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117 Cards in this Set
- Front
- Back
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What is adhesion?
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Contract is accepted "as is" or not at all.
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What is "aleatory?"
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Outcome is affected by chance. Amount of dollars given up is typically unequal.
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What is collateral source rule?
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Plaintiff's measure of damage should not be mitigated by payments received from sources than the tortfeaser.
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What is subrogation?
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A process by which an insurer takes over the legal rights its insured has against a responsible third party.
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What is superannuation?
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The risk that an individual or couple will outlive their money.
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What is vicarious liability?
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principals are responsbile for their owners
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Perils (Basic Form)
WHARVES/FLT |
Wind, Hail, Aircraft, Riot, Vandalism, Vehicles, Explosions, Smoke
Fire, Lightning, Theft |
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Perils (Broad)
RAF |
Rupture, Artificially gen electricity, Falling objects, Freezing plumbing
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What policy covers condos?
Renters? |
HO-6
HO-4 |
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Exclusions
OPEN WIF |
ordinance of law, power failure, earthquake, neglect, nuclear hazard, war, intentional loss, flood
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Fine art, jewelry, collectables, etc are insured with an endorsement floater on a ______ value basis
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Agreed
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Is depreciation taken when losses are settled on a replacement cost basis?
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No
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Under ACV, losses are settled by _______
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replacement cost less depreciation.
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Formula for property loss calculations
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(Ins Carried/Ins Req X Loss) - Ded = Amount Paid
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Split limits on auto insurance
100K/300K/50K |
100K max amount payable to any one person for bodily injury
300K max amount paid for all bodily injury claims 50K Total amount for property damage claims |
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Only those expenses for medical services within __ years are paid
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3
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What is paid for uninsured motorist coverage?
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bodily injury, medical expenses, lost wages, pain and suffering. (not punitive damages)
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Hitting a bird or animal is covered by ___________.
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Other than collision.
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A SS disability beneficiary is covered under Medicare after entitlement to disability benefits for ___ months or more.
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24
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Persons age 65 or older may buy any avail Medicare policy at any time during the 6 month period after initial enrollment for ______ benefits
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Medicare B
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Companies with fewer than ___ employees for at least half of the prior year are exempt from COBRA
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20
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Is continuation of COBRA coverage automatic?
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No, it must be elected.
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Main purpose of HIPAA
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ensure security of health care coverge for those who already have insurance.
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Can an employee be reimbursed by both an HRA and an FSA?
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No. The HRA reimbursement will come out before the FSA money can be used.
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One would buy a guaranteed renewable disability policy rather than a non-cancellable policy to get _____
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a lower premium for the same benefits.
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There is a ___ month waiting period for disability benefits under Social Security.
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5
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The disabled person must wait ___ months because Social Security will not pay if the disability lasts less than 12 months.
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12
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A partnership or S corp can/can not deduct the premiums for a partner or >2% shareholder. Proceeds are then included/excluded from taxable income
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can not
excluded |
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Which provision of a LTC policy is the most important?
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Inflation protection
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The first ___ days of skilled nursing home are paid by Medicare
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20
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For days 21-90 in a skilled nursing home the insured pays ____ per day in 2009.
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137.50
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Medicare pays ___ the first 20 days...for days 21-90, Medicare pays ____.
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257.50
120 |
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Insurance gain is ordinary income or capital gain?
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ordinary income
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For income tax purposes, a life insurance contract must meet either of two tests:
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cash accumulation test
guideline premium and corridor test |
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Policies that fail the 7 pay test because too much premium has been paid within the first 7 years are classified as a
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Modified Endowment Contract (MEC)
Once a MEC, always a MEC |
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A gift of a policy to a family member causes a ____ but not a ______.
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taxable gift
transfer for value |
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A sale of a policy to a family member does not cause a _____ but does cause a ______.
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taxable gift
transfer for value |
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If dividends are used to reduce the premium, it reduces _____
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basis.
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Howie has a life and disability corp buy-sell agreement. FMV of Howies stock is 500K. Basis is 1K.
Stock will get ____ ___ income tax due Cap gains will be |
Step up in basis
No income tax due 499K |
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Key employee life insurance
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Biz should be owner and beneficiary
Premiums are non deductible Death benefits are tax free |
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2 methods of split dollar
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endoRsement
collateral aSSignment |
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EndoRsement
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employeR is owner
employerR retains cash value employee's beneficiary gets balance of death benefit |
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Collateral aSSignment
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employee is owner
employee is Shareholder employee aSSigns policy |
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Absolute assignment
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means the insured gives up right to change beneficiary.
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What is the advantage of collateral aSSignment for a shareholder?
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Any excess cash value above premiums go to the shareholder.
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Business overhead insurance is used for ____
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to cover the costs of operating the business while the owner is totally disabled.
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Subrogation
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prevents insured from making a profit on a claim.
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A characteristic of an unendorsed HO 00 03 homeowners policy is that it provides
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all risks (open) peril coverage
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Subrogation is a provision that is designed to prevent the insured from making a profit on a claim. T/F
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T
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No-fault plans may be pure, expanded, or modified. T/F
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T
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if your employer charges an employee for group term life (above 50K)...is that $ subj to FICA? Y/N
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Y
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What is morbidity?
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Incidence and severity of sickness and accidents
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If a corp buys biz overhead expense policy, then benefits payable by the policy are limited by the actual expenses incurred. T/F
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T
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What is a condition that increases either the frequency or severity of losses called?
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Hazard
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Required ins =
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Value X coinsurance
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RBC ratios were established by the NAIC to evaluate insurance companies.
(2) RBC is used to determine if an insurance company needs to be watched closely by, or be taken over by, regulators. |
T
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What is adverse selection?
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Tendency of persons with higher than average risks to purchase or renew insurance policies
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Requisites for insurable risk
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Large # of units
Losses must be accidental Losses must be measurable Losses can't be catastrophic |
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For insurable interest for P&C
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insured must have insured interest at time of inception and time of loss
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What is estoppel?
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defense against a party reneging on a previous statement assumed to be a legal truth
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In ordinary life ...insured pays premiums till age ___
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100
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Second to die policy is appropriate to pay for
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estate tax and provide liquidity.
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Nonparticipating means
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does not pay dividends
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Participating
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pays dividends
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Dividend options on life insurance (5) CORPA
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Cash
Accumulate at interest (interest is taxable) Reduce premiums Paid up additions One Year Term (5th dividend) |
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Nonforfeiture Options
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Cash Surrender Value
Reduced Paid Up Insurance Extended Term Insurance |
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Insurance Policy Grace Period
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typically 31-61 days after premium due date
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Group term Insurance
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Premiums paid by employer are tax deductible
Premiums paid by employer are taxable income to employee. |
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A policy is MEC if it fails the
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7 pay test
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What is Medicare deductible?
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137.50 for days 21-100 (skilled nursing facility)
275 for days 61-90 coinsurance 550 for days 91-150 |
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Part B Medicare DOES NOT cover
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Exams
Dental Cosmetic surgery hearing aids eye exams |
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Long Term Care
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Person needs care for at least 90 days
Can't peform 2 or more activities of daily living Person suffers cognitive impairment |
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Long Term Care Policy Issues
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Coverage
Term Elimnation Period Taxability of Payor Amount of Benefits Def of Disability Residual Benefit |
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if one retires early then benefits are reduced by ___ per month for the first 3 years
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5/9
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Benefits are reduced by ____ for each month beyond 3 years that a worker retires early
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5/12
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Important SS Beneficiaries
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Disabled insured worker under 65
Retired insured worker age 62 or older Spouse of retired or disabled worker who is at least 62 or caring for child under age 16 Divorced spouse of a retired or disabled worker if spouse is age 62 and was married for at least 10 years and did not marry by age 60 |
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SS Tax
OASDI Tax Medicare Tax |
7.62%
6.2% 1.45% 15.3% Total |
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SS Benefit is reduced in early retirement $___ for every $____ above earnings. Threshold is _____
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1 for 3
$14,160 |
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SS benefit is reduced ___ for every ___ above threshold of ____ at full retirement age.
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$37,680
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Having a ______ is the only binding req listed for an enforceable insurance contract.
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insurable interest
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Re reinstatement...during a specified period the policyholder may reinstate a lapsed policy by paying _____ and providing _____
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past due premiums
providing proof of insurability. |
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What is the probation period in a disability policy?
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The period of time the insured must wait before certain illnesses or injuries are covered.
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The best life insurance policy for the payment of federal estate taxes for a 50-year old couple with illiquid assets is:
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A joint and last-to-die life insurance policy owned by an irrevocable trust
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Dividends which are less than the amount of premiums paid are considered a return of that excess premium to the payor and are therefore _______
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non taxable
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Are advertisements usually offers?
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No. They are usually invitations to deal.
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In a situation where someone has undertaken activities or actions that bring about extraordinarily hazardous circumstances, the term that would best describe this situation is
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Absolute liability
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With what nonforfeiture option can an insurance company use a higher mortality table than on the original?
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Extended term
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How is a MEC taxed?
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Gain + 10% penalty on cost basis
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Type of annuity that provide payments that will be equal to the purchase price of that annuity.
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Installment refund annuity
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Before what year are single premium policies not affected by MEC rules?
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1988
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6 activities of daily living
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eating
bathing dressing xferring from bed to chair using toilent maintaining continence |
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Highest Best rating
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A++
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Temporary insurance coverage which is available based on an applicant's ability to provide evidence of insurability may be provided by
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Conditional Receipt
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The particular type of disability insurance that is renewable is
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Non Cancellable
Guaranteed Renewable |
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Non-forfeiture rights of policyholders guarantee that there will be a
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Cash value
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Goals of state regulation
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Protect insured
promote competition Maintain solvency of insurers |
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5 Dividend Options for Insurance
CARPO |
Cash
Accumulate at Interest Reduce Premiums Paid up additions One year term (5th Div) |
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If Replacement value is 250, coverage is 240...ded is 1...how much will insurer pay for total loss?
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240
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Types of Term
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Annual Renewable
Level Term Decreasing Term |
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Where would you use one year term (5th div)
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when you borrow against your policy..you can opt for one year term..mitigates reduction of death benefit
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with annuity calc, use __ mode
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end
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if you give up annuity for life insurance is it taxable?
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Y
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MEC is taxed on a ___ basis
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LIFO
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pre 1982 ___ for tax on annuity
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FIFO
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exclusion on annuity payments applies only until
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principal is returned
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is Volcanic coverage provided in P&C
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Y
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Broad is also called ____ perils
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named
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How are enterobacteriaceae characterized?
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Gram negative diverse group
Mnemonic: COFFEe 3. Capsule (K [kapsular] antigen related to virulence of the bug) 2. O antigen (somatic antigen which is the polysaccharide of endotoxin) 4. Flagella (H antigen found in motile species) 5. Ferment glucose 6. Enterobacteriaceae (woo!) SPYS SEEK COFFEe |
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HO-3 has coverage for Dwelling and Structures...for Personal Property
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Open
Broad |
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a flood policy is enforceable immed during the first ___ days that coverage is aval
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30
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is there a boat policy in HO-3?
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Yes up to 25 HP.
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Res Ipsa Loquitur
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The act speaks for itself
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SS Reduction in first 3 years
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5/9
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SS reduction beyond 3 years
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5/12
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SS def of disability
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disability must last 12 months or disability will result in death and cannot perform any occupation
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Can you receive Medicare before age 65
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Yes, disabled for 2 years or on dialysis
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up to ___ of SS benefit may be taxed (based on MAGI)
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85%
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