life insurance chapter 2

Rebating

It is illegal to offer a prospective client something of value that is not specified in a contract to induce the purchase of an insurance policy. This does not include sharing commissions with other licensed and appointed producers.

suicide

After a policy has been in force for one year, the insurance company can no longer contest a death claim if the cause of death was suicide.

authority through appointment

. An insurance producer generally is given the power and express authority to act for the insurer by: soliciting applications for coverage describing coverage and policies to prospects and applicants and explaining how such policies can be purchased collecting premiums (or, in some cases, only initial premiums) providing service to prospects and the insurer's policyholders

Statements in Application

All statements or descriptions in any application for a policy of insurance, or in the policy itself, are representations and not warranties. A representation, unless material or fraudulent, will NOT prevent a recovery on the policy.

Mutual Life Insurance Companies

An insurance company owned and controlled by its policyowners. These policyholders elect a board of trustees or governing body to manage the firm. The profits of a mutual insurance company are returned to the policyowners in the form of dividends or retained as surplus to meet future obligations. Mutual insurance companies are considered participating because the policyowners do share in the profits of the company The objective is to provide insurance to its owners, the policyowners, at the lowest net cost

Material Misrepresentation

An insurer can deny a claim under a long-term care insurance policy for any material misrepresentation made by the insured if it has been in effect for less than 6 months.

compliance

Compliance means conducting business in accordance with current rules and laws set by government regulatory agencies and the courts. It means following the rules and making sure insurance producers and companies go by the book when conducting business. Laws and regulations set the minimum standard by which producers are expected to behave. Laws and regulations tell us what we must do.

Boycott, Coercion, and Intimidation

It is an illegal practice to commit or coordinate any act or boycott, coercion, or intimidation in order to restrain or monopolize the business of insurance.

Defamation

It is an illegal practice to make any public statement or advertisement that contains false information or unsubstantiated criticisms about an insurance company intended to harm or malign.

exemption from creditors

Proceeds from a life insurance policy are protected from any claims by a creditor of the insured as long as there is a named beneficiary.

Solicitation and sales presentations

Producers must provide applicants and prospects with the approved NAIC Buyer's Guide. Producers must also provide a Policy Summary to applicants.

genetic testing

discrimination based on genetic information is prohibited

one year

how long of a period from the date of completion is a prelicensing certificate valid for

Fiduciary Responsibility

A fiduciary responsibility is defined as a relationship of special trust and confidence when a person is entrusted with another's funds. Producers have a fiduciary responsibility for all funds collected from clients. Producers must not mingle these funds with their own personal funds. Unearned premiums that are to be refunded to an insured must be done so within 45 days Producers must treat each insurance policy and the premiums received on it as a separate account of the insured

home health coverage

All accident and health policies issued in Colorado that provide major medical services must offer policyholders the opportunity to purchase home health care coverage.

coverage of adopted children

All individual and group health plans must provide coverage to the insured's adopted children on the same basis as other dependents.

Authorized Insurer

An insurance company that has qualified and received a Certificate of Authority from the Insurance Department to sell insurance in this state. Also called an admitted insurance company

medical examination and lab test including hiv

For underwriting an individual policy, insurers may require proposed insureds to undergo an HIV test, but only in conjunction with other medical tests. The basis for requiring an HIV test cannot be the proposed insured's sexual orientation. The insurer must obtain written consent from the proposed insured in order to conduct the HIV test

Fraternal Benefit Societies

Fraternal Benefit Societies are a corporation, society, or order that have a representative form of government and are organized through a lodge system. Fraternal benefit societies exist for the benefit of its members and their beneficiaries.

Colorado Fraud Statute

In Colorado, a person commits a fraudulent insurance act if he knowingly and with intent to defraud prepares or presents a written statement which contains false information. All insurance applications, policies, and claim forms must bear a warning against insurance fraud

Unfair Discrimination

It is an illegal practice to unfairly discriminate against a person in any way on an insurance-related matter. An example would be charging a different rate for someone in the same actuarial class. Fair discrimination is necessary for the issuance of life insurance policies, which is based on mortality

Non-Resident Producer

Nonresident producers are not required to complete Colorado continuing education requirements as long as their home state requirements are met

Colorado Insurance Guaranty Association (CIGA)

The Colorado Insurance Guaranty Association (CIGA) provides claim payments of admitted, insolvent (financially incapacitated) insurers. Producers are prohibited from using the existence of the Colorado Guaranty Association for selling, soliciting, or inducing purchase of an insurance policy.

A temporary license

which license is issued by the commissioner not exceeding a maximum period of 180 days without an examination for servicing of an insurance business (may be longer for good cause)

Commissioner of Insurance

who enforces all laws of the state governing insurance companies appointed by and serves at the will of the governor

Ethics

honesty integrity loyalty fairness compassion respect for others personal responsibility accountability.

claim form

An insurance company will send forms for filing proof of loss to a claimant within 15 days after company receives notice of a claim.

Medical examinations and lab tests including HIV

For underwriting an individual policy, insurers may require proposed insureds to undergo an HIV test, but only in conjunction with other medical tests. The basis for requiring an HIV test cannot be the proposed insured's sexual orientation. The insurer must obtain written consent from the proposed insured in order to conduct the HIV test.

handicapped dependents

Handicapped children are not subject to an age limitation and are covered until they become self supportive.

Free Look Period

Life insurance policies must provide a minimum free-look period of 15 days upon policy delivery. This allows the policyowner time to decide whether or not to keep it. If the policyowner decides not to keep the policy within the 15 days allowed, a full refund will be given. A life insurance policy must state that the cash surrender values and the paid-up nonforfeiture benefits available under the policy are not less than the minimum values and benefits required by the insurance laws of the state in which the policy is delivered The free-look period for a replacement policy is 30 days upon policy delivery

home health care

Long-term care policies must pay for "at-home" care at the same daily amount as paid for a nursing home if the insured meets the qualifications for nursing home care.

Life ,accident & health , variable life annuities ,property, casualty, limited lines credit, crop hail, surplus lines, travel ticket sales, and personal lines

what lines must an insurance producer be licensed for

Broker

who in Colorado is a representative of the insured with limitations of at least over the age limit of 18 years old and also have completed a prelicensing course

Good ethics is good business

Ethical behavior helps insurance producers gain professional satisfaction and the respect and loyalty of clients. A code of ethics also helps a producer avoid controversy, misunderstandings, and legal entanglements, and increases personal efficiency as an insurance producer. Good clients usually refer other good clients to ethical producers.

Market conduct

Market conduct refers to how insurance companies and producers conduct themselves in accordance with ethical standards and in compliance with rules and laws governing insurance policy sales, marketing, and underwriting practices as well as policy issuance, service, complaints, and terminations. Market conduct is synonymous with professional behavior

illustration

A life insurance illustration showing future premiums being paid out of nonguaranteed values must disclose that the policyowner may need to resume premium payments, depending on actual results.

Colorado long-term care partnership program

The Colorado Long-Term Care Partnership Program is a partnership between the state of Colorado and private insurers of long-term care insurance policies. Partnership policies permit individuals to protect assets from spend-down requirements under the state's Medicaid program.

direct response

Direct response solicitation means any offer by an insurance company to persons in this state (either directly or through a third party) to effect life or health insurance coverage which enables the individual to apply for the insurance on the basis of the offer.

cancellation by the insured

If an insured changes occupation to a less hazardous one than stated in the policy, the insured can, upon written request, either: Cancel policy and receive a refund of the unearned premium Reduce the premium accordingly and refund prorated unearned premium from the date of change

cease and desist order

which law allows the commissioner to issue a cease and desist order if violated may subjected to a 10,000 fine for a company or 500 for an individual

Producer

who in any manner sells solicits or negotiates insurance on behalf of insurance companies for compensation also known to represent the insurance company

commisions

No person shall pay or accept commissions to/from an unlicensed individual for the purpose of selling or negotiating insurance business. Additional fees

License Renewal

a producer licenses are renewable every two years by the end of the producers birth month

notice of hearing

which general law allows the commissioner to call and hold hearing for any purpose deemed necessary but provide at least 10 days written notice to all persons affected by the hearing .

Examination of Records

which law allows the commissioner to conduct a financial examination of any insurance company as often deemed appropriate or at the very least once every 5 years

Alien Insurance Company

A company that is chartered and organized in any country other than the United States. It is considered an alien company in all states. A company chartered in Canada would be an alien company in Colorado

Reinstatement

A licensee who has allowed his or her license to lapse within the last year can apply for reinstatement with an application and reinstatement fee. If the license has been inactive, terminated, or cancelled for more than a year you must take the prelicensing education and re-test for all lines of authority you wish to sell

Producer Appointment

A producer cannot act as a producer for an insurer unless he or she is appointed to work for that insurer. Insurers are responsible for submitting an appointment notice to the Commissioner within 30 days of a producer's appointment or submission of first insurance application. The insurer is also responsible for paying the producer's appointment renewal fee.

Nonresident Producer

A producer licensed in a state in which he is not a resident. In most states, no exam is required to obtain a Nonresident license. You simply must prove that you are licensed and in good standing in your home state and pay the required fees. Your states must be at a reciprocal agreement allowing said person to be a producer

assumed names

An insurance producer doing business under any name other than the producer's legal name shall notify the Commissioner before using the assumed name.

commission disclosure

An insurance producer who solicits or negotiates an application for health care insurance on behalf of a carrier must disclose to the person purchasing the plan that the insurance producer will receive a commission from the carrier. Contingent or additional compensation (such as renewal commission) is not considered standard compensation and does not need to be disclosed

disclosure

Any information required to be disclosed by the insurer cannot be minimized or intermingled within the text of advertisement so as to be confusing or misleading. Also, advertisements may not omit information or use statements, references, or illustrations that will mislead or deceive prospective purchasers.

Continuing Education

Resident producers must complete 24 hours of continuing education every 2 years to keep their license active. At least 18 of these hours must be in approved courses in the lines of insurance for which the producer is licensed 3 of these hours must be in ethics. The Board of Insurance Producer Education develops the continuation education program and submits the proposal to the Commissioner for approval.

Policy summary

The policy summary contains specific information on the provisions, benefits, and coverage of the policy applied for.

Compliance and market conduct

The principles of ethics are related to those of compliance and market conduct. Because these terms are in such common use, it's important to understand the distinction between them

Twisting

Twisting is inducing or attempting to induce any insured person through misrepresentation to lapse, forfeit, or surrender insurance. The reason for this is normally to sell an insurance policy with another insurer

loyalty to the insurer

. The primary ethical responsibility a producer owes to the insurer is loyalty— producers must act in the insurer's best interest in every matter involving the insurer's business. Producers are also charged with conforming to the limits of their authority and staying within the guidelines of the agency contract.

Domestic Insurance Company

A company that resides and is incorporated under the laws of the state in which its home office is located. A company domiciled in Colorado would be a domestic company in Colorado

Foreign Insurance Company

A company whose home office is located in another state. It is considered to be a foreign company in all states except for its home office.

policy summary and buyers guide

A producer who sells an individual life insurance policy in Colorado must deliver to the policyowner a Policy Summary and Buyer's Guide no later than the delivery of policy.

viatical statement

A viatical settlement contract is an agreement under which the owner of a life insurance policy sells the policy to another person in exchange for a bargained-for payment, which is generally less than the expected death benefit under the policy.

Stock Insurance Company

An insurance company that is owned and controlled by stockholders (shareholders). The stockholders provide the capital and share in profits or losses. Stock insurance companies are considered nonparticipating because the policyowners do not share in the profits of the company The objective is to produce profits for the owners, the stockholders Stock insurance companies that issues both participating and nonparticipating policies are referred to as a company doing business on a mixed plan

Lapse Notice

An insurer must give a policyowner written notice before an individual life insurance policy will lapse due to nonpayment of premium. The notice must be mailed to the policyowner or sent electronically at least 25 days before the effective date of lapse The notice must also state the reason why the policy will lapse The notice requirement does not apply to individual policies where premiums are paid monthly or more frequently

Conformity with State Statutes

Any provision of this policy which, on the date of issue, is in conflict with the statutes of the state in which the insured resides at the date of issue is understood to be amended to conform to such statutes.

Controlled Business

Controlled business can be defined as policies written on people that the licensed producer has direct influence over: including family, employers, and/or any company to which the producer has stock control. Obtaining a license for the primary purpose of writing controlled business is prohibited.

relation of earnings to income

Disability payments shall not exceed the average monthly earnings of the insured at the time disability begins or for the two years prior to the disability.

domestic, foreign and alien companies

Insurance companies are classified according to the location of its corporation. Regardless of where the insurance company is incorporated, it still has to get a Certificate of Authority before transacting insurance within a state.

Additional fees

Insurance producers are prohibited from charging separate fees in addition to those contemplated in the rate filing and included in their commissions for the solicitation and procurement of insurance products or for servicing existing insurance policies. If insurance producers charge a separate fee in addition to those included as commissions in the insurers' rate filings, then premiums could be considered excessive.

advertisments

Insurers are expected to keep a copy of every advertisement used in the state for 5 years after it was last used. These copies are subject to examination by the insurance department. Advertisements must clearly and prominently describe the type of policy advertised Life insurance policies and annuity contracts are to be labeled as such unless other accompanying documents so label them The use of testimonials is limited to authentic statements that represent the current opinion of the author with respect to the policy advertised and to not mislead the public

Misrepresentation

It is an illegal practice to misrepresent any fact about an insurance policy, such as policy terms, benefits, value, cost, effective date, or existence of a contract of insurance. Identifying any insurance policy as being a security during the sales process is considered a misrepresentation

Buyer's Guide

The buyer's guide enables applicants to compare different life insurance policies and help them choose which policy is best for their needs.

physical exams and autopsies

The insurer has the right to examine the insured during the claim process and to make an autopsy when death is involved and where it is not forbidden by law.

intoxicants and narcotics

The insurer shall not be liable for any loss sustained or contracted in consequence of the insured's being intoxicated or under the influence of narcotics unless administered on the advice of a physician.

Illegal Occupation

The insurer shall not be liable for any loss to which a contributing cause was the insured's commission of or attempt to commit a felony or to which a contributing cause was the insured's being engaged in an illegal occupation

Insurance Information and Privacy Protection Act

The purpose of this Act is to establish standards for the collection, use, and disclosure of information gathered during an insurance transaction. The Insurance Information and Privacy Protection Act is designed to limit or direct the information collection activities of: producers and limited representatives insurance support organizations insurance companies

limitations and exclusions

Exclusion or limitation of benefits on the basis of Alzheimer's Disease, dementia or Parkinson's Disease is NOT permitted. However, limits and exclusions may be placed on: Preexisting conditions or diseases Alcoholism and drug addiction War or acts of war Participation in a felony, riot or insurrection Suicide or self-inflicted injury Aviation (except for fare-paying passengers)

Probation, suspension, revocation, refusal to issue or renew of licenses

The Commissioner must give written notice to the producer before holding a hearing that may lead to the suspension or revocation of the producer's license. The Commissioner may place on probation, suspend, revoke, refuse to renew, or deny a license to any person who has: Provided incorrect, misleading, incomplete or untrue information in the license application Violating any insurance laws, regulations, subpoena, or orders from the Commissioner Obtaining to obtain a license through fraud or misrepresentation Intentionally misrepresent the terms of an insurance contract Been convicted of a felony Committed any insurance unfair trade practice Using fraudulent, coercive, or dishonest practices or demonstrating incompetence, untrustworthiness, or financial irresponsibility in this or any other state. Having an insurance license denied, suspended, or revoked by another state Forging a name to an insurance document or application Cheating on an insurance license examination Knowingly accepting insurance business from an unlicensed individual Failing to comply with a court order imposing child support Failing to pay state income tax

new resident

who has 90 days with in canceling their previous license to apply for a resident license here, After 90 days the applicant must complete prelicense education and pass the state exam in colorado

Unpaid Premiums

Upon the payment of a claim under this policy, any premium then due and unpaid or covered by any note or written order may be deducted from such payment.

Reporting of Actions

A producer or insurer must report any administrative action taken against him in another jurisdiction or governmental agency within 30 days of the final disposition of the matter. The report, filed with the Superintendent must include a copy of any relevant legal documents.

Commingling

A producer who has combined premiums collected with personal funds has engaged in commingling, which is a prohibited act

Business Records

Every insurance producer/broker MUST maintain all records, books, and documents for insurance transactions for a period of not less than 5 years

Under the law, ethical conduct is generally defined as conduct that a reasonable person is expected to do under any circumstances

However, not all actions that are unethical (such as selling a prospect more life insurance than they can afford) are illegal. A producer must pay attention to both the "have-to" legal requirements and the "choose-to" ethical standards of business.

Interest on Death Benefits

Insurers must pay interest on death proceeds beginning from the date of death

genetic screening information

It is illegal for insurers to use the results of a proposed insured's genetic screening to: underwrite a policy; determine whether to issue an insurance policy or to cancel; refuse to issue or renew, or limit benefits of a policy

Inflation protection

All insurers issuing long-term care insurance policies on an indemnity basis, must offer, as an optional benefit, an inflation protection adjustment which provides for automatic future increases in the level of benefits without evidence of insurability. Adjustments must be at a level which provides reasonable protection from future increases in the costs of care for which benefits are provided.

Unauthorized Insurer

An insurance company that has been denied or not yet applied for a Certificate of Authority and may not sell insurance in this state. Any producer that sells an insurance policy for an unauthorized insurer runs the risk of being responsible for unpaid claims. Also called a non-admitted insurer Any person or entity who solicits, negotiates, or sells insurance for an unauthorized insurance company is guilty of a misdemeanor and will be liable for any losses or unpaid claims

termination of producer appointment

An insurer that terminates a producer appointment must notify the Commissioner within 30 days of the date of termination. Within 15 days of such notice, the insurer must mail a copy of the notice to the terminated producer, after which the producer will have 30 days to submit written comments to the Commissioner.

Suitability in Annuity Transactions

The following list is information that should be taken into consideration when making suitable recommendations concerning the purchase, exchange, or replacement of an annuity: Age Annual income Financial situation and needs Financial experience Financial objectives Intended use of the annuity Financial time horizon Existing assets