Insurance

Question 1

What are the 4 main business insurance policies that are tax deductible by the business?

Answer 1

Workers’ Compensation insurance
Unemployment insurance
Commercial umbrella insurance
A BOP policy

Question 2

How do you calculate the life insurance amount to purchase given (using capital retention calculation) given yearly income needs and inflation?

Answer 2

annual need ($50,000) / inflation

Question 3

What is in Section II of a homeowners policy?

Answer 3

Liability and medical payments

Question 4

What are the two main ways dividends on an MEC are NOT taxable?

Answer 4

When they are used to purchase paid up additions

When they are kept with the company and accumulate with interest (the interest is taxable)

Question 5

At policy surrender, how do you calculate how much of the distribution will be taxable?

Answer 5

guaranteed cash value - (net premiums paid)

the net premiums paid is the premiums billed less the dividends used to reduce the premium

Question 6

What is the main company that checks the BACKGROUND (not just ratings) of an insurance company?

Answer 6

AM Best

Question 7

What is the highest rating for AM best?

Answer 7

A++

Question 8

Is vacant land (endorsed) covered by coverage E?

Answer 8

Yes it can be

Question 9

Level amount of life insurance for a fixed period of time is ___.

Answer 9

extended term, by definition.

Question 10

Does HO3 provide broad or basic coverage?

Answer 10

Broad

Question 11

What is one of the methods to enforce the principles of indemnity?

Answer 11

Subrogation

Question 12

True/False
Form HO-2 differs from HO-3 in that the HO-2 policy provides broad form coverage on the dwelling, other structures, and loss of use.

Answer 12

True

Question 13

T/F

Form HO-4 is a renter’s policy.

Answer 13

True

Question 14

Form HO-6 loss of use limit is ____% of the policy limit on personal property.

Answer 14

50%

Question 15

T/F

Form HO-5 provides open perils coverage for personal property.

Answer 15

True

Question 16

With a term insurance policy what affect does the annual renewable term feature have on the premiums?

Answer 16

Premiums increase annually

Question 17

What does re-entry on a term policy mean?

Answer 17

You could requalify for low cost premiums through abbreviated underwriting

Question 18

What does decreasing term mean?

Answer 18

Decreasing death benefit, level premium. Good for mortgages

Question 19

What are first to die/joint life policies good for?

Answer 19

good for buy sells or mortgage protections

Question 20

What is the premium like on a variable life policy?

Answer 20

Fixed

Question 21

What does adhesion mean regarding a contract?

Answer 21

Accepted as is

Question 22

What is special about the capital utilization approach to life insurance needs analysis?

Answer 22

Annuitization to provide income but leaves no money at the end

Question 23

When is a life insurance policy in force?

Answer 23

when the policy is delivered, and the premium is collected

Question 24

What are the 4 main properties excluded under coverage C (personal property coverage)?

Answer 24

1. animals, birds, fish
2. motorized land vehicles and aircraft
3. renters’ property
4. property in a place specifically designated for renters

Question 25

Is sinkhole a covered peril for the exam?

Answer 25

yes

Question 26

What should someone with an HO2 policy usually do?

Answer 26

change it to an open perils type policy because H02 only have broad form coverage

Question 27

What is the main thing that is specifically excluded under a personal umbrella policy

Answer 27

professional acts

Question 28

What is the main thing that is specifically excluded under a commercial property insurance policy

Answer 28

professional acts

Question 29

What are the four main categories of Medicare part A

Answer 29

hospital care care in a nursing home or facility home health care care in a hospice

Question 30

What are the four main categories of Medicare part B

Answer 30

physicians services home health care diagnostic tests all outpatient services of a participating hospital

Question 31

What does noncancellable mean on a disability insurance policy?

Answer 31

guarantees the insured's right to maintain the policy at the stated premium (less expensive than guaranteed renewable because with that the premiums can increase)

Question 32

Which is worse- own or any occupation?

Answer 32

any

Question 33

Can a 1035 be done if the insured changes?

Answer 33

No

Question 34

In a conversion provision of a life insurance policy, do they have to prove insurability?

Answer 34

NO

Question 35

What is the main thing NAIC does NOT do?

Answer 35

enacts legislation

Question 36

In a life settlement question which describes a transaction involving an insured who is not terminally ill and is over 65, look for what type of answer? (regarding the taxation of settlement)

Answer 36

Look for the one with the LTGCG answer

Question 37

What dollar amount may trigger MEC rules if the person also needs to show proof of insurability?

Answer 37

ANY (even $50,000) may trigger a policy to become an MEC What if they didn't have to show proof of insurability? Is there a risk of it becoming an MEC by increasing 50k? NO.

Question 38

Does a key employee on a key employee life policy have incident of ownership?

Answer 38

No

Question 39

Is there a grace period for the dependent care (max 5k) part of a FSA?

Answer 39

no

Question 40

What is special (but not good) about the dependent care FSA?

Answer 40

if married, both spouse must earn income in order for the dependent care FSA to work. (exception if disabled or dstudent) if one spouse earns less than $5K, benefit is limited to whatever the spouse earned

Question 41

Main characteristics of an HRA?

Answer 41

solely employer funded reimburses employees for substantiated medical expenses up to a maximum dollar amount per coverage period

Question 42

Other than LTC insurance, what other means provides nursing care home coverage for longer than 100 days?

Answer 42

medicaid medicare supplements and medigaps may provide for a rehabilitation stay, but not extended nursing home coverage

Question 43

If a company owns key life policies on employees and wants to borrow against the cash value, is the interest accrued tax deductible?

Answer 43

Yes, up to $50,000

Question 44

Are "damages- personal injuries (punitive)" taxable?

Answer 44

Yes - generally

Question 45

Are self funded plans subject to COBRA?

Answer 45

Yes

Question 46

Do group life policies have more or less "liberal" underwriting?

Answer 46

more liberal