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Danko: CFP Prep > Insurance > Flashcards

Insurance Flashcards

(66 cards)

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1
Q

Personal Auto Policy (PAP) limits of liability: $100k/$300k/$50k

A

$100k per person
$300k per occurrence
$50k property damage

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2
Q

Business Owner Policy (BOP)

A

general liability

EX: employee attacks client

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3
Q

Medicare Part A

A

HOSPITAL INSURANCE if: 65 or receiving disability for 2 years

5 broad categories:
(1) hospital care
(2) skilled nursing home
(3) home health services
(4) hospice
(5) More than 3 pints of blood

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4
Q

Medicare Part B

A

MEDICAL INSURANCE. VOLUNTARY through monthly premiums

(1) physicians services
(2) home health services
(3) diagnostic tests
(4) all out patient services

Medicare pays 80% approved charges (no stop loss)

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5
Q

Medicare Part D

A

DRUGS

must have Medicare A and/or B

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6
Q

Medigap (Medicare supplement)

A

Reimbursement for hospital expenses (Part A)

Reimbursement for 20% share expenses (Part B)

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7
Q

Elimination Period

A

90 days (disability)

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8
Q

Residual Benefits Rider

A

benefits proportional to the amount of income lost and payable for the same durations the policy’s max benefit period

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9
Q

Partial Disability Rider

A

benefit usually 50% of total disability benefit, 3-6 month period max

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10
Q

Disability Waiver of Premium Provision

A

may waive premiums if insured becomes totally disabled and the disability last for 90 days or longer

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11
Q

Social Insurance Substitute Benefit (SIS)

A

If a disabled person gets SS disability benefit of $800, the $1000 SIS will be reduced to $200

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12
Q

Incontestable provision

A

after 2 years the contract cannot be questioned.

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13
Q

Suicide Clause

A

within 2 years the insured dies by suicide, the insurance company will only pay the premium paid

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14
Q

Grace Period

A

number of days allowed for premium in default

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15
Q

Automatic Premium Loan Provision

A

if the insured misses a payment, the policy will pull the premium amount from the cash value of the policy

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16
Q

Reinstatement Clause

A

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

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17
Q

Conversion

A

exchange term for a permanent type plan without having to prove evidence of insurability

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18
Q

Life Settlements

A

Not terminally ill and is over 65

Sale is treated as LTCG

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19
Q

Voluntary Employees’ Beneficiary Association deductible expenses

A

deductible for employer EXCEPT for deferred compensation

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20
Q

HO-3

A

A: Open
B: 10% of A
C: 50% of A (BROAD)
D: 30% of A

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21
Q

Price of Guaranteed Renewable vs Non-Cancellable

A

Guaranteed Renewable < Non-Cancellable

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22
Q

Owner of S Corp Disability Benefits Tax

A

TAX FREE

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23
Q

LTC Deductions

A
  • 7.5% AGI floor

Age 51-60: $1,760 deduction

Age 61-70: $4,710 deduction

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24
Q

Life Insurance 1035 exchanges

A

allowed tax free if owner & insured stay same. Taxable otherwise

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25
Viatical Company Taxation
Viatical Company: Basis = $ paid to dying person + premiums paid to company. Remainder = ordinary business income. Individual dying = receives payout tax free
26
Key Employee Life Insurance
Premiums paid by business = non deductible. Death benefits = tax free.
27
What type of protection is Uninsured Motorist?
Liability Protection
28
Health Reimbursement Arrangements (HRAs)
- solely employer funded - reimburses employees for substantial medical expenses up to a max dollar amount per coverage period
29
What are perils in homeowner policies?
Wind, fire, liability, collision, theft ## Footnote Perils are specific risks covered by homeowner insurance policies.
30
What is the law of large numbers in insurance?
Insurance companies prefer large pools of insured individuals for predictable coverage outcomes.
31
Define adverse selection.
The tendency of bad risk to seek insurance.
32
What are the criteria for insurable risks?
* Sufficiently large number of exposure units * Definite & measurable risk * Accidental * Not catastrophic to the company
33
What is self-insurance?
You handle the risk on your own.
34
What are the two main components of the risk management process?
* Risk control * Risk financing
35
What does risk control involve?
* Avoidance * Diversification * Reduction
36
What are the basic rules of risk management?
* Cover potential catastrophe first * Coverage for severity greater than probability
37
What is indemnity in insurance?
Insurer seeks reimbursement for the amount lost.
38
What is insurable interest?
Property & Casualty requires insurable interest at issue & loss; Life requires it only at issue.
39
List the contract requirements.
* Offer & acceptance * Consideration * Legal capacity to enter contract * Lawful purpose
40
What are the characteristics of an insurance contract?
* Unilateral * Adhesion * Aleatory
41
What is the Collateral Source rule?
Damages aren't reduced if paid by insurance; the tortfeasor still pays.
42
What does DDICE stand for in an insurance contract?
* Declarations * Definitions * Insuring Agreements * Conditions * Exclusions
43
What is capital utilization in insurance needs analysis?
Leaves no money at the end of the beneficiary's life.
44
What does a participating policy do?
Pays a dividend.
45
Name the rating services and their categories.
* AM Best: A+++ to F * Standard & Poor's: AAA to CCC * Moody's: Aaa to C * Weiss: A+ to F
46
What are the components of homeowners insurance?
* Dwelling * Other structures * Personal property * Loss of use * Personal liability
47
What are the exclusions in homeowners insurance?
* Business activities * Motorized land vehicles * Watercraft > 26ft * Aircraft use * Workers comp eligible injuries
48
What does an open peril policy cover?
Everything is covered unless specifically excluded.
49
What perils are covered under basic homeowner insurance?
* Windstorm * Hail * Aircraft * Riot * Vandalism * Vehicles * Explosion * Smoke * Fire * Lightning * Theft
50
What additional perils are covered under broad homeowner insurance?
* Rupture * Artificial electricity * Falling object * Freezing of plumbing
51
What are the common exclusions in all homeowner forms?
* Ordinance of law * Power Failure * Earthquake * Neglect * Nuclear * War * Intentional loss * Flood
52
What is a floater in insurance?
Separately listed and insured items within the home as an addition to the policy.
53
What is the difference between replacement cost and ACV?
* Replacement cost: Use for structures, discounted if underinsured * ACV: Use for personal property, depreciated value
54
What does the Personal Auto Policy (PAP) cover?
* Liability * Medical payments * Uninsured motorists * Damage to your car
55
What is covered under an umbrella policy?
Covers homeowners and personal auto policies, pays when other insurance is exhausted.
56
What does a Business Owner's Policy cover?
Real, contents, and personal liability for small to medium businesses.
57
What are the benefits of worker's compensation?
* Medical expenses * Disability * Death * Rehabilitation
58
What are the steps of payment in health insurance?
* Insured pays calendar-year deductible * Carrier & insured split co-insurance up to stop-loss * Carrier pays 100% after stop-loss
59
What are the provisions of a life insurance contract (no additional premium)?
* Automatic Premium Loan * Grace period * Reinstatement Clause * Incontestable clause * Misstatement of age clause * Suicide clause
60
What are life insurance riders that require an extra premium?
* Disability waiver of premium * Accidental death/double indemnity * Guaranteed insurability/purchase option
61
List the dividend options in life insurance.
* Cash * Reduced Premium Due * Accumulate with interest * Paid-up Additions * One-year term/5th dividend Option
62
What are the nonforfeiture options in life insurance?
* Cash * Extended Term * Paid-up reduced amount
63
What are the settlement options in life insurance?
* Cash * Interest Only * Fixed Period * Fixed Amount * Life income options
64
What are the exceptions for transfer for value in life insurance?
* Insured * Corporation * Divorce * Partner or Partnership
65
What is COBRA in health insurance?
Job-related coverage for 18 months.
66
What is a 1035 Exchange?
A tax-free exchange of life insurance policies or annuities.

Danko: CFP Prep (6 decks)

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