Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Beth CFP 2020 Final Deck > Insurance > Flashcards

Insurance Flashcards

1
Q

collateral source rule

A

you can still sue for negligent party for damages even if insurance paid out

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Parts of the insurance contract DDICE

A 
Declaration page
Definitions
Insuring agreements
Conditions- duties and rights of parties
Exclusions
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Homeowners Coverage and %

A

HO1 ABCD Basic
HO2 ABCD Broad
HO3 A Open, B open 10% (of A), C Broad 50%, D open 30%
HO5 Open 10A, 50A, 30A
HO8 (old) ABCD Basic
HO4 (renter) Broad C, D (30 of C)
HO6 (condoo) some coverage for AB, C open, D Broad 50% of C

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Does COBRA cover group dental and vision?

Group disability?

A

Yes, No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

which insurance premiums are qualified medical expenses for HSA

A

COBRA, qualified LTC insurance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

HRA (Health Reimbursement arrangement)

A

ONLY for C corps

  • solely employer-funded
  • reimburses medical expenses up to max amount per period
  • no OTC drugs
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Social Insurance Substitute (SIS) benefit- how does it work (disability insurance)

A

it’s a rider that pays you a certain amount that’s reduced by SS when it starts paying

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

taxation of disability for partnership/S corp owners

A

premiums paid for greater than 2% owner can be deducted by the partnership/s corp, and the owner gets tax free benefits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Non-tax qualified (NTQ)- LTC insurance

A

“medical necessity” trigger- doc certifies patient needs care, then policy pays
-premiums not deductible

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Partnership Qualified LTC insurance policy (PQs)

A

partnership bn state, insurance co and resident- individual can apply for Medicaid with “asset disregard” (or dollar for dollar)- can keep assets that would be disallowed under Medicaid

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

1035 exchange

A

no annuity to life,

can’t be done if insured changes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

“what type of life insurance should client get?”

A

endowment is WRONG answer!

consider risk tolerance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

waiver of premium (UL/VUL policy)

A

“waver of premium” or “disability waiver of mortality and admin expenses” benefits pay will pay those for you

for Whole Life, premium is waived, death benefit remains in force (waiver paid with after-tax money, then premium payment is tax-free)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Life settlement (not ill, over 65)

life insurance surrender

A

taxed, LONG TERM CAP GAIN (surrender is usually ordinary with possible penalty, but not here) [look for LTCG answer]

surrender gain above basis is always ORDINARY income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

“carve-out” plan? (group life)

A

discriminatory plan, the $50,000 exemption not allowed

I-42 example****
$0.29 x 200 x 12= $696

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

VEBA (Voluntary Employees’ Beneficiary Associations)

A

funds benefits for members:

death, medical, child care, severance, edu, disability, legal, unemployment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

life insurance- capital retention approach question

A

wants the death benefit to produce income at death, how much death benefit needed?

needs $36,000/yr from death benefit. 4% inflation, 7% return–> $36,000/3%=$1,200,000

$1,200,000+$36,000*** (for 1st yr payment)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

when do you risk turning your policy into MEC?

A

if you have to add to death benefit ($150,000) and need PROOF OF INSURABILITY (this is what makes it into MEC)….just get a new policy.

if proof of insurability is required, it may become MEC regardless of the amount

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

FSA (Flexible Spending Account or Section 125)

LTC?

experience gain?

A

it’s a section 125 cafeteria plan- solely funded by employEE

(tax free dependent care limited to $5000, health limited to $2700)

can’t be used to reimburse LTC premiums and expenses

  1. No FICA/FUTA
  2. No LTC
  3. Not HSA
  4. Use it or Lose it (dependent care only)

experience gains= forfeitures from FSA used to reduce plan costs for next year, returned to premium payers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

taxation of life insurance payout- single life pure annuity example

A

death benefit $100,000, $800/mon for life expectancy of 30 years, how much of the $800 is taxable?

$800 x 12 mon x 30 years= $288,000
($100,000/$288,000) x $800= $278 (not taxed portion)
$800-278=$522 taxed

annuity contribution before 1982 remain FIFO distribution (

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

group life- how much income is charged for benefit? (using Table 1)

conversion?

A

$500,000 group life coverage (always consider $50,000 exemption, but not for this discriminatory plan), Table 1 rate is $0.15 per $1000 per month

$0.15 x $500 x 12 mon= $900 is charged for this benefit

can convert to individual, any type of permanent (but NOT ANNUITY etc) but don’t exceed the group coverage amount!

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Homeowners

Sections I and II

A

Section I:
A Dwelling, B Other, C Personal Property (boat/trailer limited to $1000), D Loss of use

Section II:
E (enemies) Personal Liability, F (First aid) Medical payments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

joint life annuity vs joint-and-survivor annuity

A

joint-life: payments case on death of first (no good use……)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

qualified LTC policies characteristics

A

HIPAA says:

  • must be guaranteed renewable (can be noncancellable)
  • tax deduction limited by age
  • benefits TF (up to $190)
  • can’t be cash value policy (but rider in life policy is ok)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Underwriting insurance (5 sources of info used)

A
  1. application for insurance
  2. info from agent or broker
  3. investigations
  4. info bureaus
  5. physical exam or inspections

to make law of large numbers work, homogeneity- reasonable equity between better and poorer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

premiums paid for group term life deductible business expense?

A

always- it can even discriminate in favor of key employees

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

LTC- taxation of premiums and unreimbursed expenses

A

deductible as itemized medical expenses if qualified- but limitation by age
benefits are generally not taxable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

residual disability definition

A

Upon returning to work, the insured is unable to earn as much; benefits are proportional to the amount of income lost and are payable for the same duration as total disability benefits.

29
Q

Business Owner’s Policy (BOP)

A

provides liability, property damage, and medical payment coverage.

umbrella only takes effect after the limits of the BOP are exhausted.

doesn’t cover professional acts

30
Q

Human life value method (life insurance)

A

based on income-earning ability- PV of income lost by dependents resulting from the death (doesn’t take into account other resources)

31
Q

MEC

A
  • after june 21, 1988
  • doesn’t meet 7-pay (all single premium policies are mec)
  • distributions taxed LIFO
  • under 59.5 10% penalty
  • death benefit TF

-meets req of life insurance contract
meets cash value accumulation test/guideline premium and corridor test

32
Q

comprehensive major medical coverage calc

A

$500 ded/ 3 max ($1500)
80%/20% next $5000 coinsurance/100% thereafter

claims: $9000, $8000, $10,000, $7000

best way:
$1500 ded + $4000 ( 20% coinsurance of $5000 x 4 ppl)= $5500 (what YOU pay)

subtract from total claim($34000- $5500= $28,500 what insurance pays)

33
Q

HIPAA

A
  • designed to reduce “job lock”

- can move from old plan to new employer’s plan without meeting pre-exiting req

34
Q

professional liability covered by?

A

ONLY by Errors and Omissions

personal umbrella, commercial umbrella, BOP all have exclusions for pro liability

35
Q

Business Overhead Expense (BOE) covers, exclusion, benefits

A

BOE can pay for pro liability policy premium (normal business expense)

salary excluded

premiums are not deductible but benefits are tax free

36
Q

participating policies

A

they don’t ALWAYS have to pay dividends

larger premiums charged, but if not needed, returned as dividend (generally TF)

37
Q

life insurance conversion- what’s allowed?

A

you can only exchange term for permanent!

38
Q

mortality table?

A

Extended term option (nonforfeiture) puts the company at more risk, so they’re permitted to use higher mortality tables (adverse risk)

39
Q

annuity held by non-natural person (like corporation or certain trust)- taxation

A

income must be treated as ordinary income (to the corporation holding it)

(also, if income is ordinary income, loss is also ordinary loss)

40
Q

HSA (health savings account)- qualified expenses (distributions not taxed)

think “medical IRA”- it’s a savings account

A 
doctor visits not covered by insurance
rx (no non-rx)
acupuncture
eye exam
hearing test
dental
physical therapy abuse treatment
diabetic
LTC expenses
vitamins

ENROLLMENT in Medicare disqualifies HSA!(not mere eligibility)

41
Q

when calculating medical insurance payout-

A

subtract deductible first, then apply coinsurance (20% for 80/20) to the NEXT amount up to stop loss, etc

don’t forget the deductible if the question is asking you how much YOU paid

42
Q

annuity that always produces highest payout

A

life annuity (aka pure life annuity, straight life annuity)

43
Q

COBRA (in case of divorce)

A

wife covered 36 mon, child isn’t limited to 36! still covered normally as his daughter

44
Q

Medicare coverage parts A and B

Medicare Part B premium deduction

A

A: Hospital Insurance

  • hospital stays
  • post hospital skilled nursing home up to 100 days
  • post-hospital home services
  • hospice care for terminal
  • patients pay for first 3 pints of blood

*days 1-60- medicare pays all except flat deductible, then co-pay

B: Medical Insurance (Dr and tests)

  • doctor’s services: office visits, house call, nursing home
  • diagnostic tests, radiology, drugs administered by doc, physical therapy
  • outpatient
  • home health services
  • free preventive care like mammograms
  • depression screening, alcohol misuse, obesity
  • Part B*
  • itemized Schedule A deduction exceeding 10% of AGI
  • SE can do above-the-line deduction
45
Q

Homeowners Coverage C: personal property

A

Coverage C- anywhere in the world. typical limits:

  • $1000 for watercraft
  • $1000 for jewelry and furs
  • $2500 for silverware (theft only)
  • $200 for money/bullion
46
Q

worker’s compensation insurance- what’s covered and not

A

sick-leave not covered!

disability, rehab, survivor’s death benefit, medical expense (unlimited) covered

47
Q

insurance pays greater of ACV or replacement cost

see live review I-11 to 12

A

ACV:
$36,000 (loss (damage) on roof) x 50% (depreciation-given) less deductible

replacement cost- you know it

watch out for FLOOD (not covered)

48
Q

Medicare coverage calculation example

A

110 days in skilled care- $370.50/day, Medicare specified coverage amount is $170.50/day. (=means YOU pay $170.50) how much did Medicare pay?

Medicare covers first 20 days in full @$370.50
and daily charge exceeding $170.50 for 80 days ($200)
add.

Don’t confuse extended care and ltc

49
Q

viatical settlement (terminal illness)

A

death benefit $500,000; viatical settlement company buys for $325,000 and pays $32,000 of premium before person dies

dying person gets $325k tax free
viatical company’s basis is $325k + $32k= $357k, so it gets ordinary taxed on $500k-$357k=$143k

50
Q

subrogation

A

ex: insurance pays insured for loss, but makes a claim against the person who caused the loss

51
Q

aleatory contract

A

amount of dollars unequal (insured may pay lots of premium and not get anything if nothing happens, and insurer may end up paying a lot after little premium paid)

52
Q

“attempt to cope with inflation” or “keep up with market conditions” for suitability question for annuity or life insurance–>

A

variable product (annuity or life) is usually correct choice for exam

53
Q

fringe benefits (tax free)

taxable

A
  • employer paid heath plan premium
  • group life premium paid by employer (up to $50,000)
  • qualifying day care paid by employer (limited)
  • company car
  • transit passes ($265/mon cap)
  • employer provided parking ($265)
  • occasional meal, cab, tickets
  • discounts not exceeding profit percentage
  • discounts limited to 20% of what customer pays

(taxable)

  • self employed health premium (but deductible on front of 1040)
  • group life paid by employer exceeding $50,000 (nondiscriminatory)
54
Q

transfer for value (life insurance death benefit taxation)

A

income tax exclusion NOT lost for:

  • transfer to insured
  • transfer to partner of the insured (PARTNERSHIP)
  • transfer to corporation in which insured is a shareholder/officer
55
Q

fringe benefits (tax free)

A
  • employer paid heath plan premium
  • group life premium paid by employer (up to $50,000)
  • qualifying day care paid by employer (limited)
  • company car
  • transit passes ($265/mon cap)
  • employer provided parking ($265)
  • occasional meal, cab, tickets
  • discounts not exceeding profit percentage
  • discounts limited to 20% of what customer pays
56
Q

taxable employer provided plans

A
  • prepaid legal plan paid for by ER
  • individual disability plan paid for by ER
  • group disability paid for by ER
57
Q

LTC premium deduction by age (W2 AND SE)

A

Age 51-60 $1580/

Age 610-70 $4220/yr

58
Q

insurance premiums made up of?

A

premium made up of: 1. pure insurance cost (cost for insurance co), 2. cash value (permanent)

59
Q

Respondeat superior

A

Vicarious liability

60
Q

Corporate paid insurance premiums- deductible and not deductible

A 
Deductible-
Business owners 
Workers compensation
Futa 
D&O

Not deductible- key man life insurance

61
Q

Surrender of life policy (w loans and dividends reducing premiums)

A

$50,000 DB
$30,000 loans
$40,000 of premiums paid , reduced by $10,000 dividends
Cash value is $15,000 net of loan

Cv$15k+ $30k loan= $45k total cv
Minus $30k premiums paid= $15k ordinary income

62
Q

Discriminatory group term life insurance- first $50k excludable?

A

Key employee can’t deduct but non-key employees can

63
Q

What benefits can be offered under the cafeteria plan?

Cash benefits
Group term life
Nonqualified deferred comp
Accident and health benefits

A

Nonqualified deferred compensation cannot

64
Q

selling life insurance-

A

ex: employer sells policy to employee’s children-

  • selling price is greater of cash value or premiums paid
  • income taxable to the kids under transfer for value
  • income taxable to employer if sold for more than premiums paid
65
Q

group policy conversion

A

group health-> individual (not good and expensive, better than nothing)

group life-> into permanent, not term

group disability-> not convertible

66
Q

life insurance death benefit amount

A

don’t forget paid-up additions…

67
Q

can a company borrow from the cash value of life policies on key employees and deduct the interest?

A

yes, but limited to $50,000 loan on each policy

68
Q

compensatory structured settlement

A

does NOT cease at death. PV of unsatisfied payments included in gross estate

Beth CFP 2020 Final Deck (7 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions