Insurance & Risk Management Strategies Flashcards

A 35-year-old with two young children and a non-working spouse asks about life insurance. What type provides the most coverage per premium dollar?

Answer: Term life insurance

Term life insurance provides the highest coverage amount per premium dollar because it offers pure death benefit without cash value.

What is the primary purpose of disability insurance in a comprehensive financial plan?

Answer: To replace a portion of income if the insured cannot work

Disability insurance replaces a portion of earned income (typically 60-70%) when the insured cannot work due to qualifying illness or injury.

A client has a $200,000 home with a $150,000 mortgage and $300,000 dwelling coverage. What should the counselor identify?

Answer: The coverage may be appropriate if it reflects the replacement cost to rebuild

Homeowner's insurance should cover replacement cost to rebuild, not market value or mortgage balance. Replacement cost can exceed market value.

Which health insurance plan type typically requires a referral from a primary care physician to see a specialist?

Answer: HMO

HMO plans require members to select a primary care physician who serves as a gatekeeper for specialist referrals.

A client is choosing between a low-deductible plan ($500 deductible, $450/month) and a high-deductible plan ($3,000 deductible, $250/month) with HSA. What analysis should the counselor perform?

Answer: Calculate total annual cost under various utilization scenarios

A thorough comparison requires modeling total costs under different utilization scenarios, plus considering HSA tax advantages.

What is an umbrella insurance policy and when should a counselor recommend one?

Answer: An excess liability policy providing additional coverage beyond existing auto and homeowner's policies

An umbrella policy provides excess liability coverage (typically starting at $1 million) above auto and homeowner's policy limits.