Life, Accident and Health Insurance
About this set
Created by:
eribner on October 9, 2011
Subjects:
life, accident and health insurance
Description:
Study Materials for the Life, Accident and Health Insurance STC test
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283 terms
Terms | Definitions |
|---|---|
 Qualified Plan | -approved by IRS for favorable tax treatment - tax deffered growth |
| Qualified Plan Requirements | 1) Be in writing 2)provided for benefit of employee 3) must satisfy age and serive standards 4) cannot be discriminatory 5) contributions cannot exceed yearly maximus 6) must provide survivorship benefits 7) must meet miniumum vesting standards 8) cannot be top heavy |
| Advantages of Qualified plans | - employer and employee contributions are tax deductivble and accumulate tax deferred - Withdrawls before 59.5 is a 10% penalty - must begin miniumum distributions by age 70.5 |
| Qualified Plan distributions | - taxable upon withdrawl - 10% penalty upon withdrawl before 59.6 - can take out w/o penalty if death, divorce, qualified financial hardship, plan loan or qualified rollover, 1st time home buyer, disability of owner - if you take out the money early, its a 20% penalty - must rollover w/in 60 days or its considered a premature distribution |
| Penalty for Withdrawl of Qualified Plan | - a 10% penalry plus applicable state and federal taxes |
| IRA IIndividual Retirement Account) | - all individuals who have earned income - possible tax deductions - tax deferral of gains - Can contribute up to 5,000 - can add 1,000 "catch up" if over 50 |
| Education IRA | - method to provide funding - Can be transferred to another IRA at 30 |
| Section 529 Plans | - state provided - can be funded by after tax dollars - can pay prepaid tuition - All earnings exempt from federal taxes - If withdrawn for unqualified withdrawl, 10% penalty |
| Roth IRA | - Allows owner to make non tax deductible contributions - to get withdrawls tax free, the account must be in existence for 5 years - can add money tax free up to 5k - distributions are tax free - account is only allowed for people who's income does not exceed a certain amount |
| SEP IRA (simplified Employee Pension Plan) | - employer sponsored IRA for small employers - contrinutions deductible to employer - Employee must have worked for 3 of last 5 years - contributions by employer cant exceed 49k or 25% of income, whichever is lesser - contributions for employees cant exceed 16,500 |
| Keogh Plan | - self employed and employees - replaced by SEPs |
| 401k Plan | - allows employees to save for retirement tax free - money is taken out pre-tax, and can be matched (and deductible to employwer) - Withdrawl penalty of 10% prior to age 59.5 - Miniumum distributions by age 70.5 - 2011 max was 16,500 |
| 403(b)/tax-sheltered Annuity | - availbale for employees of nonprofits, schools universities, churches & hospitals - just like 401k plans |
| 457 Deffered Compensation | - available for employess of state and local govt -the plan is owned by employer |
| Profit Plan | - part of defined contribitution plan - annual profits shared among employees - no guarantee of payment |
| Pension Plan | Retirement Plan that calculates benefit based upon years of service and income averages |
| ESOP | - employee stock ownership plan - defined contribution plan that provides employer stock to employees based on income and profits of company |
| Defined Benefit Plan | - indicates amount of future benefit, based upon years of service and avg income |
| Defined Contribution Plan | - indicates amount of contribution from employer without knowing the benefit |
| What is taxable in an IRA | - both the contributions and the growth or earnings |
| How much can you contribute to an IRA | 100% of earnings or not to exceed 5,000 |
| Until What age can you contribute to an IRA | 70.5 |
| Group Insurance | - consist of term life insurance or whole insurance - the employer is the owner and receives the master contract - the employees are cirtificate holders which outlines the details of it - underwriting is much more liberal because its a large group and probably wont have adverse selection - offered only 1x per year - if you want to get in at another time, employee has to show insurability |
| Can any group form an insurance plan | NO , you need a common bond (eg trade association) |
| Group Plan Insurance Conversion | - can convert within 31 days without proof of insurability, if they leave - You normally convert to a universal life polity - pricing is based on age - the employer still ows the policy but he cant name the beneficiaries |
| Group Life insurance Premiums | - employer pays all of it (non-contributory plan) - Contributory - employee pays all of it - but 75% of employees have to participate |
| Group Life Insurance Premiums Tax issues | - The beneficiary still recieves the death benefit tax free and its still an employer expense (tax deductible) but if the insurance is over 50k, the employee counts the premium paid by the employer as income |
| Social Security | - employee and employer pay 7.65% of their payroll - Self employed pay 15.3% |
| What are the benefits of Social Security | - provides for retirement check - provides for disability - benefit to survivors - death benefit of $255 |
| What do you need to get Social Secutiry | - You have to work for 40 qtrs or 10 years |
| What benefits do you get from SS | - it depends on how much you've contributed or your Primary Insurance Amount (PIA) |
| Insurance Definiation | - Transfer of risk from 1 party to another utilizing a legal contract through the pooling or accumulation of funds - transfering financial consequences of death to the insurance company to help pay |
| Consideration | Premium payment + application |
| Indemnity | - Stated amount of death benefit in the contract |
| Risk | the uncertainty or chance of loss |
| Mortality Tables | show statistical averages or possibility of death at a certain age - helps determing premium |
| Morbidity Tables | shows statistical average or possibilty of becomeing disabled and the extent of it |
| Pure Risk | Chance of loss with no means of profit - only pure risk is insurable |
| Speculative Risk | Chance of loss or gain |
| Loss Exposure | the amount of risk in dollars the insurance company is taking |
| What kind of Risks are insurable | - loss must be accidental - loss must be definable (or calculable) - must not be financially catastrophic - premiums must be reasonable |
| Retention | The act of the individual taking on the risk themselves, or retaining some of the cost themselves |
| Peril | An example of what caused the loss (ie: death) - a fire |
| Hazard | A condition that exists that increases the chance of a loss occuring |
| What are the 3 types of Hazards | 1) Physical 2) Moral 3) Morale (ie apathy, carelessness, smoking) |
| Life insurance adds to what? | The estate of the individual |
| What are the 6 things that need to be in a life insurance contract | 1) the parties 2) the party who is the insured 3) the insurable interest of the owner of the policy 4) the risk being insured agains (ie death) 5) the coverage period 6) the premium and the mode |
| Insurable Interest | - the amount that the insurance co is at risk for; One can have an insurable interest in another |
| What does the insurance company need to pay the death benefit | - death cirtificate - completed claim form |
| Human Value approach | - the approach to determine how much insurance one should get - it looks at the lost earnings potential if someone should die - often limited to 10x annual income |
| Needs Approach | - the amount of money to pay off debts, funeral, shcool, etc |
| How are life insurance premiums determined | 1) Mortality (the probability of death) 2) Interest (how much the insurance co earns on the premiums) 3) Expenses (cost of issuing the policy) |
| Net Premium | Mortality + Interest costs |
| Gross Prium | Mortality + interest costs + expense costs |
| Rate | The price of insurance per 1000 of coverage ie if it costs 3.45 / unit than u multiply by 1000 to get total cost |
| Earned Premium | the amount of premium that has been paid to date |
| Unearned Premium | the amount that has not been paid to date but if he pays more, than he gets it back |
| Departments of an insurance co | 1) underwrite 2) marketing and sales 3) Actuarial Department 4) Claims Department |
| Underwriting department | determines whether the applicant can get insurance |
| Actuarial Department | Determines the premium rates, reserves and persistency rates of policies |
| Types of Insurance Companies | Determined by where they are located |
| Domestic Insurance Co | Charter located in the state it's doing business in |
| Foreign Insurance Co | Insurance Co that's allowed to do business in a state other than their home state |
| Alien Insurance Co | An insurer authorized to conduct business in any of the 50 states but who has its hoje office in another country |
| Ownership of Insurance Company | 2 types 1) mutual co or participating company (policy owners own the company). The dividend is considered a return of premium 2) Stock company or Non participating company |
| Authorized Insurance Company | An insurance company that can operate in a state. You need a cCertificate of Authority to operate. |
| Cerrtificate of Authority | What an insurance company needs to have in order to operate in a state |
| Fraternal Organization | A non profit or benevolent association and only can provide insurance to its members. |
| Fraternal Agent | The agent of the fraternal organization that can sell the insurance |
| Reciprocal Organization | an unincorporated organization whereby members insure eachother. managed by an attorney in fact |
| Attorney in Fact | the agent in a reciprocal organizaiton that can sell the insurance |
| Lloyds Association | group of individuals who share the risk and the exposure - known for insuring unusual risks |
| Surplus Lines of Insurance | An insurance co that is authorized to sell unauthorized insurance. You can only go to a surplus lines co if you cant get it from a regular insurance company |
| Risk Retention Group | - each policy owner is also a stockholder and can only sell liability insurance (medical malpractice, general liability, product liability) - the group assumes the risk themselves |
| Reinsurance | Insurance purchased by insurance companies - limits liability of insurance co and prevents catastrophic loss |
| Facultative Reinsurance | insurance co and re insurance co make their own agreement per loss exposure |
| Automatic or Treaty Insurance | An automatic acceptance of a risk between the insurance company and the reinsurance company |
| Retrocession | When a reinsurance company reinsures with another reinsurer |
| Primary Insurer | The insurance company that is transfering its risk to another insurance company |
| Federal Regulation 18 USC 1033/1034 | Anyone who tries to sell insurance deceptively - can be fined 50k and up to 10 years - If material misrepresentation was the primary cause of the insurance co going under, than the prison scentence could be 15 years |
| Violent Crime Control Act | It is illegal for an individual who's been in a crime involving dishonesy, breach of trust of fiduciary responsibility to work in the business of insurance without consent from the insurance regulatory official |
| Types of Marketing and Distribution systems | 1) Independent - places insurance with multiple insurers; owns the business and the policy sold 2) Direct or Captive agents - can only place business with own company 3) Exclusive - Independent agents that place business of one insurer 4) Direct Response - when insurance companies sell their insurance in the mass market |
| PPGA (Personal Producing General Agent ) | - an individual producer that does not appoint other producers |
| MGA (Managing General Agent) | - appoints hires and supervises producers while also providing underwriting and claims administration |
| Types of Producers | 1) agents 2) brokers (they represent themselves and the people they are trying to buy insurance for 3) solicitors 4) Customer service representatives |
| Tort of Error and Omission (E&O) | When a producer engages in an honest or unintentional mistake - producer can buy E&O insurance |
| What does E&O insurance not cover | - fraud or ciminal acts - misappropriation of client funds - actions covered by other insurance |
| Concept of Agency | - the relationship that exists between 2 parties; the principal (or insurance company) and the agent or Authorized Rep |
| An agent has 3 types of authority | - Actual or expressed authority as defined in his contract - Implied Authority - business practices that man not be listed in a contract - apparent authority - what the public thinks the agent has |
| Implied Authority | the authority that the agent has that is not specifically listed in their contract |
| Actual authority | the actual authority that an agent has as stipulated in his contact |
| The law of contracts - 4 elements of a contract | 4 essential elements of a contract 1) agreement 2) consdieration 3) Legal Capacity 4) Legal Purpose |
| Agreement | an offer and acceptance or a meeting of the minds |
| Consideration | the exchange of of one value for another - there are 2 parts to the consideration 1) the application 2) the premium |
| Legal Capcity | when the insurance co is legally allowed to sell and when the inseree is competent and not a minor, insane, drugged or coerced |
| Legal Purpose | sale cannot be contradictory to the good of the public |
| Unilateral | a one sided contract - only 1 side makes a legally enforcable agreement. (The insurance co has to adhere to the contract) but the insured person doesn't have to pay premiums forever |
| Adhesion | That the policy owner must adhere to the terms of the contract ie: pay the premiums |
| Aleatory | the concept of recieving a value greater than what was paid based on a possible future happening |
| Conditional | the insurers promise to pay if the condition occurs (ie death) |
| Personal | when benefits are provided to an individual |
| Fiduciary | position of trust |
| Statements made on an insurance application | 1) Representation |
| Representation | - oral or written statements made by an applicant when completeing an application - true to the best of his knowledge and belief - can be changed prior to policy issue NOT afterwards |
| Misrepresentation | a false statement made by an applicant but that does not effect the issue of the policy ie if the applicant puts the wrong address. |
| Material Misrepresentation | - a false statement that changes the outcome of issueing a policy - generally with the health statement |
| Warranty | statement made by applicant to be totally true; generally used when underwriting property and casualty |
| Concealment | The failure to disclose material facts. Concealment is grounds for recission by either party |
| Fraud | intentional deception; grounds for recission |
| Recission | the cancellation of a contract; goes back to policy inception with all premiums paid minus and payments; usually do to fraud, concealment or material misrepresentation |
| Idemnity | a policy holder or insured is made whole without profiting from the loss. |
| Waiver | the voluntary surrendering of a known right like military premium |
| Estoppel | - a broken promise and may prevent denial of a claim by insurance company 3 Parts 1) When insurance agent makes a false statement upon which the insured believes 2) The insured relies on the truthfulness of the statement 3) Harm results - the insurance company denies the claim If it can be proved that the statements were made, then the insurance co is "estopped" from claim denial |
| Parol Evidence Rule | when oral statements made prior to the contract issue cannot be used to contradict the written terms of the contract |
| Underwriting | an attempt to determine if coverage should be issued as applied, issued on a rated basis (ie higher premium) issued on a preferred rate or denied |
| The application has 2 parts | 1) section 1 = general info about the applicant 2) Detailed health info of appliant 3) (sometimes) agent report |
| Field Underwriting Duties | completing the application and collecting the premium (agent doesnt issue policy) |
| What do you need on an application | 1) Applicant and agent need to sign 2) Agent cant make changes and if the agent changes something, the aplicant has to initial it |
| Premium Payment | -application and premium must be submitted or else coverage doesnt begin - Trial application goes into effect if 1 of the 2 things is not handed in |
| Receipts | Insurability Type Conditional Receipt |
| Insurability Type Conditional Receipt | When applicant hands in application and premium, then if the policy is approved, the the contract begins on the day he handed it all in; sometimes a medical exam is needed to have it approved |
| Approval Type Conditional Receipt | Approval starts only after policy has been approved, not any sooner |
| Binding Receipt | Provides coverage as soon as premium is received (before approval) |
| Free Look Provision | Applicant has 10 days to cancel policy |
| Medical Information Bureau | intercompany databank with info gathered from previous applications; helps eliminate high risk applicants |
| Fair Credit Reporting Act of 1970 | applicant has right to see all the stored information upon which the policy is either approved or denied |
| Once an applicant is approved, what are the 4 types of categories he fits into | 1) preferred 2) standard 3) sub standard (requires higher premium) 4) uninsurable |
| rate - up | when insurance co rates up the premium because the applicant has higher risk |
| Policy Delivery | policy can be delivered 1)certified or registered mail 2) personally delivered by agent 3) 1st class mail with signed receipt 4) by any other means approved by superintendent |
| Entire Contract | The original or photo copy of original application with the policy too |
| Cobra | if terminated, the employee can still receieve insurance but has to pay it themselves. Premium charges cant exceed 102% of the group premium; you can get it for 18 months or 36 months if one of you dies, gets divorced or child leaves home |
| Policy Clauses | - Incontestable Clause - Payment of Premium Clause - Grace Period - Reinstatement Period |
| Incontestable Clause | -addresses material misrepreresenations by applicant. - Insurance Co has 2 years to discover it - If found, the insurance co has to repay all premiums - If there's fraud, than the insurance co can return premiums any time |
| Payment of Premium Mode | - the frequency of premium payments - Monthly payment is the most expensive bc of the administrative costs associated with it |
| Grace Period | - the period of time (31 days) that the policy owner has to pay the premium |
| Reinstatement Provision | Applies to the timeframe that an insurer hasn't paid premium but wants the policy back. - You have 3-5 years to reinstate - proof of insurability and back premiums plus interest would have to be paid - If you havent heard back in 45 days, then the policy has been reinstated - policy premium is based on original age |
| Owner's rights provisions | - can change the beneficiary - can borrow cash value - can receive dividends - select premium mode - assignment rights - The beneficiary has no rights in the contract |
| Assignment | The transfer of owner rights from 1 party to another 1) Absolute assignment 2) Colateral Assignment |
| Absolute Assignment | when all rights of the original owner passes to another party (parent to child) |
| Colateral Assignment | when some of the rights are passed on to a 3rd party ie whole life cash value to secure a loan |
| Entire Contract Provision | the policy owner is entitled to the entire contract so that he knows any riders or waivers |
| Conversion Provision | allows policy owner to convert 1 type of life insurance to another - have to convert to same or lower death benefit |
| When do you have to provide evidence of insurability? | only when whole converts to term. |
| Misstatement of Age / Sex or Gender | Allows insurer to adjust the premium if either age or sex is misstated. |
| Free Look Provision / Right to Examine Provision | upon delivery of the policy, the policy owner has 10 days to review the contract and a full refund on payment would occur |
| War Policy Exclusions | status exclusion - no insurance if part of military Results exclusion - coverage provided if death is direct result of battle or maneuver Suicide |
| Aviation Exclusion | Coverage exists if on a regularly schedules flights |
| Revocable Beneficiary | policy may change at any time and requires change of beneficiary form |
| Irrevocable Beneficiary | beneficiary cannot be changed - used by banks or in divorces - if beneficiary wants the contract, he can get it |
| Common Disaster Clause | When insured and primary die at the same time, it is assumed that the primary died first |
| Spendthrift Provision | When insurance company retains the proceeds. It Protects beneficiary from creditors as long as the death benefits are left with the insurer. Proceeds left for beneficiary cant be touched if left at the insurance company |
| Types of Trusts | Testamentary Trust Inter Vivos Trust Class Designations |
| Testamentary Trust | A Trust that is created in the will of the deceased |
| Inter Vivos | trust creauring during the life of the insured |
| Class Designations | names a "class" instead of each name specifically like "all my children born into the marriage..." |
| Per Capita | means per person or per head ie: if 5 children existed but 1 dies, the $ goes to 4 children |
| Per Stirpes | means per family line ie if 5 children and 1 dies, then 4 children and the kids of the 5th would get the $ |
| Facility of Payment provision | Allows for a relative to get some of the payment from the benefits because the person is helping paying for the funeral and hospital etc |
| Insuring Clause | - Appears on first page of contract - has a summary of all the main points of the contract like the "promise to pay" death benefit |
| Policy Loan Provision (APL) | - Owner has right to borrow against the cash value of the contract - not available for first 2-3 years of policy - interest is due on the policy aniversary date, not the loan date - An insurance co can delay a load of upward of 6 months |
| Automatic Premium Loan | Allows the insurer to borrow from the cash value to pay unpaid premium after grace period expires. It makes sure that the policy does not lapse |
| Non Forfeiture Options | options available only to policy owner and only if there is cash value in the policy - Surrender for Cash - The amount of value that exceeds premium payment is taxable |
| Extended Level Term Insurance | owner of policy can convert the whole life policy to a level term policy -must have the same death benefit |
| Reduced Paid - up Permanent Insurance | policy owner surrenders the policy and uses existing cash value to purchase smaller, fully paid up whole life policy |
| Surrender for Cash | policy owner takes the money thats been built up in their policy |
| Insurance Dividends | Considered to be a return of overpaid premiums and is not taxable. You can get the dividend in the form of CRAPPO - Cash - reduction of premium - allow the dividends to accumulate at interest (the money earned on the returned dividend is taxable as ordinary income - Paid up permament addition - you can purchase additional whole life policy and the price will change depending on dividend and age -paid up option - pay up policy earlier than expected - one year term - use dividends to purchase additional term insurance for 1 year (after 1 year, the term expires) |
| Settlement Options | The way the policy is paid off and could be selected at time of policy origination 5 options 1) Lump Sum 2) Fixed Period (allows for income for a definite period of time) 3) Fixed amount (can be altered) 4) Interest Only (only interest is paid out and is taxable) 5) Life Income - single premium ineediate annutiy |
| Waiver of Premium Rider | should the owner be disabled and cant earn an income, after 6 months, all premiums will be paid by the insurer during the disability period; After 6 months, the premiums will be repaid |
| Accelerated Benefit Rider | A living benefit or terminal illness rider - if you have terminal illness, you can use the money before you die and it reduces the overall death benefit |
| Family Rider | insurance to cover spounce and children |
| Accidental Death Rider (multiple indemnity rider) | only provides benefit if death is caused by an accident and death must occur within 90 days; its cheap bc it can only take effect if caused by accident and if you die w/in 90 days. |
| Principal Sum | The benefit dollars received from accidental death. Dismemberment is always 50% of the benefit |
| Guaranteed Insurability | When an insured wants to buy additional insurance later on and doesnt want to worry about having to take physical exam; premiums will be adjusted |
| Return of Premium Rider | the death benefit will increase in proportion to the premium increases |
| Payor Rider | When an adult insures a child, premiums will be waived until the child reaches 21, if the adult dies or is disabled |
| Viatical Settlement Provider | When a company purchases life insurance from a policy owner. They buy a % of the death benefit. They must pay the premium on the policy. It is usally sold to terminally ill patients (death of 24 months or less) |
| Viator | The policy owner who considers viatication (the seller) |
| Viatical Settlement Broker | Negotiaties bw the 2 parties no more than 2% of amount paid to viator as compensation |
| Annuity | A contract that provides income to an annuitant for a lifetime or a specific period of time. It is the liquidation of an estate or pool of money. Protects against outliving ones income; pays a higher interest; only sold by life insurance |
| Accumulation Phase | the period of time by which the owner of the contract pays in to the annuity; a beneficiary must be named if the policy owner dies during the accumulation phase. |
| Annuity Phase | the period of time when the owner recieves payment; |
| Qualified Annuity | it receives tax deductibility and tax deferred growth |
| Non Qualified Annutiy | Funded with after tax dollars but the interest earned is tax deferred |
| Annuity Classifications | The way the annuity is funded Fully Funded - 1 lump sum Periodic premium - can pay in level or flexible |
| Immediate Annuity | contract owner gets money immediately only if it is funded with a lump sum |
| Deferred Annuity | defer payment to a later date |
| Fixed Annuity | after the insurance co gets the funding, they guarentee a minimal rate return. more conservative; money goes into general account |
| Variable Annuity | money is put into separate accounts and the growth will fluctuate. The payouts are also variable |
| Disposition of Proceeds | Straight Life or Pure Life Life with Period Certain |
| Straight life or Pure life annuity | income for life with no refund to survivor. largest monthly income because its the highest risk. |
| Life with Period Certain | When policy owner wants to get income for life but also wants to guarentee that a survivor gets a benefit if he dies for a certain period of time; made in 5,10,15 and 20 years option |
| Annuity Certain | pays income only for a certain period of time |
| Joint Life Annuity | payment to two or moer annuitants which ceases upon death of either |
| Joint & Survivor | payment to two or more annuitants and if one dies, the other still gets payments |
| Cash refund Annuity | lifetime of annuity payments and payment of undistributed annuity costs |
| Surrender Charges | Should an owner transer monies before the stated period of time, their are charges; one can take out 10% without charge |
| Guaranteed Minimum Withdrawal | allows owner to protect the value agains downside market risk by allowing the annuitant to withdraw a stated % of account per year |
| Qualified Withdrawals | before 59.5 yrs of age, theres a 10% irs penalty |
| Equity Indexed Annuity | allows for stock market appreciation with downside protection; guarantee of principal; |
| Participation Rate | In a guarenteed annuity like an equity index annuity, the insurance co will keep a % of the index gain as a fee for the guarentee |
| Market value Adjusted Annuity | a fixed annuity which shifts some of the investment risk to contract holder |
| Modified Endowment Contract | An IRS classification of an actual insurance contract; If the premiums paid for it are higher than the proportion of the death benefit (overfunded policy) it will lose many of the tax advantages |
| 7 Pay Test | if premiums paid during the first 7 years exceed the net level premium that should have been paid, it is a MEC (Modified Endowment Contract) |
| Key employee Life Insurance | -compensates business due to death - cant be business owner - 3rd party contract so key employee needs to sign - the death benefit goes to the company |
| Business Continuation Plan - Also called "Buy Sell" or Entity?ERKERKERK | Provides for business continuation in the event a partner dies using life insurance - Allows money to be available to purchase deceased partner's beneficiaries interest - pre arranged purchase price |
| Cross Purchase Plan | When there are lots of partners, each partner would beed to buy a policy on the other partners. EG: 7 parnters, each buy insurance on the other 6 partners so there are 42 (7x6) contracts |
| Split Dollar Plan | When the employer funds the cash portion of a whole life plan and the employee funds the term part of the plan -at death, employee receives death benefit and employer receives cash calue of plan |
| Deferred Compensation Plans | - a non qualified plan - employer deffers payment of salary until a later date |
| Salary Continuation | -employer funded - employer agrees to continue salary after retirement in exchange for consultative services |
| Corporate Owned Life Insurance | Company buys insurance but is allowed to change who is insured -less expensive due to lower fees, commisions |
| Section 162 bonus plans | Non qualified benefit - allows employer to purchase life insurance for the person who was going to get the bonus - it is an employer expense and reduces employee's total bonus, but the money goes to the employee's beneficiary |
| Accident and Health policies | 1) Disability Income policy 2) Medical Expense Insurance 3) Long Term Care |
| Elimination or Waiting periods | If disabled, there is no benefit paid for a certain period of time. The longer the waiting time, the lower the cost or higher the deductible |
| Probationary Period | A one time event at policy issue, usually 30 days where illness is not covered |
| No Loss / No Gain | indemnity only, no profit so you cant have 2 policies covering the same thing |
| Blue Cross Blue Shield Plan | Blue Cross - is designed for hospital benefits Blue Shield - is designed for physicians - operate in limited geographic areas - Not all hospitals except BCBS - operate on a sevice basis - was established as a non profit service organization - premiums are considered prepaid - members are called subscribers |
| Subscribers | term used for those who participate in an HMO or BCBS plan |
| HMOs | - established as alternative to fee for service - attempt to control costs with preventative medicine - pre paid premium - Members are called enrollees or members - closed panel HMO |
| Closed Panel HMO | - dr are considered employees of the HMO - you have a primary care physician or Gatekeeper |
| PPO | Preferred Provider Organization - enters into contractual agreements with hospitals and doctors in order to provide services at a reduced cost - the insured will pay a lower deductible - the drs get more volume |
| Point of Service Plan | designed to provide a higher level of managed care - allows your physician to refer in or out of network |
| Employer administered plan | Employer self funds up to a specific dollar amount per person - allows the owner to reduce costs - must be a large group of people - there's a 3rd party administrator to handle logistics |
| Multiple Employer Trust (MET)can ppo | a trust to get groups of people with similar interest to pool together to buy group insurance |
| Multiple Employer Welfare Association (MEWA) | its a method for small employers to band together with other similar groups to buy group insurance - must have common affiliation (ie chamber of commerce) |
| CHAMPUS or Tricare | Govt organization that provides health care benefits for dependents of military personnel May be called Tri Care |
| Disability Policy | defined as the inability to perform your own normal occupation or daily duties - designed to offset loss of income due to accident or sickness - can be more restrictive and therefore lower premiums - the more liberal the definition the higher the premium - must be under physician care to get paid and dr must verify by filling out claim form |
| Presumptive Disability | type of total and permanent disability based upon loss of sight, hearing, speech and loss of limb. Need to lose 2 limbs |
| Loss of earnings test | Benefits are based on eared income, not unearned incom |
| Partial Disability Rider | the inability to perform some but not all of your daily duties - addedonly as a rider - will pay only 50% of disability benefit up to 6 months |
| Residual Disability Rider | another form of partial disability -based on a % of lost income - fluctuates monthly and may exceed 50% (unlike partial disability which pays up to 50% and for a limited time) - if you lose 80% of income, you get the full disability |
| Injury / Accident vs sickness / illness | an outside event that causes injury vs an internal sickness |
| Recurrent Disability | should the same disability reappear within 6 months after supposed recover, the disability will be considered a recurrence or continuation of original disability - no new elimination or waiting period - if disability reappears after 6 months, a new disability and elimination period is initiated |
| Elimination (Waiting) Period | period of time preceding each disability during which benefits are not paid -similar to a time deductible - the longer the elimination period, the lower the premium |
| Malingering | the reason the disability income does not pay 100% income is because there wouldnt be any incentive for person to get better - long term plans last more than 1 yr to age 65 |
| Waiver of Premium | if you are disabled, after 90 days, the premium is waved - life insurance its 6 months |
| Occupational Policy | a disability policy that provides coverage on and off the job - usually bought the self employed |
| Non Occupational Policy | a disability policy for coverage only off the job - part of a group policy |
| 24 Hour Coverage vs Limited at work | If its difficult to determine where the disability occurred (carpel tunnel, back injuries) then its difficult to determine which policy pays |
| 24 Hour Coverage | covers all disabilities (on or off the job) - covers medical benefits for occupation injuries -more cost effective - less administrative issues |
| Non Contributory Group Disabiity policy | Employer paid premium - premium deductible to employer - benefit is taxable to employee |
| Individual Disability Tax considerations | premium is not tax deductible but benefits are tax free |
| Contributory Disability Policy | Employee pays all or part of premium -premium is deductible to employer - benefit it taxable to employee but only the portion based on the employer contribution |
| Disability policy Exclusions | - war / military - intentionally self inflected - aviation (not commercial flights) - Foreign Country - loss of professional license due to misconduct - can get paid if there's a mental disorder |
| Short Term Disability payouts | has a potential benefit bw 13 - 52 weeks or |
| Guaranteed Insurability Rider | Allows insured to purchas additional amounts of disability income insurance at future dates - future dates are policy anniversary dates -added coverage can be attained but must prove income increase - AKA Additional Purchase or Future Increase Option |
| Accidental Death and Dismemberment (AD&D) | Accidental Loss only - must die w in 90 days -if dismembered, you get 50% of death benefit - Death benefit is called Principal Sum - Dismemberment benefit is Capital Sum - Must dismember above ankle or wrist - one of the least expensive policies bc of limited benefits |
| Disability Riders | Cost of living rider - increase in benefit occurs on the yr anniversary of accident Social Security Benefit - proves benefit until SS pays - payable for 1 year Rehab Rider - assists individual to return to work Return of Premium rider - refund of premium every 5-10 years - 50-80% refund premium minus claims pad - very costly Transplant Cosmetic Surger Coverage Impairment Exclusion Rider - excludes coverage for partifular illness - may be temporary or permanent - eliminates pre existing condition |
| Business Overhead Expense | Pays the business if the small business owner gets disabled - Its purpose is to pay overhead expenses to keep the business in business - premiums are tax deductible with benefits being taxable |
| Workers Compensation | Provides coverage for injuries and illness occurring on the job Provides 4 benefits - unlimited medical benefits - survivor income and funeral up to 5k - disability benefits - rehab Only available for full time employees |
| Places to buy Workers Comp | 1) individual insurer 2) state compensation insurance fund 3) self insuring |
| Exclusion from Workers Comp | exclusion of coverage if - injured while playing sports then you only get paid for meals lodging and transportation - injured while participating in a voluntary off duty activity or social event - if your drunk, commiting a crime or starting a fight in the workplace |
| Workers Comp statutes | 1) mandatory for any employer with 1 or more employees 2) 7 day waiting period for disability payments 3) premiums must be approved by state insurance dept which is determined by the "experience" of the employer ie how many claims exist from that employer |
| Employer Liability Insurance | - provides coverate for common law claims - an employee can sue their employer if workers comp is not provided |
| Impairment Exclusion Rider | - excludes coverage for partifular illness - may be temporary or permanent - eliminates pre existing condition |
| Service Plans for Heathcare | Service plans include PPO, HMO and BCBS - prepaid benefit - less choice - less paperwork - less out of pocked |
| Indemnity Healthcare plan | Basic, Major Medical - More choice of providers - more out of pocket expenses - more claim forms |
| Medical Expense Policies | - Basic - Major Medical - Comprehensive major medical |
| Basic Plan | Individual plan that reimburses all or some of the healthcare expense. The insured does not have to pay a deductible but the services are limited AKA first dollar coverage 3 Benefits: 1) Daily room and board - designed to reimburse room and board. There is a predetermined amount and predetermined number of days. Any expesnses have to be paid by insured 2)Miscellaneous / Ancillary Expenses (xrays, medication, lab test etc) - its usually a multiple of the DBR (ie 100x the dbr). 3) Surgical Expense benefit - its often added with additional premium - Any costs exceeding the maximum is up to the insured. 4) Physicians Expense Benefit - outpatient benefit or doctors office. - it will pay only up to a specific amount stated in the contract |
| Major Medical | Protects against catastrophic losses with much higher benefits - High coverage limitations - unlimited lifetime benefits - deductibles are front end (must be satisfied before you recieve any coverage) - After the deductible has been satisfied, the patient and the insureance share the costs (80% / 20%). - Blanket coverage - will cover everthing in the hospital |
| Stop Loss | it limits the amount of out of pocket expenses to the insured - adds to price of premium - certain benefits are limited like certain types of rehab (alcohol) - can lower the price of a policy by increasing the stop loss amount |
| Comprehensive Major Medical Plan | Combines a basic plan and major medical plan. |
| Corridor Deductible | the deductible between a basic and major medical policy |
| Supplemental Major Medical | elimates the insured from having to pay any deductible. |
| Coverage for dependent Children | - must notify insurance company w in 31 days of birth and pay additional premium - coverage usually ends at 19 unless kid is a full time student - if child has multiple coverage through both parents, then parent whos birthday comes first in the calendar year is the primary - if divorced, coverage under the parent with custody |
| Taxation of Medical Plans | - premiums are not deductible - benefits are not taxable - if expenses exceed 7.5% of adjusted gross income the excess is deductible - employer paid group premiums are deduction to the employer |
| Scheduled Dental Insurance | - a basic plan - generally have no deductible or co payments and include first dollare coverage. - contains categoris of treatments with maximum benefits |
| Non Scheduled Debtal Insurance | - a comprehensive plan - incude deductible and co pay - certain prodcedurs are reimbursed at 80% (like fillings and oral surgery) and some are at 50% (like crowns, orthodontics, facial reconstruction |
| Healthcare cost containment methods | 1) preventative care 2) Hospital outpatient services (pre-admission testing ) 3) alternatives to hospital confinement (hostpice or nursing facility) 4) case managment |
| Group Health Insurance | - a more liberal underwriting process - probationary period is only applied to those that enroll in the group after the policy effective date |
| Experience Rating | When the actual experience of the group determines premiums |
| Community Rateing | When a group is small, the insurance company would use the experience from their community |
| Small Employer Medical Expese Plan | 2 - 50 employees - must offer medical expense coverage to all eligible employee -preexisting conditions cannot be excluded for more than 1 year - employer must offer at least 2 medical plan options |
| Modified Fully Insured Plan | Offer employer payment options to lower group plan costs -premium delay arrangement - employer can delay payment beyond 30 day grace period for 60-90 days - Reserve Reduction arrangement - After 1 year employer can retain amount of premium equal to claim reserve - retrospective rating arrangement - when an insurer charges up to 10% less than of charges |
| Partially self funded healthcare plans | when an employer bears a portion or some of all of claim risk 1) Stop loss coverage - plan is self funded by employer up to a point and insurer assumes losses beyond that. For large empoloyers only 2) ASO Contracts - employer pays 100% of claims buts hires paid 3rd party to provide admin services. More cost effective. Pays claims from a co bank account 3) 501c3 trust - designed for voluntary employee benefit account. provides for tax deductibility of employee contributions and tax deferred growth |
| Fully Employer Funded healthcare plan | Employer makes regular contributions into fund - 1 plan no need for multiple state plans |
| Conditions for fully employer funded healthcare | -accurate claim predictability, large employee base - employer has ability manage claims - employer can hire 3rd party admin services - employer ability to pay higher than expected claims |
| Which plans are suitabile for self funding | short term disability, dental, vision, lefal expense and basic medical plans (all small payouts) |
| Master Contract | the contract given to the policyowner of a group contact and verifies that coverage is provided |
| ERISA | Employee retirement income security act - its a federal law to protect the interests of the participants and beneficiaries regarding their pension, group insurance and welfare benefit plan - There's an appointed fiduciary that manages benefit plans, must communicate benefit offerings, govern the plan per ERISA guidelines - reports are available to dept of labor and irs and must file annually |
| Family and Medical Leave Act of 1993 | Allows an employee to take an unpaid leave of absence from their employment in the event they are required to provide care for - spause, family member or parent - new child, adoption or foster care - themselves if they get sick and are unable to perform their job - 12 weeks / 12 months is the max - guarantee that employee will be able to return to their job - reinstatement of all benefits - protection of an employee to exercise their rights - protection agains retaliation by an employer |
| Family Leave Act of 1993 stipulations | - Applies to employers who employ 50 or more employees within 75 mils of the workplace - must have been employed for at leas 12 months and accumulated 1250 hrs of employment during last 12 months - applies to private and state and federal employees |
| Age Discrimination in Employment Act (ADEA) | Federal act affecting employers with 20 + employees - Affects employees age 40+ - compulsory retirement is not allowed - workplace benefits must continue beyond 65 although some reduction may occur - Medical benefits may not be reduces |
| Civil Rights / Pregnancy Discrimination Act | Fed act affecting employers with 15+employees - pregnancies get same medical coverage as everyone else -applies to medical plans, sick leave and disability benefits |
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