Insurance Live Review Flashcards
Risk vs peril vs hazard
risk - condition in which there is a probability of loss
peril - the cause
hazard - increases chance of loss
characteristics of insurable risk
large number of homogeneous exposure units
loss must be definite and measurable
must be fortuitous or accidental
must not be catastrophic (to insurer)
principle of indemnity
insurer reimburses the insured for approximately the amount lost, no more and no less
unilaterial
only one party is bound; the insured makes no promised
adhesion
“as is” - contact is not negotiated
aleatory
number of dollars given up is unequal
Parts of the insurance contract
DDICE
Declarations
Definitions
Insuring agreements
Conditions
Exclusions
attractive nuisance
high degree of care is imposed on the land occupier for certain conditions on the land
example swimming pool
negligence per se
standard of care is set by a statute
ex: school zone, cross walk
absolute liability
extra hazardous condition
ex: keeping of wild animals
strict liability
generally limited to manufacturers
ex: firestone tires
vicarious liability
respondent superior
one person is hled liabile for the negligent behavior of another person
ex: principals responsible for their agents
capital utilization
ANNUITIZATION to provide needed income
no money at the end of the presumed term
human value life
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
capital needs approach
factors interest only, so the original capital is still left at the end of the income period
insurance company rating service
AM Best
Standard & Poors
Homeowners parts
A - dwelling and attached structures
B - separate structures
C - Contents/personal property
D - Loss of use
E - Liability
F - medical payments to others
sinkholes on the exam
sinkholes are a covered peril on the exam
Replacement cost vs ACV
ACV is replacement value less depreciation
replacement cost is generally recommended
property loss calculation
(insurance carried/insurance required) x loss
less deductible
if they don’t give you a %, use 80%
auto insurance parts
A - liability
B - medical payments
C - uninsured motorist
D - Damage to your auto
what is specifically excluded with umbrella?
professional acts
Malpractice vs E&O
malpractice is for bodily injury
E&O is for property damage
medicare skilled nursing
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)
HRA keys
ONLY for C Corporations
solely employer funded
Disability insurance non cancellable
guarantees right to maintain policy at the stated premium
Guaranteed renewable
less expensive than non can because insurer may increase the premium
(diability) what if the EE owns the contract, and the ER pays the entire premium under a bonus arrangement?
Example: section 162
ER deducts the premium
EE recognizes premium in income
benefits are tax free to the EE
what types of company structure have more complicated disability tax rules?
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
universal life/variable universal A vs B
A = level death benefit
B = increasing DB plus cash value
APL
automatic premium loan
the company automatically will pay the premium and charge it against the cash value
reinstatement
specified time period
proof of insurability
conversion
exchange term for permanent
NO evidence of insurability required
dividend options - life insurance
- cash
- reduce premium
- accumulated with interest
- paid up additions
- one year term
settlemt options (other than cash, these are annuity options)
cash
refund
pure life
specified period
period certain and life
specified income
Nonforfeiture options
cash
paid up reduced amount
extended term/paid up term
life settlement
insured who is not terminally or chronically ill
generally > 65
Look for LTCG
key EE life insurance
business owns and is beneficiary
premium are nondeductible
EE has no incidents of ownership
exceptions to the transfer for value rule with life insurance
-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
taxation on annuities
LIFO
withdrawals prior to 59 1/2 are subject to ordinary income tax plus 10% penalty
taxation of group life insurance
an EE is not taxed on premiums paid < $50k in coverage
dependent group life
coverage on the lives of the EE spouse and dependents is not included in the $50k exemption
only $2k is tax free
notes on group disability
cheaper
simpler underwriting
usually a more liberal definition of total disability
Taxation on group disability benefits
ER generally pays 100% of premium
Benefits received by EE are taxable income
FSA grace period vs carryover
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
Dependent care FSA
Max $5,000
If married, both spouses must earn income in order for the dependent care FSA
VEBA
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
