Module 5: Life and Health Insurance Flashcards
1
Q
An employer can provide up to $—— of group term life insurance coverage without income tax consequences to employee. what amount?
A
$50,000
2
Q
Are group permanent life insurance policies portable?
A
Yes, upon termination or at retirement, they become individual policy
3
Q
What are traditional permanent policies?
A
Whole Life policies
4
Q
what are nontraditional permanent policies?
A
Variable Life UL and VUL
5
Q
What is temporary life insurance?
A
Term
6
Q
When determining amount of insurance premium, what are the 3 main elements?
A
- mortality
- expenses charges
- credit interest
7
Q
What is mortality?
A
probability of premature death occurring; reflection of odds of dying at a given age
8
Q
What is expense charge?
A
admin fees and other costs for running firm
9
Q
What is credited interest?
A
return on firm’s investment of premiums
10
Q
What are other names for whole life?
A
straight life or ordinary life
11
Q
What is meant by when policy endows?
A
the cash value is equal to the face amount of coverage
12
Q
What are limited payment life?
A
Whole life policy are paid up until age 65 or specified amount of time; typical whole life requires premiums paid for life.
13
Q
In order to sell variable life products, agents must be registered with?
A
FINRA
must hold a Series 6 or 7 AND Series 63
14
Q
What is viatication?
A
Viatication is when insurance policy on life of terminal person is sold to one or more people (generally pays between 60%-90% of face amount) help cover extreme healthcare expenses
15
Q
What is per capita?
A
every bene receives the same amount so one bloodline may end up with a larger share of the death benefit than another bloodline.
16
Q
If an irrevocable bene passes before insured, who do the policy rights revert to?
A
Usually the owner
17
Q
What is the delay clause?
A
allows ins co to delay payment up to 6 months; helps protect in situations of extreme demands for cash (economic crisis)
18
Q
What are paid-up additions?
A
the amount of coverage that has been purchased is paid up for life. no additional premiums required
19
Q
What is the fifth dividend option?
A
When dividends are used to purchase term insurance
20
Q
What are 3 consumer protection provisions under ACA?
A
lifetime limits on group plans eliminated
rescission of policies prohibited
children with preexisting conditions are accepted
21
Q
Premiums under ACA are based on these 4 factors
A
- age
- family size
- smoking status
- geography
22
Q
What is adverse selection?
A
when people most like to need insurance are only ones who buy it, means there isn’t enough money in pot to pay all claims.
23
Q
What are 5 categories of health care plans on public exchanges?
A
Platinum Gold Silver Bronze Catastrophic
24
Q
What is copayment?
A
set amount insured pays for insurace; may or may NOT be applied to annual deductible
25
What does Part A of Medicare cover?
Part A covers hospital expenses (bed & board), operating room costs, and lab tests
Limited LTC benefits (only if 3 days as admitted patient in hospital within last 30 days)
26
What does Part B of Medicare cover?
Part B covers physician & outpatient expenses
| monthly premium needs to be paid
27
What does Part D of Medicare cover?
Part D covers prescription drugs
| monthly premium needs to be paid
28
Describe an HSA plan
It's a Health Savings Account that allows pretax contributions (can be made as lump sum)
can pay for current & future medical expenses
MUST HAVE HIGH DEDUCTIBLE PLAN TO QUALIFY
changes to contribution amounts can be made at any time
must stop contributions at age 65
2019 limits are $3,500/$7000
catch up of $1,000 for ages 55 and over
29
What are the sources of disability income?
```
individual coverage
federal gov't
some states & municipalities
social security
worker's compensation
employers
```
30
What are the 3 criterion for a worker to obtain disability benefits under OASDHI?
1. under full retirement age
2. has been or expected to be disabled for 12 mo. or disability that will result in death
3. has filed an application for disability benefits
31
What is the normal waiting period before social security benefits for disability are paid?
5 months
32
Who shoulders all the liability for worker's compensation?
The employer - regardless of negligence
| theory is that it creates fewer opportunities for litigation
33
What is automatic benefit increase option?
designed so that as income increases, the option to increase the monthly disability benefit in $ terms, thereby maintaining same % of income protection coverage
34
What are the 3 common features of disability insurance?
```
benefit amount (including elimination period)
benefit period
definition of disability
```
35
What is the definition for Modified any occupation?
Insured can work at any occupation for which she might be qualified; takes into consideration insured's education, training, experience
36
What is loss of income policies?
policies that pay a benefit if loss of income due to illness/injury even if insured continues to work.
benefits generally triggered at 20-25% loss of income and typically paid in proportion to lost earnings (i.e. 30% loss of earnings results in 30% of benefit)
37
What is split definition in regard to disability?
combined definition of disability
Uses either any occ or modified any occ ultimately
BUT will use Own occ for specified period of time
common with group plans
38
How much disability income insurance should you get?
As much as you can
39
What are 2 types of nursing home facilities?
Rehab nursing home
| Residential nursing home
40
When will Medicare LTC benefit kick in?
After insured stays at least 3 days in hospital (within last 30 days) and goes to rehab nursing facility with possibility of recovery
41
Who do you qualify for Medicaid LTC?
Income and personal assets must be nearly exhausted ($3,000 or less remaining) Can retain home, one car of limited value, burial plots, personal belongings, small amount of life insurance
42
What is the lookback rule?
To qualify for medicaid, any assets transferred to trust or another person within last 60 months are counted a
43
Who funds medicaid?
partially funded by government and rest is supplied by individual states. creates impenetrable maze
44
What are the benefit triggers for LTC?
Unable to perform 2 or more of ADLs for at least 90 days
cognitive impairment
Medical necessity as ordered by physician
45
What are ADLs?
```
Activities of Daily Living
Dressing
Transferring (get from bed to chair)
toileting
eating
bathing
maintaining continence
```
46
What are the two reasons why annuities are purchased?
To receive periodic premiums over lifetime or specified period of time
long-term investment that grows tax deferred
47
What is an immediate annuity?
income payments start within short time (usually within 6 months) after single payment is made
48
What is joint and survivor annuity?
income payments are paid while both alive
| reduced payment is paid to survivor
49
What is a pure life annuity?
Income payments that last lifetime of annuitant
| once annuitant dies, payments stop
50
What is Life and Period Certain?
Income payments for life of annuitant with min. specified period guaranteed ex. for 10-yr certain annuity option, payments are made for life of annuitant or 10 years- whichever is longer. if annuitant dies in year 4, beneficiaries get payments for 6 more years
51
What is a Refund annuity?
if value of income payments over life of annuitant does NOT equal value of annuity at date of annuitization, balance is paid to bene either as lump sum or continued payments
52
What is a fixed annuity?
interest rate of invested $ has guaranteed minimum rate that may be increased if ins. company general account investments experience higher ROR.
53
What is the bailout provision with regard to an annuity?
The bailout provision is that company agrees that if any new rate established by the company is below the rate specified in provision, the money in contract can be withdrawn without a company-imposed penalty.
54
What is the accelerated death benefit life provision?
dictates under what conditions policy owner is able to receive reduced policy benefit while alive. onset of serious/terminal illness AKA Living Benefits
55
What is accidental death & dismemberment provision?
provides additional benefit if insured dies as result of accident or loses stated body parts as result of accident.
56
What is assignment?
pertains to life insurance policies. Owner of policy can transfer ownership to another under this clause.
57
What is association group disability insurance?
Group disability insurance that is available as result of membership of particular association
58
What is automatic premium loan provision?
Enable premium to be paid out of accumulated policy loan value if owner fails to pay premium
59
What is a beneficary?
person or entity that has a remainder interest in policy proceeds
60
What is breakpoint?
Breakpoint pertains to health insurance and is when insured has paid MOOP. Its point where insured is no longer required to pay a percentage of covered expenses. and insurer takes all cost over.
61
What is the cash surrender value option?
if policy owner wishes to surrender insurance contract, cash surrender value option enables him to receive cash equal to policy's accumulated value. Upon payout, insurer is not longer responsible
62
What is COBRA?
EE can continue coverage for 18 or 36 months after leaving employer. Coverage is same but can be no more than 102% of cost of coverage
63
What is continually renewable pertaining to health insurance?
May be renewed by insured if he meets insurer's conditions for renewal. (ex. may depend upon insured's continued employment or membership in association)
64
What are conditions with regard to life insurance?
One of the 4 components of a life insurance contract. Conditions describe the responsibilities of insured and insurer that must be accepted to cover loss
Include: insured's responsibilities in event of loss, insurer's rights w/ regard to fraud/concealment
policy cancellation procedures
Policy assignment procedures
65
What is a conventional annuity?
An annuity product in which specified benefit payment amount is guaranteed to annuitant
66
Conversion right
provision that enable insured to convert term insurance to whole life insurance during specified conversion period.
67
What is the coordination of benefits provision?
pertains to health insurance. Ensures insured will be indemnified only to extent of actual losses even though he may be covered by more than one plan
68
What is declaration?
One of the 4 major components of life insurance
| provides info about person or property being insured
69
What is a deferred annuity?
An annuity product in which payments do not begin immediately upon funding- deferred until later date
70
What is a delay clause?
pertains to life insurance; gives insurance company right to delay payment of cash surrender value or loan of policy up to six months. typically happens only during periods of severe economic stress.
71
What is the disability income rider?
pertains to life insurance: Disability income benefits may be added to basic life ins coverage. amount of disability benefit is tied to face amount of LI policy
72
What is Double Indemnity rider?
pertains to life insurance; enable the beneficiary to receive 2x face amount if insured person dies as result of an accident
73
What is an endorsement?
provision added to LI policy to supplement or modify standard policy to meet special needs of insured individual
74
What are exclusions with regard to LI?
one of 4 major components: section states perils, losses, and or property for which insurer will NOT provide coverage
75
What is extended term Insurance option?
option in whole life policy; allows the policy owner to use the cash value to purchase a term insurance policy with a death benefit equal to that of the original whole-life policy
76
What is a fixed-amount annuity?
The $ amount of payout MUST be at least the amount of premiums paid in. If annuitant dies before full receipt of this amount, remainder is payable to beneficiary. Annuitant will receive payments until death even after guaranteed amount is paid.
77
What is a Fixed-amount settlement option with regard to life insurance?
provides the bene a stated amount of income each month until insurance proceeds are exhausted . Each payment consists of interest and principal.
78
What is a fixed-period annuity?
```
# of payments annuitant receives is guaranteed. If they pass before, the beneficiary gets the balance.
Annuitant receives payments until death regardless.
```
79
What is the Fixed-period settlement option (pertains to life insurance)?
period of time over which payments made to a bene are fixed. Payment amounts vary based on payout term chosen (i.e. payments for 10 years will be higher than 20 years)
80
What is a guaranteed insurability rider for disability and life insurance?
Disability-on stated dates, insured may purchase specified additional amounts of disability income benefit without having to provide evidence of insurability.
Life insurance- insured may purchase additional amounts of coverage at stated intervals w/o evidence of insurability.
81
What is guaranteed renewable with regard to health insurance?
Insured has right to continue policy by timely premium payments up to specified time. Insurer cannot change policy except for premium rates
82
What are the 4 components of a life insurance policy?
Insuring agreement
conditions
exclusions
declarations
83
What is the insuring agreement?
One of the 4 major components of LI.
states insurer's intention to cover losses resulting from certain specified perils or all perils not specifically excluded from contract
84
What is the interest settlement option (LI)?
Bene may leave proceeds w/ insurer to accumulate interest at guaranteed rate. many insurers pay interest above guaranteed rate consistent w/ investment earnings
85
What is a Life Income Annuity?
payments are distributed only until annuitant dies
86
What is Life income with period certain settlement option?
LI settlement option in which payments are guaranteed for stated amount of time. If annuitant outlives guaranteed period, still receives payments. If dies before, bene gets payments until end of guaranteed period.
87
What are loss of income policies?
Type of disability policy that may pay a benefit if loss of income due to illness/injury even if person returns to work. Benefits typically paid in proportion to lost earnings.
88
What is the Maximum benefit period?
pertains to disability insurance: max amount of time an insured can receive a disability benefit from an insurer. max benefit period may be age 65
89
What is Medicare?
A social security benefit available to person age 65+ who are eligible for SS retirement benefits. Provides medical coverage
90
What is Medigap?
Insurance intended to supplement medicare coverage
91
What is a Modified Endowment Contract (MEC)?
an ins. contract in which accumulated premiums at any time during first 7 yrs are greater than sum of premiums for a paid-up policy at end of 7 yrs.
- loses some of tax benefits of ins. policies
92
Morbidity Rate
measure of # of people who become sick/disabled. this rate comes into play with health, disability, and LTC.
93
Mortality Rate
measure of # of deaths in given population. comes into play when developing life expectancy tables and pricing life insurance
94
What is noncancelable provision?
pertains to health insurance; gives insured right to continue the policy in force by time premium payments usually for specified time period.
95
Nonparticipating life policy
excess premium payments (dividends) are NOT paid to policy owner
96
Nonperiodic withdrawal
a one-time withdrawal taken from an annuity
97
OASDHI program
Old Age, Survivors, Disabled, and Health Ins program;
Provides protection for qualified participants and their benes against losses associated with retirement, death, disability, illness
98
Optionally renewable
pertains to health insurance'
| insurer has right to refuse renewal as of any premium due date or policy anniversary
99
"Own occupation" definition
insured is disabled only if they cannot perform their own occupation. Least restrictive definition
100
Partial disability benefit
AKA residual disability benefit
pays a proportionate part of total disability benefit when insured suffers at least a specified % of reduction to earned income
101
participating policy
LI policy in which 'dividends' may be paid to policy owner. Dividends are actually returns of premiums and are NOT taxable.
102
Policy loan provision
provision included in cash value LI policies. enable policy owner to borrow an amount up to policy's CSV. death proceeds are reduced by loan amount at time of death
103
Policyholders surplus ratio
measure of financial soundness for insurer. Compare's insurer's net worth to its liabilities
104
Preferred provider organizations (PPOs)
PPO services are provided by physicians and hospitals that contract with an insurer, plan administration, or employer to provide health care services.
105
Pure life income option
Life insurance proceeds are payable over lifetime of beneficiary but no residual benefits available to a second bene if the first one dies
106
Reduced paid-up insurance option
pertains to nonforfeiture life insurance. Policyholder make take the cash value as paid-up life insurance of the same type (whole or UL) but at a reduced face amount. I.E. Original policy is $100k of whole life, policyholder uses cash value and coverts it to paid up whole life for $50K.
107
Refund life income settlement option
provide bene with income throughout lifetime with guarantee that if bene dies b4 receiving full amount of original insurance proceeds, shortfall will go to a second beneficiary.
108
reinstate provision
insured can reinstate lapsed policy within specific period of time but must provide evidence of insurability and pay back premiums and interest prior to reinstatement.
109
Single premium whole life insurance
premium is paid in lump sum but current classified as MEC.
110
“Split” definition of disability.
Defines disability as the inability of the worker to
perform his or her own job for a period of time, then as the inability of the
worker to perform any job. This is the most commonly available definition of
disability.
111
Substandard risk.
Pertains to insurance. A substandard risk is one in which the
probability of loss is higher than in the general population. For example, a person
who has a heart condition that increases the likelihood of premature death may be
classified as a substandard risk. As a result of this classification, the insurance
company may decide not to provide coverage for the individual or may group the
individual with similar substandard risks and provide coverage at a high premium
to reflect the insurer’s increased potential claims.
112
Universal life insurance.
Combines pure insurance protection (term) with a cash
value fund that accumulates tax-deferred interest. Premiums are unbundled,
which creates greater flexibility for the policyholder.
113
Variable-universal life insurance
Also known as flexible premium variable life,
this combines the flexibility of universal life insurance with the investment
aspect of variable life insurance.
114
Waiver of premium provision
A rider that can be included as a part of a life
insurance policy. If the insured becomes totally disabled before a certain age and
disability lasts longer than a stated period, premiums on the life insurance policy
will be waived during the period of disability, but the policy will remain in force
115
Whole life insurance
Furnishes life insurance protection at a level premium
amount for the insured’s whole life. It includes a savings element on which a
minimum rate of return is guaranteed.
