Review for C17-22 (Financial Concepts) PDF

Review for C 17, 19, 20, 21, 22, 18 C17 Understand the various life cycle risks/exposures Be familiar with statistical tables: mortality, longevity, morbidity, disability, and annuity Be able to assess economic value: human life, needs, capitalization approaches Human life – estimate value of d...

Review for C 17, 19, 20, 21, 22, 18 C17 Understand the various life cycle risks/exposures Be familiar with statistical tables: mortality, longevity, morbidity, disability, and annuity Be able to assess economic value: human life, needs, capitalization approaches Human life – estimate value of deceased person income they would have acquired if they had survived Needs – estimate the financial needs of there dependants Capitalization approach - prinipals reservation + income Know the difference between cash(DW)/non-cash(IW) employment based TC - Cash is direct wage and is taxable - Non-cash is like non cash benefits that come and is non free C19 Remember how life insurance works (pooling) and how rates are calculated (discounted mortality) You should be able to calculate the cost of death protection: (#dying/#alive)*$1,000 Understand the differences between term, whole, universal type a/b, and variable life insurance TERM – year to year, premiums up each year, pure death protection, only insured in policy period if die WHOLE – Lifetime protection, level premium UNIVERSAL – Garentee min interest rates based on bonds only, flexible, A- level death benefit, B – face amount increases as cash accumulated does VARIABLE – Mutual fund bond (riskier), Fixed, depends on value of stocks, Be familiar with the level premium payment method and the reserve (cash value) accumulations Level – premium that remains constant instead of rising from year to year Cash value – accumulated fund to meet saving needs The reserve – funds accumulated to offset any falling short of providing promised death benefits No the difference between a living and death benefit and the tax implications of each, including payment to named beneficiaries and beneficiary designations Living Benefit: Payouts from life insurance while the insured is alive, often for specific needs (e.g., terminal illness or chronic care). Typically tax-free if used for qualified expenses but may be taxable if not. Death Benefit: Lump sum paid to beneficiaries after the insured's death. Generally tax-free for named beneficiaries unless included in the estate and subject to estate taxes. You should be able to calculate after tax value of a terminated whole life insurance policy It is very important for you to know the main policy provisions of the whole life policy – review contract in the appendix You should know the life riders emphasized in class Waiver of Premium: A rider that allows policyholders to skip premium payments if they become disabled or unable to work, keeping the policy active without financial strain. Accidental Death Benefit: Provides an additional payout to beneficiaries if the insured's death results from an accident, typically doubling the base death benefit. Guaranteed Insurability Option: Allows the insured to purchase additional life insurance coverage at specified intervals or life events (e.g., marriage, childbirth) without undergoing a medical exam, regardless of changes in health. Remember the differences between group and individual life insurance  Group Life Insurance: Offered through an employer or organization, it covers multiple people under a single policy, often with lower premiums but limited customization and coverage portability if you leave the group.  Individual Life Insurance: Purchased directly by an individual, it allows for tailored coverage and benefits, typically at a higher cost, but remains independent of employment or group affiliations. C20 Understand what employee benefits, the nature of group insurance, and Total Compensation concept All noncash compensation items sponsored by employers for their employees; includes group insurance, educational assistance, legal assistance, childcare, discounts, etc. Know how group insurance is priced and paid for between employer/employee Understand the concept of nondiscrimination and how it is enforced You should know the difference between contributory and non-contributory plans Noncontributory plan: EEB funded only by employer contributions. Contributory plan: EEB that requires the employee to pay all or part of pension fund contributions C21 Know the difference between a qualified and non-qualified plan and their advantages/requirements qualified - deductible as a business expense and not taxable income to the employee until they are received as benefits. non-qualified - Does not allow employer funding contributions to be deducted as business expenses unless classified as compensation to the employee You should remember the basic types of retirement plans, which are popular, and advantageous to you, such as DC, DB plans, 401(k), IRA and Roth IRA; as well as the advantages of each plan type Be familiar with annuities: types, options, advantages/disadvantages, and how annuities can be used to mitigate longevity risk C22 Understand how the Health Care System works in the US, changes, and advantages/disadvantages Be familiar with the spectrum of health plans (table 22.1) available, costs, coverage, and advantages/disadvantages Remember the continuum of health plans (figure 22.2) and major medical plans (figure 22.4) Know why protection against disability is important, especially for younger labor force participants and the characteristics of group LTD coverage You should be familiar with the main components of the Affordable Care Act and what some of the controversies are surrounding the Act Be familiar with why health care costs so much in the U.S. and why we have so many uninsured Americans Review the advantages/disadvantages of Accountable Care Organization and how they may improve quality of care and lower costs C18 You should understand the benefits that the acronym OASDHI program stands for You should be able to discuss the financial problems of Social Security and some of the potential fixes Know how you qualify for SS benefits and the various ages when benefits can be received Be familiar with the various parts of the Medicare Health Insurance Program Part A – in hospital care and follow ups Part b- dctors services, out of hospital care anjd other medical services Part D – prescription drugs Recognize why SS has played a major role in helping to reduce old age poverty in the US