Insurance Planning

Question 1

What type of annuity will be best for a single person saving for retirement?

Answer 1

Deferred Life Annuity

Question 2

What are things to consider in a needs analysis?

Answer 2

• Short term needs…debt to pay off, funeral expenses
• Long-term income needs…After-tax income required by each of them, Family Dependency period
• Assumed inflation rate

Question 3

What is the taxable policy gain formula?

Answer 3

Taxable Policy Gain = CSV - (premium paid) + (Dividends received)

=$11000 - ((675x 15 yrs) + $1500)

= $2375

Question 4

What do you call it when the CSV pays the premium after 30 days because you forgot?

Answer 4

Automatic premium Loan provision

Question 5

3 Steps to Needs Analysis

Answer 5

1. Outstanding Debt
2. Ongoing Income TVM Calc (use discounting rate as i = x%)
3. Total Insurance Required

Question 6

Are the premiums paid tax-deductible to the employer and a taxable benefit to the employee?

Answer 6

Yes tax-deductible to the employer as a business expense, and not a taxable benefit.

May join the plan without proof of insurability.

Question 7

Group Life and Group Health

Which are considered a taxable benefit to the employee?

Which are a tax-deductible expenses to the corp?

Answer 7

Group Life, accident, and critical illness insurance are taxable benefits

Group Health however is not a taxable benefit to the employee.

Both are a tax-deductible expense to the corp.

Question 8

Are STD and LTD is considered a taxable benefits?

What if the employer pays all of it?

Answer 8

NOT considered a taxable benefit

Does not matter who pays it…it is not a taxable benefit

Question 9

What is Reduced Paid-up insurance

Answer 9

Allows the policyholder to take the built-up cash and use it to purchase a fully paid-up policy.

Question 10

Is a surrender of a life insurance policy considered a realized capital gain

Answer 10

No, it may result in a taxable gain but not a capital gain.

Question 11

If premiums are paid by the employer for a health insurance plan…can the employee deduct as a medical expense

Answer 11

Premiums are NOT deductible as a medical expense

…but premiums paid by an employer are NOT a taxable benefit to the employee

Question 12

Life Insurance Needs Analysis…

Never Assume what?

Answer 12

• The family home will be sold
• The spouse will get a job

Question 13

Life Insurance Needs Analysis

Consider Cash Flow? Yes or No?

Answer 13

Yes Cash flow NEEDED

…in order to know the estate income will be adequate, you need to know what the current expenditures are to meet the lifestyle needs

Question 14

Life Insurance Needs Analysis

Factor in ROR and Inflation? Yes or No?

Answer 14

Yes ROR and Inflation NEEDED

…any capital amounts will be a ROR, and expenses will be subject to inflation increases.

Question 15

When is a First to Die policy appropriate?

Answer 15

Ideal for spouses who depend on one another for liveable income, or who have young children who still need financial support and care.

Question 16

When is a Last to Die policy appropriate?

Answer 16

Ideal for retirees or couples with few or no remaining dependents, and are not in need of income.

This is also ideal for building an estate or settling the final affairs of the family.

Question 17

If dividends are paid out to a policy owner from a Par WL policy are they subject to taxation?

Answer 17

Yes they would be taxable and this is exactly why many owners opt to buy paid-up insurance or term insurance.

Question 18

Floater Policy …what is it?

Answer 18

an insurance policy that provides coverage for loss and damage on a specific property.

can extend to objects outside the home

can cover in excess of what is in the main policy

Question 19

What is considered a final expense when it comes to a needs analysis?

Answer 19

Funeral Costs

Legal costs for the estate

Capital Gains taxes due.

Question 20

What is Morbidity

Answer 20

The Condition of suffering from a disease or medical condition

Question 21

The Narrower the definition the greater the _________?

Answer 21

Premium

Question 22

Definition of OWN occ

Answer 22

Unable to perform the major duties of his or her particular occupation

Question 23

Any OCC definition?

Answer 23

After 2 years of receiving benefits, if the insured is able to perform any occupation to which he or she is suited by either education, training, or experience, the insurer can stop paying benefits.

A much more restrictive definition would you not agree?

Question 24

What kind of agreement is a group plan based on?

Answer 24

Master agreement

Question 25

If the policy owner becomes critically ill, seriously injured, or disabled which rider do they wish they had in place?

Answer 25

Waiver of Premium rider

Question 26

Incontestability Provision prevents insurers from doing what?

Answer 26

From voiding insurance contracts after two or three years because there may have been an application misstatement.

Provides assurance to policyholders and beneficiaries that the claim will be paid with regard to these misstatements.

Question 27

Name 3 non-forfeiture options of a life insurance policy.

Answer 27

1. Reduced Paid-up insurance…Exchange policy for a paid-up policy with a lower benefit.
2. Cash surrender…cash it in
3. Extended Term…extend coverage with no further payments.

Question 28

Which Annuity would an older retired person who is concerned with paying expenses and not using up their capital choose?

Answer 28

A single premium immediate annuity

Question 29

To receive a tax credit today for a donation what must you do with your life insurance policy?

Answer 29

Assign it to the Charity

Question 30

One advantage Individual Insurance has over group insurance is_________?

Answer 30

Provisions for cash and loans in the case of emergencies

Question 31

Ei Benefits pay you ____% of your weekly earnings up to a maximum, and range from ____weeks to ____weeks.

Answer 31

55%, 14, 45

Question 32

EI Sickness Benefits provide ___ weeks benefits if you cannot work for _________reasons.

Answer 32

15 weeks, medical

Question 33

Factors usually included in choosing permanent insurance over term insurance

Answer 33

1. Client’s budget
2. The type of insurance they already have
3. their preference of one type over another????

Question 34

Which items can be included as medical expenses for the federal tax credit

Answer 34

1. Premiums personally paid for group extended health plans
2. The employer deductions from income for a group extended health plan
3. Premiums personally paid for emergency travel health insurance

Question 35

If the beneficiary and insured die at the same time what will happen to the proceeds.

Answer 35

It will be assumed the beneficiary died first and the proceeds will go to the contingent beneficiary and to the estate if no contingent beneficiary is named.

Question 36

The common disaster clause will usually say that a beneficiary must ______ the insured for a ______ __________of ________.

Answer 36

survive, specified amount of time

Question 37

Which type of annuity contract is most appropriate for someone worried about the effects of inflation?

Answer 37

Variable Annuity

…periodic payments vary based on the return of some investments

If an investment is based on some growth equities it may protect you better from the effects of inflation

Question 38

Is group dental a taxable benefit to the employee?

Answer 38

No

Question 39

Prescribed Annuities are purchased with registered or non-registered funds? Why?

Answer 39

Non-registered only

because registered funds are fully taxable

(part interest and part return of capital)

(maintain a level taxable interest portion)

Question 40

Prescribed Annuities pay the subscriber what type of income?

Answer 40

part interest and part return of capital

(maintain a level taxable interest portion)

Question 42

How do you calculate the Life Insurance Needs?

Answer 42

1. Immediate Capital Needs…pay down debt, mort, education, funeral, other loans
2. Use After-tax income for PMT= Salary x (1-MTR), i= capitalization rate
3. Less any current insurance

= Total Life Insurance need

Question 43

What is the First Time Donor’s Super Credit 2013-2017?

Answer 43

• The First-Time Donor’s Super Credit (FTDSC) gives first-time donors and those who haven’t claimed a charitable donation in the last five years an extra 25% on their tax credit for charitable gifts.
• The FTDSC is applicable to any single cash donation up to $1,000 made by an individual or couple between 2013 and 2017.

Question 44

With a couple who should claim the charitable donation?

Answer 44

Higher-income person should claim it.

Question 45

How does a Charitable donation break down?

Answer 45

• First $200 x 15% = $30
• Next $800 x 29% = $232
• Total $262 Credit…not a deduction but a tax credit
• For instance, if an individual has taxable income of $220,000 and makes a donation of $25,200, the tax credit is calculated as 15% x $200 plus $20,000 x 33% plus $5,000 x 29%
• When a taxpayer has a spouse or common-law partner and the combined donations are greater than $200, the donations for both spouses should usually be combined and claimed on one tax return.
• Check your tax return carefully in relation to donations. It is possible that by claiming all donations on one tax return, the donations may not be completely utilized. If this is the case, you can either carry forward some of the donations or split the donations between spouses.

Question 46

Break down a $1000 contribution for a first-time donor?

Answer 46

• Assume you give $1,000 in cash to a registered charity and that the rate of your provincial credit is 20 percent. Your tax credits will add up to $712, calculated as follows:
• FEDERAL On the first $200, the federal credit is 15 %, or $30
• FEDERAL On the next $800, the federal credit is 29 % or $232
• Your FDSC is 25 % of $1,000 or $250
• PROVINCIAL credit is 20 % of $1,000 or $200
• Once all of the credits have been calculated, your out-of-pocket cost of a $1,000 donation is only $288.