Health & life insurance

If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may

Require evidence of insurability.

What is the purpose of establishing the target premium for a universal life policy?

To keep the policy in force The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

endorsement

also known as rider,

medical expense

covers many of the expenses one incurs from an accident or sickness, such as a physician or hospital expense. Expenses may be paid directly to the insured, and the insured would be responsible for paying the medical expenses. This type of benefit payment is called reimbursement. If expenses are paid on a scheduled basis, the insurance company will refer to a list determining the cost of the treatment, and it will only pay to a certain amount. If a person were covered as a dependent under their spouse's group insuranc, payment of medical expenses would be coordinated.

Hazard

increases likelihood of a loss

403(b) Tax-sheltered Annuities (TSAs)

referred to as a tax-deferred annuity, or tax-sheltered account, or a 403(b) plan, is a qualified plan available to employees of certain nonprofit organizations under Section 501(c)(3) of the Internal Revenue Code, and to employees of public school systems.

7: Who may contribute to an HR-10 plan?

self employed plumber

Elimination Period

A waiting period that is imposed on the insured from the onset of disability until benefit payments begin

Coinsurance

An agreement between an insurer and insured in which both parties are expected to pay a certain portion of the potential loss and other expenses.

Coercion

An unfair trade practice in which an insurer uses physical or mental force to persuade an applicant to buy insurance

What are the "living benefits" of whole life insurance

BLoan values and retirement income

Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?

Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.

qualified retirement plan

approved by the IRS, which then gives both the employer and employee benefits in deductibility of contributions and tax deferral of growth.

What are the two components of a universal policy?

universal policy has two components: an insurance component and a cash account. The insurance component of a universal life policy is always annual renewable term insurance. The cash account accumulates on a tax deferred basis each year and earns either the guaranteed contract rate or the current rate, whichever is higher.

All of the following are characteristics of a Universal Life policy

-Any premium amounts not required to pay for mortality and expenses, create the cash account. -The cash account accumulates on a tax-deferred basis. -Universal Life is a combination of term insurance and a separate savings account joined in a single contract. -The insurance company reserves the right to adjust the mortality charges and/or interest rate.

Which of the following are ways to determine the interest rate in a Universal Life Policy?

AMaintain a profit margin between the interest credited on in-force policies and the interest earned on their own investment portfolio CDeclare the annual rate by the company's board of directors DTie current interest rates to Treasury Bills Some insurers tie their current interest rates to Treasury Bills, while others maintain a specified spread (profit margin) between the interest that they credit on their in-force policies and the interest that they are earning on their own investment portfolio. Some insurers have their current interest rate declared by the company's board of directors each year, if not more frequently.

A qualified retirement plan characteristics

Designed for the exclusive benefit of the employees and their beneficiaries Are formally written and communicated to the employees Use a benefit or contribution formula that does not discriminate in favor of the prohibited group - officers, stockholders, or highly paid employees Are not geared exclusively to the prohibited group Are permanent Are approved by the IRS Have a vesting requirement

qualified plans tax advantages

Employer contributions are tax deductible and are not taxed as income to the employee; The earnings in the plan accumulate tax deferred; Lump-sum distributions to employees are eligible for favorable tax treatment.

A Universal Life insurance policy has two types of interest rate that are called

Guaranteed and Current The insurer credits the cash value in the policy with a current (nonguaranteed) interest rate and backs the cash value with a contract (lower guaranteed) rate of interest.

Loss of Income From Disability

Loss of income caused by accident and/or sickness causing an insured the inability to work and earn income is covered under disability income policies or coverages. Disability income insurance is a valued contract or stated amount that pays weekly or monthly benefits due to an injury or sickness. Benefits may be determined by the insured's past earnings and may be limited to a percentage of that income.

the following applicants would qualify for a Keogh Plan

Someone who has been employed for more than 12 months Someone who is over 25 years of age Someone who works for a self-employed individual

Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986

The law that provides for the continuation of group health care benefits for the insured for up to 18 months if he/she terminates employment or is no longer eligible, and for the insured's dependents for up to 36 months in cases of loss of eligibility due to death of the insured, divorce, or attainment of the limiting age

Self-Employed Plans (HR 10 or Keogh Plans

Contribution limits are the lesser of an established dollar limit or 100% of their total earned income. The contribution is tax deductible, and it accumulates tax deferred until withdrawal. -must be self-employed or a partner working part time or full time who owns at least 10% of the business. Upon a participant's death, payouts can be available immediately. If a participant becomes disabled, he or she may collect benefits immediately or the funds can be left to accumulate. When a participant enters retirement, distribution of funds must occur no earlier than 59½ and no later than 70½. If withdrawn before 59½, there is a 10% penalty. At any time payments may be discontinued with no penalty, and funds can be left to accumulate.

SIMPLE Plans

A SIMPLE (Savings Incentive Match Plan for Employees) plan is available to small businesses that employ not more than 100 employees receiving at least $5,000 in compensation from the employer during the previous year. To establish a SIMPLE plan, the employer must not have a qualified plan already in place. Employees who elect to participate may defer up to a specified amount each year, and the employer then makes a matching contribution, dollar for dollar, up to an amount equal to 3% of the employee's annual compensation. Taxation is deferred on both contributions and earnings until funds are withdrawn

Comprehensive Major Medical

A combination of basic coverage and major medical coverage that features low deductibles, high maximum benefits, and coinsurance

Which statement is true regarding a Straight Life policy?

AThe face value of the policy is paid to the insured at age 100. BIt usually develops cash value by the end of the third policy year. CIt has the lowest annual premium of the three types of Whole Life policies. Correct! Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.

8: All of the following types of distributions are considered exceptions to the early distribution rule and, therefore, are not subject to the penalty tax

B Participant's disability. C Death of participant. D A loan from the plan. The following are considered exceptions to the early distribution rule: death of the participant, the participant's disability, a divorce decree, as a series of equal payments (at least annually) over the participant's life expectancy, a loan from the plan, as part of a qualified rollover

group life insurance

Group life insurance can be converted to an individual whole life, not a term, policy; the group life insurance premiums are usually lower than those of an individual policy; the group sponsor receives a master contract, while the participants receive certificates of insurance. The cost of the coverage is based on the average age of the group and the ratio of men to women

401k

Pure salary reduction plan; Bonus plan; or Thrift plan. -Under a 401(k) plan, participants may choose to either receive taxable cash compensation or have the money contributed into the 401(k), referred to as cash or deferred arrangement plans (CODA

Which of the following statements is true regarding the cash value in a Universal life policy?

The insurer credits the cash value in the policy with a current interest rate