Insurance Live Review

Question 1

Risk vs peril vs hazard

Answer 1

risk - condition in which there is a probability of loss
peril - the cause
hazard - increases chance of loss

Question 2

characteristics of insurable risk

Answer 2

large number of homogeneous exposure units
loss must be definite and measurable
must be fortuitous or accidental
must not be catastrophic (to insurer)

Question 3

principle of indemnity

Answer 3

insurer reimburses the insured for approximately the amount lost, no more and no less

Question 4

unilaterial

Answer 4

only one party is bound; the insured makes no promised

Question 5

adhesion

Answer 5

“as is” - contact is not negotiated

Question 6

aleatory

Answer 6

number of dollars given up is unequal

Question 7

Parts of the insurance contract

Answer 7

DDICE
Declarations
Definitions
Insuring agreements
Conditions
Exclusions

Question 8

attractive nuisance

Answer 8

high degree of care is imposed on the land occupier for certain conditions on the land
example swimming pool

Question 9

negligence per se

Answer 9

standard of care is set by a statute
ex: school zone, cross walk

Question 10

absolute liability

Answer 10

extra hazardous condition
ex: keeping of wild animals

Question 11

strict liability

Answer 11

generally limited to manufacturers
ex: firestone tires

Question 12

vicarious liability

Answer 12

respondent superior
one person is hled liabile for the negligent behavior of another person
ex: principals responsible for their agents

Question 13

capital utilization

Answer 13

ANNUITIZATION to provide needed income
no money at the end of the presumed term

Question 14

human value life

Answer 14

amount of life insurance determined to be purchased by the human life value
based on earning ability
DOES NOT consider other resources available to provide for income and cash needs

Question 15

capital needs approach

Answer 15

factors interest only, so the original capital is still left at the end of the income period

Question 16

insurance company rating service

Answer 16

AM Best
Standard & Poors

Question 17

Homeowners parts

Answer 17

A - dwelling and attached structures
B - separate structures
C - Contents/personal property
D - Loss of use
E - Liability
F - medical payments to others

Question 18

sinkholes on the exam

Answer 18

sinkholes are a covered peril on the exam

Question 19

Replacement cost vs ACV

Answer 19

ACV is replacement value less depreciation
replacement cost is generally recommended

Question 20

property loss calculation

Answer 20

(insurance carried/insurance required) x loss
less deductible
if they don’t give you a %, use 80%

Question 21

auto insurance parts

Answer 21

A - liability
B - medical payments
C - uninsured motorist
D - Damage to your auto

Question 22

what is specifically excluded with umbrella?

Answer 22

professional acts

Question 23

Malpractice vs E&O

Answer 23

malpractice is for bodily injury
E&O is for property damage

Question 24

medicare skilled nursing

Answer 24

pays all of the first 20 days of skilled care
everything over a specified amount per day for the next 80 days (max of 100 days)

Question 25

HRA keys

Answer 25

ONLY for C Corporations solely employer funded

Question 26

Disability insurance non cancellable

Answer 26

guarantees right to maintain policy at the stated premium

Question 27

Guaranteed renewable

Answer 27

less expensive than non can because insurer may increase the premium

Question 28

(diability) what if the EE owns the contract, and the ER pays the entire premium under a bonus arrangement?

Answer 28

Example: section 162 ER deducts the premium EE recognizes premium in income benefits are tax free to the EE

Question 29

what types of company structure have more complicated disability tax rules?

Answer 29

partnership or S corporation CAN deduct the premiums paid for coverage deduction is based on premium cost being included in the taxable income disability insurance benefits are then excludable from taxable income

Question 30

universal life/variable universal A vs B

Answer 30

A = level death benefit B = increasing DB plus cash value

Question 31

APL

Answer 31

automatic premium loan the company automatically will pay the premium and charge it against the cash value

Question 32

reinstatement

Answer 32

specified time period proof of insurability

Question 33

conversion

Answer 33

exchange term for permanent NO evidence of insurability required

Question 34

dividend options - life insurance

Answer 34

1. cash 2. reduce premium 3. accumulated with interest 4. paid up additions 5. one year term

Question 35

settlemt options (other than cash, these are annuity options)

Answer 35

cash refund pure life specified period period certain and life specified income

Question 36

Nonforfeiture options

Answer 36

cash paid up reduced amount extended term/paid up term

Question 37

life settlement

Answer 37

insured who is not terminally or chronically ill generally > 65 Look for LTCG

Question 38

key EE life insurance

Answer 38

business owns and is beneficiary premium are nondeductible EE has no incidents of ownership

Question 39

exceptions to the transfer for value rule with life insurance

Answer 39

-to the insured -to a partner or a partnership in which the insured is a partner -corporation in which the insured is a shareholder or officer -incident to a divorce

Question 40

taxation on annuities

Answer 40

LIFO withdrawals prior to 59 1/2 are subject to ordinary income tax plus 10% penalty

Question 41

taxation of group life insurance

Answer 41

an EE is not taxed on premiums paid < $50k in coverage

Question 42

dependent group life

Answer 42

coverage on the lives of the EE spouse and dependents is not included in the $50k exemption only $2k is tax free

Question 43

notes on group disability

Answer 43

cheaper simpler underwriting usually a more liberal definition of total disability

Question 44

Taxation on group disability benefits

Answer 44

ER generally pays 100% of premium Benefits received by EE are taxable income

Question 45

FSA grace period vs carryover

Answer 45

ER can use one, not both Grace period allows workers an extra 2 1/2 months to spend (until 3/15) Carryover allows up to $640 to be rolled over

Question 46

Dependent care FSA

Answer 46

Max $5,000 If married, both spouses must earn income in order for the dependent care FSA

Question 47

VEBA

Answer 47

501c9 death benefits medical expense benefits child care benefits severance benefits educaiton benefits disability benefits legal expense benefits unemployment benefits DEDUCTIBLE expense for the ER EXCEPT FOR DEFERRED COMP ARRANGEMENTS