Life, Accident and Health Insurance

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

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

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- If withdrawn for unqualified withdrawl, 10% penalty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 ex

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 exce

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 pro

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

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 co

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

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 ordina

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

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

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

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 disabi

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 lim

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

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 th

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 i

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

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 y

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

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 hire

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

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 t

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