9. Other Health Insurance Concepts

What percentage of individually-owned disability income benefits is taxable? A0% B50% C100% DAmount paid by insured

A0% Premiums are paid with after tax dollars. Benefits are not income taxable

Which statement accurately describes the Change of Beneficiary provision? AAny policy that has a death benefit must also have a Change of Beneficiary provision. BSpouses are automatically irrevocable beneficiaries, with the exception of divorce or death. CBeneficiaries can only be changed in the event of divorce, death, or severe psychiatric disorders. DChanging beneficiaries requires the consent of the original beneficiary.

AAny policy that has a death benefit must also have a Change of Beneficiary provision. Any policy that has a death benefit must also have a Change of Beneficiary provision. This allows the policyowner to change beneficiaries without the original beneficiary's consent, unless that person was designated as an irrevocable beneficiary

All of the following are true of the Key Person disability income policy EXCEPT ABenefits are considered taxable income to the business. BPremiums are not deductible to the business. CIt is typically written to protect the company in the event a key employee becomes disabled and is unable to work. DThe income may be used to find a replacement for the key employee

ABenefits are considered taxable income to the business. Key person disability benefits are not considered taxable income to the business.

In an individual long-term care insurance plan, the insured is able to deduct the premiums from taxes. What income taxation will be imposed on the benefits received? ANo tax BTax deductible CState income tax DFederal income tax

ANo tax Daily benefits from the LTC policy are received income tax free, as long as they do not exceed the daily cost of long-term care

Which of the following is CORRECT regarding Business Overhead Expense insurance? APremiums are tax deductible. BBenefits received are received tax free. CBenefits received are taxable income to the employee. DPremiums are not tax deductible.

APremiums are tax deductible The premiums paid for BOE insurance is tax deductible to the business as a business expense. However, the benefits received are taxable to the business as received.

Workers Compensation benefits are regulated by which entity? AState government BEmployer CInsurer DFederal government

AState government The state government offers and regulates Workers Compensation benefits, which vary slightly from state to state.

The transfer of an insured's right to seek damages from a negligent party to the insurer is found in which of the following clauses? ASubrogation BArbitration CSalvage DAppraisal

ASubrogation After the insured accept payment from the insurer, they have been indemnified. Insurance policies require the insured to transfer any right to recovery to the insurer so that they may seek recovery up to the amount they paid as loss.

Which of the following definitions would make it easier to qualify for total disability benefits? AThe more liberal "own occupation" BThe more strict "any occupation" CThe more liberal "any occupation" DThe more strict "own occupation

AThe more liberal "own occupation" Total disability is defined differently under some disability income policies. The more liberal "own occupation" definition of disability makes it easier to qualify for benefits.

Which characteristic does NOT describe managed care? AUnlimited access to providers BHigh-quality care CShared risk DPreventive care

AUnlimited access to providers There are five distinguishing features of managed care: controlled access to providers, comprehensive case management, risk sharing, preventive care, and high-quality care.

Under what condition are group disability income benefits received by an employee NOT taxable as income? AWhen the benefits received are equal or less than the employee's percentage of the contribution. BWhen the employer makes all the premium payments. CWhen the employee is 59 ½. DWhen the amount of the benefit is equal or less than the amount of contributed by the employer.

AWhen the benefits received are equal or less than the employee's percentage of the contribution. Benefits received by the employee that are attributable to his or her portion of the contribution are not taxable as income

A brain surgeon has an accident and develops tremors in her right arm. Which disability income policy definition of total disability will cover her for all losses? A"Any occupation" - more restrictive than other definitions B"Own occupation" - less restrictive than other definitions C"Own occupation" - more restrictive than other definitions D"Any occupation" - less restrictive than other definitions

B"Own occupation" - less restrictive than other definitions In theory, the brain surgeon could find other work, but because her disability income policy specifies that she is covered for her own occupation, she would be wholly covered.

An insured is covered under 2 group health plans - under his own and his spouse's. He had suffered a loss of $2,000. After the insured paid the total of $500 in deductibles and coinsurance, the primary insurer covered $1,500 of medical expenses. What amount, if any, would be paid by the secondary insurer? A$0 B$500 C$1,000 D$2,000

B$500 Once the primary insurer has paid the full available benefit, the secondary insurer will cover what the first company will not pay, such as deductibles and coinsurance. The insured will, then, be reimbursed for out-of-pocket costs

Which of the following would best describe total disability? AA person's inability to qualify for insurance coverage. BA person's ability to work is significantly reduced or eliminated for the rest of his/her life. CA person's inability to perform one of the regular duties of his/her occupation. DA person's total loss of income.

BA person's ability to work is significantly reduced or eliminated for the rest of his/her life. While different policies might define "total disability" differently, any definition would imply that under a total disability a person's ability to work is significantly reduced or eliminated for the rest of his/her life.

The mode of premium payment ADoes not affect the amount of premium paid. BIs defined as the frequency and the amount of the premium payment. CIs the factor that determines the amount of dividends in a policy. DIs the method used to compute the cash surrender value of the policy

BIs defined as the frequency and the amount of the premium payment. The mode refers to the frequency the policyowner pays the premium: monthly, quarterly, semiannually, or annually. The amount of premium will change accordingly

Which of the following is correct regarding the taxation of group medical expense premiums and benefits? APremiums are tax deductible and benefits are taxed. BPremiums are tax deductible and benefits are not taxed. CPremiums are not tax deductible and benefits are taxed. DPremiums are not tax deductible and benefits are not taxed

BPremiums are tax deductible and benefits are not taxed. Premiums paid by employers for Group Medical Expense insurance are tax deductible for the employer as a business expense. Also, policy benefits paid out to employees are not taxable as income to the employee

Disability income policies can provide coverage for a loss of income when returning to work only part-time after recovering from total disability. What is the benefit that is based on the insured's loss of earnings after recovery from a disability? AIncome replacement BResidual disability CRecurrent disability DPartial disability

BResidual disability A residual disability will pay an amount to make up the difference between what the insured would have earned before the loss.

A man works for Company A and his wife works for Company B. The spouses are covered by health plans through their respective companies that also cover the other spouse. If the husband files a claim, ABoth plans will pay the full amount of the claim. BThe insurance through his company is primary. CThe insurance through his wife's company is primary. DThe insurance plans will split the coverage evenly

BThe insurance through his company is primary. The policy that covers the person filing the claim will be considered the primary policy.

When may an insured deduct unreimbursed medical expenses paid under a long-term care policy? AOnly if the insured does not itemize the expenses BWhen the expenses exceed a certain percentage of the insured's adjusted gross income COnly if the insured is age 65 or older DAll LTC expenses are tax deductible.

BWhen the expenses exceed a certain percentage of the insured's adjusted gross income In either medical expense insurance policies or long-term care insurance policies, unreimbursed medical expenses paid for the insured, the insured's spouse and dependents may be claimed as deductions if the expenses exceed a certain percentage of the insured's adjusted gross income.

An insured is covered by a partially contributory group disability income plan that pays benefits of $4,000 a month. If the insured pays 25% of the monthly premium, how much of the monthly benefit would be taxable? ANone B$1,000 C$3,000 D$4,000

C$3,000 On partially contributory group disability income insurance, only that portion of the benefits that are related to the premium paid by the employer is taxable to the employee. In this case, because the employer pays 75% of the premium, the employee will be taxed on 75% of the benefits.

Individuals who itemize deductions can claim deductions for medical expenses not covered by health insurance that exceed what percent of their adjusted gross income? A5% B7% C10% D15%

C10% Most people who itemize their deductions can claim deductions for unreimbursed medical expenses, those that are not covered by health insurance, that exceed 10% of their adjusted gross income.

An individual is insured under his employer's group Disability Income policy. The insured suffered an accident while on vacation that left him unable to work for 4 months. If the disability income policy pays the benefit, which of the following would be true? AFor the business, payments are not considered tax deductible as an ordinary business expense. BThe insured can deduct his medical expense benefits from his income tax. CBenefits that are attributable to employer contributions are fully taxable to the employee as income. DThe insured has to wait 2 more months to start receiving the benefits

CBenefits that are attributable to employer contributions are fully taxable to the employee as income. Group disability income premium payments are considered tax deductible by the business as an ordinary business expense. In a plan funded entirely by the employer, income benefits are included in the employee's gross income and taxed as ordinary income.

Under which of the following employer-provided plans are the benefits taxable to an employee in proportion to the amount of premium paid by the employer? ADental Expense BBasic Medical Expense CDisability Income DMajor Medical

CDisability Income The part of the benefit that is provided by the employer's contribution is income taxable to the employee

Which of the following statements about occupational vs. nonoccupational coverage is TRUE? AIndividual disability policies never cover nonoccupational injuries. BOnly group disability income policies can be written on an occupational basis. CDisability insurance can be written as occupational or nonoccupational. DGroup medical expense policies and individual medical expense policies always cover both occupational and nonoccupational injuries.

CDisability insurance can be written as occupational or nonoccupational. All disability insurance can be written on either an occupational or nonoccupational basis.

Which of the following is correct regarding the taxation of group medical expense premiums and benefits? APremiums are not tax deductible and benefits are not taxed. BPremiums are tax deductible and benefits are taxed. CPremiums are tax deductible and benefits are not taxed. DPremiums are not tax deductible and benefits are taxed

CPremiums are tax deductible and benefits are not taxed. Premiums paid by employers for Group Medical Expense insurance are tax deductible for the employer as a business expense. Also, policy benefits paid out to employees are not taxable as income to the employee

Which of the following are the main factors taken into account when calculating residual disability benefits? AEmployee's full-time status and length of disability BPresent earnings and standard cost of living CPresent earnings and earnings prior to disability DEarnings prior to disability and the length of disability

CPresent earnings and earnings prior to disability Residual disability will help pay for loss of earnings by making up the difference between the employee's present earnings and what they were earning prior to disability.

Workers Compensation benefits are regulated by which entity? AInsurer BFederal government CState government DEmployer

CState government The state government offers and regulates Workers Compensation benefits, which vary slightly from state to state

Which of the following statements regarding the Change of Beneficiaries Provision is false? AThe policyowner cannot change beneficiaries if he/she has chosen to have an irrevocable beneficiary, unless the policyowner has the permission of the irrevocable beneficiary. BAll policies that allow a death benefit must at least provide the option of a change of beneficiary provision. CThe policyowner has the right to change beneficiaries in any case. DA policyowner can change beneficiaries without the consent of the former revocable beneficiary.

CThe policyowner has the right to change beneficiaries in any case The policyowner has the right to change beneficiaries unless he/she has chosen to have an irrevocable beneficiary. Otherwise, the policyowner can legally change beneficiaries, without the consent of the former beneficiary

Under what condition are group disability income benefits received by an employee NOT taxable as income? AWhen the employee is 59 ½. BWhen the amount of the benefit is equal or less than the amount of contributed by the employer. CWhen the benefits received are equal or less than the employee's percentage of the contribution. DWhen the employer makes all the premium payments.

CWhen the benefits received are equal or less than the employee's percentage of the contribution. Benefits received by the employee that are attributable to his or her portion of the contribution are not taxable as income.

For group medical and dental expense insurance, what percentage of premium paid by the employer is deductible as a business expense? A50% B60% C90% D100%

D100% For group medical and dental expense insurance any premium paid by the employer is deductible as a business expense

Which of the following is not true of Disability Buy-Sell coverage? AIt is typically written to cover partners or corporate officers of a closely held business. BPremium payments are not deductible to the business. CThe policies provide funds for the business organization to purchase the business interest of a disabled partner. DBenefits are considered taxable income to the business.

DBenefits are considered taxable income to the business. The buy-sell coverage benefits are tax free.

Which of the following is NOT true regarding Workers Compensation? ABenefits are not regulated by the federal government. BBenefits vary from state to state. CBenefits are regulated by the state government. DBenefits are offered by the insurer.

DBenefits are offered by the insurer. The state government regulates Workers Compensation benefits, which vary slightly from state to state.

What type of insurance is sold to small business owners that must meet overhead expenses such as rent or utilities following a disability? AKey-person disability BMedical expense coverage CBuy-sell DBusiness overhead expense

DBusiness overhead expense Business overhead expense (BOE) insurance is a unique type of policy that is sold to small business owners who must continue to meet overhead expenses such as rent, utilities, employee salaries, installment purchases, leased equipment, etc., following a disability

A woman's health insurance policy dictates which doctors she is allowed to see. Her health providers share an assumed risk for their patients and encourage preventive care. What best describes the health system that the woman is using? AComprehensive health BMajor medical CGroup health DManaged care

DManaged care There are 5 distinguishing features of managed care: controlled access to providers, comprehensive case management, risk sharing, preventative care, and high-quality care.

Premium payments for personally-owned disability income policies are AEligible for tax credits. BTax deductible. CTax deductible to the extent that they exceed 10% of the adjusted gross income of those itemizing deductions. DNot tax deductible.

DNot tax deductible. Premiums for personally-owned individual disability income policies are not deductible

Which of the following applies to partial disability benefits? AAn insured is entitled to a principal sum benefit for the partial loss of a limb. BPayment is based on termination of employment. CBenefits are reduced once an insured is no longer under a doctor's care. DPayment is limited to a certain period of time.

DPayment is limited to a certain period of time. The partial disability benefit is typically 50% of the total disability benefit, and is limited to a certain period of time.

An employee insured under a group health policy is injured in a car wreck while performing her duties for her employer. This results in a long hospitalization period. Which of the following is true? AThe group plan will pay. BThe group plan will pay a portion of the employee's expenses. CThe group plan will pay depending on the employee's recovery. DThe group plan will not pay because the employee was injured at work

DThe group plan will not pay because the employee was injured at work. Because the employee's injuries were work related, the group health policy would not respond. The insured would have to rely on worker's compensation for coverage.

Which of the following is NOT true regarding partial disability? AThe insured can still report to work and receive benefits. BBenefit payments are typically 50% of the total disability benefit. CAn insured would qualify if he couldn't perform some of his normal job duties. DThis is a form of insurance that covers part-time workers.

DThis is a form of insurance that covers part-time workers. Partial disability covers full-time-working insureds who are unable to perform some, but not all, of their regular job duties or can no longer work full-time, which ultimately results in a loss of income. Payment from partial disability is typically 50% of the total disability benefit.

A policyowner has a health insurance policy with his wife listed as the primary beneficiary. He would like to change the primary beneficiary to his sister. Which of the following is true? AThe policyowner can only change the primary beneficiary with the current beneficiary's consent. BThe beneficiary may only be changed if a court deems the change acceptable. CThe policyowner will have to cancel this policy and apply for a new one with a new primary beneficiary. DUnless the policy designated the current beneficiary as irrevocable, the policyowner can make the change at any time.

DUnless the policy designated the current beneficiary as irrevocable, the policyowner can make the change at any time. Unless a beneficiary is designated as irrevocable, the insured can change beneficiaries without the consent of the former beneficiary

Workers compensation insurance covers a worker's medical expenses resulting from work related sickness or injuries and covers loss of income from AJob termination. BPlant or office closings. CTemporary job layoffs. DWork-related disabilities.

DWork-related disabilities. All states have workers compensation laws, which were enacted to provide mandatory benefits for employee's work related injuries, illnesses, or death.

An employee is injured in a construction accident, rendering him unable to work for a year. Which of the following plans would provide him with medical expense coverage and income assistance? AMajor Medical Insurance BLong-term Care CSocial Security Disability DWorkers Compensation

DWorkers Compensation Workers Compensation provides employees with medical, income, death, and rehabilitation benefits in the event of work-related injury.

Disability income coverage specifies that the policy covers the insured if he is unable to perform any job for which he is qualified. In this case, total disability is defined as AAny occupation - less restrictive than other definitions. BOwn occupation - more restrictive than other definitions. COwn occupation - less restrictive than other definitions. DAny occupation - more restrictive than other definitions.

If total disability is defined as any occupation, it means the coverage will apply only if the insured cannot find any means of income whatsoever. This is more strict than own occupation, where a person merely has to prove that they cannot perform the job for which they were previously trained.