Insurance Planning Flashcards

Question

Basic Perils Covered

Answer 1

Windstorm Hail Aircraft Riot Vehicles Vandalism Explosion Smoke Fire Lightning Theft

Answer 2

Basic Perils Plus: Rupture of a system Artificially generated electricity Falling objects Freezing of plumbing

Answer 3

Ordinance/Law Power Failure Earthquake Neglect Nuclear Hazard War Intentional loss Flood Sink hole is a COVERED peril for the exam

Answer 4

Replacement cost x Coinsurance % = Insurance Required ((Insurance Carried / Insurance Required) x loss)) - Deductible = Amount paid by insurance Replacement cost of the residence DOES NOT INCLUDE THE LAND!

Answer 5

- Owned by an Individual or Couple LIVING IN THE SAME HOUSEHOLD - Must be a private passenger auto - Can't be used as a public/livery conveyance (the transporting of people and/or goods for hire, such as by a taxi service, motor carrier, or a delivery service.) - Can't be rented to others.

Answer 6

- Part A: Limited to third parties - Part B: Medical Payments - Part C: Uninsured/Underinsured Motorist - Part D: Damage to the covered auto

Answer 7

- Any vehicle shown on the Dec page. - A private passenger auto, pickup truck, panel truck or van, ACQUIRED during the policy period. Must notify insurance company within 14 days for D coverage. - Any trailer you own listed on the dec page. - Any auto or trailer you do not own, while used as a temporary sub for any vehicle that is out of normal use. ie. Repair. No coverage for business use. Need a business policy for that.

Answer 8

- The named insured and any family member who suffers bodily injury caused by accident while occupying a covered vehicle. - The named insured and family members who if, while a pedestrian, are struck by any motor vehicle designed for use on public roads or by a trailer. - Other persons while a passenger of the insured auto.

Answer 9

This agreement promises to pay the amount an injured insured could have collected from the uninsured driver, if such driver had carried auto liability insurance. This also covers family, other passengers, etc. UM is Liability Insurance, NOT Medical Payments.

Answer 10

This is Open perils coverage!!! Loss Caused by: - Glass breakage - Falling Objects - Fire - Theft - Explosion - Earthquake - Windstorm - Hail - Water - Flood - Riot or Civil Commotion - Contact with Birds or Animals.

Answer 11

- Nearly always a correct answer. - Provides liability coverage (BI/PD) for catastrophic claims. - Requires policy owner to carry certain underlying coverage of specified amounts. - Professional acts are specifically EXCLUDED.

Answer 12

Malpractice: Bodily injury (doctors, dentists) Errors and Omissions (E&O): Monetary damages (financial advisors, lawyers, accountants, insurance agents)

Answer 13

- Unlimited Medical Expenses - Disability Income (TAX FREE). Opposite of UE income. - Death benefits - Medical and Vocational Rehabilitation Absolute Liability

Answer 14

- Routine foot care, glasses, hearing aids, and dental. - Emergency care outside the US (some exceptions for Canada, Mexico and Caribbean)

Answer 15

- Benefits are limited: Pays all of the first 20 days of SKILLED CARE and everything over a specified amount per day for the next 80 days of SKILLED CARE with a 100 day MAX. - The limited benefit is subject to substantial restrictions: Pays for SKILLED CARE ONLY. - Admission to a nursing home must follow within 20 days of the hospital stay of three days or more. - The patients condition must be expected to improve.

Answer 16

HMO: - Monthly fee regardless of services rendered. - Out-of-network care not covered (unless an emergency). - Gatekeeper PPO: - Pay Per service. Provider is paid for the actual services rendered. - Out-of-network partially covered (usually 70%)

Answer 17

- Must have 20 full/part-time employees. - The option to buy continuation. 18 months if: - Voluntary or involuntary termination, or change from FT to PT. - This covers terminated employees and their dependents. 36 months if: - Employee death, divorce, legal separation, or eligibility for medicare. - Loss of dependent status (marriage). - Reaches dependency age limit specified by plan. - This covers Spouses, children, dependents. *If either the employee or a covered family member is disabled (SS definition) within 60 days of a triggering event, the period of continuation coverage can be extended by 11 months (total of 29 months).

Answer 18

- Savings accounts - Used in conjunction with HDHP. - Contributions are deductible for federal tax purposes even if not itemizing. Contributions by an employer are also deductible to the ER, and do not represent taxable income to EE. - Distributions are tax-free if used for health care. - Contributions not spent are carried forward and portable. - Unused assets become property of named bene upon death. - Distributions for non-medical are ordinary income plus 20% penalty if under 65.

Answer 19

- Own Occupation: Best definition for the insured. Cant perform duties of Own-Occ. - Split Definition: Own-Occ then modified. - Any Occupation: SOCIAL SECURITY DEFINITION. Basically have to prove you can't do ANY gainful activity.

Answer 20

Non-cancellable "Noncan"- Guarantee that the individual can keep the policy in force by paying the stated premium and that the premium will not increase. "No can change the premium" Guaranteed Renewable- Guarantee that the individual can keep the policy in force by paying the stated premium but the insurer may increase the premium by class of insureds. Provides lower premium because policy may increase. Conditionally renewable allows the above two policies to continue beyond age 65. The policy usually has a 2-year benefit, and the premium is adjusted for benefit and age. Insured must still be an active employee.

Answer 21

Individual OWNS AND PAYS for the contract: - Premiums are NOT DEDUCTIBLE. Paid with after-tax dollars. - Benefits are TAX-FREE. *Employee recognizes premium, then benefit is TF* EmployEE owns, EmployER pays the entire premium under a BONUS arrangement (section 162): - Premiums are DEDUCTIBLE to EmployER. - Benefits are TAX-FREE to EmployEE. *Employee recognizes bonus, then benefit is TF* EmployEE owns, EmployER pays the entire premium under a SALARY CONTINUATION plan (group plan): - Premiums are DEDUCTIBLE to EmployER. - Benefits are TAXABLE to EmployEE.

Answer 22

- Whole Life - Universal Life - Insurance company controls the investment return. - Assets part of general account.

Answer 23

- Variable Life - Variable Universal Life - Client controls the investment return. - Assets part of separate account.

Answer 24

Cash Reduced premium Accumulate with interest Paid-up additions One-year term/5th dividend

Answer 25

CPR!!! Gotta give CPR to not forfeit. Cash Paid-up Term insurance (Extended Term) Reduced Paid-up whole life. Other surrender options would be to use the APL to cover the premium (if elected by the policyholder in the application), and another option would be to annuitize the cash value.

Answer 26

Cash Pure Life/Single Life Refund Period Certain Specified Income/Period Interest Only Joint and Survivor

Answer 27

- Entered into after June 21, 1988 - Fails to meet the 7-Pay Test (Single premium) - Distributions/Withdrawals are taxed LIFO - Distributions under 59.5 are also subject to a 10% federal penalty tax (if not disabled). - Death Benefit is still tax-free. - dividends paid by mutual insurance companies are taxed as income if they are received as cash/reduce premiums due, or retained by the insurer in repayment of a policy loan.

Answer 28

- If the DB INCREASES by $150,000 OR LESS and the insured has guaranteed insurability, the policy will NOT lose its grandfathered status. - If the DB increases more than $150,000, the contract becomes subject to material change rules and may lose its grandfathered status. - If the policy increases by ANY amount, and the insured has to show proof of insurability, the policy MAY lose its grandfathered status.

Answer 29

If an interest in a life insurance policy is transferred for valuable consideration (not a gift), the proceeds in the excess of the consideration paid for the policy, combined with any premiums paid by the owner, are taxable as ordinary income (like a viatical). The main exceptions to this rule are: - A transfer to the insured (most common). - A transfer to a partnership in which the insured is a partner. - A transfer to a corporation in which the insured is a shareholder or officer. - A transfer pursuant to a Divorce.

Answer 30

Life to Life Annuity to Annuity Life to Annuity NO Annuity to Life Lindsay Lohan went to AA in LA, NOT AL.

Answer 31

Stock Redemption: - No step up in basis Cross-Purchase: - Step up in basis

Answer 32

Endorsement Method: - Employer is owner - Employee is not a shareholder Collateral Assignment Method: - Employee is owner - Employee is a shareholder - Employee assigns the policy to the employer at the earlier of the employee's death, or the termination of the split-dollar plan.

Answer 33

Periodic Payouts: - Monthly payment x Life expectancy in MONTHS = Expected Payout. - Investment (basis) / Expected Pa1st out = EXCLUSION RATIO. - Once basis is recovered, the whole distribution is taxable. Withdrawals: - LIFO, Ordinary income. -Ordinary income tax plus 10% penalty if under 59.5. Ordinary Income!! NOT LTCG!

Answer 34

- Must be used by March 15th or forfeited to the company (use it or LOSE it - Medical Only) - Dependent Care must be used by 12/31 - Not subject to income tax, FICA or FUTA - Health FSA may not be used to reimburse employee premiums paid for other health plans (such as MSA, HSA and LTC) - Expenses for LTC services can NOT be reimbursed under a health FSA, but other medical expenses can be reimbursed.

Answer 35

- Health Care Premiums. - Insurance Premiums on non-discriminatory group life policy up to $50k. - Company car for work only. - Employer-provided transit passes ($300/mo. cap) or parking ($300/mo. cap). - Occasional overtime meal money, cab fare, theater or sporting event tickets. - Discounts on services limited to 20% of selling price charged to customers.

Answer 36

- Health insurance premiums paid for self-employed, partners, and more than 2% owners of an S-Corp are TAXABLE. - 100% is deductible as an adjustment to income on the FRONT of the 1040. - This can include all types of health insurance programs, BUT NOT DISABILITY INSURANCE PREMIUMS

Answer 37

With insurance, the amounts paid by the contract holder and issuer are unequal.

Answer 38

If Penny was injured by Ricky, and penny has her own insurance to compensate for the injury, she can still sue Ricky for the amount of medical expenses and lost income she would have incurred had there been no personally owned insurance. The measure of damage should not be mitigated by payments received from sources other than the negligent party.

Answer 39

When an insurer pays a claim, it takes over the legal rights it's insured had against a negligent third-party.

Answer 40

(Amount needed / Investment return %) + money for year 1.

Answer 41

- LTC insurance is purchased to cover a certain dollar amount per day. - Services covered: skilled, intermediate, custodial, home health care, and adult day care. The home health care benefit can be as much as 100% of the nursing home benefit. - Has elimination period and benefit period.

Answer 42

Willful overcharge. If the additional premium is not needed, it is returned as a dividend tax-free.

Answer 43

RC: No deduction in benefits is made for depreciation. Dwelling will typically be covered under replacement cost coverage. ACV: RC - Depreciation. Could result in a shortage to replace an item. Personal property (contents) will typically be covered by ACV.

Answer 44

For loss coverage under a typical homeowners policy, when the amount of the insurance is LESS THAN 80% of the dwelling's replacement cost, the insurer will pay the GREATER of : - ACV, or - Replacement cost formula: Replacement cost x co-insurance % (80%) = Insurance required. ((Carried / Required) x Loss) - deductible = Amount paid by insurance. *When the amount of dwelling insurance is 80% of the replacement cost, OR GREATER, just apply the formula*

Answer 45

- Named insured - Family member living in same house - Person using auto with permission - Spouse living in the same house. *If the spouse ceases to be a resident of the same household, he or she is still covered until the EARLIEST of 90 days following change of residency, effective date of spouses new policy, or end of the policy period.*

Answer 46

First number is limit paid to any one person for bodily injury. Second number is aggregate that will be paid for all bodily injury. Third number is aggregate property damage claims.

Answer 47

Workers comp benefits are tax-free to the employee (but still deductible to the employer). Unemployment is based off of previous earnings, payable for 26 weeks + 13 in high periods, and are included in income. FULLY TAXABLE.

Answer 48

All persons 65 and over who are entitled to monthly SS cash benefits or monthly benefits under Railroad Retirement programs are entitled to benefits. A SS disability beneficiary is covered under Medicare after entitlement to disability benefits for 24 months or more. Those covered include disabled workers at any age, disabled widows and widowers age 50 or older, beneficiaries age 18 or older who receive benefits because of a disability beginning BEFORE age 22, and disabled qualified railroad annuitants. The above disabled persons receive Part A and Part B.

Answer 49

A. Hospital stays, subject to deductibles. Limited to 150 days for one stay. B. Post-hospital extended care in a skilled nursing home. Up to 100 days. C. Unlimited number of post-hospital home health services. D. Hospice care for terminally ill patients. E. Patient pays for first 3 pints of blood or donates them. Medicare A covers additional blood.

Answer 50

- Part B is voluntary - Same persons eligible for A are eligible for B - Financed through monthly premiums - Patient pays a deductible first - Medicare pays 80% of unlimited amount of approved charges (co-insurance).

Answer 51

A. Doctor's services B. Diagnostic tests, radiology/pathology, treatment for mental illness, transfusion of blood, physical/occupational therapy, drugs and biologicals that cannot be self-administered. C. Outpatient services from a participating hospital D. Home health services E. Preventative care services (wellness checks) F. Depression screening Excluded: - Dental - Eye glasses - Hearing aids - Most immunizations (does cover one free flu vax per year) - Prescription drugs.

Answer 52

Drug coverage. Drug companies must generally provide a 50% discount. Person must have A and/or B coverage.

Answer 53

- Must be covered under a HDHP - Below Medicare eligibility age - 65 - Not covered by any other health plan

Answer 54

- Distributions can be for health care needs not covered by HDHP and are tax-free. - 20% penalty for nonmedical HSA withdrawals if under age 65. - Can be used to pay for retiree health insurance premiums, prescription drugs, COBRA, and LTC PREMIUMS. - Preventative care services are not subject to the deductible. - Contributions not used can be carried forward for life, and transferred to spouse tax-free upon death. - Unused assets become property of a named beneficiary upon the account-holder's death, or go to the estate if no bene. A non-spouse bene has to include assets as ordinary income. - Employees are allowed a once in a lifetime rollover from their IRA into an HSA.

Answer 55

Yes. HSAs cover most all necessary expenses. especially those expenses not covered by insurance (HDHP). HSAs also can be used to pay deductibles!!

Answer 56

HRA is an arrangement that is SOLELY EMPLOYER FUNDED. It reimburses employees for substantiated medical expenses up to max dollar amount per coverage period. Cannot be part of a cafeteria plan because it is solely employer funded. Used before FSAs. Employer retains any excess unused money in an HRA. R for EmployeR!

Answer 57

With regard to health insurance, the notification to convert should be made immediately after the termination or, if COBRA is elected within 180 days, before the end of the continuation period. Employer should inform the terminating employee and/or any dependents that may be losing coverage of any available options. Employee must submit an app and pay initial premium within 31 days of the date the group insurance ends.

Answer 58

Residual disability benefit Indemnifies the insured. Makes them whole for any decrease in salary when injured. Guaranteed insurability option- Permits an insured the right to purchase additional amounts of coverage without new proof of insurability. Increased coverage is subject to financial underwriting. This is different from guaranteed renewable!!

Answer 59

Residual disability benefit Indemnifies the insured. Makes them whole for any decrease in salary when injured. Guaranteed insurability option- Permits an insured the right to purchase additional amounts of coverage without new proof of insurability. Increased coverage is subject to financial underwriting. This is different from guaranteed renewable!! Social Insurance Substitute- For total disability, the monthly benefit will be equal to the social insurance substitute (SIS) less any social insurance benefit (Social Security disability payments) received in that month. SIS - SSDI. Cannot reduce Base.

Answer 60

A policy that provides cash at surrender is a NONqualified policy. If it is a NQ policy, the premiums cannot be deducted.

Answer 61

For individuals whose income and resources are insufficient to meet the costs of necessary medical care. A single individual will not qualify for medicaid in most states unless he or she has less than $2,000 in countable assets.

Answer 62

Premiums are deductible by the employer. The ability for the employee to name the beneficiary causes DB to be included in the employee's estate. The DB is not taxable as long as it’s under the 50k exemption. Individuals are generally ineligible for Medicaid coverage if they give money or assets away within 5 years of incurring nursing home expenses. Individuals also become ineligible if they have more than 700k "ish" in home equity.

Answer 63

- Cafeteria Plan that offers an FSA for qualified medical expenses, and an FSA for dependent care. - Before the end of the prior calendar year, employees file a written election with their employer to reduce their salaries by the amounts they choose to allocate to FSA accounts. These reductions avoid income, FICA and FUTA taxes. - Employee submits receipts for expenses to be reimbursed. - Employer can also contribute to the plan. - For the DCFSA, both spouses must work (unless disabled or a student) in order to be eligible to contribute to the plan (if one spouse earns less than $5k, the benefit is limited to whatever the spouse earned), and every tax-free dollar used to reimburse expenses directly reduces the dependent care credit.

Answer 64

Can pay eligible expenses for care of a participants dependent child under age 13.

Answer 65

- Tuition and Fees - Expenses for children age 13 and older - Late PAYMENT fees - Overnight camps - Payments for services not yet provided - Field Trips - Clothing or Food - Transportation to and from the dependent care provider

Answer 66

- Any money that is left unspent at the end of the coverage period is forfeited and can be applied to future plan administrative costs, or can be equally allocated as taxable income among all plan participants. - The coverage period generally ceases upon termination of employment unless the employee continues coverage under cobra.

Answer 67

Yes. Deductible by ER, generally taxable to EE.

Answer 68

Cash value above cost basis at the time of SURRENDER is taxed as ORDINARY INCOME.

Answer 69

- Received in cash or used to reduce premiums due. - Retained by the insurer in repayment of a policy loan.

Answer 70

A gift of a policy to a family member causes a taxable gift, but not a transfer for value because no consideration is received. A sale of a policy to a family member, other than the insured, is not a taxable gift but is a transfer for value.

Answer 71

- Corporation buys policies on stockholder's. Agrees to purchase the stockholders interest upon death. - Best for multiple owners. - Corporation is Owner and Beneficiary of the policies of each stockholder. - Nondeductible, tax-free benefit. - Creditors have right to claims. - NO STEP-UP in Basis.

Answer 72

- Think, Cross-parter, each partner buys a policy. - One stockholder buys a policy on the others. One stockholder agrees to purchase the deceased stockholders interest. - Best with fewer owners. - Each stockholder is owner and beneficiary of other stockholders policy. - Nondeductible, tax-free benefit. - Creditors have no right to claims (owned by individual). - STEP-UP in Basis.

Answer 73

No they are not, but the proceeds of the life policy are received tax-free.

Answer 74

Expenses are deductible as a business expense, but the proceeds are taxable.

Answer 75

Expenses are not deductible, but the proceeds are tax-free.

Answer 76

Medigap policies include benefits to pay deductibles and coinsurance but also add benefits not included in Medicare. Medigap policies offering prescription drug coverage are no longer issued.

Answer 77

- A chronically ill person has been certified as meeting one of the following requirements: expected to be unable to perform at least two activities of daily living for a period of at least 90 days, or, substantial services are required to protect the individual from threats to health, and safety due to a substantial cognitive impairment. - skilled, intermediate, custodial, home healthcare, and adult day care. - Elimination and max benefit periods will depend on each policy. - Inflation protection, amongst others can be added for additional premium.

Answer 78

Premiums paid and unreimbursed expenses for qualified LTC services are deductible as ITEMIZED medical expenses. The deduction is subject to dollar limitations that increase with age. Deductions are subject to 7.5% of AGI floor.

Answer 79

Employer pays and deducts premium. Benefits paid to the employee are taxable income. There are also partially contributory plans.

Answer 80

- Plans that allow employees to choose from a "cafeteria" of benefits provided by their employer. - Must include a cash option to allow participants to receive cash in lieu of non-cash benefits of equal value. Examples of cafeteria plan choices include the following: - Term life equal to 2 times salary - Medical insurance - Short/long-term disability insurance a 401(k) arrangement can be offered under a cafeteria plan.

Answer 81

- FSAs are Cafeteria plans under section 125. - Most cafeteria plans offer two FSA accounts; one account for qualified medical expenses, and another for dependent care. - Before the end of the prior calendar year, employees file a written election to reduce their salaries by the chosen amounts. The dollar limit must be made before the compensation is earned. - Reductions are not subject to income tax, FICA, or FUTA. - Each employee keeps receipts of expenses in each benefit category and submits them for reimbursement.

Answer 82

- Used to pay for medical expenses not covered by insurance. - Employers may offer either a grace period or a rolling balance, but not both.

Answer 83

- Maximum tax-free reimbursement is $5,000 (2022). - Any tax-free reimbursement from the account reduces the expense eligible for the dependent care credit. - If the participant is married, both spouses must earn income in order for the dependent care FSA to be available. Exceptions is spouse is disabled or a student. - If one spouse earns less than $5,000, then the benefit is limited to what the spouse earned.

Answer 84

Can pay eligible expenses for care of a participants children under age 13, or any age if dependent is mentally or physically unable to care for self.

Answer 85

- Tuition and fees - Expenses for children 13 and older - Late PAYMENT fees (late pick-up fees are good). - Overnight camps - Advanced payments for services not provided yet - Field trips, clothing and food - Transportation to and from the dependent care provider

Answer 86

- Ends either at the time the "plan year" ends, or at the time when an employee's coverage under the plan ends.

Answer 87

- The participating employee's entire annual contribution is available at the start of the plan year. - An employee does not continue to contribute to the plan upon termination of employment.

Answer 88

- Any money left unspent at the end of the coverage period is forfeited and can be applied to future plan admin costs, or can be equally allocated as taxable income among all plan participants. - "Coverage period" generally ceases upon termination or employment whether initiated by the employee or the employer, unless employee elects COBRA.

Answer 89

- Employers establish VEBAs to fund certain benefits for its members. Benefits can include the following: - Death benefits - Medical expense benefits - Disability benefits - Legal expense benefits - Unemployment benefits - Childcare benefits - Severance benefits - Education benefits Notice there are no benefits that are similar to pensions, annuities, retirement savings or deferred comp. That is because they are not allowed!!

Answer 90

Expense of the plan is deductible to the employer, but benefits are generally taxable as compensation to the employee. Individually purchased plans would be paid for with after-tax dollars, but the benefits are tax-free.

Answer 91

Any persons who die within 120 hours of each other, by law, predecease each other. This keeps the property of one deceased person from passing through the estate of another deceased person before passing to those who survive them both.

Answer 92

A loss deduction can be claimed only if the loss is incurred in connection with the taxpayers trade or business, or from a transaction entered into for profit.

Answer 93

The annuity taxation rules change. The income on the contract must be treated as ordinary income received or accrued by the holder that year.

Answer 94

Disability carriers will typically issue only 50%-60% of earned income. This may be improved by adding group disability coverage AFTER the individual policy has been issued.

Answer 95

Generally purchased to cover a certain dollar amount per day. Per diem.

Answer 96

Voluntary or involuntary termination Or Change from full-time to part-time Everything else is 36 months.

Answer 97

Guaranteed renewable.

Answer 98

- The patient's condition requires skilled nursing. - The patient has been in a hospital at least 3 days in a row before admission to a participating skilled nursing facility. - The patient is admitted to the skilled nursing facility within a short time, generally 30 days, after leaving the hospital. - The patient's care in the skilled nursing facility is for a condition that was treated in the hospital. - A medical professional certifies that the patient needs and receives skilled nursing care.

Answer 99

Needs analysis estimates survivors needs that must be met following an individuals premature death and compares those need to the resources available. Human life value analysis is based on the insureds individual income earning ability. It factors in a discount rate to determine the present value. Needs analysis = considers existing insurance and investments. Human life = replaces income earning ability, and factors no other resources.

Answer 100

Can make partial withdrawal of cash value with no requirement to repay the loan. The DB will be reduced by the outstanding loan amount. As long as the policy is not a MEC, the withdrawal is not taxed.

Answer 101

If the premiums paid + Cash value covers the expenses of the policy (company expenses & mortality costs) then no extra premium is needed. Mortality cost is the cost of pure protection.

Answer 102

Dividends paid are generally treated as return of unused premium, and are not income taxable, with the exception of MECs.

Answer 103

withdrawals and loans against a life insurance policy do not count as taxable income unless the policy is surrendered or lapses, and the amount owed exceeds what was paid in.

Answer 104

Normally dividends are not taxed because they are a return of premium, and policy loans and withdrawals from CV are not taxed. With a MEC, loans against the contract are treated as distributions. Distributions are taxed under the interest first rule. If dividends paid by mutual life insurance companies are received in cash or to reduce premiums do they are taxable as income. If dividends are retained by the insurer as repayment of a policy loan, It is also taxed. MEC distributions are taxed LIFO!

Answer 105

Deductible as a business expense, benefits are taxable.

Answer 106

Non-deductible, benefits are tax-free.

Answer 107

THIS IS THE HOSPITAL INSURANCE COVERAGE PORTION - All persons 65+ who are entitled to monthly Social Security or Railroad retirement program cash benefits. - All disabled beneficiaries, receiving Social Security for at least two years. 1. Hospital care 2. Nursing home or extended care facility 3. Home health services 4. Hospice care

Answer 108

THIS IS THE VOLUNTARY MEDICAL INSURANCE PORTION - financed jointly through monthly premiums, paid by persons who have elected coverage, and by the federal government. 1. Physicians services 2. Home health services 3. Diagnostic tests 4. All outpatient services of a participating hospital - the patient pays the deductible. Medicare usually pays 80% of the approved charges after the deductible. Generally does not cover outpatient prescription drugs, but does cover some oral anticancer drugs, certain drugs for hospice enrollees, and certain drugs that can't be self administered.

Answer 109

Number of total employees. Needs to be at least 20 or more. In order for someone to elect cobra, they need to be participating in the plan!

Answer 110

Yes, you typically need a separate policy. Premiums paid and unreimbursed expenses for qualified LTC services are deductible (as itemized medical expenses). The deduction is subject to a 7 1/2% AGI floor. The deduction is subject to dollar amount limitations that are based on age. This is important to remember.

Answer 111

Whole life premium is completely waived UL/VUL disability income benefit pays either the charges for mortality and administrative expenses, or full amount of premium.

Answer 112

It is a transaction involving an insured who is not terminally, ill or chronically ill, and is generally over age 65. These settlements are taxed as a long-term gain. Look for the LTCG answer.

Answer 113

T CV - Basis (premiums paid) = Taxed at OI

Answer 114

The main difference is that loans and withdrawals have no effect on non-MEC contracts. The death benefit is excluded from income for either MEC or non-MEC.

Answer 115

- No Income tax, FICA, FUTA - No LTC. - Not an HSA - DCFSA: use it or lose it by 12/31 -MFSA: could allow for 2.5 month grace period until March 15th.

Answer 116

- $3050 cap - there is a 2 1/2 month grace period, or $610 rollover option

Answer 117

- max tax-free reimbursement is $5000 per year. - any tax free reimbursement from the account reduces the expense eligible for the dependent care credit. - no grace period, use it or lose it by 12/31.

Answer 118

Tuition, fees, supplies, books, and equipment. Not room and board.

Answer 119

No. Life insurance cash values are not generally counted as assets either.

Answer 120

Yes they all allow it, except HRAs are solely employer funded.

Answer 121

You can purchase the rate to require additional insurance, and specified amount, as specified times are ages. No exam required. This is different than guaranteed renewable for disability policies.

Answer 122

When net cash value is provided, factor in the outstanding loan. Net cash value + outstanding loan = ACV

Answer 123

A group permanent policy does not meet the requirements to be treated as group term life insurance. The employee will be taxed W-2 income on the premiums paid by the employer, if the proceeds are payable to the beneficiary named by the employee. The premiums are deductible by the employer.

Answer 124

A withdrawal can be made up to the total amount of premiums paid “basis”. A loan is a interest bearing withdrawal up to the total amount of cash value in the policy. Check back in the example in the book. Net cash value plus the outstanding outstanding loan at policy surrender is the amount of “value”. Subtract the basis and the remainder is taxed at ordinary income.

Answer 125

No loan involved: - The investor will receive CV. - CV - Basis = taxed at Ordinary Income. When there is a loan involved: - The investor will receive the remainder of CV in excess of the outstanding loan. The investor already has possession of the loan, so the remainder of CV will be given, which will total the amount of CV. - CV - Basis = taxed at Ordinary Income. Remember that loans can only come from cash value.

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