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CFP > Risk Management and Employee Benefit Review > Flashcards

Risk Management and Employee Benefit Review Flashcards

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CFP® flashcards
1
Q

which of the following provides for a guaranteed death benefit?

  1. Variable Universal Life
  2. Variable Life
A

2 only

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2
Q

which of the following is true regarding Whole Life policies?

  1. death benefit remains level
  2. used for low risk tolerance clients
  3. premiums are level throughout policy life
  4. provides for lifetime coverage
A

all are true

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3
Q

which of the following is true regarding annual renewable term policies?

  1. the premiums will decrease as you get older
  2. used for long term needs
  3. has a fixed/level death benefit
  4. no cash value
A

3 and 4

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4
Q

the following statements describe which type of life insurance policy?

  • appropriate for people who have higher risk tolerance
  • death benefit is adjustable
  • premium payments are flexible
  • invests in subaccounts
A

Variable Universal Life

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5
Q

true or false?

Variable Life policies provide for flexible premium payments

A

false, Variable universal life policies provide for flexible payments

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6
Q

true or false?

annual renewable term policies should be used for short to intermediate needs

A

true

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7
Q

second to die policies have ___ costs than first to die policies

A

lower

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8
Q

second to die policies are usually used for ___

A

estate liquidity needs

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9
Q

first to die policies are usually used for ____

A

paying off a debt at the first spouses death

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10
Q

true or false?

if the employer pays the premiums on a life insurance policy for the employee and is not the beneficiary of the policy then the premium payments are deductible to the employer

A

true

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11
Q

under a fixed annuity the ____ bears the investment risk

A

insurer

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12
Q

true or false?

a fixed annuity is more appropriate for conservative investors than investors with a higher risk tolerance

A

true

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13
Q

under a variable annuity the ____ bears the investment risk

A

owner or annuitant

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14
Q

true or false?

bonus annuities usually have shorter surrender charge periods than other annuities

A

false, usually have longer

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15
Q

true or false?

bonus annuities usually have higher management fees than other annuities

A

true

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16
Q

what is the difference between a guaranteed lifetime withdrawal benefit rider (GLWB) and a guaranteed minimum withdrawal benefit rider (GMWB)?

A

GLWB will last for life

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17
Q

the practice of using misrepresentations to induce a policy owner with one insurance company to lapse, forfeit, or surrender a life insurance or annuity policy for the purpose of taking out a policy with a another insurance company

A

twisting

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18
Q

occurs when policy values of an existing life insurance or annuity contract are used to purchase another policy or contract with the same insurance company for the purpose of earning additional commissions without an objective reasonable basis for believing that the new policy will result in an actual benefit for the client

A

churning

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19
Q

what’s the difference between the own occupation definition of disability and the modified own occupation definition?

A

under the modified own occupation definition the insured cannot be working in order to receive benefits

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20
Q

which of the following will automatically qualify the insured to receive full disability benefits?

  1. blind
  2. deaf
  3. loss of 2 or more limbs
  4. loss of speach
A

all will automatically qualify the insured to receive full benefits

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21
Q

____ disability is certain conditions that automatically qualify the insured to receive full benefits

A

presumptive

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22
Q

if you disability insurance policy has an elimination period of 60 days you typically won’t receive a payment until day ___

A

90

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23
Q

a disability benefit rider that pays the difference between the original pay and current pay if the insured returns to work

A

residual DI rider

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24
Q

a disability benefit rider that provides coverage for the insured when the insured is unable to perform one or more important duties of their own occupation, but can still perform some duties

A

partial DI rider

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25
Q

type of DI policy where a right to renew the policy is guaranteed but the insurance company can increase premiums based on the policyholder’s class

A

guaranteed renewable

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26
Q

type of DI policy that guarantees the insured the right to renew until a specified age or stated number of years at a fixed level premium

A

noncancellable

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27
Q

true or false?

noncancellable DI policies are usually expensive

A

true

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28
Q

under a S corp the employer can only deduct DI premium payments to ___ and greater than ___% shareholders

A

partners ; 2%

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29
Q

true or false?

DI premiums paid for a disability buyout or buy sell agreement are deductible by the employer

A

false

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30
Q

true or false?

under a S corp DI premiums paid by the employer are included in taxable income to the partners or greater than 2% shareholders

A

true

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31
Q

true or false?

partners and 2% shareholders of an S corp will receive DI benefits tax free if the premiums were paid by the corp

A

true

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32
Q

true or false?

business overhead expense insurance is tax deductible as a business expense for the employer and are also taxable income to the business when benefits are received

A

true

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33
Q

the waiver of premium provision normally waives the premium after ___ days of disability

A

90

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34
Q

residual disability benefits are based on a ____ of lost income

A

percentage

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35
Q

true or false?

a disability policy application is more in depth than a life insurance policy application

A

true

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36
Q

____ is the dollar amount of covered benefits to which the coinsurance provision is applied and does not include the deductible

A

stop loss limit

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37
Q

_____ the maximum amount the insured pays which includes the coinsurance and deductible

A

maximum out of pocket

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38
Q

true or false?

COBRA coverage applies to plans that only provide life insurance and/or disability benefits?

A

false, it would not apply to a plan who only provides those things

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39
Q

under COBRA coverage employees and dependents are entitled to ___ months of coverage resulting from reduction in hours or normal termination

A

18

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40
Q

under COBRA coverage employees are entitled to ___ months of coverage if the employee meets the social security definition of disabled

A

29

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41
Q

under COBRA coverage employees and dependents are entitled to ___ months of coverage if the employee dies, if they get divorced, or the plan terminates

A

36

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42
Q

under COBRA coverage dependents are entitled to ___ months of coverage if the employee becomes eligible for Medicare

A

36

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43
Q

___ limits the application of preexisting condition exclusions when enrolling in a new employer’s health plan

A

HIPAA (1996)

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44
Q

HIPAA defines a preexisting condition as a medical condition for which medical advice, treatment, or diagnosis was recommended or received within ____ months prior to enrollment date in the new plan

A

6

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45
Q

true or false?

The 2010 Health Care Reform Legislation requires preventive services to be free without a deductible, co payment, or coinsurance

A

true

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46
Q

true or false?

The 2010 Health Care Reform Legislation is allowed to impose lifetime maximums and annual maximums for essential health benefits

A

false, neither maximum can be enforced

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47
Q

which of the following regarding health insurance policies purchased on exchanges are correct?

  1. policies must be guaranteed issue and renewable
  2. to purchase insurance through an exchange the individual must not have qualifying coverage through an employer or or a public program
  3. premiums and cost sharing credits are available to some low income individuals/families
A

all are correct

48
Q

true or false?

to be covered under your parent’s health plan you must live at home and be claimed as a dependent on their tax return

A

false, neither statement is true

49
Q

true or false?

a married child can be covered under their parent’s health plan but the child’s spouse cannot be covered

A

true

50
Q

which of the following are covered under Medicare Part A?

  1. hospital care
  2. skilled nursing care
  3. physician’s fee
  4. hospice care
  5. home health care
  6. outpatient services
A

1, 2, 4, and 5

51
Q

which of the following are covered under Medicare Part B?

  1. hospital care
  2. skilled nursing care
  3. physician’s fee
  4. hospice care
  5. home health care
  6. outpatient services
A

3 and 6

52
Q

true or false?

people of any age with permanent kidney (ESRD) failure that requires dialysis or a kidney transplant are eligible for medicare part A

A

true

53
Q

people who have been receiving social security disability benefits for at least ___ months are also eligible for medicare benefits

A

24

54
Q

medicare pays for hospital services for up to ___ days in each benefit period

A

90

55
Q

a benefit period under medicare ends when the patient is out of the hospital for ___ consecutive days

A

60

56
Q

under medicare part A a lifetime reserve of __ days is also available to individuals who have exhausted the regular 90 days of benefits

A

60

57
Q

to receive skilled nursing benefits, a physician must certify that skilled nursing care or rehab services are needed for a condition that was treated in a hospital within the past ___ days

A

30

58
Q

medicare part A will pay skilled nursing benefits in full for the first ___ days

A

20

59
Q

true or false?

medicare coverage is not provided for skilled nursing after 100 days

A

true

60
Q

medical equipment and diagnostic tests are covered under Medicare part ___

A

B

61
Q

home health services are covered under medicare part ___

A

A

62
Q

drug coverage is provided under medicare part ___

A

D

63
Q

nonqualified withdrawals from a HSA will incur a penalty until age ___

A

65

64
Q

___ is a long term care approach that uses coverage equal to a specified dollar amount

A

pool of money concept

65
Q

chronically ill means you can’t perform ___ of the ___ ADL’s for at least ___ days

A

2 ; 6 ; 90

66
Q

name the 6 ADL’s

A 
eating 
bathing
continence
transfer from bed to chair
dressing 
toileting
67
Q

NAIC legislation for long term care policies requires a ___ day free look back period

A

30

68
Q

NAIC legislation for long term care policies requires expected loss ratio to be at least ___%

A

60%

69
Q

what is the major draw to using a partnership long term care policy?

A

partnership long term care policies can provide for more asset protection by requiring an insured person to only spend down assets to a specified level instead of having to spend down to the $2,000 usually required for medicaid

70
Q

true or false?

under the 2010 Health Care Reform Legislation individuals could be penalized if they do not have appropriate health insurance coverage

A

true, if they are uninsured they could face penalties depending on income level

71
Q

nonqualified plans may be ___ or ___

A

funded ; unfunded

72
Q

____ nonqualified plans use informal funding with life insurance, annuities, mutual funds or general investments

A

unfunded

73
Q

___ nonqualified plans are plans where assets are owned by the company and are subject to company’s creditors

A

unfunded

74
Q

under a ____ nonqualified plan there is no company tax deduction until the employee receives the benefit or has constructive receipt

A

unfunded

75
Q

true or false?

a Top Hat plan is an example of a funded nonqualified plan

A

false

76
Q

true or false?

rabbi trust are an example of an unfunded nonqualified plan

A

true

77
Q

true or false?

rabbi trust are subject to the claims of a company’s creditors

A

true

78
Q

true or false?

rabbi trusts immediately create taxable income for the employee

A

false

79
Q

true or false?

secular trusts are subject to the claims of a company’s creditors

A

false

80
Q

true or false?

secular trusts create immediate taxable income to the employee

A

true

81
Q

do employers receive an immediate tax deduction when they contribute to a secular trust?

A

yes

82
Q

do employers receive an immediate tax deduction when they contribute to a rabbi trust?

A

no

83
Q

do employees get to defer taxes under a secular trust?

A

no

84
Q

do employees get to defer taxes under a rabbi trust?

A

yes

85
Q

a nonqualified deferred comp plan that focuses on providing adequate retirement income to executives and is appropriate to provide benefits above both IRC Section 415 Limits and compensation limits

A

SERP (Supplemental executive retirement plan)

86
Q

true or false?

when an employee converts junior class shares to common shares they will be taxed

A

false

87
Q

no more than ___ families may occupy the dwelling under a homeowners insurance policy

A

two

88
Q

personal property is covered under ____ and this applies to all forms of homeowners insurance policies

A

actual cash value

89
Q

actual cash value = ______ minus ____

A

replacement cost minus depreciation

90
Q

homeowners section A covers ___

A

dwelling

91
Q

homeowners section B covers ___

A

other structures

92
Q

homeowners section C covers ___

A

personal property

93
Q

homeowners section D covers ___

A

loss of use

94
Q

what section of homeowners insurance covers materials and supplies intended for use in construction?

A

section A

95
Q

True or false?

land is specifically excluded from section A of homeowners insurance

A

true

96
Q

generally ___% of the amount of insurance on the dwelling applies as insurance on detached structures

A

10%

97
Q

homeowners section ___ covers the garage and other structures that are detached from the dwelling

A

B

98
Q

name the three exclusions under coverage B of homeowners insurance

A

land
business use
rental use

99
Q

homeowners section ___ covers personal property and contents

A

C

100
Q

generally the amount of insurance available under homeowners section C is ___% of the coverage on the dwelling

A

50%

101
Q

generally homeowners insurance section D is limited to ___% of the dwelling for HO-2 , HO-3, and HO-5 policies

A

20%

102
Q

generally homeowners insurance section D is limited to ___% of the dwelling for HO-1 and HO-8 policies

A

10%

103
Q

what are the three types of benefits provided under section D of homeowners insurance?

A

fair rental value
additional living expenses
prohibited use

104
Q

homeowners section 2 covers ____ and ___

A

personal liability and medical

105
Q

coverage E covers ____

A

personal liability

106
Q

coverage F covers

A

medical payments to others

107
Q

true or false?

coverage F covers medical payments to others from incidents that may occur on or off the premises

A

true

108
Q

this coverage protects the insured against claims arising out of both bodily injury and property damage

A

coverage E

109
Q

name the 8 general exclusions under a homeowners policy

A 
water damage
nuclear hazard
earth movement
ordinance or law
power failure
neglect
war
intentional loss
110
Q

HO-2 is considered ___ form

A

broad

111
Q

HO-2 covers ___ named perils

A

18

112
Q

loss of use coverage under HO-4 is limited to ___% of the amount of coverage ____

A

30% ; C

113
Q

loss of use coverage under HO-6 is equal to ___% of the amount of coverage

A

40% ; C

114
Q

true or false?

under HO-6 an attached shed is considered part of the dwelling

A

true

115
Q

true or false?

there is no section B coverage (other structures) under a HO-6 policy

A

true

116
Q

true or false?

under HO-6 a detached shed will be considered personal property

A

true

CFP (65 decks)

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