MN laws

Minnesota Insurance Guaranty Association The Minnesota Insurance Guaranty Association provides claim payments of admitted, insolvent(financially incapacitated) insurers.Producers are prohibited from using the existence of the Minnesota Guaranty Association for selling, soliciting, or inducing purchase of an insurance policy. For any one person, the Guaranty Association will provide:

$500,000 in life insurance death benefits · $130,000 protection of cash surrender for life insurance · $500,000 in health insurance benefits · $410,000 in present value annuity benefits The Insurance Guaranty Association will provide a maximum of $500,000 in total benefits to any one person. Insurers and producers can not advertise the existence of the Life and Health Insurance Guaranty Association for the purpose of selling any form of insurance covered by the Association.

Duties of the replacing producer

-Present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the producer. A copy must be left with the applicant. -Obtain a list of all existing life insurance and/or annuity policies to be replaced including policy numbers and the names of all companies being replaced. -Leave the applicant with the original or a copy of written or printed communications used for presentation to the applicant. -Submit to the replacing insurance company a copy of the replacement notice with the application.

Handicapped dependents

Handicapped children are not subject to an age limitation and are covered until they become self- supportive. · Proof of incapacity must be provided to the insurer within 31 days of attainment of the limiting age ·The requirement to cover disabled children includes children who have a developmental disability, mental illness or disorder, or physical disability

Backdating

Policies cannot be backdated more than 6 months from the date of application. The point of backdating a policy is to make it effective at an earlier date to preserve a slightly lower premium at that reduced age.

Qualifying events for continuation or conversion

· Termination of employment (voluntary or involuntary) · Divorce · Surviving dependents ·Disabled employee

Exclusions In Minnesota, the following causes of death may be excluded from life insurance coverage:

· War · Aviation · Specified hazardous occupations · Any cause arising while the insured is a resident outside the continental United States orCanada ·Suicide, while sane or insane, within 2 years form the policy issue date

Replacement of health insurance When replacing one health insurance policy with another:

· a notice must be signed by the applicant and the producer · a copy of the notice is left with the applicant · a copy is retained by the insurer A replacement policy must also allow the policyowner to return the policy for a full premium refund if not satisfied with it for any reason within 30 days of purchase.

If a licensee is convicted in any court for any crime or offense other than a motor vehicle infraction, the licensee must notify the Commissioner within

30 days of initial pre-trial hearing date.

Policies must be delivered or mailed to the insured within

30 working days of the producer's receipt from the insurer.

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.

Domestic insurance company

A company that resides and is incorporated under the laws of the state in which its home office is located.

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.

Misstatement of age

A misstatement of age provision must specify a fair adjustment of premiums or benefits if an insured's age has been misstated.

Insurance producer

A person licensed to sell, solicit, or negotiate insurance. All agents must be licensed by the Commissioner for each line of insurance they plan to sell

Reinstatement

A policy can be reinstated within 3 years (unless it was surrendered) from the date of premium default if the following are submitted to the insurer: · A written application · Evidence of insurability · Back payment of premiums · Any interest The policy cannot be reinstated if it has been surrendered for its cash value or its paid-up term insurance has expired.

Policy loans

A policyowner cannot borrow against the cash value unless the policy has been in force for 3 full years. If policyowner fails to repay loan, the policy will not be voided. The company has the right to deduct from the death benefit any outstanding loan balances when an insured die. maxxed fixxed interest rate is 8% in MN

Free look

A policyowner has 10 days after policy delivery to return a health insurance policy and receive a full refund on premiums.

Policy cancellations

A producer who receives a policy cancellation request must make or initiate the refund within 10 days of the request. Refunds must be delivered within 5 days of the producer's receipt from the insurer.

Conservation

A producer's attempt to stop the replacement of an existing life insurance policy or annuity is known as conservation.

mixed plan.

A stock insurance company that issues both participating and nonparticipatingpolicies is referred to as a company doing business on a

Convertible term

A term life policy has a provision that allows policyowners to convert their term insurance into permanent policies without showing proof of insurability. Convertible Term provides temporary coverage that may be changed to permanent coverage without evidence of insurability. For example, if you take out a term insurance policy when you are young to take advantage of your good health and the policy's lower premium, but want the option convert the policy to a permanent one for final expense benefits once your finances improve, you would want a convertible term life policy. The conversion privilege of a group term life policy allows an individual to leave the group term (temporary) plan and convert his or her insurance to an individual (permanent) policy without providing evidence of insurability. The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is the premium cost. The number one factor which impacts life insurance premium cost is the insureds current or attained age. For example, a $25,000 policy on a healthy 7-year-old boy will cost substantially less than a $25,000 policy on a 57-year-old man.

Term - Rider

A term rider is a type of life insurance product which covers children under their parent's policy. Family plan policies usually cover the family head with permanent insurance, and the coverage on the spouse and children is term insurance in the form of a rider. A term rider is always level term. This is cheaper than every family member getting their own policy. For example, the main policy may be on Dad, then mom and the children are riding on (attached to) to dad's policy as term riders.

Incontestability

After a policy has been in force for two years, the insurance company cannot contest the validity of the policy for any reason other than failure to pay the premiums.

Forms and rate review

All forms and rates used for the business of insurance in the state of Minnesota must be filed with the Commissioner of Commerce at least 60 days prior to use.

Newborn child coverage

All individual and group health plans which provide coverage to family members of the insured must provide coverage for the insured's newborn child at the moment of birth. If a premium is required to continue the newborn's coverage, it must be paid within the first 31 days to continue coverage. Coverage includes injury and sickness, including medical care for diagnosed congenital defects and birth abnormalities.

Premium rates

All premium rates charged for individual health insurance policies must be filed with the Commissioner, who has 30 days to disapprove of any rates. Premium rates must be reasonable in relation to benefits available.

Records

All producers must maintain and keep complete records of all insurance transactions for at least 3 years. The records must be available for the Commissioner to examine at all times.

Insurer

An insurance company is any domestic or foreign corporation, indemnity or guaranty company, partnership, fraternal order, association, or individual that transacts insurance business.

Notice of lapse

An insurance company must provide a notice to the insured 15 days before a policy will be cancelled or lapsed due to nonpayment.

Mutual life insurance companies (participating)

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. The objective is to provide insurance to its owners, the policyowners, at the lowest net cost

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 if the unauthorized insurer does not pay.

Authorized insurer:

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

Stock Insurance Company

An insurance company that is owned and controlled by stockholders

claim forms

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

Discrimination of military personal

An insurer may not refuse to reinstate coverage on an individual whose policy has terminated while on active duty. The individual must apply for reinstatement within 90 days after no longer on active duty.

Policy renewal

An insurer must deliver to the insured a written notice of its intention not to renew the policy at least 30 days before the premium due date.

Business entities

Any business wishing to be licensed must designate a person to be licensed as a producer of insurance that is responsible for compliance with Minnesota state insurance laws.

A producer who sells an individual life insurance policy in Minnesota must deliver to the policyowner a Policy Summary and Buyer's Guide. 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.

allows the ownership of the policy to be transferred.

Assignment All individual life insurance policies and annuity contracts delivered in Minnesota must include an assignment provision

Fiduciary responsibility

Because the producer handles money of the insured and insurer, he/she has a

Settlement of death benefits

Death settlements must be made upon receipt of proof of death.

Contestability period (Time limit on certain defenses)

EXCEPT for fraud, the time after issuance of a policy during which an insurance company may contest a health insurance claim due to the statements on an application is 2 years from the date of issue.

Financial and complaint records

Financial and complaint records must be kept on file for 6 years

Reinstatement

If a health policy is reinstated after it has lapsed for nonpayment, there is a waiting period of 10 days before a claim covering sickness will be covered. Injuries sustained from an accident, however, will be covered immediately.

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

Hearing

If an insurer or producer disagrees with the Commissioner's findings, a hearing can be requesting within 30 days of the order. Once requested, the hearing must be held within 30 days.

Penalties

In addition to administrative penalties levied by the Commissioner, the first violation of an insurance law is a misdemeanor. Each subsequent offense is a gross misdemeanor.

Conversion

In the event of employment termination, a person covered by a group policy also has the right to convert such coverage to an individual policy without proving insurability. If this right is exercised, the employee is responsible for the payment of premium. ·If the insured dies during the conversion period, the beneficiary will receive the amount payable under the group policy

Time payment of claims

Indemnity claims will be paid immediately upon receipt of written proof of loss. Disability claims will be paid no less frequently than monthly.

Fasle advertising

It is an illegal practice to falsely advertise insurance products or publish misleading information about its insurance coverage. This includes making false statements about the financial condition of an insurer.

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.

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.

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.

Boycott, Coercion, and Intimidation

It is illegal to be involved in any activity of boycott, coercion, or intimidation that is intended to restrict fair trade or create a monopoly.

Rebating

It is illegal to offer a prospective client something of value that is not specified in a contract to induce policy purchase

Right to examine (free-look)

Life insurance policies must provide a minimum free-look period of 10 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 10 days allowed, a full refund will be given. · A policyowner can cancel an individual life insurance policy by returning the policy with written notice of cancellation before midnight of the 10th day after receiving thepolicy · With the exception of variable annuity contracts, the policyowner is entitled to a refund of all premiums paid as well as any fees

Duties of the replacing insurance company

Require from the producer a list of the applicant's life insurance or annuity contracts to be replaced and a copy of the replacement notice provided to the applicant. · Send each existing insurance company a written communication advising of the proposed replacement within a specified period of time of the date that the application is received in the replacing insurance company's home or regional office. A policy summary or ledger statement containing policy data on the proposed life insurance or annuity must be included. ·The applicant has a right to return the policy within 30 daysof policy delivery for a full refund

License renewal

Resident producers must renew their license every 2 years to keep their license active by: · Filling out a renewal application · Paying renewal fee · Completing a continuing education course ·A license will expire on the last day of the producer's birth month if these conditions aren'tmet

Renewable term:

Term insurance that guarantees the insured the right to continue term coverage after expiration of the initial policy period without having to prove insurability. Renewable Term provides temporary level coverage at the lowest possible cost for a limited period of time, but then allows the policyowner to renew the policy to maintain coverage past the policy's termination. When a term policy is renewed, the insured does not have to prove insurability. However, the premium price will rise because the insurance company will use the insureds current or attained age to determine the new premiums.

Decreasing Term Insurance

Term life insurance that provides an annually decreasing face amount over time with level premiums. These policies are usually used for mortgage protection. A decreasing term policy is a type of life policy which has a death benefit that adjusts periodically (according to a schedule) and is written for a specific period of time. Decreasing term policies are usually written for a mortgage or other debt that typically decreases over time until it is paid off. For example, a 15 year decreasing term policy could protect a 15-year mortgage. As the mortgage balance reduces each year, the face value of the insurance policy will adjust accordingly to match. After the mortgage is paid off, the insurance policy will expire.

Increasing term

Term life insurance that provides an increasing face amount over time based on specific amounts or a percentage of the original face amount

Examination of Records

The Commissioner of Commerce has the authority to examine and investigate the affairs of all parties engaged in the insurance business in Minnesota to determine whether they are participating in any deceptive practice or unfair method of competition. Every insurer operating in Minnesota must be examined at least once every five years, at the insurer's expense.

Department of Commerce

The Department of Commerce is the regulatory authority who oversees the insurance industry. The Commissioner of Commerce heads up the Department of Commerce.

Criminal convictions

The producer must notify the Commissioner within 10 days of any conviction involving moral turpitude.

legal action

There is a waiting period of 60 days to file a lawsuit after a claim for loss has been filed by the insured. No lawsuit may be filed after 3 years has passed from when the claim was submitted.

Unpaid premiums

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

Payment of claims

When a death claim of an insured is submitted, settlement must be made within 2 months after receipt of proof of death.

Suitability

When making recommendations of the purchase of insurance, the producer must make reasonable inquiries to determine...

Notice of Claim

Written notice of a claim for injury or sickness must be given to the insurer within 20 days after the date of occurrence

Proof of loss

Written proof of loss must be furnished to the insurer within 90 days after the date of such loss.

To renew a producer license

a producer must complete 24 hours of continuing education courses every 2 years, with 3of those hours being on the subject of ethics.

Examination report

a summary of important points, recommendations, and suggestions.

Replacement is strictly regulated and requires full disclosure by both the producer and the replacing insurance company. Replacement regulations exists to assure that purchasers receive specified information and it also reduces the opportunity for misrepresentation. Policy replacement is defined as

a transaction in which a new policy or contract is to be purchased, and the producer is aware that an existing policy or contract has been, or will be: · Lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer or otherwise terminated · Converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values · Modified to cause a reduction in benefits or length of policy term · Reissued with a reduction in cash value ·Used in a financed purchase

Ordinary life (level term)

also called level premium level term, has a level face amount and level premiums. Premiums tend to be higher than annual renewable term because they are level throughout the policy period. However, the premiums will increase at each renewal. Life insurance written to cover a need for a specified period of time at the lowest premium is called Level Term Insurance. Term insurance always expires at the end of the policy period. For example, if D needs life insurance that provides coverage for the remainder of her working years and wants to pay as little as possible, D would need Level term. Level term provides a fixed, low premium in exchange for coverage which lasts a specified time period.

Certificate of Authority

an insurance company's license to transact business in Minnesota. It certifies that the company has complied with the requirements of the Minnesota insurance laws and is admitted to transact business in the state.

Credit policies

are typically purchased using a decreasing term life insurance policy, with the term matched to the length of the loan period and the decreasing insurance amount matched to the declining loan balance. Since Credit life insurance is designed to cover the life of a debtor and pay the amount due on a loan if the debtor dies before the loan is repaid, credit policies can only be purchased for up to the amount of the debt or loan outstanding. For example, if you wanted an insurance policy to protect a $20,000, 5-year auto loan, you would use a 5 year decreasing term life insurance policy with an initial face value of $20,000. You will pay the same level premium every month for the 5-year term of the policy. The face value will start out at $20,000 and change according to a schedule (the decreasing balance of the auto loan). After 5 years, the car will be paid for and the insurance policy will no longer be needed.

Stock insurance companies are considered nonparticipating

because the policyowners do not share in the profits of the company

Policy summary

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

Buyer's guide

enables applicants to compare different life insurance policies and helps them choose which policy is best for their needs.

Ordinary life (term life)

insurance gives you the greatest amount of coverage for a limited period of time. Term insurance is only good for a limited period of time because it has a TERMination date. Term insurance is an inexpensive type of insurance, making it an attractive option for large policies. Term life is the CHEAPEST type of pure life insurance, and due to having a termination date and not having any cash value, it will ALWAYS be cheaper than a whole life policy with the same face value. It provides a pure death protection since it only pays a death benefit if the insured dies during the policy term. Term is often renewal and convertible. For example, if you have a 10-year renewable and convertible term; After the 10 years are up, the policy terminates or you can renew it. If you renew it the premium price will go up, and you will have the policy for another 10 years. This cycle continues until you are too old to renew or it's too expensive. All TERM insurance has a final TERMINATION date where you can no longer renew it. If the policy is CONVERTIBLE, you can CONVERT it to whole life (think rent to own) at any time. Any time you renew or convert ANY type of insurance, you do not have to worry about your health, is your insurability is locked in. However, the price will always go up, because your attained (or current) age is used for your new policy. Term is typically thought of as "renting" -- you have a roof over your head, but they're going to raise the price and until it no longer makes sense for you to keep it or at some point they TERMINATE the contract and kick you out.

Industrial life

insurance issues very small face amounts, such as $1,000 or $2,000. Premiums are paid weekly and collected by debit agents. They were designed for burial coverage.

Whole life:

insurance that provides death benefits for the entire life of the insured. It also provides living benefits in the form of cash values. It matures at age 100 and normally has a level premium.

Group life

insurance written for members of a group, such as a place of employment, association, or a union. Coverage is provided to the members of that group under one master contract. The group is underwritten as a whole, not on each individual member. One of the benefits of group life coverage is usually there is no evidence of insurability required

Fair Credit Reporting Act (FCRA)

is a federal law that regulates the use and disclosure of consumer credit information. The primary purpose is to protect consumers with guidelines regarding credit reporting and distribution.

Stranger-originated life insurance (STOLI)

is an illegal use of the life settlement process in which a third party (the stranger), with no insurable interest in an individual, persuades that individual to purchase a life insurance policy. Once the policy is issued, it is sold to the third party in a life settlement.

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

Credit Life and Health Insurance

is insurance purchased by debtors to pay the balance due on their loans in the event they die or become disabled. · The amount of credit life insurance issued may not exceed the total amount of principal repayable, plus an amount equal to one monthly payment · If the term of the loan exceeds 63 months, the amount of credit life insurance will notexceed the amount of unpaid debt, plus an amount equal to 2 monthly payments · In the event of disability, the total amount of debt payable by credit accident and health insurance shall not exceed the total of the scheduled unpaid loan installments

A "restore any deficiency" order

is issued if an insurance company's capital, surplus, or reserves. Any person who violates a written order may be fined up to $10,000 for each day the violation continues

A "cease and desist" order

is issued to prevent an insurer from transacting business that may harm the company's policyholders or the public. Any person who violates a written order may be fined up to $10,000 for each day the violation continues

Insurable interest

means the person acquiring the contract (the applicant) must be subject to loss upon the death, disability, or illness of the insured. Insurable interest must occur at the time the application is taken, but not required afterwards. Employers have insurable interest in the lives of their employees. An employer may insure the life of an employee as long as the proposed insured provides prior written consent. The employer must disclose that it may keep the policy in force after the employee retires and during the period he or she receives employer-sponsored retirement benefits. A married person has insurable interest in the life of his or her spouse. An insurable interest in each other's lives may exist in absence of an economic interest when the individuals are married.

Grace Period

period of 1 month after the due date. If the insured dies during the grace period, the insurance company may deduct any premium due from the death benefit.

Gramm-Leach-Bliley Act

removed barriers in the market among banking companies, securities companies and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. With this law, commercial banks, investment banks, securities firms, and insurance companies were allowed to consolidate.

Producers must report a change in address or name to the Commissioner of Commerce

within 10 days

An applicant for a resident producer license in Minnesota must

· Be at least 18 years of age · Not have committed any act that is grounds for denial, suspension, or revocation · Completed a prelicensing course of study for the lines applied for (20 hours per line of authority) · Have passed the state exam for the lines of authority in which licensure is sought · Submit the application with fees · Consent to a criminal background check and fingerprinting Exam results Applicants must pass the state exam with a minimum score of 70%. Exam results are valid for 3 years from the date of exam.

Fraternal benefit societies

· Does not have capital stock · Is formed solely for the benefit of its members · Operates on a lodge system ·Has a representative form of government

Commissioner of Commerce

· Enforce insurance laws · Create rules that assist with the enforcement of insurance laws · Conduct investigations and hold hearings · Examine and approve policy forms · Examine the books, records, and documents of any person or entity engaged in the business of insurance · Appoint a staff to assist with enforcement duties

The following acts, omissions, or practices are defined as unfair and deceptive claim settlement practices when knowingly committed or performed with such frequency as to indicate a general business practice, and are prohibited:

· Misrepresenting to insured's pertinent facts or policy provisions relating to coverage at issue · Failing to acknowledge and act reasonably promptly upon communications with respect to an insurance claim · Failing to adopt and implement reasonable standards for prompt investigation and processing of insured's claims · Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements are completed and submitted by insureds · Denying an insured's claim without indicating the basis of denial under the policy · Not attempting in good faith to effect prompt, fair, and equitable settlements of claims for which liability has become reasonably clear; Refusing or delaying a settlement solely because there is other insurance available to partially or entirely satisfy the claim loss; the claimant who has a right to recover from more than one insurer has the right to choose the coverage from which to recover and the order in which payment is to be made · Compelling insureds to initiate suits to recover amounts due under an insurance policy by offering substantially less than the amount ultimately recovered in those suits ·The insurer must reply to customer claims and inquiries within 10 days

The Commissioner of Commerce may place on probation, suspend, revoke, refuse to renew, or deny a license to any person who has:

· Willfully violated any provision of the Minnesota Insurance Code · Intentionally made a material misstatement in the licensing application · Obtained, or attempted to obtain, the license by fraud or misrepresentation · Misappropriated or converted to personal use money belonging to an insurer, insured, or beneficiary · Been guilty of fraudulent or dishonest practices · Materially misrepresented the terms and conditions of lifeinsurance policies or contracts · Made or issued any statement misrepresenting or making incomplete comparisons regarding the terms of an insurance or annuity contract in an attempt to induce the owner to forfeit or surrender the contract and replace it with another (also called twisting) · Been convicted of a felony · Offered or given a rebate to an insured or enrollee · Obtained a license for the purpose of writing controlled business (business written primarily on family or business associates of the producer) · Failed to comply with a court-ordered child support obligation · Failed to pay state income tax · Knowingly accepted business from an unlicensed individual ·Forged another name on an insurance application

Advantages of whole life insurance:

• Covers the entire life of the insured • Living benefits - cash value and policy loans • Fixed premiums

Drawbacks of whole life insurance:

• Protection is more expensive because of living benefits • Premium paying period may extend beyond the income-earning years