Insurance Flashcards

Question

Participating Policy

Answer 1

Pays annuall dividend Charges larger premiums (will overcharge) If extra premium is not used, it is returned to the polocyholders as a policy dividend (usually tax free) Dividends are based on higher-than-expected investment return and/or lower-than-expected mortaility and expenses

Answer 2

Company retains the profits for its shareholders

Answer 3

A.M. Best. A++ to F (Provides detailed, historical data on insurance carriers) Standard and Poors AAA to CCC (Provide Ratings)

Answer 4

Offer and acceptance / legal object / legal form Consideration Something of value is exchanged (usually money) Competent parties Principal must have legal capacity to execute contracts 1. Incompetent or intoxicated adults have limited or no capacity to execute contracts 2.Minors have capacity to contract for necessities (ex. Food, clothing, shelter) only.

Answer 5

Written, explicit direction from principal (the insurance company) to the agent. The agency agreement (contract)

Answer 6

Is that which the public believes the agent holds and includes the signage, rate books, etc. Implied authority enables the agent has to carry out the principal’s busienss

Answer 7

A rise out of negligence of the principal in allowing the agent to appear to have the authority because of certain actions of the agent in the past. This typically aggects terminated agents

Answer 8

Coverage A - Adobe - covers dwelling and attached structures plus construction materials Coverage B - Buildings - covers structures separated from the dwelling by a clear space (garage) Coverage C - Contents - covers contracts and personal property owned or used by any insured while anywhere in the world. Boats and trailers are limited to $1,000 Coverage D - ‘dditional demnity - covers loss of use coverage, provides indemnity for the necessary increase in living expenses incurred by the insured to continue the insured’s normal standard of living Coverage E - Enemies - Comprehensive liability insurance Coverage F - First Aid - medical payments to others, not the insured’s family members

Answer 9

1. Animals, birds, or fish 2. Motorized land vehicles (not riding lawn mower) and aircraft 3. Property of roomers, boarders, and other tenants (needs HO-3 renter’s policy) 4. Property contained in an apartment regularly rented or held for rental to others by the insured (unless specifically endorsed)

Answer 10

WHARVES/FLT Windstorm, Hail, Aircraft, Riot, Vandalism, Vehicles, Explosion, Smoke, Fire, Lightning, Theft

Answer 11

WHARVES/FLT/RAF Rupture of a system, Artificially generated electricity, Falling objects, Freezing of plumbing

Answer 12

Ordinance or law, earth movement (earthquake), water damage (flood), power failure, neglect, war, nuclear hazard, intentional loss. Sinkhole is a covered peril for the exam

Answer 13

Replacement cost applies only to buildings Personal property is covered for its actual cash value ACV (only used when depriciation is given AND amount of dwellling is 80% or under. If it is use higher of ACV or replacement cost formula) Replacement cost x depriciation less deductible Replacement cost formula : (always use when dwelling insurnace is 80% or over) Coverage/replacement cost = required insurance Replacement cost x coinsurance = insurance required Insurance carried/insurance required x loss - deductible

Answer 14

Used for jewlery, cameras, coin collections Property coverage is on a valued basis Ex. A diamond ring is appraised and insured for $10,000 (valued)

Answer 15

Be owned by an individual or by spouses living in the same household Be a private passenger automobile Not be used as a public or livery conveyance (a vehicle hired out to carry persons or property) not be rented to others

Answer 16

Liability Coverage (BI/PD)(Bodily Injury/Property Damage) Vehicles in business not covered (would need commercial policy) Important for wealthy client

Answer 17

Medical Payments (med-pay) coverage Important for unemployed Will pay reasonable expenses incurred by necessary medical/funeral services Will pay only those expenses incurred within 3 years of the date of the accident

Answer 18

UM (Uninsured Motorist Coverage) Important for wealthy clients The agreement promises to pay the amount an injured insured could have collected from the uninsured driver if they carrier auto liability insurance Important* this is liability insurance, not medical

Answer 19

Physical Damage Insurancing Agreement of the Personal Auto Policy Collision: the upset of your covered auto or its impact with another vehicle or object Other than Collision (comprehensive/comp protection) : Think of this as an open perils type of policy .. applies to all losses except those specifically excluded (breakage of glass, loss caused by missiles, falling objects, fire, theft, larceny, explosion, earthquake,windstorm,hail,waer,flood,malicious mischief or vandalism, riot, or civil commotion, and contact with birds of animals)

Answer 20

Generally appropriate where the professional’s substandard conduct may result in bodily injury, physicians or dentists

Answer 21

Appropriate where professionals substandard conduct may result in property damage. Such situations include damage to intangible property, such as loss of money. Lawyers, insurance agents, stockbrokers, and financial planners should carry

Answer 22

Benefits are received income tax free No limit on time or money. This included occupational disease benefits. Not subject to deductibles or coinsurance Disability income with very short waiting period (days). Benefits are limited Death benefits are paybale to family members Rehabilitation benefits include medical rehab as well as vocational rehab

Answer 23

65+ and are entitled to monthly SS or railroad retirement program cash benefits All disabled benes receiving SS disability beneifts for at least 2 years 1. Hospital care 2. Care in nursing home or extended care facility 3. Home health services 4. Care in hospice Patient must pay cost for first 3 units of blood in calendar year or have blood donated by the patient or someone else

Answer 24

Voluntary program 1. Physicians services 2. Home health services 3. Diagnostic test 4. All outpatient services of a participating hosptial Patient pays the deductible, no stop loss

Answer 25

Drugs Must have A and/or B coverage plsy pay a premium to obtain this coverage. Can buy later at increased premiums EXCLUSIONS Foot Care, eye care, glasses, hearing aids, dental work Emergency care outside the US

Answer 26

Pays all of the first 20 days of skilled care and everything over a specificed amount per day (185.50) for the next 80 days of skilled care (maximum of 100 days). After the 100th day, patient will pay the full cost. This limited benefit is subject to substantial restrictions. Pays for skilled care only/Admission to a nursing home must follow within approximately 30 days of a hospital stay of three days or more. Condition must be expected to improve (this, not Alzheimer’s)

Answer 27

Basic benefits typically include Reimbursement for the insured’s share of hospital expenses (Medicare Part A) Reimbursement for the insured’s 20% share of expenses (Medicare Part B)

Answer 28

Small companies (fewer then 20 employees for at least half the year of the prior year) are exempt from federal legislation. 19 full time and 4 half time, 15 covered under the companies health plan.. 15 that are covered will be covered by COBRA **part timers are different from half time** be careful COBRA is based on the # of employees, not covered employees under the plan COBRA covers dental and vision Disability coverage NOT covered

Answer 29

Mere eligiblity for Medicare doesn’t preclude HSA contributions. However, an individual, once enrolled in Medicare Part A and B may not contribute to an HSA Only certain insurance premiums such as COBRA and qualified long-term care insurance are qualified medical expenses

Answer 30

Soley employer-funded Reimbursements for substantiated medical expenses up to a maxmium amount per coverage period. Ex. It can reimburse for out of pocket costs of an HDHP

Answer 31

The inability of the insured to engage in his or her own occupation

Answer 32

Harder to claim benefits Unable to engage in any occupation for which he/she is qualified through training, education, experience Certian poliicies use the 1st definition for some years, and then second definition after. This is known as split definition

Answer 33

Pays benefits based on economic loss following a physical disability. Partial disability is covered

Answer 34

Disability policies generally provide that full benefits will be paid if the insured loses his or her sight, speech, both hands, both feet, or one hand and one foot. SOME POLICIES DO NOT COVER ALL OF THE LOSSES LISTED. SOME REQUIRE THE LOSS TO BE TOTAL AND PERMANENT WHILE OTHERS MAY COVER EVEN A TEMPORARY LOSS

Answer 35

Continuous term policy guaranteeing the insured’s right to maintain the polocy AT THE STATED PREMIUM

Answer 36

Continous right to maintain the policy, but the insurer may increase the premium by class of insureds. Guaranteed renewable policy is LESS EXPENSIVE than a noncan polocy because the insuere may increase the premium for the guaranteed renewable policy later

Answer 37

Benefits are proportional to the amount of income lost and payable for the same duration as the policy’s maximum benefit period

Answer 38

Benefit usually is 50% of the total disability benefit; the maximu payment period is limited (3-6 months) while the insured recuperates

Answer 39

This provision may waive premiums if the insured policyholder becomes totally disabiled and the disability lasts for some specified minimum period (90 days or longer). NOTE: Most individual disabilty policies include waiver of premium, but NOT ALL. EX. Group disability policies do not have waiver

Answer 40

Fot total disability, the monthly benefit will be equal to the social insurance subsitute (SIS) benefit shown on the policy schedule page less any Social Insurance benefit received in that month

Answer 41

Premiums are deductible by the employer as a bonus. Employee recognizes premiums in income Benefits are tax free to the employee

Answer 42

Premiums are deductible by the employer. Paid with pre tax dollars Benefits are entirely taxable to the employee

Answer 43

A partnership or S CORPORATION CAN deduct the premium paid for coverage for a partner or a great-than-2% shareholder of an S Corporation. The deduction is based on the premium cost being included in the taxable income of the partner or shareholder (conduit income). DIsability insurance benefits are then EXCLUDABLE from taxable income (employee pays the premium)

Answer 44

``` For taxable years after 1996, premiums paid and unreimbursed expenses for qualified long term care services are DEDUCTIBLE as itemized medical expenses. In addition, the deductions are subjeect to the 7 1/2 of AGI floor. Benefits received are generally not taxable subject to the dollar caps. The deduction (2021) is subject to dollar amount limitations based on age Self employed health insurance deduction - for a long term care policy, part of the premium is deductible (depending on age from above) on the 1040 ``` ** important to know that the potential deductible dollar amount is limited by age***

Answer 45

Often includes a “trigger” called a “medical necessity” trigger. A doctor must certify that the patient needs care and the policy will pay. THE PREMIUMS ARE NOT DEDUCTIBLE

Answer 46

This program is a partnership between a state, insurance company and state residents who buy policies. With a PQ, and individual can apply for Medicaid with “asset disregard” (also called dollar for dollar). This allows the applicant to keep assets that would otherwise be disallowed under Medicaid rules

Answer 47

Life to Life Life to Annuity Annuity to Annuity Life insurance and annuities may now be exchanged tax-free for a qualified long-term care policy or for a life insurance policy with a long term care benefit 1035 CANNOT BE DONE IF THE INSURED CHANGES. BE CAREFUL ON THE EXAM

Answer 48

CV and death benefit is included in his estate

Answer 49

After 2 years, the validity of a contract cannot be questions (excpetion: fraud)

Answer 50

If within 2 years the insured dies by suicide, the amount payable by the company shall be the premium paid

Answer 51

Number of days allowed for premium in default | Designed to keep policy in force

Answer 52

(Automatic premium loan - applies to whole life only) If the insured does not pay the premium by the due date, the company automatically will pay the premium and charge it against the cash value of the policy Designed to keep the policy in force

Answer 53

provides for a policy to be reinstated within a specified time period after the date of premium default (WITH PROOF OF INSURABILITY)

Answer 54

Exchange term for a premanent-type plan without having to prove evidence of insurability

Answer 55

Whole Life Policy Company agrees to waive all premiums due after the policy owner has become totally and permanently disabled

Answer 56

With Universal and Variable Universal Life Policies, 2 choices 1. The company just waives the charges for mortality and administration expenses but does not include an increment to the policy’s cash value 2. The company waives the full premium that the client would normally pay

Answer 57

``` Cash Reduced Premium Acumulated with interest Paid-up additions One-year term (5th dividend) ```

Answer 58

``` Cash Pure life Refund Period certain and life Specific period Specified income ``` Some who needs CPR, Probaby Safe Sucker

Answer 59

Cash Extended term/Paid up term Paid-up reduced amount CEP (accountant j murph, he aint payin)

Answer 60

applies only to non-variable life insurance policies Model regulation Copies of illustration must be sent to the insurer along with the policy Copies of the illustrations must be signed by the applicant and by the agent Polocy cannot be represented as anything other than a life insurance policy Model prohibits the user of the term “vanish” or “vanishing premium” Illustration Must Include (must be labeled “life insurance illustration”) Name of insurer Name and address of producer Name, age, sex of the proposed insured Initial death benefit, underwriting and rating classification

Answer 61

Causes a transfer for value Benefits in excess of basis (plus premiums paid) is subject to ordinary income tax to viatical company upon participants death

Answer 62

Describes a transaction involving an insured who is not terminally or chronically ill and is generally over 65. Since the settlement is not made to a terminally ill person, the particpants in a life settlement transaction are taxed as part of the settlement will be treated as a LONG TERM GAIN. LOOK FOR THE LTCG ANSWER

Answer 63

Generally tax free to the beneficiary except for the transfer for value rule Policy transfers that ARE NOT jeopardized by the transfer for value rule are as follows: Transfer to the insured Transfer to a partner of the insured (partnerships) Transfer to a corporation in which the insured is a shareholder or an officer Transfer pursuant to a divorce agreement

Answer 64

Contract that was entered into after 1988. Taxed like an annuity Grandfathered non-MECs can be change grandfather rules if death benefit increases by MORE than 150k Also if death benefit increases by any dollar amount, or an additional qualified benefit is purchased and the contract owner did NOT have the right (has to show proof of insurability)to obtain such an increase or addition without providing additional evidence of insurability, it may lose its grandfathered status If client did not have to show proof of insurability, can’t becom a MEC The main difference between MEC and non MEC contracts is that loans and withdrawals have no tax effect on the non MEC contracts

Answer 65

Mostly the same as life buy sell, however in life buy sell, his family will get 500k income tax free buy the 500k will be included in his gross estate. In Disability buy sell, deceased family gets 500k. He will pay 499k in cap gains (basis 1k). General rule, pays by corporation will be treated as dividend. However important excpetion to dividen treatment is a compelte redemption

Answer 66

Basis/yearly payout x life expectancy to get tax free return If an annuity is owned by trust or corporation, the accrued gain for the year is taxed as income in that year. Basis increases that year If the contract decreases in value that year, the basis of the contract is now adjusted downward. These situations would only occur when the annuity is owned by a corporation, not an individual

Answer 67

For discriminatory plans, calculation to determine individual must report for the group life insurance for full year of coverage Need to mutiply cents per 1000 by 12

Answer 68

Benefits 1st 20 days covered by medicare 21-100 day a co-payment is required of the patient by medicare (Insured (patient)pays 185.5/day and medicare will pay excess) After day 100, patient pays in full

Insurance Flashcards

(92 cards)