Concepts

Question 1

Only forms of insurance anyone is required to purchase

Answer 1

P&C and Health

Question 2

Coinsurance provision for homeowner’s

Answer 2

((Amount of insurance / Cost to rebuild x 80%) x Loss)) less the Deductible

Question 3

Forms of professional liability insurance

Answer 3

Malpractice (physical harm) and E&O (fiscal harm)

Question 4

8 ISO General Homeowner’s Policy Exclusions

Answer 4

water, war, intentional, nuclear, neglect - power, earth, law (WWINN-PEL)

Question 5

Commercial insurance primary packages

Answer 5

Commercial package policy (CPL) and Business owners policy (BOP)

Question 6

Auto split limits e.g. 100/300/100

Answer 6

100/300 Bodily injury (per person/accident) and 100 Property

Question 7

Auto policy structure

Answer 7

Liability, med payments, uninsured/underinsured, physical damage (collision and comprehensive), duties of insured

Question 8

Business liability exclusions

Answer 8

Employees and Business Auto

Question 9

HO section I

Answer 9

A-Dwelling, B-Other Structures (10% of dwelling), C-Personal Property (50% of dwelling), D-Loss of Use

Question 10

HO section II

Answer 10

E-Comprehensive liability, F-Med payments (to others)

Question 11

Permanent life insurance

Answer 11

Cash value - whole, universal, variable, variable universal

Question 12

Short-term life insurance

Answer 12

Term

Question 13

Whole life insurance

Answer 13

GUARANTEED premium, death benefit, cash values; insurer takes mortality and interest rate risk

Question 14

Life insurance needs analysis

Answer 14

LIFE - L=liabilities + I=income replacement + F=final expenses + E=education funding = Total life insurance need

Question 15

Universal life insurance

Answer 15

FLEXIBLE premium and adjustable death benefit and cash value; unbundles whole life and insured takes mortality and interest rate risk

Question 16

Variable whole life insurance

Answer 16

built on whole life platform with cash value invested in sub-accounts - policy owner has investment risk

Question 17

Variable universal life

Answer 17

built on universal life platform with no guaranteed death benefit and insured takes investment risk

Question 18

Life insurance primary tax benefits

Answer 18

1. death benefit is income-tax free
2. earnings (in cash value) grow tax-deferred
3. withdrawals tax-free up to basis (balance taxed at ordinary income)

Question 19

Why not buy term insurance and invest the difference?

Answer 19

1. cash value growth is tax-deferred
2. risk is less than equities
3. cash value return is similar to CDs, which is where most investors invest their taxable money
4. flexibility
5. cash value can grow even if disabled (waiver of premium)
6. forced savings
7. savings is difficult to access and this discourages spending

Question 20

Joint life insurance policies

Answer 20

first-to-die (buy-sell, mortgage, education, donation), second-to-die (estate tax planning), surviforship policies

Question 21

Education funding 3-step process

Answer 21

1. Current cost of college is inflated
2. PV of an annuity due is determined for the college years
3. Sum is discounted to PV

Question 22

Life insurance primary uses

Answer 22

replace earning power and assuring estate liquidity

Question 23

3 beneficiary designations

Answer 23

1. Per capita (default)
2. per capital by generation
3. per stirpes

Question 24

Life insurance model regulation disclosure

Answer 24

illustration requirements; buyers guide before 1)sales presentation, 2)5 days pefore policy delivery; agent must idenitfy as such

Question 25

What's required to file a life insurance claim form

Answer 25

a certified copy of a death certificate and a claim form signed by the beneficiary

Question 26

Consumer debt rule of thumb

Answer 26

20% or less of net monthly income

Question 27

Housing costs rule of thumb

Answer 27

28% or less of gross monthly income

Question 28

Total debt rule of thumb

Answer 28

36% or less of gross monthly income

Question 29

5 Key Annuity Questions

Answer 29

1. Who is the annuitant? 2. What is the method of benefit payment or accumulation? 3. When do benefits begin? 4. How long are benefits paid? 5. How are premiums paid?

Question 30

3 Ways Annuity investments can be made

Answer 30

Fixed, variable and indexed

Question 31

Annuity taxation

Answer 31

- Withdrawals (of earnings) taxable as ordinary income using LIFO, and if prior to age 59 1/2 10% tax penalty - Annuitized payments partially taxable using exclusion ratio

Question 32

Annuity exclusion ratio

Answer 32

The ratio that the total investment in annuity bears to the total expected return (payments x months) to determine the amount of payment excluded from taxes.

Question 33

Cash value Life insurance policy nonforfeiture options

Answer 33

1. receive the cash value 2. use cash value as a single premium to purchase a reduced amount of paidup insurance 3. use cash value as a single premium to purchase extended term insurance

Question 34

Medicaid and CHIP

Answer 34

Provide health care coverage to minorities and low incomes; administered by states.

Question 35

11 transitions that cause a change in health coverage (and increase the need for financial advice

Answer 35

Marriage, Divorce, Death, Disability (MDDD) Job change, Job reduced hours, Job reduced income, Move (JJJM) 30d, 26, 65

Question 36

3 important health insurance acts

Answer 36

HIPPA, COBRA, PPACA

Question 37

Cobra benefit length periods in months

Answer 37

18 (job loss), 29 (disability), 36 (divorce)

Question 38

Medicare

Answer 38

federal health care program for 1. persons age 65 or older, 2. certain disabled persons who qualify for SSDI after 24 months, and 3. anyone who has end-stage renal (kidney) disease

Question 39

Medicare initial enrollment period

Answer 39

It’s the three months before the 65th birthday month, the birth month, and three months after the birth month for a total of 7 months.

Question 40

Medicare special enrollment period

Answer 40

If employed past age 65 may still enroll in Part A when they turn 65 ( no cost) and enroll in Part B when retire (within 8 months after the employer coverage ends)

Question 41

Why delay signing up for Medicare part B at age 65 if still employed?

Answer 41

1. need to pay Part B and C premiums and no benefit since Medicare would be secondary for paying claims if there is employer-based coverage. 2. the window for obtaining a guaranteed-issue Medicare supplement policy opens giving the client eight months to purchase a policy. If no policy is purchased during this time frame, the client would need to go through the underwriting process to qualify for a policy.

Question 42

Medicare annual general enrollment period

Answer 42

for Part A and Part B between January 1 and March 31, with coverage taking effect on July 1. The penalty for signing up late is 10% per year of delay and the penalty is permanent

Question 43

Medicare open enrollment period

Answer 43

October 15 through December 7; the client can make changes to their plans

Question 44

Medicare 4 basic parts

Answer 44

Part A - in-hospital expenses (in-patient expenses) Provided to people without a premium (10 years or more of medicare contributions), but there are deductibles and copayments. Part B - physician’s (outpatient expenses). Individuals with incomes above certain threshold amounts pay higher Medicare Part B premiums. For 2019, the annual deductible for Part B is $185. ``` Part C (Medicare Advantage Plan) - four employer type plans - program alternatives (similar to group plans offered by employers) Medicare HMOs, Medicare PPOs, private fee-for-service plans, and the special needs plans. Additionally, Medicare offers a Medical Savings Account (MSA) option. These plans are offered by private insurance companies. Two differences between Medicare Advantage Plans and most group plans are that Medicare Advantage Plans often include dental, hearing, and vision coverage, and premiums are subsidized by Medicare. ``` Part D - prescription drug coverage. A factor that determines the costs of the drugs and copayments is the tier in which a drug is classified. There are five tiers: two generic drug tiers, two name brand drug tiers, and one specialty drug tier that may require preauthorization.

Question 45

Medicare supplement plans

Answer 45

group of special policies (A-N) to cover the gaps between the cost of medical care and the amount Medicare pays

Question 46

HSA

Answer 46

The 2019 maximum annual contribution to an HSA is $3,500 for individuals and $7,000 for family coverage (age 55 but under age 65 may make catch-up contributions of $1,000).

Question 47

What are the lowest cost medical plans?

Answer 47

HMOs, or possibly POS plans, are usually the lowest-cost plans.

Question 48

major features to consider when evaluating a disability income policy

Answer 48

1. disability definition (most important) 2. elimination (waiting) period (time deductible) 3. max monthly payment 4. max benefit period 5. premium

Question 49

Two categories used to qualify for LTC

Answer 49

1. Inability to perform 2 or more activities of daily living (ADL) 2. Impaired cognitive ability