Review tests Flashcards
What is stop-loss limit?
The dollar amount beyond which the insured no longer must pay the coinsurance percentage and participate in expense payment.
Example: Many major medical policies include a provision whereby when expenses reach a certain dollar amount, the insured no longer shares in the cost of expenses, the insurer pays 100% of the remaining covered charges.
Third-party ownership refers to a situation in which
the policyowner is someone other than the insured.
Example: in a business, a corporation may apply for insurance on the life of a key employee.
The amount of benefit payments with a fixed annuity are
guaranteed.
A life annuity with period certain settlement option pays the annuitant
for a specified minimum number of years, or the rest of his life, whichever is longer.
A life annuity with a period certain settlement option guarantees payments for a minimum stated period. If the annuitant dies before all the guaranteed payments have been made, the rest of the guaranteed payments are made to a beneficiary.
Under Social Security disability benefits, a qualified disabled worker receives a benefit equal to
100% of the worker’s primary insurance amount (PIA)
How is the beneficiary paid when there is a discrepancy in age when discovered after insured dies?
When a discrepancy between the age used for setting premiums and actual age exists, the insurer must determine the amount the premium would have bought at the insured’s correct age and pay that face amount to the bene.
Basic services that HMOs (Health Maintenance Organizations) are required to provide include:
- Hospital inpatient and outpatient services
- Physician
- Emergency
- Preventative services
- Diagnositc and therapeutic radiology services
- Short-term physical therapy and rehabilitation services
- Laboratory and x-ray services
- Outpatient Surgery
The death benefit of a variable life policy…
may go up or down but will never fall below the guaranteed minimum amount specified in the policy.
The suicide clause states that if an insured commits suicide:
During the first two years after the policy is in effect, the insurance company will only pay the premium paid by the insured, not the face value of the policy.
An insurance contract is an aleatory contract. This means:
equal value is not given by both parties to the contract.
Dread disease, travel accident, vision care and hospital income (indemnity) policies are all examples of:
Limited Policies
A limited policy is one that covers only a limited, specific risk.
Premiums paid for individual life insurance are (tax deductible or not tax deductible)?
NOT TAX-DEDUCTIBLE
When the entire death benefit is paid in a lump sum to a beneficiary, how is it taxed?
Not taxable as income.
If the death benefit payment is made under other settlement options, not a “lump sum”, the original death benefit is NOT taxable, but any interest earned on the proceeds are taxable as ordinary income when paid to the bene.
Qualified Health Plans (QHP) that are part of the Affordable Care Act are sold where?
ONLY on the Health Insurance Exchange
QHPs are only available on the health insurance exchange and are the only plans that provide premium tax credits and cost-sharing reductions for eligible individuals.
What is the proper term for a company owned by its policyowners?
A mutual insurance company
In a mutual insurance company, the policyowners share ownership of the company.
Income payments made from an annuity are (tax info)…
only partly subject to federal taxation
Federal law states a fixed part of each annuity income payment is return of capital rather than new income and is not subject to taxation.
Insurance policies are legal contracts and are subject to the general law of contracts. To form a valid contract, what four elements must be present.
- Legal purpose
- Agreement (offer and acceptance)
- Consideration
- Competent Parties
Accelerated death benefits
An accelerated death benefit can be requested when the insured has a limited life expenctancy or meets certain medical circumstances.
- Generally death must be expected within 24 months.
- Payments range from 25%-100% of the death benefit, not the cash value
- Medicaid rules are not a factor in determining accelerated death benefit amounts
What is a unilateral contract?
In a unilateral contract, only one party is required to perform contractual obligations.
The cash value accumulation in a life insurance policy
can be used for loans or later as retirement income.
The federal Affordable Care Act (ACA) eliminated pre-existing condition exclusions for ___ but not for ___.
The federal Affordable Care Act (ACA) eliminated pre-existing condition exclusions for MEDICAL EXPENSE POLICIES
but not for DISABILITY POLICIES, LONG-TERM CARE INSURANCE, MEDICARE SUPPLEMENTS, AND LIMITED BENEFIT POLICIES.
Expense load is also known as
the insurers operating costs.
Modified Endowment Contract (MEC)
MECs are still life insurance and offer tax-free death benefits and tax-deferred cash value accumulation. If a policy becomes MEC and no distributions are taken from that policy during the insured’s lifetime, they will not experience any adverse tax implications due to the contract’s MEC status.
The type of health care provider that is a managed care entity and provides both health care services and health care financing is…
a health maintenance organization (HMO)
An HMO is a group of medical practitioners who contract to provide medical services at a negotiated price, so the group provides both the coverage and the medical services. HMOs provide both the health care service and the health care financing, while traditional health care insurance companies provide only the financing.
Term insurance differs from permanent insurance in that term
builds no cash value and pays a death benefit only.
Term insurance, with lower premiums, provides only protection against early death. No cash value accumulates in a term life policy.
The Medical Information Bureau is
a non-profit insurance trade association
The insurance industry-sponsored Medical Information Bureau tries to help insurers reveal misrepresentation or potential fraud by applicants.
A limited pay life policy…
requires premium payments for a specified number of years or until a spedified age is reached
In a limited pay life policy, the insured policyowner pays premiums for a specified time or until a specified age, and the insurance protection continues throughout his life.
Living benefits of insurance include:
- Loan values
- dividends
- cash withdrawals
- retirement income
Employer paid premiums for employee grout health insurance are generally:
tax deductible to the employer and nontaxable to the employees
Premiums paid by an employer for a group plan are generally deductible as a business expense, and benefits are tax free to employees as long as benefits do no exceed actual expenses.
Rebating
The giving of anything of value including a portion of the agent’s commission.
This may be done if it is specified in the insurance contract and available to the entire class of insured.
Rebating may NOT occur if the practice is prohibited by the insurer or involves discrimination according to race, sex, age, marital status, or nationality among insured.
Any rebating schedule must be visable to the public in the agent’s office and kept by the agent for five years.
Failure to comply with Florida’s statues regardign controlled business would:
subject the agent’s license to revocation.
Medicare coverage is divided into four parts, explain them
Part A - covers hospital, skilled nursing facility, hospice and home health care
Part B - covers medical care provided by physicians and other medical services
Part C - covers health care delivered by managed care plans
Part D - covers prescription drugs
A limited pay life policy…
the insured policyowner pays premiums for a specified time or until a specified age, and insurance protection continues throughout his life.
Taxes, premiums paid for individual life insurance are…
NOT tax-deductible
MECs (Modified Endowment Contracts)
MECs are life insurance and offer tax-free death benefits and tax-deferred cash value accumulation. If a policy becomes MEC and no distributions are taken from that policy during the insured’s lifetime, they will not experience any adverse tax implications due to the contract’s MEC status.
Living benefits of life insurance:
loans, dividends, cash withdrawals, and retirement income
In a group insurance, the evidence of an agreement between the insurer and the employer or association is the
CONTRACT
What is the proper term for a company owned by its policyowners?
Mutual Insurance Company
Employer-paid premiums for employee group health insurance are generally (taxes)
tax deductible to the employer and nontaxable to the employee
Premiums paid by an employer for a group plan are generally deductible as a business expense, and benefits are tax free to employees as long as benefits do not exceed actual expenses.
Universal Life (UL)
was designed for people who want flexible premiums and flexible coverage over the course of their lifetime. UL premiums are flexible, not fixed, like whole life. Premiums paid into a UL policy accumulate as interest in the policy’s cash value.
Elements of a contract:
- competant parties
- a legal pupose
- an offer and acceptance (agreement)
- a consideration
Social Security PIA payout at time of death?
The social security spouse benefit for a spouse caring for an unmarried child under age 16 or disabled before age 22 is 50% of the PIA.
If a long-term care policy is considered tax qualified,
its benfits will qualify for tax-exempt treatment.
Individual certificates issued to all individuals insured under an insurance policy must include
Individual certificates for insureds in a group plan must state what coverage is provided and to whom it is payable, and they must include a detailed conversion provision
What is the withdrawal rule for annuities?
The withdrawal rule on annuity cash value is LIFO, last in first out.
This means if the policyowner takes a withdrawal, the company will give the owner interest first, which is taxable at the insured’s individual income tax bracket.
If the owner is not at least 59 1/2 at the time of withdrawal, a 10% penalty will also be assessed to taxable dollars withdrawan. The owner never pays taxes on withdrawing the cost basis or the money paid into the annuity.
What provides for an enhanced death benefit on a universal life policy?
Option B
Option B (or Option 2) allows the cash value in the account to be added to the death benefit.
For example, if a $100,000 policy has $25,000 of cash value, the beneficiary will receive $125,000.
Ref: 4.6.2.2
Alexandria assigns her $10,000 life insurance policy to a bank as collateral for a loan. The ASSIGNEE is
The bank
When a life insurance policy is assigned, the recipient of the policy (in this case, the bank) is called the assignee.
