Dalton Quizzes Flashcards
(195 cards)
1
Q
Duties of insurance commissioners in regulating insurers?
A
I. To determine if an insurer meets the requirements to obtain a license
II. To conduct financial investigations of insurers operating in the state
2
Q
Which of the following are the purview of the state courts?
A
I. To rule on the constitutionality of insurance laws
II. To render decisions on the meaning of policy terms
3
Q
The policy dividends paid to the policy owner in excess of premiums paid.
A
is taxable income
4
Q
catastrophic
A
adj. 灾难的；灾难性的
5
Q
Dismemberment
A
n. 分割；肢解
6
Q
non-forfeiture
A
不被没收
7
Q
Life Income
A
benefits are paid as an annuity
8
Q
Life annuity with period certain
A
—the beneficiary is paid a specified amount of money periodically for life, but the payments are guaranteed for a certain number of periods. In the event of the beneficiary’s death before the specified period ends, the payments continue to the beneficiary’s estate or to a contingent beneficiary, until the guaranteed period ends.
9
Q
underwriting department
A
承销部门
10
Q
Insurance companies have three options for protecting against adverse selection:
A
including accurately identifying risk factors, having a system for verifying information, and placing caps on coverage
11
Q
What Is Anti-Selection?
A
Anti-selection is a term that is often used in conjunction with adverse selection. It is defined as an increase in the chance for a person to take out an insurance contract because they believe their health risk is higher than what the insurance company has allowed for in the premium amount.
12
Q
insurability
A
可保性
13
Q
universal life insurance plan bought by a company
A
employees also contribute to group life plans. An employee can choose a multiple of their salary to fit their coverage needs. Most companies limit coverage to 3xs salary with no evidence of insurability, and up to 5xs salary with evidence of insurability.
14
Q
NO/without evidence of insurability
A
Without evidence of insurability means an insurance provider underwrote a policy, such as for life or health insurance, without verifying that the policyholder was eligible for that coverage.
15
Q
Extended term insurance
A
Extended term insurance is life insurance is a life insurance policy where the policy holder stops paying the premiums but still has the full amount of the policy in effect for whatever term the cash value permits.
that is a non-forfeiture option
16
Q
Reduced paid-up insurance
A
Reduced Paid-Up Insurance — a life insurance nonforfeiture benefit that provides paid-up insurance for a lesser amount than the cash value of a policy that has lapsed because of premium nonpayment
Although this is a non-forfeiture provision, the amount of insurance coverage would be reduced
17
Q
Installments for a fixed period.
A
Fixed Period Option — a life insurance option that may be selected as a settlement under which the policy proceeds are left on deposit with the insurance company to accrue interest and are paid to the beneficiary in equal payments for a specific number of years
It has a settlement option
18
Q
One-year term
A
Use Dividends to Purchase One-Year Term Insurance - This so-called “fifth dividend option” allows the policy owner to use the dividends to purchase one-year term insurance at net rates, usually limited to no more than the current cash value on the contract.
19
Q
rendering
A
n. 翻译；艺术表现；透视图；抹灰底层
20
Q
enforcing
A
vt. 强迫；强制；实施；执行；加强
21
Q
Express authority
A
the actual authority that an insurance company gives representatives (agents)
a. Usually granted in writing by an agency agreement or contract
b. The insurance company is responsible for the acts of agents per express authority
22
Q
Implied authority
A
—the authority that the agent is not expressly given by the principal but that an agent in similar circumstances normally possesses
a. The authority that is reasonably necessary to carry out the agent’s duties
b. If implied authority exists, an insurer will be liable for the acts of the agent even if the agent knowingly or unknowingly misleads the insured
23
Q
Apparent authority
A
—when the insured is led to believe the agent has authority, either express or implied, where no such authority actually exists
a. The insured is unaware that the agent has exceeded expressed or implied authority, and the insurer makes no attempt to stop the agent (a notice issue)
b. Apparent authority may bind the insurer
24
Q
insurable interest
A
可保利益
25
Taxable or no taxable on dividend payments?
Dividends which are less than the amount of premiums paid are considered a return of that excess premium to the payor and are therefore non-taxable. Dividends paid to the premium payor above the amount of premium paid are fully taxable as income when earned.
26
Survivorship (second-to-die) life insurance policies
provide death benefits when the second, or last, insured dies. Second-to-die life expectancy is greater than either individual life expectancy; therefore, premiums are lower.
a. Applicable for estate planning where spouses intend to make substantial use of the marital deduction and need a cost-effective vehicle to provide estate liquidity at death of the second spouse when federal estate taxes are expected to be substantial
b. Usually, second-to-die policies are cost effective because of combined life expectancies that reduce premiums and because of the payment of policy expenses associated with one policy rather than two
c. Premiums may increase at the death of the first insured
27
Accidental death and dismemberment
—a death benefit to be paid to the beneficiaries if the insured dies by accidental means; benefits are paid to the insured for loss of limb or sight
28
exclusions
n. 不包括的项目:如接受服务项目是由投保以前已患有的疾病或伤害引致的
to prevent the acceptance of undesirable risks and losses, they are best covered under another type of coverage or policy.
29
Aleatory
adj. 碰运气的；侥幸的；偶然的
30
Variable life—
Its the premium is fixed, but the face amount may vary with no guarantee of cash value
1. ) The insured can choose from a wide variety of investment options
2. ) The death benefit may go up in value but cannot fall below a guaranteed minimum amount (face value) and consists of two parts: the minimum and the excess amount created by favorable investment returns
3. ) Insurance and securities licenses are required to sell variable life insurance
4. ) Variable life insurance is suitable only for clients with a higher risk tolerance
5. ) Sold with a prospectus
31
A client has asked you, as her planner, to review her life policies. The variable life insurance contract that she owns may be characterized as a/an:
I. Unilateral contract.
II. Aleatory contract.
III. Conditional contract.
IV. Personal contract of adhesion.
A)I, II and III only.
B)I and III only.
C)II and IV only.
D)I, II, III and IV.
Rationale
| The correct answer is "D." All choices accurately describe the variable life contract.
32
business overhead expense disability policy
pays the insured's business overhead expenses if the insured becomes disabled. The policy is designed for small businesses that rely on one or two persons.
33
COMPREHENSIVE PERSONAL LIABILITY COVERAGE --It may be part of a standard ISO homeowners policy or a stand-alone policy.
1. Personal liability insurance provides coverage for the insured’s legal obligation resulting from bodily injury or property damage
2. Personal liability insurance also provides payment for reasonable medical expenses for the injured party 3. Personal liability is included in Section II of the homeowners policy with a minimum limit of $100,000. 4. In most policies, the definition of insured includes the following:
a. You and residents of your household who are relatives
b. A person under 21 who is in the care of a relative
c. A person who has your permission to operate watercraft or tend to animals that belong to you
d. Any person engaged in your employment or using a vehicle on an insured location
5. Exclusions
a. No coverage for bodily injury or property damage if the act that created the injury or damage was intentional
b. Liability that is a result of business owned or conducted by the insured is not covered by liability insurance
c. Liability arising from a rental operation conducted by the insured is not covered; however, there are exceptions for occasional rental of residence, rental of part of the premises for residence, or rental of part of the residence as an office
d. Professional liability is excluded
34
ISO
homeowners forms portfolio, the HO 3 insures the described owner-occupied dwelling, private structures in connection with the dwelling, unscheduled personal property on and away from the premises, and loss of use. Personal liability coverage and medical payments coverage are also provided by this policy.
35
Private medical insurance does not pay for custodial nursing home stays, except possibly in a convalescent situation.
(The clarification on why Option "III" above is incorrect ) in that a comprehensive major medical policy would pay for treatments for the arthritis, but not for the custodial care which is required because Fred cannot perform the functions of daily living (i.e., dressing, feeding, bathing, etc.)
36
The particular type of disability insurance that is renewable is:
I. Non-cancelable.
II. Guaranteed Renewable.
III. Cancelable.
A)I only.
B)II only.
C)I and II only.
D)II and III only.
Rationale
The correct answer is "C." Cancelable policies are not renewable. These are one-time temporary policies, not seen very often anymore and best avoided.
37
Modified Endowment Contract (MEC)
1. once all the earnings are withdrawn and tax and penalty paid on them, the basis is not taxed, nor is there a penalty.
2. even loans from a MEC are taxable and the penalty is applied.
3. Once a contract is a MEC, it remains so even after a 1035 Exchange for a different policy.
4. Any withdrawals are made on a LIFO basis.
38
Which of the following represents the LEAST favorable means of securing long-term care coverage?
A)Continuing Care Retirement Communities.
B)Disability Income Policy Rider.
C)Association Arrangements.
D)Life Insurance Policy Rider.
The correct answer is "D." Continuing Care Retirement communities are structured specifically for Long-Term Care (LTC) coverage, as are the individual policies. Association arrangements are also LTC specific. These three all provide excellent means to obtain LTC coverage. The disability income policy rider takes a coverage that can no longer be carried after age 65 and converts it to useful LTC coverage, another excellent plan. The least favorable is to have diminished coverage that one will most definitely need at some point - life insurance.
39
surrender
v. 投降；屈服；放弃
| n. 投降；屈服；放弃
40
Tracy Cardinale was named by her sister, Lisa, as irrevocable beneficiary of Lisa's life insurance policy. After this was set up, Lisa wanted to borrow from the policy's cash value. What right does Lisa have to the cash value? Consider carefully the supporting rationale in selecting your answer.
A)Lisa can borrow the cash value, but she may NOT surrender the policy because of Tracy's interest in the policy.
B)Tracy must allow Lisa to borrow from the cash value because she is the owner of the policy and as such has a right to do so.
C)Lisa may borrow from the cash value because Tracy has only a contingent interest in the policy.
D)Lisa can only borrow from the cash value with Tracy's written approval because she has a conditionally vested interest in the policy.
Rationale
The correct answer is "D." Even though Lisa is the owner of the policy, she can be denied permission to borrow from the cash value since Tracy (the irrevocable beneficiary) has a vested interest in the policy.
41
incontestable
adj. 无可争辩的；毋庸置疑的
42
Conditional receipt
Note that while the conditional receipt sets forth certain terms of temporary life insurance coverage, it will not be issued without a completed application and payment of an initial premium.
43
Non-forfeiture rights of policyholders guarantee that there will be a:
Cash value
Non-forfeiture rights (or provisions) arrange an orderly legal structure to assure monies paid on an insurance policy are not simply absorbed by the company without recourse in the event that an insured decides to terminate coverage.
44
Non-forfeiture rights
非没收权利
45
which of the following statements is correct concerning the tax consequences of paying the death benefit to the designated beneficiary?
Life insurance contracts, even a modified endowment contract, acts as a life policy in that there are no income taxes levied on the proceeds to the beneficiary, while the proceeds must be included in the estate value of the decedent for calculation of the gross estate.
46
borrow money from a life insurance policy with irrevocable beneficial?
irrevocable beneficiaries have all of the rights of the policy owner. In this case, the insured must secure permission from the irrevocable beneficiary with regard to any activity or dispositive change in the policy.
47
tax implication on the proceeds of insurance policy owner by a third party?
Because John owns the policy on Mary's life, when Mary dies and the proceeds go to Ester, their daughter, as beneficiary, they are considered a gift from the policy owner (John) to his daughter. Had Mary owned the policy on her life, the proceeds would have passed to her daughter tax-free.
48
adjuster
n. 调整者；调停者；调节器；理赔人
49
arbiter
n. 仲裁人；主宰者
50
When a property claim has been submitted, the adjuster is called in to do which of the following:
I. Assist the insured in the preparing the proof-of-loss statement.
II. Determine whether there was a loss covered by the policy.
III. Classify the loss as standard, substandard, or ineligible.
IV. Choose the arbitrator who will determine the amount of loss.
A)I and II only.
B)I and III only.
C)I and IV only.
D)II and III only.
Rationale
The correct answer is "A." Options "I" and "II" are roles of an adjuster. Option "III" is incorrect because the classification is the underwriter's job. Option "IV" is incorrect because the adjuster determines the amount of loss. An arbiter would enter into the situation only if the two sides cannot agree.
51
```
Six years ago, Sonny Gates purchased a building for $400,000. Its current replacement cost is $800,000. The building is covered for fire-related perils by Commercial Carriers Insurance Company to $400,000, with an 80% coinsurance provision and a $2,000 straight deductible. Last week, a fire broke out in the building, causing $600,000 of covered damage. What amount will Commercial Carriers Insurance Company pay for this loss?
A)$298,000
B)$373,000
C)$598,000
D)$600,000
```
Rationale
The correct answer is "B."
(Face value ÷ co-insurance) x Loss - Deductible
[400,000 ÷ (.80 x 800,000)] x 600,000 - 2,000
[(400,000 ÷ 640,000) x 600,000] - 2,000
(.6250 x 600,000) - 2,000
375,000 - 2,000
373,000
52
When a person is deemed to need skilled care, intermediate care, or custodial care, what is being established relative to a long-term care policy?
A)Whether the patient really needs long-term care, or if some other way can be found to meet the patient’s needs.
B)Where the care required is classified in the Medicare DRG table.
C)Whether the care must be delivered by a hospital or nursing home.
D)The identification of the "level of care" required.
Rationale
The correct answer is "D." Options "A," "B" and "C" simply describe the various levels of care one could receive through an LTC policy.
53
bundle
n. 捆；束；包；大笔钱
| v. 捆；把 ... 扎成一捆；匆忙地走
54
unbundle
vt. 对(不同产品、劳务)作分类交易
| vi. ( 将一揽子交易中各部分)分类定价
55
```
The policy where there is an unbundled premium and the client selects the investments is known as:
A)Universal life.
B)Variable life.
C)Variable universal life.
D)Adjustable whole life.
```
Rationale
The correct answer is "C." Universal policies provide for unbundled premiums. Variable allows policy owners to select investments. Variable Universal Life (VUL) allows for both.
56
non-forfeiture options
A nonforfeiture (sometimes hyphenated) clause is an insurance policy clause stipulating that an insured party can receive full or partial benefits or a partial refund of premiums after a lapse due to non-payment. Standard life insurance and long-term care insurance may have nonforfeiture clauses.
57
Of the following policy options and provisions, which are dividend options available to policyholders of a participating whole life insurance policy?
I. Reduced paid-up insurance.
II. Paid-up additions.
III. Accumulate at interest.
IV. Extended term.
A)I only.
B)I and II only.
C)III and IV only.
D)II and III only.
Rationale
| The correct answer is "D." Only Options "II" and "III" are dividend options. The others are non-forfeiture options.
58
Insurance for personal fine arts and antiques
Fine arts and antiques are generally insured on a homeowners policy with an endorsement known as a "personal articles floater" which is a form of Inland Marine insurance. This coverage is provided on an appraised value.
59
可保利益
insurable interest
60
```
An HO-3 policy (Special form "open perils") is also known as an "all risks policy". It covers all losses except those specifically named as exclusions in the policy. If there are NO endorsements, which one of the following perils is excluded?
A)Flood.
B)Fire.
C)Collapse.
D)Weight of ice.
```
Rationale
The correct answer is "A." Flood is excluded from homeowners. Remember, water damage done by water coming from the sky down (as in rain) is covered, but water coming from the ground up (as in flood) is not covered. It should be noted that personal property/contents are covered on a named perils basis in an unendorsed HO-3 policy.
61
HEALTH MAINTENANCE ORGANIZATIONS (HMOs)
1. An HMO is an organization that provides a broad range of health services to a group of subscribers for a fixed periodic payment
2. An HMO provides both the financing and delivery of health care
3. Operation of an HMO consists of comprehensive health care provided by contracted physicians and medical facilities for a prenegotiated payment
4. A preferred provider organization (PPO) is similar to an HMO, except it allows members to receive care outside the network of PPO providers; however, the insured will generally face higher deductibles and/or higher coinsurance
5. Health care providers are employees of HMOs, whereas the PPOs contract directly with the health care providers for a reduced price in exchange for increased patient volume and timely payment of fees
62
The group model of the HMO:
A)Is a corporation and medical staff members including doctors, nurses and clerical staff are employees of the HMO.
B)Is a type of HMO organization that is made up of physicians who have their own office locations.
C)Is an arrangement that is sometimes known as the network model.
D)Has no gatekeeper within the structure of this model.
Rationale
The correct answer is "C." The group model of the HMO is an arrangement that is sometimes known as the network model.
Option "A" describes a staff model.
Option "B" describes an IPA. The IPA allows the greatest flexibility among HMO coverages.
Option "D" is incorrect as ALL HMOs employ gatekeepers.
63
leasehold interest coverage
Covers favorable terms in a lease agreement should a fire render a building uninhabitable.
64
contingent extra expense insurance
Covers expenses caused by the occurrence of a loss to a covered peril which the insured does not own.
65
extra expense insurance
Covers any extra expenses incurred to continued operation.
66
Business interruption insurance:
Covers indemnity for businesses during the period where they are rebuilding and restoring after covered losses have forced a halt of business as usual.
67
cognitive impairment
认知障碍
68
SETTLEMENT OPTIONS (UPON INSURED’S DEATH)
1. Lump-sum—the death benefit is paid in full
2. Interest only—the principal (death benefit) of the policy remains invested with the insurance company to be paid at a later date; however, the interest earned on the principal is paid to the designated beneficiary (interest earned is taxable in the year earned)
3. Fixed-period installments—the proceeds (principal and interest) are paid over a specified period or term
4. Fixed-amount installments—the proceeds are paid at a set dollar amount per month until all of the principal and interest are exhausted
5. Life income—benefits are paid as an annuity
a. Single-life annuity—the beneficiary receives a specified amount of money periodically until the beneficiary dies, at which time annuity payments cease (this provides the highest periodic payment)
b. Life annuity with period certain—the beneficiary is paid a specified amount of money periodically for life, but the payments are guaranteed for a certain number of periods. In the event of the beneficiary’s death before the specified period ends, the payments continue to the beneficiary’s estate or to a contingent beneficiary, until the guaranteed period ends.
c. Life annuity with refund—the beneficiary is paid income periodically for life. If the death benefit has not been recovered at the time of the beneficiary’s death, the total amount of payments received does not equal or exceed the basis of the annuity. The remainder up to the basis of the annuity is paid to the contingent beneficiary either in installments or in a lump sum.
d. Joint and survivor annuity—provides payment to two payees; at the death of the first payee, the payment may or may not be decreased to the second payee but will cease on the death of the second payee
69
Loan provision
a. The insured may obtain a loan from the insurance company up to the cash surrender value using the policy’s cash value as collateral b. The automatic premium loan provision (APL) provides for the premium to be automatically charged against the cash value if the premium is not paid by the insured on the due date 1.) Outstanding loans reduce the death benefit payable at the time of death
70
Dividend provision
a. Dividends paid on participating policies represent the favorable difference between premiums paid and the actual cost of the policy based on the insurance company’s mortality experience b. Dividends may be: 1.) paid in cash, 2.) used to reduce premiums, 3.) left with the insurance company to accumulate interest, 4.) used to purchase additional paid-up insurance, or 5.) used to purchase one-year term insurance c. Dividends are not taxable income until the amount received in dividends exceeds the policy’s cost basis, which is usually the amount of premium paid less any distributions
71
Nonforfeiture provision
a. When a policyowner discontinues premium payments in a cash value policy, the policy-owner is entitled to either the cash value or surrender value, if less
1. ) The standard nonforfeiture provision requires the cash surrender value to be made available in cash to the policy-owner. However, the insurance company may delay payment for up to six months after surrender of the policy.
2. ) At the time of surrender, excess cash received over the net paid premiums (basis) is considered income and is taxable to the policy-owner in the year received b. A policy-owner may elect to receive a reduced amount of paid-up insurance equivalent to what the cash value could purchase as a net single premium. The face amount of the policy will be based on the net single premium and the assumptions of the insurance company regarding mortality and other expenses.
c. Paid-up term insurance
1. ) This policy will have the same face amount as the original policy
2. ) The period of the term insurance is determined by the net single premium the cash value can purchase according to the assumptions of the insurance company regarding mortality and other expenses
72
```
A supplier of your company experiences fire damage at their plant. They cannot provide an essential part to you for a number of weeks. This, of course, delays your operation. You are covered by a very extensive insurance. For this reason, you would go to collect from your:
A)Contingent business interruption.
B)Extra expense insurance.
C)Business interruption.
D)Lease hold interest coverage.
```
Rationale
The correct answer is "A." You would go to collect from your contingent business interruption insurance because it is a business which you do not own that has a direct effect on your own business.
73
Contingent business interruption
is a form of small business insurance that provides financial assistance when the loss of a primary supplier, partner, or customer affects your ability to do business.
74
Which of the following statements concerning the choice of an entity versus a cross-purchase partnership buy-sell agreement funded with insurance is FALSE?
A)The use of existing insurance to fund the agreement causes a transfer-for-value problem if an entity agreement is selected, but does NOT cause this problem if a cross-purchase approach is used.
B)A cross purchase should be selected if the surviving partners expect to sell their interests during their lifetimes.
C)An entity approach may solve the affordability problem if one partner is significantly older than the other.
D)An entity agreement becomes more desirable as the number of partners included in the agreement increases.
Rationale
The correct answer is "A." The use of existing insurance does not cause a transfer-for-value situation in both entity and cross-purchase situations because the entity is presumed the same as the individual in a partnership.
(B) is a true statement because when surviving owners expect to sell their business interest during lifetime, they will prefer a cross-purchase agreement to allow them to increase their cost basis in the business upon the death of one of the owners.
(C) is correct because the if we have owners significantly older than other owners then the young owners will have to pay a lot more in premiums to insure the older owners' lives in a cross-purchase agreement. (D) is correct because the number of policies needed in a cross purchase is N * (N-1).
75
```
The policy which insures an individual when "the insured is unable to perform the duties pertaining to any gainful occupation for which they are suited by education, experience, or training" best describes what definition of disability?
A)Any Occupation.
B)Modified Any Occupation.
C)Split Definition.
D)Loss of Income
```
Rationale
The correct answer is "B." Option "A" - Any occupation would say you are employable even in the severest disabilities. Option "C" - Split definition uses own occupation to begin with and moves toward modified any occupation. This allows for training in a new field. Option "D" - Loss of income avoids having to define disability.
76
Life insurance is an aleatory contract. This means that:
A)Life insurance is designed to make one whole.
B)Those who need this contract most will try to buy it.
C)Only one party is legally obligated to perform.
D)One party pays more than the other party.
Rationale
The correct answer is "D." Option "A" is indemnity. Option "B" is adverse selection. Option "C" is a unilateral contract.
77
Direct recognition programs
are best described as follows: Any amount of cash that is removed from the policy is reflected in a decrease in the amount of dividends and interest paid on that policy.
78
viatication
Viatication becomes an important issue if the insured were suffering from a terminal illness.
----purchasing insurance policies for cash from terminally ill policy holders.
79
Dun & Bradstreet report
concerns itself more with credit standings of a firm not with insurance.
80
insurance coverage should use reports:
I. A.M. Best Reports
II. Standard and Poor's
III. Moody's Investors Services
81
Express authority is written in the contract.
Implied authority are actions assumed to be part of an agent's repertoire within his or her rights, including signs on the wall and letterhead. Apparent authority is when a 3rd party believes there is authority, but none exists.
82
Dynamic risk
in which the core of risk resides in the change in the environment caused by the changing human condition.
83
In the Commercial General Liability contract, which of the following parts does not belong?
A)Coverage A, bodily injury and property damage liability.
B)Coverage B, personal and advertising liability.
C)Coverage C, medical payments.
D)Coverage D, other structures.
Rationale
| The correct answer is "D." There is no "other structures" coverage on a CGL contract.
84
Coinsurance
he sharing of expenses with the health insurer at a fixed percentage up to a fixed amount
85
Internal policy limits
refers to maximum amounts the policy will pay for certain specified services.
86
The stop-loss limit
is the maximum the client will pay.
87
Disability income insurance benefits terminate for the following reasons:
I. Insured has returned to work.
II. Maximum benefit period has been reached.
III. Group coverage has been canceled.
A)I only.
B)I and II only.
C)II only.
D)I, II and III only.
Rationale
| The correct answer is "B." If one is on disability and the company cancels the policy, coverage is still continued.
88
The dependency period
is also known as the "critical period." The blackout period occurs after the youngest child leaves home.
89
declaration
n. 宣言；宣布；申报
90
```
The branch of government responsible for proposal of bills and passage of legislation that governs the conduct of insurance organizations and their business is:
A)U.S. Congress.
B)State legislature.
C)State judicial branch.
D)State insurance commissioner office.
```
Rationale
| The correct answer is "B." Insurance is state regulated. Legislation is from legislature.
91
The testamentary trust
will provide the surviving spouse with access to the proceeds. Any amount remaining in the trust at the death of the surviving spouse will pass to the children.
92
Floaters
漂浮物
93
The hull of the ship
is covered under ocean marine insurance. An inland marine insurance is a category of insurance that protects against property losses to goods in transit.
94
hull of the ship
船的船体
95
2054Question 23 of 25Insurance Quiz 4
```
All of the following require a special endorsement rider or a separate policy for coverage to be effective, except:
A)A house involved in flooding.
B)A house involved in an earthquake.
C)A car involved in flooding.
D)A piece of jewelry valued at $10,000.
```
Rationale
The correct answer is "C." Personal auto policies are the only ones that offer coverage for flooding. On a homeowners policy, water damage is covered "from the sky coming down," but not "from the ground coming up."
96
The collateral source rule
it holds that damages assessed against a negligent party should not be reduced simply because the injured party has other sources of recovery available, such as insurance or employee benefit
97
Vicarious
adj. 代理的；担任代理的；替身的；代替性的；有同感的
98
Vicarious liability
—one person may become legally liable for the torts of another (e.g., parent/child)
1. ) Employers may be vicariously liable for the acts of employees
2. ) Principals may be liable for the actions of agents
99
Negligence per se
—the act itself constitutes negligence, thereby relieving the burden to prove negligence
100
Absolute liability
Strict (absolute) liability—liability that may be imposed without proof of the defendant’s negligence or bad intent
101
moral hazards and morale hazards
道德风险和士气危害
102
There are physical hazards, moral hazards and morale hazards, all of which increase the likelihood of a loss.
Perils are the proximate cause of a loss.
103
Pure risk
When a circumstance exists where there is an uncertain possibility of loss and no chance of gain,
104
speculative risk.
When a circumstance exists where there is an uncertain possibility of loss and A chance of gain,
105
HO-1 is almost non-existent basic coverage. HO-15 is an endorsement to HO-3 coverage.
HO-4 is renter's coverage.
| HO-6 is condominium owner coverage.
106
Homeowners Forms is known as Special Form and provides open peril coverage on both dwelling and appurtenant structures
HO3
107
Guaranteed renewable
"guaranteed renewable" is the policy where if a rate change is made, it must be for an entire rate class.
These policies guarantee renewability, not level premiums. Premium levels can be changed as long as it is done for an entire rate class.
108
Which of the following statements about the conversion privilege is/are true regarding group life insurance plan provided by employers?
I. The policy may be converted from a permanent product to a term product.
II. The policy may be converted if the insured provides evidence of insurability.
III. At conversion, the billing is switched to the insured.
IV. The policy may be converted from a term policy to an individual permanent life policy.
A)I and IV only.
B)I, II and III only.
C)I, II, III and IV.
D)III and IV only.
Rationale
The correct answer is "D." Option "I" - Switching from a permanent to a term product is not a conversion available in any group life insurance. Option "II" - These group plan term-to-permanent conversions will occur without evidence of insurability.
109
The 'principle of indemnity' refers to which of the following:
A)The right of a party to collect from third parties who are responsible for having caused the loss.
B)The right of the insured to be made whole after a loss occurs.
C)The right of the insured to bring tort action against the tortfeasor.
D)The stake or interest in a matter, person, property, or other business concern that might be damaged if the peril insured against occurs.
Rationale
The correct answer is "B." (发生损失后，被保险人有权享有全部赔偿) Option "A" is vicarious liability. Option "C" is the right to bring suit (提起诉讼的权利). Option "D" is an insurable interest.
110
torts
侵权行为
111
probation period in a disability income policy
The period of time the insured must wait before specified illnesses or injuries are covered.
Rationale
The probation period, when included in a Disability Income policy, is the time the insured must wait after the issue of the policy before specified conditions will be covered.
112
the conversion privilege:
Term life can be converted to cash value or permanent life insurance.
113
impede
vt. 妨碍；阻止
114
fatal
adj. 致命的；毁灭性的；决定性的
115
Where no-fault auto insurance is involved, which of the following is a correct match?
A)Pure no-fault: Several states have enacted this system.
B)Verbal threshold: Law suits may be allowed when there is a fatal injury.
C)Modified no-fault: In no way impedes the right of tort action.
D)Pure no-fault: Allows for tort action under certain conditions.
Rationale
The correct answer is "B." There is no "pure no-fault" in existence in any state in the U.S. Modified no-fault allows suits when verbal and dollar thresholds have been crossed. Dollar threshold is damage occurring above a certain amount, not a limit to actionable compensatory amounts.
116
tax-deferred annuities
A tax-deferred annuity is an investment vehicle used by an individual planning his retirement income. It is sold by insurance companies, and it offers fixed or variable rates of return. A tax-deferred annuity grows tax-free until retirement.
Payments from annuities are federally taxed depending on whether the annuity is qualified or non-qualified. A qualified annuity is funded by pre-tax dollars, while a non-qualified annuity is funded by post-tax dollars. Taxes on annuity distributions are assessed at the same rates as regular income, so the amount you're taxed will depend upon your marginal tax rate.
If you have a non-qualified annuity, you've already paid tax on the money you contributed to the annuity, and so you'll only be taxed on a portion of your income from the annuity. That amount, called the "exclusion ratio," depends upon how much you earned on the principal and the length of the annuity. If you live past your life expectancy, however, you could be taxed beyond the exclusion ratio.
If you have a qualified annuity, you must pay tax on the full amount of any distributions, because you never paid tax on the amounts you contributed. You were able to set the money aside before paying taxes on it and must now pay taxes on what you receive from the fund.
117
immediate annuities
are not subject to a premature distribution penalty tax. This only applies to deferred annuities. In a MEC all withdrawals are considered to be above the basis (earnings first). Therefore all distributions are subject to tax until the insured's basis is reached on a LIFO basis, but death benefits are still income tax free.
118
If the insured under a disability income insurance policy moves to a more hazardous job and receives an increase in compensation with the job change, what will be the likely effect on the disability coverage?
A)The relation of earnings to insurance clause will require an adjustment in the benefits payable.
B)The definition of disability will automatically change from "own-occupation" to "any-occupation".
C)The change of risk clause will require new underwriting of the risk.
D)The change of occupation provision will permit the insurer to reduce benefits payable.
Rationale
The correct answer is "D." In the case of increased risk on a disability policy the insurer will generally reduce coverage to match what the premium will purchase at the new, riskier position.
119
1) Own occupation (own occ)—the inability to perform any or all of the duties in one’s own occupation (most expensive)
2. ) Modified own occupation—benefits are paid if the disabled person cannot perform their specific occupational duties but would not continue to pay if that individual chose to be gainfully employed in another field
3. ) Any occupation (any occ)—the inability to perform the duties of any occupa-tion for which one is reasonably qualified by education, training, or experience
4. ) Social Security definition of disability—a mental or physical impairment that prevents the worker from engaging in any substantial gainful employment; for Social Security, the disability must have lasted for 5 months and be expected to last a total of at least 12 months or result in the death of the worker
5. ) Many hybrid forms of disability are available today. An example of this type of policy would cover the insured under an own occupation definition of disability for two years and then cover the insured under an any occupation definition of disability thereafter up to age 65.
120
tax-deferred annuities
延税年金
121
incontestable clause
不可争议的条款
122
Annuities are a contract and as such avoid probate and pay proceeds to a named beneficiary.
Accumulated interest income is taxable owned by a decedent.
IRD is estate and income taxable, but the income tax will be offset by estate tax paid.
123
```
Rodney is being admitted to the hospital with a preapproved covered expense for procedures that will cost $12,225. Rodney's policy has a $300 deductible per person. This deductible must be met by two family members. This requirement has been satisfied already this year. The policy also has a $5,000 coinsurance feature with an 80/20 split. What is the amount the insurer will pay for the procedure that Rodney is about to receive?
A)$11,225
B)$10,925
C)$10,625
D)$11,925
```
Rationale
The correct answer is "A." If the deductible has been satisfied, then Rodney has only the 20% of the $5,000 coinsurance amount to satisfy (5,000 x 20% = 1,000). This means that the insurer will cover $11,225 ($12,225 - $1,000).
124
```
An insurable risk is characterized by an accidental loss, low cost, and a:
A)Large number of exposure units.
B)High chance of loss.
C)Low amount of exposure.
D)Limited number of perils.
```
Rationale
The correct answer is "A." Recall that there must be a large number of homogenous (or similar) exposure units to minimize the overall risk to the insurer. The insurer, however, does not want a high chance of loss. The others are not part of an insurable risk profile.
125
assignee
n. 受托者；代理人；受让人
126
assignor
转让人
127
collateral assignment
—the employee is the owner of the policy and is responsible for premium payments. The employer obligates itself and then makes interest-free loans in the amount of the premium the employee has agreed to pay under the split-dollar plan. To secure these loans, the policy is assigned as collateral to the employer. At the employee’s death, the employer recovers the loan (aggregate premium payments) from the policy proceeds as the collateral assignee. The remainder of the policy proceeds is paid to the employee’s designated beneficiary. Should the employer terminate the plan, the employer will receive an amount equal to the premium payments loaned to the employee, while the employee will receive the policy. Some states do not allow collateral assignment of life insurance contracts.
128
The endorsement method
—the employer owns the policy and is primarily responsible to the insurance company for paying the entire premium. Should the employee die while the plan is in effect, the split beneficiary designation provides for the employer to receive a portion of the death benefit equal to its premium outlay with the remainder of the death proceeds going to the employ-ee’s designated beneficiary. In the event the employer terminates the plan, the employer will receive the cash surrender value of the policy, while the insured employee will receive nothing. Under this method of ownership, the employee’s rights are protected by endorsement, giving the employee the right to name the residual beneficiary.
129
Which of the following statements regarding assignments is/are true?
I. A collateral assignment is a temporary transfer of some or all of the ownership rights on condition such rights revert to the assignee.
II. A collateral assignment is a temporary transfer of some or all of the ownership rights whereby such rights revert to the assignor upon satisfaction of agreed-upon conditions.
III. A collateral assignment is a temporary transfer of some or all of the ownership rights on condition such rights revert to the insurance company upon satisfaction of agreed-upon conditions.
IV. An absolute assignment is an irrevocable transfer of all ownership rights which can be accomplished through a sale or gift.
A)I, II and III only.
B)I and III only.
C)II and IV only.
D)IV only.
Rationale
The correct answer is "C." Option "I" incorrectly describes a collateral assignment, reversion right should go back to the assignor. Option "III" almost describes a collateral assignment, but reversion of rights return to the insured, not the insurance company.
130
2002Question 6 of 25Insurance Quiz 6
An employer subject to COBRA must provide a covered employee with the option of continuing health insurance coverage in which of the following circumstances?
I. The employer has terminated its health plan.
II. The employee has been terminated for incompetence.
III. The employer has gone out of business.
IV. The employee has been terminated for gross misconduct.
A)I & II only.
B)I and IV only.
C)II and III only.
D)II, III, and IV only.
Rationale
The correct answer is "A." If an employer terminates a plan but is still in business, COBRA would apply to the formerly covered employees. However, if the business ceases for any reason causing the plan to terminate, then COBRA does not apply.
131
```
Derek Baldwin purchased a 20-year limited payment whole life policy 15 years ago. He would like to stop paying the premiums on his policy. If he does so, which one of the following is a nonforfeiture option he could possibly use?
A)Installments for a fixed amount.
B)Life annuity.
C)Installments for a fixed period.
D)Extended term insurance.
```
Rationale
The correct answer is "D." Ideally the insured should simply use dividends to meet premium obligations over the next five years and have a fully paid-up policy. However, this is not one of the choices. Therefore, the best possible answer would be extended term, Option "D". Options "A", "B" and "C" are settlement options.
132
Which of the following combinations describes a lump sum payment made at the beginning, by the annuitant, on an annuity payable to one person at current equity market investment rates, payable for life or a set number of years, even to the annuitant's beneficiary if need be, beginning at some future date:
I. Single pay, individual.
II. Installment, individual.
III. Variable, immediate, life period certain.
IV. Variable, deferred, life period certain.
A)I and II only.
B)I, II and III only.
C)II and III only.
D)I and IV only.
Rationale
The correct answer is "D." The annuity described in the question is a single pay, individual, variable, deferred, life period certain annuity.
133
Being a 15-year old car with such high mileage,
there are few insurers who would provide physical damage coverage. The other coverages are necessary.
134
Installment
n. 分期付款；部分；分册
| n. 安装；安置
135
incorporation
| n. 包含；合并；组成公司
136
```
If a permanent life policy provides a guaranteed option to purchase additional insurance on the original policy, that option will include all of the following features in the new policy, except:
A)Guaranteed purchase option.
B)Disability waiver of premium.
C)Accidental death benefit.
D)Non-forfeiture provisions.
```
Rationale
The correct answer is "A." Guaranteed purchase options cannot be purchased with guaranteed purchase option provisions. It would be like making the third wish for three more wishes.
137
Contributory negligence
was a defense that prevented many frivolous law suits, but also resulted in some very justifiable cases being thrown out of court. This doctrine has been supplanted for the most part by comparative negligence, but as a result law suits have become far more frequent and frivolous.
138
non-forfeiture provision
Extended term insurance.
139
dividend option
Paid-up additions
140
Insured buy-sell agreements have the following characteristics, except:
A)Stock redemptions (entity agreements) increase the cost basis of the surviving shareholders.
B)Insured cross-purchase plans involve shareholders buying life insurance on each other.
C)Parties to a cross-purchase agreement can agree to the purchase of remaining life insurance policies from the decedent's estate.
D)Under a stock redemption (entity agreements) plan, life insurance owned by the corporation on the shareholder's life is not included in the decedent's estate.
Rationale
The correct answer is "A." The cost basis of surviving shareholder does not increase in an "entity" or stock redemption buy-sell, but would increase, in part, in a cross-purchase.
141
```
Lisa is a condo owner and has an HO-6 policy. She purchased the condo for $400,000. Her HO-6 policy is an open peril policy and has a face value of $360,000. Her contents are covered on a named peril basis with $100,000 in coverage. She also has an 80% coinsurance requirement. A tornado hits the building and completely destroys the roof of the condo. The cost to repair the roof is $50,000. How much would her condo policy cover for the roof damage?
A)$0.
B)$32,000.
C)$45,000.
D)$50,000.
```
Rationale
The correct answer is "A." An HO-6 policy does not provide coverage for the building or roof. The building and roof are covered by the condo association policy, which covers all exterior walls and roof. The HO-6 policy covers all interior walls for a condo.
142
```
The following type of insurance would be described as an unbundled policy where the company selects the places of investment:
A)Universal life insurance.
B)Interest sensitive life insurance.
C)Variable universal life insurance.
D)Adjustable life insurance.
```
Rationale
The correct answer is "A." In all of these coverages, the monies above and beyond mortality and expenses are invested by the company in its general fund. Only variable life allows the investor to select investments. A universal policy is unbundled. The way this question is asked ("unbundled and selected by the company") points one toward the correct answer of universal life.
143
unbundled policy
An unbundled life insurance policy is a type of financial protection plan that provides cash to beneficiaries upon a policyholder's death. An unbundled life insurance policy contains a savings and investment component that the policyholder can use during his or her lifetime.
144
bundled policy
Bundled insurance typically means you're purchasing multiple insurance policies from a single company. For example, if you buy your home and auto insurance policy from the same place, you'd be bundling your policies. A package policy is a bit different.
145
Survivor benefits: Who’s eligible
All individuals eligible for survivor benefits would be seriously impacted by the death of a wage-earning loved one. Survivor benefits are available to:
1. A surviving spouse age 60 or older.
2. A surviving spouse (any age) who cares for a loved one’s child who is under age 16 or disabled.
3. An unmarried child of the deceased who is:
Under age 18 (up to 19 if a full-time student in secondary school).
4. 18 or older with a disability that began before age 22.
5. A stepchild, grandchild, step-grandchild or adopted child, under certain circumstances.
6. Parents, age 62 or older, who depended on the deceased for at least half their support.
7. A surviving divorced spouse, under certain circumstances.
146
Casey Russell, age 45, comes to see you because he has just been diagnosed with a terminal illness. His doctor told him he will NOT be able to work more than another 4 months and that his life expectancy is only 12 months. Casey also tells you that he has always been self-employed and with the exception of the last two years, has NEVER paid into Social Security. What benefits will be available to Casey and his family from Social Security as a result of his death? Assume his wife is also 45-years old, and his two children are ages 15 and 19.
I. Monthly survivor's benefit for the worker's child, under age 18 (or age 18 if the child is a full-time high school or elementary school student).
II. Monthly survivor's benefit for the worker's spouse, or former spouse, who is caring for a dependent child under age 16 who is eligible for benefits.
III. Monthly survivor's benefit for the worker's spouse until age 65.
IV. Lump-sum death benefits of $255 for the worker's spouse or child.
A)I, II and III only.
B)I, II and IV only.
C)III and IV only.
D)I and II only.
Rationale
The correct answer is "B." Monthly survivor's benefit for the worker's spouse occur only if there are minor children for the surviving spouse to raise. Once the children are of age, benefits to the spouse cease.
147
All the following statements describe benefits of a typical buy-sell agreement, EXCEPT:
A)It provides liquidity to the deceased’s estate for paying death taxes and other debts.
B)It provides for continuation of the business by the surviving owners.
C)It can establish the estate tax value of the business interest in the deceased’s estate.
D)It provides the surviving owners with the option to buy the deceased’s business interest.
Rationale
The correct answer is "D." A buy-sell agreement should provide for a commitment of the surviving owners to buy the deceased’s interest, not just an option to buy. The owner wants to be assured that there will be a sale of the interest at the time of death, not just an option. The other statements are benefits of a buy-sell agreement.
148
Jerry, age 66 is a U.S. citizen, an avid cyclist and currently has Medicare part A and B. He recently spent two-weeks traveling through France and cycling through some of the country side. One day while cycling he had an accident and required an ambulance to take him to the hospital, he spent three nights in the hospital while they evaluated him and provided medical treatment for a concussion and a broken arm. How much coverage will Medicare provide?
A)Medicare will not provide any coverage while outside of the U.S.
B)Part A will cover inpatient hospital care coverage while Jerry was admitted to the hospital.
C)Part B will cover any emergency ambulance service to transport Jerry to the hospital.
D)Medicare will not provide coverage for the hospital stay or ambulance services, but will provide prescription drug coverage for any medication Jerry purchases immediately after leaving the hospital, but while still in France.
Rationale
The correct answer is "A." In most situations, Medicare does not provide health care coverage for services received outside of the U.S. There are three exceptions to this rule: 1 - You’re in the U.S. when you have a medical emergency and the foreign hospital is closer than the nearest U.S. hospital. 2 - You’re traveling through Canada without unreasonable delay by the most direct route between Alaska and another state when a medical emergency occurs and the Canadian hospital is closer than the nearest U.S. hospital. 3 - You live in the U.S. and the foreign hospital is closer to your home than the nearest U.S. hospital, regardless of whether it’s an emergency or not.
149
Which of the following statements accurately reflect the nature of buy-sell agreements?
A)A stock redemption plan must have a corporation as a party to the contractual arrangement.
B)A stock redemption plan increases the cost basis of surviving shareholders.
C)Under a cross-purchase plan funded with life insurance, premiums paid are tax deductible to the payor.
D)Proceeds of a life insurance policy owned by a surviving shareholder must be included in the gross estate of the decedent.
Rationale
The correct answer is "A." The corporation must be a party to the stock redemption plan.
A stock redemption plan is a stock purchase by a corporation, so the cost basis of the surviving shareholders are not affected, thus they do not receive a step up in basis.
Proceeds of a policy owned by a surviving shareholder are not includible in the decedent's gross estate. Premiums are not tax deductible.
150
Reasons to use life insurance to fund business continuation agreements include which of the following:
I. It provides sufficient assets for the buyer to perform on the contract.
II. Insurance protects the company and its shareholder because the IRS cannot challenge value of stock if provided in a Shareholders Agreement (SHA).
III. The insurance gives the agreement efficacy. No money . . . No deal.
IV. The insurance strengthens the commitment of the buyer when it must follow through on the agreement.
A)I, II and III only.
B)I, III and IV only.
C)II and IV only.
D)IV only.
Rationale
The correct answer is "B." The IRS may challenge the valuation of stock in business continuation agreements, with or without insurance; the IRS is not bound by any contractual agreement between the company and its shareholders.
151
2168Question 7 of 18Insurance Quiz 7
Kathleen recently died. She was currently insured for Social Security. Which of the following persons would be entitled to survivorship benefits based on her work record?
A)Her husband, Robert, who is age 65.
B)Her mother, Joy, age 70, who was a dependent of Kathleen before her death.
C)Her daughter, Nora, age 18 and in high school.
D)None of the above.
Rationale
The correct answer is "C." Since she was only currently insured Robert and Joy are not entitled to survivorship benefits. Her daughter is still eligible for benefits even though she is 18 because she is in high school.
Retirement Survivorship Survivorship Disability
Fully Insured Fully Insured Currently Insured Based on Age
Participant 100% Deceased Deceased 100%
Child Under 18 50% 75% 75% 50%
Spouse w/ Child under 16 50% 75% 75% 50%
Spouse Age 65 50% 100% 0% 50%
Retirement Survivorship Survivorship Disability
Fully Insured Fully Insured Currently Insured Based on Age
Spouse Age 62 40% 0.83 0 40%
Child Under 18 50% 75% 75% 50%
Spouse Age 60 N/A 72% 0% N/A
Dependent Parent (age 62) 0% 75/82.5% 0% 0%
152
SPLIT-DOLLAR LIFE INSURANCE - 1
1. Described
a. Split-dollar life insurance is an arrangement, typically between an employer and an employee, in which the costs and benefits of the life insurance policy are shared
b. The employer corporation may pay the part of the annual premium that equals the current year’s increase in the cash surrender value of the policy
c. If the insured employee dies, the corporation recovers its premium outlay with the balance of the policy proceeds paid to the beneficiary chosen by the employee
d. The objective is to merge the employee’s need for life insurance with the premium-paying ability of the employer
2. Appropriate applications of split dollar
a. When an employer wishes to provide an executive with a life insurance benefit at a low cost and low cash outlay to the executive.
b. When a preretirement death benefit for an employee is a major objective—split dollar can be used as an alternative to an insurance-financed nonqualified deferred compensation plan or in conjunction with a nonqualified, unfunded, deferred compensation plan c. When an employer is seeking a selective executive fringe benefit
153
SPLIT-DOLLAR LIFE INSURANCE - 2
3. Advantages
a. A split-dollar plan allows an executive to receive a benefit of current value using employer funds
b. In most types of split-dollar plans, the employer’s outlay is at all times fully secured. Upon the employee’s death or termination of employment, the employer is reimbursed from policy proceeds for its premium outlays.
4. Disadvantages
a. The employer receives no tax deduction for its share of premium payments under the split-dollar plan
b. The employee must pay income taxes each year on the economic benefit derived from the arrangement
c. The plan must remain in effect for a reasonably long time, 10–20 years, for policy cash values to rise to a level sufficient to maximize plan benefits
d. The Sarbanes-Oxley Act eliminated the ability of employers to use these arrangements to benefit officers or directors
5. Design features a. In a split-dollar arrangement between the employer and employee, at least three aspects of the policy can be subject to different types of split
1. ) The premium cost
2. ) The cash value
3. ) The policy ownership
154
2152Question 8 of 18Insurance Quiz 7
Which of the following statements about split-dollar life insurance and its uses is incorrect?
A)Stock redemption plans can be funded by split-dollar life insurance.
B)All policy values and benefits of a split-dollar life insurance policy are subject to the claims of company general creditors.
C)The insurance premium of a split-dollar life insurance contract is generally divided between the employee and the employer.
D)The insurance death benefit of a split-dollar life insurance policy is generally divided between the employee and the employer.
Rationale
The correct answer is "B." Only the portion of benefit in the policy that is attributable to the actual contributions of the company are subject to the claims of company creditors.
155
Insurance premiums to fund buy-sell agreements in a cross-purchase plan are not tax deductible.
In the case of an entity agreement, where the firm owns the policies, the premium would also NOT be tax deductible.
156
Federal Insurance Contributions Act (FICA)
tax consists of the Social Security tax (OASDI) and the Medicare tax (HI)
157
Kathleen recently died. She was fully insured and left behind her husband Robert (age 60), their two children, Nora (age 18 and in college) and David (age 13), and her dependent single mother Joy (age 70). All of the following are true, except?
A)Robert is entitled to a maximum survivorship benefit of 71.5% of Kathleen’s PIA subject to the family maximum.
B)Joy is entitled to a survivorship benefit of 82.5% of Kathleen’s PIA subject to the family maximum.
C)Nora is not eligible for survivorship benefits.
D)David is entitled to a survivorship benefit of 75% of Kathleen’s PIA subject to the family maximum.
Rationale
The correct answer is "A." Her husband, Robert, who is age 60 is entitled to a survivorship benefit of 71.5% of Kathleen’s PIA based on retirement but he would be entitled to 75% since he is caring for a child under 16 (David). Her mother, Joy, age 70, who was dependent on Kathleen before her death is entitled to a survivorship benefit of 82.5% of Kathleen’s PIA. Her daughter, Nora, age 18 and in college is not eligible for survivorship benefits because she is not less than 18 and being in college is not an exception to the rule. Her son, David, age 13 is entitled to a survivorship benefit of 75% of Kathleen’s PIA.
Retirement Survivorship Survivorship Disability
Fully Insured Fully Insured Currently Insured Based on Age
Participant 100% Deceased Deceased 100%
Child Under 18 50% 75% 75% 50%
Spouse w/ Child under 16 50% 75% 75% 50%
Spouse Age 65 50% 100% 0% 50%
Retirement Survivorship Survivorship Disability
Fully Insured Fully Insured Currently Insured Based on Age
Spouse Age 62 40% 0.83 0 40%
Child Under 18 50% 75% 75% 50%
Spouse Age 60 N/A 71.5% 0% N/A
Dependent Parent (age 62) 0% 75/82.5% 0% 0%
158
Medicare is an 80/20 split without stop-loss limits.
Medicare does not provide custodial care coverage, eye care or dental coverage.
159
Schedule F tax
form 1040
160
2163Question 13 of 18Insurance Quiz 7
Which of the following individuals will be eligible for Medicare coverage A and B?
A)A 63-year old federal government employee hired in 1972.
B)A corporate director, age 55, whose only income is from being a corporate director.
C)A 68-year old proprietor filing Schedule F.
D)A 65-year old business owner who, over his lifetime, has received only dividend income from the S-corp business.
Rationale
The correct answer is "C." Persons "A" and "B" are too young. Person "D" did not receive any income which was ever subject to self-employment or social security taxes, therefore, did not ever become qualified.
161
2154Question 14 of 18Insurance Quiz 7
Which of the following accurately reflects the use of split-dollar life insurance in a business setting?
I. It can be a fringe benefit to an employee.
II. Insurance premiums are usually split between the employer and the employee (insured).
III. It may be used to fund a buy-sell stock redemption agreement.
A)I only.
B)I, and II only.
C)II and III only.
D)I, II and III.
Rationale
The correct answer is "D." All these statements are correct. Split dollar life insurance is an arrangement where an employee and employer generally share the premium cost and cash value for death benefit of a life insurance policy covering the life of the employee.
162
Medicare
It is a government-sponsored health care plan that has two primary components, namely:
It includes Basic hospital insurance and supplementary medical insurance.
Medicare does not include any of the other items such as dental coverage. Nor does it contain any more than basic hospital coverage.
163
2156Question 16 of 18Insurance Quiz 7
Which of the following statement(s) concerning the choice of a stock redemption (entity agreement) versus a cross-purchase corporate buy-sell agreement funded with insurance is FALSE?
A)The use of existing insurance to fund the agreement causes a transfer-for-value problem if an entity agreement is selected, but does NOT cause this problem if a cross-purchase approach is used.
B)A cross-purchase agreement should be selected if the surviving owners expect to sell their interests during their lifetimes.
C)An entity approach may solve the affordability problem if one owner is significantly older than the others.
D)An entity agreement becomes more desirable as the number of owners included in the agreement increases.
Rationale
The correct answer is "A." Transfer-for-value problems can be created if existing policies are transferred between shareholders of a corporation in a cross-purchase agreement. An exception to transfer-for-value exists for transfers from a shareholder or officer to the corporation (to fund an entity purchase agreement), but not for transfers between shareholders.
B is a true statement because when surviving owners expect to sell their business interest during lifetime, they will prefer a cross-purchase agreement to allow them to increase their cost basis in the business upon the death of one of the owners.
C is a true statement because the business will be the owner, premium payer, and beneficiary of the policies in an entity purchase agreement. Since the business will be paying the high premium on the policy covering the older owner, the other owners are relieved of that financial hardship.
D is a true statement because with an entity purchase agreement only one life insurance policy is needed for each owner. With a cross-purchase agreement the number of policies needed = n(n-1).
164
```
What is the total length of time a 35-year old employee must have worked to be considered fully insured in order to qualify for disability insurance under social security?
A)10 quarters.
B)15 quarters.
C)20 quarters.
D)40 quarters.
```
Rationale
The correct answer is "D." The disability recipient must have worked 40 quarters (or periods) in total to be eligible for benefits, and of these, 20 quarters must have occurred in the 40 quarters immediately before becoming disabled.
The Social Security Disability Income Plan uses the "any occupation" definition for disability.
165
转让人
assignor
166
An HO-6 policy does not provide coverage for the building or roof. The building and roof are covered by the condo association policy, which covers all exterior walls and roof. The HO-6 policy covers all interior walls for a condo.
The split definition of disability includes the following:
At first, the insured is considered disabled if he or she cannot perform his or her specific occupation. After a period of time (usually 2 to 3 years), the definition is broadened to include any occupation to which the insured is fit to undertake based education or training.
167
The conversion privilege found in some life insurance policies refers to:
The conversion of term life to permanent life insurance.
Term life can be converted to cash value or permanent life insurance.
Most term life insurance plans are convertible
168
There are indirect federal government involvement.
IRC: Internal Revenue Codes.
SEC: Securities Exchange Commission.
ERISA: Employees Retirement Income Security Act.
FDIC Federal Deposit Insurance Corporation-- is coverage for bank deposits.
169
```
All of the following require a special endorsement rider or a separate policy for coverage to be effective, except:
A)A house involved in flooding.
B)A house involved in an earthquake.
C)A car involved in flooding.
D)A piece of jewelry valued at $10,000.
```
Rationale
The correct answer is "C." Personal auto policies are the only ones that offer coverage for flooding. On a homeowners policy, water damage is covered "from the sky coming down," but not "from the ground coming up."
170
insurer
n. 保险公司；保险人；承保方
171
The use of existing insurance does not cause a transfer-for-value situation in both entity and cross-purchase situations because the entity is presumed the same as the individual in a partnership. (B) is a true statement because when surviving owners expect to sell their business interest during lifetime, they will prefer a cross-purchase agreement to allow them to increase their cost basis in the business upon the death of one of the owners. (C) is correct because the if we have owners significantly older than other owners then the young owners will have to pay a lot more in premiums to insure the older owners' lives in a cross-purchase agreement. (D) is correct because the number of policies needed in a cross purchase is N * (N-1).
Cancelable policies are NOT renewable. These are one-time temporary policies, not seen very often anymore and best avoided.
172
convalescent situation
康复期
173
Which of the following statements accurately reflect the nature of buy-sell agreements?
A)A stock redemption plan must have a corporation as a party to the contractual arrangement.
C)Under a cross-purchase plan funded with life insurance, premiums paid are tax deductible to the payor.
D)Proceeds of a life insurance policy owned by a surviving shareholder must be included in the gross estate of the decedent.
Rationale
The correct answer is "A." The corporation must be a party to the stock redemption plan. A stock redemption plan is a stock purchase by a corporation, so the cost basis of the surviving shareholders are not affected, thus they do not receive a step up in basis. Proceeds of a policy owned by a surviving shareholder are not includible in the decedent's gross estate. Premiums are not tax deductible.
B)A stock redemption plan increases the cost basis of surviving shareholders.
174
Which of the following statements accurately reflect the nature of buy-sell agreements?
A)A stock redemption plan must have a corporation as a party to the contractual arrangement.
B)A stock redemption plan increases the cost basis of surviving shareholders.
C)Under a cross-purchase plan funded with life insurance, premiums paid are tax deductible to the payor.
D)Proceeds of a life insurance policy owned by a surviving shareholder must be included in the gross estate of the decedent.
Rationale
The correct answer is "A." The corporation must be a party to the stock redemption plan. A stock redemption plan is a stock purchase by a corporation, so the cost basis of the surviving shareholders are not affected, thus they do not receive a step up in basis. Proceeds of a policy owned by a surviving shareholder are not includible in the decedent's gross estate. Premiums are not tax deductible.
175
There are physical hazards, moral hazards and morale hazards, all of which increase the likelihood of a loss. Perils are the proximate cause of a loss.
Paid-up additions is a dividend option that represents an inexpensive way to add coverage without concern to health risks or ratings.
176
Having non-forfeiture provisions.:
Extended term option and
Reduced paid-up option.
immediate annuities are not subject to a premature distribution penalty tax. This only applies to deferred annuities.
In a MEC all withdrawals are considered to be above the basis (earnings first). Therefore all distributions are subject to tax until the insured's basis is reached on a LIFO basis, but death benefits are still income tax free.
177
Switching from a permanent to a term product is not a conversion available in any group life insurance.
At conversion, the billing is switched to the insured.
These group plan term-to-permanent conversions will occur without evidence of insurability.
Pure risk: an uncertain possibility of loss and no chance of gain
Speculative risk: n uncertain possibility of loss and a chance of gain
178
Inland marine insurance
内河海上保险
| The hull of the ship is covered under ocean marine insurance.
179
Independent Practice Association (IPA) — a type of health maintenance organization (HMO) in which individual practitioners see patients enrolled in the HMO but also treat their own patients who are not HMO participants.
Reduced paid-up insurance option allows the policy owner to receive a lower amount of fully paid whole life insurance, excluding commissions and expenses. The attained age of the insured will determine the face value of the new policy. As a result, the death benefit is smaller than that of the lapsed policy
180
Continuing Care Retirement communities are structured specifically for Long-Term Care (LTC) coverage, as are the individual policies. Association arrangements are also LTC specific. These three all provide excellent means to obtain LTC coverage. The disability income policy rider takes a coverage that can no longer be carried after age 65 and converts it to useful LTC coverage, another excellent plan.
Life insurance contracts, even a modified endowment contract, acts as a life policy in that there are no income taxes levied on the proceeds to the beneficiary, while the proceeds must be included in the estate value of the decedent for calculation of the gross estate.
181
Guaranteed purchase options cannot be purchased with guaranteed purchase option provisions. It would be like making the third wish for three more wishes.
tort action: n. 侵权行为；民事过失
182
no-fault auto insurance:
Verbal threshold: Law suits may be allowed when there is a fatal injury.
Dollar threshold is damage occurring above a certain amount, not a limit to actionable compensatory amounts.
"Non-cancelable" policies are renewable on a guaranteed basis and the premium cannot be changed.
but the "guaranteed renewable" is the policy where if a rate change is made, it must be for an entire rate class.
183
Waiver of premium
保费豁免
184
Commercial general liability (CGL) is a type of insurance policy that provides coverage to a business for bodily injury, personal injury, and property damage caused by the business’s operations, products, or injuries that occur on the business’s premises.
legislature: 立法机关
185
Contingent business interruption insurance and contingent extra expense coverage is an extension to other insurance that reimburses lost profits and extra expenses resulting from an interruption of business at the premises of a customer or supplier.
Staff model: Is a corporation and medical staff members including doctors, nurses and clerical staff are employees of the HMO.
IPA model: Is a type of HMO organization that is made up of physicians who have their own office locations.
HMO mode: Is an arrangement that is sometimes known as the network model
186
Life insurance is an aleatory contract. This means that:
A)Life insurance is designed to make one whole.
B)Those who need this contract most will try to buy it.
C)Only one party is legally obligated to perform.
D)One party pays more than the other party.
Rationale
The correct answer is "D." Option "A" is indemnity. Option "B" is adverse selection. Option "C" is a unilateral contract.
187
Coinsurance Provision — A property insurance provision that penalizes the insured's loss recovery if the limit of insurance purchased by the insured is not equal to or greater than a specified percentage (commonly 80 percent) of the value of the insured property (replacement cost).
main responsibility of the underwriting department of a life insurance company?
Answer: To guard against adverse selection.
188
Your client's employer has recently adopted a group universal life insurance plan. The advantages of such a plan for your client typically include all of the following EXCEPT that:
A)It allows employees to borrow or withdraw cash.
B)It provides an opportunity to continue coverage after retirement.
C)The entire premium cost is borne by the employer.
D)It provides flexibility in designing coverage to best meet individual needs.
Rationale
The correct action is "C." Plans may vary, but "typically" employees also contribute to group life plans. An employee can choose a multiple of their salary to fit their coverage needs. Most companies limit coverage to 3xs salary with no evidence of insurability, and up to 5xs salary with evidence of insurability.
189
```
The person who commits the tort will not benefit or be relieved of obligation and responsibility just because the victim has insurance. This best describes:
A)Negligence per se.
B)Vicarious liability.
C)Collateral source rule.
D)Absolute liability.
```
Rationale
The correct answer is "C." This is the collateral source rule. The survival of a tort action means that even in the event of death of the victim or the tortfeasor, the tort will remain actionable. Negligence per se regards a violation of a legal standard.
190
adjustor
n. 调整者；调停者；调节器；理赔人
| =adjustor.
191
Unbundled life insurance policies often allow the policyholder to adjust their death benefit and corresponding premium. This allows the policy to be changed with the changing needs of the holder.
Premiums can flexibly decrease or increase with decreases or increases in death benefit coverage.
Universal policies provide for unbundled premiums. Variable allows policy owners to select investments. Variable Universal Life (VUL) allows for both.
192
Conversion privileges are generally part of the term insurance policy that allows them to be changed over to cash value insurance without proof of insurability.
lump-sum death payment：
A surviving spouse or child may receive a special lump-sum death payment of $255 if they meet certain requirements. Generally, the lump-sum is paid to the surviving spouse who was living in the same household as the worker when they died.
193
Life insurance is an aleatory contract: One party pays more than the other party.
When a property claim has been submitted, the ADJUSTOR is called in to do which of the following:
I. Assist the insured in the preparing the proof-of-loss statement.
II. Determine whether there was a loss covered by the policy.
III determine the amount of loss
194
a vested interest in the policy
保单的既得利益
195
Cross-purchase plan:
Insurance premiums to fund buy-sell agreements in a cross-purchase plan are not tax deductible. In the case of an entity agreement, where the firm owns the policies, the premium would also NOT be tax deductible.
Life insurance owned by Denise will not be included in Dennis' probate estate.
Denise would receive an increased cost basis in Dennis' stock equal to the amount paid to redeem the shares from Dennis' estate.
The transaction side-steps the entity and thus avoids constructive dividend concerns.
In most situations, Medicare does not provide health care coverage for services received outside of the U.S. There are three exceptions to this rule: 1 - You’re in the U.S. when you have a medical emergency and the foreign hospital is closer than the nearest U.S. hospital. 2 - You’re traveling through Canada without unreasonable delay by the most direct route between Alaska and another state when a medical emergency occurs and the Canadian hospital is closer than the nearest U.S. hospital. 3 - You live in the U.S. and the foreign hospital is closer to your home than the nearest U.S. hospital, regardless of whether it’s an emergency or not.
