Life & Health Insurance Exam Prep

Death Benefit

(Face Amount, Face Value, Proceeds) is the amount paid when a death claim occurs against a policy of insurance. In health policies, the only time a death benefit is paid is in AD&D policies, death must occur because of an accident only.

Coinsurance

- Once the deductible is met the insured and the insurance company share in the expenses in what is called coinsurance. It is written as 80/20, 70/30, etc. Also called percentage participation requirement.

Major Medical Expense Policy

-A supplement (in addition) to Basic Medical or as a stand-alone policy. -individual or group policy. -Take over when the Basic Policy runs out

Future Increase Option, (FIO)

-Allows an insured to increase the benefit level up to a specific predetermined amount at certain times or on certain occasions, without proof of insurability. -An increase may also be taken at one's marriage or birth of a child. -In order to exercise this rider, the insured must qualify from an income standpoint to prevent over insurance.

Taxation of LTC Premiums

-Any premium paid by the employer is deductible as a business expenses. -Any premiums paid by the employee are only deductible to the extent that the employee's premiums, when added to all other un-reimbursed medical expenses, exceed 7.5% of the taxpayer's adjusted gross income, if the taxpayer itemizes deductions.

LTC Coverage

-At least12 consecutive months in the event the insured requires confinement in any care center environment, other than an acute unit of a hospital.

Morbidity Tables

-Based on the law of large numbers. -Predict how many people are going to be disabled in a given year and the severity the disability. -Tables are important to an insurer because some insureds become more disabled than others.

Payment of AD&D Exceptions:

-Be Purely Accidental -Occur within ninety days of the accident -Occur before the age of 70

Daily Hospital Benefit

-Cost of a hospital room, up to a daily $ limit. The limit may be expressed either as a dollar amount, e.g. $500 per day, or it may be expressed as the Usual, Customary and Reasonable (UCR) and Charge

Major Medical Expense

-Cover "catastrophic" or huge loss. A Catastrophic loss is defined as whenever Basic coverage runs out and not a specific dollar amount. -High Maximum Limits ($2,000,000) -Deductibles (per person or per family ea yr)) -Co- insurance (Usually 80/20%) -Stop Loss -Miscellaneous Expense Benefits - x-rays, MRI, lab tests, etc.

Business Over Head Expense (BOE)

-Designed to provide funds to pay continued expenses of a business when the proprietor (owner) is disabled. Continuing expenses such as power, heat, rent and salaries of employees are provided by this policy. -Will not provide income for the owner -Only actual incurred losses are payable.

Disability Income Insurance

-Designed to replace income lost due to a disability or illness of the insured wage earner. It never pays for the medical expenses; it only replaces lost income and must be paid no less frequently than monthly. Its to avoid Economic Death. -Can be group of individual policy

Key Employee Policy

-Indemnifies an employer for the additional cost of doing business upon the disability of a Key Employee. -The funds can be used to replace the income from losing a key employee or for the hiring of a replacement. -3rd party ownership:The business is the owner, pays premium and is beneficiary

Exclusions found in Basic and Major Medical

-Injuries due to war or military conflict -Elective cosmetic surgery -Routine Dental Care -Eye Exams & Glasses Treatment in a Veterans Hospital or other Gov Facility -Workers Compensation Accidents -Claims Occurring Outside the U.S. -Intentionally Self-Inflicted Injury

Taxation of LTC Benefits

-LTC benefits are received income tax free if the plan is a tax- qualified plan. Excessive benefits, as determined by statute, are taxable as ordinary income.

Service Based Contracts

-Pay doctors and hospitals directly according to the # of days of coverage that is provided in the contract for each event and are prepayment plans. Once a claim is settled, the insured will receive an Explanation of Benefit (EOB), which is a written confirmation that the claim was paid. Blue Cross and Blue Shield, Health Service Corporations and Medicare coverage are all provided on a Service Basis.

Hospital Expenses

-Pay for covered expenses incurred during a hospital stay. 1. Daily hospital benefit - Room and Board 2. Miscellaneous expenses - Other Medical Expenses (X-Rays, MRI, Prescriptions, Doctor Visits)

Capital Sum

-Payable if the insured is dismembered (loses a limb) in an accident. The Capital Sum is usually different for each body part listed for coverage (hands, feet, legs, arms and eyeballs). The policy will pay a Capital Sum for loss of use of eyesight and loss of hearing. Other loss of use is not payable

Critical Illness Plans

-Pays a lump sum to the insured upon the diagnosis (& survival) of a critical illness. The insured must survive the illness for a certain time period (Ex 30 days).

Flat Deductible

-Portion of medical expenses that are paid by the insured each year before benefits start. The higher the deductible the lower the annual premium will be. -If a medical incident occurs in the last three months of any plan year and the annual deductible has met the yearly requirement then the medical treatment for that incident only would be covered in the new plan year. Thus a "carryover" into the next year of the paid deductible has occurred.

Hospital Indemnity

-Provides a specific amount on a daily, weekly or monthly basis while the insured is confined to a hospital. The benefit payments are sent directly to the insured and can be used for any purpose.

Recurrent Disability

-Provision that specifies a period of time (usually 6 months) during which the reoccurrence of a disability is considered to be a continuation of the prior claim. It addresses situations when a claimant returns to work and is again disabled by the same cause.

LTC Policy's Must Include:

-Provisions for benefit increases for inflation and increased cost of living. -Cannot be cancelled, non-renewed or otherwise terminated on the grounds of age or the deterioration of the mental or physical health of the insured. -Exclusions may not include Alzheimer's disease, senile dementia, or other organic brain disorders. -Must provide not only for skilled nursing care, but offer the same coverage for lower levels of care.

Waiting Period or Elimination Period

-Refer to a period of time from the date of the claim (not date of issue) during which no benefit is paid. This provision can be viewed as a deductible of days. The premium on a DI policy is adjusted depending on the selection of the elimination period. Longer elimination periods result in lower premiums.

Miscellaneous Expense Benefits

-Secondary benefits (inside benefits) because they occur inside the hospital for charges related to the stay. X-rays, prescriptions, MRI's, anesthesia and lab fees are usually separate fees incurred during a stay. Miscellaneous Expense Benefits have separate limits, referred to as Inside Limits. The are expressed usually as a multiple of the daily amount (UCR)

Group Short Term Disability (STD)

-Some Disability policies pay in conjunction with Workers Comp, such as STD -The benefit period for STD cannot be longer than 2 years.

Benefit Schedule

-Specifically states what is covered in the plan and for how much. The coverage is subject to a maximum amount or number of days.

Pre-Existing Condition

-To Prevent avoid adverse selection. -A is a medical condition for which an insured sought medical attention, treatment, or advice for symptoms or for which should have sought medical advice/treatment in the previous 6 months. -For individual policies, the exclusion can not exceed 24 months, for group policies 12 months, and for late enrollees in group plans, 18 months.

Exclusions

-War and Military Service -Intentionally self-inflicted injury, including attempted Suicide -Standard Aviation Exclusions -Losses occurring during the commission of a felony -Private Pilot Exclusions and Exclusions related to hazardous hobbies (sky diving, Race Car Driving etc.) -Pre-existing condition limitations -Impairment Riders (used to exclude specific named conditions from coverage)

DI Taxation

. If an individual buys Disability Insurance with his/her after-tax dollars, the benefits will be tax-free. On the other hand, when employers pay for Group Disability Income benefits, the benefits are taxable to the employee.

Workers Compensation

A benefit required by the state and benefits will vary to some degree from state to state. This coverage is made available through government programs, private insurers, or by self-insuring. To be eligible the employee must work in an occupation covered by Workers Compensation insurance, and have had an accident or sickness that is work related.

Cognitive impairment

A person who can no longer take care of themselves without help or supervision of another person due to mental incapacity certified within the previous 12 months. LTC policies must provide a benefit for insureds suffering from Alzheimer's disease.

Surgical Expense

A schedule of procedures lists the amount allowable for each procedure. If a surgical procedure is not found in the schedule, it will still be payable. The amount payable for a procedure not listed is based on its relative value to a procedure of similar difficulty. There are usually no deductibles.

Per Cause Deductible

A separate deductible for each separate illness or accident.

Cancellable policies

Allow the insurer to cancel the policy at any time by providing a written notice. In this case, all unearned premium must be returned on a prorate basis.

Activities of Daily Living (ADL)

An insured qualifies for the LTC benefit by meeting a test for determining needs which involves an individual's inability to independently perform the ADL. Coverage commences when the insured cannot perform at least two of the listed ADL's .(Walking, Sitting, Eating Etc)

Travel Insurance

Covers most kinds of travel accidents, but only for a specified period of time.

Claim Settlement

DI claims must be paid no less frequently than on a monthly basis. Lump sum settlements may be offered to a client, but a company may not coerce a client into accepting a lump sum settlement.

Sickness or illness

Defined as either a sickness or disease contracted after the policy has been in force for at least 30 days, or a sickness or disease that first manifests itself after the policy is in force

Business Buy Out

Designed for partnerships and closely held corporations and is used to fund Buy-Sell Agreements between partners in the event of the total disability of any one of them. The Benefit is paid in a Lump Sum to the survivors in order for them to buy out the disabled partner

Long Term Care (LTC)

Designed to cover people who have assets that they want to protect and are in reasonably good health, who can qualify for the coverage, and can afford to pay for it. Many individuals requiring LTC are not sick or ill, but need support services to maintain an optimal level of functioning.

Respite Care

Designed to provide relief to the family care giver, and can include a service such as someone coming to the home while the caregiver takes a nap or goes out for a while. Adult day care centers also provide this type of relief for the caregiver.

Occupations or Non-occupational

Disability Income policies are classified as Occupational or Non-occupational, depending on whether or not they will pay for accidents occurring on the job. In most cases, Group Disability Insurance is written on a Non-occupational basis because accidents occurring on the job are covered by Workers Comp. There are many people, who are not eligible for Workers Comp, such as self- employed individuals and Principals of Partnerships.

Coverage Triggers

Event or condition that must occur before benefits are payable. There are 3 event triggers: activities of daily living, cognitive impairments, and medical necessity. It is important to note that hospital confinement is not required to qualify for LTC benefits.

Optional Renewable

Extends the right of renewal to the insurer only. Not allowed in Insurance Industry. These are phone in Cell Phone Contracts etc

Garmented Insurability Rider

Future Increase Option or Guaranteed Purchase Option. This option is also available on the life policies which allow the insured to purchase additional amounts of Disability Income coverage without evidence of insurability (no medical exam).

LTC Benefit Period

How long coverage applies after the Elimination Period (usually 30 or more days), in which the insured must be confined in a nursing home facility before benefits begins. -Benefit Period is usually 2 to 5 years

DI Flat Dollar Amount

In the event the insured becomes disabled the policy might pay a flat $1,000 per month, regardless of any other income benefits.

Notice Before Lapse or Termination

Include a written designation of at least one person, in addition to the applicant, who is to receive notice of lapse or termination of the policy for nonpayment of premium, or a written waiver, dated and signed by the applicant, electing not to designate an additional person to receive notice.

Individual VS Group LTC

Individual is the most common type of LTC in the private market and is sold as a guaranteed renewable policy, meaning the only way to change benefits or cancel the policy is on a group or class basis. Group plans are gaining in popularity and offer less underwriting and open enrollment periods.

Usual, Customary and Reasonable (UCR)

Insurance company will pay an amount for a given procedure based upon the average charge for that procedure in that specific geographic area. The coverage is subject to a maximum amount or number of days.

Any Occupation

Insured is qualified by reason of education, training or experience, is less liberal and may be used when the policy provides for Total and Partial Disability coverage. Most policies are any occupation because it is easier to justify the "any occupation" definition when agreeing to issue a policy

Temporary Total Disability

Insured is rendered unable to work for a period of time, but recovery can be anticipated. Maternity leave or traction for a bad back are examples.

Indemnity

Insured pays the bill and is reimbursed by the insurance company up to a specified limit amount. Medical expense policies that pay a fixed rate provide the insured with a stated benefit amount for each day of hospital confinement.

Surgical Schedule

Is simply a price list. Each procedure is listed and a dollar amount assigned and if a procedure is not listed in the schedule it is still paid.

Medical Impairment (Physical)

LTC policy provides coverage for only medically necessary diagnostic, therapeutic, rehabilitative, maintenance or personal care services.

Comprehensive major medical

Major Medical and Basic Medical are written together.

Malingering

Making the loss last longer than it has to.

Stop Loss

Max amount the insured is required to pay out of pocket: After the stop loss amount is reached by the insured, in a calendar year, the company will pay 100% of the remaining covered expenses. -calculated by adding both deductibles and coinsurance amounts.

Partial Disability

May be related to loss of Time, Function or Compensation. Partial disability is defined as the inability to perform one or more of the regular duties of one's own occupation or the inability to work on a full time basis, which results in a decrease in income.

Intermediate Care

Occasional nursing care at an institution or a specialized facility (rehab, for example). This provides coverage for individuals who require daily, but not 24-hour, care.

Corridor deductible

Occurs in the middle of the hospital stay, and bridges the gap from the basic to the major medical plan.

Residual Disability

Occurs when a person is disabled then returns to work under the "Any Occupation" provision and earns less than was promised by the Disability Income Policy.

DI Insurability

Only Disability Income Policies can be written as Guaranteed Renewable (G/R) and Non-Cancelable.

Permitted Compensation

Only if the first year compensation is not greater than 50% of the first year's premium. The commission or other compensation for a minimum of 5 subsequent years cannot exceed 10% of renewal premium.

Benefit Amount

Payable is usually a specific amount per day, such as $50 to $200 per day, and some policies pay the actual charge incurred per day. Most LTC policies are guaranteed renewable, so insurers have the right to increase the premiums on a class or group basis.

Physicians Medical Expense

Pays for visits to the doctor (office hospital) plus post operation care. There may be a per-visit benefit, or the coverage is based on UCR. -May or may not be a deductible . This policy is usually written as an indemnity plan and has first dollar coverage (no deductible). -usually written as an indemnity plan and has first dollar coverage

Dread Dieses (Limited Risk)

Policies provide a variety of benefits for a specific disease such as a cancer policy or a heart disease policy. Benefits are usually paid as a scheduled amount of indemnity for specified events or medical procedures, such as hospital confinement or chemotherapy.

Accidental Death and Dismemberment (AD & D)

Policy pays specific benefits to an insured who suffers a loss on a purely accidental basis. Always 2 benefits: 1. Principal Sum 2. Capital Sum No Payments will ever pay for loss of disease or sickness

Reimbursement

Policyowners obtain medical treatment from whatever source they want and submit their charges to their insurer for reimbursement (actual amount).

Basic Medical Expense policies

Provide coverage for Hospital, Surgical and Physicians Medical Expense. -Purchased as a individual or group policy. -provide first dollar coverage (no deductibles). -limited benefit periods and low coverage limits.

Home and Community based Services

Provided in one's home and might include occasional visits to the person's home by registered or licensed nurses or community organizations like hospice. It may include physical therapy and some custodial care, such as meal preparation.

Custodial Care

Provides assistance in areas such as eating, bathing and using bathroom facilities. These are not performed by medical personnel, but prescribed by a physician. These services can be performed in a nursing home or at the claimant's residence since it provides for the least severe cases.

Skilled Care

Provides daily nursing care and rehab that can only be provided by medical personnel and under the direction of a physician -Service is provided at a specialized institution and requires 24-hour care because it provides for the most severe cases

Presumptive Disability

Provision that is found in most DI policies which specifies the conditions that will automatically qualify the insured for full disability benefits. Some disability policies provide a benefit when people simply meet certain qualifications, regardless of their disability to work.

Benefit Period

Range from a six month period to policies that provide coverage to age 65. Disability payments cannot go beyond age 65 because the purpose of Disability is to replace lost income, and at age 65 you are presumed to be retired.

Group Long Term Disability (LTD)

Reserved for management or higher paid employees. The Elimination Period will coincide with the benefit period of the STD Period so they don't overlap. The Benefit Period may be up to age 65. Lower paid employees are limited to 66 2/3% of their monthly wage.

The Cost of Living Adjustment (COLA)

Rider will help protect against inflation. Insured's monthly benefit will be increased automatically once payments have begun. Generally, the first increase would be at the end of one year, and it would be followed by annual increases for as long as the insured remains on the claim. Some of these Riders provide for compound interest adjustments, while others provide simple interest adjustments.

Key Employee Policy Disablity

Should a key person become disabled, the benefit is treated as a reimbursement to the business for loss of services from that key person, and the benefit is collected tax-free

Limited Coverage

Specified Coverage policies, or Limited Coverage, are insurance policies that limit coverage to one illness or one limiting group of coverage.

Own Occupation

States that a disability occurs when a person cannot perform any of the regular duties a person's own occupation is the most liberal to the insured. After 24 months it goes to Any Occupation

Principal Sum

The amount paid if the insured dies because of an accident.

Conditional Renewability

The company may renew the policy with changes that are stipulated in the policy conditions. Premiums may be increased and coverage may be amended as long as those conditions were included in the policy when it was issued.

Total Disability

The inability to perform the duties of one's own occupation for which a person is suited by reason of education, training or experience.

Temporary Partial Disability

The least severe of the classifications and usually refers to a disability which lasts a very short period of time. A sprained ankle which takes seven or eight days to recover would be an example

Permanent Total Disability

The most severe of the classes. The insured will never work again. Examples might be paralysis or coma.

Guaranteed Renewable (Class or Rate)

The policy must be renewed and may not be canceled or modified by the insurance company to a stated date, usually age 65. The premium may not be increased unless all members of the same class are increased.

Non-cancelable policy

The premium may not be increased beyond what was originally expressed when the policy was issued. Graded premiums are usually used with this type of policy.

BOE Taxation

The premiums paid for are tax deductible (paid with pre-tax dollars) because this policy is considered a business expense. However, if benefits are received, they are taxable to the business.

DI Position Schedule

Used in employer sponsored group plans because it bases the benefit on the position held in the company.

Disability Income (DI)

Written specifically to cover accidents only or sickness only. These are usually short term policies designed to provide income on a per diem basis. Any policy that provides a flat dollar income benefit for each day of hospital confinement is referred to as a Hospital Indemnity Plan.

Short Term Vs Long Term

benefit period of up to two years (24 months) are considered short term. Policies which have a Benefit Period of more than two years are considered long term.

Replacing LTC

if the purchase of a LTC policy is meant to replace a policy already in existence, the application must contain signed acknowledgment from both the agent and applicant that the application is a replacement of existing insurance.

Probationary Period

is used to describe the period of time from the date the policy is issued during which no claims will be paid for Sickness Only. Usually this period of time is from 15 to 30 days. Used to avoid Adverse Selection (pre-existing conditions). This helps to protect the insurer against individuals who would purchase a disability policy shortly AFTER developing a health condition that requires immediate attention.

Accidental means

means the CAUSE of the accident must be unexpected and unintended. Employ the use of "reasonable judgment" on the part of the insured to determine whether or not it would be accidental and covered by the policy

Accidental bodily injury

means the DAMAGE to the body is unexpected and unintended. A policy that uses the accidental bodily injury provision will provide more coverage than a policy that uses the accidental means provision.

Selling LTC

producer must include an outline of coverage and a Shoppers or Buyer's Guide which must be presented prior to completing the application, and LTC's 30-day FREE LOOK provision must be explained. LTC policies must adhere to a standardized style format, including 12- point font, style and overall appearance. LTC are sold individually, on a group basis, and are also offered as a rider on life insurance policies.

Permanent Partial Disability

refers to a type of injury, which is permanent, but the insured can still work. A loss of a finger is an example of this type of injury

Acute Unit of a Hospital

refers to the emergency room or other setting that is designed for short term care and/or rehabilitation, so it is not covered in LTC.

Relative Value

scientific method of paying different benefits based on the region of the country an insured lives. It is based on assigning a value to each procedure and using a conversion factor. A schedule of assigned points for each procedure must be included in the policy.