Insurance and Retirement Practice Flashcards

Flashcards covering life, health, and disability insurance concepts, annuities, retirement plans, government programs (Medicare/Medicaid/Social Security), and Washington state insurance regulations based on lecture notes.

What is an example of an applicant intentionally lying to an insurance company to obtain a cheaper premium?

Fraud

What activity is typically excluded from coverage in most life insurance policies?

Racing cars as a hobby

Which document is NOT typically considered a source of underwriting information for life or health insurance?

Disclosure authorization response

What happens if a life insurance applicant with a conditional receipt dies the day after applying?

The claim will be paid if the application is approved by the underwriter

Which signature is NOT required on an individual insurance application?

The insurer

Besides the producer and the policyowner, from whom MUST a producer obtain signatures for an insurance application?

The insured (note: the beneficiary is NOT required to sign)

In most states, how many months can a life insurance policy be backdated from the date of application?

$6$ months ($3$ months in Ohio)

For what purpose would an attending physician's statement (APS) be requested?

At the request of the insurer to assist in the underwriting decision with the applicant's consent

Which document specifies the critical segments of a life insurance policy?

Policy summary

What is the status of an applicant's medical history when applying for life or health insurance?

The medical history may be analyzed and reported

How is a person classified if they are not acceptable by an insurer at standard rates due to health history, occupation, or hobbies?

Substandard risk

Which law requires insurers and producers to comply with consumer rights regarding inspection or credit reports?

Fair Credit Reporting Act

What is a statement of fact or something guaranteed to be true in an insurance application called?

Warranty

Which factor is NOT considered a key factor in underwriting life or health insurance?

Marital status

In what specific way can an insurer screen applicants for HIV?

Requiring a blood test for HIV

What is the conversion privilege in a group life plan?

It allows an employee to convert to an individual plan upon termination of employment

What document does an insurer issue to a group policyowner for delivery to each person insured?

Certificate

What is adverse selection?

The tendency of less favorable insurance risks to seek or continue insurance to a greater extent than others

What type of group is organized for purposes other than obtaining insurance and has a constitution and bylaws?

Association or labor group

Which factor does an insurer consider when determining whether to accept a group life plan?

Average age

Why are non-contributory health insurance plans desirable from an underwriting standpoint?

They minimize adverse selection because all eligible employees are typically covered

What are the common characteristics of a Group Life Insurance Plan?

Group underwriting, master contracts, and probationary periods

What document describes the coverage, conditions, and limitations of the master policy in a group contract?

Certificate of coverage and benefits

What term describes the phase where an annuity is experiencing tax-deferred growth?

Accumulation period

Which annuity payout option allows a pre-determined number of benefit payments?

Period certain

How do interest earnings accumulate in a deferred annuity?

On a tax-deferred basis

What is a Guaranteed Lifetime Withdrawal Benefit (GLWB)?

A rider on a variable annuity that guarantees a certain percentage can be withdrawn each year regardless of how long the contract holder lives

What is the nonforfeiture value of an annuity before annuitization?

All premiums paid, plus interest, minus any withdrawals and surrender charges

What is the minimum schedule for income payments to begin in a deferred annuity?

At least $12$ months after the date of purchase

What is an equity-indexed annuity?

An annuity linked to a market-related index

Which type of annuity requires premium payments that vary from year to year?

Flexible premium deferred annuity

What is an annuity certain?

A type of annuity providing a guaranteed accumulation or payout

Who is the only person authorized to surrender an annuity during the accumulation period?

The policyowner

When does an immediate annuity begin making payments?

After the first premium has been paid

What determines the payment amount in an annuity?

The annuitant's life expectancy

If an annuitant dies before the annuity start date, what is returned to the beneficiary?

The premiums paid plus interest earned

How does an individual qualify as fully-insured under Social Security?

By being credited with the appropriate number of quarters of coverage

What is the blackout period in Social Security?

The period where no benefits are provided to a surviving spouse, starting when the youngest child turns $16$ until the spouse reaches age $60$

What is the duration requirement to qualify for Social Security Total Disability?

The disability must be expected to last at least $12$ months or result in death

Which retirement plan was designed primarily for self-employed individuals?

Keogh plan

Under a Traditional IRA, when is interest earned taxed?

Upon distribution at ordinary income tax rates

How many days does an individual have to complete an IRA rollover to avoid tax penalties?

$60$ days

Which employers are subject to ERISA regulations?

Private sector employers offering qualified benefit plans

What are the requirements for tax-free withdrawals from a Roth IRA?

The owner must be at least age $59 \frac{1}{2}$ and have held the account for at least $5$ years

Are contributions to a Roth IRA tax-deductible?

No, they are made with post-tax dollars

What does the human life value approach measure?

Future net earnings capability to calculate financial impact on dependents

What are examples of business continuation plans?

Key person insurance, cross-purchase agreements, and stock redemption plans

Is taking out a business protection policy on entry-level employees an appropriate use of life insurance?

No

What is estate conservation in life insurance?

Purchasing a policy to enable heirs to pay estate taxes

How are employer-paid premiums for group life insurance treated for the employer?

They are typically tax-deductible to the business

What is a Section 125 Plan (Cafeteria Plan)?

A plan that allows contributions to an HSA to be made pre-tax; without it, contributions are taxable income to the employee

Who is ineligible for COBRA continuation coverage?

An employee terminated for gross misconduct

If an employer pays $50 \%$ of a disability premium, what portion of a $1,000$ monthly benefit is taxable income?

$$500$$

What is HIPAA's rule for an insured person moving from one group health plan to a new employer's plan?

The individual is eligible for coverage upon hire

What are the two perils in health insurance?

Accident and sickness

How is Medicare utilized if an individual over $65$ continues to work and stays on an employer group plan?

The group plan is primary and Medicare is the secondary payer

How much of their health costs can sole proprietors deduct?

$$100 \%$$

What is the purpose of Credit Accident and Health plans?

To help pay off existing loans during periods of disability

What percentage of physician fees does Medicare Part B typically pay?

$$80 \%$$

How is Medicaid funded and administered?

It is funded by federal, state, and local taxes but administered by each state

What does Medicare Part A cover?

Inpatient hospital stays, skilled nursing care, hospice, and some home health care

How is Medicare Part B partially funded?

By monthly user premiums and general tax revenue

What is a Preferred Provider Organization (PPO)?

A health plan that provides a greater choice of providers and covers out-of-network care at a lower percentage

What is the primary goal of a rehabilitation benefit in disability insurance?

To assist the insured so they can return to work

What is presumptive disability?

Conditions like loss of sight or limbs that automatically presume total disability, regardless of earnings

What kind of rider allows the purchase of additional coverage without a medical exam?

Guaranteed Insurability Rider (GIR)

When are premiums waived under a waiver of premium rider?

Beginning at the date of disability

What is a drug formulary?

A list of prescription drugs covered by a pharmacy benefit

What are the three levels of care provided by Long-Term Care policies?

Skilled nursing, intermediate, and custodial care

What is respite care?

Care designed to provide temporary relief to a primary caregiver

What is the Mandatory Entire Contract provision?

The policy, endorsements, and attached papers constitute the entire insurance contract

In Washington, what is the maximum fixed interest rate for life insurance policy loans?

$$8 \%$$

What is the time limit for a Legal Actions provision in a health contract?

$5$ years

What is the difference between a noncancellable policy and a guaranteed renewable policy?

A noncancellable policy may never raise premiums, whereas a guaranteed renewable policy may raise premiums at renewal

How many days does an insurer have to furnish proof of loss forms after receiving a notice of claim?

$15$ days

What is the continuing education requirement for Washington insurance producers?

$24$ hours every $2$ years, including $3$ hours of ethics

What is the free-look period for life insurance in Washington?

$10$ days ($30$ days for Long-Term Care and Medicare Supplement)

What is defamation in the insurance industry?

Making false or maliciously critical statements about the financial condition of an insurer

What is the purpose of the Washington Life and Disability Guaranty Association?

To protect insureds from insolvent insurers

How often must the Commissioner examine domestic insurers in Washington?

At least every $5$ years

What are the four tiers of health plans under the Affordable Care Act (ACA)?

Bronze, Silver, Gold, Platinum

What is the actuarial value of a Silver Plan under the ACA?

$$70 \%$$

At what age does open enrollment for Medicare Supplements typically begin?

Age $65$

What is the grace period for a health insurance policy with a monthly premium?

$10$ days

What is the grace period for a life insurance policy in Washington?

$30$ days