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BIF Review > Insurance Planning > Flashcards

Insurance Planning Flashcards

1
Q

which annuity pays the highest income but ends at death of anuitant?

A

life only

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2
Q

three general types of annuities

A

fixed, equity indexed, variable

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3
Q

Fixed annuity types

A

guaranteed interest; minimum & current

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4
Q

equity indexed annuities

A

linked to an index, often SP 500; point to point; participation rate; spread; caps

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5
Q

variable annuities

A

have sub accounts

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6
Q

what is the lowest paid annuity type

A

joint life

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7
Q

ways annuities are purchased

A

single premium, installment period, flexible premium

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8
Q

when annuity payments begin

A

immediate or deferred

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9
Q

how are annuity funds invested

A

variable, fixed, equity indexed

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10
Q

forms of annuity payments

A

withdrawals, life annuity, annuity certain

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11
Q

annnuity certain options

A

fixed period or fixed income

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12
Q

annuity withdrawal options

A

full or partial, systematic

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13
Q

annuity guaranteed minimums

A

refund or period certain

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14
Q

annuity refund types

A

lump sum, installment

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15
Q

period certain options

A

5,10, 15, 20 years

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16
Q

is there a step up in basis of annuities

A

no, annuities are income in the respect of the decedent (IRD)

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17
Q

what are taxable distributions classified as for tax purposes

A

ALL ordinary income

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18
Q

Annuity exclusion allowance

A

made with after-tax basis received

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19
Q

tax free portion of annuitization payment formula

A

basis/expected payout

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20
Q

what kind of tax treatment do annuity withdrawals have

A

LIFO, subject to early 10% withdrawal penalty prior to age 59.5

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21
Q

what may be exchanged for an annuities

A

other annuities (section 1035 exchange) or qualified long term care insurance

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22
Q

how are gains distributed from a non-qualfiied annuity taxed?

A

ordinary income, plus 10% penalty fee if 59.5 younger unless an exception applies

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23
Q

Withdrawal of an annuity taxation

A

LIFO

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24
Q

annuitization of an annuity taxation

A

exclusion allowable is applied from each payment until the basis is recovered

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25
Q

exclusion ratio of an annuity payout tax treatment

A

investment in contract/annual payment x life expentancy

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26
Q

what happens if annuity payments go beyond life expectancy

A

all taxable income

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27
Q

what is the annuity withdrawal penalty and qualifications

A

pre 59.5= 10% penalty on taxable earnings

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28
Q

what are the exceptions for an annuity withdrawal penalty fee (5)

A

owner over 59.5, owner disabled, owner dies, immediate NQ annuity, substantially equal periodic payments later of: 5 years or owner reaches 59.5

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29
Q

Difference in taxation of withdrawals versus annutization

A

Withdrawals: LIFO
Annuitization: Exclusion allowance is applied from each payment until the basis is recovered.

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30
Q

How are annuities before 1982 withdrawals taxed

A

FIFO

31
Q

What is Section 1035 exchange primarily used for

A

primarily to defer current taxation in the exchange of life insurance and annuity contracts.

32
Q

What can life insurance be exchanged for in a 1035 exchange

A

life insurance, endowments, annuities, qualified L-T care insurance

33
Q

what can endowments be exchanged for in a 1035 exchange?

A

endowments, annuities, qualified L-T care insurance

34
Q

what can annuities be exchanged for in a 1035 exchange?

A

annuities, L-T care insurance

35
Q

What part does Coverage A, B, C, & D of homeowners insurance cover?

A

Property

36
Q

What part does Coverage E & F of homeowners insurance cover?

A

liability

37
Q

HO-02 home insurance

A

basic homeowners coverage- basic homeowners coverage

38
Q

HO-03 home insurance

A

special form- better homeowners coverage

39
Q

HO-04 insurance

A

contents broad form- for tentants/renters (only covers contents)

40
Q

HO-05 insurance

A

comprehensive form- best homeowners insurance

41
Q

hO-06 insurance

A

unit owners form- for condo/co-op owners (studs in)

42
Q

HO-08 insurance

A

Modified coverage- for older or historic homes only (less covereage); got very old , intricate woodwork, stained glass, etc

43
Q

What does a Named Perils policy cover

A

coverage specifies perils or “causes of loss” that are covered. Everything else is not covered.

44
Q

What does a Open Perils policy cover

A

coverage specifies excluded perils or “causes of loss” that will not be paid. Everything else is covered.

45
Q

which HO policies provide the most comprehensive coverage

A

HO-03 & HO-05

46
Q

what is the difference between HO-03 and HO-05 policies?

A

HO-03 covers contents on a named perils basis and HO-05 covers contents on an open perils basis.

47
Q

Coverage A home insurance policy

A

Address

48
Q

Coverage B home insurance

A

is for backyard

49
Q

Coverage c home insurance

A

crate-crap

50
Q

coverage D home insurance

A

damage/destroyed digs

51
Q

coverage E home insurance

A

exposure to legal action

52
Q

coverage F home insurance

A

fractured femurs

53
Q

how can an HO-03 policy provide open perils coverage for contents?

A

by adding a HO-15 endorsement – remember this by 3 x 5 =15.

54
Q

What is the difference between a peril & hazard

A

peril= the actual cause of loss: the things we insure for. ex: a fire

hazard= a condition that makes loss from a peril more likely. ex: a gasoline soaked rag in the garage

55
Q

What does HO-03 policy covers

A

the dwelling on an open perils basis but covers contents on a names peril basis

56
Q

what is the requirement that the dwelling is insured for at least of the Replacement Cost Value (RCV)

A

80%

57
Q

what does the policy pay if a dwelling is insured for 80% or more of the replacement cost

A

the LESSER of:
The actual cost to repair damage or replace the building
The stated limit of coverage under the policy

58
Q

what does the policy pay if a dwelling is insured for less than 80% the replacement cost

A

GREATER of:
The “actual cash value” of the damage (Replacement cost minus depreciation)
Proportion of the loss that is equal to the proportion of insurance maintained as compared to 80% of the replacement cost

59
Q

Homeowners coinsurance formula

A

([“Did Have” + “Should Have”] x Loss Amount) - Deductible

60
Q

what is the buyer known as in an options contract

A

known as the “holder” and the “long.”

61
Q

what is the seller known as in an options contract

A

known as the “writer” and the “short.”

62
Q

does the buyer have the right or obligation to do something?

A

the right

63
Q

who has the obligation to perform in an options contract?

A

the seller

64
Q

Explain split level insurance 250k/750k/500k in part A, liability auto insurance

A

max bodily injured/max total/all bodily injured/ max property damage

65
Q

PAP part D: collision coverage

A

damange to a car caused by an accident withan inanimate object- another car, light pole, building

66
Q

PAP part D comprehensive coverage

A

all other damage to auto- theft, glass breakage, flood, fire

67
Q

damage caused by a collision with an animal is covered under what coverage?

A

comprehensive

68
Q

personal liability umbrella policy (PLUP)

A

Provides additional liability coverage above and beyond the underlying limits of one’s homeowners and automobile liability coverage (an “umbrella”). Policies are commonly $1,000,000+.
Typically requires the insured to maintain stated minimum coverage limits in the underlying homeowners and automobile insurance policies.

69
Q

Does a personal liability umbrella policy cover boat, ATV, etc?

A

if required minimum liability insurance on the boat is maintained.

70
Q

when does a personal liability umbrella policy kicn in?

A

Does not pay until the underlying policy limit is exhausted.

71
Q

What does a PLUP cover

A

Covers the same bodily injury and property damage exposures as the underlying policies but also typically extends coverage for personal liability (such as libel or slander). Typically covers cost of defense

72
Q

What does a PLUP not cover?

A

Does not extend coverage for business interests of the insured.

73
Q
A

BIF Review (7 decks)

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