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A&S Accident & Sickness Insurance (OFFICIAL LLQP ) > INSURANCE TO PROTECT ASSETS (Chapter 3) > Flashcards

INSURANCE TO PROTECT ASSETS (Chapter 3) Flashcards

1
Q

A&S Terminology

Medical Expense tax credit

A
  • Non-refundable tax credit that you can use to reduce the tax that you paid or may have to pay
  • If you paid for healthcare expenses, you may be able to claim them as eligible medical expenses on your tax return.
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2
Q

A&S Terminology

Indemnity

A
  • Insurance compensation paid for damage or loss
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3
Q

A&S Terminology

Long-term care options: Assisted living

A

Support services in senior residences for individuals who can no longer function in an independent living situation.

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4
Q

A&S Terminology

Long-term care options: Nursing home (facility) care

A
  • Also known as chronic care
  • Support services in nursing homes for individuals who have lost the ability to live independently.
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5
Q

A&S Terminology

Long-term care options: Respite care

A
  • The need to provide 24/7 home care for the family’s patient
  • Providing relief (respite) to the primary caregiver for a short period of time.
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6
Q

A&S Terminology

Long-term care

A

Benefits that are structured to provide a daily maximum benefit to cover the costs of professional health care services for insured individuals who, due to illness,
injury or aging, are no longer able to function independently.

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7
Q

A&S Terminology

Long-term care options: Home care

A

long-term care services which involves health care in the home of the afflicted individual.

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8
Q

REVIEW

Disability can be measured as “partial” or “total” and within that range there are four distinct definitions that are employed by different policies what are they?

A
  • Own occupation;
  • Regular occupation;
  • Any occupation;
  • Total disability (according to the CPP).
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9
Q

REVIEW

What are the most common methods of classifications that insurance companies use to assume occupational classes?

A
  • 4A: Professionals, such as doctors, lawyers, dentists and senior executives.
  • 3A: Administrative office workers who face few, if any, workplace hazards, such as clerical staff.
  • 2A: Supervisors in low-risk environments, salespersons and like occupations.
  • A: Skilled manual workers who face few or no workplace hazards, or those working, for instance, as courier truck drivers
  • B: Manual labourers who work in hazardous environments, such as home construction workers.
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10
Q

REVIEW

What are some of the riders that are applicable with disability insurance?

A
  • Future purchase option (FPO)
  • Cost-of-living adjustment (COLA)
  • Accidental death and dismemberment (AD&D)
  • Partial and residual disability benefits
  • Return of premium (ROP)
  • Hospitalization benefit
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11
Q

REVIEW

What are the calculations for Residual disability benefits

A

Pre-disability income - part-time income ÷ Pre-disability income = Percentage%
($80,000 - $32,000 ÷ $80,000 = 60%)

While working part-time after suffering a disability, 60% of maximum disability benefit can be claimed, combined with the part time income post disability

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12
Q

REVIEW

The amount of disability benefit available to group disability insurance (DI) plan members is subject to restriction on several different levels such as…

A
  • A non-evidence maximum amount (without medical evidence) that is absolute, spelled out in the
    master contract, regardless of the plan member’s qualifying income;
  • A maximum overall amount based on a percentage of the group member’s qualifying income
    (with medical evidence);
  • An “all source” maximum that is governed by group offset rules set out in the master contract.
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13
Q

REVIEW

Name 5 types of Individual (DI) policies?

A
  • Non-cancellable policies;
  • Guaranteed renewable policies;
  • Cancellable policies;
  • Guaranteed issue policies;
  • Non-traditional disability insurance plans
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14
Q

REVIEW

A number of circumstances may arise where a claim is denied and no benefits are paid.

What are some of the reasons for a denial of benefits? (name at least 3)

A
  • Misstatement of a material fact on the insurance application;
  • Fraud.
  • Absence of loss;
  • Absence of proof;
  • Delay in filing a claim.

[Ref. 2.2.2.4]

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15
Q

REVIEW

There are 3 types of benefits for recuring disabilities, what are they?

A
  • Recurring disability with two waiting periods
  • Recurring disability with a single waiting period
  • Recurring disability with extended benefit period
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16
Q

REVIEW

Meeting family goals is primarily dependent upon clients’ ability to generate sufficient income and savings over time.

Unfortunately, there are a number of risks that could disrupt those plans, name at least three

A
  • Unexpected expenses;
  • Loss of income or savings;
  • Lower standard of living;
  • Inflation;
  • Longevity;
  • Debt.
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17
Q

CHAPTER 3 - Insurance to protect assets

TRUE OR FALSE?

Critical illness (CI) (also known as “dread disease”) insurance and long-term care (LTC) insurance provide such living benefits and help protect assets from erosion due to prolonged health-related expenses.

A

TRUE

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18
Q

What’s the difference between Critical illness (CI) and long-term care (LTC) insurance?

A
  • Critical illness policies are designed to provide a tax-free sum of money to assist an insured in adapting to his changed circumstances caused by a life-threatening illness.
  • Long-term care policies provide tax-free funds for care services for those insured persons who can no longer care for themselves independently, due to illness, injury or the effects of aging.
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19
Q

Explain the qualification period with CI insurance

A

Exclusionary clause that specifies that an otherwise covered condition that is first diagnosed or which first manifests itself within 30 - 90 days of policy issue will not be covered.

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20
Q

What is the purpose of qualification period?

A

To protect the insurer against anti-selection: applicants seeking coverage because they fear that they may have a covered condition.

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21
Q

Explain the waiting period with CI insurance

A
  • Period between the date that a covered condition is diagnosed and benefit becomes payable.
  • The waiting period is often 30 days after the date of diagnosis, but may be longer in relation to certain conditions.

[Ref. 3.1.1.4]

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22
Q

What is the contract duration of a CI insurance?

A
  • They are issued both as term and permanent contracts
  • Term policies run for a specific number of years, typically for 10 or 20 years, or to age 65 or 75
  • Permanent plans run from date of issue to the life insured’s age 100, much like Term-100 life insurance

[Ref. 3.1.1.4]

23
Q

How do critical illness policies distinguish from each other?

A

They are distinguished in the number of conditions that are covered such as:

  • Heart attack, stroke and cancer, coronary bypass surgery;
  • Children’s policies (under age 18) such as Muscular dystrophy, Type 1 diabetes, Cerebral palsy, Cystic fibrosis
  • Comprehensive policies covering 20 or more conditions
24
Q

Does CI insurance have riders?

A

YES

The two most common riders available under critical illness policies are the return (refund) of premium rider and the waiver of premium rider

25
Q

Insurance companies may offer their critical illness policyholders the opportunity to add a return of premium clause to their contracts that would pay back some, or all, of premiums previously paid by the policyholder.

When can these types of returns be offered?

A
  • On death
  • On surrender
  • On maturity
26
Q

CHAPTER 3 - Insurance to protect assets

A waiver of premium rider may be added to a critical illness policy provided the insured qualifies medically and pays an additional premium.

Waiver of premium rider on CI insurance will continue until…

A

Waiver of premium rider on CI insurance will continue until the earlier of

  • The recovery of the insured from the disabling condition;
  • A successful claim for benefits for a critical illness;
  • The expiry date of the policy
27
Q

The payment of benefits under a critical illness contract is subject to a number of restrictions. Name at least three restrictions.

A
  • Diagnosis or first manifestation of the condition, or disease, must occur more than 30 days after the issue date of the policy (the qualification period);
  • The life insured must survive the diagnoses of the covered condition for at least 30 days (the waiting period, which may be extended to 90 days in some instances)
  • The life insured must usually make a claim within 30 days of diagnosis of the qualifying condition;
  • The claimant must provide medical proof of the qualifying condition within 90 days of filing
    a claim
28
Q

TRUE OR FALSE?

There is usually only a one-time payout of benefits under a critical illness policy, similar to the situation with a life insurance policy. After a successful claim the policy is cancelled.

A

TRUE

  • (Example) Sylvia successfully claimed a $100,000 benefit under her CI insurance policy in 2011, due to diagnosis of a qualifying cancer. When she subsequently had a heart attack in 2013, she was unable to make a second claim under her policy because the contract had been terminated upon payout of the 2011 cancer claim.
29
Q

Explain the second event rider under CI insurance

A

Rider that allows coverage remains in force after a successful claim and a lesser level of benefits may be paid in the event of a future, unrelated claim.

30
Q

What are the Tax treatment of critical illness premiums, benefits and return of premium benefit?

A
  • Premiums paid for individual critical illness coverage are not deductible for income tax purposes.
  • Benefits received as the result of a claim or a refund of premium are not taxable income in the hands of the recipient policyholder.
31
Q

There are about 4 long-term care options
what are they?

A
  • Home care;
  • Respite care;
  • Assisted living;
  • Nursing home (facility) care
32
Q

Name some key factors of home care

A
  • Most often provided by informal caregiver (family member)
  • Patient’s need is relatively minimal and likely to be only temporary
  • Provided also by professional health care workers or community service workers.
  • Home care services are typically charged by the hour and may not be required on a daily basis. (Nursing / personal care, overnight stay, companionship, housekeeping/cleaning services etc…)
33
Q

CHAPTER 3 - Insurance to protect assets

Home care may involve both health and support services provided for in the patient’s home. When services offered are publicly funded, they may be received in one of
two ways:, (Name them)

A
  • Through a contracted agency paid for by the government;
  • Through a home care agency selected and paid for by the client with an allowance received from the government.

[Ref. 3.2.3.2]

34
Q

TRUE OR FALSE?

Long-term care coverage is most often acquired as a stand-alone policy, but can also often be offered as an optional rider on life insurance and critical illness insurance contracts.

A

TRUE

35
Q

TRUE OR FALSE?

Long-term care contracts are a form of disability insurance.

A

FALSE

  • Long-term care contracts are not “disability insurance”
  • They do not provide income replacement in the event that the insured is unable to engage in gainful employment due to injury or illness.
36
Q

TRUE OR FALSE?

Prospects for long-term care insurance are most often those in the range of ages 45 to 55.

A

TRUE

37
Q

What are some advantages of LTC insurance (name two)

A
  • Minimization / elimination, of the burden of costs for needed long-term care services
  • A by-product of the relief of financial burden
  • The knowledge of not having to depend on the government in a time of need in old age.
38
Q

Explain the COVERAGE provided by LTC

A

LTC insurance contracts provide protection for the costs of in-home, assisted living or facilities services required by individuals who are recovering from an illness or injury or those who have a condition (for example, Parkinson’s disease) that requires chronic care.

39
Q

Coverage provided by LTC is medically underwritten based on a number of factors, name at least three.

A

Coverage is medically underwritten based on a number of factors, including:

  • Age of the life to be insured;
  • Gender;
  • Whether the life to be insured is a smoker or a non-smoker;
  • Current health;
  • Medical history;
  • Cognitive ability;
  • Current ability to perform the six activities of daily living
40
Q

How does the amount of coverage work in LTC?

A
  • The amount of coverage is computed based on a maximum daily rate multiplied by a number of days (care days) of coverage, to an overall maximum specified in the contract

Example;

Gregory has an LTC insurance policy with a rider that offers him up to one year (365 days) of home care coverage at a maximum of $200 a day.

His overall maximum benefit for home care would be $73,000 ($200 × 365 days). If some of his care days required less than $200 of benefits, the term of the benefits payable could be extended beyond 365 days until the entire $73,000 of benefits had been paid out.

41
Q

What are the exclusions for LTC benefit? Name at least three.

A

No benefits will be paid arising from:

  • Act of war, declared or otherwise;
  • Act of terrorism;
  • Accident and sickness insurance
  • Attempted suicide;
  • Self-inflicted injuries;
  • Normal pregnancy;
  • Criminal activities;
  • Abuse of non-prescription drugs;
  • AIDS/HIV

[Ref. 3.3.3]

42
Q

What are the 6 Activities of daily living (ADLs)?

A
  • Dressing
  • Bathing
  • Toileting
  • Transferring
  • Eating
  • Maintaining continence
43
Q

Does LTC have riders, if so what are they?

A

YES

  • Cost-of-living adjustment (COLA)
  • Return of premium (ROP)
44
Q

How are benefits paid under LTC?

A

Long-term care benefits are payable on either a reimbursement (repayingthe insured for expenditures already made) or an indemnity (paid directly to the care provider) basis, subject to daily and overall limits specified in the contract. I’m

45
Q

TRUE OR FALSE?

Daily maximums for home care be acquired in increments of anywhere from $30 to $550 a day and the maximum overall benefit is calculated as a number of weeks of coverage at the maximum daily rate.

A

FALSE

Daily maximums for home care can be acquired in increments of anywhere from $10 to $350 a day and the maximum overall benefit is calculated as a number of days of coverage at the maximum daily rate.

[Ref. 3.3.5]

46
Q

TRUE OR FALSE?

Qualification for benefits under LTC is subject to medical evidence of need certified by the attending physician, using the ability to perform the ADLs as a guideline.

A

TRUE

47
Q

What are the tax treatment of long-term care benefits and Premiums ?

A
  • All benefits paid out under a long-term care policy are tax-free to the insured
  • Premiums paid for LTC insurance are not a deductible expense for income tax purposes. They may, however, qualify as eligible expenses for purposes of claiming the federal Medical Expense Tax Credit
48
Q

TRUE OR FALSE?

Long-term care policies are generally non-cancellable policies.

A

FALSE

Long-term care policies are generally guaranteed renewable, meaning that the policy must be renewed annually for the life of its term.

[Ref. 3.3.6]

49
Q

TRUE OR FALSE?

Some LTC insurers offer a fixed-term option for premiums, 20 years for example. This could permit the insured to pay up the policy prior to retirement.

A

TRUE

50
Q

Premiums for LTC insurance are generally payable for the life of the contract, subject to a waiver of premium provision if and while the policyholder is on claim.

The amount of premium payable depends on a number of factors, name at least three.

A
  • Amount of coverage provided (daily and overall maximums);
  • Number of days for which benefits are payable;
  • Type of coverage provided;
  • Elimination period under the contract;
  • Underwriting characteristics of insured;
  • Requirements to qualify for benefits.

[Ref. 3.3.6]

51
Q

What are the tax treatment of long-term care premiums?

A
  • Premiums paid for LTC insurance are not a deductible expense for income tax purposes.
  • They qualify as eligible expenses for purposes of claiming the federal Medical Expense Tax Credit.
52
Q

Illustrate common characteristics (Events triggering the benefits) for DI, CI, & LTC

A
53
Q

TRUE OR FALSE?

The existence of insurance coverage are guaranteed that all medical and care needs of an afflicted individual will be accommodated.

A

FALSE

The existence of insurance coverage is not a guarantee that all medical and care needs of an afflicted individual will be accommodated.

[Ref. 3.5]

A&S Accident & Sickness Insurance (OFFICIAL LLQP ) (15 decks)

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