Accident and Health Insurance (policy provisions, disability income, medical expense, group health, and New York-specific requirements)
Retirement Plans: Qualified, IRA, and Nonqualified Arrangements
Qualified plans
Qualified plans satisfy IRC and ERISA rules in exchange for tax deferral and employer deductions. Defined benefit plans promise a benefit, often by formula; defined contribution plans promise only the account. Common designs include profit sharing, 401(k) with salary deferrals and employer match, 403(b) for schools and nonprofits, and 457(b) for government employers. Contributions are generally pre-tax, growth is tax-deferred, and distributions are ordinary income. Before age 59 and a half a 10 percent penalty usually applies, with exceptions for disability, death, qualifying separation at 55, 72(t) substantially equal payments, and qualified birth or adoption. Required minimum distributions begin at 73 for those born 1951 through 1959 and later rise to 75.
IRAs
Traditional IRA contributions may be deductible or nondeductible depending on coverage and income. Roth IRA contributions are after-tax with tax-free qualified withdrawals and no lifetime RMDs. Catch-up contributions apply at age 50 and over. Limits are indexed; exams typically quote current-year figures (for example 7,000 dollars for an IRA and 23,500 dollars for a 401(k) in 2025), so learn the concept and the catch-up rules.
Nonqualified plans
Deferred compensation, split dollar, and executive bonus (Section 162) plans may discriminate freely, provide no deduction until income is recognized, are often funded with life insurance, and fall outside qualified plan rules.
Traps
Proper rollovers are not taxable, whether trustee-to-trustee or within 60 days. SEP and SIMPLE plans are employer plans, not IRAs an employee opens alone. A Roth conversion is taxable in the year of conversion.
Worked rule
An employer match does not count against the employee's elective deferral limit; only the employee's own deferrals do.
Uses of Life Insurance: Personal, Business, and Estate Planning
Personal needs analysis
Producers set face amounts using human life value (present value of future earnings) or the needs approach: income replacement, mortgage and debt, education, final expenses, and an emergency fund, minus existing resources. Capital retention preserves principal and pays interest to survivors; capital liquidation spends principal and interest. Mortgage protection is usually decreasing term; family income plans blend level and decreasing coverage.
Business uses
Key-person insurance indemnifies a firm for the loss of a crucial employee; the business owns the policy and receives proceeds (premiums not deductible, proceeds generally tax-free). A buy-sell funds the purchase of a departing owner's interest in a cross-purchase or entity (stock redemption) arrangement, fixing value and providing liquidity. Split dollar shares premium and benefit between employer and executive; executive bonus uses a deductible bonus the executive applies to a policy; deferred compensation is informally funded with a corporate-owned policy.
Estate planning
Estate shrinkage comes from taxes, administration expenses, and debt. Life insurance supplies liquidity so heirs do not have to sell assets. An irrevocable life insurance trust owns the policy, removing proceeds from the estate, provided the insured gives up incidents of ownership and survives the three-year inclusion rule.
Other uses
Charitable gifts of policies or beneficiary designations, business continuation funding, credit life tied to a loan balance, juvenile policies that lock in insurability, and Section 1035 exchanges to reposition coverage tax-free.
Worked example
Four equal business owners choose an entity-purchase buy-sell: the company owns and pays for the policies and buys a deceased owner's shares from the estate, avoiding four separate cross-purchase policies.
Traps
Key-person proceeds are not deductible to anyone; buy-sell premiums are not deductible; a business-owned policy may create transfer-for-value or estate inclusion issues.
Accident and Health Insurance: Provisions, Disability Income, Medical Expense, and New York Rules
Policy structure
Health policies are conditional contracts with defined renewal provisions (noncancellable, guaranteed renewable, conditionally renewable, optionally renewable). Core provisions include entire contract, time limit on certain defenses (typically two years), grace period, reinstatement, claim forms supplied within 15 days, proof of loss (usually 90 days), time of payment of claims, physical exam, legal actions, change of occupation, misstatement of age, other insurance with this insurer, and cancellation notice. New York adds mandated benefits and strict claim-practice rules under Regulation 64.
Disability income
Benefits replace income. The elimination period is a waiting period, not a deductible, and a longer one lowers premium; benefit periods run from short term to age 65. An own-occupation definition pays more and costs more than any-occupation. Residual or partial disability pays a percentage for reduced earnings, and recurrent disability clauses waive a new elimination period. New York statutory Disability Benefits Law coverage provides short-term benefits (up to 26 weeks at 50 percent of average weekly wage, subject to a maximum adjusted annually) for off-the-job illness or injury.
Medical expense and group
Basic hospital, surgical, and medical plans combine with major medical featuring deductibles, coinsurance, and stop-loss limits. Managed care models: HMO (closed panel, gatekeeper), PPO (network discounts), and POS. Group health includes conversion and continuation rights (COBRA 18 or 36 months), coordination of benefits, and New York community rating and guaranteed issue in the individual and small-group markets. Medicare supplements fill gaps in Parts A and B; Medicare Advantage is Part C.
Traps
A pre-existing condition clause limits coverage during a look-back period. Business overhead expense and key-person disability insure the business, not personal income.
Worked rule
If income must resume quickly after a disability, shorten the elimination period and accept the higher premium.