Insurance Flashcards

Question

What are the Two Types of Professional Liability Insurance and who/what does it cover?

Answer 1

**Malpractice:** Bodily injury *(Doctors & Dentists)* **Errors and Omissions (E&O):** Monetary damages *(Financial advisors, lawyers, accountants, insurance agents)*

Answer 2

**THINK – URADD** * Unlimited Medical Expenses * Rehabilitation (Medical & Vocational) * Absolute Liability * Disability Insurance (TAX FREE) * Death Benefits

Answer 3

Eligible for Medicare at 65 with no income limits (GET secondary coverage to employer with 20+ EE) **Special Enrollment Period:** 8 month period following the last month of group health coverage ends or following the month employment ends whichever comes first to avoid 10% premium increase **DOES NOT COVER:** * Routine foot care, glasses, hearing aids, and dental * Emergency care outside the US (some exceptions for Canada, Mexico, and Caribbean)

Answer 4

**Benefits are Limited:** Pays all the first 20 days of SKILLED nursing and everything over specific amount (194.50) per day for next 80 days SKILLED care **Limited Benefit Restrictions:** Pays for SKILLED nursing: * Admission to nursing home must be within 20 days of hospital stay of 3 days or more * Patients condition must be expected to improve

Answer 5

**HMO: Health Maintenance Organzation** * Provider paid monthly fee regardless of services rendered (Capitation) * Out of Network care NOT covered **PPO: Preferred Provider Organzation** * Provider paid for actual services rendered * Out of network partially covered, usually 70%

Answer 6

* Must have 20 Full/Part-Time Employees * The Option to Buy Continuation * Coverage ends if employee doesn’t pay premiums and cost can be up to 102% of cost **Coverage Qualifying Events:** * Employee Termination, Reduction of Hours, Loss of Pay, or Enrollment to Medicare (18 months) - excludes gross misconduct * Lost Spouse Coverage (36 months) → Employee death, Divorce, or Enrollment to Medicare * Lost Dependency Status (36 months) → Turn 26 or Married

Answer 7

* Used with High Deductible Health Plan (HDHP) → $1600 (2024) * Contribution Cap ($4150/single → $8300/family) * Deposits are tax-deductible, growth is tax-deferred, spending tax-free * Balance carried forward (can be invested) * On death, becomes property of beneficiary * **Distributions for non-med are ordinary income plus 20% penalty if under 65**

Answer 8

**Own Occupation:** Pays if unable to perform main duties of job *(BEST FOR INSURED)* **Split Definition:** Starts Own then Any **Any Occupation:** Unable to work in any job qualified for *(Social Security definition; some policies have less strict “any” than SS)*

Answer 9

**Noncancellable “Noncan”:** Continuous term policy guarantees right to maintain policy at stated premium **Guaranteed Renewable:** Continuous term policy, but insurer may increase premium by class of insured

Answer 10

**Individual owns Contract and pays the Premiums:** * Premiums are not deductible * Benefits are tax-free **Employee owns Contract and employer pays entire Premium under bonus arrangement like section 162:** * Premiums are deductible by employer as bonus * Benefits are tax-free to employee **Employee owns contract and employer pay entire Premium under Salary Continuation (Group Plan):** * Premiums are deductible by employer * Benefits are taxable to employee **Employer owns the contract and is beneficiary, premiums are NOT deductible**

Answer 11

* Insurance Company Controls Investment return * Assets part of General Account * Whole Life/Universal Life

Answer 12

* Client Controls Investment return * Assets part of Separate Account * Variable Life/Variable Universal Life

Answer 13

**THINK – CRAPO** **Returned of Unused Premiums (Not Taxable Not Guaranteed)** * Cash * Reduce Future Premiums * Accumulate additional gains (Sits in separate account where gain Taxable) * Paid up Additions (Purchase Single Premium Whole life Policy-Increase Cash and Death Benefit) * One-Year Term / 5th Dividend (Purchase one year term Policy)

Answer 14

**End Policy and Pay Small Surrender Charge** * Cash (Pay Income Tax if Value > Premiums) * Extended Term (Default Option) → (Take Value and start New Term Policy) * Reduced Paid Up (Take Value and start New Permanent Policy you don’t pay premiums on)

Answer 15

**Options to Pay Death Benefit to Beneficiary (Can’t change after Selection). Gains above Death Benefit ALWAYS Taxable to Beneficiary** * Cash (Not Taxable) * Life Income (Fixed payouts for life for beneficiary based on life expectancy) * Life Income Period Certain (Fixed Payouts for Life with guaranteed period) * Interest Only (Only interest paid until another option is selected) * Fixed Period (Total Amount over Fixed Period) * Fixed Amounts (Specific Amount) * Joint and Survivor (Payout between two beneficiaries who receive set amount even if other dies) * Term Life / Permanent Life (With Single Large Payment) * Refund

Answer 16

* Life → Life (OK) * Life → Annuity (OK) * Annuity →Annuity (OK) * Annuity → Life (NO WAY!!) **Note:** Original Basis Carries Over, No Partial Exchanges

Answer 17

* Entered in after June 21st, 1988 * Fails to meet “7-Pay Test” (For exam, includes ALL single premium policies) * Distributions/Withdrawals Taxed LIFO (Interest First) * Distributions <59½ subject to 10% federal penalty tax (if not disabled) * Death Benefit still tax free

Answer 18

* Death Benefit increases <=150K + guaranteed insurability, NOT lose grandfathered (NON-MEC). * Death Benefit increases by ANY amount + must prove insurability, MAY lose grandfathered (NON-MEC) status.

Answer 19

**Pay Income Tax if Value > Premiums when transferred for money (not a gift) to a party other than:** * A sale or transfer to the insured * A sale or transfer to a partner or partnership * A corporation in which insured is shareholder or officer * Divorce

Answer 20

**When shareholder sells shares back to corporation** * Remaining Shareholders do not get step up in basis; * Entity is owner and beneficiary. * **Policies Needed:** One per owner

Answer 21

**When shareholders sell shares back to other stockholders** * Remaining Shareholders get step up in basis; * Individual owner is owner and beneficiary. * **Policies Needed:** N x (N-1)

Answer 22

**Valuable fridge benefit for Key Employees involving Costs and Benefits of Permanent Life Insurance** * Employer is owner * Employee is not a shareholder

Answer 23

**Valuable fridge benefit for Key Employees involving Costs and Benefits of Permanent Life Insurance** * Employee is owner * Employee is shareholder * Employee assigns the policy to Employer

Answer 24

* Max Contribution of $3200 (2024) * Must be used by March 15th * Dependent used by 12/31 * Not subject to income tax, FICA, or FUTA * Health FSA cannot reimburse employee premiums paid for other health plans (MSA, HSA, LTC) * Expenses for LTC cannot be reimbursed under FSA

Answer 25

**THINK – HIDECO** * Health Care Premiums * Insurance Premiums on non-discriminatory group life policy up to 50K (Imputed Income taxable to employee for amounts over 50K) * Discount on services limited to 20% of selling price charged to customers * Employee-provided transit passes (315/month) or parking (315/month) * Company car for working conditions only * Occasional overtime meals, cabs, theater, or sports **NOTE:** If group life policy discriminates in favor of key employees, they must include full 50K as imputed income (non-key still get 50K excluded)

Answer 26

**Health Insurance Premiums paid for self-employed, partner, and >=2% owner of S-corp are taxable income** * 100% is deductible as an adjustment to income on FRONT of 1040 * This can include all types of health insurance programs

Answer 27

**Whole Life:** Premiums don’t change and cash value grows at fixed rate **Universal Life:** Premiums can vary and cash value grows based on market interest rates **Variable Life:** Premiums can vary and cash value grows based on performance of investments

Insurance Flashcards

(51 cards)