Insurance

Question 1

unilateral

Answer 1

Only one of the parties to an insurance contract (insurer) makes a binding promise
Life insurance is unilateral

Question 2

Adhesion

Answer 2

Accepting contact as is

Question 3

Aleatory

Answer 3

Amount of dollars of parties is unequal

Term insurance is aleatory

Question 4

High severity low probability

Answer 4

Use insurance

Question 5

High severity high probability

Answer 5

Avoidance

Question 6

Low severity high probability

Answer 6

Use retention or reduction

Question 7

Low severity low probability

Answer 7

Use retention

Question 8

Parts of insurance contract

Answer 8

DICE
Declarations, Definitions
Insuring agreements
Conditions
Exculsions

Question 9

Policy ownership

Answer 9

Ok with insurance interest

Question 10

T or F: change in ownership automatically changes beneficiary

Answer 10

NO

Question 11

Prop and casualty insurance interest rules

Answer 11

Pays out at time of issuance and time of loss

Question 12

Life insurance insurable interest rules

Answer 12

Time of issuance only

Question 13

When is the only time the death benefit is included in probate

Answer 13

When the estate is the beneficiary

Question 14

Attractive Nuisance

Answer 14

Situation where a high degree of care is imposed on the land occupier for certain conditions of the land
Ex/ pool that isn’t screened
Vacant lot- someone breaks in to your lot and you are liable

Question 15

Absolute liability

Answer 15

Extra hazardous condition which results in losses to others.

Workers compensation falls under absolute liability

Question 16

Assumption of risk

Answer 16

Think of waiver you sign before you ski

Question 17

Contributory negligence

Answer 17

Any negligence on the part of the injured party, although slight, defeats the claim (drunk driver)

Question 18

Disability insurance- what is used first

Answer 18

Individual policy used first before other policies

Question 19

Pros of Hybrid policy

Answer 19

Provides LTC but premiums can’t go up. Get a guaranteed death benefit or some other cash value

Question 20

Part A:
Part B:
Part C:
Part D:
Part E:
Part F:

Answer 20

Part A: Dwelling (Abode)
Part B: detachments (Backyard)
Part C: personal Property (contents)
Part D: loss of use (days in hotel)
Part E: liability (everyone wants to sue)
Part F: medical (first aid)

Question 21

Basic form:

Answer 21

WHARVES/FLT

Windstorm, hail, aircraft, riot, vandalism, explosion, smoke, fire lightning and theft

Question 22

Exclusions

Answer 22

OPEN/WIF
ordinance of laws
Power of failure
Earthquake
Neglect/nuclear
War
Intentional loss
Flood

Question 23

Property loss calculation

Answer 23

Insurance carried/insurance required X loss - deductible

Insurance required is the replacement cost X 80%

Question 24

Personal auto policy
Part a
Part b
Part c
Part d

Answer 24

Part A: BI/PD (100/300/100 means per person/ per occurrence/ property damage)

Part B: medical payments
Part C: uninsured Motorist
Part D: damage to your auto

Question 25

COBRA months

Answer 25

Cobra Job related: 18 months
Cobra non job related: 36 months

Question 26

Dividend options

Answer 26

Use for when the policy is in force
Whole life only

CRAPO
Cash (non taxable)
Reduced premiums due
Accumulate with interest (interest taxable)
Paid up additions (creates mini policies that last forever)
One year term

Question 27

Non forfeiture options

Answer 27

Use when wanting to get rid of the policy

Cash- get cash value
Reduced Paid up insurance (smaller insurance policy where the premiums are paid)
Extended term- keep Db the same but instead of forever it now has a term

Question 28

Settlement Options

Answer 28

Use when dead
Cash
Interest only
Fixed period
Fixed installment
For life income options

Question 29

Transfer for value exceptions

Answer 29

I SEE DEAD PEOPLE
Sell to insured
Transfer to a corp in which insured is a shareholder/officer
Divorce
Transfer to partner of insured

Question 30

Voluntary employee’s beneficiary association (VEBA)

Answer 30

No deferred comp in a VEBA

Question 31

Health FSA

Answer 31

3050 deferral limit
No fica futa nor income tax
Use it or lose it but grace period of 2 1/2 months OR $610

Question 32

Dependent care FSA

Answer 32

5k max deferral
No FICA Futa nor income tax
No grace period
Exceptions

Question 33

Dependent care FSA exceptions

Answer 33

Tuition and fees
Expenses for children over 13
Late payment fees
Overnight camps
Payments for services not yet provided
Field trips clothing and food
Transportation to and from the dependent care provider

Question 34

Calculating tax on group term Life insurance

Answer 34

Take DB and subtract 50k. Divide that number by second part of table 1 info

Take above information and multiply it by first part of table 1 number and then multiply that by 12

Ex// 120k DB. Table 1= 0.14/$1000

120k-50k= 70k
70K/1000= 70
70 X 0.14 X 12= 117.6 added to W-2

Question 35

How to calculate capital needs approach for insurance

Answer 35

Take income, divide by after tax return minus inflation. Then add 1 year of income

Ex// 36k a year, 4% inflation, 7% after tax return, how much insurance should he buy?

36,000/0.03= 1,200,000
1,200,000+ 36,000= 1,236,000

Question 36

Can you contribute to a HSA once enrolled in Medicare part A and B

Answer 36

NO

Question 37

Health reimbursement arrangement

Answer 37

Only C Corps can use
Solely employer funded
Reimburse employees for substantiated medical expenses up to a max amount per coverage period

Question 38

2 most important parts of a disability contract

Answer 38

1. Own Occ
2. COLA

Question 39

How are long term care potential deductible dollar amounts limited?

Answer 39

Limited by age

Question 40

Vatical company tax liability

Answer 40

Benefits one excess of basis (what the Viatical company paid for + <cash> ) are subject to ordinary income</cash>

Question 41

Other then collision Insurance

Answer 41

Falling objects, fire, theft, larceny, explosion, earthquake, windstorm, hail, water, flood, malicious mischief or vandalism, riot and contact with bird/animals

Question 42

Workers comp

Answer 42

Benefits income tax free
Medical expenses without limit on time or money

Question 43

Expenses the Medicare doesn’t cover

Answer 43

Foot care, eye care, glasses, hearing aids, dental work, units of blood, emergency care outside US