Risk Management and Employee Benefits

Question 1

Which type of insurance provides the highest death benefit for the lowest premium?

Answer 1

Annual renewable term insurance

Question 2

What are most single premium policies?

Answer 2

MEC

Question 3

How are withdrawals and loans treated for a MEC?

Answer 3

Included in taxable income to the extent the cash value exceeds the premiums paid using LIFO

Question 4

MEC 59.5 rule and exception:

Answer 4

Persons under age 59.5 may be subject to a 10% tax penalty on withdrawals and loans if there is a profit in the contract.
No penalty or tax due on the return of basis in the contract

Question 5

Group Term Life: Section 70 Table 1 cost is:

Answer 5

per $1,000 of insurance per month

Question 6

What is presumptive disability and who needs it?

Answer 6

Certain conditions that automatically qualify the insured for full benefit(blindness, deafness, loss of speech, loss of two or more limbs) For high profile entertainers, actors or athletes.

Question 7

What amount of disability insurance is adequate?

Answer 7

60%-80%

Question 8

What is Social Insurance Substitute integrate with and how does it work

Answer 8

Rider that provides a benefit that is integrated with S.S., workers comp, or social insurance. The benefit is reduced dollar-for-dollar by an social insurance amounts received.

Question 9

What is a stop-loss limit:

Answer 9

It is the dollar amount of covered benefits to which the coinsurance provision is applied and doesn’t include the deductible

Question 10

COBRA is available to which employers? How much cost can be passed through?

Answer 10

Those who have a healthcare plan, 20 or more employees (PT counts as .5)
102%

Question 11

COBRA: What are the requirements for 18 months and 36 months?

Answer 11

18 months if terminated or change of status

36 months for everything else

Question 12

COBRA: What is the 29 month option available for and why?

Answer 12

Those that qualify for the S.S. definition of disability. (You have to wait 5 months before getting on S.S. disability, then 24 months on S.S. disability then you can qualify for medicare)

Question 13

ADS’s and time required:

Answer 13

BEDTTC (bed to the chair), 90 days

Question 14

What is the primary reason to purchase Long-term Care Insurance:

Answer 14

to protect wealth

Question 15

ISO Disqualifying Disposition:

Answer 15

1 year from date of exercise and 2 years from date of grant, determined by date sold

Question 16

How is ISO taxed if it is disqualifying disposition and when does the holding period start?

Answer 16

Ordinary income, no payroll tax, hp starts when exercised.

Question 17

Should ACV or replacement cost be insured?

Answer 17

Replacement cost, the older the property, the lower the ACV due to depreciation

Question 18

What is Section I Coverage and how much should be recommended?

Answer 18

Sections A, B, C and D, 100%

Question 19

What does Section A cover?

Answer 19

Dwelling (permanently attached), construction materials. Land isn’t included.

Question 20

What does Section B cover? what amount of A is covered?

Answer 20

Other structures (detached), 10%, doesn’t apply to land or business property

Question 21

What does Section C Cover? What amount of Coverage A ? Where?

Answer 21

Personal property, 50%, all over the world,

Question 22

How would someone who has lots of personal property obtain additional insurance?

Answer 22

Through a separate policy or a rider

Question 23

What does Section D Cover?

Answer 23

Loss of use

Question 24

What is covered under section II Coverage?

Answer 24

Coverage E:

Coverage F:

Question 25

What does Coverage E cover?

Answer 25

Personal Liability: neighbor falls and needs major surgery that costs hundreds of thousands of dollars, covers golf course can’t be doing business

Question 26

What does Coverage F cover?

Answer 26

Medical payments to others: Neighbor falls and needs stitches, can’t be immediate family, $5,000-$10,000