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Life & Disability Flashcards

1
Q

3 major items that premiums are based on

A

Age
Gender
Health status

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2
Q

Most Canadians need mandatory insurance. 4

A
  • Provincial health plans for hospital and physician service to residents of Canada
  • car owners need vehicle insurance
  • corporations need liability
  • professional liability for professionals
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3
Q

2 consequences of being underinsured

A

Issuers not cover full replacement

Insurers may consider policy void if they think it’s intentional

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4
Q

Percent of income that can be covered with disability insurance

A

60%

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5
Q

2 benefits to insurance policy holders in regards to taxation

A

Beneficiary receives death benefit tax free

Investment growth inside is tax free,while held inside

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6
Q

4 risk factors leading to morbidity

A

Health
Lifestyle
Gender
Socio-economic

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7
Q

Cra requirements of a private health services plan - 5 elements

A
  • undertakings by one person
  • to indemnify another person
  • for an agreed consideration
  • from a loss or liability in respect of an event
  • the happenings of which are uncertain

** a valid PHSP must involve reasonable risk

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8
Q

PHSP can take one of 2 forms

A

Insured plan, employer pays premiums under contract of insurance to insurance co

Self insured, PHSP is not backed by contract of insurance but a contract where employer reimburses

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9
Q

When can self employed deduct their premiums for PHSP

A

If business income exceeds 50% of their total income, or if income from other sources less than $10k

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10
Q

How can employers limit liability under PHSP. 2

A

Cap amount

Require employee to contribute to plan or have deductible

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11
Q

Who has ownership and control over individual disability

A

Purchased owned and controlled by insured

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12
Q

Who has ownership and control over group disability insurance

A

Employer purchases

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13
Q

Is individual disability portable

A

Does not terminate after insured leaves

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14
Q

Is group disability insurance portable

A

May end when insured leaves

If employer agrees, it may be portable

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15
Q

What kind of coverage for individual disability insurance

A

Usually insured can tailor it

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16
Q

What kind of coverage for group disability insurance

A

Usually restricted to 3 levels

  • sick leave
  • short term
  • long term
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17
Q

Premiums for individual disability insurance

A

More expensive to policy holders

May include ability to waive premium during disability

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18
Q

Premiums for group disability insurance

A

Employer pay full

Lower cost because more people

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19
Q

Benefit for individual disability insurance

A

May provide for loss of income, not inability to work
Benefit contractually guaranteed
Limited time it pays

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20
Q

Benefit for group disability insurance

A

Long term benefit usually reduced by other benefits received

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21
Q

Optional riders for individual disability insurance

A

Return of premiums if low or no claim

Cost of living or residual benefit

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22
Q

Optional riders for group disability insurance

A

Purchase extra coverage

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23
Q

Evidence of insurability for individual disability insurance

A

Increase coverage without more underwriting

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24
Q

Evidence of insurability for group disability insurance

A

Offers basic regardless of health

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25
Tax on individual disability insurance
Premiums not deductible, paid with after tax dollars | Benefit is tax free
26
Tax on group disability insurance
If insured pay benefit is tax free , if employer taxable
27
What is a non-cancellable policy
Insurer cannot cancel or increase price during contract
28
What is a guaranteed renewable policy
Cannot increase individual premiums
29
What is a conditional renewable policy
At end of premium payment period, insurer can refuse to renew policy for outlined reasons
30
What is a commercially renewable policy
Based on claims, on anniversary, issuer can cancel or increase price
31
What is a cancellable policy
Allows insurance co or policy holder to cancel anytime as set out in policy
32
How are incurable earned income calculated for disability insurance
Earned income after expenses but before taxes
33
Ways to determine earned income for self employed 4
- Monet they take from business - net profit, if directly attributed to applicants - dividend if there’s a pattern - if company, look at financial statements
34
What is not included as earned income for self employed
- Depreciation, cca - discretionary dividend - dividend payed previous year - retained earnings
35
Important needs life insurance can provide. 4
pay insured clients taxes Pay debts/ final expenses Provide for dependent Fund a goal
36
Explain term to 100 plans
Premiums go to 100, then considered paid. Client remains covered for life
37
When is a whole life insurance policy said to mature
When cash value equals death benefit, usually 100
38
Provincial laws require insurance companies to include 3 details in the contract
Identity of policy holders Life insured Premiums
39
Incontestable clause
Allows insurer to void contract-in first 2 years if untruthful
40
2 options if misrepresentation of age while still alive
- increase or decrease coverage | - adjust premiums retroactively
41
If misstatements of age is found at death
Death benefit adjustment
42
If intentional fraud in insurance application
Can void policy at anytime
43
Types of preappoval for insurance
- conditional approval - conditional insurability receipt - temporary insurance
44
What is interim Conditional approval
Insurer agreed to cover death during underwriting processes policy delivery
45
Conditional insurability receipt
No underwriting decision yet but will cover death if it happens during decisions
46
Temporary insurance
Insurer agrees to provide life insurance from date app completed even if they end up deciding unacceptable risk for insurance
47
Cancellable
Not usually on life insurance contracts, but allow insurer of insured to cancel
48
Non cancellable and guaranteed renewable
Guarantees that insurance company will not cancel, increase premiums or make changes until insured is certain age - common for disability
49
Convertible
Clients can convert term to permanent - usually certain time (55 or 65) - insurability evidence not required - converted policy is an extension and death benefit remains the same
50
Renewability
Renew term policy without evidence of insurability | - premiums increase due to age not health
51
Death benefit payment to terminally ill
- advanced death pay | - full death benefit if dying within 12 to 24 months
52
Waiver of premiums
If become disabled, premiums waive until recovery or 65
53
Level term rider
Added to permanent life, provide extra coverage at lower cost
54
Family coverage
Added to term, for coverage of dependant
55
Child term rider
Extra coverage for children until 21 to 25, then kids can convert to individual without evidence of insurability
56
Spousal term rider
Adds term coverage for spouse and children who are minors. Children automatically added after 15 days
57
Accidental death rider
Extra money if die of accident
58
Guaranteed insurability rider
Can apply for additional coverage after policy issue without evidence of insurability I.e. every 5 years, with a max - premiums based on age when rider is exercised
59
Cost of living rider
Policy holder can purchase one year term equal to change in CPI without evidence of insurability
60
If beneficiary discrepancies between will and insurance app
Most recent wins
61
Benefit of naming beneficiary in insurance 4
No probate No estate delays Avoid intestacy rules Privacy
62
Benefit of naming beneficiary of family class
Credit or protection, souse, child, grandchild or parent | if holder and insured differ then the beneficiary / insured relationship is determined.
63
If insurance policy has “all children”listed as beneficiary
All children equally including those born after contract signed and out of wedlock
64
Quebec rule with designating spouse as beneficiary of insurance policy
Irrevocable unless stated otherwise
65
Can will designate irrevocable beneficiary
No
66
If policyholders don’t want to pay irrevocable beneficiary
Stop paying premiums and let policy lapse
67
Key advantage of irrevocable beneficiary
Creditor protection
68
Disadvantage of irrevocable beneficiary is that you need there approval to to the following. 5
``` Change beneficiary Surrender policy Use as collateral Take out policy loan Take cash out ```
69
Survivorship rules if beneficiary and insured die before policy holder
Paid to contingent beneficiary, if none, then policy holder
70
Survivorship rule if policy holder and beneficiary die at same time
Proceeds paid as if beneficiary died before policy holder - money paid to policy holder
71
Survivorship If policy holder is different from insured, and policy holder dies before beneficiary and insured
Ownership transferred to successor owner, otherwise ownership passes to personal representative of policy holder and ownership is transferred according to will If no will, province determines new owner
72
2 types of permanent life insurance
Term to 100 life insurance policy | Universal
73
Reasons for getting universal life policy. 8
``` Permanent insurance Extra cash to invest Shield returns from tax Access extra cash Ability to change premiums Decide how to invest extra premium Comfortable with selecting investment Maxed annual RRSP contribution ```
74
What kind of policies pay dividends
Participating shares companies surplus
75
3 factors affecting size of dividends from participating policy
Investment earnings Mortality experience General expense level
76
Ways that participating policy holders can receive dividends 5
``` Cash Left in to gain interest Used to reduce premiums Purchase additional term insurance in form of rider Purchase paid up addition ```
77
What determines how dividends from participating policy are paid
In contract or holders choice
78
What is premium offset mean
Dividends issued are equal to required premiums
79
Are dividends from whole life participating policy subject to income taxes
- not if paid out, considered return on cost | - if lest in, interest earned on dividends are taxed
80
Types of creditor insurance. 6
``` Life insurance Disability insurance Critical illness insurance Accidental death and dismemberment Job loss Hospitalization ```
81
How does disability insurance for a creditor work
Covers minimum payment and once better borrower owes remaining
82
What are considered critical illnesses
``` Cancer Heart attack Stroke Multiple sclerosis Parkinson’s ```
83
Is creditor insurance mandatory to borrow
No
84
What is the ownership and control of creditor insurance
Group policy issued to creditor
85
Cancellability of creditor insurance
Can be canceled by borrower at any time | - depend on province, 20 - 30 day review with full refund of premiums
86
Minimum and maximum amounts of coverage for creditor insurance
Limits on amount or time which proceeds are paid | I.e. amount limit to debt
87
Is creditor protection portable
No because group plan tied to debt, terminates when debt is paid
88
Is insurability required for creditor insurance
Basic health questions
89
Age range for creditor insurance
18/19 - 65/70

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