Life, Health and Disability Flashcards
6 factors of why life insurance
- income replacement in event of death
- income for readjustment period
- financial support to dependents, or elderly parents of primary care giver
- fund children’s education after death
- pay off debt such as mortgage, car, etc.
- provide income for surviving spouse
What is the difference between Needs Approach and Human Life Value Approach
Needs: evaluates income replacement and lump sum such as debt repayment, blackout period for SSN
Human Life: uses projected future earnings less self maintenance cost as basis for need.
What is term life insurance
- provides a predetermined sum
- ends at term unless renewed
-premium may increase annually - no cash value
-inexpensive at young age
What are the provisions and limitations of Term Life
- Renewable without insurability
- convertible to whole life without insurability
- ## waiver of premium during disability
- higher premiums at older entry
- may not for permanent life insurance needs
Describe the types of term life insurance and their advantages and disadvantages.
1.Annual Renewable: fixed death benefit with premiums increasing annually
Advantages: inexpensive, max benefit, convertible
Disadvantages: No savings, premiums increase
- Level Term: fixed for period of time with expensive premiums earlier, death benefit fixed
Advantages: level premiums
Disadvantages: overpaid premiums, no savings - Decreasing Term: level for decreasing term, no cash value, death benefit decreases (ex mortgage)
What are the characteristics of Whole Life and Permanent Life Insurance
- lifetime protection if paid
- pretends high mortality cost using PV
- premiums vary
- cash value - can be surrendered for loans
- minimum guaranteed interest
- needs estate planning, liquidity for transfer taxes and need investment like returns
What are the advantages and disadvantages of Whole Life
Advantages: cash value, tax deferred, protects until age 120
Disadvantages: expensive premiums with no flexibility, may not be able to purchase as much protection
What are the different types of Whole Life
- Ordinary - premiums paid until death or 120, cash value increased to face value at 120, level death benefit.
- Limited Pay - high premiums paid until certain age
- Variable Life- cash value invested in stock, bond, mutual finds with higher opportunity for returns, death benefit fluctuates
- Current Assumption (CAWL)-uses new money and mortality rates for premium, one time adjustment to premium if high interest rates
-LoCAWL- low premium assuming higher interest
-HiCAWL- assumes lower interest rate than current for higher premiums until adjustment
-Interest Sensitive - create demand fr lower premiums
What are the Dividend Options for whole life
- nonparticipating
- participating (CRAP-O**)
- cash
-accumulate at interest - dividends taxable
-reduce premiums
-paid up additions
- one year term
What are the non forfeiture options for whole life
- cash surrender, reduced paid up insurance, extended term, accelerate death benefit (<24 months to live, not taxable)
What is Universal Life
- insured can adjust premiums paid, face value, and cash value
- insured doesn’t direct investment portion
-cash value can pay premiums
What is the difference between Life A and Life B
A: flexible premium, adjustable death benefit, death benefit increases with cash value
B: death benefit varies with cash value directly, more expensive
What is Variable Universal Life
- has investment option, no guarantee rate of return or interest, cash value in separate account and not guaranteed but considered asset if insurance company fails
What is a Non Direct Recognition Program
where dividends are not paid when there is an outstanding loan on the policy
What are the policy provision of Universal Life
- Grace Period
- Misstatement of gender or age
- suicide
- disability waiver of premium - will waive charges related to mortality and administration or WHOLE premium
What is an Assignment and the different types
- policy owner assigns rights of life contract to someone else.
1. Absolute Assignment - transfers all policy ownership rights
2. Collateral Assignment- used for collateral on debt which assigns limited ownership, terminates when debt is satisfied
What is group Life insurance and group whole life
- paid by the employers and deductible premiums, first 50000 is free, premiums paid after tax by employee.
- can accumulate savings, premiums paid by employer are taxable income to employee
What is a life annuity and the different types
- provides protection from outliving assets, commonly used to fund retirement, doesn’t hedge against inflation
- Immediate - lump sum
- deferred - lump sum or payments
- flexible premium deferred - retirement is funded by total premiums paid
- single premium deferred- lump sum pay of premium tax free until distributed
- fixed
- variable - no guarantee of return,risky, keeps up with inflation
- equity indexed
What are the 5 classes of Health Insurance Expenses
- Hospital- room/board, not physician fees
- Surgical
- Physician
- Major Medical
- group hospitalization
What is the characteristics of Patient Protection and Affordable Care Act
- requires most US citizens and legal residents to have health insurance
- employer requirements:
if 50+ employees does not have it then fee of 2k/ emp after 1st 30. - 200+ emp - auto enrolled and employees can opt out
- less than 50 emp are exempt
What is HMO
Health Maintenance Organizations
- deliver comprehensive health care in return to payment. care is managed by gate keeper determining care received, no coverage outside of HMO
What is Preferred Provide Organizations
- network of providers whom are employers or insurance company contracts, provider recieves discount of services, insured receives reimbursement, insured can seek else where for higher deductibles
What is managed care
think Military care
What are characteristics of Health Savings accounts and eligibility requiremens
- those who seek health care tax deduction for amounts contributed to account and tax free earnings to use for qualified medical expenses
- employer and employee can contribute
- must have high deductible health plan to be eligible
NOT ELIGIBLE: general HRAs or FSA already opened, medicare participation individuals claimed as dependent on other tax return
What are the provisions of HSA
- Noncancellable policy - right to renew without insurer cancelling or raising premiums
- guaranteed renewable- can raise premiums if raised for entire group
What is HIPPA
- allows to obtain healthcare when between jobs, laid off or retiring
- can obtain coverage without restriction of switching groups plans
- 12 month exclusion window (18 for late)
What is COBRA and eligibly
Consolidated Omnius Budget Reconciliation Act
- extension of coverage with 60 day election and possible fee
- only if offered and have at least 20 employees
Eligible if… :
1. covered employee dies
2. employee leaves or terminated ( not for misconduct)(18mo)
3. hours reduced FT to PT (18mo)
4. separates from spouse
5. eligible for medicare
6. dependent child not eligible
What is Medicaid characteristics
- poor, determined eligibility by assets, individuals can apply when going to nursing home after spending down assets, paid by gov
What is private long term care policy and the 7 types of coverage and Eligibility?
- coverage for nursing home stays and other types of care not covered
1. Skilled Nursing
2. Intermediate
3. Custodial Care
4. Home Health care
5. Assisted Living
6. Adult Day Care
7. Hospice
Eligibility:
- chronically ill or cognitive impairment (ADLs)
What are the policy issues of Disability Income Insurance
- coverage, term, elimination period, taxation of benefits, definition of disability, residual benefit and probation period
Define:
Any occupation
Modified Any occupation
Own Occupation
Split
Any: cannot perform any job (least expensive)
Modified: unable to perform duties of gainful occupation that they are fit by education and experience
Own: cannot perform own occupation (expensive and specialized)
Split: Own to Modified after 1-2 yr
