If married, both spouses must earn income in order for the dependent care FSA

47
Q

VEBA

A

501c9
death benefits
medical expense benefits
child care benefits
severance benefits
educaiton benefits
disability benefits
legal expense benefits
unemployment benefits
DEDUCTIBLE expense for the ER EXCEPT FOR DEFERRED COMP ARRANGEMENTS

48
Q
A

CFP - Review Cards (17 decks)

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