Chapter 15

Test Tip: 2 fines commonly confused on the state exam:

- A fine of 3 times the premiums paid - applies to an insurer accepting business from a person that is not properly appointed an or not licensed in the state - a fine of 3 times the Commissions paid - applies to producers that are paid commissions while not properly licensed.

The following are common on Exams:

- Limits $100,000 cash values for $300,000 for all benefits on one life - guarantees payment of benefits - Reinsure's the insurer's covered policies. - Pays the insurer's contractual obligations - will loan money to the insurer

The Second Injury Fund

- Promotes the hiring of previously injured or physically handicapped workers, if a handicapped employee is injured a second time, the employer is charged only for the loss accrued by the second injury. All private insurer's offering Workers' Compensation in the state must contribute to this fund

Life and Disability Insurance Guaranty Association Protects insureds, beneficiaries, annuitants, and their assignees from insurer insolvency(inability to pay debts). To provide this protection:

- guarantees payment of benefits and continuation of coverages - The association's member insurers are assessed for the Association's expenses, obligations, and other costs

Test Tip: Know how to refer to premiums in disclosure documents and advertisements

- must refer to premiums ONLY as PREMIUMS - May NOT use the following: Deposits, deposit premiums, investments

Test Tip

60 days or 2 months is how long the insurer has to provide a death settlement payment upon receiving proof of death

Know that the Commissioner can grant or deny an agent request for an extension to comply with the continuing education requirements. The following time limits to comply would apply:

90 days if granted, 30 days if denied

Test Tip

A consumer is a prospect that a producer has not yet entered into a business relationship with

Test Tip

A customer has already conducted business with a producer

Test Tip

A minor aged 15 may contract for life insurane

Unfair Trade Practices : Twisting

A person may not misleadingly compare policies in order to induce a policy's lapse, forfeit, surrender, exchange, or conversion.

Illustration

A presentation or depiction including a life policy's nonguaranteed elements over a period of years. This must be 1 of the 3 types defined below: Basic - a ledger or proposal used to a sale, which shows both guaranteed and nonguaranteed elements. Supplemental - An illustration, given with and possibly having a different format than a basic illustration, that only depicts a scale of nonguaranteed elements permitted in a basic illustration. In Force - An illustration given after the policy has been in force for at least 1 year.

Continuing Education Requirments

A producer or service representative must complete at least 24 classroom hours, at least 3 of which are in ethics or business practices, per biennial reporting period of courses, instructional programs, or seminars approved by the Commissioner

Currently Payable Scale

A scale of nonguaranteed elements in effect on the illustration's preparation date or becoming effective within 95 days.

Disciplined Current Scale

A scale of nonguaranteed elements limiting an insurer's illustration production because of actual recent historical experience

Extraterritorial Provisions

A worker employed in a particular state has coverage under that state's Workers' Compensation law, even while temporarily working in another state. If injured while working in another state, coverage is provided and regulated under the state the policy was originally written, not covered to the location of the injury

All of the following are required to be considered for reinstatement

A written application. Provide evidence of insurability. Payment (or reinstatement) of overdue premiums. Once a policy has lapsed, an insurer is not obligated or required to reinstate the policy merely because the insured applies. The insurer has the right to fully underwrite the reinstatement application and choose to re-issue the policy preferred, standard, rated up—substandard, or reject the reinstatement application altogether

Test Tip 1 : Know the difference between the 45-day clean claim and the 30-day clean electronic claim

An insurer providing medical or hospital expense benefits must pay for services rendered within 45 days after receiving a clean claim; within 30 days after receiving a clean claim electronically

Separate Accounts for Variable Annuities

An insurer may not use 75% or more of the market value of a separate account's assets to acquire any issuer's securities, other than those issued or granted by the US, if the securities exceed 10% of the market value of the separate account's assets.

Purpose and Scope

An insurer must give life insurance buyers any information that will improve his/her ability to evaluate the relative costs of similar plans and select the most appropriate plan or his/her understanding of a policy's basic features. This applies to any solicitation, negotiation, or procurement but does not apply to: Annuities. Credit, group, or variable life insurance. Life policies issued with pension and welfare plans subject to ERISA. Life policies with an equivalent level death benefit of $5,000 or less and an annual premium of $200 or less

Termination of Appointment

An insurer must notify the Commissioner within 30 days after terminating a producer's appointment. The insurer must also send the producer a copy of the termination notice within 15 days after sending the notice to the Commissioner. A producer may file written comments about the termination with the Commissioner and the insurer within 30 days after receiving the notice. The Commissioner, an insurer, and a producer, in the absence of actual malice, may not be held liable for making information available to regulatory or law enforcement agencies.

The Commissioner may suspend, revoke, or refuse to issue or to renew a license for 1 or more of the following grounds

Any reason for which the Commissioner would have refused to issue the license had he/she known of the reason. Providing incorrect, misleading, incomplete, or materially untrue information in any communication to the Commissioner. Obtaining a license through misrepresentation or fraud. Intentionally misrepresenting an application or contract. Committing any unfair trade practice or fraud. Using fraudulent, coercive, or dishonest practices. Demonstrating incompetence, untrustworthiness, or financial irresponsibility. Improperly withholding or misappropriating any property belonging to an insurer or insured. Violating insurance law or any order, subpoena, rule, or regulation of any state's insurance regulatory authority. Having been convicted of a felony. Having a license denied, suspended, or revoked in any other jurisdiction. Forging another's name to any insurance document. Using reference material when taking a licensure exam. Accepting insurance business from an individual who is not licensed. Failing to comply with a child support obligation or to pay state income tax

Mammography (Know this)

At least once every 2 years for women ages 40 to 49. Yearly for women age 50 or over. More frequently as recommended by a physician

Alabama Health Insurance Plan

Designed for eligible HIPAA individuals and dependents. It is a risk pool for high risk individuals. The coverage is a type of comprehensive major medical insurance Premiums are typically 25% more than original premium Requirements - Upon exhausting Cobra benefits an individual may then apply for AHIP You are eligible for at least 18 months and must have no more than a 63 day break in coverage between the original loss of coverage or loss of COBRA and apply for AHIP.

Dividends - Advertisements may not misleadingly describe dividends (e.g. "tax-free" dividends) or imply that:

Dividend payments or amounts are guaranteed. Illustrated dividends will be enough to fully pay the policy. Dividends are other than a refund or a return of part of the paid premium

Test Tip: Know the following Annuity Disclosure standards well

Face to Face - At time of application Within 5 Days - If other than face to face, such as by phone,etc.

If an illustration is used with a life policy, the insurer must annually report the policy's status to the policyowner. The report must include

For universal life policies : The reporting period. The policy values at the end of the previous and current reporting periods. The total amounts credited to, or debited from, the policy value. The current death benefit for each covered life. The net cash surrender value. Any outstanding loan amount

An annuity or pure endowment contract must contain the following provisions:

Grace period - The contract may charge interest, pro rata, of up to 6% per year. Incontestability Dividends Reinstatement

Life policies must contain the following provisions:

Grace period of 30 days incontestability - the policy is incontestable after being in force, during the insured's lifetime, for 2 years from the issue date. Reinstatement - a policy must be permitted to be reinstated up to 3 years after a lapse due to premium default.

Test Tip: Know the following exam facts: LTCP Plans:

Help in the spending down of assets to become eligible for Medicaid Protect some if not all assets Helps reduce reliance on Medicaid

Test Tip

If a company wishes to share information about a customer's health with a third party, the customer must actively Opt-In to allowing the disclosure

An individual deferred annuity must contain the following provisions:

If premium payments cease, the insurer must pay: The minimum nonforfeiture amount on the date benefit payments begin. Cash surrender benefits of at least the present value of the part of the paid-up annuity benefit that would have been earned at the annuity's surrender

Death Benefits

Include a one time burial allowance and a weekly benefit for a surviving spouse and or children

Test Tip : Know the difference between insurer and producer penalties

Insurer is fined up to 3 times the premiums paid for accepting business from a non-licenses provider Producer is fined up to 3 times the commissions paid for violating this regulation

Test Tip

Know that a group must have 15 members to include maternity benefits.

According to Long Term Care policies, an insurer may deny a claim under an LTC policy in force:

Less than 6 months on the basis of material misrepresentation At least 6 months, but less than 2 years After 2 years it is incontestable

Industrial Life Insurance

Life policies with face amount of $2,500 or less, the words "industrial policy" on the first page, and premiums payable monthly or more often. Grace period - This period must be 4 weeks for any premium other than the first premium, except that, under policies with premiums payable monthly, it must be 1 month of at least 30 days. During this period, the policy must stay in force, and any overdue and unpaid premiums may be deducted from a settlement. Reinstatment -A policy must be reinstated within 3 years after premium default. An insurer receiving an insufficient reinstatement payment must, within 60 days, either refuse to reinstate the policy and refund the payment, or reinstate the policy and either collect or waive the difference Conversion Privileges - Prohibited Provisions -

Rehabilitation Benefits

Provided under Workers' Compensation

Opt-Out or Opt-In Standard (KNOW THIS FOR TEST)

Opt-Out or Opt-In Standard - Health information, such as that acquired during a medical exam, is subject to an opt-out or opt-in standard, meaning a customer can opt in or out from allowing companies to share information it has about them to others. Health information is subject to a stricter Opt-In rule, they must get specific permission first. The ability to prohibit any information sharing would seriously limit a company's ability to manage the underwriting of a policy and detect fraud before it happens. For this reason, there are several exceptions to an individual's right to Opt-Out of information sharing; for example, companies are always permitted to share information with their affiliates, like the MIB, etc. to help prevent fraud. If a company wishes to share information about a customer's health with a third party, the customer must actively opt-in to allowing the disclosure

McCarran-Ferguson Act (public law 15)

Provides the federal government the right to regulate the insurance industry, regarding fraud and false statements. This law gives authority to the states to continue to tax and regulate the business of insurance even though the South-Eastern Underwriters Association Case (1944) established insurance to be commerce and, therefore, subject to federal regulation whenever subject to interstate regulation. The Act provided further that antitrust laws should not apply to the extent the business of insurance is regulated by the states, Except for coercion, intimidation and boycott. Federal law does apply to situations involving fraud and false statements made in the insurance transaction that might lead to jeopardizing the financial soundness of an insurance company

An HMO has the power to:

Purchase, lease, construct, renovate, operate, and maintain hospitals, medical facilities, and their ancillary equipment. Loan money to contracted providers or to corporations in which it owns a majority interest in order to acquire or construct medical facilities and hospitals or in order to provide health care services. Furnish health care services through its contracted or employed providers. Contract with any person performing certain functions (e.g. marketing, enrollment, and administration). Contract with an insurer or health care service plan providing insurance. Offer services in addition to basic or other required health care services

When using an illustration to sell a life policy, an insurer or producer may not:

Represent the policy as anything other than a life policy. Misleadingly use nonguaranteed elements. Imply that nonguaranteed elements are guaranteed. Use an illustration that violates insurance law, is not self-supporting, is lapse-supported (unless the policy cannot develop nonforfeiture values), or shows policy performance as more favorable than that produced by the insurer's illustrated scale. Give an applicant an incomplete illustration. Falsely represent that premium payments are not required each policy year to maintain illustrated death benefits. Use the term "vanishing premium" or a similar term implying that the policy becomes paid-up by using nonguaranteed elements to pay future premium

TEFRA - Tax Equity and Fiscal Responsibility Act of 1982

TEFRA is intended to prevent group plans from discriminating in favor of Key Employees, including officers, the top 10 interest-holders in the employer, or owning more than 1% who are compensated annually at $150,000 or more. Maximum benefits are required in plans when benefits for key employees might be greater than for other employees

The Federal Americans with Disabilities Act

The Americans with Disability Act makes it illegal for employers with 15 or more employees to discriminate on the basis of disability.

Contract Premium

The gross premium payable under a fixed premium policy

Know This An illustration used to sell a life policy must be labeled "Life Insurance Illustration" and state:

The insurer's name. The producer's name and business address. The proposed insured's name, age, and sex, unless a composite illustration is permitted. The illustration's underwriting or rating classification. The policy's generic name, product name (if different), and form number. The initial death benefit. The dividend option election or application of nonguaranteed elements, if applicable.

Guaranteed Elements

The premiums, benefits, values, credits, or charges determined at the life policy's issuance

Nonguaranteed Elements

The premiums, benefits, values, credits, or charges not determined at the life policy's issuance

Variable Contracts

Variable contracts providing variable benefits state the procedures the insurer must follow to determine the amount of variable benefits. Variable contracts must state that the amount of values and benefits vary to reflect investment experience. Variable annuity contracts may include an incidental death benefit during the deferred period of up to the greater of the premiums paid or the contract's value