Life, Health, and Disability Insurance (Lesson 2) Flashcards
1
Q
What is the Needs approach to life insurance protection
A
- Evaluates the income replacement and lump-sum needs of survivors in the event of an income producers untimely death
- Any future cash or income need should be discounted using the PV of future cash flow
2
Q
What is the human life value approach to life insurance
A
- Uses projected future earning less self maintenance costs as the basis for measuring the life insurance needs
- Important items in calculating the Human life value include: Individuals current earnings, future growth rate of earnings, number of working years remaining, cost of self maintenance, and the capitalization rate (discount rate)
3
Q
What is term life insurance
A
- Pure insurance protection which pays a predetermined sum if the insured dies during a specified period of time
- Protection ceases at the end of the term
- Premium may be level or increasing
- Face amount must be level or decreasing
- No cash value
- Inexpensive at young ages
4
Q
What is a renewable provision with term insurance
A
- most term policies can be renewed without evidence of insurability
5
Q
What is a convertible provision with term insurance
A
- most term policies have a provision to convert to a whole life policy without evidence of insurability for a particular period of time
6
Q
What is a Wavier of premium provision with term insurance
A
- if the insured becomes totally disabled the premiums are waived during the period of disability
7
Q
What are limitations of Term life insurance
A
- exponentially increasing premiums for older age entry or renewal
- term policies may not meet permanent insurance needs
8
Q
What are annual renewable term policies
Premiums:
Cash Value:
Death benefit:
A
- premiums increase annually (more expensive each year)
- no cash value
- death benefit is fixed at the face amount of the policy
9
Q
What are advantages of Annual Renewable Term policies
A
- Pure death benefit protection that is inexpensive
- Insured receives a maximum death benefit for each dollar in premiums
- can be converted to a permanent policy without proving insurability
10
Q
What are disadvantages of Annual Renewable Term Policies
A
- may become too costly at older age
- no savings component
- premiums increase each year
11
Q
What are level term policies
Premiums:
Cash Value:
Death Benefit:
A
- Premiums are level for a period of time (Insured prepays some of the later more expensive premiums earlier in the policy)
- No cash value
- Death benefit is fixed at the face amount of the policy
12
Q
What are advantages of a level term policy
A
- premiums remain level
- provides a pure death benefit protection that is inexpensive
- insured receives maximum death benefit for each dollar in premiums
- Can be converted to a permanent policy without proving insurability
13
Q
What are disadvantages of a level term policy
A
- Insured overpays premiums initially
- no savings component
14
Q
What are decreasing term policies
Premiums:
Cash Value:
Death Benefit:
A
- Premiums are level
- no cash value
- death benefit decreases over the term of the policy
15
Q
When is term life policies appropriate
A
- temporary funding needs such as education funding, paying off debts, or to cover expenses during the grieving process
16
Q
What is an appropriate use of decreasing term
A
- to payoff a mortgage
17
Q
What are Whole life insurance policies
Premiums:
Cash value:
Death benefit:
A
- Whole life policies prefund future higher mortality costs using present value analysis
- Premium patterns may vary widely from single premium to level premiums over a fixed term or level premiums for life
- Cash value savings component or investment component
- Cash value may be used for loans or may be received if the policy is surrendered
- Cash value usually have a minimum guaranteed rate of interest
- Varying death benefit
18
Q
What are advantages of Whole life insurance policies
A
- Provide tax deferred growth of cash value
- provides permeant protection until age 120
19
Q
What are disadvantages of Whole life insurance
A
- Premiums are expensive and there is no flexibility with the premium payments
- cash value grows gradually
- insured may not be able to purchase as much protection
20
Q
(Types of Whole Life Insurance)
What is Ordinary life insurance
Premiums:
Cash Value:
Death Benefit:
A
- Pays premiums until age 120 or death
- Cash value increases to face value at age 120
- Death benefit is level throughout the term of the policy
21
Q
(Types of Whole Life Insurance)
What is the difference between Ordinary life and limited pay life insurance
A
- premiums are higher than ordinary life because the insured only pays premiums until a certain age
22
Q
(Types of Whole Life Insurance)
What is variable life insurance
A
- cash value is invested in stock, bond, and money market mutual funds
- Opportunity for higher returns on cash value
- Death benefit and cash value fluctuate based on investment performance
23
Q
(Types of Whole Life Insurance)
What is Current Assumption Whole life insurance
A
- insurer uses new money rates and new mortality rates to establish premiums
- if interest rates turn out to be too high and premiums to low the insurer reserves the right to adjust the premium once (Usually at the five year mark)
24
Q
What is a Lo CAWL policy
A
- low premium assuming a higher interest rate for crediting
25
What is a Hi CAWL policy
- assumes a lower interest rate than is currently being credited resulting in a higher premium with the possibility of a one time downward adjustment at year five
26
What are some appropriate uses for whole life insurance
- anyone with lifetime or permanent needs
- estate planning purposes to provide liquidity to pay transfer taxes
- insured has a need for investment performance/returns
27
What are first to die policies
- provides death benefits when the first insured dies
- first to die life expectancy is less than either single life expectancy
28
What are second or Last to die policies
- provides death benefits when second or last insured dies
- second to die life expectancy is greater than either individual life expectancy
- appropriate to pay for estate taxes and provide liquidity
29
What does a nonparticipating whole life policy mean
does not pay dividends
30
What does a participating whole life policy mean
will pay dividends
31
What are the dividend options for whole life insurance policies
(Dividends are CRAP-O)
- Cash
- Reduce premiums
- accumulate at interest
- paid up additions
- term
32
What is the cash dividend option for whole life insurance
- client receives the money and can use it or invest it as they wish
33
What is the accumulate at interest dividend option for whole
- company invests the dividends and they are tax free up to the clients basis in the policy
- interest paid on dividends is taxable
34
What is the reduce premium dividend option for whole
- Decreases the out of pocket expense for premiums
35
What is the paid up additions dividend option for whole
- Purchases additional insurance each year for insured regardless of health or occupation
36
What is the One year term dividend option for whole
- Adds term insurance each year to the policy face amount equal to cash value of the policy
- also known as the 5th dividend option on the CFP exam
37
What is the lump sum payment settlement option for life insurance
- pay the lump sum directly in the form of a check to the beneficiary
38
What is the interest only settlement option for life insurnace
- receive periodic payments of interest on the policy proceeds
39
What is the fixed amount annuity option for life insurance settlement
- beneficiary will receive a fixed payment until the proceeds are depleted
40
What is the life income annuity option for life insurance settlement
- life income option converts the death benefit into an annuity contract for the life of the beneficiary
41
What is the fixed period option for life insurance settlement
- the death benefit proceeds may be used to purchase an annuity certain which is an annuity that will make payments for a specified number of periods
42
When is a fixed period settlement option appropriate for life insurance
- need additional cash flow for a fixed period of time
- suspects that they will have shorter than average life expectancy and would like to preserve some of the death benefit value for a successor beneficiary if the primary beneficiary dies before the term expires
43
What is a life income with period certain for life insurance settlement
- combines the benefit of the life income method with the benefit of the fixed price method
- transforms the death benefit into a life annuity contract based on the age and health of the beneficiary yet promises to make a specified number of payments
44
What is a Joint and Last Survivor income option for life insurance settlement
- annuity payments are made over the joint lives of two individuals
- when one annuitant dies the survivor will receive a reduced payment for the rest of their life
45
What is a cash surrender value life insurance nonforfeiture option
- insured receives the accumulated cash value when terminating the life insurance policy
- cash surrender value is the cash value less surrender charges
46
What is a Reduced paid up insurance life insurance nonforfeiture option
- insured receives the cash value in the form of a paid up policy with a smaller face amount
47
What is a extended term insurance life insurance nonforfeiture option
- insured receives the cash value in the form of a paid up term policy for a specified duration with the same face amount as the original policy
48
When can the insured receive accelerated death benefits
- insured becomes terminally ill
- may be lump sum or monthly income
- any payments are deducted from the policy face value
- life expectancy must be 24 months or less
- Income for the benefit is non taxable
- no restriction on what the benefit is used for
49
What is a Universal life insurance policy
- Insured may adjust premiums paid, face value of the policy, and cash value
- insured does not direct the investment portion of the cash value
- cash value can be used to actually pay the policy premiums
50
What is a universal Life A policy
Premiums:
Cash Value:
Death Benefit:
- Flexible premium, adjustable death benefit, unbundled life insurance contract
- Cash value gets high enough the death benefit will increase
- the amount of insurance purchased declines as the cash value rises keeping the total death benefit level
51
What is a universal Life B policy
Premiums:
Cash Value:
Death Benefit:
- Same as Universal A except the death benefits vary directly with the cash values
- more expensive than Universal A
52
What is variable universal life
- product with investment options such as stock, bond, and money market mutual funds
- no minimum guaranteed rate or interest
- cash value is invested in a separate account no the insurers general account
- Cash value is not guaranteed but in the event of an insurance company failure the separate account will not be treated as an asset of the insurance company
53
What is a non direct recognition program
does not adjust the dividends paid on a policy when there is an outstanding loan against the cash value of a policy
54
What is a direct recognition program
- dividends are reduced by any outstanding loan against the policy
55
What is a grace period
- Typically 31 - 61 days after the premium due date in which the policy remains in force
- if insured dies during grace period the insurer with pay the death benefit and deduct the premium
56
What is a misstatement of gender or age
- younger people and women pay less for life insurance
- does not void the contract
- death benefit will be paid but reduced by what premiums would have been if age was accurately stated
57
Suicide provision for life insurance
- coverage is excluded if suicided is committed within one or two years of purchasing the policy
- premiums return if committed within the exclusion period
58
What is a disability waiver premium
- Whole life insurance: All premiums waived after disability
- Universal and Variable Universal: Insurer will waive the charges related to mortality and administration or waive the entire premium
59
What does assignment mean
- owner transfers all policy ownership rights
60
What is absolute assignment
owner transfers all policy ownership rights
61
What is collateral assignment
- used for collateral on debt, which only assigns limited ownership rights
- assignment automatically terminates when the debt is satisfied
62
What is group term insurance
- Most common form of insurance offered by employers
- premiums for the first $50,000 is tax free
- premiums paid by the employer are tax deductible
- premiums paid by the employee are with after tax dollars
- income must be imputed based on the coverage in excess of $50,000
63
What does group whole life insurance do
- allows employees to accumulate savings for retirement through the cash value of a policy
- premiums paid by the employer are taxable income to the employee
64
When is a Life Annuity contract appropriate and not appropriate
- Provides protection for outliving assets
- Used to Fund retirement
- Not appropriate if you want to leave assets to heirs
- Not a hedge against inflation
65
What is an immediate annuity
- payments begin immediately and is purchased with one single lump sum
66
What is a deferred annuity
- Payments begin at some future date
- usually in the form of a retirement annuity that accumulates interest until retirement
- can be purchased with a lump sum or periodic installment premiums
67
What is a Flexible Premium Deferred Annuity (FPDA)
- allows insured to vary premiums paid
- retirement income is a function of total premiums paid
68
What is a Single Premium Deferred Annuity (SPDA)
- A lump sum payment of premiums
- Earnings accumulate tax free until distribution
- Proceeds from a life insurance policy can be used to purchase a single premium annuity
69
What is a fixed annuity
- Annuity accumulates a fixed interest rate over a period of time
- provides the owner with more security than a variable annuity contract
70
What is a variable annuity
- Owner may invest in stock or bond mutual funds that are held in sub accounts
- no guarantee of return on investment
- More investment risk
- appropriate if the client wants to keep pace with inflation
71
What is an equity indexed annuity
- is linked to an index
- index is most often S&P500
- Limits downside risk of index
72
How long is the index term for an equity index and what happens at the end
- 1 - 10 years
- Interest is credited at the end of the term
73
What is the participation rate for an equity index annuity
- percentage of index increases that affects credited interest
- may vary from term to term or could be guaranteed
- EX: if PR is 70% and the index rises 10% the credited interest would be 7%
74
What is the cap rate for an equity indexed annuity
- maximum rate of credited interest
75
what is the floor crediting rate for an equity indexed annuity
- Typically 0%
- no losses allocated to the contract
76
What is the annual reset- Ratcheting method for indexing a equity indexed annuity
- Index rate calculated each year (beginning vs. end of year)
- Interest added each year and protected from future decreases
- Generally has lower participation rate & may use averaging over time
77
What is the high watermark approach for indexing a equity indexed annuity
- Compares highest anniversary index to initial index
- beneficial if index declines toward end
- interest is only credited at end
- may have low participation rate or use a cap rate
78
What is the point to point method for indexing a equity indexed annuity
- Compares index at end of term (typically 6-7 years) to beginning of term
- pays interest at the end of term
- may have higher participation rate
79
What is a pure life annuity
- payments are made to the annuitant over their lifetime
- payments stop at death
- risk is receiving one payment and dying
80
What is a life annuity with guaranteed minimum payments
- payments continue for a minimum term and payments are payable to the annuitants beneficiary if death occurs prior to the term ending
- Payout is less under this method than a pure life annuity
81
What is a installment refund annuity
- if total payments to the annuitant are less than the premiums paid for the policy at the owners death the policy will payout the difference between premiums paid and what has already been paid out
82
What is a joint and survivor annuity
- annuity is paid out over the lifetime of two annuitants
- payments are lower than a pure life annuity
83
Are death benefits excludable from taxable income
yes
84
Are dividends earned taxable
tax free until withdrawn
85
Is the cash value taxable if withdrawn at death
No
86
Are loans against life insurance tax free
- yes with the exception of a MEC
- if contract is deemed a MEC any loans or withdrawals will be treated using the LIFO method
87
Does an exchange for one life insurance policy to another or for an annuity a taxable event
No taxable event
88
Is exchanging an annuity for life insurance a taxable event
Yes
89
(Taxation of Benefits Received During Life)
Dividends
- dividends are not taxable and considered a return of basis
- if dividends exceed premiums then the dividend is taxable
90
(Taxation of Benefits Received During Life)
Withdrawals
- are considered a return of principal until accumulated premiums have been distributed then taxable as ordinary income
91
What are MEC's subject to if withdrawn before age 59 1/2
10% penalty
92
A policy is a MEC if it fails the ____ test. And what is this test
- 7 Pay test
- if the cumulative premiums paid exceed the premiums due for the time period being considered
93
Does MEC status affect the taxation at death
- No just affects loans
94
(Taxation of Policy surrendered prior to death)
Taken as a lump sum
- Amount above premiums paid is ordinary income
95
(Taxation of Policy surrendered prior to death)
Taken as a interest only
- Interest is taxable as ordinary income
96
(Taxation of Policy surrendered prior to death)
Taken as a installment payments
- Portion is a return of principal and interest
- Interest taxed as ordinary
97
How is the policy taxed if the policy is transferred for value
- death benefits are taxable to the transferee to the extent proceeds exceed basis
- Unless terminally or chronically ill
- or a transfer for value rule applies
98
What are the exceptions to the transfer for value rule that would make the transfer non taxable
- transferred to the insured
- transferred to a business partner of the insured
- transferred to a partnership of the insured
- transferred to a corporation in which the insured is a shareholder or officer
- transfer that results in carryover basis from transferor to transferee
99
What is the formula for surrender of cash value cash value life insurance to find taxable amount
CSV - Premiums = Ordinary income
100
Tax consequence for sale of cash value life insurance sold to an unrelated party
- Sale price - basis = gain
- Gain - (CSV - Premiums) = Capital portion
- the CSV - Premiums would be treated as ordinary income
101
What is the taxability of a sale of term insurance to an unrelated party
- Sale price - Premiums paid = gain/loss
- tax payer cannot take a loss unless it incurred for trade or business or a transaction entered into for profit
102
Are premiums paid by the insured tax deductible by the insured
No
103
Are group life insurance premiums paid by an employer deductible by the employer
Yes
104
The first $\_\_\_\_\_ of coverage is not taxable to an employee
$50,000
105
What if the benefit is greater than $50,000
- excess is imputed taxable income
- imputed income is a function of age and amount of benefits per $1,000 in excess coverage
106
How is the installment option for life insurance proceeds and annuity payments taxed
- taxable income is calculated using the exclusion/inclusion ratio
- Monthly payment x 12 months x life expectancy = total payments
- (Basis / Total Payments) = Exclusion Ratio
- (Exclusion ratio x Monthly payments) = Amount excluded from monthly income
107
What is the Exclusion ratio
Basis / Total payments = Exclusion ratio
108
How are payments taxed that are received beyond the life expectancy rate for annuities
100% taxable income
109
What if the annuitant dies before recovering all of their basis
- any basis not recovered is deductible on their final return as a miscellaneous itemized deduction NOT subject to 2%
110
How long does a life insurance death benefit paid as annuity retain the exclusion ratio
indefinitely
111
When is a person considered chronically ill
- person who is not terminally ill
- unable to preform at least two activities of daily living for at least 90 days
- ADLs are eating, toileting, transferring, bathing, dressing, and continence
112
How is the amount received under a life insurance contract on the life of a chronically ill person taxed
- nontaxable is limited to the amounts incurred by the payee for qualified long term care services
113
How is a Viatical settlement company taxed on policies they purchase
- taxable income to the extent the policy proceeds exceed the amount paid for the policy
114
How are withdrawals from an annuity taxed purchased prior to 1982
- taxed using the FIFO method
115
How are withdrawals from an annuity taxed purchased after 1982
- taxed using the LIFO method
116
Does exchanging one annuity contract for another taxable
no 1035 exchange
117
Does exchanging one annuity contract for a life insurance contract create a taxable event
Yes
118
Traditional Medical expense insurance is divided into four major classes
- Hospital expense
- Surgical expense
- Physician expense
- Major Medical
119
What is a stop loss for medical insurance
- Maximum amount that the insured must pay in coinsurance payments
120
With group hospitalization and major medical what is maximum out of pocket
- the maximum a individual will pay including deductibles
121
What is the Employer requirement for the patient protection and affordable care act
- employers with 50 or more full time employees that do not offer coverage a fee of $2,000 per full time employee excluding the first 30 employees from the assessment
- Employers with more than 200 employees to automatically enroll employees into health insurance (Employees may opt out)
- Exempts employers with up to 50 full time employees from the about penalty
122
What are the four benefit categories for PPACA
- Bronze (minimum coverage, 60% of the benefit costs of the plan, out of pocket limit equal to the HSA limit)
- Silver (covers 70% of teh benefit costs of the plan, with the HSA out of pocket limits)
- Gold (Covers 80% of the benefit costs of the plan, with HSA out of pocket limits)
- Platinum (90% of the benefit costs of the plan, with HSA out of pocket limits)
- Catastrophic (Available for individuals up to age 30 or who are exempt from the mandate, provides catastrophic coverage)
123
What age are dependents covered under the PPACA
Age 26
124
What are health maintenance organizations (HMOs)
- Delivers comprehensive health care in return for a premium
- Care is managed by a primary care physician
- disadvantage is that there is no coverage outside of the HMO
125
What is a staff model HMO
- the HMO is a corporation, and medical staff members are employees of the HMO
126
What is a group HMO
- known as the network model
- HMO contracts with groups of medical providers to care for insured plan subscribers
127
What is a Individual practice association HMO
- made up of physicians who have their own office locations but contract out to the HMO on a fee for service basis
128
What are Preferred Provider Organizations (PPOs)
- network of health care providers with whom are employer or insurance company contracts
- provider offers a discount on services
- Higher rate of reimbursement for in network providers
- Can choose outside providers but co insurance and deductible will be higher
129
What are Primary care physician or managed care policies
- Insured accesses care via a primary care physician who provides services or refers to a specialist
- Physicians need approval to perform certain procedures
- Consumer pays a small copayment or other deductible
- Health care providers agree to accept compensation provided under the plan
130
What are HSA Accounts
- provides employees and individuals with a tax deduction for amounts contributed to their account
- Employer and employee can make contributions
- individual must have a HDHP
131
What are some rules that disqualify eligibility for a HSA account
- not covered under a HDHP
- having a HRA or FSA account
- Medicare participation
- individuals who may be claimed as a dependent on another return
132
What does a deductible have to be for single/family under a HDHP
- Single $1,400
- Family $2,800
133
What is the maximum out of pocket for a single/family under a HDHP
- Single $7,000
- Family $14,000
134
What is the contribution limit for single/family for HSA account
- Single $3,600
- Family $7,200
- $1,000 catch up contribution for those over 55 and older
135
Is the contributions to an HSA deductible if the employee contributes
Yes
136
Is the contributions to an HSA deductible if the employer contributes
Yes
137
Are you able to use an HSA account for over the counter drugs
No unless the taxpayer has a prescription
138
Are cosmetic surgery costs considered qualified expenses
No
139
Care COBRA premiums and Long Term care insurance premiums considered qualified medical expenses
Yes
140
Distributions for non qualified medical expenses from an HSA account are subject to a \_\_% penalty if taken before ___ years old
20%, 65 years old not 59 1/2
141
Who can make contributions to a MSA account
the employer OR the employee
142
What is a noncancelable policy for health insurance
- policies are continuous and guarantee an insured the right to renew until a specific age or stated number of years
- insurer cannot raise premiums or cancel policy
143
What is a guaranteed renewable policy for health insurance
- right to renew is guaranteed until a specific age or stated number of years
- Insurance company cannot cancel policy but they can raise the premiums as long as the premiums are raised for an entire group or class
- All policies must be guaranteed renewable under provisions of the PPACA
144
Is employer provided health insurance taxable income to the employee
no
145
What did HIPPA do
- protects workers ability to obtain health insurance when changing jobs, being laid off, or retiring
146
What is Consolidated Omnibus Budget Reconciliation Act (COBRA)
- is an extension of group health insurance with the same coverage
- total cost is 102% of actual insurance cost to the employee
- Applies to loss of coverage for the covered employee, employees spouse, and/or dependent children
147
Who is eligible for COBRA
Group coverage must terminate because
- Covered employee dies
- Employee is voluntarily or involuntarily terminated
- Hours are reduced from full time to part time
- Covered employee separates from spouse
- Employee becomes eligible for Medicare
- Dependent child is no longer eligible for coverage
148
An employer with fewer than __ employees is not required to offer COBRA
- 20
- Both full time and part time count but part time count as a fraction of full time based on hours
149
How long does COBRA need to be offered for reduction in hours or normal termination
18 months
150
How long does COBRA need to be offered for death
36 months
151
How long does COBRA need to be offered for divorce
36 months
152
How long does COBRA need to be offered for Medicare Eligibility
36 months
153
How long does COBRA need to be offered for loss of dependency status by children of employee
36 months
154
How long does COBRA need to be offered for employee that meets Social Security definition of disabled
Up to 29 months
155
If employee is terminated for gross misconduct are they eligible for COBRA
No
156
How long do employees have to make a COBRA election
60 days
157
When can COBRA coverage by terminated before the designated term ends
- Employer terminates its health plan for all employees
- employee or beneficiary fails to make premium payments
- employee becomes covered under any other plan
158
Who is Medicaid available to as long term care option
- Available to nations poor
- eligibility is determined by a persons assets
159
What is the penalty period for assets gifted
- There is a penalty period for assets gifted in 5 years prior to entering nursing home
160
Who is Medicare benefits available too
- available to those eligible for Social Security
- Benefits under Medicare are extremely restrictive
161
What does a patient have to be in order to receive Medicare benefits
- patient must be capable of realizing an improvement in their condition
162
What is skilled nursing
- traditional nursing home
- Physician ordered
163
What is intermediate nursing
- occasional nursing care
- physician ordered
164
What is custodial care
- assistance with eating, dressing, bathing, etc
165
What is home health care
- In home nursing or necessary assistance
166
What is assisted living
- Apartment style living with healthcare services
167
What is adult day care
- Daily assistance while a spouse or family member works
168
What is hospice care
- For terminally ill, at home, hospital, or nursing facility
169
When is person eligible under a private long term care policy
- Must be chronically ill or suffer from substantial cognitive impairment
170
What is the definition of Chronically ill for long term care
- unable to preform 2 of 6 ADLs for at least 90 days
- eating, bathing, dressing, transferring, using the toilet, and continence
171
What is the Long Term care insurance Partnership program
- policy includes an asset disregard for Medicaid to the extent of the total amount of benefits received under the long term care policy
172
Are premiums tax deductible for Long term care
- yes but limited based upon age of the insured
173
A benefits taxable for a long term care polciy
- no as long as the policy is qualified Qualified policy as the following provisions
- person is expected to need care for at least 90 days
- unable to preform 2 or more ADLs or substantial cogitative impairment
174
Definition of disability
- Any Occupation
- considered disabled if insured cannot perform the duties of any occupation
175
Definition of disability
- Modified Any Occupation
- unable to preform duties of gainful occupation that you are reasonably fit for
176
Definition of disability
- Own Occupation
- cannot perform the duties of their own occupation
177
Definition of disability
- Split Definition
- begins with own occupation and moves into modified any occupation after a year or two
178
What is a short term benefit period for disability insurance
two years or less
179
What is a long term benefit period for disability insurance
coverage until normal retirement age, death or for a specified period of time
180
What is the elimination period for disability insurance
- amount of time before the benefit begins
- premium is usually waved during elimination period
- serves as a deductible
181
Taxation of disability insurance if employee pays the premium with after tax dollars
- premiums are not deductible
- benefits are tax free
182
Taxation of disability insurance if employer pays the premium
- premiums are deductible to the employer
- benefits are taxed to employee
183
Taxation of disability insurance if employee pays the premium with pre tax dollars (cafeteria plan)
- benefits to employee are taxed
184
What is a cost of living rider for disability insurance
- benefits received will adjust for inflation
185
What is a residual benefits rider for disability insurance
- if insured goes back to work at less pay then the policy will pay the difference between the two incomes
186
What is a integrating with Social security rider for disability insurance
- any disability benefit received by Social Security will reduce the amount of disability benefit paid by the insurer
187
What is a probation period rider for disability insurance
- the time the insured must wait after the policy is issued before specific conditions are covered (typically 15-30 days after inception)
188
What is a Grace period for health and disability insurance policy provisions
- period beyond the due date of the premium
- coverage remains if premium is paid during grace period
189
What is a reinstatement for health and disability insurance policy provisions
- What needs to occur if policy lapses
190
What is a guaranteed renewable for health and disability insurance policy provisions
- insurer is required to renew but may increase premiums if increased on the entire group
- renewal is up to the insured
191
What is a noncancelable for health and disability insurance policy provisions
- insurer must renew and cannot raise premiums
