Florida Insurance 2-15 Exam Terms
Home Service Insurer
Insurer that offers relatively small policies with premiums payable on a weekly basis.
Upcoming Large Expenses
The burden of funding a college education can be lessened
Claim Forms
The company's responsibility to supply a claim form to an insured within 15 days after receiving notice of claim. - 15 days
Certificate of Authority
o What an agent obtains when they are able to operate as an insurer
Aleatory
(1) There is an element of chance for both parties (2) The dollar values exchanged may not be equal
Career Agency System
(GA) - Build sales staffs and agents are treated as employees. They are recruited and trained. A principal of the company supervises agents.
Brokers
-Florida does not issue separate licenses for brokers - Cannot bind the contract
Experience Rating
A method of establishing a premium for the group based on the groups previous claims experience
Other Insureds Rider
Allows owners to add other family members the base policy.
Annuity Units
At the time the variable annuity benefits are to be paid out to the annuitant, the accumulation units in the participant's individual account are converted into annuity units.
Implied Authority
Authority that is given not in writing but that is necessary for the agent to transact insurance
Last Survivor Policy (Second-to-Die)
Covers two life's; benefit is paid upon the death of the last surviving insured
Service Providers
Contract for and sell medical and hospital care services. Participants are known as subscribers.
Traditional Whole Life
Funds invested in general accounts
Pure Assessment Mutual Company
Don't pay premium and total loss is divided among members
Different Types of Funding Methods
FPDA - Flexible Premium Deferred Annuity SPIA - Single Premium Immediate Annuity SPDA - Single Premium Deferred Annuity TSA - Tax Sheltered Annuity
Straight Life Income Annuity
Guaranteed income for the annuitant's lifetime.
Competent
Just like " innocent until proven guilty"
Insuring Pure Risk
Loss must be due to chance Loss must be definite and measurable Risk must be predictable Loss must NOT be catastrophic Exposure to loss must be large Loss exposures must be randomly selected
Indeterminate Premium Whole Life
Lower premium rate initially (2-3 years) and adjusted (up or down) according to the insurers mortality, expense and investment projections.
Graded Premium Whole Life
Lower premiums for designated timeframe (typically 5-10 years); payments rise annually thereafter until leveling off
Valued Contracts
Pay a predetermined amount with no way to assess loss
Additional Insured Rider
Provides a death benefit on the lives of family members
Comprehensive Major Medical
Provides coverage for all major medical expenses under a single policy, and are not coordinated with basic plans
Estoppel
Simply means the legal enforcement of a waiver.
Nonparticipating Variable Policy
The annuitant participates only in investment earns, and the company would stand to profit from any savings realized.
Adhesion
The contract has been prepared by one party (the insurer), rather than by negotiation between the contracting parties.
Mortality
The relative incidence of death within a group.
Investment Configuration
allows for a fixed (guaranteed) rate of return or a variable (nonguaranteed) rate of return.
Date Annuity Benefit Payments Begin
allows immediate payments or deferred until a future date
Collateral Assignment
as a means of establishing security on a debt.
Disability
defined in: o Any Occupation "acc" - inability to work at any occupation suitable for o Own Occupation "occ" - inability to work at the person regular and occupation o Presumptive Disability - Presumed to be disable (blind, deaf, loss of limb)
Payout Period
gives the recipient option of receiving returns for a specified term or for life, or a combination of both.
Admitted
insurance company is one that the Office of Insurance Regulation has licensed to transact insurance business in Florida in accordance with state laws
Cliff Vesting
means that the employee must have a designated amount of years of service before becoming fully vested
Lifetime Reserve
o 60 days of hospital coverage o A one-time benefit and does not renew o Higher copayment (566) o If hospitalized beyond 60 days then the patient is responsible for all hospital expenses
Family Plan Policies
o All family members are covered under one plan.
Accidental Death Benefit Rider
pays a multiple of the death proceeds if the cause of death is a covered accidental event.
Special Risk Policies
provide coverage for unusual hazards not normally covered in other policies o Football player insuring his knees
Office of Insurance Regulation
regulates insurers
Multiple Employer Trust MET
used to market to employers who have a small number of employees. Might only provide a single type or a wide range of coverage
Key Person Disability Insurance
- Business owns the policy, pays the premiums and is the beneficiary
Supplementary Major Medical
- Can be combined with basic plans to pick up expenses where the basic plan leaves off to cover expenses that otherwise would not be included at all
Deferred Annuities
- Can be funded through either the single premium payment or through periodic premium payments - Begin payout at sometime in the future
Lawsuits
The settlement of a lawsuit can be fully funded and made payable to the prevailing party
Hazards
The source of danger
Principal Sum
is the stated amount payable as a death benefit death is due to an accident
Viatical Settlements
- Able to sell the insurance policy for up to 50-80% of face value if you have a life-threatening illness.
Grace Period
- A stated period of time after the premium due date during which the policy remains in force even though the premium has not been paid.
Conditionally Renewable Policies
- Can be renewed unless one or more conditions stated in the contract occur - Possibility of premium increase
Weiss Ratings, Inc.
- Strength and safety of financial institutions and rates risk adjusted mutual funds and stocks - A to F
Indexed Whole Life
(Indexed means to follo shadow or mirror) Face amount increases with the Consumer Price Index.
Personal Producing General Agency System
(PPGA) - The agent supplies his own working environment. Agents hired by a PPGA are considered employees of the PPGA, not the insurance company, and are supervised by the regional salary.
Participation Standards for Retirement Plans
- Employee must be at least 21 years old and have completed one full year of service - If the plan provides 100%, the employee must complete 2 full years
Purchasing Health Insurance
- Life insurance, AD&D, and Disability Income insurance are valued contracts. - Medical Expense insurance is based on a contract of reimbursement.
Mini COBRA
- What Florida Health Insurance Coverage Continuation Act is considered - Up to 18 months without proof of insurability, after being fired - Conversion must take place within 31 days after termination
Uniform Simultaneous Death Act
- When there is a situation were the policyowner and primary beneficiary die at same time. The proceeds go to secondary beneficiary - Proceeds will be given out as if the primary beneficiary die first
Tax Treatment
- Whenever a policy terminates for any reason other than a death benefit, any excess income over the cost basis is taxable.
Integrated Deductibles
- Works in conjunction with supplementary policies as well - What ever amount the basic medical expense covers is applied to the deductible
Corridor Deductibles
- Works with supplementary policies in conjunction with a basic medical expense policy - Basic medical expense policy will pay its limit o Then the deductible will come into play o Finally, the supplementary policy will pick up the remainder - Usually a fixed dollar amount per loss
COBRA
- a federal law that guarantees an employee the right to continue group health coverage due to termination of employment - With 20 or more employees - The insurer will provide coverage for 18 months - If disable could be covered up to 29 months
Use Dividends to Buy Paid up Additions
- additional life insurance can be purchases as long as it is of the same kind as original policy.
Option To Covert
- allows the policyowner the choice of exchanging a term policy for a whole life policy at renewal time.
Modified Community Rating
- means that all small groups are afforded the same pricing for everyone in the same category or class - 15% plus or minus rate variance is limit
Indexing Methods
- approach used to measure the amount of change in the index - Ratcheting, High-Water Mark, Point-to-Point
Custodial Care
- assist with the activities of daily living, which includes bathing, eating, dressing, and other routine activities o Special training or medical skills is not required
Closed Panel HMOs
- consist of a group of physicians who operate out of an HMO facility as HMO employees
Respite Care
- designed to give the primary caregiver a short rest period while still providing the patient with assistance in various ADLs
Business Overhead Expense (B.O.E.)
- designed to keep a business going when the owner is disabled - sold on an individual basis
Service Providers
- do not provide insurance in and of themselves - in exchange for premiums paid, they contact for medical services with hospitals and physicians on the behalf of their members
Extended Term Insurance
- does not allow the policy to continue to earn interest, increase cash value, or pay dividends. - Allows the face amount of the policy to remain the same for a specified period of time.
Waiver of Premium
- exempts the owner from paying premiums while they're disabled.
Facility-of-Payment Provision
- found most often in industrial policies and grants the insurer permission to pay out benefits to any person appearing entitled
Coordination of Benefits COB
- if there is a wife and husband that get difference insurances through work, then you must coordinated the benefits to eliminate duplicate payments
Chiropractic Treatment
- insurers must either provide or offer chiropractic coverage
Option To Renew
- most popular on ART annual renewal term) and YRT (yearly renewal term). - Allows the policyowner to renew the policy without the insured having to go through medical underwriting.
Cleft Lip and Palate
- must cover a child under 18 - Must include: Medical, Dental, Speech therapy, Audiology, and Nutrition
Authorized Insurers
- one duly authorized by a subsisting certificate of authority issued by the office to transact insurance in this state
Commercial Insurance Providers
- operate on the reimbursement method
Limited Risk Policies
- provide accidental death or dismemberment benefits for a specified cause
Health Maintenance Organizations (HMOs)
- provide financing for health care plus the health care itself - known for stressing preventive medical care and early treatment programs - It is NOT insurance, it is a maintenance contract on the insured's well-being - New dependents are eligible to
Payor Rider
- provides an additional safeguard for life insurance taken out on a minor. - If the adult premium payor dies or becomes totally disabled, premium payments will be waived until the child's a specific age of adulthood, such as 21.
Ambulatory Surgery
- provides insureds with the choice of outpatient or inpatient surgery
Use Dividends to Purchase One Year Term Insurance
- purchase one year term insurance at net rays, usually limited to no more than the current cash value of the contract.
Department of Financial Services
- regulates agents
Guaranteed Renewable Policies
- state the policy must be renewed as long as premiums are paid or until a specified age (usually 60 or 65)
Reduced Paid Up Insurance
- the policyowner may request the cash value of the policy to be used to pay for itself. - It's the same type of insurance as the original policy except all riders, including those for disability and accidental death
Cash Surrender Value
- the policyowner may want to give up the value of the policy in exchange for cash - May not be aloud to do this for the first two or three years.
Common Disaster Provision
- to provide a sequence of beneficiaries for the distribution of proceeds in the event of the simultaneous death of both the insured and the primary beneficiary
Change of Address
- within 60 days must notify the Department
Open Panel HMOS
- work with a network of doctors who use HMOs on a part-time basis in their private offices
Annuities Purpose
-Provide cash contracts with an insurance company that are based primarily on equity investments and should be undertaken only as a long-term program - Basic purpose is to liquidate an asset through periodic payments
Authority over the insurance industry
1. The State Legislature 2. The Department of Financial Services 3. The Office of Insurance Regulation 4. The State Court System
Apparent Authority
A third party is led to believe and that the agent is given due to the agent's actions.
Fixed Annuities
A type of annuity that provides a guaranteed fixed benefit amount, payable for the life of the annuitant
Net Single Premium
Amount needed today to fund the future benefits
Risk Retention
Being aware of the risks involved and taking precautions for financial protection. Auto policy's deductible is an illustration of risk retention
Accidental Means
Both the cause and the result of the accident must have been unintentional. Normally, the death cause by the accident must occur within 90 or 190 days of the incident
Major Medical Insurance
Broader, more complete coverage
Offer & Acceptance
Completed when a premium payment accompanies the offer made by the proposed insured
Violation of a cease and desist order
Can carry a fine of up to $50,000 o A legal court order preventing an individual or entity from continuing to do business or perform that which is being addressed and to refrain from doing it again in the future
Peril
Cause of risk (when a building burns, fire is the peril)
Credit Life Insurance
Decreasing Term that pays the amounts due on a loan if the debtor dies before the load is paid off
Lloyds of London
NOT considered an insurance company - An association of individuals and companies that individually underwriter insurance.
Accidental Bodily Injury
Only the injury resulting from the accident must have been unintentional
Categories of Life Insurance
Ordinary Industrial Group
Single Premium Whole Life
Paid up for life with one large premium payment
Adjustable Life
Permanent + Term Combines permanent and term life policies allowing changes to face amount, period payments, and term during policy lifetime.
Special Agents
Usually not license and don't sell insurance. Assist insurance companies field representatives.
Parol Evidence Rule
When parties put their agreement in writing, all previous verbal statements come together in that writing, and a written contract cannot be changed or modified.
Capital Sum
is the amount payable for the accidental loss of eyesight or for an accidental dismemberment. Can be a percentage of principle sum
Grace Period
o 7 days on weekly premium health insurance policies, 10 days for health policies with premiums payable monthly and 31 days for other health policies
Free Look Provision
o A 10-day free look period for health insurance policies and a 30 day free look period for Medicare supplement and LTC policies
Delayed Disability Provision
o A 30, 60, or 90 day time period o Allows for some time after an accident in order to assess the damage
Sections In An Insurance Application
o Part I - General o Part II - Medical o Part III - Agents Report - The app must contain the name of the insurance company, the name of the soliciting agent, and the agents ID number
Nonadmitted Insurance Company
- Have not been licensed by the the Florida Office of Insurance Regulation
Diabetes
- Health insurance policies and HMO contracts must provide coverage for all medically necessary equipment~
Alcoholism and Drug Dependency
- Health insurers are required by Florida law to offer coverage for alcoholism and drug dependency to the policyowner.
Automatic Premium Loan Rider (AVC)
- If the premium is not paid after grace period, the cash value of the policy can be used to pay the premium - Creating reduced paid-up insurance
Misuse of Premiums
- Improper use of premiums collected by an insurance producer - Depositing a client's premium in own personal account
Accidental Death Benefit Rider
- "Double Indemnity" - Provide an additional amount usually equal to the face amount if death occurs under certain conditions stated in the policy. - Can be written to triple the policy's face amount.
Accidental Death and Dismemberment Insurance
- (AD&D) considered the purist form of accident insurance and is typically sold through group insurance plans
Three year cliff vesting
- 100% vestige after three years of service
Short Term Disability
- 13 or 26 weeks - Paid weekly and range from 50% to 100%
Employer Employee Plans
- 16,500 is the limit for all - 401(k) Plan - One of the most popular today for retirement. A defined contribution plan - 403(b) plan - for nonprofit organizations - IRC Section 457 - Employee compensation is deferred to some future age or date
NAIC Model Insurance Policy Provisions
- 23 provisions are outlined o 12 are mandatory provisions o 11 are optional provisions
Skilled Nursing Care
- 24/7 for nursing and rehabilitative care and is the most expensive care that can be given o Only available by prescription through a doctor
Conversion
- 31 days to convert the group coverage to individual If they don't exercise it and die after 31 days the policy is void - All group life insurance policies must be convertible - The conversion period is 31 days - Any death within the conversion period is covered
Taxes of Social Security
- 6.20% goes to OASDI and 1.45% goes to Medicare for a total of 7.65% - Self-employed workers are taxed 15.3%
Modified Endowment Contracts
- A Modified Endowment Contract (MEC) makes different tax considerations to a policy - It must pass the "7-pay test" o If the total amount a policyowner pays into the contract during its first seven years exceeds the sum of the net level premiums that would have been payable to provide paid-up future benefits.
Long Term Disability
- A benefit period of up to two years or more - For first year must use "occ"(own occupation) and later switch to the "acc" (any occupation) definition
Florida Health Kids Corporation
- A combined public and private venture in 1990 - As an effort to help improve access to comprehensive health insurance for Florida's uninsured children. - Participation is strictly voluntary
Policy Loan Provision
- A permanent life insurance may be borrowed against - If insured dies, the loan amount and any interest due must be repaid from the death benefit proceeds.
Flat Deductibles
- A stated amount that the insured must pay before policy benefits become payable - Deductible that most people know about
Incontestable Clause
- A time limit (usually 2 years) in which the insurer can dispute a policy based on the validity of statements made on the original application.
Medicare Part B
- A voluntary program designed to provide supplemental medical insurance (SMI) - To cover physician services, medical services, and supplies not covered under Part A - Participants pay monthly premiums (96.40) - Annual deductible of 162 - After deductible Part B will pay 80% of covered expenses - Premiums are adjusted according to income
Franchise Life Insurance
- AKA Wholesale Insurance and provides each covered individual with their own policy - The employer acts merely as a "backer" or "sponsor" of the plan - Employer must collect premiums and deliver them to insurer. - Normally used by small groups who don't meet the states minimum numbers laws
Medical Expense Insurance
- AKA first dollar insurance - Pays benefits "up front" without the patient having to first satisfy a deductible
Health Savings Accounts (HSA)
- Accumulates tax-free funds to be used for medical expenses in high deductible and out-of-pocket expense health plans - individuals under 65
Advantages of Whole Life
- Advantages o Guaranteed for life and will not cancel because of age o Cash value builds o Premium costs can be fixed or flexible o Cash value can be used to pay the premiums o Additional insurance can be added without the need for medical examination o The policy can be converted to an annuity o Loan values are available for borrowing against the principal
Continuing Education
- After 6 years 20 hours of CE every 2 years - After 25 years - only 10 hours of CE every 2 years
Proof of Loss
- After a loss occurs, or after the company becomes liable for period payments, the claimant has 90 days in which to submit proof of loss - 90 days
Part III Agents Report
- Agent becomes eyes and ears of the underwriter - Agent must also state if the policy being applied for is a replacement policy - Write down observations and anything that is important to the underwriting process
The Traditional IRA
- Allows contributions to grow tax deferred - Participants can contribute up to 5,000 per year - Anything over this will be taxed at 6% - Anyone under the age of 70 ½ may open a traditional IRA - Withdrawals must start no later than April 1 the following year they turn 70 ½ - Any withdrawal prior to age 59 ½ will be taxed at 10% - Funds are taxed when taken out
Florida Employee Health Care Access Act
- Allows small businesses to provide group health insurance coverage for its employees on a guarantee-issue basis regardless of health circumstances, preexisting conditions, or claims history. - Preexisting condition restrictions can be carried from employer to employer - Has 50 or fewer employees and full time employee is one who works at least 25 hours a week
Free Look Provision
- Allows the applicant to look over the policy after they receive it. - 14 days and 30 days
Income For Life
- Allows the beneficiary to receive a guaranteed income for the rest of their life.
Accelerated Death Benefits Provision
- Allows the policyowner to withdraw funds from their life insurance policy early, before death.
Keogh Plans (HR-10)
- Allows unincorporated business owners to participate in the retirement plan - as an employee - Can be either defined contribution or defined benefit plans
Cafeteria Plans
- Also called Section 125 plans - Employee benefits are paid for on a pretax basis, which amounts for valuable savings
Policy Replacement
- An action which eliminates the original policy or diminishes its benefits or values
Simplified Employee Pension Plans (SEP)
- An employer contributes directly to the traditional individual retirement accounts (SEP-IRAs) for all employees. - Difference between SEPs and IRAs is that you can contribute a much larger amount to an SEP within one year. - 25% of the emp annual comp or 49,000
Funding Standards
- An employer must deposit enough money to cover the pension plans and administrative costs
Rollover IRA
- Any IRA whose funds have been distributed and reinvested in another IRA within 60 days of distribution - Funds must be transferred directly
Taxation of LTC Benefits
- Any benefit paid above $290 per day or $105,850 per year is considered taxable
Credit Life Insurance
- Applies to the relationship between debtor groups (those who owe) and creditor groups (those who loan) - Usually carried by entities such as banks and finance companies to ensure that if the debtor dies before a loan is repaid - May only be used on loans up to 15 years
Endowment Premiums
- Are always the most expensive and build cash values the fastest. - Could be considered investment policies rather than insurance
Policy Dividends
- Are not taxable income as they are considered a return of premiums paid - Shareholders receive dividends in stock companies (taxable) - Mutual companies pay their dividends in form of return of excess premium (NOT taxable) - Participating policies usually have higher premiums. - Surrender values are the same for both
HMO Operation
- Are required to file a report of its activities within three months of the end of each fiscal year. They are conducted at least once every five years - Must reimburse claim within 20 days after receipt
Part II Medical
- Ask questions about current and past health issues - Ask questions about family health past and present - Medical reports must be completed by a qualified person o Could get a nurse to do this
Relative Value Scale
- Assigns points to surgical procedures instead of dollar figures - 10 points for a broken finger and 100 points for surgery on a hand o $10 scale - $100 for broken finger and $1000 for hand surgery
The Roth IRA
- At time of payout, funds are tax free - The funds are made with taxed dollars - Annual contribution limit is 5,000 - No age limits - Roth IRA distributions are not mandatory - Must hold the account for a minimum of fiver years before withdrawal. - Also, nothing will be taxed if: o The owner has reached age 59 ½ o The owner dies or becomes disabled o The distribution is used to purchase a first home - Qualified withdrawal earnings are tax free, and with a nonqualified withdrawal earnings are subject to taxation.
Cost of Living Adjustment Rider (COLA)
- Based on the Consumer Price Index (CPI). - If inflation increases, so does the value of the policy. - Limited to 5% increase per year.
Hospital Expenses
- Basic room and board charges are taken care of - Cover hospital "extras" or miscellaneous charges as well o Drugs, x-rays, anesthesia, lab fees, dressings, and the use of the operation room and supplies o Does not cover physician services - All the information will be labeled out in how much they cover and on what
Medicare Part A
- Benefit period begins the first day of hospitalization - The first 20 days is covered in full contingent upon the patient being hospitalized prior for three consecutive days - Max limit is 100 days in each benefit period - Copayment for 21st day to 100th (141.50)
Composite Rating
- Can be used for groups of 10 or more and averages the cost for all employees, charging the same premium for each, regardless of the nature variance of age and sex
Immediate Annuities
- Can only be funded using the Single Premium payment method - First income payment is made one month from the date of annuity purchase - Typically designed to provide income immediately upon retirement o In exchange for a lump sum premium the company pays them a monthly income for the rest of their life.
Defamation of Character
- Can take place in the form writing or spoken - A personal attack on somebody's good name, character or reputation
Dividend Options
- Cash in Hand - Apply Dividends Against Premium Payments - Allow Dividends to Accumulate at Interest - Use Dividends to Buy Paid-up Additions - Use Dividends to Purchase One-Year Term Insurance
Adult Day Care
- Caters to those who are mentally or physically impaired, or when primary caregivers are not accessible
Optional Provisions
- Change of Occupation - Misstatement of Age or Sex - Other Insurance with This Insurer - Insurance with Other Insurer - Insurance with Other Insurers - Relation of Earnings to Insurance - Unpaid Premiums - Cancellation - Conformity with State Statues - Illegal Occupation - Intoxicants and Narcotics
Standard and Poors (S&P) Rating Agency
- Claims and the ability to pay - AAA to C to R
Increasing Term
- Commonly used as a hedge against inflation. - Used to ward of decreased purchasing power. - Death benefit increases with time. - Depends on CPI
Preferred Provider Organizations (PPOs)
- Consist of a group of health care providers that contract with a group to provide there services - Creates a set discounted fee - Operate on a fee for services rendered basis rather than prepaid plans like HMOs
Medicare Reform
- Costs of Medicare and Medicaid are straining budgets - The Deficit Reduction Act - Options include cost-sharing, flexible benefits, and health opportunity accounts (HOAs)
Basic Surgical Expense
- Cover the cost of surgeons services whether the surgery is performed on an inpatient bases or on an outpatient basis - Follow Three Methods: o Surgical Schedule o Reasonable and Customary o Relative Value Scale
Basic Physicians Expense
- Covers doctors visits while the insured is hospitalized for a nonsurgical reason based on the indemnity approach
Fitch IBCA (formerly Duff & Phelps)
- Credit worthiness of securities - AAA to CCC
Currently Insured vs. Fully Insured
- Credits are the determining factor - Each credit = $1,120 annual FICA taxed earnings with an annual limit of four credits per year o $1,120 = 1 credit 2,240 = 2 credits .. 6,300 = 4 credits (max) - Fully insured = 40 quarters of participating employment - Currently insured = 6 credits in the last 13 quarters prior to death
Intervention by SEC
- Dealing with variable annuities - Securities and Exchange Commission (SEC) should regulate the variable annuities (since they're used for investments) & variable life insurance. - Therefore, agents must obey the rules to both SEC and state regulation.
Universal Life
- Death Benefit is Adjustable - Two death benefit options - Premium is Flexible - Mortality Rates are current & guaranteed maximum - Cash Value is current, Guaranteed maximum - No investment options - Yes, partial surrenders
Whole Life
- Death Benefit is Fixed - Only one death benefit option - Premium is fixed - Mortality Rates are fixed & guaranteed - Cash Value is Fixed & Guaranteed - No investment options - No partial surrenders
Variable Life
- Death Benefit is Variable - Only one death benefit option - Premium is fixed - Mortality Rates are fixed & guaranteed - Cash Value is Variable & No Guaranteed - Yes, investment options - No partial surrenders
Variable Universal Life
- Death Benefit is Variable & Adjustable - Two death benefit options - Premium is Flexible - Mortality Rates are current & guaranteed maximum - Cash Value is variable, and no Guarantee - Yes, investment options - Yes, partial surrenders
Participation Rate
- Decides how much of the increase in the index will be used to calculate index-linked interest
Rights of Ownership
- Decision on choosing and changing the beneficiary - Decision on just how the death benefits will be disbursed to the beneficiary - Right to policy loans - Right to policy dividends and their disbursement method - Right to Assign ownership of the policy to someone else - The right to cancel the policy and select a no forfeiture option.
Continuing Care
- Designed for seniors while living in an ongoing or lifelong care retirement community and provides assistance with full time medical and social needs
Misstatement of Age or Sex Provision
- Designed to enable the insurer to make the adjustment between the death benefit at the misstated rate and what the death benefit should have been if the age and/or sex had not been misstated.
Coverage Requirements
- Designed to prevent employee discrimination - Favoritism of company offers, highly compensated employees, and shareholders is strictly forbidden
Limited Risk Policies
- Designed to protect people against specific illnesses - Can be purchases for financial protection against very expensive illnesses (caner or heart disease)
Disadvantages of Whole Life
- Disadvantages o The required premium levels may make it hard to buy enough protection o Could prove more costly than term insurance over time o Make sure the client knows all the facts of the policy and is aware of everything they are applying for.
Life Settlements
- Don't have to be terminally or chronically ill - Can be sold for more than cash surrender value but less than face value
Employee Retirement Income Security Act of 1974
- ERISA - to protect employees from possible loopholes in retirement plans
Automatic Premium Loan Provision
- Enables the insurer to withdraw funds from the policy if any cash value has accumulated within the contract
Mandatory Provisions
- Entire Contract - Time Limit on Certain Defenses - Grace Period - Reinstatement - Notice of Claims - Claims Forms - Proof of Loss - Time of Payment of Claims - Payment of Claims - Physical Exams and Autopsy - Legal Actions - Change of Beneficiary
Equity Indexed Annuities
- Established in the mid 90s to compete with indexed mutual funds - A form of fixed rate annuity - Cash value of equity indexed contracts usually grow at a minimum interest rate - Credits interest to the annuity's value
The State Legislature
- Establishes and maintains the legal framework for state laws relating to insurance (the Insurance Code)
Surgical Schedule Method
- Every surgical procedure is assigned a dollar amount by the insurer - The patient can be billed for the difference between the cost allotted and the cost charged - No deductible
Intervention by the FTC
- FTC tried to control the advertising and sales literature used by the health insurance industry - Thus, supreme court held that the McCarran-Ferguson Act disallowed this - FTC tried even harder to force more federal control
Decreasing Term
- Face value declines over time - Usually purchases to cover debts whose balances decrease over time
Fair Credit Reporting Act
- Fair and accurate report of information about consumers - Insurers must inform them about any investigations being made - Then insurers must let the applicants know the name of the reporting agency
Purpose of Disability Coverage
- Financial protection if disability strikes - Provides an income stream if an individual is unable to continue working for a period of time due to a disabling accident or illness - Must be at least 20% disabled
Moodys Investor Services Rating Agency
- Financial strength - Aaa to C
Florida Health Insurance Plan
- Florida Comprehensive Health Association (FCHA) was created to provide high-risk individuals the most cost effective quality health care, at rates up to 250% of standard rates - The FHIP was created to replace this - "Last resort" plan
Rebating
- Florida and California are the only two states that allow rebating - When any part of commission or anything else of value is given to the insured as a incentive to buy a policy - Agent must keep copies of rebating schedules for five years
Coercion, Boycott and Intimidation
- Forcing somebody to do something against their will through the use of force or threats - "Do not apply pressure and/or unfair restrictions"
Florida Insurance Guaranty Association
- Funded by insurance companies through assessments -FIGA is part of a non-profit, - Guaranty associations protect policyholders and claimants. - Holds three separate accounts: - Health Insurance - Life Insurance - Annuity Accounts
The McCarran-Ferguson Act
- Gave back some regulatory authority to the states - Did not provide the states to regulate individually - Insurance regulated by state law "is in the publics best interest"
Claims
- In life insurance (as well as disability and AD&D insurance), the claim amount is a stated contract amount - Health or medical expense insurance, a contract is of a reimbursement
Fixed Indemnity Method
- In rehab center for 5 days at 100 per day, 500 for bill, and insurance pays 150 per day. The additional 250 can be used for whatever purpose
The State Court System
- Indentifies and makes legal determinations involving cases of conflict between insurance companies and policyowners and enforces criminal penalties for violation of any directive of the Insurance Code
Optional Renewable Policies
- Insurer has the option to terminate the policy by class, only a specific date that is stated in contract - Has option to increase premium by class as well
Hospital Fixed Rate Policies
- Is getting more popular - It offers daily, weekly, or monthly protection - Based on the number of days an insured is hospitalized - Coverage can last a few months, yeas, or even a lifetime depending on contractual agreement
Sliding
- Is like misrepresentation - When an agent tells or implies that it is a requirement that the client purchase specific coverage's or products in conjunction with the policy being purchased
Individual Health Insurance
- Issued by commercial insurers and service organizations as contracts between the insured and the company - Nonparticipating basis
Group Health Insurance
- Issued to groups of individuals who are covered under a master policy - Typically on a participating basis - Florida law does not limit the number or percentage of employees required to participate in order to qualify for group heath insurance o They do mandate that all group health insurance contracts make coverage for alcohol and drug rehabilitation
Group Term Life Insurance
- Least expensive - Based on experience rating of group during the previous year - Use the ART method o Flexibility for insurer of being able to raise premiums yearly o Allows insured members the right to renew coverage without having to provide evidence of insurability
Multiple Employer Trusts
- METs are another alternative form of group coverage - Used for small group employers, and the employer must become a member by subscribing to the trust - Joinder Agreement o Each subscriber receives this detailing everything about the trust
Multiple Employer Welfare Arrangement
- MEWA requires you to have an "employment-related common bond" - A number of employers pool their risks, self insure, and attain tax-exempt status
Medical Information Bureau
- MIB - nonprofit org that is a reliable source of med info for their more than 700 member insurance companies
Civil Rights Act of 1979
- Made it mandatory that group insurance provide maternity benefits
Optometrists and Podiatrists
- Medical expense policies must provide payment to an optometrist or podiatrist
Medicare Part C
- Medicare Advantage - Provide more focused health care for people with specific conditions - Focus care on the management of a specific disease or condition - 6 month enrollment period - PPOs o Similar to before except PCP is not required - Private Fee-For-Service Plans o Determines how much the covered individual must pay for Medicare-covered services
Term Life Insurance
- Most common. Policy premiums are based on mortality and loading. - Premiums stay level, and there are no cash values
Reasonable and Customary Approach
- Most commonly used method - Surgical expense are compare to what is "reasonable and customary" for the geographical part of the country where the surgery was performed
Extra Percentage Tables
- Most commonly used method of Rating Substandard Risks - Numerical system that calculate premium rates for those who present a higher health risk for the insurer
Bad policy remplacement issues
- Most the first year's premium is consumed by the commission - The premium is higher due to the insured's advanced age - Waiting periods begin anew
Newborn Children
- Must be covered immediately at birth till 18 months
Lapse Notice
- Must be sent to the policy owner at the end of the required grace period - The notice must inform the insured that they have an additional 21 days in which to prevent the policy from lapse because of nonpayment - If the policy provides a grace period of more than 51 days, the lapse notice must be mailed at least 21 days before expiration of the grace period provided in the policy
Breast Cancer and Mastectomies
- Must provide coverage for prosthetic devices and reconstructive surgery following a mastectomy, including all surgery necessary to reestablish symmetry between the breasts - Cannot deny or exclude coverage if they have been breast cancer free for two years
NAHU
- National Association of Health Underwriters - Designed to protect agents - Dedicated to supporting the health insurance industry
NAIC
- National Association of Insurance Commissioners - No legal power of its own - Encourages uniformity in state insurance laws and regulations
NAIFA
- National Association of Insurance and Financial Advisors (NAIFA) - Designed to protect agents - Dedicated to supporting life insurance industry
Whole Life Insurance
- Offers coverage for the insured's entire lifetime. - Can be broken down into six different types o Straight whole life o Universal life o Variable life o Adjustable life o Modified life o Family life
Admitted insurance company
- Office of Insurance Regulation has licensed them to carry out business in Florida
Social Security
- Originally intended to be a retirement program for the primary worker - Pay as you go system - To provide for the general welfare of those U.S. citizen who are 65 years of age and older
The Insuring Clause
- Outlines the conditions under which the policy will pay. - If the insured dies, the insurer promises to pay the beneficiary the death benefit as laid out in the policy. - It contains the face value of the policy, the insured's name, and the name of the insurer.
Joint Life Income
- Paid to two beneficiaries in equal monthly installments.
Variable Annuities
- Payments fluctuate according to the value of an account invested primarily in common stocks - provides conservative to aggressive investments that are not guaranteed
Controlled Business
- Pertains to taking out life insurance or annuity contracts covering the agent or family members
Stop Loss Feature
- Places a limit on the max out-of-pocket expenses an insured must incur for health care, above which the policy pays 100% of the remaining eligible expenses
Medicare Part D
- Prescription Drug Plan - Created by The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) - An optional outpatient prescription drug benefit for individuals who are entitled to or are enrolled in benefits under Medicare Part A, B or both - 6 month enrollment period - Monthly premium of $30 and a $310 annual deductible - Responsible for 25% of the first 2,830 of prescription drug costs - Coverage stops - Then starts back up after drug costs are more than 6440 after the beneficiary has spent another 4550
Case Management
- Process that may deter very expensive claims
A.M. Best Rating Agency
- Profitability, leverage, & liquidity - A++ to F and S (suspended)
Unfair Discrimination
- Prohibited from showing any type of partiality to individuals in regard to their premium and benefits
Medical Expense Insurance
- Protects individuals from having to cover the full expense of medical treatment - There are deductibles involved as well
Major Medical Expense Plans
- Provide total maximum lifetime benefits to individual insured's from about $250,000 to $1,000,000 or more. - Can serve as a comprehensive stand-alone plan or be a supplement to the basic plan
Intermediate Nursing Care
- Provided by the registered nurses or skilled medical practitioners on a daily basis. o Less specialized than skilled nursing care
Home Health Care
- Provided to patients while they are still in their own home and are generally able to function for themselves in most areas o Therapy on a part-time basis
Time Payment of Claims
- Provides for immediate payment of the claim after the insurer receives notification and proof of loss. - 45 days
Long Term Care Insurance
- Provides medical care needed for an extended period of time, typically longer than 90 days - Minimum age around 50 and max around 89
Disability Income Insurance
- Providing an income to compensate for lost wages - Can provide coverage in two ways: o Accidents only o Accidents and sickness - Must provide a proof of disability
Medicaid
- Purpose is to improve the health of people who might otherwise go without medical care for themselves and their children - It is different in each state - For less fortunate and the poor
Florida Life and Health Guaranty Association
- Purpose is to protect policyowners, insureds, beneficiaries, annuitants, payees, and assignees of life insurance - Must be residents of the state - They maintain three separate accounts: o The health insurance account o The life insurance account o The annuity account
Qualified for Retirement Plans
- Qualified meet requirements and receive tax benefits, nonqualified do not
Noncancelable Policies
- Referred to as "noncan" policies. - Cannot be canceled, nor can the premiums change - Benefits are predetermined as a fixed amount - Usually end at the insured's attained age of 65 - Cannot be used for medical expense reimbursement
Savings Incentive Match Plan For Employees (SIMPLE)
- Replaced SARSEP - Can be constructed as a IRA or 401(k) - Allow employees over 50 to add money towards the account, up 2,500
Similarities of Fixed and Variable Annuities
- Retirement income is the primary purpose - Purchase methods are the same - They have the same types of annuity options - They have the same concept of accumulation and annuity periods - Partial surrender provisions are the same - The guarantees of expense and mortality are alike
Financial Services Modernization Act
- Revoking the Glass-Steagall Act - This changed the industry so commercial banks, investment banks, retail brokerages, and insurance companies can now enter each other's lines of business
United States v. Southeastern Underwriters Association (SEUA)
- Ruling is a form of interstate commerce - Should be regulated by the federal government - Fed Gov. WINS
Vesting Schedules
- Sets forth the time period by which an employee-participant becomes entitled to nonforfeitable benefits under the plan
Reserves
- So there are enough funds to pay projected claims - Premium reserve - losses that have not occurred but for which premiums have been paid - Loss reserve - liability for losses that have occurred but for which settlement is not yet complete
Industrial Life Insurance
- Sold by home service insurers - Over the years has been used less - Mainly, to cover funeral expense
Consideration Clause
- Spells out exactly how much premium payments are and when they are due. - The legal consideration for a life policy consists of the application and payment of the initial premium.
Cancelable Policies
- State they can be terminated at any time by the insurer - Insurer must provide written notification of contract cancelation 45 days in advance - Are allowed to increase premiums in a cancelable policy
Paul v. Virginia
- State tried to control insurance domiciled from another state. - U.S. Supreme Court sided against insurance company - Upholding the right of sate to regulate insurance - States WIN
Binding Receipts
- States that the effective date of policy is the date of receipt of the initial premium o Should the applicant die before it is full processed • The benefits are full payable • Will pay this whether or not they would have been approved
War or Military Service
- Status clause excludes payment of proceeds if insured dies while in military. Results clause excludes payment if the insured dies as a result of declared war.
The Reinstatement Clause
- Stipulates the conditions under which the policy can be restored. - All overdue premiums plus interest must be paid if they restore. - Usually policies may be reinstated three years after lapse.
STOLI
- Stranger-Orignated Life Insurance - Typically target seniors -
Pension Protection Act of 2006
- Strives to improve the pension system and expand opportunities to build retirement nest eggs - Beginning in 2010 anyone can convert funds from a 401(k) plan to a traditional or Roth IRA
Tax Treatment of Annuities
- Taxes are only paid when interest is withdrawn - Just like the IRA, the 10% excise tax penalty exists - The exclusion ration allows clients to receive income partially income tax free - Section 1035 exchanges are a way to move annuity funds income tax free - No Capital Gains tax to the individual during the accumulation period of a variable annuity
Blanket Life Insurance
- Temporary coverage of a specific hazard for a specific group. - Airline companies covering the passengers while they are on the flight for a temporary time
Ordinary Life Insurance
- Term, Whole Life, Universal Life, Endowment - The most common
Coinsurance
- That portion of balance due that each participant pays - The insurer pays their fair share and the insured pays his/her part - For instance, the coinsurance amount could be 80/20
Agents
- The acts of the agent are considered the acts of the company - Can bind the contract
Return of Premium Rider
- The beneficiary could receive the paid premiums as well as the death benefit - Also, with ROP the premium payments paid could go to the living owner.
Salary Reduction SEP Plans (SARSEP)
- The employee can elect to have employer contributions added to their SEP or paid to them as wages, limited to 16,500 - Not aloud to create any more after 1997
Interest Only Payments
- The insurance company gives the money out at a certain rate - The beneficiary can take the money out at anytime
Legal Actions
- The insured cannot take legal action against the company in a claim dispute until after 60 days from the time the insured submits proof of loss. - A claimant must take legal action against the company within 5 years - 60 days - 5 years
Time Limit on Certain Defenses
- The policy is incontestable after it has been in force for a period of time. - 2 Years
Special Payment Plans
- The policyowner and insurance company can get together and figure out how they want to payout to the beneficiary - As long as they both agree
Notice of Claim
- The policyowner's obligation to the insurer to provide notification of loss within 20 days after the occurrence (or as soon as is reasonably possible). - 20 days
Underwriting
- The process by which an insurer determines whether, and on what basis, an insurance application will be accepted
Installment Payments
- The shorter the payout period, the larger each payment amount - Equal number of money at intervals from the proceeds
Absolute Assignment
- The transfer is irrevocable and the assignee receives full control of the policy. - The assignee can even change the beneficiary without the beneficiary's permission, unless otherwise stated.
Human Life Approach
- The value of a humans life is calculated on net future earning potential and may be determined by discounting a persons future net earning at a reasonable rate of interest - Replaced by the Needs Approach
Differences of Fixed and Variable Annuities
- The variable annuity holds no guarantee of the principle, interest, or the amount of payment - The variable annuitant bears the investment risks - Variable annuities are regulated by both state and federal governments
Allow Dividends to Accumulate at Interest
- They do not have to be disbursed. Can be left in the account to accumulate interest. Dividends are not taxable, however the interest earned is taxable.
The Suicide Provision
- This is designed to protect the insurance carrier. - A two-year period of time in which the policy's death benefit will not be paid if the insured commits suicide.
Unauthorized Entities
- Those insurers who are nonadmitted, meaning they have not been approved or authorized to sell insurance in the state.
Spousal IRA
- Those who set up IRAs for themselves can also create one for their nonworking spouse. - Contributions must be reported on the couple's joint tax return.
Endowment Policies
- To endow is to "furnish with an income" - A type of life insurance that is payable to the insured if she/he is still living on the policy's maturity date. - Can provide a death benefit to the beneficiary or a living benefit to the policyowner.
Group Life Insurance
- To provide insurance coverage for a number of people under one contract known as the single master contract or master policy.
Part I The General
- Type of policy, amount of insurance, name address, birthdates, gender, marital status, smoker or nonsmoker, occupation, and income
Accumulation Units
- Typically is a function of the after-tax interest earned, dividends received and capital gains (or losses) incurred, minus investment expenses associated with the insurer equity investment portfolio supporting the annuity
Apply Dividends Against Premium Payments
- Used to pay policy premiums and lessen the out of pocket expenses
Group Ordinary Plans
- Uses cash value life insurance plan - - Employees are allowed to own the cash portion of the policy
Term Insurance for Interim Coverage
- Usually allowed to defer the policy 1-11 months - Will issue premiums based on the time of app - When principal policy is issued, premiums will be based on the insured's age at the end of the interim coverage
Exclusions
- War or Military Service - Aviation - Hazardous Occupation or Hobby - Felony Commission - Suicide
Grace Period
- Weekly premium payment policies = 7 days - Monthly premium payment policies = 10 days - All others = 31 days
Social Security Benefits
- Were computed on a workers average monthly wage (AMW) if the person became eligible for benefits before 1979. Since 1979, the calculation has been based on the workers average indexed monthly earnings (AIME)
Nonforfeiture Options
- privileges allowed under a life insurance contract after cash values are created
Reinstatement
-Automatic after 45 days if the delinquent premium is accepted by the company without requiring a new application - 45 days
Two to six year graduated vesting (Graded Vesting)
20% increase each year beginning after two yeas of service until 100% vested after six years of service
Exclusion Ratio
= Contract Investment/Life expectancy - Considered 100% in variable annuities
Agent in charge
A insurance agency must have one, but the agent does not have any specific duties or responisbilities
Physical Hazard
A hazard being of physical nature. A person being treated of cancer, the disease is the physical endangerment. (Blindness & deafness)
Captive Agents
A.k.a. Career agents Works for only one insurer and sells only that insurers products
Independent Agency System
Agents represent several insurers through signed contracts and are paid on commission or fee basis, not through salary.
Multiple Employer Welfare Arrangement (MEWA)
Allows small employers to pool together to provide insurance benefits for their employees. - Self funded and enjoy tax-exempt status - Must have a "employment-related bond"
Loading
Amount added to net premiums to cover the company's operation expenses and contingencies
Gross Premiums
Amount policyowner is required to pay after the addition of the expense factor
Minimum Deposit Whole Life
Cash values begin immediately and are use to pay future premiums (partially or on full).
Joint Life Policies
Covers two or more people. Using some type of permanent insurance, it pays the death benefit when one of the insured's dies. Premiums are less than MPP's
Health Insurance
Evolved from scientific principles to provide funds for medical expensed due to sickness or injury and to cover loss of income during disability
Childrens Insurance Rider
Extends a death benefit to the insureds child
Insurance
Financial protection against loss or harm - An arrangement by which company gives customers financial protection against loss or harm such as theft or illness in return for premium payments.
Void Contract
Fraud + Prior Knowledge - Have two years from the date of the contract purchase to dispute the validity of a contract
Installment Refund Option
Guarantee income for the annuitant's lifetime; or if the annuitant dies before funds are depleted, the policy pats the beneficiary in period installments
Life With Period Certain
Guaranteed income for annuitants lifetime; and if the annuitant dies before the period certain has expired, the policy pays the beneficiary in periodic installments until the end of the designated period
Cash Refund Option
Guaranteed income for the annuitants lifetime; or if the annuitant dies before funds are depleted, the policy beneficiary receives a lump sum cash payment
Period Certain Option
Guaranteed payments for a certain period of time; if the annuitant dies before the period has expired, the policy pays the beneficiary through the remainder of the period
No lapse guarantee rider
Guarantees a death benefit for life so the insured is covered even if premium payments lapse.
HMO
Health Maintenance Organization - Health care management stressing preventive health care, early diagnosis and treatment on an outpatient basis
Policy Reserves
Intangible and belong to the insurer
Speculative Risks
Involve the possibility of loss and gain. (Not Insurable)
Pure Risks
Involve the possibility of loss only. (Insurable)
Life Insurance
Is based on actuarial or mathematical principles and guarantees a specified sum of money upon the death of the person who is insured.
Independent Agents
Is self-governing and actually works for himself. This affords him the versatility to represent several insurers and their different insurance products.
Regulating the business of insurance
Legislation The Court System State Insurance Departments
Modified Whole Life
Level premiums for designated timeframe (typically 5 years); higher premiums thereafter
Limited Pay Whole Life
Level premiums limited to certain time period, less than life.
Basic Medical Insurance
Limited coverage to select type of medical care
Single Premium Payment
Lump Sum Method - Used to be the only way - Nowadays there are too many people that lack financial knowledge to handle this much money at once
Factors That Determine Premium Costs
Mortality Interest Expenses
Net Single Premium =
Mortality Cost - Interest
Fraternal Benefit Societies
Must be nonprofit, have a lodge system, and offer insurance to its members only
Enhanced ('Economatic') Whole Life
Mutual insurers issue policy with lower premium and face amount that diminishes after a few years. Dividends are used to purchase paid-up additions
Gross Premium =
Net Single Premium + Expenses
Risk Avoidance
Occurs when individuals evade risk entirely. "If you don't drive, then you avoid getting in an auto accident."
Elements of Contract
Offer & Acceptance + Consideration + Legal Purpose + Competent Parties = Legally Binding Contract
Voidable
One of the parties has a legal reason to reject or cancel the contract
Mutual Insurers
Participating policies Owned by policyholders Vote for directors and trustees Directors and management have control Typically higher rates
Indemnity Contracts
Pay the amount of the loss only (up to the policy limit)
Multiple Protection Policies
Pays a benefit of double or triple the face amount if death occurs during a specified period.
Accelerated Benefit Rider
Pays a portion of the death benefit if the insured is diagnosed with a terminal illness.
Juvenile Insurance
Permanent insurance written on underage children (usually from one day to age 14 or 15 years.)
Guaranteed Insurability Rider
Permits Insured to buy specific amounts of additional insurance at specified intervals (usually 3 years) without evidence of insurability
Straight Whole Life
Premium level protection; level premiums, until insured's death or age 100.
Net Level Premiums
Premium payments over the number of years
Interest Sensitive Whole Life
Premiums vary to reflect the insurer's changing assumptions with regard to death investment and expense factors.
Assessment Mutual Insurers
Prohibited in Florida
Unilateral
Promise for Performance
Annuities
Provide a stream of income by making a series of payments to the annuitant for the annuitant's lifetime or for a specifically designated period of time.
Joint and Full Survivor Option
Provides income for two people; if one dies, the same income payments continue to the survivor for life. There is no beneficiary after the second person dies.
Adverse Selection
Refers to the tendency for those individuals who present less favorable insurance risk to seek or continue insurance to a great extent than other risks.
Risk Reduction
Takes place when the chances of loss are lessened. Changing a lifestyle to minimize a known risk.
Risk Transference
The act of shifting the responsibility of risk to another in the form of an insurance contract.
Entities involved in agency
The agent The insured The insurance company
Participating Variable Annuity Policy
The annuitant participate more than just the investment performance of the company
Express Authority
The authority that an agent has in writing in the contract with the insurer that the agent represent
Legal Purpose
The policy owner must have an insurable interest in the insured
Joint and 1/2 survivor
The survivor income is reduced to one-half
Joint and 2/3 survivor
The survivor's income is reduced to two-thirds
Waiver
The voluntary giving up of a legal, given right.
Funding the Lottery
The winner wants to take periodic payments rather than a lump sum
Cash In Hand
Through a company check
Policy Riders
To make alterations to original policy
Value of one share =
Total amount of units/Amounts of units outstanding
Universal Life
UL policies are characterized by considerable flexibility. UL policies allow premium payments and face amounts to be adjusted up or down according to the policyowners needs.
Risk
Uncertainty regarding loss; the probability of loss occurring for an insured or prospect
Jumping Juvenile Policy
When the child reaches age 21, coverage increases to five times the face amount, premiums remain the same and no evidence of insurability is required.
Family Income Policies
Whole Life + Decreasing Term • This policy pays the beneficiary a monthly income for the balance of the family income coverage period. • The insurer must die prior to the time the selected family income coverage period ends. Starts when policy is issued.
Family Maintenance Policies
Whole Life + Level Term • The policy will pay the beneficiary a monthly income for a preselected number of years. • Must die prior to a selected date • The specified income period begins on the date of death.
Group Paid Up Plans
a. Combines term life with whole life b. Death benefit is a total of the two plans c. At retirement or termination the employee is entitled to the cash value (paid-up) policy
Group Universal Life Plans
a. Greater degree of flexibility b. Employee pays most of premium i. But can select the amount of insurance and the premium amount to be paid c. Flat benefits (same amount of coverage per person) d. Use employment positions within the group e. Ty life insurance benefits to earnings
Ratcheting
o Comparing the index value at the end of the contract year with the index value at the start of the contract ear
Leeway or Basket Provision
o Spells out the terms that allow domestic insurers the right to invest a certain percentage of their total assets in loans or certain other investments
Cost of Living Rider
o COLA is geared toward adjusting the benefit according to an individuals current living conditions o Fairly expensive o Is yearly modified to reflect changes in the CPI
Mandatory Second Opinions
necessary before an insured undergoes any form of nonlife-threatening surgery
Other Insurance In This Insurer
o A maximum amount an insurer is allowed to cover an individual in or to limit the company's risk o A person may occupy more than one policy with an insurer
Profit Sharing Plans
o Allow employees to participate in the company's profits through a plan formula established and maintained by the employer
Time Payment of Claims
o Allows insurers 45 days after receiving notice and proof of loss in which to pay or deny the claim
Misstatement of Age
o Allows the insurer to go back and make changes to the benefits so that they match the correct age o Benefits will be adjusted accordingly
Change of Beneficiary
o Allows the policyowner to change the policy beneficiary if so desired as long as the beneficiary designation is revocable o Without the beneficiaries permission
Reinstatement
o Allows the restoration of a policy that lapsed due to late premium payments back to its original active status rather than being considered canceled and reissued o The insurer may request an updated application o However, if the insurer takes no action either way within 45 days, the policy is considered reinstated automatically
Relation of Earnings to Insurance
o Amount of monies from premium payments the insurer received versus the loss the insurer suffered through claims payments
Probationary Period
o Applies to sickness only o Period of time that must pass after the effective date o Usually last 15 or 30 days
Medicaid Requirements
o At least 65, blind, or disabled o A US citizen or permanent resident alien o Need the type of care that is provided only in a nursing home o Meet certain asset and income tests
Conformity with State Statues
o Automatically adjusted at the time the policy is issued
Point to Point
o Based on the difference between the index value at the end of the term and the index value at the start of the term.
Consequences for an unauthorized insurer
o Conviction on charges of up to a first-degree felon o Liability for all unpaid claims o Suspension or revocation of all insurance licenses
High Water Mark
o Decided by look at the index value a various points during the term, usually the annual anniversaries of the date the annuity was first purchased.
Insuring Clause
o Defines and describes the scope of the coverage provided and limits of indemnification
Money Purchase Plans
o Depend on fixed contributions and are better suited to the true definition of defined contribution plans. o Defined contribution plan - a taxed qualified retirement plan in which annual contributions are determined by the formula set forth in the plan
Conversion Privilege for Dependents
o Dependents must meet certain age requirements o Requires insurers to provide the offer of dependent coverage up to age 30 o Until child marries or reaches the limiting age
Physical Exam and Autopsy
o Gives the insurer the right to have the insured physically examined periodically, and if dies they have a right to an autopsy
Guaranteed Insurability Rider
o Guaranteed the insured the opportunity to purchase additional coverage during the company's specified enrollment periods without having to provide proof of insurability
Change of Occupation
o If someone changes their job to a riskier profession, the insurer has the right to raise the premiums and change the benefit policy o Also works if person changes to a less risky profession
Illegal Occupation
o If the insured is connected with a felony or has an illegal occupation and incurs injury, the insurance company is not held responsible
Unpaid Premiums
o If there are any unpaid premiums they will be deducted from the benefit
Basic Levels of LTC
o Institutional Care o Home-based Care o Community Care
Minimum Premium Plan (MPP)
o Insures against a certain level of large, unpredictable losses above and beyond the self insured level and is available for a fraction of the insurers normal premium
Important Factors of Underwriting
o Is the proposed insured insurable? o Does insurable interest exist? o If the applicant and insured are two different people, does an insurable interest exist between the two of them o Is the proposed insured a standard risk?
Insurance With Other Insurers
o It calls for prorating beenfits on any other reason than "expenses incurred"
Nonadmitted
o It has NOT been licensed or authorized to transact insurance business
Recording Method
o Main way that the changing of beneficiaries is dealt with o Policyowner must notify the company in writing o The effective date is the date the policyowner signed and dated the notice
Waiver of Premium Rider
o May be exempt from making premium payments during the period of total disability o Generally does not extend past the insured's age of 60 or 65 o Premium payments are increased as well
Legal Reserve Requirement
o Means that a certain amount of money is set aside to fulfill future claims o Displayed as a liability on the company's balance sheet
Insurability Conditional Receipt
o Most common and is based on that the applicant proves to be insurable o Effective date of policy is the policy on this receipt
Claim Forms
o Outline the insurers responsibility to provide the claimant with the specific forms the insurer requires within 15 days. o The claimant has 90 days to supply proof
Administrative Services Only (ASO) (TPA)
o Paid a fee to provide the service of handling paperwork and processing claims, which alleviates the task from corporations
Non-Disabling Injury Provision
o Pays the actual cost of medical treatment for non-disabling injuries that result from an accident o Limited to a percentage of the weekly or monthly income benefit
Notice of Claim
o Pertains to the timely notice given to the insurer when a claim is being made (within 20 days)
Health Insurance Underwriting factors
o Physical Condition o Moral Hazards o Occupation
Legal Actions
o Prohibits insureds from taking legal action against the insurer due to a claim for 60 days from the date of proof or loss if the claim is disputed o Legal action cannot be taken before 60 days nor after five years
Insurance With Other Insurer
o Protects the insurance company against over-insurance in case a person has the same coverage from two different insurance policies o States that benefits payable will be prorated and excess premiums will be refunded
Social Security Rider
o Provides extra income when social insurance benefits are not being received by the insured o Must show that they have applied for social insurance benefits
Benefit Period Provision
o Short-term benefit period • Ranges from six months to a year o Long-term benefit period • More than a few years, such as 5, 10, or 20 years • Sometime will cover insured till age 65 o Benefit period depends on the policy
Elimination Period Provision
o Similar to a deductible o Time period is agreed upon o Shorter the elimination period, higher the premium
Time Limit on Certain Defenses
o Similar to incontestability clause in life insurance policies • Except that a fraudulent statement on a health application can be contested at any time unless the policy is guaranteed renewable, which usually last 2 years
Stock Bonus Plans
o Similar to profit sharing plans except that benefits are delivered in the form of company stock instead of relying on the profits of the company
Payment of Claims
o Specifies how and to whom claims payments are to be made
Recurrent Disability Provision
o States a time period for which the disabled may need additional coverage o If injury occurs during this, then it is consider a continuation of a prior disability o If it is after, then it is treated as a new injury
Approval Receipt
o States that the effective date of the policy is the date of approval. o Not used as common today since courts frown upon them
Entire Contract
o States that the insurance policy represents the contract between the insurer and the policyowner in its entirety, assuring the policyowner that no changes to the contract can be made once the contract has been issued • Same in health insurance policies as well as life insurance
Consideration Clause
o States the amount and frequency of premium payments and may include the effective date of the contract, the initial term of the policy and the insureds right to renew
Medigap policies
o Supplement Medicare benefits o Pay most, if not all, Medicare deductibles and copayments o Pay for some health care services not covered by Medicare - 10 plans offered (A thorough D, F, G, and K through N)
Cancelation
o The insured must be notified 45 days in advance and must be reimbursed for any prepaid premiums
Intoxicants and Narcotics
o The insurer is not responsible for any loss that occurs while the insured is intoxicated or under the influence of narcotics unless drugs were administered by a physician
Florida Association of Insurance and Financial Advisors (FAIFA)
o To enhance the ability of members to provide financial security for their clients o FAIFA defines appropriate and inappropriate business behavior for life insurance agents as demonstrated by the associations Code of Ethics
Funding Method
provides a single lump sum payment or periodic payments over time
Precertification Review
the insured must obtain "permission" from the insurer before seeking nonlife-threatening hospital care