Risk Management and Insurance Planning - 11% - 19 out of 170 questions

Question 1

4 types of Risk Management

Answer 1

ARRT
Avoid - skydiving (not engaging in something where risk that can’t be reduced)
Reduce - fire detectors, sprinklers
Retain - insurance deductible&raquo_space; reducing premium, self-insuring (default strategy)
Transfer - Insurance

Question 2

Adverse Selection

Answer 2

one party has more relevant info or more control over outcomes than another party in transaction
- represents risk to insurance company

Question 3

Peril

Answer 3

Cause of loss (tornado, fire, heart attack)

Question 4

Hazard

Answer 4

Condition increasing likelihood or frequency or severity of loss (oil rags in garage)

Question 5

HDHP & HSAs

Answer 5

• HDHP makes one eligible to participate in HSA
• Last month rule = Dec 1 = fully fund HSA for whole year
• 1 direct transfer from IRA to HSA up to annual limit
• Withdrawals:
• qualified med exp = tax free
• non-qualified med exp prior to 65 = income tax + 20% penalty
• non-qualified med exp after 65 = income tax only
• Triple tax advantage: contributions, earnings, withdrawal
• MOOP (includes deductibles, copays, NOT premiums) Maximium to qualify as HDHP
• HDHP MINIMUM deductibles - must be at least these figures on Tax Table

Question 6

Describe how insurers use risk pooling to pay for losses incurred by policyholders.

Answer 6

• premiums collected by insurer, who assumes the risk, will be used to compensate those who incur covered losses
  - the larger the risk pool, the more predictable and stable the premiums can be

Question 7

Explain the factors that affect policyholder premiums and recommend appropriate methods for reducing household insurance costs.

Answer 7

dials (benefit period, elimination period, daily benefit, riders, waiver of premium, renewability)

Question 8

Consolidated Omnibus Budget Reconcilliation Act
COBRA

Answer 8

20+ EEs in prior year offer EEs/families opportunity to extend health coverage for qualifying events
* Termination (except gross misconduct)/ Reduction of Hours = 18 mo
* Medicare, divorce, death, loss of dependent child status = 36 mo
* Social Security definition of disability = 29 mo

continue cost to cover = (ee + er) x 102%

Question 9

Part-Time EEs (cobra)

Answer 9

count as half
Example: if you have 15 full time and 10 part time, that would equal 20 total FT EEs because 10 part-time = 5 full-time plus the other 15 full time