Insurance Flashcards
(53 cards)
What is the elimination period for SS disability?
5 months
If the employer pays for disability insurance for the employee, are the benefits taxable?
Yes
If the employee pays for disability insurance via payroll deduction, are the benefits taxable?
No
If disability insurance premiums are paid with pre-tax dollars, are the benefits taxable?
Yes
What should be covered by disability insurance?
Sickness and Accidents (Illness and Injury)
Disability benefit should be in what range?
60-70% of gross income
Best way to determine how long you want the elimination period of a disability policy to be?
determined by the amount of time that can be covered by the emergency fund
What are the four common methods of paying for LTC services?
Medicare, Medicaid, Personal assets & savings, LTC insurance
What are ADLs?
Activities of Daily Living (Eating, Bathing, Dressing, Transferring, Toileting, Continence)
What are the four categories of risk?
- Pure & Speculative, 2. Subjective & Objective, 3. Fundamental & Particular, 4. Non-financial & Financial
Pure Risk
Either loss or no loss, no chance of gain (insurable, ex premature death, illness or injury, disability, damage to property by natural forces like wind)
Speculative Risk
Profit, loss, or no loss (not insurable. ex investments or starting a business)
Subjective Risk
Risk that an individual perceives based on prior experience. Differs based on individual perception. Not measurable and not insurable.
Objective Risk
Does not depend on an individual’s perception, the difference between the expected and actual losses. Varies indirectly with the number of loss exposures in an insured pool. As the pool of insureds increased, objective risk is reduced because actual results will more likely approximate expected claims. Measurable and insurable.
Fundamental Risk
A risk that can impact a lot of people at once like a war or earthquake. These are difficult to insure by the insurer and can sometime be covered by a separate policy. Some are uninsurable. (flood damage, flood insurance is backed by the government)
Particular Risk
A risk that has the likelihood of only affecting a small number of people or a particular individual like death or disability. This is an insurable risk.
Nonfinancial Risk
Results in a loss that is not a financial loss. Ex. emotional distress
Financial Risk
Loss of financial value.
3 Categories of Insurance Products
Personal, Property, Liability
Most Important types of risk coverage for individuals
Life, Health, Disability, Property, LTC, Personal Liability
Law of Large Numbers
“Pooling Effect”, the more exposures, the more likely the probable results will equal actual results, helps reduce objective risk.
Risk Management Process
- Determine Objectives; (protect assets, protect earing capacity, human life value, health, peace of mind, family relationships)
- Identify Pure Risks or exposures; (3 categories: loss of income, loss of property, liability causing financial loss) lifecycle position plays a role in what is needed. (review income statement, and statement of financial position to help identify potential exposures)
- Evaluate the identified risks for probability and severity; (determine how often the event is likely to occur and how much it would cost)
- Determine alternatives for managing risks; (reduction, transfer (high severity, low frequency), avoidance (high severity, high frequency), retention)
- Select most appropriate alternative for each exposure;
- Implement plan;
- Periodically Evaluate.
How much cash in the home will typical HO policy cover? Limits on other valuables?
$200 cash
$1500 Jewelry, Furs, Watches
$2500 Firearms
Silverware/Goldware $2500
What is a peril?
immediate cause and reason for a loss occurring (accidental death, disability, property loss caused by fire, storm, burglary, etc
