Risk Management & Insurance Planning (12%) Flashcards

Question

What is **Uninsured Motorist Coverage** (UM)?

Answer 1

This agreement promises to pay the amount an **injured** insured could have collected from the uninsured dirver if such driver had carried auto liability insurance. The term "covered person" as used under the uninsured motorist coverage of the PAP includes the following: * The named insured and any family member * Any other person occupying the insured's covered auto * Any person, for damages that person is entitled to recover because of injury to a person described above **Note: UM is liability protection, NOT medical payments**

Answer 2

* Glass breakage * Loss caused by: * Falling Objects * Fire * Theft * Explosion * Earthquake * Windstorm * Hail * Water * Flood * Riot or civil commotion * Contact with birds or animals

Answer 3

* Nearly always a correct answer since it is smart coverage * Provides liability coverage Bodily Injury (BI) or Property Damage (PD) for catasptrophic claims * Requires policy owner to carry certain underlying coverage of specified amounts * Professional acts are specficially EXCLUDED!

Answer 4

**Malpractice -** Bodily Injury (doctors, dentists) **Errors and Omissions (E&O) -** Monetary damages (financial advisors, lawyers, accountants, insurance agents)

Answer 5

Study Tip: **U****R A D D** with two D's * **U**nlimited medical expenses * **R**ehabilitation (medical and vocational) * **A**bsolute Liability * **D**isability Income (TAX FREE) * **D**eath Benefits (TAX FREE)

Answer 6

**HMO:** * Provider paid monthly fee regardless of services rendered (capitation) * Out of Network care not covered at all **PPO** * Provider paid for actual services rendered * Out of network partially covered, usually 70%

Answer 7

Patient Protection Affordable Care Act PPACA = ObamaCare

Answer 8

* Benefits are **limited** - pays all of the first 20 days of **SKILLED** care and everything over a specified amount per day for the next 80 days of **SKILLED** care (100 day max) * The limited benefit is subject to substantial restrictions: * Pays for **SKILLED** care only * Admission to a nursing home must follow within 20 days of the hospital stay of three days or more * The patient's condition must be expected to improve

Answer 9

Study Tip: D E F G H * **D**ental * **E**mergency (outside US, except Canada, Mexico and Carribean) * routine **F**oot care * **G**lasses * **H**earing Aids

Answer 10

Those who have worked 40+ quarters are automatically enrolled in Medicare Part A. You have to enroll in Part B unless you are already getting SSA or Railroad Retirement Board. 1. Individual must register within 3 months prior to, or three months after birth month when turning age 65. 2. If no registration, then NO coverage until open enrollment or preexisting conditions apply. 3. If enroll late in Part A (meaning you worked 39 or less quarters) you will pay a 10% penalty on the premiums. You have to pay late fee for twice as many years as it took you to sign up for Medicare Part A (1 year late = 2 year 10% penalty.) 4. Premiums increase for Parts B, C, and D if not covered from that time until enrollment and remain increased for life. 1. Part B penalty is permanent, if you are 1 year late to sign up then you pay 10% penalty, 2 years = 20%, 3 years = 30% and you pay the late fee the entire time you have Part B. 2. Part D late-enrollment penalty is calculated by multiplying 1% of the "national base beneficiary premium" by the number of months you were eligible, but did not apply, for a Medicare Prescription Drug Plan. This amount is rounded to the nearest 10 cents and added to your monthly prescription drug plan premium. 1. The national base beneficiary premium may change each year, so the late-enrollment penalty may also change each year. 2. Beneficiaries may have to pay the late-enrollment penalty the whole time they're enrolled in a Medicare Prescription Drug Plan. 5. Common ERROR is that preexisting conditions are gone due to PPACA but PPACA does NOT apply to Medicare.

Answer 11

Most beneficiaries over age 65 don’t pay a monthly premium for Medicare Part A coverage if they or their spouse paid Medicare taxes for at least 10 years (or 40 quarters) while working. * If worked 40 quarters contribution to OASDHI - then $0 premium paid * If worked 30 to 39 quarters - Then owe $277/mo. premium * If worked less than 30 quarters - Then owed $413/mo. premium

Answer 12

Think of Dad's Stroke...... A looks like an H so think of Hospital Inpatient Hospital Expenses like bed and board, operating room costs and lab tests. * Some home health services * Hospice Care * Skilled Nursing Care * Very limited Long-Term Care

Answer 13

For 2017, the Medicare Part A deductible is $1,316 for each benefit period. (60 day period between hospitalization - new spell of illness)

Answer 14

Your pay per benefit period varies based on the length of your hospital stay. Medicare Part A deductible is $1,316 for each benefit period. After deductible is met then.... * 1 through 60 days: $0 coinsurance * 61 through 90 days: $329 per day coinsurance ($9,870) * 91 days and beyond: $658 per day coinsurance for each lifetime reserve day (you may get up to 60 lifetime reserve days in your lifetime) * After lifetime reserve days are used up: Medicare typically doesn’t cover your inpatient hospital stay.

Answer 15

The 2017 skilled-nursing facility coinsurance you pay per benefit period also varies based on the length of your stay. Medicare Part A deductible is $1,316 for each benefit period. After deductible is met then.... * 1 through 20 days = $0 coinsurance * 21 through 100 days = $164.50 per day coinsurance ($13,160) * 101 days and beyond = You are responsible for all costs unless you have a separate insurance policy that covers these costs.

Answer 16

The costs for inpatient mental health coverage are the same as inpatient hospital costs (see above). If you get physician services as part of your mental health care while you’re a hospital inpatient, you’ll pay 20% of the Medicare-approved amount.

Answer 17

You pay 20% of the Medicare-approved amount for durable medical equipment. Medicare pays all other costs.

Answer 18

## Footnote You pay up to a $5 copayment for each prescription drug needed for symptom control or pain relief while you’re at home, and 5% of the Medicare-approved amount for inpatient respite care.

Answer 19

B looks like a D or P so think of Doctors or Physicians Medicare **Part B** Covers Physician & Outpatient Expenses such as bed and board (for outpatient), operating Room costs, and lab tests. * Ambulance * Blood work * Lab Service & Screenings * Physical Therapy * Supplies * medical equipment * diabetic * glasses

Answer 20

Part B Premium is based on MAGI income as reported 2 years ago: Most people pay $109 monthly premium. Less than $85K then pay $109 premium $85K Single or ($170 MFJ) then pay $134 premium graduated AGI Limits up to $214K $214K Single then pay $428.60

Answer 21

Annual deductible: You pay $183 per year before Medicare Part B benefits begin.

Answer 22

* **_Physician coinsurance:_** You pay 20% of the Medicare-approved amount for most doctor services after you have reached your yearly deductible. You may pay more if your doctor does not accept Medicare. * **_Preventive care services:_** Certain preventive care is covered 100% (do not have to meet deductible first) by Medicare if your doctor or health-care professional accepts assignment (meaning they agree to accept the amount set by Medicare as full payment for providing the service). Otherwise, you generally pay 20% of the Medicare-approved amount after your deductible. * **_Clinical lab tests:_** You pay nothing. Medicare covers all Medicare-approved clinical lab expenses.(do not have to meet deductible first)

Answer 23

Medicare Part C is a Medicare Advantage Plan which combines A, B and D together. * Provides additional benefits not included in the original Medicare program * MAY provide better coverage at lower cost than a combination of A, B and D plus a supplement. * Problem ---- Programs not always available in a given geographic area. Also, you have to stay in network of your plan for better rates.

Answer 24

Medicare Part **D** covers Prescription **D**rugs and requires a deductible payment and significant co-pays. **D**onut hole in Part **D**

Answer 25

Medicare Part D covers prescription drugs and, like Medicare Part C, is available through private insurers that are approved by Medicare. To be eligible to enroll in a Medicare prescription drug plan (PDP), you must have Medicare Part A and/or Part B and you must live in the service area for the prescription drug plan in which you want to enroll. To be eligible to enroll in a Medicare Advantage plan with prescription drug coverage (MAPD), you must have Medicare Part A and Part B, and you must live in the service area for the MAPD plan you're considering.

Answer 26

The annual deductible for a standard Medicare Part D Prescription Drug Plan is a maximum of $400 in 2017.

Answer 27

Medicare Part D Prescription Drug Plans often charge a monthly premium for coverage. Since these plans are provided by Medicare-approved private insurance companies, the actual premium you pay varies by plan.

Answer 28

The late-enrollment penalty for Medicare Prescription Drug Plans depends on how long you go without creditable coverage. The late-enrollment penalty is calculated by multiplying 1% of the "national base beneficiary premium" by the number of months you were eligible, but did not apply, for a Medicare Prescription Drug Plan. This amount is rounded to the nearest 10 cents and added to your monthly prescription drug plan premium. The national base beneficiary premium may change each year, so the late-enrollment penalty may also change each year. Beneficiaries may have to pay the late-enrollment penalty the whole time they're enrolled in a Medicare Prescription Drug Plan.

Answer 29

Pay $400 deductible: * Then 25% copayment of next $3,700 covered expenses (beneficiary - $925; Med D - $2,775) * Donut Hole (varies by state): next $3,625 out-of-pocket (no insurance benefit) * Then coverage resumes (insured pays 5%) * Total out-of-pocket: $4,950 (deductible $400 + copayment $925 + donut hole $3,625)

Answer 30

**Must have 20 full/part time employees**. The option to buy continuation: Coverage must be offered to: (and what's the qualifying event) * Terminated employees/dependents up to 18 mo. * Voluntary or involuntary termination, change from FT to PT * Spouses and other dependents up to 36 mo. * Employee's death, divorce, legal separation, or eligibility for Medicare * Children of Employees up to 36 mo. * Loss of dependent status (marriage) * Reaching dependency age limit specified by plan

Answer 31

* Used inconjunction with Health Deductible Health Plan (HDHP) * Distributions are tax free if used for health care * Contributions not spent are carried forward and portable * Unused assets become property of named bene on death * Distributions for non-medical are ordinary income plus 20% penalty if under 65

Answer 32

1. Own Occupation - best definition for the insured (Most Liberal) 2. Modified any occupation 3. Split definition - Own then modified 4. Any Occupation (Social Security definition) 5. Loss of Income

Answer 33

**Noncancellable "noncan":** Continuous term policy guaranteeing the insured's right to maintain the policy at the stated premium **Guaranteed renewable:** Continuous right to maintain the policy, but the insurer may increase the premium by class of insureds **Waiver of Premium:** The premium will be paid if the insured becomes disabled.

Answer 34

Taxation of premiums and benefits: * The **individual** owns the contract and **pays** the premium. * Premiums are not deductible * Benefits are tax free to the employee. * The employee owns the contract and the **employer pays** the entire premium under a **bonus arrangement like section 162** disability insurance. * Premiums are deductible by the employer as a bonus * Benefits are tax free to the employee. * The employee owns the contract and the employer pays the entire premium **under a salary continuation plan (group plan).** * Premiums are deductible by the employer * Benefits are taxable to the employee

Answer 35

* Insurance company controls the investment return * Assets part of the general account 1. Whole Life 2. Universal Life

Answer 36

* Client controls the investment return * Assets part of a separate account 1. Variable Life 2. Variable Universal Life

Answer 37

Study Tip: **C R A P O** * **C**ash paid to insured * **R**educe Premium * **A**ccumulate with insurer with interest (like savings a/c) * **P**aid up additions (allows to pay for additional insurance like a stock having dividend reinvestment - also accelerated endowment option ) * **O**ne-year term (Treated as a net single premium of 1 year term as insured's current age. 5th dividend option)

Answer 38

Study Tip: **R E C** * _**R**educed Paid Up Policy_ (An insured terminating a policy receives the cash value in the form of a paid-up policy with a smaller face amount) * _**E**xtended Term Ins Policy_ (The insured receives the cash value in the form of a paid-up term policy for a specified duration, with same face amount as the original policy) * _**C**ash Surrender Value_ (Insured receives accumulated cash when terminating the policy)

Answer 39

Study Tip: **L I Fa Fp (a = Amount, p = Period)** * **L** ife Income Options: The proceeds are paid for the remainder of one or more beneficiaries’ lives, with various provisions for remaining funds. These are annuity payout options * See annuity Payout options slide. * **I** nterest only Option: Proceeds kept with insurer with guaranteed Int rate * **F** ixed Period Option: The bene receives a fixed number of payments * **F** ixed Amount Option: The beneficiary receives a stated amount of income each period until the proceeds are exhausted.

Answer 40

Dividends are paid from mutual companies where the mutual policy owners own the policy/company. These dividends are non-taxable. They are considered to be returns of premium which you have already paid taxes on. Stock companies pay dividends to shareholders. These dividends are taxable to all shareholders.

Answer 41

**Nonforfeiture Options:** _Reduced Paid Up Policy:_ (An insured terminating a policy receives the cash value in the form of a paid-up policy with a smaller face amount) _Extended Term Ins Policy:_ (The insured receives the cash value in the form of a paid-up term policy for a specified duration, with same face amount as the original policy) _Cash Surrender Value:_ (Insured receives accumulated cash when terminating the policy) **Dividend Options:** Cash paid to insured Reduce Premium Accumulate with isurerer with interest (like savings a/c) Paid up additions (allows to pay for additional insurance like a stock having dividend reinvestment - also accelerated endowment option ) One-year term (Treated as a net single premium of 1 year term as insured's current age. 5th dividend option)

Answer 42

Concerns the taxability of life insurance * Entered into after June 21, **1988** * Fails to meet the "7-pay test" (for the exam, includes ALL single premium policies) * Distributions/withdrawals are taxed LIFO (interest first) * Distributions under 59½ are also subject to 10% federal penalty tax (if not disabled) * Death benefit is still tax-free The 7-pay test is assessed by calculating if the total amount of premiums paid into a life insurance policy by the holder within the first seven years exceed the amount of premiums required to have the policy be considered paid up in seven years. If the premiums paid exceed the amount required, then the life insurance policy is considered an MEC.

Answer 43

* If death benefit increases by $150k or less and the insured has guaranteed insurability (no proof of insurability), the policy will **NOT** lose its grandfathered (non-MEC) status. * If the policy increases by **ANY** amount and the insured must prove insurability, the policy **MAY** lose its grandfathered (non MEC) status.

Answer 44

If an interest in a life insurance policy is transferred for valuable consideration (not a gift), the proceeds in the excess of the consideration paid for the policy, combined with any premiums paid by the owner, are taxable as ordinary income (like a viatical). The main **exceptions** to this rule are: * A sale or transfer to the insured * A sale or transfer to a partner or partnership in which the insured is a partner * A corporation in which the insured is a shareholder or officer * Divorce

Answer 45

* Life → Life (OK) * Life → Annuity (OK) * Annuity → Annuity (OK) * Annuity → Life (NO NO NO!)

Answer 46

**Stock Redemption:** No Step up in cost basis **Cross-Purchase:** Step up in basis

Answer 47

Endo**R**sement Method: * Employe**R** is the owne**R** * Employee is NOT a shareholder Collateral a**SS**ignment method: * Employee is owner * Employee is a **S**hareholder * Employee a**SS**igns the policy

Answer 48

**Periodic Payouts:** Payout ÷ Basis = Tax-free **Lump Sum Payouts:** * LIFO (interest first rule) * Ordinary income plus 10% penalty if under 59½

Answer 49

Study Tip: F I P 3 Life's & 3 Joints * **F**ixed amount—flat dollar amount until the account is depleted. * **I**nterest income—only the interest earned is distributed so the account principal remains * **P**eriod certain—payments for a specified length of time that depletes the account. * **L**ife income—pays for the life of the annuitant. * **L**ife income with period certain—pays benefits for the longer of the life of the annuitant (to the annuitant) or the stated period certain (e.g., 10, 15, 20 years) (to a beneficiary). * **L**ife income with refund—pays for the life of the annuitant and if any account value remains upon the annuitant’s death, pay the balance to the beneficiary. * **J**oint life—seldom used as it pays until the first of two annuitants dies. * **J**oint and survivor—pays until the death of the second of two annuitants. * **J**oint and survivor with period certain—pays for the longer of the life of the surviving annuitant or a specified length of time.

Answer 50

* Must be used by March 15th or forfeited to the company (use it or **LOSE** it - Medical Only. Dependent Care must be used by 12/31) * Not subject to income tax, FICA or FUTA * Health FSA may not be used to reimburse an employee premiums paid for other health plans (such as MSA, HSA and LTC) * Expenses for LTC services can NOT be reimbursed under a health FSA, but other medical expenses can be reimbursed.

Answer 51

* Health Care Premiums * Insurance Premiums on non-discriminatory group life policy up to $50k * Company car for working conditions only * Employer-provided transit passes ($135/mo cap) or parking ($255/mo cap) * **Occasional** overtime meal money, cab fare, theater or sporting event tickets * Discounts on services limited to 20% of selling price charged to customers

Answer 52

Health insurance premiums paid for self-employed, partners, and more than 2% owners of an S-corp are Taxable income. 100% is deductible as an adjustment to income on the **FRONT** of the 1040. This can include all types of health insurance programs.

Answer 53

1. Don't risk more than you can afford to lose. - transfer potentially devastating losses when the severity can't be reduced. 2. Consider the odds. - the higher the probability of loss, the less appropriate is risk transfer - cost plus administration fees. 3. Don't risk a lot for a little. - some risks should definitely be transferred while other risks should not. 4. Evaluate the maximum possible loss and the maximum probable loss. - use this to determine which risks to retain and which risk to handle with another risk management technique.

Answer 54

1. Aleatory (chance, unequal dollars) An agreement concerned with an uncertain event that provides for unequal transfer of value between the parties. Insurance policies are aleatory contracts because an insured can pay premiums for many years without sustaining a covered loss. Conversely, insureds sometimes pay relatively small premiums for a short period and then receive coverage for a substantial loss. 2. Adhesion (if you wrote it, you’re stuck with it) A contract offered intact to one party by another under circumstances requiring the second party to accept or reject the contract in total without having the opportunity to bargain over the wording. Insurance policies are contracts of adhesion and, as such, are construed strictly against the party writing them (i.e., the insurer). 3. Conditional (certain conditions must be met; physical, premium payment, etc.) 4. Personal (between insurer and insured) 5. Unilateral (only one side is under legal obligation) A contract in which only one party makes an enforceable promise. Most insurance policies are unilateral contracts in that only the insurer makes a legally enforceable promise to pay covered claims. By contrast, the insured makes few, if any, enforceable promises to the insurer. Instead, the insured must only fulfill certain conditions—such as paying premiums and reporting accidents—to keep the policy in force. 6. Utmost good faith: This principle is enforced through legal doctrines and policy provisions, which include * warranties * concealment * note that fraud voids the contract 7. Contract of Indemnity (except for “valued policies” and “cash payment policies”): This principle is enforced through legal doctrines and policy provisions, which include * insurable interest, * actual cash value, * subrogation, and * “other insurance” provisions.

Answer 55

* Express Authority – specifically conferred by the agent OR occasionally. * Implied Authority – not expressly granted, but assumed to have in order to transact business * Apparent Authority – ostensible authority; the appearance of, or assumption of authority, based on agent’s actions (it appears that agent is acting within the scope of authority). Example is if I a new life insurance agent and I just sold a life insurance policy to a client. Then the client said that want to get new home owners insurance. Since I am a new agent, I can’t sell home owners yet, but I say yes, we can get that for you and give them a quote. Then the company is liable because the client doesn’t know that I can’t do that, but I could get sued or fired for this. APPARENT AUTHORITY INVOLVES APPEARANCES

Answer 56

Groundwater and flood is generally not covered. You will have to get federal flood insurance for flooding.

Answer 57

Section I A - Dwelling B - Other Structures C - Personal Property D - Loss of Use: This component of a homeowners policy will pay for additional costs that you incur when it is necessary to live away from your home due to damage from a covered peril. The coverage will pay for up to 12 months of the necessary difference in living expenses required to maintain your family’s current standard of living. For example, if you normally spend $1,000 of groceries and dining each month, but your displacement causes the grocery and dining bills to increase to $1,400, your insurance will pay the additional $400. This coverage will vary by insurer, but most policies offer 10 percent of your home coverage with additional coverage available for a price. Section II E - Comprehensive Liability: The liability portion of a homeowners policy protects you against lawsuits for property damage or bodily injury that you or members of your family cause to other people. Examples of this would be a guest slipping on an icy sidewalk, tripping down your stairs or being bitten by your dog. The liability portion of your policy covers the following: Injured party’s medical bills Legal fees Any damages awarded to the injured party Most homeowners policies offer a minimum of $100,000 worth of liability coverage, but this is often not enough to cover all expenses. Industry experts recommend carrying at least $300,000 to $500,000. F - Medical Payments & Property Damage to others, expenses and claims: mini-accident policy. –Medical payments to others pays the reasonable medical expenses of another person who is accidentally injured while on an insured location, or by the activities of an insured, resident employee, or animal owned by or in the care of an insured –The insured is not required to be legally liable –Coverage does not apply to the insured or regular residents of the household, other than a residence employee –Coverage applies even if the injury occurs away from an insured location

Answer 58

Basic form – Fire and lightning, windstorm and hail, explosion, riot and civil commotion, vehicles, aircraft, smoke, vandalism, volcanos and theft (ONLY these listed perils) Broad form – adds falling objects, weight of ice, snow, sleet, collapse of buildings, accidental discharge of overflow of water or steam. Open Perils (all risk) – Any peril not specifically excluded is covered.

Answer 59

HO 3 is the most standardized homeowners policy and it is insured against.... 1. Open Peril for the Dwelling 2. Open Peril for the Other Structures 3. Broad for Personal Property (if you add HO-15 to HO-3 then it becomes Open Peril for Personal Property and a HO-5 policy) 4. 20% of A (Dwelling)

Answer 60

Replacement Cost: 1. Cost of replacement covered up to specified preset limits 2. Usually coupled with an inflation guard endorsement All other HO’s pay on replacement cost basis. Also HO only pays medical for those who DON'T live in the house because you can’t cover yourself or your family. It only covers visitors. Payment based on the replacement cost of damaged or stolen property is usually the most favorable figure from your point of view, because it compensates you for the actual cost of replacing property. If your camera is stolen, a replacement cost policy will reimburse you the full cost of replacing it with a new camera of like kind. The insurer will not take into consideration the fact that it has a shutter count of 20,000 because you’ve used the camera every day for the last two years, causing a considerable amount of wear and tear. If it was ACV then the insurance company would reduce the amount becuase it is a used camera with 20,000 shutter count. Actual Cash Value (ACV): 1. Essentially, replacement cost minus depreciation 2. If given a choice, replacement cost is the better option for the insured. HO-8 is the ONLY Home Ownership policy is settled by actual cash value (ACV) or replacement cost minus depreciation, meaning old home have gorgeous crown molding and plaster walls. The insurance company says, you pay for crown molding and plaster, we will play for regular molding and dry wall

Answer 61

You can add HO-15 Rider and it will actually bring the HO-3 to for personal property up to open perils coverage. You can only add the HO-15 to the HO-3. You cannot add it to any other policy. IMPORTANT MISTAKE PEOPLE MAKE: This does not eliminate the limits that are put on personal property that are put in the standard policy. YOU WILL HAVE TO USE ANOTHER RIDER HO-5 is the same as the HO-3 + HO-15 rider. All states aren’t on this yet.

Answer 62

HO-8 (Old Homes) HO-8 is the ONLY Home Ownership policy is settled by actual cash value (ACV) or replacement cost minus depreciation, meaning old home have gorgeous crown molding and plaster walls. The insurance company says, you pay for crown molding and plaster, we will play for regular molding and dry wall All other HO’s pay on replacement cost basis. Also HO only pays medical for those who Don’t live in the house because you can’t cover yourself or your family. It only covers visitors.

Answer 63

Has nothing to do with water..... Personal Property Floater Provides open perils-level coverage Broad coverage for: Articles that may be moved or are in transit Examples: jewelry, furs, silverware Purpose: to cover articles excluded or limited on homeowner’s policies Not used for installed property (e.g., wall-to-wall carpeting) May be purchased as separate policy or by endorsement on homeowners policy as scheduled Endorsement Also known as: Personal Articles Floater

Answer 64

Increase coverage on the house to $400K is a wrong answer. You actually have to get a different policy like for jewelry. You get an inland marine policy. Think of the insurance that floats all of the cargo/stuff along the inland or rivers/canals of the US

Answer 65

Most beneficiaries over age 65 don’t pay a monthly premium for Medicare Part A coverage if they or their spouse paid Medicare taxes for at least 10 years (or 40 quarters) while working. If worked 40 quarters contribution to OASDHI - then $0 premium paid If worked 30 to 39 quarters - Then owe $277/mo. premium If worked less than 30 quarters - Then owed $413/mo. premium

Answer 66

Your pay per benefit period varies based on the length of your hospital stay: Deductible of $1,316 first, which is 10% of the $13,160 cost of Skilled Nursing Care. Divide that by the 80 days 1-20 free and 21-100 = $164.50. Times $164.50 x 2 = $329. * 1 through 60 days: $0 coinsurance * 61 through 90 days: $329 per day coinsurance * 91 days and beyond: $658 per day coinsurance for each lifetime reserve day (you may get up to 60 lifetime reserve days in your lifetime) * After lifetime reserve days are used up: Medicare typically doesn’t cover your inpatient hospital stay.

Answer 67

The 2017 skilled-nursing facility coinsurance you pay per benefit period also varies based on the length of your stay: Deductible of $1,316 first, which is 10% of the $13,160 cost of Skilled Nursing Care. Divide that by the 80 days 1-20 free and 21-100 = $164.50. * 1 through 20 days = $0 coinsurance * 20 through 100 days = $164.50 per day coinsurance * 101 days and beyond = You are responsible for all costs unless you have a separate insurance policy that covers these costs.

Answer 68

Universal Life is an unbundled life insurance product with a cash value fund that accumulates tax deferred (invested in an insurer’s money market-like investment) earning at least a minimum guaranteed rate of interest); it includes flexible premium payments, adjustable benefits, unbundled structure, and full disclosure or transparency of costs; it may have a level death benefit, sometimes referred to as (Option A or Option 1) or an increasing death benefit (Option B or Option 2).

Answer 69

* Flexible premium payments * Adjustable death benefits * Unbundled structure (‘U’ for universal and ‘U’ for unbundled) * Full disclosure annually

Answer 70

* Policyholder may receive neither the most competitive insurance coverage nor the most competitive savings vehicle. * Future yield is uncertain. * Compulsory nature of savings is reduced due to flexible premium payments. * There is no assurance that a given premium will be adequate to maintain the policy.

Answer 71

Variable life is built on a whole life platform. This means that premiums are fixed and mortality charges are guaranteed (which is also true of universal life). Additionally, variable life guarantees a minimum death benefit, even though there may be some variability of death benefit based on market returns. Neither variable life nor universal life guarantee cash values, but universal life normally includes a guaranteed minimum interest rate. (CFP D28)

Answer 72

* [(Amount Carried/Amount required) × Loss] - Deductible = Amount of Loss to be Recovered [($500,000/$700,000) × $250,000] − $1,500 = $177,071. * \*\* The amount required is 80% (rule) of the $875,000 or $700,000. (CFP D32) * \*\*\* If amount of insurance exceeds 80% of replacement cost then you will get the full amount of insurance less the deductible. * \*\*\*\* If you have adequate coverage to meet the 80% coinsurance requirement, the payment by the insurance company is limited to the policy face amount of coverage, unless the house is insured for its full replacement cost and a replacement cost rider (inflation adjusted) is included with the policy. (CFP D32) Amount carried is the current amount of insurance Amount required is 80% of the replacement cost. Insurance company can only pay back the amount limited to the policy value. A $200K policy can't pay $210K out.

Answer 73

It means the insurance company can NOT incresae the premium for the policy term.

Answer 74

Guaranteed renewable means they can NOT increase the premium for individuals but they can increase the premium rate for an entire policyholder class.

Answer 75

Yes, however if the business is a C coporation, the death proceeds may be subject to AMT.

Answer 76

Yes, premiums are tax deductible. Surviving owners do not receive a step up in basis because the company owns the policy.

Answer 77

Yes, they are considered taxable income and they are tax deductible to the employer.

Answer 78

Yes, the _cash value_ is considered to be in the deceased's estate but the policies owned by the other shareholder's on the deceased life are not considered in the decedent's estate. Yes, surviving owners receive a step up in basis.

Answer 79

**_Cross Purchase Agreement_** (Partners own policy and are beneficiary of each other's policy) & **_Stock Redemption Plan or Entity Purchase Agreement_** (Company owns policy and is beneficiary of policy)

Answer 80

N x (N-1) = # of policies For example. 3 partners = 6 policies [3x(3-1)=6] 4 partners = 12 policies [4x(4-1)=12]

Answer 81

Rider that pays for the premium if I become disabled.

Risk Management & Insurance Planning (12%) Flashcards

(105 cards)