Florida Life Laws Chapter 14

Grace Period in Group

31 days for payment of any premium due after the first

Suitability information is information related to the consumer which is reasonably appropriate to determine the suitability of a recommendation made to the consumer. This information includes:

Age Annual income Financial situation, needs, and experience Financial/Investment objectives Intended use of annuity Financial time horizon Existing assets Liquidity needs Liquid net worth Risk tolerance Tax status

Prohibited Charges

An annuity contract issued to a senior age 65 or older may not include a surrender or deferred sales charge for a withdrawal of money from an annuity that exceeds 10% of the amount withdrawn. The charge must be reduced so that no surrender charge, or deferred sales charge, exists after the 10th policy year

Dependent Coverage

Avail for all groups but creditor group, benefits cannot exceed benefits of the insured

Misrepresents:

Benefits, advantages, conditions, or terms of any insurance policy Dividends or share of the surplus to be received on any insurance policy Insurance policy as being shares of stock Ownership interest in the company The financial condition of any person or as to the legal reserve system upon which any life insurer operates For the purpose of inducing, or tending to induce, the lapse, forfeiture, exchange, con-version, or surrender of any insurance policy For the purpose of effecting a pledge or assignment of, or effecting a loan against, any insurance policy

A class of employees may not be created solely to be covered under a group plan

Employees Include: Those employed in one or more subsidiary corporations, individual proprietors, or partnerships under common control. Individual proprietor or partners. Directors of a corporate employer, former employees, or retired employees. Elected or appointed officials employed by a public body.

Types of Eligible Groups

Employer Groups Debtor/Creditor Groups Labor Union Groups Credit Union Groups Association Groups

Each insurer must maintain at its home office a complete file containing:

Every printed, published or prepared advertisement of its individual policies Typical printed, published or prepared advertisement of its blanket, franchise, and group policies A notation attached to such advertisement indicating the manner and extent of distribution and the form number of any policy advertised Advertisements submitted by and approved for use by agents, brokers or others

Standard/Required Provisions of Group life

Grace Period Incontestability Applicaaton Statements Deemed Representations Insurability Misstatement of age Payment of Benefits Individual Certificate

Death Pending Conversion

If person dies during the conversion period before any such individual policy has become effective, the amount of life insurance the person would have been entitled to under the individual policy will be payable as a claim under the group policy, whether or not application for the individual policy or the payment of the first premium has been made.

Agent Responsibilities Marketing Methods and Practices

In addition to the Unfair Methods of Competition previously discussed, and the Code of Ethics, the Florida Life Insurance Solicitation Law provides the following requirements for agents when soliciting life insurance to an applicant:

Prohibited Provisions

Maximum interest rate on policy loans free look/unconditional refund grace period designation of beneficiary secondary addressee

Group Life

No required minimum number of lives to be covered

Replacing Insurance company must:

Send the applicant, when requested in the NOTICE, a completed Comparative Information Form containing complete information regarding the proposed insurance. This must be done within 5 working days of the date the application and the NOTICE are received at its home or regional office. Send to the existing insurer a copy of the NOTICE immediately upon receipt at its home or regional office. Provide to each prospective purchaser a buyer's guide and a policy summary prior to accepting any applicant's initial premium or premium deposit, unless the policy or policy summary contains a provision for an unconditional refund for a period of at least 10 days, in which event the buyer's guide and policy summary must be delivered with the policy or prior to delivery of the policy. Maintain copies of NOTICE, requested Comparative Information Forms, all Sales Proposals used, and a replacement register, cross indexed, by replacing agent and existing insurer to be replaced, for at least 3 years or until the conclusion of the next succeeding regular examination by the Insurance Department, whichever is later.

Duties of Insurers and Agents Replacing Insurance Company

Supervision Records Prohibited Chargeas

Advertising and Sales

The file must be available for inspection by the Office. All advertisements must be maintained in the file for a period of 4 years or until the filing of the next regular report or examination of the insurer, whichever is longer.

All of the following are agent requirements when soliciting life insurance to an applicant, except: A Stating that policy dividends are not guaranteed B Informing the applicant that he/she is acting as a life insurance agent C Informing the prospective purchaser of the full name of the insurance company which the agent is representing D Representing him/herself as an investment advisor in order to gain the applicant's trust

d

Records

must maintain, or make available, the records of the information collected from the consumer, and other information used as the basis in making recommendations that resulted in insurance transactions. These records must be kept for 5 years after the insurance transaction is completed.

Non Contributory

no part paid by employees, all eligible employees must be insured

Policy Settlement

policy becomes a claim by the death of the insured, settlement will be made upon receipt of proof of death and surrender of the policy

Group Insurability

policy must contain provision setting forth the condition, if any, which insurer reserves the right to require a person eligible to furnish evidence of individual insurability

Application Statements Deemed Representations

provision that states a copy of the application must be attached to the policy when issued. All statements made by the policyholder are representations and not warranties, and no statement made by any insured person may be used in any contest unless a copy of the instrument containing the statement was furnished to the insured person or beneficiary.

Employer Groups

coverage for full time employees of an employer

Agent Duties in policy replacement

A signed statement as to whether or not the agent knows replacement is or may be involved in a transaction A signed statement by the applicant as to whether or not such insurance will replace existing life insurance

Supervision must include

Maintaining reasonable procedures to inform its agents of the requirements and incorporate the requirements into agent training materials Establishing standards for agent product training Providing product-specific training and materials that explain all material features of its annuity products to its agents Maintaining procedures for the review of recommendations to ensure there is a reasonable basis for determining that the recommendation is suitable Maintaining procedures to detect recommendations that are not suitable Providing an annual report to senior management which details a reasonable review to determine the effectiveness of the supervision system

Or of the following:

Makes any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy Uses any name or title of any insurance policy or class of insurance policies misrepresenting the true nature thereof Uses any advertisement that would mislead or otherwise cause a reasonable person to believe mistakenly that the state or the Federal Government: Is responsible for the insurance sales activities of any person Stands behind any person's credit Guarantees any returns on insurance products Is a source of payment of any insurance obligation, or sold by any person

Designation of Beneficiary

policy owner can name primary and secondary beneficiaries unless specified irrevocable

Contributory

premium paid by policyholder from employers funds or funds contributed by employees or both

Misstatement of Age Group

provision specifying equitable adjustment of premiums, benefits or both in event the age of a person has been misstated, must contain clear statement of method of adjustment

For Employee Groups

this certificate provides life insurance for the employees and dependents, if applicable, of (employer's name and address) under (group contract number). The employee will be given a copy of the group enrollment application. The benefits are payable to the beneficiaries of record designated by the employee. Current records will be maintained by the employer and the insurer of all insured persons and beneficiaries. The insurance company is required to notify each person (member or employee) when a group policy has been cancelled or expired. The insurer may meet this requirement by notifying the group sponsor (employer) and requesting the sponsor notify each certificate-holder to advise of the expiration or cancellation of the policy.

All of the following statements regarding life insurance policy provisions in Florida are correct, except: A The unconditional refund period for life insurance policies must be at least 14 days B The unconditional refund period for variable annuities must be at least 31 days C Under the beneficiary designation provision, the agent cannot be named as beneficiary unless insurable interest exists D The grace period for a person 64 years of age or older is 51 days

b

Before the replacement of an annuity contract, the agent must provide information to the consumer regarding the existing contract and the recommended annuity contract to determine suitability, which is included on which of the following forms? A Buyer's Guide B Disclosure and Comparison of Annuity Contracts C Notice Regarding Replacement D Annuity Suitability Questionnaire

b

Upon the death of the insured, payment of proceeds of a lump sum will be made: A The actual date of death listed on the death certificate B A date determined by a probate judge C Upon receipt of proof of death and surrender of the policy D The date any investigations by the insurance company are complete

c

Maximum Interest Rate on Policy Loans

cannot exceed 10% a yr max adjustable rate cannot exceed a rate calculated annually as permited by law

Conversion of Termination of Policy

every person whose insurance terminates, including the insured dependents of a covered person, and who has been insured for at least 5 years prior to termination date is entitled to have the insurer issue an individual policy of life insurance, subject to the same conditions and limitations. policy may provide that the amount of such individual policy may not exceed the smaller of the amount of the person's group life insurance protection, less the amount of any eligible life insurance for which she becomes under any group policy issued or reinstated by the same or another insurer within 31 days after such termination or $10,000.

Credit Union Groups

group of individual credit union members insured under a policy issued to the credit union

Debtor/Creditor Groups

lives of a group of individuals may be insured under policy issued to a creditor to insure debtors of the creditor

Labor Union Groups

lives of group of individual labor union members and their dependents for the benefit of persons other than the union

Free Look/Unconditional Refund

madatory 14 day period whre a refund in full if requested by the payor

Secondary Addressee

a policy in force for at least 1 year insuring a person 64 years or older may not be lapsed for nonpayment of premium unless after the grace period has expired, and at least 21 days before the effective date of any such lapse, the insurer has mailed a notification of the impending lapse in coverage to the policyowner specifying a secondary addressee if such addressee is designated in writing by name and address by the policyowner

The insurer maintain a complete file of advertisements for a period of at least: A 18 months B 2 years C 4 years D 3 years

c

Which of the following statements regarding conversion rights of a group policy is correct? A The individual policy will not cover dependents B All supplementary benefits provided under the group policy will remain on the individual policy C The individual is required to provide evidence of insurability D The amount of coverage on the individual policy cannot exceed the amount of life insurance provided under the ceased group policy`

d

Association Groups

group of individual members, employees or dependents of an association for the benefit of persons other than the association

If replacement is involved, the replacing agent must:

Give the applicant a NOTICE TO APPLICANT REGARDING REPLACEMENT OF LIFE INSURANCE, referred to as the NOTICE, when the application is being completed. Both the agent and the applicant must sign this notice and a copy left with the applicant. Leave with the applicant the original or copy of all sales proposals used for presentation Submit to the replacing insurer, along with the application, a completed copy of the Notice Regarding Replacement and all sales proposals used for presentation

Standard Provisions in Individual Contracts

Protection of Beneficiaries from creditors insurance must be used exclusively to benefit the person so designated in the policy and the proceeds will be exempt from creditors unless a valid assignment provides otherwise cash surrender values of life insurance policies are not liable to attachment, garnishment, or legal process in favor of any creditor of the insured person or named beneficiary

The agent's duties regarding replacement of an existing policy include which of the following? A The agent must give the applicant copies of the Notice Regarding Replacement and all sales proposals used during the presentation B Notify the existing insurer of the planned replacement C Require the applicant sign a statement if the insurance will replace an existing non-convertible and nonrenewable term policy which will expire in 5 years or less D Send a Comparative Information Form to the applicant within 5 days of the date of application

a

Assignment of Proceeds in Group

individual insured my assign any or all part of the incidents of ownership. This includes, but is not limited to, the privilege of having an individual life insurance policy issued and the right to name a beneficiary

Conversion on Termination of Group Eligibility

policy will cease due to termination of employment or membership in the class eligible for coverage under the policy. The individual and dependents are entitled to convert to an individual policy of life insurance, provided an application for the individual policy is made, and the first premium is paid to the insurer within 31 days after termination. This coverage is issued without evidence of insurability and will not include health or other supplementary benefits amount of coverage on the individual policy cannot exceed the amount of life insurance provided under the ceased group policy

Policy Summary

A prominently placed title: STATEMENT OF POLICY COST AND BENEFIT INFORMATION Name and address of the insurance agent, or if no agent is involved, a statement of the procedure to follow to receive responses to questions regarding the policy summary Full name of the insurance company and the home or administrative office location Generic name of the basic policy and of each rider The following amounts and values for the first 5 years and later years to show premium and benefit pattern: The annual premium for the basic policy and for each optional rider The guaranteed amount payable upon death Total guaranteed cash surrender values Cash dividends payable at the end of the year Effective policy loan annual percentage, if applicable Life insurance cost indexes for 10 and 20 years Equivalent level annual dividends Statement that dividends, if applicable, are based on company's scale and not guaranteed Date on which the policy summary was prepared

Replacement regulations do not apply to the following:

Industrial Insurance Group, franchise, and individual credit life insurance Group life insurance and life insurance policies issued in connection with a pension, profit sharing or other benefit plan qualifying for tax deductibility of premiums An application to the existing insurer that issued the existing life insurance where a contractual change or conversion privilege is being exercised Existing life insurance that is a non-convertible term life insurance policy which will expire in 5 years or less and cannot be renewed, unless such policy has tabular cash values Proposed life insurance that is to replace existing life insurance issued under a binding or conditional receipt delivered by the same company Variable life insurance or annuities under which the death benefits and cash values vary in accordance with unit values of investments held in a separate account

Examples will be:

Lapsed, forfeited, surrendered, or otherwise terminated Converted to reduced paid-up insurance, continued as extended term insurance, or reduced in value by the use of a nonforfeiture option Amended as to a reduction in benefits or in the term for which coverage would otherwise remain in force Reissued with a reduced cash value Pledged as collateral or subjected to borrowing for amounts exceeding 25% of the loan value

Nonforfeiture Options

These options are policy values if there is still cash value after stopping payment of premiums within 60 days of the due date of the default payment

The replacing insurance company must do all of the following regarding a replacement of an existing policy, except: A Send the existing insurer a copy of the Notice Regarding Replacement of Life Insurance within 10 days after policy delivery B Send the applicant a completed Comparative Information Form within 5 days after the application is signed when requested C Maintain copies of the notice, comparative information form, all sales proposals, and a replacement register for at least 3 years D Provide a copy of the buyer's guide to the applicant prior to accepting the initial or at or prior to the policy delivery if the policy has at least a 10-day unconditional refund provision

a

Prohibited Practices

agent is prohibited from knowingly making, issuing, circulating, or causing to be made, is-sued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison

Cash Surrender Value

insured will take a paid-up policy for a reduced face amount of insurance. No further premiums are paid, but there is a lower coverage amount.

Disclosure

insurer will provide the life insurance buyer's guide and policy summary to every applicant prior to accepting the initial premium. In the case of an unconditional refund offer for at least 14 days, the buyer's guide and policy summary must be delivered with the policy or prior to policy delivery.

Employee life

lives of a group of individual employees may be insured, for the benefit of persons other than the employer, under a policy issued to the policyholder

Grace Period

no less than 30 days within which payment of any premium after the first may be made. may be subject to an interest charge not in excess of 8% per year for the number of days of grace that elapsed before the payment of the premium If the insured is 64 or older, Florida law adds an additional 21 days to the grace period for a total of 51 days

Extended Term Insurance

insured uses the cash value to purchase a term policy at the same policy value. The term is the period of time the cash value can pay the term policy premium.

Group Individual Certificate

provision states insurer issues the policyholder for delivery to each insured an individual certificate containing the group number and the following: Description of the insurance protection to which the certificate holder is entitled Those to whom the insurance benefits are payable Any dependent's coverage The rights and conditions The insured

Group Payment of Benefits

provision that any sum due by reason of death of insured be payable to beneficiary designated by insured if at death there is no designated beneficiary living the insurer my pay the sum to any person equitably entitled by reason of having incurred funeral or other expenses incurred by the insured- not exceeding 2000

Incontestability

provision that provides the validity of the policy will not be contested expect for nonpayment after its met 2 yr in force from date of issue

Policy Replacement

any transaction in which new life insurance is to be purchased and it is known, or should be known, that existing life insurance will be:

An insurer must provide the life insurance Buyer's Guide and Policy Summary to every applicant: A Within 60 days after the policy is issued B Prior to accepting the initial premium C 14 days after the policy is delivered D When the application is signed

b

All of the following statements regarding group life insurance issued in Florida are correct, except: A There is no minimum number of lives that must be covered under a group life insurance policy B Each insured must receive an individual certificate containing the group number C Dependent coverage may not exceed the amount of coverage provided to the insured member or employee D If a person insured under a policy dies during the 31-day conversion period before any individual policy has become effective, there is no death benefit payable

d

Buyers Guide

provides information to improve the buyer's ability to select the most appropriate plan of life insurance, improve the buyer's understanding of the basic features of the policy that was purchased or is being considered, and help with the ability to evaluate the relative costs of similar plans of life insurance.

Suitability

standards and procedures for making recommendations to consumers which result in transactions involving annuity products. They must also establish a system for supervising recommendations to ensure that the insurance needs and financial objectives of consumers are appropriately addressed. Suitability requirements apply to any recommendation, or advice, made to a consumer by an insurer or agent which results in the purchase, exchange, or replacement that was recommended.