Massachusetts Life and Health Insurance Exam
Per Stirpes
"By the branch" if beneficiary is deceased, it goes down the line to their children
Penalties for intentional violations of privacy statutes- $ per violation
$1,000
Unfair or deceptive trade practices require how much penalty per violation?
$1,000
Penalties for intentional violations of privacy statutes- $ Maximum for an insurance representative
$10,000
Penalty for violating a commissioners cease and desist order
$10,000
Public adjusters maximum penalty for violations
$10,000
(Guaranteed Association) Maximum benefits for any one life- Life insurance cash values
$100,000
(Guaranteed Association) Maximum benefits for any one life- Other health insurance benefits
$100,000
(Guaranteed Association) Maximum benefits for any one life- Present value on annuity benefits
$250,000
(Guaranteed Association) Maximum benefits for any one life- Disability insurance benefits
$300,000
(Guaranteed Association) Maximum benefits for any one life- Life insurance death benefits
$300,000
(Guaranteed Association) Maximum benefits for any one life- Long Term Care insurance benefits
$300,000
Penalties for intentional violations of privacy statutes- $ Maximum for an insurance institution or support organization
$50,000
(Guaranteed Association) Maximum benefits for any one life- Basic hospital, medical, and surgical insurance or major medical insurance benefits
$500,000
Annuitization period
(liquidation, pay-out period) income is paid to the annuitant
Exclusions
* See list on pg 357
Variable Annuity
*Must be licenses with securities to sell- money is put into separate accounts and the growth will fluctuate. The payouts are also variable
HIPAA (Health Insurance Portability and Accountability Act)
*Preexisting conditions- 6 month exclusion period includes most health coverage guaranteed 48 hour for child birth, 96 for C section Small employers cannot be denied
Major Medical Covered Expenses
*See chart on Pg. 356
labor union
*Taft Hartley Trust An organization of workers that tries to improve working conditions, wages, and benefits for its members
Business Uses of Life Insurance
*buy sell funding (cross purchase, entity purchase) *key person *executive bonus *deferred compensation
Eligible groups
*groups can't exist solely for the purpose of buying insurance Employer Sponsored Multiple Employee Combined -Multiple Employer Trust (MET) -Multiple Employer Welfare Arrangement (MEWA) Labor Unions- Taft Hartley Trust Trade or professional association Lender Group
Determining Amount of Life Insurance needed
*human life value (current income) *needs approach (money for specific needs
Surrender or Withdrawal
- 10% tax if withdrawn before 59 1/2. - surrender period - waiting period. - surrender fee - penalty for early withdrawal.
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
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
Medicare Part A Coverage
- Hospitalization (per episode of illness (DRG)- cost for person goes up the longer they are there) - Skilled nursing facility (no coverage beyond 100 days) - home (skilled) health care (100 visits per illness) - hospice care - does NOT cover unskilled nursing home care Excludes: -first 3 pints of blood -private duty nursing -non medical services -intermediate care -custodial care
Methods of Marketing
- Independent - Exclusive or captive - General agents or managing general agents - direct writing companies
Classes of Life Insurance Policies
- Individual vs. Group - Term vs. Permanent - Participating vs. Non-participating - Fixed vs. Variable - Industrial & Home Service
Fiduciary Trust
- Promptly sends premiums to insurer - Has knowledge of products - Complies with laws and regulations - Does not commingle funds
Time of Payment of Claims
- Provides for immediate payment of the claim after the insurer receives notification and proof of loss. no longer than 60 days
Effective Date of coverage
- Terms of conditional receipt is issued - Substandard and pays additional premium - date of policy issue - No receipt - policy issue date if premium paid at delivery
Material Misrepresentation
- a false statement that changes the outcome of issuing a policy - generally with the health statement
Assignment by policyowner
- collateral - pledging the policy as collateral for a loan. - absolute - complete change of ownership.
producers report
- completed by the producer (agent). - not attached to policy if issued.
contributory
- employee pays part or all of the premium - 75% of eligible employees must enroll
Return of Premium Rider
- increasing term insurance rider - amount of rider equal to all premiums paid - death must occur while rider is in force
Required Signatures
- insured - producer/agent - applicant (if not the insured)
Medically Defined Disability
- the insured must also be confined to the house and under the treatment of a doctor.
Insuring clause or agreement
- usually found on the first page of the policy. - insurers promise to pay upon death. - includes the face amount. - usually signed by an officer of the company.
long term care rider
-Advance of death benefits while insured is living -Percentage of face amount each month -May pay for home care, assisted living, and nursing home care -reduces death benefit payable upon death
Requirements to be a qualified long term care policy
-Benefit Triggers: Cannot perform at least 2 ADL for at least 90 days, or cognitive impairment certified by a physician -Guaranteed renewability -Coverage of only long term care expenses -No benefits for expenses reimbursable under medicare No cash surrender value Any dividends or refunds or premiums must be used to offset future premiums or increase benefits -Conforms to specified consumer protection marketing and benefit standards
Dividend Options- Carppo
-Cash -Reduce premium -Accumulate at interest -Paid-up additions -Purchase one year term
Types of long term care
-Facility Based Care *Skilled Nursing Care- Performed by licensed nurses under doctors orders *Intermediate Care-Intermittent care performed by licenses nurses *Custodial Care- Help performing ADL's informal caregiver - Home health care -Adult Day Care -Respite Care -Assisted living facilities
4 types of medicare advantage plans
-Medicare Managed Care Plans HMO or POS -PPO No gate keeper, more cost if outside network -Private fee for service plans plans negotiates the fees that providers will be paid -Medicare Specialty plans Special needs such as kidney failure
Disability Income Rider
-Pays a monthly income benefit to the insured in the event he or she becomes disabled -Pays benefits for life or until a disability ends once a waiting period has passed from the date of the insured's disability
Skilled care in nursing home (Medicare)
-Requires prior 3 day hospital stay -Medicare pays 100% for first 20 days -Beneficiary has daily co pay days 21-100 No medicare coverage after 100 days
Group Underwriting
-looks at broad characteristics of group to determine rates -still must control adverse selection
Dental Prosthodontics-
Artificial replacements, such as a bridge and dental implants
Navigators
Funded by government through federal grants cannot sell insurance or provide advice help determine eligibility for public assistance
Increasing Term
-death benefit increases -premium increases
Personal Uses of Life Insurance
-survivor protection -mortgage payoff -estate creation -estate conservation -liquidity -cash accumulation
Lapsed Producer licenses may be reinstated within how many years of the license renewal date
1 year
Free look for health insurance-MA
10 days
Free look for life insurance
10 days
Free look for long term care?
10 days
COBRA Premiums
102% of group premium *Employer no lonoger contribute
Producer appointment- How many days to file notice of appointment after the agency contract is executed or the first insurance application is submitted
15 days
Rates must be filed with the commissioner how many days before their effective day?
15 days
producer termination- producer must receive notice within how many days after notifying the commissioner
15 days
Public Adjusters Total hours of continuing education
15 hours
Required ethics hours for producer continuing education
15 hours
Minimum age to obtain a producer license
18
How long can a temporary insurance producer license, without forcing an examination be valid if a licensed producer dies, becomes disabled, or enters the armed forces of the united states
180 days
Time limit on contesting application information
2 years after application Fraud in the application can void the policy when discovered
Free look for replacement of life insurance
20 days
Maximum first year commision may be no more than what percent of servicing compensation (Renewal)
200%
Public Insurance Adjusters minimum age to obtain a license
21
A commissioner must give how many days advance notice of a hearing?
21 Days
Unfair or deceptive trade practices punitive damages of up to what % of claim?
25%
OBRA
29 months if disbled at the time of termination
Public adjusters license expires after how many years?
3
Free look for medicare supplement policies- MA
30 days
Grace Period- Standard life insurance policies
30 days
Producer must report a change of legal name or address within how many days?
30 days
Producer termination- Commissioner must be notified within how many days after termination date
30 days
Producers must report criminal acts within how many days?
30 days
Producers must report non resident change of legal residence within how many days?
30 days
An eligible employee is one who works a minimum of how many hours per week on a full time basis? - MA
30 hours
Grace Period- variable scheduled premium policies (Variable whole life)
31 days
Group health insurance must continue how for how many days after an individual leaves the group
31 days
conversion period for group life insurance
31 days
Free Look Provision
Generally 10 days after policy delivery to cancel policy w/ full refund, except 30 days for seniors or for replacement policies.
Producers subsequent 36 month renewal period requires how much continuing education?
45 hours
Renewal compensation must be paid for at least____ years?
5
Maximum pre-existing condition period- Long Term Care
6 months
Producers initial 36 month renewal period requires how much continuing education?
60 hours
Grace Period- Variable flexible premium policies (Variable universal life)
61 days
Eligibility for Medicare COverage
65 and over kidney failure (renal failure received social security disability for at least 24 months
Primary Care Provider
A HEALTH CARE PROVIDER WHO PROVIDES CHECKUPS AND GENERAL CARE * All insured and dependent must have a PCP
US Patriot Act
A U.S. federal act that broadens the surveillance of law enforcement agencies to enhance the detection and suppression of terrorism
Moral Hazard
A belief that intentionally causing a loss is acceptable
Own Occupation
A definition of total disability. The insured must be unable to work at her own occupation. It is easier for the insured to receive benefits under policies using this definition.
Keogh Plan
A federally-approved, tax-deferred savings program for self-employed people, allowing them to set money aside for their retirement.
Multiple Employer Trust (MET)
A group of small employers who do not qualify for group insurance individually, formed to establish a group health plan or self-funded plan.
Risk Retention Group
A liability insurance company owned by its members, which are exposed to similar liability risks by virtue of being in the same business or industry.
Fixed Period Settlement Option
A life insurance settlement option in which the number of payments is fixed by the payee, with the amount of each payment determined by the amount of proceeds.
Fixed Amount Settlement Option
A life insurance settlement option whereby the beneficiary instructs that proceeds be paid in regular installments of a fixed dollar amount. The number of payment periods is determined by the policy's face amount, the amount of each payment, and the interest earned.
Accelerated Benefit Rider
A living benefit or terminal illness rider - if you have terminal illness, you can use the money before you die and it reduces the overall death benefit
HMO (Health Maintenance Organization)
A managed care organization that provides comprehensive medical services for a predetermined annual fee per enrollee. Prepaid services Co pays Gate Keeper (PCP) Limited CHoise of providers Limited service area
Sickness
A medical condition, disease or illness.
presumptive disability
A provision that is found in most disability income policies which specifies the conditions that will automatically qualify the insured for full disability benefits.
Waiver of Cost of Insurance
A rider that waives the deduction of the monthly cost of insurance and expense charges associated with a Universal Life type policy while the insured is totally disabled, usually after 6 months of continuous disability.
Rollover & transfer
A rollover occurs when an IRA account owner takes temporary ownership of IRA account funds when moving the account to another custodian. One hundred percent of the funds withdrawn must be rolled into the new account within 60 days or they will be subject to tax and a 10% early withdrawal penalty, if applicable. An individual can make only one rollover from an IRA to another (or the same) IRA in any 365 day period (not per calendar year), regardless of the number of IRAs the individual may own. The limit will apply by aggregating all of an individual's IRAs, including SEP and SIMPLE IRAs, as well as traditional and Roth IRAs, effectively treating them as one IRA for purposes of the limit. However: ■ Trustee-to-trustee transfers between IRAs are not limited ■ Conversions from traditional to Roth IRAs are not limited
Flexible Spending Account (FSA)
A salary reduction cafeteria plan that uses employee funds to provide various types of health care benefits.
employer-sponsored retirement plan
A savings plan for retirement that is offered through a company's benefits package; contributions are usually matched by the company.
Life Income Settlement Option
A settlement option providing for life insurance that provided income to beneficiaries based upon life expectancy
Reinsurance-
An insurance company sells some of its risk to other insurance companies.
A- CANHAM Risks
Accidental
ERISA
Act that allows employers to set up insurance plans. Also allows funding for Medicaid
Llyod's Associations
Organizations that provide support facilities for underwriters or groups of individuals that accept insurance risk.
Flexible policies
Adjustable life- Adjusts death benefit, adjust premium (Increase required proof of insurability)
A- CANHAM Risks
Affordable
Facility of Payment provision
Allows for a relative to get some of the payment from the benefits because the person is helping paying for the funeral and hospital etc
Misstatement of Age
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
Contract Policy
An agreement between the insured and the insurer
Fixed Annuity
An annuity that offers fixed payments and guarantees a minimum rate of interest to be credited to the purchase payment or payments.
Deferred Annuity
An annuity that starts sometime in the future.
Mutual Insurer
An insurer that is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them.- Non Taxable dividends & Participating Polcies
Stock Insurer
An insurer that is owned by its stockholders and formed as a corporation for the purpose of earning a profit for the stockholders.- Issues Non Par Policies
Modified Endowment Contract (MEC)
An irrevocable IRS classification of a policy (determined by the 7 Pay Test) whereby tax advantages are lost for all distributions ONLY. *Once MED- Always MEC Interest on cash values not taxed while in the policy Withdrawals or loans are taxed -interest out first -10% ppenalty on interest if withdrawn before 59& 1/2 unless disabled
Utmost Good Faith
An obligation to act in complete honesty and to disclose all relevant facts.
Premium Mode
Annual, semi - annual, quarterly, monthly -annual is the lowest
Estate Taxes Life Insurance Death Benefit
Annuities are included in gross estate if death occurs during accumulation- entire value including cost is included Death occurs during annuitization- present value of future payments is included
Individual Life Insurance Full Surrenders-
Any Gain is taxable
Insurable Interest
Any financial interest in life or property such that, if the life or property were lost or harmed, the insured would suffer financially.- must be proven before policy can be purchased
Features of dental insurance
Any provider VS PPO Scheduled vs non scheduled benefits Preventative- usually 100% covered basic services -80/20 major services- 50/50
COBRA
Applies to employers who employ 20 or more Employer must allow employee or dependents to remain on the group plan Applies to medical and dental- not life insurance extends coverage for 18 months if terminated extends coverage for 36 months if dependents no longer qualify fur to -divorce -Too old -death of employee
Long Term Care
Assistance with living Not medical treatment Usually not covered by Medicare
How often will the commissioner conduct an examination of every domestic company?
At least every 5 years
Medicare Part A
Automatically eligible at 65 supported by payroll taxes premium charge for those not fully qualified for social security
A- Method of handling risk
Avoidance
STOLI/IOLI
Banned in most states Investors named as beneficiaries
Spendthrift Provision
Benefits cannot be paid in lump sum, cannot be claimed by creditors before payment to beneficiary
Major Medical Insurance
Broader Coverage Supplemental major coverage -insured has a basic policy -major medical pays when basic ends
C- CANHAM Risks
Calculable
Medicare part BAdditional Info
Calendar year Deductible 80/20 Coinsurance after deductible No Stop Loss
Revocable
Can be changed by owner at any time
Term- Convertible
Can be changed to permanent insurance, no new application required
CANHAM Risks
Can be insured with the following characteristics
Morale Hazard
Carelessness
Long Term Care Provisions Non forfeiture
Cash Value or return of percentage of premiums minus claims paid policy has been surrendered or has lapsed for nonpayment of premiums
Extended Term Insurance
Cash values buy single premium term insurance, same amount of insurance as old policy default option by insurer*
Peril
Cause of Loss
Legal Contract
Consideration, Legal Purpose, Offer (Made by Insured), Acceptance, Competent Parties
Medicare Part C- Advantage Plans
Contracts with and pays private companies enrollees medical expenses paid by private plan Must be enrolled in A & B also May provide outpatient drug coverage 4 types of Medicare advantage plans
`Roth IRA
Contributions not tax deductibe limits same as IRA Qualified Distributions are tax free
Decreasing Term
Death benefit decreases, premium remains level
Level Term Insurance
Death benefit is level, premium level for the term
Medical Expense Policies for Self Employer Persons
Deduct premiums if have a net profit from business not covered by a group policy Benefits not taxable
Major Medical Features
Deductible Coinsurance Stop Loss Insured Maximum Out of pocket
Medicare Part B Coverages
Doctor Outpatient Services Home Health
State Long Term Care Partnership programs
Dollar for dollar asset protection joint effort between insurance companies & state insurance Department and state medicaid agency
Insurance Company Locations
Domestic, Foreign, and Alien
coordination of benefits
Eliminates the duplication of payments when an employee, spouse, or dependents have health coverage under two or more plans. *Birthday/ calendar rule
Medical Savings Account (MSA)
Employed by less than 50 employer Self Employed Contributions deductible Must have HDHP Tax Free withdrawals New plans not allowed after 2006
Eligiility
Employee Full Time Actively at work Completed probabationary period dependednts enrollment
Employer Responsibilities
Employer Notification responsibilities Emplopyer Mandate *Employer 50 or more must offer ACA
Simplified Employee Pension (SEP)
Employer makes contributions on employee behalf higher contribution limits employees must be 100% vested
Termination of group coverage
Employer terminated plan Employer didnt pay premium Employee: -Quit -laid off -reduction in hours
Health Reimbursement Account (HRA)
Employer-funded plan that reimburses employees only for eligible and substantiated health-care expenses. HDHP not required Money rolls over from year to year
Savings Incentive Match Plan for Employees (SIMPLE)
Employers with 100 EE or less Employees can contibute 100% vesting for EE contributions 25% early withdrawal penalty
Group Health/ Medicare
Employers with less than 20 EE- Medicare is primary Employers with 20 or more- Group plan is primary for EE, Medicare is primary for retirees
ERISA (Employee Retirement Income Security Act)
Federal law that increased the responsibility of pension plan trustees to protect retirees, established certain rights related to vesting and portability, and created the Pension Benefit Guarantee Corporation
Fraud and False Stataments
Fine and or imprisonment (10-15 years) *Embezzlement included
Joint Life
First to die, second to die (Survivorship Life)
Traditional Whole Life
Fixed Premium, Fixed & level death benefit, Cash Values *Guaranteed interest, may be surrendered, may be borrowed, endows at 100 *Death Benefit- Amount at risk to the company, plus cash values
Universal Life Insurance
Flexible premium permanent life insurance twith Cash account
Metal Tiers of ACA
Four levels of coverage, each must offer minimum EHB Tiers represent average proportion of expected costs percentages represent how uch plan will pay
Risk Purchasing Groups
Groups of people with similar insurance needs who form an organization to buy insurance as a group.
Long Term Care Provisions Optional Benefits
Guaranteed insurability allows insured to raise daily benefit uses attained age No medical questions not currently receiving benefits
Point of service
HMO allows subscribers to use providers outside of HMO No gate keeper for out of network services subscribers pay more of the cost *Called open ended HMO
Physical Hazard
Hazard that can be seen
Pre-existing condition
Health plans can no longer exclude pre existing conditions (except Grandfathered)
H- CANHAM Risks
Homogeneous
Time of Payment of Claims
Immediately or no less frequent than monthly for disability payments
Estate Taxes Life Insurance Death Benefit
Included in insured gross estate if Payable to estate, insured owns the policy at time of death, issured transfer ownership within 3 years of death
Long Term Care Provisions Benefit Amount- How much?
Indemnity- Stated dollar amount per day Reimbursement- Acutal expense or stated dollar amount per day, whichever is less Home Care- if covered usually 50% of facility amount Higher the benefit- higher the premium
HSA (Health Savings Account)
Individually owned medical expense savings account Contributions are tax deductible Withdrawals are tax free Must have HDHP Account values accumulate from year to year
Grace Period following the due date of premium
Insurance still in force during grace period Weekly preium= 7 days Monthly premium= 10 days Annual , semi annual, quarterly= 31 days *unpaid premiums deducted from a claim
Long Term Care Benefit Triggers
Insured must be unable to perform activities of daily living Eating Dressing Toileting Continence Bathing Transferring *Insured has cognitive impairment
Long Term Care Provisions Elimination Period
Insured qualified for benefits benefits not paid until end of period time deductible longer the elimination period- lower the premium
Characteristics of Group Health insurance
Insures many people in one contract usually less expensive than individual insurance sponsor received master contract participants receive a certificate of insurance
Variable Policies
Life insurance plus investments, must have securities license too, investments in separate account *Owner can lose money
Graded Premium Whole Life
Lower premiums for designated timeframe (typically 5-10 years); payments rise annually thereafter until leveling off
Distributions at death to a beneficiary
Lump Sum- ALl gain is taxable 5 year withdrawal-interest out first - No 10% penalty Annuity Payments- Taxed according to exclusion ration If spouse is beneficiary- transfer ownership to spouse with no tax consequences
Long Term Care Insurance Regulations
Marketing: -Must provide applicant with a shopper guide and outline of coverage -consider suitability of applicant -notice regarding replacement -30 day free look -describe policy renewal conditions on its first page
M- CANHAM Risks
Measurable
Gross Premium
Net Premium plus expenses, gross annual
STARR
Method of handling risk
Long Term Care Provisions Benefit Period- How Long
Minimum 12 months Usually 2-5 years May choose lifetime Subject to lifetime maximum amount Longer benefit period- higher the premium
Medicare Part B
Monthly Premium that increases with income level 'Not required- can have part A only initial enrollment period -3 months before age 65 -month of age 65 -3 months after 65 Annual Open enrollment -January 1- March 31 each year
premium elements
Mortality Interest Expenses Net Premium (Mortality minus interest) = Net Single
dependent coverage
Most group life insurance policies cover the member's dependents, as long as the amount of coverage does not exceed 50% of the insured member's coverage.
Medigap regulations
Must be given NAIC Buyers Guide 30 day free look guaranteed renewal guaranteed acceptance if bought within 6 months of enrollment in Medicare Part B Cold Lead Advertising not allowed Sales COmmisions cannot exceed 200% of renewal commisions renewal commisions must be level in years 2-5
Medicare Supplement plan- Core benefit Plan A
Must cover hospital co pays for days 61-90 and lifetime days adds an additional 365 days of coverage to a benefit period- covered at 100% Covers Medicare Part B Coinsurance Must be offered if company sells an y medicare supplement plans Doesnt cover part A and B deductibles
Individual Retirement Account (IRA)
Must have earned income, non working spouse can make contributions based upon earned in come or spouse
IRA Required Minimum Distribution
Must start taking withdrawals by 72 First minimum withdrawal can be delayed until April 1 tje following year after turning 72 50% penalty if not taken
Change of insurers
No loss or gain in benefits for current claim
Temporary annuities
No payment for life- Fixed period, fixed amount
Emergency Medical Servcies
No preauthorization required In Network or out of network normal cost sharing requirements
N- CANHAM Risks
Non- Catastrophic
Reduced Paid-Up Insurance
Nonforfeiture option where cash value is used to make a single premium payment to purchase as much of the same type of insurance as possible. Face amount of the new policy would be less than the original policy but no further premium payments would be necessary. Policy can be reinstated.
Suicide
Not covered before 2 years in contract
Individual Life Insurance Cash Value Loans
Not taxed while policy is in force, taxed is policy is surrendered and there is a gain
Guaranteed Insurability Rider
Optional rider that enables the policyowner to purchase additional amounts of coverage at predetermined times without proof of insurability.
Waiver of Premium Rider
Optional rider that requires an insurer to assume payment of premiums should the insured become totally disabled for six months for the duration of the disability.
ACA
PPACA, Obamacare, and health care reform Signed in 2010 with reforms Additional refrms began jan 2014 Grandfathered= before ACA Non Grandfathered= existed after ACA
Single Premium Whole Life
Paid up for life with one large premium payment
Death benefit of Annuity
Pay out accumulated money of pwner dies, pay out of money if annuitant dies too soon
Life Income Period Certain
Payments are guaranteed for the lifetime of the recipient or a specified period of time, whichever is longer.
Joint Life and Survivorship Annuity
Payments are made to two annuitants with the survivor continuing to receive payments after the first annuitant dies.
Joint Life and Survivor Annuity
Payments may decrease by 2/3 or 1/2
Joint and survivorship
Pays two beneficiaries an income for life
IRA deductibility
Phase out of deductions base upon adjusted gross income No deduction if imcome above max AGI
Long Term Care insurance regulation standards
Policy must be at least guaranteed renewable A sale must include an offer of inflation protection Pre existing conditions- 6 month look back limit
Adhesion
Policy written by the insurance company
Conditional Receipt
Premium with the application; coverage effective as of the date of application or medical exams - whichever is later
Taxation of Annuities
Premiums are not tax deductible Interst during accumulation not taxed in the contract Withdrawals= interest our first, income tax on interest -10% penalty on interest if younger than 59 & 1/2 No penalty if withdrawal due to disability or death or annuitization
Individual Life Insurance
Premiums are not tax deductible, interest earned on cash values tax deferred- not taxed while in the policy
Medical Expense Policies for Self Employer partnerships
Premiums deductible for partnership Premiums are income to partners benefits not taxable
Cost Containment- Managed Care
Preventative Care
Utilization Management
Prospective review concurrent review retrospective review
Prepaid
Provider is paid a set fee in advance- customers called subscribers/ participants
Experience Rating
Rating system that bases insurance rates on claims history of individual group
R- Method of handling risk
Reduction
Statement of Good Health
Required if no premium with application, if health changed- agent can't deliver policy
R- Method of handling risk
Retention
Non-Qualified Plans
Retirement plans that do not meet the requirements of ERISA are known as non-qualified plans These plans often discriminate in favor of the highly paid employees and often have no vesting prior to retirement age The contributions paid in by employers are not tax deductible until the employee actually receives the funds
Exposure
Risks for which the insurance company would be liable
Dental Diagnostic and preventative
Routine exams and x rays, regular cleanings , fluoride treatments
Medicare Part B Exclusions
Routine foot, vision, dental or hearing most immunizations Mst outpatient prescription drugs private duty nursing cosmetic surgery
Modified Premium Whole Life policy
Same as WL but premium low for 1st 3-5 yrs., THEN has one-time premium increase- levels off afterwards
Section 1035 Exchange
Section 1035 of the Internal Revenue Code allows for certain exchanges without recognizing a gain or loss for tax purposes, such as an annuity exchanged for another annuity. -Life to Life= Not Taxable -Annuity to Annuity = Not Taxable Life to Annuity = Not Taxable Annuity to Life = TAXABLE
S- Method of handling risks
Sharing
Market Value Adjusted Annuties
Single premium deferred annuities, interest rate for a fixed number of years, early withdrawal penalty
Group Underwriting Considerations
Size of the group composition of the group flow of members through group plan design contributory vs. non contributory persistency administrative capability
Alternatives to Hospital care
Skilled Nursing Facilities Intermediate nursing facilities rehabilitiative facilities Home health care
Hazard
Something that causes an increase in the chance of loss
Classification of Risks
Standard, Preferred, Substandard, Declined
Federal Government Health Insurance
TRICARE- Active Military Veterans- Former Military Medicare- Primarily for senior citizens & social security disability
Free PReventative Care
Take care of yourself now to prevent future conditions
Binding Receipt
Temporary, not commmon in life insurance
Agency
The insurance agent acts on behalf of principal (Insurance Company)
Law of Large Numbers
The larger the group, the more accurate losses can be predicted
Essential Health Benefits (EHB)
The minimum coverage requirements for health insurance under the affordable care act. the qualified plans must be guarantee issue with a no pre-existing conditions and no lifetime benefit maxiumums
Group Insurance Premium
The premium for the group insurance is calculated in the methods.
Accumulation Period
The time before an annuitant's retirement during which the annuitant is making payments or investments in an annuity.
Group Credit Life
These are set-up by banks, finance companies, etc. in case the insured dies before a loan is repaid. Policy benefits are paid to the creditor and used to settle the loan balance. The premiums are usually paid by the borrower. A decreasing term policy is commonly used.
Fair Credit Reporting Act
Third Pary information, notice to applicant requiredm consumers have rights and can dispute information in files
T- Method of handling risk
Transfer
Insurance
Transfer of Risk
Distributions from IRA upon death
Transfer to spouse is not taxable Entire value or IRA is included in deceased EState
usual, customary, and reasonable (UCR)
Type of retrospective fee-for-service payment method in which the third-party payer pays for fees that are usual, customary, and reasonable, wherein usual means usual for the individual provider's practice, customary means customary for the community, and reasonable is reasonable for the situation.
Risk
Uncertainty/ Possibility of Loss
Qualified Health Plan
Under the Affordable Care Act, starting in 2014, an insurance plan that is certified by an Exchange, provides essential health benefits, follows established limits on cost-sharing (like deductibles, copayments, and out-of-pocket maximum amounts), and meets other requirements. A qualified health plan will have a certification by each Exchange in which it is sold.
Agent Delivery
Usually must get signed delivery receipt
Backdating
Usually no more than 6 months
Group Eligibility
classes, not individuals, waiting period before eligibility for insurance, enrollment follows probationary period (Usually 31 days), no medical questions, late enrollment = medical questions,
Long Term Care Provisions Exclusions
Wars Alcohol or drug abuse self inflicted injuries treatment provided without cost to the insured mental illness-without demonstrable organic cause *Dementia or alzheimers is covered
Payor Rider
When an adult insures a child, premiums will be waived until the child reaches 21, if the adult dies or is disabled
proof of loss
Within 90 days
Long Term Care Provisions Inflation protection
Yearly increase in benefit coverage by a stated percentage -simple -compound (2X usually
Medicare—Part D Prescription Drug Coverage
a United States federal-government program to subsidize the costs of prescription drugs and prescription drug insurance premiums for Medicare beneficiaries. -purchased from private company -premium charge, reduced by income level -Annual deductible -25% co pay until gap -Payment policy stops- donut home -5% co pay after donut hole -Donut hole gap ends in 2020
Self-insurance
a business that pays its own claims
Medicaid
a health care program that assists low-income families or individuals in paying for long-term medical and custodial care costs Health coverage for the poor regardless of age a person can be covered by both Medicare and Medicaid funded by state and federal government
Reinstatement
a policy can be restored within a specified period of time with proof of insurability
imcome replacement
a reduction in income trigger payent
Defined benefit
a retirement benefit in which an employee is guaranteed certain payments on retirement
subsidies
a sum of money granted by the government advanced premium tax credits cost sharing (only available in silver tier)
open enrollment
a time when employees can change their participation level in various benefit plans and switch between benefit options *No medical questions
limited benefit policies
accident only, dread disease, critical illness, hospital indemnity, credit disability, blanket coverage, [rescription drugs, vision, hearing
estoppel
actions reasonably relied on by one party cant be denied by the party that accepted the same previously
accidental death or dismemberment rider
amount of rider is the principal sum, paid in addition to face amount if death is due to accident, death within 90 days of accident
employer-sponsored retirement plan
an IRS-approved retirement plan offered by an employer (also called qualified plans) Regulated by ERISA Employer & Employee Contributions tax deductible Interest earning grow tax deferred
Immediate annuity
an annuity in which the annuitant begins receiving monthly benefits immediately
Any provider
any provider the insured chooses
Surplus Lines
any type of insurance for which there is no available market within the state, and the coverage must be placed with a non admitted insurer
Reinstatement of health policy
application and recipt company must deny within 45 days after applcation or policy is in effect accident claims covered immediately sickness clains covered 10 days after reinstatement
Underwriting Sources of Information
application, medical exams, physicians statement, AIDS Testing, Medical Information Buereau, Consumer Reports, Investigative Reports
Community rating
based on pooling groups
representation
believed to be true
Per Capita
by the head -- per person *Not inheritable
modifications
can only be made by company, owner can request a change
Irrevocable
can't be changed without beneficiary pprival
IRA Funding
investments can't be put in life insurance, art work, antiquesm stamps or coin collections, precious metals
Optionally Renewable
company may not renew
medical exam and autopsy
company pays all costs
Conversion
convert to individual permanent policy, cost based upon attained age, no medical questions, death curing conversion is covered
Dental orthodontics
correction of irregular alignment of the teeth
comprehensive care
covers broad range of services
Specified coverage
covers only specific services
Accidental death rider
death due to accident that must have occured within 90 days of accident, doubles or tripled the face value
Any Occupation
definition for being totally disabled in a disability income policy. person cannot perform any occupation he/she is qualified *more difficult to qualify
Legal action against the insurer
earliest 60 days after proof of loss maximum three years after proof of loss
Employer sponsored group life
employer is policyowner, employee recieved a certificate of coverage, employee names beneficiary
Agent Authority
express, implied, apparent
concealment
failure to disclose known facts
other provisions
free look (10 days, 30 for senior citizens) , insuring clause, consideration clause, renewability, optionally renewable, conditionally renewable, conditionally renewable, guaranteed renewable, non cancellable, military suspense
Group Annuities
funded by employer contributions, distributions determined by employer
warranty
guaranteed to be true
Life Annuity
guarantees income for life and payment to stop at death; nothing to heirs (highest income)
Interest Sensitive Whole Life
has current interest rate, guaranteed interest rate
Health insurance covered benefits
hospital and medical bills loss of income- disability Dental Bills Longer Term care- medical ad no medical expenses
profit sharing
incentive pay in which payments are a percentage of the organization's profits and do not become part of the employees' base salary
Life and Period Certain Annuity
income for life, regardless of how long, death before end of period- remaining payments to beneficiary
life with refund annuity
income for life- regardless of how long, death before payments equal to accumulation money- Balance to beneficiary, lump sum or monthly payment
Misrepresentation
information that is not true, but would not affect the insurance company decision
Residual Market
insurance from the state or federal government
Credit Life individual
insured policy-owner, assigned to lender, insurance can be greater than the debt, doesn't stop when debit is paid, more expensive than group, may require medical questions
Guaranteed Renewable
insurer must renew premiums can be rasied by classes
noncancelable
insurer must renew premiums cannot be rasied
fraud
intentional act to cheat another
health insurance exclusions
intentional, war, elective cosmetic surgery, workers compensation, felony
Interest Only Settlement Option
interest if paid on the death benefit, death benefit paid at a later date
Small Group size for health plans is how many employees?
less than 50
Use of annuities
life income, tax favored savings, funding individual retirement accounts (IRA) , Education finds
limited plans
limited benefits limited perils- cancer / vision notice insured must be informed of the limited benefits
Limited choice
limited to contracted providers
Access to Cash Values While Insured is Living
loan reduced death benefits, if interest if not paid, loan automatically taken to pay interest,
Basic Hospital, Medical, and surgical policies
low coverage amounts, non deductibles
Preferred Provider Organization (PPO)
managed care network of health care providers who agree to perform services for plan members at discounted fees Fee for service pre negotiated rates Insured pays less in petwork of PPO providers
Notice of Claim
need to provide notice of claim within 20 days off loss if continuing disability can only be required to provide proof every 6 months
Health Care Tax Credit for small employers
maximum credit- 50% of premiums paid for small business employers 35% of premiums paid for small tax exempt employers *Eligible for 2 years
Late enrollment
medical questions required
Continuous Premium Whole Life
most common type of whole life insurance; stretch premium payments over the whole life of the insured up to age 100
Changes in the Application
must be initialed by the applicant
claim forms
must be suplied by insurer within 15 days of notice of loss
ownership rights
name or change a beneficiary, select how benefits paid, borrow or withdraw from cash values, recieved dividends, surrender or cancel the policy,
conditionally renewable
non renewal can occur under certain conditions - turning 65
aleatory
not equal value - small premium for a large amount of coverage
individual life insurance death benefits
not taxed if paid in a lump sum, interest is taxable, if paid over time, part of payment is not taxed and part is
individual life insurance accelerated benefits
not taxed, certified termially ill, or permanently confinded to nursing home
individual life insurance dividends
not taxed, interest earned is taxed
Prohibition on lifetime/ annual limit
on all EHB limits allowed on non EHB
SHOP
online application to compare health plans for small businesses 50 employees or less
Reducing Hospital Care Costs
outpatient benefits -2nd surgical option -preauthorization- precertification -limits on lengths of stay
indemnity
pay for the loss but with no gain
Joint Life
payments stop when first of two annuitants dies
Life Income - Refund
pays beneficiaries income for life, guaranteed payment will be at least equal to death benefit
benefit schedule
pays only a specified amount regardless of the actual charge
Entire Contract
policy (with riders and amendments) and copy of the application
Grace Period
premium not paid by due date, usually 31 days followin due date, insurance still in force, death benefit paid minus premiums due
Non-contributory
premium paid by employer, 100% of eligible employees must enoll
Indeterminate Premium Whole Life
premiums adjusted by company, guaranteed maximum premium
payment of premium
premiums are due in advance
COBRA Automatically ends
premiums not paid employer stops group plan individual becomes covered by another plan individual becomes eligible for medicare
Taxation of Business Life Policies
premiums not tax deductible except for executive bonus death benefits not taxable premiums for executive bonus policies are taxable income to the employee
Taxation of group life insurance
premiums paid by employer are tax deductible premiums paid by employee are not tax deductible Death benefits are not taxable premiums paid by employer for insurance above $50,000 is taxable income to the employee
Adverse Selection
risks that have a greater than average chance of loss
Medicare Supplemental Plans
private insurance plan [premiums not subsidized by Medicare *Cannot be sold to Medicare Part C
fee-for-service
provider is paid as services are provided- customers called insureds
Long Term Care Insurance
provides for long-term care expenses not covered by Medicare -bought from insurance company -insured choose type and amount of of coverage protects assests upon death
Fraternal Insurer
provides insurance and other benefits must be a member of the society to get the benefits
Qualified long term care insurance
received favorable tax treatment -benefits are paid tax free -premiums may be deductible
Term features
renewable (No new application required, new preium based upon attained age
Dental Restorative
repairing or restoring teeth that have been damaged usually by tooth decay
Individual Mandate
required by law to have insurance or else you have to pay a fine
limited-payment life insurance
requires the payment of premiums for a limited time for a lifetime protection// at the end of the term does not pay any more premiums, but has lifetime protection
Comprehensive Major medical
stand alone policy
Certificate of Authority
state license for an insurance company
Admitted or Authorized
state requires the insurance company to have a certificate of authority
Uniform Simultaneous Death provision
states that if both the insured and the primary beneficiary die as a result of the same accident, then it is always assumed that the insured died last This provision ensures that the insured's contingent beneficiary would receive the policy proceeds, rather than the heirs of the primary beneficiary
Dental oral surgery
surgery performed in the oral cavity
Annuity payments after annuitization
taxed according to exclusion ration premiums paid (divided by TOTAL of expected payments over annuitants life expactancy = percent of payment not taxed If annuitant lived beyond life expectancy, 10% or payment becomes taxable
Individual Life insurnace withdrawals
taxed only if withdrawal exceeds premiums paid, only gain is taxed
Estate Taxes
taxes levied on a person's estate or total holdings after that person's death
military suspense
temporary suspension while in military, reactivated afrer discharge
Treaty Reinsurance
the reinsurer accepts the transfer according to an agreement called a treaty
Facultative Reinsurance
the reinsurer evaluates each risk before allowing the transfer
Equity Indexed universal Life
tied to performance of equity index (S&P)
dental periodontics
treatment of supporting structures of the teeth- GUMS
dental endodontics
treatment of the pulp- soft tissue in the center of tooth
Equity Indexed Annuities
type of fixed annuity that offer the potential for higher credited rates of return than their traditional counterparts but also guarantee the owners principal. There is a minimum guaranteed rate(3-4%) so a certain rate of growth is guaranteed. Designed to bridge the gap between fixed and variable annuities.
Non-admitted
unauthorized-insurance company not required to have a Certificate of Authority from the state
Reciprocal Insurers
unincorporated groups of people that provide insurance for one another through individual indemnity agreements
Accident
unintentional injury
IRA contributions
up to 100% of earned income, subject to annual maximums, extra contributions age 50 and over
Coverage of Children tp Age 26
up to, not including 26, children can remain if : Married, not living with parents, attending school, not financially depended or eligible to enroll in employer plan *Past age 26 if unmarried, financially depended, and have physical or mental impairment
consideration
value given by policy owner, information in the application and premium
waiver
voluntary giving up of a right
