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QAFP > Life & Disability > Flashcards

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
Q

Tax on individual disability insurance

A

Premiums not deductible, paid with after tax dollars

Benefit is tax free

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26
Q

Tax on group disability insurance

A

If insured pay benefit is tax free , if employer taxable

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27
Q

What is a non-cancellable policy

A

Insurer cannot cancel or increase price during contract

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28
Q

What is a guaranteed renewable policy

A

Cannot increase individual premiums

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29
Q

What is a conditional renewable policy

A

At end of premium payment period, insurer can refuse to renew policy for outlined reasons

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30
Q

What is a commercially renewable policy

A

Based on claims, on anniversary, issuer can cancel or increase price

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31
Q

What is a cancellable policy

A

Allows insurance co or policy holder to cancel anytime as set out in policy

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32
Q

How are incurable earned income calculated for disability insurance

A

Earned income after expenses but before taxes

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33
Q

Ways to determine earned income for self employed 4

A
  • Monet they take from business
  • net profit, if directly attributed to applicants
  • dividend if there’s a pattern
  • if company, look at financial statements
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34
Q

What is not included as earned income for self employed

A
  • Depreciation, cca
  • discretionary dividend
  • dividend payed previous year
  • retained earnings
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35
Q

Important needs life insurance can provide. 4

A

pay insured clients taxes
Pay debts/ final expenses
Provide for dependent
Fund a goal

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36
Q

Explain term to 100 plans

A

Premiums go to 100, then considered paid. Client remains covered for life

37
Q

When is a whole life insurance policy said to mature

A

When cash value equals death benefit, usually 100

38
Q

Provincial laws require insurance companies to include 3 details in the contract

A

Identity of policy holders
Life insured
Premiums

39
Q

Incontestable clause

A

Allows insurer to void contract-in first 2 years if untruthful

40
Q

2 options if misrepresentation of age while still alive

A
  • increase or decrease coverage

- adjust premiums retroactively

41
Q

If misstatements of age is found at death

A

Death benefit adjustment

42
Q

If intentional fraud in insurance application

A

Can void policy at anytime

43
Q

Types of preappoval for insurance

A
  • conditional approval
  • conditional insurability receipt
  • temporary insurance
44
Q

What is interim Conditional approval

A

Insurer agreed to cover death during underwriting processes policy delivery

45
Q

Conditional insurability receipt

A

No underwriting decision yet but will cover death if it happens during decisions

46
Q

Temporary insurance

A

Insurer agrees to provide life insurance from date app completed even if they end up deciding unacceptable risk for insurance

47
Q

Cancellable

A

Not usually on life insurance contracts, but allow insurer of insured to cancel

48
Q

Non cancellable and guaranteed renewable

A

Guarantees that insurance company will not cancel, increase premiums or make changes until insured is certain age - common for disability

49
Q

Convertible

A

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
Q

Renewability

A

Renew term policy without evidence of insurability

- premiums increase due to age not health

51
Q

Death benefit payment to terminally ill

A
  • advanced death pay

- full death benefit if dying within 12 to 24 months

52
Q

Waiver of premiums

A

If become disabled, premiums waive until recovery or 65

53
Q

Level term rider

A

Added to permanent life, provide extra coverage at lower cost

54
Q

Family coverage

A

Added to term, for coverage of dependant

55
Q

Child term rider

A

Extra coverage for children until 21 to 25, then kids can convert to individual without evidence of insurability

56
Q

Spousal term rider

A

Adds term coverage for spouse and children who are minors. Children automatically added after 15 days

57
Q

Accidental death rider

A

Extra money if die of accident

58
Q

Guaranteed insurability rider

A

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
Q

Cost of living rider

A

Policy holder can purchase one year term equal to change in CPI without evidence of insurability

60
Q

If beneficiary discrepancies between will and insurance app

A

Most recent wins

61
Q

Benefit of naming beneficiary in insurance 4

A

No probate
No estate delays
Avoid intestacy rules
Privacy

62
Q

Benefit of naming beneficiary of family class

A

Credit or protection, souse, child, grandchild or parent

if holder and insured differ then the beneficiary / insured relationship is determined.

63
Q

If insurance policy has “all children”listed as beneficiary

A

All children equally including those born after contract signed and out of wedlock

64
Q

Quebec rule with designating spouse as beneficiary of insurance policy

A

Irrevocable unless stated otherwise

65
Q

Can will designate irrevocable beneficiary

A

No

66
Q

If policyholders don’t want to pay irrevocable beneficiary

A

Stop paying premiums and let policy lapse

67
Q

Key advantage of irrevocable beneficiary

A

Creditor protection

68
Q

Disadvantage of irrevocable beneficiary is that you need there approval to to the following. 5

A 
Change beneficiary 
Surrender policy 
Use as collateral 
Take out policy loan 
Take cash out
69
Q

Survivorship rules if beneficiary and insured die before policy holder

A

Paid to contingent beneficiary, if none, then policy holder

70
Q

Survivorship rule if policy holder and beneficiary die at same time

A

Proceeds paid as if beneficiary died before policy holder - money paid to policy holder

71
Q

Survivorship If policy holder is different from insured, and policy holder dies before beneficiary and insured

A

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
Q

2 types of permanent life insurance

A

Term to 100 life insurance policy

Universal

73
Q

Reasons for getting universal life policy. 8

A 
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
Q

What kind of policies pay dividends

A

Participating shares companies surplus

75
Q

3 factors affecting size of dividends from participating policy

A

Investment earnings
Mortality experience
General expense level

76
Q

Ways that participating policy holders can receive dividends 5

A 
Cash
Left in to gain interest 
Used to reduce premiums 
Purchase additional term insurance in form of rider 
Purchase paid up addition
77
Q

What determines how dividends from participating policy are paid

A

In contract or holders choice

78
Q

What is premium offset mean

A

Dividends issued are equal to required premiums

79
Q

Are dividends from whole life participating policy subject to income taxes

A
  • not if paid out, considered return on cost

- if lest in, interest earned on dividends are taxed

80
Q

Types of creditor insurance. 6

A 
Life insurance 
Disability insurance 
Critical illness insurance 
Accidental death and dismemberment 
Job loss
Hospitalization
81
Q

How does disability insurance for a creditor work

A

Covers minimum payment and once better borrower owes remaining

82
Q

What are considered critical illnesses

A 
Cancer 
Heart attack 
Stroke
Multiple sclerosis 
Parkinson’s
83
Q

Is creditor insurance mandatory to borrow

A

No

84
Q

What is the ownership and control of creditor insurance

A

Group policy issued to creditor

85
Q

Cancellability of creditor insurance

A

Can be canceled by borrower at any time

- depend on province, 20 - 30 day review with full refund of premiums

86
Q

Minimum and maximum amounts of coverage for creditor insurance

A

Limits on amount or time which proceeds are paid

I.e. amount limit to debt

87
Q

Is creditor protection portable

A

No because group plan tied to debt, terminates when debt is paid

88
Q

Is insurability required for creditor insurance

A

Basic health questions

89
Q

Age range for creditor insurance

A

18/19 - 65/70

QAFP (12 decks)

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