Group Insurance
Describe the Master Policy and the Certificate of Insurance (COI) and who receives both.
- Plan sponsor receives and describes the contract details. Plan participants do not have control over premium payment options, type or amount of coverage. The plan sponsor is the policyowner.
- Participants receive and it describes the benefits, identifies the insurance company and the policy number. Participants have a right to name and change beneficiaries at any time.
Explain Dividends (What is it an when is it paid? What is and is not taxable? Can you withdraw?)
- Paid annually and is the return of excess premium paid
- Is not taxable until all premium paid in is recovered
- Interest left in is taxable
- Can be withdrawn whenever
Mortality rates are based on the mortality tables which show life expectancy and death rates per ____ living in the US.
1,000 people
Insurance industry is primarily regulated at the ____ level.
State
How long do complaints and replacement notifications need to be kept on file?
6 years
Name and describe the two types of Buy-Sell Agreements
- Cross Purchase Plan: Partners of a business purchase life insurance on each other. At the death of one of the partners, policy proceeds are used to purchase that person’s interest in the business from his/her heirs.
- Entity Purchase Plan: Business agreement to purchase deceased owners interest in the company. The entity is named as the beneficiary.
Group Life Premiums - Are they taxable?
- Premiums paid by employer are tax deductible to business
- Employee paid premiums are not eligible for tax deduction
- Is not considered a taxable income unless death benefit paid by employer exceeds $50,000
What does UCR stand for and what does it mean?
Usual, Customary and Reasonable
Benefits are based on the average fee charged by all providers in a given geographical area.
Mandatory uniform provisions in health policy are designed to protect the ___ and optional uniform provisions are designed to protect the ___.
1. Insured
2. Insurer
When does coverage end for physically disabled children end? What about emotionally disabled children?
Physically: Does not end for those who are incapable of self-sustaining employment due to mental or physical disability or who are dependent on policyholder. insured must provide proof within 31 days, once 2 years of limiting age has passed, insurer may ask for proof annually.
Emotionally: Must provide for those residing in licensed treatment facilities
The inability to perform all duties of one own's occupation
What is the 7-pay test? How is it taxed and what are the penalties?
- compares premium paid vs net-level premium during first 7 years of a policy. (examples - universal and VU life policies due to flexible premium). Excess premiums refunded within 60 days of contract year.
- LIFO - last in, first out tax treatments. Withdrawals are considered earnings and taxed as ordinary income.
- 10% penalty on gains withdrawn prior to 59 1/2
An insured must wait ____, but no later than ____ after providing proof of loss, before legal action can be brought against the insurer. This would fall under which type of uniform provision?
60 days
3 years
Mandatory Uniform Provisions
Under personally-owned health insurance policies, unreimbursed medical expenses in excess of ____ of AGI may be tax deductible. Is it tax-deductible?
7.5%
Yes, may deduct 100% of the cost oneself and dependents
How long are temporary licenses issued for and what are the 4 circumstances it would be issued for?
- 180 days
- to a spouse or personal rep if mental/physical disability, to member or employee of business entity if death or disability, military active duty or if in the public interest
What is a business overhead expense and tell me about it's taxation.
Provides the funds to cover the overhead expenses of a business when the owner becomes disabled.
Owner cannot collect for loss of income.
Premiums paid are tax deductible
Benefits are taxable.
For SS - how long does a worker need to work to be considered fully-insured?
10 years
What is an HDHP and what type of account can be opened alongside it?
High Deductible Health Plan.
Health plan which requires the insured to absorb a relatively high deductible in exchange for a significantly reduced premium.
Health Savings Account (HSA)
What are the benefit triggers of long-term care?
Activities of daily living (ADL's) - bathing, continence, dressing, eating, toileting, transferring
Cognitive impairment - loss of memory due to organic mental illness, Alzheimer's and senile dementia
When can loans be taken out and what is the max interest rate?
After 3 full years of premium payments. Interest rates on policy loans cannot exceed max annual fixed rate of 8% or an adjustable max rate established by methods regulated by law.
What is an advantage of key person life insurance?
Provide owner funds to recruit and retrain replacement upon death of an employee who contributes substantially to a companies sucess.
NUMBERS!!!
What is the social security / retirement blackout period for a surviving spouse? Surviving children are covered until ___? And at what age do surviving parents get monthly benefits if being at least one half supported by deceased worker?
Cannot remarry, begins youngest child is 16 and ends when spouse reaches age 60 (16 / 60).
Age 18 or 19 if enrolled in high school.
Age 62
Name and describe the four optional uniform provisions.
1. Change of Occupation - benefits are reduced for more hazardous occs. May apply for rate reduction for less hazardous occs.
2. Misstatement of age - if understated, benefits reduced. If overstated, benefits stay but insurer reduces premium.
3. Relation of earnings to insurance - benefits reduced to current income and excess premium refunded if disability income exceed monthly earnings
4. Illegal occupation - claims will be denied
Which annuity is recommended for a client that wants to keep up with inflation while protecting capital?
Equity-indexed annuity
What happens when an insurance policy is sold and the person is not authorized to engage in business of insurance in that state?
- Person is personally liable for any loss the insured sustained or which would have been covered if the policy had been issued.
- Person is also liable for all premiums paid by the insured.