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Questions and Answers
What is the primary purpose of a Pour-Over Will?
What is the primary purpose of a Pour-Over Will?
Which of the following best describes the role of a General Power of Attorney?
Which of the following best describes the role of a General Power of Attorney?
What is included in the estate for federal estate tax purposes?
What is included in the estate for federal estate tax purposes?
What is the consequence of gifting more than $15,000 annually per person?
What is the consequence of gifting more than $15,000 annually per person?
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Who has the authority to make medical treatment decisions in a health care power of attorney?
Who has the authority to make medical treatment decisions in a health care power of attorney?
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Which trust allows for a surviving spouse to receive outright distributions?
Which trust allows for a surviving spouse to receive outright distributions?
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When will the estate tax exemption reset to $5 million?
When will the estate tax exemption reset to $5 million?
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What is typically specified in a Living Will?
What is typically specified in a Living Will?
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What type of insurance coverage is designed to protect against claims that exceed standard liability limits?
What type of insurance coverage is designed to protect against claims that exceed standard liability limits?
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Which investment strategy is characterized by consistent investing in equal amounts over time?
Which investment strategy is characterized by consistent investing in equal amounts over time?
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What is the recommended credit score for optimal financing options?
What is the recommended credit score for optimal financing options?
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Which document is essential for someone to control healthcare decisions if they become unable to do so themselves?
Which document is essential for someone to control healthcare decisions if they become unable to do so themselves?
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Which of the following is NOT a tax-advantaged account for retirement savings?
Which of the following is NOT a tax-advantaged account for retirement savings?
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What is the maximum contribution limit for a Health Savings Account for a single individual?
What is the maximum contribution limit for a Health Savings Account for a single individual?
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Which type of retirement distribution is tax-free when withdrawn at retirement?
Which type of retirement distribution is tax-free when withdrawn at retirement?
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Which of the following best describes the goal of effective personal financial planning?
Which of the following best describes the goal of effective personal financial planning?
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What is the retirement income objective based on a salary of $220,287 at age 67?
What is the retirement income objective based on a salary of $220,287 at age 67?
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Which of the following retirement funding options is NOT mentioned?
Which of the following retirement funding options is NOT mentioned?
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Which investment type is generally considered to have a low return and high safety?
Which investment type is generally considered to have a low return and high safety?
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What is the total amount required at age 67 to fund a monthly income of $8,554 for life with 20 years certain?
What is the total amount required at age 67 to fund a monthly income of $8,554 for life with 20 years certain?
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Which of the following accounts allows for tax-free growth?
Which of the following accounts allows for tax-free growth?
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What is the primary purpose of FICA tax?
What is the primary purpose of FICA tax?
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Which of the following is a characteristic of dollar cost averaging?
Which of the following is a characteristic of dollar cost averaging?
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Which document is NOT typically part of estate planning?
Which document is NOT typically part of estate planning?
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Study Notes
Personal Umbrella Policy
- Protects against catastrophic personal lawsuits ($1-$10 million limits)
- Covers excess liability beyond homeowners and auto policies
- Provides broader coverage than standard policies
- Minimum underlying limits are required from home and auto policies
- Premiums range from $200-$250 annually per $1 million limit
Umbrella Insuring Agreement
- Pays damages exceeding the retained limit for BI, PD, or PI
- Legal defense is included in the policy limits
Retained Limits Under Umbrella
- Policy specifies umbrella retained limits (HO or PAP)
- Retained limits are stated in the declarations, often $1,000
- Issues arise when underlying policy limits are lower than required minimums
Underlying Coverage Limits for Personal Umbrella Policy
- Auto limits: $250,000/500,000/50,000
- Homeowners' liability: $300,000
- Watercraft liability: $500,000
Example of Underlying Policy Limits
- Dan and Lori have a $1 million umbrella policy with $250,000/500,000/100,000 auto limits.
- A $300,000 umbrella loss occurs with lower underlying auto policy limits ($100,000/300,000/100,000 at the time of the loss)
- Dan and Lori would pay $150,000 out of pocket before the umbrella coverage responds.
Umbrella Provides Broader Coverage
- Covers personal injury (false arrest, libel, slander)
- Covers non-owned watercraft
- Covers worldwide automobile (not owned or rented)
- Excludes intentional injury, business liability, communicable disease, professional services (doctor, lawyer), and directors' and officers' liability
Umbrella Claims Examples
- Insured is at fault in an auto accident involving school bus passengers.
- Insured slanders a public official.
- Auto accident while driving in Europe.
- Jet ski accident with serious injury.
- Intoxicated driver crosses median and crashes.
Health Insurance
- Deductible: Amount paid for covered services before insurance starts to pay. Higher deductible = lower premiums, often per individual or family annually. Preventative care checkups can be waived for some plans. Separate prescription limits may exist.
- Coinsurance: Percentage paid for covered services after the deductible has been met. Common percentages are 20% or 30%.
- Copay: Flat fee for doctor's visits and prescription drugs. Discourages overuse.
- Annual Stop Loss: Maximum out-of-pocket limit, once this threshold is met the company pays 100% of medical expenses for the year.
Health Insurance - Policy Types
- POS (Point of Service): Allows utilization of both in-network and out-of-network providers. Higher costs for out-of-network. Specialist referrals usually required for out-of-network specialists.
- HMO (Health Maintenance Organization): Allows utilization of only in-network providers. Premiums are generally lower. Specialist referrals usually required for specialists.
- Preferred provider organization (PPO): Allows both in-network and out-of-network providers, but out-of-network coverage is typically lower and a referral is not required to see specialists.
Health Savings Account (HSA)
- A personal account for qualified medical expenses.
- Eligibility: High-deductible health plan (HDHP), not covered by Medicare. Balance may accumulate if not used in the previous year.
Health Care Reform (ACA)
- Effective in 2010, governs health insurance.
- Key provisions: dependents covered until age 26, no lifetime limits, coverage regardless of pre-existing conditions, prevent cancellation due to illness.
- Health Care Exchange: A place for individuals and families to purchase plans. Premiums can be subsidized to 50% of costs up to $47,250 and $97,200 for families.
Retirement Planning
- Need for Comprehensive Retirement Program: Budgeting, savings, and investing. Key resources to have are health care power of attorney, general power of attorney, and living wills.
- Retirement Income Objective: Examples provided for salary, annual growth rate, and desired retirement income.
- Retirement Funding Options: Employer-sponsored retirement plans, tax-exempt Roth IRAs, and personal investment accounts.
- Savings & Investing: Types of savings vehicles like CDs, money market accounts, emergency funds, and investments. Stocks and bonds. Risk tolerance is also a consideration. Portfolio diversification is important.
Investments - Tax Strategy
- Tax deferral from employer-sponsored 401K, IRAs, or annuities.
- Tax-free income sources like Roth IRAs, health savings accounts (HSAs), and municipal bonds.
Revocable Living Trust (RLT)
- Estate planning tool for managing assets during lifetime and at death.
- The grantor retains control during lifetime and designates a successor trustee.
- Avoids probate fees and protects assets from claims.
- Includes life insurance, cash, stocks, bonds, and other personal assets.
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Description
This quiz covers the key aspects of personal umbrella policies, including their coverage limits, underlying requirements, and insuring agreements. It addresses how these policies provide protection against significant personal liability claims and the importance of retained limits. Test your knowledge on umbrella insurance details today!
