Insurance

Question 1

What company might use stop-loss coverage to partially self-insure employee medical insurance program?

Answer 1

Company with less than 100 employees

Question 2

Vicarious Liability

Answer 2

Respondeat Superior

Question 3

What is not covered in a homeowner’s policy?

Answer 3

Earthquake
Flood
Intentional Loss

Question 4

Umbrella Liability Insurance

Answer 4

Provides Excess Coverage for underlying insurance policy
Almost always a recommendation on the test

Question 5

True Statements of Medicare Part B

Answer 5

Benefits are subject to calendar-year deductible. Only 80% of Medicare approved charges are paid.

Cost of Dr. Visits are covered in and out of the hospital

Part B is voluntary

Outpatient Services are covered

Question 6

COBRA Qualifying Events
Must be company with 20 employees

Answer 6

• Voluntary or involuntary termination (18 mos.)
• Employee’s death, divorce, legal separation, or eligibility for Medicare (36 mos.)
• Loss of dependent status (36 mos.)

Question 7

Do HSA distributions count toward gross income?

Answer 7

Not for qualifying medical distributions

Question 8

Nonforfeiture Options

Answer 8

If someone decides to discontinue premiums
- Cash Option
- Reduced Paid Up
- Extended Term

Question 9

Cash Option NF

Answer 9

Policy surrendered for cash value less any indebtedness. 6mo delay.

Question 10

Reduced Paid-Up

Answer 10

Face amount reduced. Paid up insurance will be amount cash value would purchase.

Question 11

Paid Up Term

Answer 11

Cash value pays premiums until the cash value is zero.

Question 12

Dividend Options (CRAPO)

Answer 12

Cash
Reduced Premium
Accumulate with Interest
Paid-Up Options
One Year Term

Question 13

Settlement Options (CIFF4)

Answer 13

Cash
Interest Only
Fixed Period
Fixed Amount
4 Life Income

Question 14

Term Insurance

Answer 14

• Short Term Need
• Low Cost
• No Cash Value

Question 15

Annual Renewable Term

Answer 15

• Premiums increase annually
• Benefit remains level

Question 16

Level Term

Answer 16

• Premiums are level for a specified term
• What I have

Question 17

Decreasing Term

Answer 17

• Decreased death benefit with level premium
• MORTGAGE PROTECTION

Question 18

What are first to die / JT Life policies used for?

Answer 18

• Buy-Sell Agreements
• Mortgage Protection
• Debt Protection

Question 19

What policies aid in mortgage protection?

Answer 19

• Decreasing Term
• First to die / JT Life

Question 20

Term Insurance Provisions

Answer 20

Renew
Convert to permanent

Question 21

In what scenario does limited pay whole life insurance make sense?

Answer 21

Insured with LONG LIFE EXPECTANCY
“Limited Pay; Long Life”

Question 22

Advantages and Disadvantages of Whole Life Insurance

Answer 22

Advantages
- Provides Permanent Protection
- Level Premium
- Cash Value (savings)

Disadvantages
- Premiums are paid for your lifetime
- Premiums are higher than term
- NOT FLEXIBLE

Question 23

Main use of second to die / survivorship life

Answer 23

Provide liquidity to pay federal estate taxes at the death of the second spouse.

Question 24

Characteristics of an ENTITY buy sell agreement

Answer 24

• Premiums are NOT DEDUCTIBLE
• Death benefits are income tax free
• Deceased’s stock will get a step-up in basis

Question 25

Taxable Income for Disability and life proceeds

Answer 25

Disability = Taxable Net the Basis Life = Tax Free Income

Question 26

Characteristics of Life and Disability Buy-Sell Agreements

Answer 26

- Neither Life nor death premiums are deductible - Disability Payments / benefits are income tax free - Disability benefit will be subject to gain tax if business interest is sold

Question 27

Gains tax for annuities owned by a corp on behalf of another

Answer 27

- Taxable as ordinary income to the corporation - income to the corp net gains tax - annuities do not declare gains

Question 28

Are annuity contract premiums deductible

Answer 28

Yes when the annuity premiums are paid as a bonus to the employee.

Question 29

Tax nature of contributory plan where employer pays 50% of the premiums

Answer 29

- Half of benefit would be taxable - Other half is tax free

Question 30

Waiting PD for social security disability benefit

Answer 30

5 Month Waiting Benefits payable at the beginning of the sixth month

Question 31

Which group insurance coverages provide a conversion feature

Answer 31

Life & Health Insurance NOT DISABILITY

Question 32

Advantages of Group Disability Insurance Program

Answer 32

- More liberal waiting periods - Premiums per insured are lower - underwriting is more liberal

Question 33

Are premiums for a group life insurance deductible as a business expense?

Answer 33

Yes

Question 34

Can Key Employees in a discriminatory group life insurance plan exclude the taxable cost?

Answer 34

No, it is taxable to key employees.

Question 35

Can non-key employees in a discriminatory group life insurance exclude the taxable cost?

Answer 35

YES UP TO 50k

Question 36

IF ALL EMPLOYEES receive 100k of group term coverage, what part is tax free?

Answer 36

- 50k is tax free. Because EVERYONE receives the plan it is non discriminatory. That means that everyone receives the taxation benefit.

Question 37

Is money deducted from an employee’s pay into a FSA subject to withholding or FICA tax?

Answer 37

- No withholding - No FICA

Question 38

Can a health FSA pay for health insurance premiums?

Answer 38

No, it cannot pay for health premiums.