Chapters 1-13

Medical Expense Insurance Taxation (Personal Policies)

- the premiums and unreimbursed medical expenses that exceed 10% of the individual's adjusted gross income may be tax deductible - medical expense benefits received are not taxable

Long-Term Care Insurance Taxation (Personal Policy)

- the premiums paid for individual LTC policies that exceed 10% of the individual's adjusted gross income may be tax deductible - for individuals age 65 or older, the premiums paid for individual LTC policies that exceed 7.5% of adjusted gross income may be tax deductible - LTC benefits received from a qualified plan are not taxable

Credit Term Life Insurance Characteristics

- although Credit Life Insurance (term) can obtained as an individual, it is usually sold on a group basis to a creditor, such as a bank, finance company or a company selling high priced items on the installment plan - the policy generally pays the outstanding balance of the debt at the time of the borrower's death, subject to policy maximums

Sources of Information used in Underwriting

- application - medical exams - Attending Physicians Statement (APS) - Medical Information Bureau - inspection report - agent's report

Hold Harmless Agreement

A contractual agreement that transfers the liability of one party to another party; it is used by landlords, contractors, and others as a way to avoid or reduce risk

Conditional Contract

Both parties must perform certain duties and follow rules of conduct to make the contract enforceable - the insurer must pay claims if the insured has complied with all the policy's terms and conditions - w/o premiums being paid on time and in full the insurer is not obligated to pay the claim if the policy lapses

4 Necessary elements in a contract

Competent Parties, Legal Purpose, Agreement, Consideration

Applicant Challenge (FCRA)

Credit reporting agency must reinvestigate within 6 months if applicant challenges accuracy

Group Plan Sponsors

Group plans may be sponsored by employers, associations, debtors, labor unions, or trusts. The most common type is an employer group. Employer plans have certain characteristics

Investigation of Disputed Information (FCRA)

If a consumer's file contains inaccurate information, the agency must promptly investigate the matter with the source that provided the information. If the investigation fails to resolve the dispute, a statement may be added to the credit file explaining the matter

Total Premium paid to Insurer

Mortality - Interest + Expenses = Total premium paid to the insurer

Policy Cost Comparison Methods

There are two common methods: - Traditional Net Cost - Interest Adjusted Method

Preferred Provider Organizations (PPOs)

subscribers have more choices among doctors and hospitals under this arrangement. subscribers can choose a preferred provider or out of network provider. If an out-of-network provider is utilized the PPO pays a reduced amount and the subscriber will have a larger out-of-pocket cost

oral surgery

surgical treatment of diseases, injuries, and jaw defects

Industrial (Home Service) Life Insurance

synonymous with debit life insurance and makes up only about .03% of life insurance today. These small policies, normally $250 to $1,000 were originally sold to pay funeral expenses

Morbidity Table

table showing the mathematical probability of a loss due to a sickness or injury. The table is used to help determine premiums for accident and health insurance. The table is comparable to the mortality table used for life insurance rating

Net Premium

takes into account interest and mortality factors only - Mortality - Interest = (Net Premium)

Changes in Adjustable Life

the changes can be exercised annually and are not retroactive - for example, these changes can be exercised annually and are not retroactive - a policyowner is not allowed to decrease the premium starting on a previous date - changes can only be made on a policy anniversary date as approved by the insurer

Principle of Indemnity

the insured is intended to be restored to the same financial or economic condition that existed prior to the loss, depending on amount and type of insurance purchased - the insurer should not profit from an insurance transaction, but be made "whole again"

Health Insurance Market (Affordable Care Act)

a resource where individuals, families, and small businesses can learn about their health coverage options; compare health insurance plans based on costs, benefits, and other important features; choose a plan; and enroll in coverage

Retrospective Review

a review of claims for services already received. this type of review may be used to confirm medical necessity of services, identify coordination of benefits opportunities, and to determine if a non-precertification penalty applies

Waiver of Cost of Insurance/Waiver of Monthly Deduction (Disability Riders)

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 - usually, the disability must occur prior to a stipulated age

Service Area

the primary geographical area of coverage and service provided by a Health Maintenance Organization (HMO)

Small Employer Non-Renewability of Coverage (Small Employer Medical Expense Insurance)

an insufficient number of individuals under the plan to meet participation requirements

Immaterial Representations

do not affect the acceptance or rating of the risk

Dental Insurance Exclusions

duplicate dentures or prosthetic devices

Status Clause Exclusion

no coverage for individuals with military status, since these individuals are provided coverage through the government

Small Employer Non-Renewability of Coverage (Small Employer Medical Expense Insurance)

noncompliance with the carrier's plan provisions

Personal Uses of Life Insurance

life insurance reduces uncertainty, giving a greater peace of mind while replacing the possibilities of a larger loss (income) with a known smaller loss (premium) - it does not eliminate risk; it reduces the loss by transferring the larger risk from the policy owner/insured to the insurance company

Key Employee Insurance (Disability Income Special Uses)

pays a benefit to the business when a key employee becomes disabled by helping pay for a replacement, train a new employee, or replace loss of revenue due to the disabled employee's lack of ability to work

Advertisement Requirement (Health Insurance)

statistical information that insurers may include as long as it is accurate and the source is named

Fraud Disclosures

insurance applications and claim forms must contain a disclosure about how false statements and fraud will be treated by the insurer

Advertising Requirement

insurance companies are responsible for the accuracy of its personal testimonials

Denial due to HIV

insurance companies may refuse to issue a policy to individuals based on positive HIV test results - applicants must be tested for HIV and be informed that testing for HIV may determine insurability

Issue Age

insured's age on the policy issue date

Fraud

intentional deception of the truth in order to induce another to part w something of value or to surrender a legal right

Surviving Children Survivor Benefits

these people are eligible for benefits and are covered to age 18 or 19 if still enrolled in high school

Medical Benefits (Workers' Compensation)

unlimited as to time, but dollar amounts payable may be limited by law

Dental Expense

a form of Medical Expense health insurance covering the treatment and care of dental disease and injury affecting the insured's teeth

Different Life Income Options

- Straight Life (Pure or Life Income Only) - Life Income Period Certain - Life Refund - Joint and Survivor Income Option - Joint Life Income Option -

Examples of Worksite Insurance Plan products

- Dental Insurance - Vision Insurance - Accident-Disability Insurance - Short-Term Disability Insurance - Long-Term Disability Insurance - Critical Illness Insurance

Types of Disability Policies

- Disability Income (Indemnity) Policy - Pure Loss of Income (Income Replacement) Policy

Employer Group Dental Expense

- Adverse Selection - Integrated Deductibles vs Stand-alone Plans

Policy Riders (Health Insurance

- Impairment Rider - Guaranteed Insurability Rider - Multiple Indemnity Rider

Classification of Healthcare Plans

- Indemnity (Reimbursement) Plan - Service Plan - Self-Insured (Self-Funded) Plan

All Policies and Insurable Interest

- Insurable interest must exist in every enforceable contract - it requires the potential for an insured to suffer financial or economic hardship in the event of a loss, as well as a valid legal purpose for the contract

Parts of Application

- Part I - General - Part II - Medical

Definitions of a Disability

- Total Disability -- Own Occupation -- Any Occupation - Permanent Disability - Temporary Disability

Characteristics of Group Insurance (Health)

- employers are the most common sponsors - employer may contract w an insurance company, HMO, or PPO to provide for payment of direct health care expenses, or may hire a Third Party Administrator to manage claims and other aspects of a self-funded plan. - usually only cover nonoccupational injury or disease - to be eligible, it must be a natural group

Advantages of having a Buy-Sell Agreement

- it is legally enforceable - the value of the business is previously agreed upon - it is an immediate and automatic method of transferring the deceased's interest

Policy Loans (Variable Whole Life Insurance)

- they are available from either the general account or the separate account - Typically 75-90% of the cash value can be borrowed - Partial surrenders are not allowed from a variable whole life policy

Insurance Contract

-A legal contract purchased to indemnify the insured against a loss, damage, or liability arising from an unexpected event. -The exchange of a relatively small and definite expense for the risk of loss that, if it occurs, may be large or small. -A contract designed to transfer risk from the insured to the insurer.

Contract

An agreement between two or more parties in which there is a promise to do something in return for a valuable benefit known as consideration

Switching Jobs and Protecting Insurance Coverage under HIPAA

Although HIPAA does make it easier when switching jobs and protecting insurance coverage it does not: - require that employers offer health coverage - guarantee that any conditions you now have (or have had in the past) are covered by your new employer's health plan - prohibit an insurer from imposing a pre-existing condition exclusion period if you have been treated for a condition during the past 6 months

Scheduled (Basic) Plan

Benefits are paid based on a schedule of procedures. Benefit maximums are commonly paid on an amount lower than the usual, customary, and reasonable dental charges

Utmost Good Faith

Both parties bargain in good faith when forming and entering into the contract. The two parties rely upon the statements and promises of the other and assume no attempt to conceal or deceive has been made.

Field Underwriting Nature and Purpose

Field underwriting is very important due to the risk of a moral hazard. It is the initial step of the total process of insuring a health risk. It includes the producer's initial personal contact with the applicant and the determination of insurability while assisting the applicant in recording information on the application. Fundamentally, the purpose is to be certain that a prospective insured individual or group has the same probability of loss for which the premium rate is based.

Flexible Premium Deferred Annuity (FPDA)

Flexible premiums are made as installments and can fluctuate. The benefits begin more than 1 year from the issue date

Health Insurance Portability and Accountability Act of 1996

HIPAA

Risk Pools (Eligible Health Groups)

High-risk pools are private, self-funded health insurance plans organized by a state to serve high-risk individuals, who meet enrollment criteria and do not have access to group insurance - in most states, they are independent entities governed by their own boards and administrators, but in some states they function as part of the state's department of insurance

Threats and Forces

If a person uses threats, force or attempts to impede/obstruct the administration of the law during any proceeding involving the business of insurance before any insurance regulatory official, he/she will be fined up to $50,000 or imprisoned up to 10 years, or both.

Gross Premium Calculation

Morbidity - Interest = (Net Premium) + Expenses = Gross Premium

Major (Dental Care)

Major dental care includes any crowns, dentures, or bridge work, and orthodontics

Consideration (Legal Contract)

Something of value is exchanged by each of the parties to the contract; the exchange of money (first premium only) for a promise (the guarantees within the contract)

Cash (Dividend Option)

the policyowner receives the declared dividends in the form of a check on or near each policy anniversary

Rollover and Transfers of IRAs

The IRS permits and IRA rollover from one account to another or a transfer. This may avoid taxation as an early withdrawal

USA Patriot Act

This act specified which financial institutions would be required to institute AML training programs including insurance companies. The act specified which insurance products require anti-money laundering training and how to respond to suspected laundering activity. It also helped expand the definition of money laundering to include the money's ultimate purpose as well as its origin. The insurance products being used are mostly single premium permanent life insurance and annuity products, as they generate cash value.

Indexed Universal Life (Equity Indexed)

This policy gives policyowners the opportunity to decide the percentage of cash value that is invested in traditional fixed income securities. The remainder of the cash value is invested in an equity index account linked to a stipulated stock index, typically the S & P 500. - When there is an increase in the market, a given percentage of the gain is used to determine the interest credited to the policy. - When the market declines, the policy is credited with the minimum guaranteed interest rate or zero interest. - The policy typically guarantees the principal amount in the indexed account.

Anti-Money Laundering

With the increase of drug trafficking and acts of terrorism, the desire and demand for laundered money has also increased. As of May 2006, insurance companies have been required to provide anti-money laundering training to their producers. Brokers as well as agents are required to undergo training as insurance products are now being used to give legitimate appearance to money financed by and for illegal activities.

Cash Values Taxation

a cash value policy will experience increases in the cash value annually from both the premium and any interest or gains. The interest and gains are not taxable at the time they are credited to the policy. Any earnings in the cash value are allowed to grow tax-deferred until one of the following happens: - the policy is surrendered - the policy is transferred for value - the policy ceases to meet the IRS definition of a life insurance contract

Per Capita (Beneficiary Designations)

a designation that will pay to surviving beneficiaries equally if a named beneficiary predeceases the insured

Inspection Report

a general report of the applicant's finances, character, morals, work, hobbies, and other habits - sometimes referred to as a Consumer Investigate Report - can be completed by the insurer or a third-party provider - the applicant must be made aware of any information gathering and has rights provided under the FCRA

Loans (Universal Whole Life Insurance)

a loan is taken against the cash value remaining in the policy - the cash value secures the loan and cannot be used for other purposes, but it remains in the policy - the loan itself neither decreases the total cash value, nor the face amount - the amounts payable would decrease if the loan is not paid back before the insured dies or the policy terminates

Issued as a Preferred Risk

a lower rate will be used if the insured meets the insurance company's qualifications as a preferred risk (its lower than average)

Third-Party Ownership

a policy owned by a person other than the insured

Variable Whole Life Insurance

a whole life policy with certain benefits that will vary based on market conditions - they feature a fixed premium, two separate accounts (general account and separate account)

Right to Examine (Free Look) (Provision)

allows the insured, upon delivery of the policy, a specified number of days to look over the policy and dissatisfied, return it for a full refund (usually 10-30 days)

Nonmedical Application

an application used when a policy requested does not require a medical examination for underwriting - health questions on the application are asked by the producer and are the only medical info required

Life Income Joint & Survivor (Annuity Payment Options)

annuity is payable to 2 annuitants (in one check) while both are living. Upon the death of the first annuitant, survivor benefits continue, either paying the full amount or reduced to 2/3 or 1/2 for the survivor's income until the survivor dies - depending on which option is selected, these options may be referred to as a Joint and Full Survivor, Joint and 2/3 Survivor, or Joint and 1/2 Survivor

Insurable Events

any event which may cause loss or damage to a person having an insurable interest in the event

Breach of Trust (Violent Crime Control and Law Enforcement Act of 1994)

based on the fiduciary relationship of parties and the wrongful acts violating the relationship

Individual Retirement Accounts (IRAs)

because these plans are established by individuals, they are not considered "qualified plans" and have their own set of rules. This means an individual can set up a Traditional Roth IRA whether or not the employer has established a qualified plan at work

Surviving Parents Survivor Benefits

beginning at age 62, these people are eligible for monthly survivor benefits if being at least one half supported by the deceased worker

Required Signatures

both the producer and the applicant must sign the application. - the applicant is representing that statements on the application are true. If someone other than the insured is the owner, both signatures are required. If the applicant is a minor, a guardian must sign the application

Comprehensive Major Medical Policy

combines the features of the Basic and Major Medical policy into a single policy. Benefits provide for reimbursement of covered expenses on a "usual, customary, and reasonable" basis. The insured has the freedom to choose any hospital, physician, or surgeon, or other health care providers. This policy requires an initial Flat Deductible that is paid before the Basic plan begins to provide coverage. An additional Integrated Deductible must be met before the Major Medical benefits are payable. This policy provides the most comprehensive of all medical expense plans

HIV Consent Form

explains the purpose of the test, confidentiality, and specifies how individuals may receive the test results

Common Accident Deductible (Major Medical Policies)

if several family members are injured in the same accident, only one deductible is applied

estoppel

judicial denial of a contractual right based on prior actions contrary to what the contract requires

HIPAA Eligibility Requirement

not be covered under any other health insurance plan

Accident & Health Insurance

policy covering the perils of injury and sickness

Fee-for-Service

provides a separate payment to a healthcare provider for each medical service received by a patient. They pay benefits based on actual services provided

Immediate Annuity

this annuity does not have an accumulation period and is used to generate immediate income within a year of the issue date

Exemption under Affordable Care Act

those who are incarcerated (serving time in jail)

Full Retirement Age (FRA)

varies based on year of birth but is up to age 67

Riders Affecting the Death Benefit Amount

- Accidental Death Benefit (Double or Triple Indemnity) - Accidental Death and Dismemberment - Guaranteed Insurability - Return of Premium - Return of Cash Value - Cost of Living (COL)

Types of Limited Policies

- Accidental Death and Dismemberment - Limited Accident - Critical Illness (Dread Disease or Limited Sickness Plans) - Hospital Income - Blanket - Credit Insurance (Credit Disability Insurance)

Additional Federal Regulation of Group Insurance

- Age Discrimination in Employment Act (ADEA) - Civil Rights Act/Pregnancy Discrimination Act (PDA)

Legal Purpose (Legal Contract)

- All parties to a contract must enter it for a legal purpose; public policy cannot be violated by a legal contract. - All parties to a contract must enter it in good faith. - impersonation of any person applying for insurance removes legal purpose

Basic Insurance Policy Characteristics

- Basic Medical Expense - Basic Hospital Expense - Basic Surgical Expense

Payment Structures

- Blanket Payment - Scheduled Payment - Cash or Indemnity Payment (Hospital Income) - Fee-for-Service - Prepaid - Usual, Customary, Reasonable (UCR) - Lifetime Limit - Annual Limit - Per-Cause

Service Plans Providers

- Blue Cross and Blue Shield - Health Maintenance Organizations (HMOs) - Preferred Provider Organizations (PPOs) - Point of Service Plans (POS)

Definitions of Small Employers

- Business Group of One - Small Employer - Eligible Employee

Disability Income Special Uses

- Business Overhead Expense - Key Employee Insurance - Buy-Sell Agreement or Disability Buyout - Disability Reducing Term

Dividend Options

- Cash - Premium Reduction - Accumulate at Interest - Paid-Up Additions - 1-Year Term - Paid-up Option

Types of Optional Uniform Provisions

- Change of Occupation - Misstatement of Age - Other Insurance with this Insurer - Insurance with Other Insurers - Relationship of Earnings to Insurance - Unpaid Premiums - Conformity with State Statutes - Illegal Occupation/Act - Intoxicants and Narcotics - Cancellation

Types of Buy-Sell Agreements

- Cross Purchase Plan - Entity Plan - Stock Redemption Agreement

Universal Life

- Death Benefit = Adjustable; Guaranteed Minimum - Cash Value = Guaranteed Minimum - Premiums = Flexible - Loans/Partial Surrenders = Loans and Partial surrenders - Risk = Insurer

Variable Universal Life

- Death Benefit = Adjustable; no guaranteed minimum - Cash Value = not guaranteed - Premiums = flexible - Loans/Partial Surrenders = loans and Partial surrenders - Risk = policyowner

Whole Life Insurance

- Death Benefit = Fixed - Cash Value = Guaranteed - Premiums = Fixed - Loans/Partial Surrenders = Loans available - Risk = Insurer

Variable Life

- Death Benefit = Fixed; Guaranteed minimum - Cash Value = Not guaranteed - Premiums = Fixed - Loans/Partial Surrenders = Loans amiable - Risk = Policyowner

Qualified Retirement Plans

- Defined Benefit Plan - Defined Contribution Plan

Worksite Plans and Flexible Payment Funding Options

- Employer only (uncommon) - Employee only (most common) - cost shared program designed by the employer (when the employer contributes funds for an FSA plan) - Section 125 Cafeteria Plan option allows premiums to be paid with pretax income

12 Mandatory Provisions

- Entire Contract Clause - Time Limit on Certain Defenses (Incontestable) - Grace Period - Reinstatement - Notice of Claim - Claim Form Provision - Proof of Loss - Time of Payment of Claims - Payment of Claims - Physical Exam and Autopsy - Legal Actions - Change of Beneficiary

Insured Statuses (Social Security)

- Fully Insured - Currently Insured

Standard HMO Models

- Group Model - Staff Model (Closed-Panel) - Independent Practice Association (IPA Model (Open-Panel))

Life Policy Settlement Options

- Interest Only - Fixed Amount - Fixed Period - Life Income Option

Specialized Policies

- Juvenile Insurance - Joint Life (First to Die) Insurance - Joint Survivorship Life (Last to Die) - Return of Premium Term

Types of Term Life Insurance Policies

- Level - Decreasing - Credit Life Insurance - Increasing - Annually Renewable Term - Re-Entry Term Option

Annuity (Benefit) Payment Options

- Life Income (Pure or Straight Life) - Life Income Period Certain - Life Income with Refund (Installment or Cash Refund) - Life Income Joint & Survivor - Joint Life - Annuity Certain

Annuity Classifications

- Method of premium payment (single, flexible, and periodic) - Funding (fixed vs. variable) - When income benefits are payable (Immediate vs. Deferred) - The payout option selected (Life only vs. Annuity Certain) - Number of lives covered (single vs. joint)

Factors in Premium Determination (Health Insurance)

- Morbidity - Interest - Expenses - Mode of Premium

Employment-Related Groups

- Multiple Employer Trusts (METs) - Multi-Employer Welfare Associations (MEWAs) - Labor Unions - Associations - Blanket Insurance - Customer Groups - Risk Pools

Types of Policy Renewal Provisions

- Noncancellable - Guaranteed Renewable - Conditionally Renewable - Optionally Renewable - Cancellable - Period of Time (Nonrenewable)

Classifications of Risks

- Preferred Risk - Standard Risk - Substandard Risk - Rejection

Cost Containment Measure (Health Care Delivery)

- Preventive Care - Alternatives to Hospital Services - Comprehensive Case Management - Mandatory Second Surgical Opinion - Utilization Review

Characteristics of a Disability Income Policy

- Probationary Period - Elimination Period (Waiting Period) - Benefit Period

Types of Social Security Benefits

- Retirement - Death Benefits - Survivor Benefits

Payment of Benefits

- Scheduled (basic) Plan - Nonscheduled (Comprehensive) Plan - Combination Plans

Annuity Premium Payment Options

- Single Premium - Periodic Premium - Fixed Premium - Flexible Premium

Riders Covering Additional Insureds

- Spouse (Other Insured) Rider - Child Rider - Family Rider - Nonfamily Rider

Violent Crime Control and Law Enforcement Act of 1994

- The largest crime bill in U.S. history expands funding to federal agencies such as the FBI, DEA, and INS and includes provisions that address (among other topics) domestic abuse and firearms, gang crimes, immigration, registration of sexually violent offenders, victims of crime, and fraud. - made it a felony for a person to engage in the business of insurance after being convicted of a state or federal felony crime involving dishonesty or breach of trust.

Examples of Third-Party Ownership

- a husband buying a policy on a wife - a parent buying a policy on one of their children - a business buying a policy on a key employee - a business partner buying a policy on another business partner

Qualified Accelerated Death Benefits

- a physician must give a prognosis of 24 months or less life expectancy for the named insured - the amount of the benefit must at least be equal to the present value of the reduced death benefit remaining after payment of the accelerated death benefit - the insurer provides a monthly report for the insured showing the amount paid and the amount of benefit remaining in the life insurance policy

Underwriting Factors (Health Insurance)

- age - gender - tobacco use - occupation and hobbies (degree of risk); if more than 1 occupation, the most hazardous will be used - physical condition - moral hazard/financial hazard - health history - foreign travel/residence - other insurance - plan applied for

self-insurers

- assume all financial risk faced w/o transferring that risk to an insurer - rather than paying premiums to a third-party, they set aside funds in an amount equal or greater than expected losses - if losses are less than what is reserved, it is a gain - losses in excess of the reserve will require additional funding - generally only an option for large companies who limit their risk by only self-insuring a certain dollar amount of risk and requiring insurance for dollar amounts in excess of that

Reducing Risk of Disability Income Policies

- charge an extra premium or surcharge - increase the elimination period, shorten the benefit period, reduce the amount of benefit or some combination thereof - utilize a Full Exclusion Rider when a condition appears certain to result in recurrent disabilities

The Producer's Responsibilities:

- completing a Notice Regarding Replacement which must be signed by the applicant and producer - Obtain information regarding any existing policies, including the names of the existing insurers and policy numbers - providing copies of the Notice Regarding Replacement and any sales proposals to the applicant and replacing insurer

Employer Sponsored Qualified Retirement Plans (Annuity Business Uses)

- corporations may use annuities to provide pensions for employees, funding non qualified deferred compensation plans or qualified retirement plans, and even to structure payments from liability settlements, known as structured settlements - corporate owned annuities lose the tax-deferral aspect of the policy and interest or gains are taxable as income in the year earned

Characteristics of Term Insurance

- coverage can be written separately or with other types of insurance (as a rider) to suit individual needs - rates charged are based upon underwriting class, the age and gender of insured, and upon the length protection is provided

5 elements of fraud

- false statement, made intentionally and that pertains to a material fact - disregard for the victim - victim believes the false statement - victim makes a decision and/or acts based on the belief in, or reliance upon, the false statement - the victim's decision and/or action results in harm

Fraud and False Statements (Fraudulent Insurance Act)

- fraud always involves a false statement and deceit; it can either be criminal or civil crime - federal law prohibits the commission of fraud - In 2001, the NAIC adopted model legislation for the prevention and enforcement of insurance fraud and subsequently, each of the states enacted its own Fraudulent Insurance Act

Lloyds of London

- group of syndicates who specialize in a particular risk - they are not an insurance company by definition - provides a meeting place for syndicate members to transact business - each member is liable for each risk they assume

Risk Retention Groups (RRG)

- group owned insurers that primarily assume and spread the liability-related risks of its members - they are owned by policyholders, and licensed in at least one state, but may insure members of the group in other states - made up of large similar units - membership is limited to risks with similar liability exposures and have sufficient liquid assets to meet loss obligations - each member assumes a portion of risk - theme parks, go-cart tracks, or water slides

Reciprocal Insurance Company

- group-owned insurer whose main activity is risk sharing by unrelated individuals - each member is known as a subscriber - the exchange is run through an Attorney-In-Fact - if premiums paid do not cover claim, an assessment of additional premium can be made

Interest Rates and Market-Value Adjustment (Adjusted) Annuity

- if the interest rates on which the MVA is based are higher than when the annuity was purchased, the MVA will likely be negative, meaning an additional amount may be deducted from either the annuity or the withdrawal amount - if the interest rates on which the MVA is based are lower than when the annuity was purchased, the MVA will likely be positive, meaning money may be added to either the annuity or to the withdrawal amount

Disadvantages of Not Having a Buy-Sell Agreement

- income to surviving family members stops - surviving business owners may suffer a loss of income - asset reduction due to forced liquidation may occur - the estate transfer may be delayed due to forced business liquidation - shares of ownership transfers to surviving relatives

Life & Health Policies and Insurable Interest

- insurable interest must exist at the time of application, but not at time of loss - coverage is determined based on possibility of an economic or financial loss due to an accident, sickness, or death of the insured - amount of purchase that can be purchased varies based on type of coverage. each person has unlimited insurable interest in his/her own life but this does not prevent an insurance company from limiting the amount of life insurance it makes available to each person; the insurer does not want to over insure which increases likelihood of a claim

Casualty and Insurable Interest

- insurable interest must exist at the time of loss, but need not be continuous - insurable interest usually results from property or contract rights and potential legal liability

Characteristics of Term Insurance

- is considered pure insurance and provides a pure death benefit - it does not offer any cash value or living benefits - premiums paid for these types of policies purchase strictly death benefits and because of this they are less expensive in the early years as compared to permanent forms of insurance

Consequences of Incomplete Applications

- is the producer's responsibility to make certain the application is filled out completely, correctly, and to the best of the applicant's knowledge. The producer's primary underwriting role is to make sure the application provides proper information for the insurer - the underwriter will return an incomplete application to the producer for completion by the applicant. If a policy is issued with questions unanswered, it is assumed the information is not material to the issuance and the insurer waives the right to challenge a claim based on the incomplete application

Characteristics of Term Insurance

- it can expire at an attained age or after a specified period of time - the face amount is paid out to the named beneficiary if the insured dies during the specified term - the low, initial premium outlay when the insured is young can increase at renewal or upon conversion, and as insured gets older the policy can become more expensive

Employer Group Underwriting Process

- it is different than individual underwriting; all eligible members of the group are covered regardless of physical condition, age or gender - it may not discriminate in favor of executive or other highly compensated persons - in essence, the group as a whole is viewed as an individual - the underwriter will take careful measures to protect against adverse selection by appropriately rating each group as a whole

State Level Regulation

- legislative branch writes and passes state insurance laws, or statutes, to protect the insuring public - Judicial branch is responsible for interpreting and determining constitutionality of the statutes - the executive branch enforces existing statutes that have been put in place - The Commissioner of Insurance is elected in NC and has the power to issue rules and regulations to help enforce the statutes

Exchanges the IRS will allow on Tax-Free Basis

- life insurance to life insurance - life insurance to an annuity - annuity to an annuity - life insurance or annuity to long-term care - But NEVER an annuity to life insurance

Private vs. Government Insurers

- most insurance is written through private insurers - there are instances government-based insurers step in to offer an insurance alternative when private insurers are unable to provide protection, usually related to the catastrophic nature of risk, capacity to handle the risk, and lack of desire to engage in a line of insurance where experience to evaluate necessary premium intake to offset potential loss is lacking

ERISA Qualified Plan Requirements

- must benefit employees and beneficiaries - may not discriminate in favor of highly compensated employees - must be approved by the IRS - have a vesting requirement

Deferred Annuity Characteristics

- normally purchased to defer taxes on any contract earnings - they are ideal for accumulating a retirement fund - during the accumulation period, only the contract owner can sign the request for surrender of the annuity - during the early parts of the accumulation period, the insurer normally assesses a surrender charger - Tax-Deferred Growth

Red Flags for Anti-Money Laundering

- paying for an entire policy up front with cash - early cancellation of the policy, regardless of cancellation fees (surrender charges) - the heavy use of third parties for policy transactions - strong reliance on wire or electronic fund transfers to foreign accounts

Debts Covered in Credit Life

- personal loans - loans to cover the purchase of appliances, motor vehicles, mobile homes, farm equipment - educational loans - bank credit and revolving check loans - mortgage loans, etc.

Exclusions from Individual or Group Disability or Medical Expense Policies

- pre-existing conditions may be excluded; or subject to a probationary period - intentionally self-inflicted injuries (suicide) - war or any act of war - elective cosmetic surgery - medical expenses payable under Workers' Compensation, or any Occupational Disease Law - active military service - overseas residence - coverage payable under a government plan - commission or attempt of a felony

Disability Buy-Sell Agreement Taxation

- premiums are not tax deductible - the benefits received are not taxable

Business Overhead Expense Taxation

- premiums paid by the business are tax deductible - benefits received are taxable to the business owner and must be reported as income

Group Accidental Death and Dismemberment Taxation

- premiums paid by the employer are tax deductible - benefits received are not taxable

Group Long-Term Care Insurance Taxation

- premiums paid by the employer are tax deductible - benefits received from a qualified LTC policy are not taxable

Disability Income Insurance Group Taxation

- premiums paid by the employer are tax deductible. Under a contributory plan, premiums paid by the employee are made with after-tax dollars - disability benefits received by the employee as a result of employer contributions are taxable as income to the employee based on the percentage of the premium paid by the employer

Beneficiary Succession

- primary beneficiary - contingent or secondary beneficiary - tertiary beneficiary

Insurance license applicants and producers

- producers must apply for consent in their residential state - officers and employees must apply for consent in the state where their home office is located - prohibited persons must apply for consent in order to discover if they are permitted or prohibited from the insurance business

Personal Uses of Annuity

- purchase other insurance - education funding - retirement fund accumulation - retirement income - long-term care benefits - lump sum structured settlements

Fully Insured Social Security Benefits

- retirement starting at age 62, or older - spousal retirement at age 62, or older - widows and widowers can begin receiving Social Security benefits at age 60

Types of Policies Potentially Classified as MECs

- single premium life insurance policy (automatically deemed a MEC) - flexible premium policies such as Universal and Variable Universal Life (the flexible premium feature allows the owner to pay premiums on their own schedule)

DNC Registry Guidelines

- telemarketers and sellers are required to search the registry at least once every 31 days and drop from their call lists the phone numbers of consumers who have registered - Telephone solicitation calls to your home before 8 am or after 9 pm are prohibited - anyone making a telephone solicitation to your home must provide his/her name, the name of the entity on whose behalf the call is being made, and a telephone number or address at which you may contact that entity

Characteristics of Employer Plans

- the employer may be a partnership, a corporation, or a sole proprietorship - there are two legal employer-employee groups; Contributory and Noncontributory - An employee must be a full time employee in the immediate group, a subsidiary firm or an employee of any active partner to be eligible for coverage

Factors to Determine Human Life Value

- the individual's age and gender - the individual's occupation - the individual's annual wage and employment benefits - the individual's planned retirement age - inflation

Premium Rates and Group Conversion

- the premium is at a higher rate than normal to include the insurer's guaranteed convertible surcharge since the majority of all conversions are on persons that would otherwise be uninsurable - premiums will also be higher because the conversion policy will be issued at the attained (current) age of the insured an the policy will build cash values

Advantages of Reinstatement

- the premium on the reinstated policy will be based on the original policy so premiums will be lower - the policy's cash value will be greater - the policy's original contestable period and suicide clause may have expired

Disability Income Insurance Taxation (Personal Policies)

- the premiums paid for individual disability income insurance are not tax deductible - disability income benefits received are not taxable

Characteristics of Multiple Employer Trusts (METs)

- the sponsor or TPA develops the plan, sets the participation rules, and administers the plan - Due to the smaller size of the individual companies in the Trust, group health coverage is almost always fully insured and backed by an insurance company - The Trust gets the Master Policy

Medical and Dental Group Insurance Taxation

- these plan's premiums paid by the employer are tax deductible - self-employed person may deduct up to 100% of the cost of health insurance for themselves and their dependents - an employee's share of premiums paid for group health insurance are deductible only to the extent that all premiums, as well as reimbursed medical expenses, exceed 10% of their AGI - Benefits received under any medical expense and dental plan, regardless of the premium payor, are not taxable

Premiums in Traditional Whole Life Policies

- these policies have a level premium and level face amount - to keep the premium rate level, the premium at younger ages exceeds the actual cost of protection - Whole Life policies stretch the cost of insurance over a longer period of time in oder to level out the increasing cost of insurance - the extra premium builds a reserve (cash value) which helps pay for the policy in later years as the cost of protection rises above the premium - the cash value provides an accumulation element - traditional policies earn a specified guaranteed rate of return - Once the cash value has accumulated for a certain number of years (typically 3 years) the owner can borrow against the policy

Adjustable Life Insurance Characteristics

- they allow policy owners to manipulate the period of protection (to age 100 or shorter), increase (w insurability) or decrease the face amount w insurability, raise or lower the premium amount, and change the length of the premium payment period - these policies also provide cash value, although reducing the premium could stop the cash value from increasing therefore adjusting the coverage to term insurance

Dividend Options Characteristics

- they are available on participating policies issued by mutual insurers - they are paid annually and cannot be guaranteed - since they are essentially a return of excess premium paid, they are not taxable as income until all of the premiums paid in have been recovered - if the total accumulation of dividends exceed the total premiums paid, the excess amount is taxable as ordinary income - interest earned on dividends left to accumulate is taxable as ordinary income - the policyowner decides which dividend option is in effect and can change the election at any time - if they are designated for any option rather than cash and all current accumulations are withdrawn, this option will begin again at the next declared dividend

Characteristics of Life Policy Settlement Options

- they are used in place of receiving a lump sum death benefit or living benefit at the time of maturity - the choice of settlement option may be made by the policyowner if the insured is living or by the beneficiary if the insured is not living and if no option has been previously selected - it is important to note that if the owner has selected a settlement option, a beneficiary cannot change that option

Income Benefits (Workers' Compensation) (Disability Income)

- total disability - partial disability - scheduled injury

Group Underwriting

- underwriter's greatest concern is adverse selection - they have probationary periods to help protect against pre-existing conditions and immediate claims - as long as individuals enroll during open enrollment, coverage is guaranteed and evidence of insurability is not required - Individuals who do not enroll during the initial enrollment period are considered late enrollees and must provide evidence of insurability unless they wait until the next open enrollment period

The Replacing Insurer's Responsibilities:

- upon receiving proper notification w the new application, the replacing insurer must notify the existing insurer of the planned replacement - maintaining copies of the information regarding replacement for a specified period of time

Premiums and Credit Life Insurance (Individual and Group)

- usually the individual debtor pays the premium - a few dollars of a monthly payment are credited toward premiums for the insurance and the debtor is entitled to cancel the insurance if and when the loan is prepaid or refinanced - the premiums are based on a flat amount - the amount of insurance benefit must not exceed the total amount of indebtedness - the coverage begins when the debtor becomes obligated to the creditor - the creditor must apply the insurance proceeds to discharge the loan

Key Person Disability Insurance Taxation

- when an employer purchases a disability income policy on a key employee and is also the beneficiary, the premiums are not tax deductible to the business - benefits received are not taxable

Property + Insurable Interest

- while it is unlikely an insurer will issue a policy if there is no insurable interest at the time of application, insurable interest must specifically exist at the time of loss - property ownership (or mortgage or lien) is evidence of insurable interest

Characteristics of Term Insurance

-offers temporary life insurance protection for a specified period of time - the period could be as short as 1 year, or provide coverage for a specific number of years such as 5, 10, 20 years - it could also be purchased to provide coverage up to a specified age, such as 65 - the premium is level for the stated term, which represents the average level of risk over the course of the policy

Buyer's Guide

A generic brochure developed by the NAIC to assist prospective buyers of life insurance. Descriptions of all basic types of life insurance as well as comparative costs of each are included.

Collecting the Initial Premium and Issuing the Receipt

A producer should attempt to collect the initial premium and submit it along with the application to the insurer, because the policy will not go into effect until the first premium has been paid. If the premium is paid with a check that is not signed (or does not clear), it is not considered paid and coverage is not effective.

Fraternal Benefit Society

A social organization engaging in charitable activities and provides life insurance and annuities to members. Is a non-profit organization based on a lodge or fraternal system and offers insurance only to members of the organization

Age Discrimination in Employment Act (ADEA)

Age discrimination involves treating someone (an applicant or employee) less favorably because of his age. The ADEA: - applies to groups with 20 or more employees - forbids age discrimination against people who are age 40 or older - provides that employers cannot deny older workers coverage under a group health plan

Completing the Application and Field Underwriting

An application is a written formal request by an applicant to an insurer requesting the insurer issue a policy based upon information contained in the application. It is the consumer making an offer to the insurer. It is the producer's responsibility to probe beyond the stated questions, which is known as field underwriting. The application is the primary source of information for an insurer underwriting a potential risk. In fact, a copy of the application if attached to the policy becomes part of the entire contract.

Insurance Aspects of an Annuity

Annuities are insurance products based on a mortality table. If a life contingency settlement option is chosen, the insurance company guarantees to provide an income benefit payment as long as the annuitant live - actuarial assumptions based off of the law of large numbers allows this to occur - those who have a shorter life span than expected allow the insurance company to have the reserves in place to be able to pay out guaranteed lifetime income benefit payments to those who live well beyond life expectancy

Convicted Felons (Fraud)

Any individual who has been convicted of a felony involving dishonesty or a breach of trust, who then willfully engages or permits an individual to engage in the business of insurance, and whose activities affect interstate commerce, will be fined up to $50,000 or imprisoned up to 5 years, or both.

Capital Liquidation (Income Objective)

Assumes both principal (capital) and interest are liquidated over the relevant time period to provide the required income for the dependents. When income is paid out using this method of Income Objective, the account balance will decrease as each payment is distributed.

Retirement Benefit (Social Security)

At Full Retirement Age, a retired worker is eligible to receive monthly income equal to his/her PIA - covered workers may begin receiving these benefits as early as age 62, however benefits will be permanently reduced - delaying benefits beyond FRA will increase future benefits - they are modified each year for Cost-of-Living Adjustments - they are also payable to qualified dependents of a covered or deceased worker

Consolidated Omnibus Budget Reconciliation Act of 1985

COBRA

Preventive Care (Cost Containment Measure)

Care designed to prevent illness or disease. The basic premise is that it is more cost effective to prevent losses than to treat losses after they occurs. Managed care plans are known for stressing this type of care Examples of this care include: - well child care visits - immunizations - mammography screenings - nutrition and weight loss programs

Out-of-Area Benefits and Services

Description of benefits and services available outside the HMO service area. Medically necessary emergency benefits must be made available when the insured is outside the service area

COBRA Continuation of Coverage (Consolidated Omnibus Budget Reconciliation Act of 1985)

Employees must be notified of their right to continue coverage within 14 days of a qualifying event. The employer or the beneficiary must notify the employer within 60 days if they elect to continue coverage. - Recipients of COBRA coverage will be required to pay premiums to the employer. Employers may require a former employee or their surviving spouse to pay up to 102% of the premium

Common Exclusions from Coverage

Exclusions are causes or conditions listed in the policy that are not covered and for which no benefits are payable. If an exclusion rider is added by the insurer after the application is taken and a receipt has been issued, coverage is effective when the insured accepts the policy.

Premiums Paid by the Employer and the Employee (Taxation of Group Life Insurance)

Group Life premiums paid by an employer are tax deductible to the business as an ordinary and necessary business expense. Any employee paid premiums are not eligible for tax deduction - employer paid premiums in connection w group life do not constitute taxable income to the employee, unless the death benefit paid for the employer exceeds $50,000 - all employer paid premiums for amounts above $50,000 are reported as taxable income to the employee

HIPPA Law (Groups 2 or more)

HIPAA guarantees the continuation of health benefits to individuals who have 12 months creditable coverage from a group insurance plan immediately preceding a change of employment and who choose to participate in the new employer's group health plan - a certificate of creditable coverage, or proof of coverage, is required

Pre-existing Conditions under HIPAA

HIPAA limits the pre-existing condition exclusion period for most people to 12 months (18 months if a late enrollee). In order for pre-existing conditions to be covered, there can be no more than a 63-day gap in continuous coverage - a pre-existing condition is a condition which the insured received medical advice, diagnosis, care, or treatment within the past 6 months - the plan may impose a pre-existing condition exclusion for that condition - if a pre-existing condition can be excluded from plan coverage, then there is a limit to the pre-existing condition exclusion period that can be applied

Guaranteed Coverage under HIPAA

HIPAA now allows a new employee to enroll immediately without a waiting period if a certificate of creditable coverage is presented - this law also applies to employees leaving the employer to become self-employed. They cannot be denied coverage

Preventive Care and HMOs

HMOs emphasize preventive medicine by providing prepaid routine medical exams, wellness programs and diagnostic screenings. Early detection of a condition reduces unnecessary procedures, surgeries, and hospitalizations

Misstatement of Age or Gender

If the age and/or gender of the insured have been misstated in a policy, all benefits under the policy will be provided based upon the insured's correct age and/or gender according to the premium scale in effect at the time the policy was issued. An insurer can refund any overpaid premiums if the amount of premium paid was greater than should have been paid. The insurer can reduce the face amount in cases where the amount of premium paid was less than that which should have been paid. There is no time limit for discovery, and this provision never cancels or voids a policy. The incontestability clause does not apply. Age and/or gender are not considered material to the policy issuance.

Payor Benefit (Waiver of Payors Premium) (Disability Riders)

If the payor (policyowner) dies or becomes disabled and is unable to make the premium payments, the insurer will waive the premiums payments for a specified period of time - because this rider is commonly added to a juvenile policy, the payor typically most show evidence of insurability before the rider can be added to the policy

Characteristics of Group Insurance Plans

In a group insurance plan, the insurer issues a Master Policy to the plan sponsor and each participant receives a Certificate of Insurance covering the participant; and if offered, his/her spouse and dependents. Participants in the plan do not have personal control of the policy or policy changes as with an individual policy. Group insurance is a contract between the sponsor and the insurance company. The sponsor may set the terms and determine which classes of employees qualify, such as full-time vs. part-time employee. The plan cannot discriminate so all members of the eligible class of employees must be eligible for predetermined benefits based on a single formula, such as the same percentage of annual income. The sponsor can elect to discontinue the plan and the insurance company can increase the rates it charges. To be eligible for a group plan, the group must be a natural group, meaning it was formed for a purpose other than for procuring or reducing the cost of insurance. Group plans must also have a grace period of typically 31 days and is usually written as Annual Renewable Term. Evidence of insurability is not required if the individual enrolls when eligible.

Annuity Death Benefits

In addition to providing a guaranteed benefit payout for life, an annuity also has another guarantee if the annuitant dies prior to annualizing the contract - In this case, the policy has a named beneficiary, just like a life insurance policy, whereby the insurer pays out an amount equal to the premium paid or the account value, whichever is greater

Common Disability Income Policy Exclusions

Individual disability income policies typically exclude coverage for losses caused by: - aircraft, except for passengers on a regularly scheduled flight - war or acts of war - attempted suicide or self-inflicted injuries - normal pregnancy - pre-existing conditions - commission of a felony

Underwriting Disability Income

Individual plans can provide for greater indemnity amounts, longer benefit periods, and are typically issued with noncancellable or guaranteed renewable provisions. - Benefit limitation will also be determined during underwriting. The benefit may be based on a percentage of income or stated as a flat dollar amount based on income at the time of underwriting, not the time of loss

Graded (Lien) Plan

Initially, only the premium would be refunded in case of death. The death benefit increases over time, maxing out when the full face amount is payable. This is generally used with senior life insurance plans to provide minimal benefits without a medical examination.

Disclosure at Point of Sale - Issues Relating to AIDS

Insurers must: - avoid making or permitting unfair discrimination between individuals of the same class in the underwriting for the risks of Acquired Immune Deficiency Syndrome (AIDS) - require the maintenance of strict confidentiality of personal information obtained through testing and to require informed consent before testing for HIV

Limited Policies

Limited health exposures are generally covered by these policies that specify the exposure to be covered and the amount of the corresponding benefit, such as prescription drugs, vision care, etc. State laws require that the agent/insurer make special not or reminder to the insured regarding the fact that the policy pays only under stipulated conditions

Primary Insurance Amount (PIA)

Mathematical calculation based on overall FICA contributions used to determine retirement/disability/survivorship benefit from Social Security

Medical Expense Benefits and Provisions

Medical Expense plans include specified benefits and provisions as determined by federal and state regulation. Certain requirements and limits may apply.

Premium Payment Mode

Mode reflects the frequency of payment. Premium payments are made either monthly, quarterly, semiannually, or annually - Monthly (highest costs) - quarterly - semiannually -annually (lowest costs)

Agreement (Legal Contract)

One party must make and communicate an offer to the other party and the second party must accept that offer. Without an offer, there is nothing to accept, and without acceptance of an offer, there can be no agreement. Offer, acceptance, or agreement can represent this element.

Unilateral Contract

Only one party is legally bound to the contractual obligations after the premium is paid to the insurer - Only the insurer makes a promise of future performance, and only the insurer can be charged with breach of contract - the policy owner can cancel the policy at any time and for any reason and is not required to continue paying future premiums

Partial Withdrawals or Partial Surrenders (specific to Cash Value Policies)

Partial withdrawals of cash value are permitted in a Universal or a Variable Universal Life policy - a partial withdrawal is considered a partial surrender of the policy - a partial surrender is actually paid from the policy value and either reduces the amount of the death benefit or the amount of cash value in the policy - since its not considered a loan, annual interest is not charged - taxation applies to any interest on the cash value paid out as a withdrawal - in other words, any amount paid in excess of the premium is subject to taxation - when a partial withdrawal is made, the policy's cash or account value will be reduced by the amount of the withdrawal - there may be a surrender or withdrawal charge associated with the withdrawal - the insurer may limit the number of withdrawals that can be made annually or the amount of the withdrawal specifying minimums and maximums

Civil Rights Act/Pregnancy Discrimination Act (PDA)

Pregnancy discrimination involves treating a woman less favorably on the basis of pregnancy, childbirth or related medical conditions. This act: - applies to groups w 15 or more employees - prohibits an employer from discriminating in it employment practices against. woman because of any pregnancy-related conditions

Limited Payment (Ordinary Whole Life Payments)

Premium payments are for a specified time (20-pay Life or 30-Pay Life) or to a specified age (Life Paid up at 65) - the face amount remains level and cash value continues to earn interest and mature at age 100 - while annual premium is higher than Straight Life, it is paid for a shorter period of time and will have a lower total premium outlay

Advertisement Requirement (Health Insurance)

Prohibiting the use of the history of a very high or unique claim settlement by the agent or insurance company

Paid-up Additions (Dividend Options)

Purchases single premium, additional permanent benefits at the insured's attained age - the additional insurance is paid out in addition to the face amount if the insured dies - while insured is living, it generates cash value and dividends as if the paid-up additional benefit was part of the original policy

Social Security Disability Income Limitation (Coordination of Benefits)

SSDI benefits are secondary to Workers' Compensation and any other public insurance benefit. If the total of SSDI, Workers' Compensation, and other public disability benefits exceed 80% of the worker's pre-disability earnings, the SSDI benefit will be reduced dollar-for-dollar until the 80% limitation is reached

Change in Institutions Privacy Policy

Should the financial institutions privacy policy change at any point in time, the consumer must be notified again for acceptance. Each time the privacy notice is re-established, the consumer has the right to opt out again.

Do Not Call Registry

The Federal Trade Commission amended the Telemarketing Sales Rule to give consumers a choice about whether they want to receive most telemarketing calls. It is prohibited under the Telephone Consumer Protection Act (TCPA) for most telemarketers or sellers to call a number listed on the National Do Not Call Registry. Companies must update their list at least once every 31 days.

Do Not Call Registry

The Federal Trade Commission amended the Telephone Consumer Protection Act (TCPA) to give consumers a choice about receiving unwanted telemarketing calls - it is illegal for most telemarketers or sellers to call a number listed on the National Do Not Call Registry - companies must update their list at least once every 31 days - the TCPA also limits the hours that telemarketers may call non customers at home to between the hours of 8 am - 9 pm

Acceptance (Agreement)

The acceptance of an offer to provide an insurance contract takes place when the insurance company agrees to issue the insurance applied for, after receiving an initial premium and complete application. If the applicant is insurable, but only under less favorable terms, the insurer may make a counteroffer. In such cases, the insured has been determined to be acceptable to the insurance company but a policy will not be in force until the applicant pays a higher premium and/or accepts any conditions imposed on the coverage (such as reduced benefits)

Aleatory Contract

The exchange of value is unequal - Insured's premium payment is less than the potential benefit to be received in the event of a loss - The insurer's payment in the event of a loss may be much greater, or much less, than the insured's premium payment

Offer (Agreement)

The offer made to enter into an insurance contract is most commonly an application, accompanied by an initial premium, and submitted by the applicant.

Primary Beneficiary

The person who is named as first to receive benefits from a policy

Medical Information Bureau (MIB)

The primary purpose is to collect adverse medical information about an applicant's health (supported by insurance companies) and act as an information exchange. MIB is a member-owned corporation that operates on a not-for-profit basis. The MIB's underwriting services are used exclusively by MIB member life and health insurance companies to assess an individual's risk and eligibility during the underwriting of life, health, disability income, critical illness, and long-term care insurance policies. These services "alert" underwriters to fraud, errors, omissions or misrepresentations made on insurance applications and the MIB may help lower the cost of life and health insurance for consumers.

Group Insurance Market

The purpose of Group Life is to underwrite the combined risk of a group of individuals as a single policy - Group Life insures people under a single contract - state and federal laws restrict the insurer's underwriting criteria for group policies - it allows the insurer to write a bulk amount of insurance at an appropriate rate - the group sponsor benefits both from the standpoint of employee retention, but also because costs are lowered because the sponsor takes on some of the tasks of marketing and administration

Tertiary Beneficiary

The third in line to receive the benefits of a life insurance policy

Government Health Insurance Policies

These health policies are provided through sources such as Social Security Disability, Medicare, Medicaid, and TRICARE for military personnel

Tort Law

Torts are civil wrongs; they're not crimes or breaches of contract. They result in injuries or harm that constitute the basis of a claim by a third party

Modified Endowment Contracts (MECs)

Under current law, if a policy is funded too quickly it will be classified as this. The rules impose stiff penalties to eliminate the use of life insurance as a short-term savings vehicle - Prior to 1988, individuals could place large sums of money into a cash value policy (typically in a lump sum) and the cash would grow tax deferred until the insured died, at which point a death benefit was paid income tax free. Or if they needed cash, they could take a tax free lifetime loan or withdrawal. These policies were used in place of investment vehicles to avoid paying taxes

Death Benefit Options (Universal Whole Life Insurance)

Universal Whole Life allows a policyowner to choose from two death benefit options: - Option A - Option B

Flexible Life Insurance

Universal and Variable Universal Life policies have given the policyowner more flexibility in terms of premiums, investment objectives and other policy benefits. These policies assist the insured during inflationary periods w the changing needs of the policyowner and insured

Eligibility (Affordable Care Act)

Unless exempt, Americans are required to obtain and maintain minimum essential coverage

Regulatory Jurisdiction/Place of Delivery

Unless the state of delivery has a significant relationship to the insurance transaction, other states may seek to exercise their regulatory authority. Because of this it has become common practice that an acceptable policy of delivery must meet certain requirements

Attending Physician Statement (APS)

Used in cases in which the individual application and/or medical reports reveal conditions of which more information is required. This statement is completed by the applicant's personal physician treating a specific condition. An applicant must sign a written release to enable a release of the APS.

Accounts (Variable Whole Life Insurance)

Variable Whole Life Insurance policies have two separate accounts - a General Account, which features guaranteed values - a Separate Account, which features nonguaranteed values

Renewable (Special Features)

a benefit that will renew the contract on the renewal date without evidence of insurability - the policy may be a 1, 5, 10, or 20 year renewable contract up to a specified age, with premiums increasing at the beginning of each renewal period - the renewal premium is based upon attained age - it is important because the risk that the insured's health may deteriorate and the insured may be unable to obtain a policy at the same rates or even at all, leaving the insured without coverage - level term policies offer this option for an additional premium

Comprehensive Case Management (Cost Containment Measure)

a case manager may be assigned to determine the current appropriate course of action for an insured. The case manager may require a referral or a second opinion before approving a procedure. The case manager will also manage the utilization review of a subscriber's stay in the hospital may provide assistance with a future course of action during recovery of the insured

Participating Life Insurance

a class of policy marketed by a mutually owned company - a dividend may be paid to the policyowner when they are declared by the board of directors - company is not required to issue only participating policies, but only participating policies will be eligible for dividends - the dividends are treated as a refund of premium for tax purposes initially but once all premiums have been recovered, any further dividends are taxable

Variable Universal Whole Life Insurance (VUL)

a combination of Universal and Variable Life Policies. Like Universal life, this policy provides for flexible premiums and adjustable death benefits - Death benefit Option A and Option B are available to policyowners

Family Rider

a combination of writing both the Spouse and Child Rider on one policy - this may be written as a policy or a rider; in the market today, it is normally written in the form of a rider - they are usually sold in units (packages) of protection, such as $5,000 on the main wage earner, $1,500 on the spouse and $1,000 on each child

Flat Rate

a constant dollar amount added to the standard rate per $1,000 of coverage. If the standard premium is $25 annually for $1,000 of insurance, with a flat rate of $5/$1,000 added to the standard premium the new total premium per $1,000 is no $30. - a student pilot or someone who has a hazardous hobby would be flat rated

Limited Access to Information (FCRA)

a consumer reporting agency may not provide a credit report to any party that lacks a permissible purpose, such as the evaluation for a loan, credit, service, or employment. - permissible purposes also include several business and legal uses

Correct or Delete Inaccurate Information (FCRA)

a consumer reporting agency must correct or, if necessary, delete from a credit file the information that is found to be inaccurate or can no longer be verified. The consumer reporting agency is not required to remove accurate data from a file unless it is outdated. Adverse information that is more than 7 years old (10 years for bankruptcies) must be removed from the file

Personal Contract

a contract between the insurance company and an individual that are specific to the person insured at the time the contract is formed - Owner and insured cannot be changed w/o consent of insurance company - Property contracts are person, but life contracts are not

Group Annuity

a contract between the insurer and the employer and is set up for eligible employees - each employee receives a certificate - this is a defined benefit plan under IRS rules

Valued Contract

a contract that pays a specified amount regardless of the actual loss. A life insurance contract is an example. It has a face value that provides a death benefit in the event of a loss

Retirement Fund Accumulation (Annuity Personal Uses)

a deferred annuity that is held outside an IRA allows for the accumulation of earnings on a tax-deferred basis - the earnings may come from current or guaranteed interest credits, excess interest credits linked to the performance of a stock index, or from separate account investment performance - the premiums paid-in are not eligible for a tax deduction - an IRA annuity may allow for all or part of the premiums paid to be tax deductible - since an annuity is already tax-deferred, having it held inside an IRA account does not provide any additional tax deferral benefit

Profit-Sharing and 401(k) Plans

a defined contribution plan for employees of for-profit companies. It is an elective deferral plan or salary reduction. They can also be profit-sharing plans allowing an employee a choice between taking income in cash or putting the income into a qualified plan and deferring that portion of income

Dental Insurance

a dental plan offered by an insurer must state the benefits, the exclusions, and any limitations in coverage. Plans are normally written stating an annual maximum dollar benefit, not the number of appointments or the number of teeth repaired. These contracts may be written on either an individual or group basis. Some plans limit the selection of dentists; others the benefits. Services received immediately prior to a plan termination are normally covered. Some group health and dental plans share the same deductible (integrated deductible)

Per Stirpes (Beneficiary Designation)

a designation that will pay a deceased beneficiary's share to the heirs of the beneficiary who predecease the insured - if an insured names his/her 3 children as beneficiaries and one of the children predeceases the insured, the deceased beneficiary's share will be paid to their heirs - the surviving beneficiaries will each receive 1/3 of the benefit and the remaining 1/3 will be paid to the deceased beneficiary's heirs in this example

Misrepresentations

a false statement contained in the application; usually does not void coverage of the policy, if it is immaterial - if material to issuance of coverage then coverage does not apply - a material misrepresentation may void the policy

Vanishing Premium

a feature in a Universal Whole Life policy that is created because the policyowner can increase premiums during working years to accumulate enough cash value to make future premium payments in later years

ERISA (Employee Retirement Income Security Act)

a federal law that sets minimum standards for pension plans in private industry. It does not require the employer to establish a pension, it only requires that those who establish plans must meet certain minimum standards

Fraud Penalties

a fine of no more than $50,000, imprisonment for up to 10 years, or both

Capitation Fee

a fixed amount paid monthly per subscriber

Current Assumption Whole Life (or Interest-Sensitive Whole Life)

a form of Whole Life in which the insurance company can change the premiums or interest rate being credited to the account based on current money market rates - Interest rate changes affect the policy premiums - policy has a guaranteed minimum death benefit, but may increase based on the growth of the cash value - if current rates increase, either the policyowner pays a reduced premium or the cash value will increase at a faster rate - If cash values increase too quickly, this could cause the policy to mature prior to age 100 - To prevent this from happening, the insurer will add a corridor of insurance protection to keep the policy from endowing - this increase is provided without evidence of insurability

Inspection/Investigative Report

a general report of the applicant's finances, character, morals, work, hobbies, and other habits. Is sometimes referred to as the Consumer Investigative Report. - in general, the report will confirm or elaborate on information provided on the application - Information is usually collected through a telephone interview of the applicant and may be extended to interview others who may serve as character references - financial information may be requested and can be completed by a third-party provider, if requesting a credit report - the applicant must be made aware of any information gathering and has rights provided under the FCRA

Mortgage Life Insurance (Specialized Plans)

a group term insurance designed to protect against the unpaid balance of a mortgage upon the death, or lienholder - the amount of protection decreases along w the balance of the mortgage and the mortgage lender is the beneficiary of the policy

Natural Group

a group that is formed for a purpose other than to obtain group insurance

Interest Rate and General Account

a guaranteed minimum interest rate applied to the policy (usually 3-4%) means that, no matter how the investments perform, the insurance company guarantees a certain minimum return on the cash value - if the insurance company does well with its investments, the current interest rate will be credited to the cash value causing the cash value to grow at a faster rate - since it has a general account, the producer only needs a life insurance license to sell it - premiums are paid into and interest is credited into the general cash value account - Expenses, loans or withdrawals, and mortality charges are deducted from the cash value account

Renewability of Coverage (Small Employer Medical Expense Insurance)

a health benefit plan will be renewable with respect to all eligible employees and dependents at the option of the small employers except in certain cases

Scheduled Payment

a health plan with limits as to what will be paid for covered expenses. These plans are most associated with covering day to day losses based on a specified or flat dollar amount. They are not designed to cover catastrophic losses and have limited annual benefits

Tier 3 Plans (Consumer-Driven Health Plans)

a high deductible health plan (HDHP), which is a health insurance plan that has been designed to coordinate with pretax accounts to help consumers manage their spending for health care and insurance

Variable Life Insurance

a life insurance policy introduced in the 1970s that uses separate accounts for the cash value accumulation - the separate accounts are similar in nature to mutual funds, and a securities and life insurance license are required to sell this policy - the policyowner takes on the investment risk of the policy - the policy's overall death benefit can increase along with the cash values w positive investment performance coming from the separate accounts selected, however there is no guarantee of return and down markets can cause significant loss of policy value

Nonparticipating Life Insurance

a life insurance policy marketed by a stock insurer. - a stock insurance company is a company under the control of stockholders who would receive a share of any profits in the form of a corporate dividend as opposed to policy dividend - stock dividends are treated as ordinary income for tax purposes - a policyholder does not have to be a stockholder

Permanent Life Insurance

a life insurance policy that remains in force to age 100 or beyond - the premium is always larger than that of a term policy at issuance when the amount of coverage and underwriting factors are equal - it provides for living benefits for the policy owner or insured by way of its cash values - also has many options available to the policyowner

7-Pay Test

a limitation on the total amount that can be paid into a policy in the first 7 years. It compares premiums paid for the policy during the first 7 years with the net level premiums that would have been paid on a 7-Year Pay Whole Life policy providing the same death benefit. As long as the premium guidelines are met, the policy will avoid being deemed a Modified Endowment Contract - if a policyowner pays premiums in excess of the guidelines, the excess premium can be refunded by the insurer within 60 days after the end of the contract year. Since a single premium life insurance policy clearly does not pass the 7-pay test, it will automatically be deemed a MEC - once a policy is classified as a MEC, it will maintain that classification for the life of the policy - the overfunding cannot be undone in future years

Policy Loans and Cash Value

a loan against the cash value does not immediately reduce the cash value in a policy - rather the cash value is used as collateral against the loan - interest will be charged annually, and if unpaid will be added to the balance of the unpaid loan - Interest charge may be fixable or variable

Single Premium

a lump sum payment is made into an annuity

Stop-Loss Provision (Major Medical Policies)

a maximum dollar limit set on the coinsurance to limit the out-of-pocket expense that an insured can incur in a policy year. This may or may not include the deductible. Once the out-of-pocket limit has been reached, the stop loss provision kicks in and the policy will cover 100% of covered losses for the balance of the year

Material Misrepresentation

a misstatement in which the insurer would not have issued the policy had they known the true information

Survivor Benefits (Social Security)

a monthly payment payable to eligible dependents of a fully insured deceased worker

Roth IRA

a nondeductible tax-free retirement plan for anyone w earned income. The IRS sets maximum annual contribution limits, plus a "catch-up" contribution for persons age 50 or older - Unlike a traditional IRA, contributions are not tax-deductible. If the account has been open for at least 5 years and the owner is at least 59 1/2, qualified distributions are tax-free. The owner may make a tax-free, penalty-free distribution in case of death, disability or qualified first-time home purchase - a non-qualified distribution is subject to taxation of earnings and a 10% additional tax unless an exception applies - if a person owns one of these and a traditional Roth IRA, the combined contributions to both cannot exceed the annual maximum IRA contribution for one IRA

Intermediate Premium (Nonguaranteed) Whole Life Insurance

a nonparticipating whole life policy that provides for two premium rates - the company initially charges a "current" premium based on its current estimate of interest earnings, mortality, and expense costs - this rate is lower than traditional whole life in the early years - if these estimates change in later years, the company will adjust the premium accordingly but never above the maximum guaranteed premium stated in the policy

Death Benefits

a one-time lump sum payment of $255 in total may be made after the taxpayer's death - this death benefit is only payable to a survivor spouse or minor children

Partial Withdrawals (Universal Whole Life Insurance)

a permanent transaction, and cannot be reversed. It is different from a loan - the funds are paid from the general account - the cash value decreases, and the face amount may be affected as well - depending on the policy, the withdrawal may also be taxable

Subscriber

a person applying for coverage through a service provider

Insured

a person applying for coverage through an indemnity provider

applicant

a person making application for himself/herself or another to be insured under an insurance. They may be the insured, the owner or both

Agent's Report

a personal statement submitted by the producer to the insurer regarding any personal knowledge of the applicant, including information observed during the application process. The information remains confidential between the producer and the insurer, and it does not become part of the entire contract

Agent's Report

a personal statement submitted by the producer to the insurer regarding the applicant's financial condition, any personal knowledge of the applicant, etc. - the info remains confidential between the producer and the insurer, and it does not become part of the entire contract

Self-Insured (Self-Funded) Plan

a plan offered through employers, associations, or unions who pay claims out of their own funds instead of funding claims through an insurer

Medical Savings Account (MSAs)

a plan that is purchased along with a High Deductible Health Plan. It is established by an employer on behalf of the employee. Premiums paid by the employer are tax deductible by the business. Distributions for qualified expenses are not taxable to the employee - Nonqualified distributions are included in the employee's gross income and subject to a penalty tax if withdrawn before age 65. If funds remain in the account at the end of the year they can be rolled over for use in the following year without a penalty

State College Tuition Plans - 529 Plans

a plan that offers tax advantages when saving for college and other post-secondary training for a designated beneficiary. It is operated by a state or educational institution - contributions are not tax deductible, but earnings are not subject to federal tax (and typically not state tax) when used for qualified education expenses of the designated beneficiary (child or grandchild)

Family Plan (Family Protection Plan)

a plan that provides a base policy of whole life insurance on the primary insured and the spouse and children are covered by level term riders - the spouse's coverage is written to a specified age, such as 65, and is usually convertible to a whole life policy any time prior to expiration without proof of insurability - the children are covered by a single level term insurance rider with one premium covering all of the children under age 18 who meet underwriting guidelines - Newborn or adopted children will automatically be covered once they are 15 days old w/o an additional premium as long as the insurer is notified in writing - the children's coverage is also convertible to a whole life policy at a specified age (up to age 25) without proof of insurability

Defined Benefit Plan

a plan that provides employees w a fixed and known benefit at retirement, the amount of which depends upon length of service and highest attained salary. The company assumes the responsibility for making sure money will be available to fund a pension for retiring workers

Defined Contribution Plan

a plan that provides employees w a retirement benefit based on the value of the employee's account at retirement. The employer and employee or both can make contributions. This is a type of retirement plan in which a certain amount or percentage of money is set aside each year by a company for the benefit of the employee

Contributory Plans (Plan Design Factor)

a plan that requires both the employees and employer contribute to the premium, and 75% participation is required

Noncontributory Plans (Plan Design Factor)

a plan that requires the employer to pay all premiums and 100% participation is required

Policy Loans Provision

a policy loan may be made in a cash value policy once there is sufficient cash value to borrow against. In most policies, cash value must be made available to borrow against after 3 years - the insurer may defer granting a loan for up to 6 months unless the loan was intended to repay any premium, such as an automatic premium loan - failing to repay a loan or interest will not void the policy until the total amount of the outstanding loan and unpaid interest equals or exceeds the policy's total cash surrender value - any outstanding loans will be deducted from the face amount at time of claim or from the cash values upon surrender along w any interest due

Third-Party Ownership

a policy owned by one person insuring the life of another person. The three parties involved a third-party ownership are: - policyowner - insured - insurer

Individual Health Policies

a policy purchased by an individual and is not dependent upon an employer - some require proof of insurability and the rates applied are based upon underwriting factors used by the insurance company - they tend to be costlier and have higher deductibles and out-of-pocket expenses

Nonmusical Application

a policy requested when the applicant's age, medical history or amount of coverage does not require a medical examination for underwriting. Health questions on the application are asked by the producer and are the only medical information required

Family Income

a policy that combines whole life insurance with a Decreasing Term Rider - the length of the rider is based on the number of years until the youngest child is no longer a dependent, such as age 21 - if the insured dies while the rider is in force, the death benefit of the rider is paid in equal monthly installments (including interest) for the remaining number of years the rider would have been in effect - this benefit is in addition to the face amount of the whole life policy - if insured is still living at the end of the decreasing term, the rider drops and the premium decreases

Family Maintenance

a policy that combines whole life insurance with a Level Term rider - if the insured dies while the rider is in force, the death benefit of the rider is paid in equal monthly installments (including interest) for the full number of years for which the rider was issued - this benefit is in addition to the face amount of the whole life policy - if the insured is still living at the end of the term, the rider drops and the premium decreases

Group Insurance Plans

a policy that is available to employees and dependents - group underwriting factors determine the premiums for the group, as opposed to underwriting each individual - Employer makes all the decisions regarding the coverage, but mandatory benefits must be offered - Proof of insurability is not typically required

General Account (Universal Whole Life Insurance)

a portion of the premium is invested by the insurance company and held in its general account. The current return on the investments is credited to the UL policy -

Advertisements

a printed or published material, audiovisual material and descriptive literature, to include newspapers, magazines, radio scripts, television scripts, billboards, sales talks, presentations, and personal testimonials

Errors and Omissions

a professional liability insurance covering the liability of an agent - claims are filed due to client reports (complaints) for a number of reasons. The two most common are: - Inadequacy - Negligence

Transfer-for-Value Rule (Life Insurance)

a rule passed by Congress to discourage business transfers of ownership between parties looking to take advantage of the tax free status of life insurance death benefit - if a life insurance policy is transferred to a new owner in return of any kind of material consideration, this rules partially removes the tax empt status of a life insurance policy - the rule states that the amount of the death benefit that exceeds the value of consideration and any additional premium paid will be taxed as ordinary income - if the transfer qualifies as an allowable exception to the rule, the death benefit will be paid tax free

Single Premium Immediate Annuity (SPIA)

a single premium (lump sum) is put into an annuity from which the annuitant may immediately begin drawing benefits (within a year of the issue date) - a retirement plan, rollover, savings account balances or CDs, mutual funds, deferred annuity values, or the death proceeds of a life insurance policy might be used to purchase a SPIA

Single Premium Deferred Annuity (SPDA)

a single premium (lump sum) is put into an annuity from which the annuitant will draw the benefits at some specified time in the future, more than 1 year from the issue date

Probationary Period (Provision)

a specified period of time before coverage goes into effect for pre-existing conditions. This is designed to protect the insurer for losses due to a sickness that immediately occur after the policy is issued. Losses due to an accident are not pre-existing and are covered immediately with no waiting period

Accidental Injury

a spontaneous event, unforeseen and unintended, resulting in injury

Tabular Rate

a surcharge is calculated using a table showing past claims history of individuals with similar impairments

Flexible Premium (Universal Whole Life Insurance Feature)

a target premium established by the insurer, which is the minimum amount that must be deducted from the cash value to maintain the policy to age 100, based on current interest rates, mortality and expense charges - because mortality and expense charges are deducted from the cash value monthly, the policyowner has more flexibility with universal life premium payments - the premiums can be increased, decreased, or even skipped at the policy owner's discretion as long as there is sufficient cash value to cover these deductions - the feature also allows the policyowner to increase premiums during working years to accumulate enough cash value to make future premium payments in later years, known as the vanishing premium - if the cash value becomes insufficient to pay the monthly deductions, the owner will be required to start paying premiums to keep the policy from lapsing

Impairment Rider (Health Insurance)

a temporary or permanent rider added to a policy that will exclude specific conditions that would normally cause a policy to be declined. The use of this rider allows an insured to qualify for a policy with the exclusion attached, where they would otherwise be declined altogether

Viatical Settlements (Personal Life Insurance)

a terminally ill insured/owner selling his/her policy to a third party for less than the death benefit but more than the cash values in order to obtain funds when no other sources are readily available

Permanent Disability

a total disability that reduces or eliminates the insured's ability to work again

Pre-need Plan (Personal Life Insurance)

a type of coverage with a small face amount, typically purchased to pay the burial expenses of the insured

Health Reimbursement Arrangements (HRAs)

a type of health insurance plan that reimburses employees for qualified medical expenses. The plans are entirely employer-funded and there is no limit on the amount an employer can contribute. Employees are not allowed to contribute so contributions may not attributable to any salary reductions - cash-payouts are permitted, but a former employee may continue to receive subsequent coverage periods. Employer-provided coverage and medical reimbursement amounts under this plan are excludable from employee's gross income - they do not require coordination with a high deductible health plan

Adjustable Life Insurance

a type of permanent life insurance that combines features of term and whole life coverage, giving policy owners the option to change the characteristics of their policies - it is most appropriate for those whose income is expected to fluctuate from year to year or those persons who may have a change in needs - all the common features of level premium cash value life insurance are still present

Prospective Review

a utilization review conducted prior to the delivery of the requested medical service. They include the initial review conducted before treatment starts, and the initial review for treatment to a different body part. - During this review, copies of medical records shall be required only when necessary to verify that the health care services being considered are medically necessary

Concurrent Review

a utilization review conducted while services are being provided. The insurer monitors the insured's hospital stay to make certain that everything is proceeding according to schedule. The length of hospital stay is monitored

Probationary Period

a waiting period between when an individual is hired and when they become eligible to enroll in the group plan

Elimination Period Provision

a waiting period found in disability insurance polices before benefits are payable after a loss occurs. This acts as a time deductible and eliminates claims for losses that do not last a minimum period of time. The policyowner can choose this period in the policy and the time period selected will affect the premium. The longer the period chosen, the lower the cost of coverage

Joint Survivorship Life (Last to Die) (Specialized Policies)

a whole life policy that is written to cover 2 or more lives, and the death benefit is not paid until the last insured dies - Premiums are based upon a joint issue age which is obtained by average of bother insureds' ages resulting in a lower premium than two separate policies - the policy is often purchased to provide a lump sum benefit to pay estate taxes once the second spouse dies

Joint Life (First to Die) (Specialized Policies)

a whole life policy that is written to cover 2 or more lives, and the death benefit is paid upon the first insured to die - once payment is made, the policy no longer exists - premiums are based upon a joint issue age which is obtained by an average of both insureds' ages resulting in a lower premium than two separate policies - the policy is designed to provide income protection for the surviving spouse when both have earned income

Withdrawals and Annuities

a withdrawal is any amount distributed from the annuity that is not part of the annuitization process. - investments are taxed on a last-in, first-out basis (LIFO) - withdrawals made prior to the annuitant's age 59 1/2 are generally subject to a 10% early withdrawal penalty

Currently Insured

a worker must earn at least 6 quarter credits during the full 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or is entitled to retirement benefits

Parol Evidence Rule

a written contract may not be altered without the written consent of both parties

application

a written formal request by an applicant to an insurer requesting the insurer issue a policy based upon information contained in the application. It is the primary source of information used in underwriting

Gross Premium

additional charges (expenses) are added to the net premium rate to enable an insurer to meet all costs under the contract - Net Premium (Mortality - Interest) + Expenses = Gross Premium

The Age Discrimination in Employment Act (ADEA) (Underwriting Group Disability Plans)

affects both the short- and long-term group disability benefits for the people employed after age 65. This, in turn, will have some effect on premium determination by the insurer when underwriting a particular group

Coinsurance (Major Medical Policies)

after the annual deductible has been met, this feature applies. It is a cost sharing feature and is stated as a percentage of sharing between the insurer and the insured, such as 80/20, 70/30, 60/40. The insurer pays the larger amount

Inaccuracies (FCRA)

agency must forward to applicant inaccurate information given out within previous 2 years

Sales Presentation

agents are required to provide prospective health insurance buyers with all sales materials used when soliciting policies of insurance

Reporting money-laundering activity

agents/brokers are required to report any activity they believe or have reason to believe is an effort to launder money - Depending on the producer's involvement in transaction, failure to comply can result in dismissal and civil or possibly criminal prosecution

Penalties of MECs

all cash values transactions are subject to taxation and penalty. Funds are subject to a 10% penalty on gains withdrawn prior to age 59 1/2 which is considered a premature distribution. Distributions made on or after 59 1/2 and distributions paid out due to death or disability are not subject to the penalty

Time of Payment of Claims (Mandatory Provision)

all claims are to be paid immediately upon written proof of loss. Loss of time benefits (disability income) will be paid not less frequently than monthly

Newborn Infant Coverage (Medical Expense Provisions)

all individual and group health insurance policies, written on an expense-incurred basis, providing coverage for dependents of the insured must provide coverage for the insured's newborn child from the moment of birth. Adopted children are covered at the date of placement for adoption - the coverage must include injury and sickness, including the necessary care and treatment of medically diagnosed congenital defects and birth abnormalities - notification of birth or adoption and payment of the required premium must be within a month (30-31 days) after the date of birth or adoption, in order to continue coverage; otherwise, the coverage is only for the first month

Competent Parties (Legal Contract)

all parties to a contract. Those without legal capacity include: - Minors - the insurer may be held responsible for obligations but in most cases a minor cannot enter into a contract. There are exceptions such as purchase of auto insurance - the mentally incompetent or incapacitated - persons under influence of drugs or alcohol

Regulation and Separate Account (Variable Whole Life Insurance)

all variable products are subject to FINRA regulation - it is considered a security and can only be sold by individuals with a life insurance license and FINRA registration, Series 6 or 7 - a prospectus must be provided prior to the sale of a variable policy, and there are suitability requirements that must be met before a variable policy can be sold

Regulation and Variable Universal Life Policies

all variable products are subject to FINRA regulation. It is considered a security and can only be sold by producers registered with FINRA and holding either a Series 6 or 7 registration - this securities registration is required in addition to a life insurance license - In some states, a variable contracts insurance license and state securities registration (series 63) is also required - a prospectus must be provided prior to the sale of a variable policy and there are suitability requirements that must be met before a variable policy can be sold

Internal Revenue Code Section 1035

allows for the exchange of an existing insurance policy or contract for another without incurring any tax liability on the interest and/or tax treatment - these tax-free exchanges, known as 1035 exchanges, can be useful if another insurance policy has features and benefits that are preferred or are superior to those found in an existing contract - policyowners must be aware that surrender charges might still apply on the existing contract, and a new surrender charge period may start after the exchange on the newly acquired policy. Further, the new insurance contract may have higher fees and charges than the old one which will reduce the returns or increase costs for such things such as policy loans - when moving from an existing life insurance policy to a new life insurance policy as part of a 1035 exchange, the new life insurance policy will be issued only after a new application for coverage is received, and the policy is issued and accepted

Guaranteed Insurability Rider

allows the insured to purchase amounts of additional insurance every 3 years based on certain ages (specifically 25, 28, 31, 34, 37, and 40), events, or specified dates w/o evidence of insurability up to a maximum age, usually 40 - the premiums are based on attained age - the events which will allow the insured to obtain additional insurance in between the specified ages include marriage and the birth or adoption of a child, when the need for insurance coverage may increase - it normally limits the insured to acquire additional amounts of the same type of coverage already in force - the insurer often limits the amount of coverage that may be added - the rider drops at age 40

Free Look (Right to Examine Period)

allows the policyowner a specified number of days following receipt of the policy to look it over - if dissatisfied for any reason, the owner has the right to return it for a full refund of any premiums paid - the period is usually 10 days, unless state law specifies otherwise - it starts the date when the policy is delivered to the owner of the policy making it important for a producer to collect a delivery receipt when delivering the policy

Outline of Coverage

also called a policy summary that must be provided to a prospective buyer of health insurance at the time of application or policy delivery. - the outline of coverage includes benefits, premiums, and other relevant information regarding the sale of the policy

Life Insurance Policy Riders

also known as an ammendment. They modify conditions of the policy by expanding or decreasing its benefits, or excluding certain conditions from coverage, and are at the option of the insured - they are available for an additional premium in most cases - they are provided for a specified period of time as stated in the policy - it is typical for a them to end at a specified age - once they drop from the policy, the additional premium will also drop - most are added at the time of policy issue - any riders after the policy has been issued usually require evidence of insurability

Copay and HMOs

although they provide services on a prepaid basis, members are still required to make a copayment for office visits and hospital services. The copayment is considered an administrative fee and is not based on the specific services provided. The copayment helps to discourage unnecessary use of medical resources, such as emergency room services for non-emergency care. Subscribers do not pay deductibles, file claims, or receive a bill

Predetermination of Benefits (Pre certification or Prior Authorization) (Dental Insurance)

although this procedure is normally not mandatory, it does allow both the patient and dentist to know what will be covered before treatment. This knowledge enables the insurer to maintain some control over unnecessary or more expensive than necessary procedures and give the insured an opportunity to seek less expensive care if he knows the benefits are limited

Factor for Needs Analysis

an Emergency Reserve Fund or lump-sum needs may be part of the calculation to provide for unexpected emergencies the family might encounter immediately after the death of the insured

Benefit Categories (Affordable Care Act)

an Essential Health Benefits package is required by the ACA to provide coverage for at least one of four levels of coverage offered through all health exchanges. These coverage levels are known as "Metal Plans" and are defined as Bronze, Silver, Gold, or Platinum.

Rider

an added benefit to the policy that supplements existing coverage. It is usually added at the time of application and typically requires a small increase in premium

Prohibited Form of Advertisement

an advertisement cannot imply that claim settlements are generous or liberal or use similar words to imply the same thing

Prohibited Form of Advertisement

an advertisement cannot use words: "only", "just", "merely", "minimum", or similar words to imply a minimal imposition of restrictions and reductions

Advertisement Requirement (Health Insurance)

an agent must include the full name of the insurer when advertising a certain type of policy

Stock Redemption Agreement (Type of Buy-Sell Agreement)

an agreement between the shareholders and a close corporation. Each shareholder agrees to sell their shares upon death to the corporation according to the price, terms and circumstances specified in the agreement. This type of buyout is structured so the corporation buys the shares with corporate dollars

Cash Accumulation (Personal Life Insurance)

an amount of cash accessible to the policy owner from within permanent life insurance policies

Education Funding (Annuity Personal Uses)

an annuity can provide funds to help offset the costs of a college education. Using a systematic withdrawal or a settlement option will provide for an income stream to help meet or offset some of the expenses incurred

Corporate-Owned Annuities (Annuity Taxation)

an annuity contract owned by a non-natural person is not treated as an annuity for federal income tax purposes, so the contract's gains are currently taxed as opposed to being taxed deferred. - in short, there are no tax benefits when an annuity is owned by a corporation

Qualified Annuities

an annuity funded with pre-tax dollars, meaning the contribution itself could qualify for a tax deduction, lowering taxable income - the entire distribution from a qualified annuity (contributions and earnings) is subject to ordinary income taxes

Nonforfeiture Provisions (Annuities)

an annuity owner will not lose the value accumulated up to the point where they stopped paying into the contract - these options give the owner the rights to the accumulation in the contract - the owner has the right to surrender the contract during the accumulation period - these provisions only apply to deferred annuities since immediate annuities do not have an accumulation period

Market-Value Adjustment (Adjusted) Annuity

an annuity product that features fixed interest rate guarantees combined with an interest rate adjustment factor that can cause the surrender value to fluctuate in response to market conditions. Upon withdrawal, the MVA will add or deduct an amount from the annuity or the withdrawal amount

Indexed (or Equity Indexed) Annuity

an annuity product with interest rates that are linked to the positive performance of a stock market related (equity) index, such as the S&P 500 Index - the contract owner enjoys safety of principal and some guaranteed minimum returns - the safety of the principal and previously locked-in interest is backed by the insurer's general account. The minimum guarantee can be as low as 0% reflecting that the policy will not be adversely affected by negative stock market index performance - these contracts typically have a fixed account from which funds are transferred into the index selected. They also tend to have higher surrender charges an longer surrender charge periods

Completing the Application and Field Underwriting

an application is a written formal request by an applicant to an insurer requesting the insurer issue a policy based upon information contained in the application. It is the producer's responsibility to probe beyond the stated questions, which is known as field underwriting. The application is the primary source of information for an insurer underwriting a potential risk. If attached to the policy, a copy of the application becomes part of the entire contract

Preferred Provider Organizations (PPOs)

an arrangement under which a selected group of independent hospitals and medical practitioners become preferred providers in a geographical area. Unlike an HMO prepaid plan, the providers perform services to subscribers and charge a discounted fee-for-service negotiated in advance. Payment is made directly to the provider after treatment is received

Establishing a Health Savings Account (HSA)

an eligible individual or employer may establish this plan with a qualified custodian or trustee (typically an insurance company or bank). Generally, account contributions may be made by the individual, the employer, or both. Contributions are deducted, or excluded from the employee's income if made by the individual or the employer, respectively - if funds remain in the account at the end of the calendar year, they may be rolled over for use in the following year without a penalty

Group Health Plan

an employee welfare benefit plan established or maintained by an employer or by an employee organization (such as a union), or both, that provides medical care for participants or their dependents directly or through insurance

Eligible Employee

an employee who has a regular work week (30 hours). It does not include an employee who works on a temporary or substitute basis. A waiting period for eligibility cannot exceed 90 days - Small employers offering group health must offer the plan to all eligible employees. If dependent coverage is offered, then the coverage must be offered to all employees with dependents

Flexible Spending Accounts (FSAs)

an employer-established plan that permits the employee to defer up to $2,550 on a pre-tax basis into a specifically designated account from which the employee may withdraw funds to pay for unreimbursed medical expenses such as eyeglasses, elective cosmetic surgery, deductibles, copayments, and coinsurance which are part of the insured's out-of-pocket expenses - The IRS sets a limit on the calendar year maximum amount the employee can defer into the account., The employer funds the account in full at the beginning of the year, and withholds a prorated amount of income each pay period throughout the year until the employee's allocation has been fully received. - It may be opened without a High Deductible Health Plan or any other medical plan

Eligible Expense (Provision)

an expense actually incurred by, or on behalf of, an insured person for services and supplies that are: - administered or ordered by a physician - medically necessary to the diagnosis and treatment of an injury or sickness - are not excluded by any provision of the policy; and incurred while the insured person's insurance is in force

Sickness

an illness or disease that is contracted after the probationary period has ended, at least 30 days

Return of Cash Rider

an increasing term rider that provides coverage equal to the amount of cash value at the time of death - upon insured's death, the beneficiary would receive the face amount plus a return of the amount of cash value - this does not relieve the obligation to pay loans from the claim proceeds at the time of death

Return of Premium Rider

an increasing term rider that provides coverage equal to the amount of premiums paid into the policy - benefit is paid in addition to the death benefit - if the insured dies within the term, the beneficiary would receive the face amount plus a return of premium

Business Group of One

an individual, sole proprietor, or a single full-time employee of an S Corporation, C Corporation, Limited Liability Company, or partnership who has carried on business activities for at least one year prior to the application date. Also, the business must have generated taxable income in one of the previous two years

Deductible (Major Medical Policies)

an initial amount the insured must meet per year before benefits are paid. This applies as per person or family. They can vary in cost and are designed to allow the insured to assume a portion of the risk. Changing them will affect the premium cost. Higher deductibles result in a lower premium

Group Life Insurance

an insurance plan normally owned by an employer, credit or association, under which coverage is provided for the employees, debtors, or members. - generally provides protection for an employee's named beneficiary, typically their spouse if married - the coverage may be changed only in the Master policy - it is normally written on a renewable term basis providing no cash value or living benefits as found in individual cash value policies - the amount of coverage can be limited to a fixed dollar amount or a multiple of earnings - some allow for the purchase of additional coverage which may be partially or fully underwritten - Upon retirement, group coverages can be converted to an individual permanent life insurance plan without having to prove insurability

Temporary Disability

an insured is able to continue work at reduced efficiency or reduced hours, but is expected to fully recover

Non-Emergency Hospital Pre-Authorization Admissions

an insured who does not comply with the provision may have the normal benefit level reduced. This managed care provision reduces hospitalizations

Alien Insurer

an insurer organized under the laws of any jurisdiction outside the United States, whether or not it is admitted to do business in this state

Foreign Insurer

an insurer organized under the laws of any other state, possession, territory, or the District of Columbia, whether or not it is admitted to business in this state

domestic insurer

an insurer organized under the laws of this state, whether or not it is admitted to business in this state

Early Withdrawal w/ No Penalty

an ira owner may take an early withdrawal without penalty for certain qualifying events, such as: - death or permanent disability - up to $10,000 for the down payment on a home as a first time home buyer - medical expenses not covered or reimbursed by health insurance, or to pay health premiums - qualified educational expenses

Guaranteed Minimum Withdrawal Benefit (GMWB) (Retirement Income)

an optional benefit that can be purchased to help annuitants protect their retirement income from a down market - this option allows the annuitant to withdraw a maximum percentage each year until the initial investment has been paid out

Employer Sponsored Qualified Retirement Plans (Annuity Business Uses)

annuities are usually purchased by individuals. They may also be purchased as part of a structured corporate pension plan referred to as a Group Annuity

Purchase Other Insurance (Annuity Personal Uses)

annuities can be used as a funding vehicle for insurance premiums for which the consumer may have a need - if an annuity has a large amount of tax deferred earnings then, upon death, the beneficiary will receive the payout and be responsible for paying income taxes according to his tax bracket. This could force him into a higher tax bracket overall - Instead the annuity can be used either through systematic withdrawals or a settlement option to buy life insurance which will pay out a death benefit income tax free to the beneficiary

Employer Sponsored Qualified Retirement Plans (Annuity Business Uses)

annuities can be used simply as funding vehicles or provide benefits that other investments cannot, such as a guaranteed minimum death benefit, a guaranteed minimum interest rate, an income benefit payment that cannot be outlived, or other various benefits and riders

Employer Sponsored Qualified Retirement Plans (Annuity Business Uses)

annuities may be used as a nonqualified savings plan or as a qualified retirement plan - when qualified, annuity contributions are limited only to the extent that the insurance company has the right to limit the amount it is willing to accept for deposit at any time - if used as a qualified or other type of retirement plan, contributions are limited by the Internal Revenue Code according to the type of plan

Annuity Certain (Annuity Payment Options)

annuity benefit payments are received for a specified period of time or a specified amount of periodic income. If the annuitant dies with time remaining on the period certain or a balance is left in the account, the named beneficiary receives the balance of the payments - an annuity guaranteed to pay out for a specific number of years (such as a typical, state lottery prize) is called a fixed period - if the periodic amount is specified, but not the number of payments needed to pay out (liquidate) the sum in question, then the annuity certain is called a fixed amount - both forms are often used in settlement options

Life Income (Pure or Straight Life) (Annuity Payment Option)

annuity is payable for as long as the annuitant lives, and upon death all payments cease - this option provides the highest monthly income than any of the other options

Life Income Period Certain (Annuity Payment Options)

annuity is payable for life, or for a specified period of time, whichever is longer - if the annuitant lives beyond the stated period, benefits continue for life of the annuitant - if the annuitant dies prior to the end of the periods certain, a beneficiary receives the balance of the payments for the remaining time period

Life Income with Refund (Installment or Cash Refund) (Annuity Payment Options)

annuity is payable for the lifetime of the annuitant. Upon death, if an annuitant has not received an amount equal to the total of all payments made into the annuity (not the growth), the balance is refunded to the beneficiary as a lump sum, cash refund, or in installments, sometimes referred to as the installment refund

Joint Life (Annuity Payment Options)

annuity is payable to 2 or more named annuitants while both are living. Upon the death of the first annuitant, the benefits stop

Variable Annuity

annuity payments and cash values fluctuate according to the investment experience of the separate account the contract owner has designated. Payments are based on "units" rather than dollars - while not guaranteed, theses annuities may act as a hedge against inflation - this protects against the purchasing power risk of a fixed payment annuity by providing income that trends toward keeping pace with inflation - These annuities are regulated by the SEC, FINRA, and State insurance departments

Waiver (Annuity Nonforfeiture Options)

annuity surrender charges are generally waived if the annuitant is hospitalized for an extended period, placed in a nursing facility for at least 30 days, becomes disabled, or dies

Prohibited Form of Advertisement

any advertisement that uses a policy title to misrepresent or that might misrepresent coverage is unlawful

Insurable Events

any event, past or present, which may cause loss or damage, or create legal liability on the part of an insured

Taxation of MECs

any funds that are distributed are subject to a "last-in, first-out" (LIFO) tax treatment, rather than the normal "first-in, first-out" tax treatment. Taxable distributions include - partial withdrawals - cash value surrenders - policy loans (including automatic premium loans)

Surrendering a Cash Value Policy (Cash Value Taxation)

any gains will be subject to federal and possible state income tax. The gain is the difference between the gross cash value paid out, plus any loans outstanding, and the cost basis in the policy. - when the policy matures, cash can be paid in a lump sum or using one of the settlement options offered by the insurer. - the sum in excess of the cost basis is taxable as ordinary income

Small Employer

any person, firm, corporation, or association that is actively engaged in business and has 50 employees or less

Insured

any person, organization or company protected by an insurance policy

Conformity with State Statutes (Optional Uniform Provisions)

any provision on the policy effective date that is in conflict with statutes of the state is automatically amended to meet state requirements

Acceptable Place of Delivery (Regulatory Jurisdiction/Place of Delivery)

any state where an employer or labor union that is a party to a trust is located

Replacement

any transaction in which a new life policy or annuity is to be purchased, and the producer knows, should know, that existing contract(s) will be: - lapsed, forfeited, surrendered or terminated - reduced in value - amended w a reduction in benefit or term - reissued with a reduced cash value - subjected to borrowing

Ordinary Life Insurance

any type of life insurance that is not group, industrial or government insurance. A large number of people are insured with an ordinary life policy making this the largest portion of the life insurance in force today

Traditional IRAs

anyone with earned income may open this account. Contributions may be tax-deductible in whole or part - a non-working spouse can also set up a Spousal IRA on the working spouse's income. The contributions grow tax-deferred until they are withdrawn - there is a maximum annual contribution allowed by the IRS, as well as a "catch up" contribution for persons age 50 and older - all amounts contributed pre-tax plus gains withdrawn from an IRA are fully taxable as ordinary income

Pre-Existing Condition Provision

applies to prior conditions when the applicant received, or should have received, medical advice or treatment within a specified period before the effective date of the policy

direct rollover

applies when the funds are transferred from one qualified plan to the trustee of an IRA or another plan. While this is reportable, the income is not taxable and therefore no 60-day requirement

Partial Withdrawal in VULs (Variable Universal Whole Life Insurance)

are allowed in Variable Universal Whole Life policies and paid from the separate account

Flexible Spending Account contributions

are considered a "use it or lose it" form of voluntary salary reduction agreement. In the event that the employee fails to spend all the designated funds in the account by the end of the plan year, the employer retains the unused funds. A grace period may be offered by the employer which can extend up to 3 months of the following calendar year, to spend the unused funds

Executive Bonus Plans Taxation

are considered to be nonqualified plans and is a plan in which an employer pays the premiums on a permanent life insurance policy owned by an employee - the employer may be able to deduct salary and compensation under Section 162 of the IRC - since the plan is designed to provide a salary to the employee upon retirement, the premiums within limits are tax deductible to the employer and the income is taxable to the employee when paid out - they are nonqualified because they are designed to discriminate in favor of highly compensated key employees - while the employer pays the initial premiums, additional funds can be deposited by the employee

Open Enrollment Periods

are offered on an annual basis which allows individuals to enroll without evidence of insurability or to make changes - an individual can make changes at any time if they have a change in status, such as adding an eligible dependent or change in employment status such as going to or from full time to part time employment

Partial and Residual Disabilities

are referred to as "at-work" benefits since the insured is able to work and continue to receive the benefits. All other disability benefits are considered "24 hour" benefits

Health Maintenance Organization (HMOs)

are required to provide basic health care services including the usual physician, hospitalization, laboratory, x-ray, urgent care, emergency and preventive services, and out-of-area coverage for emergency care. Payments are provided to member hospitals on a predetermined basis. Emergency care outside of the network must be covered for necessary services at the nearest emergency room

Special Features of Term Insurance

are typically available only on level term insurance policies and an additional premium may be charged. The two forms are a Renewable and Convertible term policy and they will cost more than a level term policy

Morbidity Tables

are used to provide statistics that give the company a basic estimate of how much money it will need to pay for medical and disability claims each year

Open Enrollment Period (Group Health Insurance)

as long as the individual enrolls during this period, coverage is guaranteed and evidence of insurability is not required. individuals who do not enroll during this period are considered late enrollees and must provide evidence of insurability unless they wait until the next open enrollment period. It is offered each year to allow employees the chance to enroll in the plan at a. later date

Capital Retention/Conservation (Income Objective)

assumes the desired income will be generated by the interest only, thus retaining or conserving the principal

Return of Premium Rider (Disability Income Rider)

at specified policy years (typically after 10 years) the insurer will provide a refund of 80% of premiums paid in to that point less any dollar amounts paid out in claims. This optional rider has a premium requirement which can be an additional 40-60% of the base policy's premium

Cost of Living Rider (Disability Income Riders)

automatically increases monthly benefits after the onset of a disability, as the Consumer Price Index (CPI) increases. An adjustment in benefits is made on each policy anniversary while the disability continues and protects the insured against inflation

Disability Income Benefits under Social Security

based on the employees' average indexed monthly earnings on which Social Security taxes have been paid. This is referred to as the Primary Insurance Amount (PIA). Benefits cease when the employee reaches Social Security's definition of Full Retirement Age, dies, or is no longer disabled. When Full Retirement Age is reached, the insured worker is eligible to receive retirement benefits - the employee is eligible for 100% fo the PIA. A spouse and other dependents (parents or children) may be eligible for up to 50% of the amount of the disability benefit received by the disabled individual, A spouse caring for the worker's unmarried child who is under age 16 or was disabled before age 22 also receives a benefit equal to 50% of the employee's PIA. Unmarried children under age 18 (or 19 if still in high school) or if disabled prior to age 22 are also eligible for a benefit equal to 50% of the employee's PIA. The total dollar limit is 150-180% of the employee's disability benefits

Annuity Uses

before determining the use, it is important to determine the suitability of the product to the intended purchaser - suitability describes the steps that must be taken by a producer to ensure that an annuity is addressing a prospective owner's needs and financial objectives at the time of sale - additional factors used when determining suitability include the age, income, risk tolerance, and potential use of the annuity

Affordable Care Act Requirements

beginning in calendar year 2014, individuals are responsible for obtaining "minimum essential coverage" for themselves and their dependents, or pay a penalty--a "shared responsibility payment." - individuals who do not obtain or retain qualifying health care coverage will be required to pay a penalty as part of their income tax returns

Emergency Care (Affordable Care Act)

benefit plans that cover emergency services must provide coverage without the need for prior authorization regardless of the participating status of the provider. Out-of-network providers are covered for the same cost as in-network providers

Dependent Continuation (Affordable Care Act)

benefit plans that provide coverage for dependents are required to cover adult children up to age 26. Eligibility for dependent child coverage may be based only in terms of the relationship between a child and participant, and not deny or restrict coverage based on factors such as: financial dependency, residency, student status, employment, or marital status

Usual, Customary, Reasonable (UCR)

benefits are not scheduled, but based on the average fee charged by all providers in a given geographical area. Many insurers pay the (UCR) amount and the balance of any overcharges or costs of any disallowed services are the insured's responsibility

Life Policy Settlement Options

benefits are paid in a lump sum, unless another mode of settlement has been selected. It directs the insurance company how to pay out the death benefits

Nonscheduled (Comprehensive) Plan

benefits are paid on a usual, reasonable, and customary basis. Dentures are a major dental expense and would be paid using this benefit provision

Workers' Compensation

benefits do not include extra income and each state sets the eligibility requirements for Workers' Compensation benefits. - because it is a state-mandated benefit for employees, an individual occupation disability income policy usually includes a coordination of benefits provision that reduces the insurance company's monthly claims liability by the amount of Workers' Compensation income benefit paid to the insured. This means individual and group disability benefits will be reduced by the amount of Workers' Compensation benefits. Workers' Compensation is always the primary payor when applicable

Home Health Care

benefits for limited nursing services, home health aide, light housekeeping, and related expenses may be available in both medical expense insurance and long-term care insurance

Estate Taxes and Benefits Included

benefits may be included in the insured's estate, either intentionally or by default. The policyowner may name the estate as a beneficiary, or by default, if no beneficiary is living at the time of the insured's death, the benefit will automatically be paid into the insured's estate. These values will be added to the amount in the estate and potentially be subject to federal estate taxes - if the policyowner is also named the insured, the proceeds will be added to the value of the insured's estate - it is usually recommended to name an owner other than the insured for this reason

Partial Disability (Workers' Compensation Income Benefits)

benefits restore a percentage of lost wages

Misstatement of Age (Optional Uniform Provisions)

benefits will be paid based on what the premium paid would have purchased at the correct age. If the misstatement leads the insurer to provide coverage beyond the age limit, liability is limited to a refund of premiums

Variable Annuity and Regulation

both an insurance license and a securities license (FINRA) are required - a variable annuity is considered a security, and therefore, must comply with the Federal Securities and Exchange Commission (SEC) rules as well as the state insurance laws - a prospective buyer of a variable annuity must be provided with a prospectus - the prospectus gives detailed information on the separate account available in the annuity - this information provides the contract owner the opportunity to make a better decision based on the historical performance of the separate account - the prospectus must be provided at or before the time of the sale

Family Income and Family Maintenance Policies (Family Policies) (Specialized Policies)

both policies begin with a base policy of whole life insurance written on the parent with the largest income and greatest risk of death - they provide protection to age 100 - a term insurance rider may be attached to the base policy that is designed to provide a monthly income to the survivor if the insured dies during the specified term. This greatly increases the total insurance amount w/o affecting the cash accumulation feature of the base policy - both policies only provide insurance protection on one parent

Required Signatures (Completing the Application)

both the producer and the applicant/insured must sign the application. The applicant is representing that statements on the application are true. If the applicant is a minor a guardian must sign the application

Factor for Needs Analysis

calculate all financial needs caused by an immediate death, including debts, medical bills and final expenses

Traditional Net Cost (Policy Cost Comparison Method)

calculated using the policy's premium and dividends that have accumulated over a period of years at an assumed interest rate - this amount is added to the policy's cash value at the end of a period (such as 10 years) - the total of this amount is subtracted from the total premium payments to determine how much the policy actually costs - this is averaged over the specified time period (10 years) to arrive at the average cost per thousand for a policy surrendered for its cash value at the end of the specified time period (10 years)

Issued as a Substandard Risk

can either be issued as: - Issued Rated-Up - Issued with Exclusions/Limitations

Dental Insurance Exclusions

certain services that began prior to the date of coverage

Disabled Children and Eligibility (Group Health Insurance)

children who are not capable of self-support may continue to be covered beyond age 26 as long as their disability is due to mental or physical handicap and chiefly dependent upon the employee for support and continuous maintenance. - proof of the child's incapacity and dependency must be furnished to the insurer within 31 days of the child's attainment of the limiting age

Payment of Claims (Mandatory Provision)

claims are to be paid to the policyowner unless otherwise specified or there is an assignment of benefits. Any death benefits are paid to the named beneficiary. - Under this provision, assignment of benefits allows the person receiving medical benefits (the insured) to assign or transfer the payment of those benefits directly to the provider of services (a physician or hospital). Assignment of benefits makes the claims process easier by granting the health care provider permission to file the claim on behalf of the insured

Combination Plans

combines the benefits of both the Basic and Comprehensive Plans. Some procedures are paid on a usual, customary, and reasonable basis

Exclusions

conditions that stipulated in the contract for which the insurer will not provide coverage. The insurer cannot add or alter any of the exclusions after the policy has been issues. The exclusions are normally limited to the following: - aviation - status clause - results clause (war clause) - hazardous occupation - hazardous hobbies or avocation - suicide

Medical or Physical Examination

conducted by a licensed medical professional, such as a registered nurse or paramedic, who provides the results and information regarding the applicant's present health directly to the underwriter. Typically, the examiner is "mobile" and can perform the exam by appointment at any time or location, making it convenient for the applicant. A routine examination is usually dependent upon the amount of coverage being requested, the age of the applicant, or health history. Medical exams include checking vital statistics (height, weight, blood pressure) and lab tests including the collection of blood and urine samples or a cheek swab to detect nicotine. More extensive tests may be requested, such as a stress test or even an electrocardiogram (EKG). Medical exams are at the insurer's expense.

Medical Examinations

conducted by physicians or nurses who provide results of an examination and information regarding the applicant's present health. Is usually requested by the insurer after determining if the amount of coverage, age of applicant, or health history warrant the examination - it is more frequently requested due to the higher amounts of insurance applied for coupled w the high degree of cardiovascular concerns, high cholesterol and enzyme levels, as well as the prevalence of the HIV virus. Medical exams are at the insurer's expense - the results are the only report that may be copied and made part of the policy

Change of Beneficiary (Mandatory Provision)

consent of beneficiary is not required unless the beneficiary is irrevocable. The change becomes effective on owner's signature date upon the insurer's recording the change

Consideration Clause (Provision)

consideration by definition is the exchange value in a contract. This clause states the amount and frequency of the premium, including statements in the application that determine the premium. This is the insured's consideration in exchange for the insurer's promise to pay benefits within the contract terms

Disclosure upon Request (FCRA)

consumer reporting agencies must provide the information on file if requested

Part I - General

contains general questions about the applicant, such as gender, marital status, residence, date of birth, occupation, and past and present life

Application - Part I

contains general questions about the applicant, such as sex/gender, marital status, residence, date of birth, occupation; and past and present life insurance

Part II - Medical

contains questions pertaining to medical background, past and present health, any medical visits, hospitalizations, or surgeries in recent years, and medical state of immediate family members, including their ages and causes of death

Application - Part II

contains questions pertaining to the medical background, past and present health, any medical visits, hospitalizations, or surgeries in recent years, medical status of immediate family members, including their ages and causes of death

Periodic Premium

continuous premiums paid into the contract. The most common example of this premium payment is a flexible premium

Medical Expense

contract that covers various expenses which an insured may incur due to an accident or sickness

Disability Income (Loss of Time or Income)

contract that pays weekly or monthly benefits due to injury or sickness if an insured is unable to perform the duties of their job. The benefit is either a percentage of the insured's past earnings or a flat dollar amount

Staff Model (Closed-Panel) (HMOs)

contracting physicians are paid employees working on the staff of the HMO - generally operate in a clinic setting at the HMO's physical facilities - as hospital services are required, staff doctors and HMO administrators arrange for these services - this model is considered closed panel since the providers do not work outside of the HMO and subscribers must use the providers on staff for treatment, with very few exceptions - unlike the group model, practitioners are under no financial risk, the HMO, as the employer, takes the risk

Expense Charges (Universal Whole Life Insurance Feature)

cover administrative costs and are deducted monthly from the policy's cash value - it is the insurance company's cost of maintaining the policy and can be impacted by the overall increasing administrative costs associated w a plan - like mortality charges, there is a maximum established within the plan - expenses may be referred as "loads" - Loads charges up front before the premium is added to the cash value are called front-end loads. - most Universal Life policies deduct charges on the back-end in the form of a surrender charge

Mental Illness and Substance Abuse (Medical Expense Provisions)

coverage for mental illness and substance abuse will be subject to the same deductibles and coinsurance factors as those that apply to any physical illness. It is provided on an inpatient and outpatient basis and includes the treatment of alcohol abuse and chemical dependency. Many plans will have limitations on the benefits provided on an outpatient basis

COBRA Continuation of Coverage for Dependents

coverage may continue for dependents up to 36 months for certain qualifying events: - death of employee - divorce or legal separation - employee's entitlement to Medicare benefits - loss of dependent status

Prohibit Rescissions (Affordable Care Act)

coverage may only be rescinded for fraud or intentional misrepresentation of material fact. Notification must be made to the policyholder 30 calendar days prior to cancellation

Bronze Plan

covers 60% of the benefit cost of the plan

Silver Plan

covers 70% of the benefit cost of the plan

Gold Plan

covers 80% of the benefit cost of the plan

Platinum Plan

covers 90% of the benefit cost of the plan

Credit Insurance (Credit Disability Insurance) (Limited Policy)

covers a debtor, with the creditor receiving benefits to pay the debt if the debtor becomes disabled as defined in the policy. It is commonly sold as a group plan, however, individual contracts may be written. Coverage may not exceed the total amount of debt or the amount of the monthly payment

ERISA (Employment Retirement Income Security Act)

covers most private sector health plans - governs employer-sponsored retirement, welfare, and benefit plans - provides protection for participants and beneficiaries in employee benefit plans, including providing access to plan information. - individuals who manage plans (and other fiduciaries) must meet certain standards of conduct under the fiduciary relationships specified in the law - an employer is required to provide a Summary Plan Description filed with the Department of Labor explaining benefits to the employee on an annual basis. An annual financial report must be filed with IRS

Limitations (Designed to Control Costs and Eliminate Unnecessary Dental Care) (Dental Insurance)

deductibles are normally waived for routine preventive care, exams, and/or cleaning. Preventive care is more fully covered, stressing preventive dentistry, similar to an HMO stressing preventive medicine. - Coinsurance applies in addition to deductibles. The least expensive treatment will be used

Deductible and Coinsurance (Dental Insurance)

deductibles include an annual amount ($50-$100) that must be paid before the plan will cover any losses. Once the deductible is met, the plan will impose a coinsurance feature of 20%-50% for basic and major services. Diagnostic and preventive care is not usually subject to a deductible or coinsurance

Spendthrift Trust Clause

denies the beneficiary the right to assign his interest in the policy proceedings - the purpose is to prevent creditors of a beneficiary from claiming any benefits payable to the beneficiary before they are actually received - this clause does not protect the beneficiary if the benefits are payable in a lump sum, only when the proceeds are held by the insurance company under a settlement option

Annuity Suitability

describes the steps that must be taken by a producer to ensure that an annuity is addressing a prospective owner's needs and financial objectives at the time of sale - Additional factors used to determine suitability are: - age - income - risk tolerance - potential use of the annuity

Creditor (Beneficiary Designation)

designated by assignment or named at application to cover indebtedness - the creditor may either be the named beneficiary or can be the assignee under a collateral assignment - the creditor can only receive the amount of the indebtedness - the benefit may be purchased as decreasing term so the benefit will decrease by the amount of the loan automatically

Experience Rating

determined by examining the history of claims a particular group experiences

Community Rating

determines premiums by examining a particular geographic region of all insureds in a group

Relationship of Earnings to Insurance (Optional Uniform Provisions)

disability income (loss of time) benefits cannot exceed the greater of the insured's monthly earnings at the time the disability began or the insured's average earnings for the 2 years immediately preceding a disability. The monthly benefit cannot be reduced to less than $200

Total Disability

disability policies will pay benefits according to the one or two definitions of total disability - own occupation - any occupation

Partial Disability

disability resulting in an inability to perform 1 or more of the regular duties of an occupation. The benefit usually pays up to 50% of a total disability benefit for 3 to 6 months

Premium Reduction (Dividend Option)

dividends are applied toward the next premium due. - The same could be accomplished if the policyowner received the dividends in cash and remitted the full premium - if the declared dividends equal or exceed the premium, the premium payment may be suspended

State Fraudulent Insurance Acts

do not modify the privacy of any individual; they protect producers, brokers, and insurers in the event fraudulent information is provided by consumers

Aviation Exclusion

does not apply to fare-paying passengers on a regularly scheduled commercial flight. Applies most specifically to student pilots or those with a newly issued pilot's license w a limited number of hours of flying experience

Non-Disabling Injury Rider (Disability Income Riders)

does not pay disability income, but pays the medical expenses that are related to an injury that does not result in total disability. It is a limited form of medical expense coverage added to a disability income policy

Bailout Provision (Escape Clause) (Annuity Nonforfeiture Options)

during the accumulation period, some contracts offer a "bailout" that allows the owner to withdraw money from the annuity without surrender charges if the crediting rate falls by more than a specific amount - this will enable the policyowner to consider other savings and investment options

Fixed (Guaranteed) Annuity

during the accumulation period, the insurer guarantees a minimum fixed interest rate. At annuitization benefits are paid as a minimum level fixed amount - the fixed amount purchasing power decreases as the cost of living increases. The actual rate of interest created at any one time is based on the earning's rate of the insurer's general account the insurer bears any investment risk - only a life insurance license is required in order to sell fixed annuities in most states - some fixed annuities offer a base interest rate plus a bonus interest rate which becomes the current rate credited into the annuity - the current rate is set by the insurance company at the time the contract is issue and is guaranteed for a specific time period

Estate Taxation (Annuities)

during the accumulation phase, if the contract owner dies, the value of the annuity is included in the owner's estate for valuation. If the annuitant dies during the annuity payout phase, the remaining value in the account will be added to the deceased annuitant's estate for valuation - if the annuitant was receiving income from a Pure or Straight Life annuity, the company keeps the balance and nothing goes into the annuitant's estate for valuation

Policy Renewal Provisions

each health policy must express conditions and provisions for coverage continuation. Effective and termination dates must be expressed in the policy. Insurers may cancel under any of the renewal provisions when premium payments are discontinued.

Dependent Eligibility (Group Health Insurance)

eligible dependents include the employee's spouse and all children from birth until age 26. - disabled children who are not capable of self-support may continued to be covered beyond age 26 as long as their disability is due to mental or physical handicap and chiefly dependent on the employee for support and continuous maintenance. Proof of the child's incapacity and dependence must be furnished to the insurer within 31 days of the child's attainment of the limiting age - the decision of whether to offer this dependent coverage rests with the employer. It must be offered to 100% of participating employees, and this optional coverage may be paid for by the employer, employee, or both - if a state recognizes domestic partnerships or other civil unions between persons of the same or opposite gender, a group health insurance plan that offers coverage to spouses and dependents must also permit enrollment of a domestic partner

Impairment Rider (Disability Income Riders)

eliminates coverage for pre-existing conditions, such as back injuries. Attaching this rider excludes coverage for a condition that would otherwise be covered. The use of this rider may take insurance obtainable for an otherwise uninsurable person

COBRA Termination of Continuing Coverage Event

employee become eligible for any other group health plan

COBRA Termination of Continuing Coverage Event

employee becomes eligible for Medicare benefits; dependents may remain under COBRA

Changes Outside of Open Enrollment Period

employee can only make changes to the group plan if they have a change in status, such as going from part-time to full-time, getting married, or adding/dropping dependents

COBRA Termination of Continuing Coverage Event

employee converts to an individual health plan

If Employees Elect a Defined Contribution Plan (Profit-Sharing and 401(k) Plans

employees define their contribution amount as a percentage of income or a fixed dollar amount per payroll period. Employer must deduct that amount from pay and forward to the plan custodian on a timely basis - participants typically invest in a portfolio of mutual funds - employers may contribute and match funds to participant accounts as long as the contribution formula is not discriminatory

Contributory Group Plans

employees must contribute to the premium payments and at least 75% of all eligible employees must participate

COBRA Termination of Continuing Coverage Event

employer ceases to maintain any group health plan

Noncontributory Group Plans

employer pays the entire premium with a mandatory 100% of eligible employees participating. The percentage participation requirements are used to reduced adverse selection

Cost of Living (COL) Rider

enables the insured to purchase more insurance each year to help offset increase insurance needs due to inflation - the amount the can be purchased is based on increases in the cost of living index - the additional coverage is usually available at low rates and evidence of insurability need not be provided for such increases

Way to Obtain Minimum Essential Coverage (Affordable Care Act)

enrollment in a government program such as Medicare, Medicaid, TRICARE, the Children's Health Insurance Program (CHIP), or any other state health plan

Multiple Employer Trusts (MET) (Eligible Health Groups)

entities formed by unrelated businesses in the same or related industrial classification. The trust is organized under a third-party administrator (TPA) or sponsor and allows for small to medium-sized employers to combine their employees into a single, large group in order to obtain more favorable life and health insurance premiums and increased benefits

Carryover Provision (Major Medical Policies)

expenses that did not satisfy the previous year's deductible and were incurred in the last 3 months of that year are used towards satisfying the current year's deductible

Standard Provisions-Individual Policies Only

explain what the contract consists of, what duties and responsibilities the parties to the contract have, how the policy works, and basically spells out the agreement between the policyowner and the insurance company. Provisions and clauses, unlike riders, are included in the contract for no additional charge.

Lifetime Benefit Rider (Disability Income Riders)

extends the benefits for life if total disability begins before a specified age. If disability beings when the insured is older than the age specified, the rider is not in effect.

Inadequacy (Errors and Omissions)

failing to obtain proper type or amount of coverage for a client

Required Minimum Distributions (RMD)

failure to take all or part of an annual RMD incurs a 50% penalty tax on the amount not distributed. The SECURE Act made major changes to the RMD rules - Persons who reached the age 70 1/2 prior to January 1, 2020 must take their first RMD by April 1, 2020 - Persons who reached, or will reach, age 70 1/2 on January 1, 2020 or later must take their first RMD by April 1st of the year after the year they reach age 72 Following their first RMD, the RMD deadline for each subsequent year is December 31st

Universal Whole Life Insurance (or Flexible Premium Whole Life Insurance)

features insurance protection and a savings element (cash value) that grows on a tax-deferred basis. It is an "unbundled policy", which means that the individual elements of the policy and premium--which includes the mortality risk, policy expenses, and the cash value--are credited to the account separately after the premium is paid - they provide guaranteed values regarding the cost of insurance (mortality risk) and the interest rates applied to cash values - this policy has different level of flexibility and features

Dependent Child Coverage (Limiting Age Law) (Medical Expense Provisions)

federal law that requires every policy providing coverage for a dependent child extends coverage up to age 26 (through age 25). This includes natural children, adopted children, married or unmarried, even if eligible for other insurance. There is no requirement for a dependent child to be enrolled as a full time student to qualify

Change of beneficiary

filed by written request and will take effect on the date the request was signed by the owner, whether or not the insured is alive at the time the insurer actually receives the notice

Basic (Dental Care)

fillings, periodontics, and root canals are considered to be basic care

Surplus Lines Insurance

finds coverage when coverage cannot be obtained from admitted insurers. It cannot be utilized solely to receive lower cost coverage than would be available from an admitted carrier - each state regulates the procurement of Surplus Lines Insurance - can be placed through non-admitted carriers; non-admitted business must be transacted through a Surplus Lines Broker

Penalties

fines and possible prison time

Fixed Premium Deferred Annuity (FPDA)

fixed premiums are made as installments and are scheduled. Benefits being more than 1 year from the issue date

Flexible Premium

flexible contributions may be made as often and in whatever amount the contract owner desires. However, most insurers set a minimum and a maximum dollar amount they will accept

Last-In, First-Out (LIFO)

for income tax purposes it means the first money out of annuity will be considered as earnings not principal, and will be taxed as ordinary income when withdrawn from the contract

Premium Taxation

for individuals, they are considered a personal expense and are not deductible. - they are paid with after-tax dollars - this establishes a cost basis in the policy for tax purposes

Variable Annuity Income Payment Taxations (Exclusion Ratio)

for these payments, determining the amount of each payment that is tax free is by dividing the investment in the contract by the total number of periodic payments expected to be received, based on the settlement option selected under the contract - the income tax due is based on the annuitant's ordinary income tax rates

Small Employer Non-Renewability of Coverage (Small Employer Medical Expense Insurance)

fraud or misrepresentations of the small employer in the application

Non-qualified Annuity

funded with after-tax dollars, meaning taxes on the money were paid before it goes into an annuity - upon distribution, only the earnings are taxable as ordinary income

Multi-Employer Welfare Associations (MEWAs) (Eligible Health Groups)

generally formed by larger employers for the purpose of obtaining more favorable rates for life and health insurance. These groups primarily consist of employers who self-fund their employees' health insurance benefits. The employer assumes responsibility for providing payment of its own employees' claims through a TPA and do not have the safety net of the backing of an insurance company

Prospectus (Variable Annuity)

gives detailed information on the separate account available in the annuity - the information provides the contract owner the opportunity to make a better decision based on the historical performance of the separate account - it must be provided to a prospective buyer at or before the time of sale

Physical Exam and Autopsy (Mandatory Provision)

gives the insurer the right to examine the insured or require an autopsy at insurer's expense, where not prohibited by law

Events that Terminate Coverage (Change in Insurance Companies or Loss of Coverage)

group coverage may be terminated for an employee if: - employment is terminated - employee no longer meets eligibility requirements (becomes part-time) - group contract is terminated

Integrated Deductibles

group dental insurance can be combined with medical expense insurance and have a shared deductible

Administrative Capability (Plan Design Factor)

group health plans handle many of the administrative issues on behalf of the sponsor, such as updating enrollments and adding new members. Since many of these abilities can handled online, the cost of administration in a group plan is less than that of an individual plan

Noncancellable

guaranteed renewable to age 65 with guaranteed premiums. This is one of the most favorable for the insured, because only the owner can terminate the policy and rates never increase. The insurer cannot change the plan once issued

Guaranteed Purchase Option (Guaranteed Insurability, Future Increase) Rider (Disability Income Rider)

guarantees that on specified dates, ages, or occurrences, such as marriage, birth of a child, etc. the insured may purchase additional monthly benefits, if income justifies it, without proof of insurability. Rates are based on attained age. Some insurers refer to this as a Future Increase Option (FIO)

Uniform Simultaneous Death Act

has been adopted by all states and provides that when the insured and primary beneficiary dies as the result of the same event and the order of death cannot be determined, it is assumed the insured died last, protecting their secondary beneficiary or heirs

Non-admitted (Unauthorized) Insurer

has either applied for authorization to do business in this State and was declined or they have not applied; they are not authorized to transact insurance in this State - excess lines insurance can be placed through non-admitted carriers

Fully Insured

has permanent coverage under Social Security and cannot lose this status. It requires an individual to have earned a minimum of 40 quarter credits, or approximately 10 years of employment

HIPAA Eligibility Requirement

have 18 months creditable coverage with most recent coverage under an employer-sponsored plan, government plan, church plan or health benefit plan. Proof of prior coverage, or a certificate of creditable coverage is required

HIPAA Eligibility Requirement

have no more than a 63 day gap in coverage

HIPAA Disclosures and Consent

health care providers are required to preserve patient confidentiality and protect health and medical information - all medical information obtained on an applicant during the underwriting process must remain confidential and the applicant's privacy must be protected - before an insurer can share any medical information, the applicant must be notified of the treatment of the information, rights to maintain privacy, and an opportunity to refuse the dissemination of information

Premium Determination and Rating

health insurance companies require underwriting similar to life insurance, but the risk to the insurance company is different. Underwriters are concerned about the possibility of illness or injury rather than death. Upon receipt of the necessary information, the home office underwriters analyze the information and determine if the applicant is an acceptable risk, looking at accident and illness history, exposure to environmental hazards, and working conditions. If acceptable, underwriters determine the classification to be used in the calculation of the premium

Appeal Rights (Affordable Care Act)

health plans must have an internal appeals process for beneficiaries to challenge "adverse benefit decisions" such as denial, reduction, termination of, or failure to provide or make a payment for a benefit. The plan must also include a notice of the right to an external appeal, together with a description of external appeal process and time frames for such appeals

Disability Reducing Term (Disability Income Special Uses)

helps a small business that has long-term commitments requiring monthly or other regular payments meet their obligations. The amount of coverage remains the same monthly, but the benefit period reduces as the debt reduces

Advertisement Requirement (Health Insurance)

holding both the insurer and agent accountable if an agent misleads the public in an advertisement

Family Deductible (Major Medical Policies)

if a family is insured, a maximum of 2 or 3 deductibles will satisfy the deductible requirement for the entire family per calendar year

Reinstatement

if a policy has lapsed unintentionally due to nonpayment, it can be reinstated by the owner. The period is typically 3 years from lapse (but can be as long as 5 years) In order to reinstate, the insured must provide evidence of insurability and the owner must pay all back premiums from the date of lapse plus interest - they are designed to put a policy back in force as if the lapse never occurred - when used, a new incontestability period takes effect based only on the information contained in the reinstatement application, but no new suicide clause applies

Policy Loans Taxation

if a policyowner takes out a loan against the cash value of a life insurance policy, the amount of the loan is not taxable - this is true even if the loan is larger than the amount of premiums paid in - the loan is not taxed as long as the policy is in force - if the policy lapses with a loan outstanding, the excess over cost basis becomes taxable as ordinary income - the interest paid on a permanent life insurance policy loan is not tax-deductible

Collecting the Initial Premium and Issuing the Receipt

if a premium is paid at the time of application, the producer will provide the owner with a conditional receipt. The conditional receipt provides coverage effective back to the date of application as long as coverage is issued as applied, standard or better. If a loss occurs before the policy is issued, the insurer would have to prove the policy would not have been issued as applied; otherwise, the loss is covered based on the terms of the receipt. If a producer does not collect the initial premium and submits only the application to the insurer, the policy will not go into effect until the application has been approved, the policy has been issued, and the premium has been paid

Changes in the Application

if an answer to a question on the application needs to be changed, the producer or applicant may make the correction but the applicant must initial the change, or the producer can complete a new application

Reinstatement for Military Personnel (Change in Insurance Companies or Loss of Coverage)

if an employer discontinued health coverage during deployment, federal law requires an individual be allowed to resume plan membership without any type of waiting period as long as notice is given to the insurance company directly after your military deployment

Consent Withdrawal (Violent Crime Control and Law Enforcement Act of 1994)

if conditions of consent are not continually met, the consent may be withdrawn

Reciprocity (Violent Crime Control and Law Enforcement Act of 1994)

if consent is granted by any state, other states must allow the applicant to work in their state as well

Minors (Beneficiary Designation)

if minors are named as beneficiaries, but no trust has been established, the funds are placed in a settlement option with the insurer acting as trustee - the guardian or legally responsible adult may receive payments for the benefit of the child, until the child receives the lump sum at the age of majority

Policy Not Approved

if not approved, the insurer may make a "counteroffer" to applicant - the insurer may issue a policy with a surcharge (higher rating) or exclusions to the policy - the producer must hand deliver the policy to the applicant to collect any additional premium, explain the changes in coverage and premium, and reinforce the value of the contract

Conditional Receipt

if premium is paid, coverage will be in effect the date of application or completion of the medical exam, whichever is later as long as the policy would have been issued as applied for

Binding (Unconditional) Receipt

if premium is paid, coverage will begin immediately for a specific length of time regardless whether the applicant is ultimately approved by the insurer - may be referred to as a temporary insurance agreement

Replacement

if replacing an individual health or disability policy, care must be taken to compare limits of coverage, benefits, and exclusions. - the process includes cancelling an old policy upon the purchase of a new policy. The old policy should not be canceled before the new policy is issued, otherwise this could leave the applicant without coverage. - the new policy may require underwriting to prove evidence of insurability, which can affect the coverage and premiums of the new policy - to avoid an Errors and Omissions claim, the producer must not be negligent, or make false statements or misrepresentations

Fraud Penalties

if the amount embezzled or misappropriated does not exceed $5,000, violators will be fined up to $50,000 or imprisoned for up to 1 year, or both

Waiver of Premium (Disability Riders)

if the insured becomes totally disabled, the insurer will waive premiums for the duration of the disability or the end of the policy, whichever occurs first - to qualify for the waiver, the insured must be disabled for a waiting period of 3-6 months - the policyowner must continue to pay premiums during this period, but once eligible, the waiver is retroactive to the start of the disability - during the disability, the insurer will credit the premiums to the policy and all benefits, such as cash value accumulation and dividend payments will continue - unless the insured is disabled, the rider drops at age 65

Change of Occupation (Optional Uniform Provisions)

if the insured changes to a more hazardous occupation, the benefits will be reduced to that benefit which premiums paid would have purchased at the more hazardous occupation. If the insured changes to a less hazardous occupation, the benefits will pay as stated in the policy and the insured may apply for a rate reduction. If the insured works at two occupations, rates for the most hazardous occupation will be charged

Suicide Clause

if the insured commits suicide, while sane or insane, within typically 2 years from the issue date, the insurer's liability is limited to a refund of premium - if the insured commits suicide after the suicide clause has expired, the insurer must pay out the death benefit to the named beneficiary - the intent of this clause is to discourage individuals from purchasing an insurance policy while contemplating suicide

Insurance with Other Insurers (Optional Uniform Provisions)

if the insured has duplicating coverage with other insurers, any one insurer's liability is limited to a proportion of the loss. This is referred to as the Coordination of Benefits for individual policies. This is calculated by determining each company' proportion of the total coverage and applying that same proportion to the loss. Only policies written on the insured are applicable. This concept applies to losses on a service or expense incurred basis

Other Insurance with This Insurer (Optional Uniform Provisions)

if the insured has more than 1 policy with the same company, the insured may decided which policy to use. Excess premiums for the excess coverage will be returned. The provision protects insurer against overpayment of claims

Claim Form Provision (Mandatory Provision)

if the insurer requires a claim form, it must be received by the insured from the company within 15 days after notice of claim. If forms are not furnished, the insured may submit written proof of occurrence, character, and extent of the loss

IRA Rollovers

if the payment is made directly to the IRA owner, he will have 60 days to deposit the check into a new IRA to avoid taxes and penalties. This type of transaction is reported to the IRS and is only allowed once per year. - a 20% withholding of funds is required unless a direct rollover occurs

Cost Recovery Rule (Cash Value Taxation)

if the policyowner does sell, surrender, or withdraw funds from the policy, the difference between what is received and what had been paid is taxed as ordinary income

Fraud Penalties

if the violation jeopardized the safety and soundness of an insurer and was a significant cause of the insurer being placed in conservation, rehabilitation, or liquidation by an appropriate court; imprisonment can be for up to 15 years

Liquidity (Personal Life Insurance)

immediate funds available upon death to pay creditors, taxes, and final expenses as well as cash values available for policy loans, withdrawals, and full surrenders

Risk in a Traditional Whole Life Policy

in a traditional whole life policy, the net amount at risk if the face value minus the cash value - as the cash value increases over time, the net amount at risk decreases and this does not affect the face amount of the policy as that remains level - since the cash value equals the face amount at maturity, as the cash value grows, the amount of risk to the insurance company decreases

Underwriting Disability Income

in addition to occupation, other factors influence both underwriting and rates, including age and gender, and a person's prior health history. When a person is approved by underwriting, the final rate is determined by the amount of benefit purchased, the duration of the benefit period, and on the elimination period

Waiting Period (5 "full" months) under Social Security

in general, benefits start with the 6th full calendar month of disability and are not retroactive to the date of disablement. In no event are benefits retroactive prior to the date of application for disability determination. Accordingly, a person should apply for SSDI benefits as soon as possible following their disabling event. To be considered a "full" month of disability, the individual must be disabled prior to the first day of a month and remain disabled through the last day of a month (a person first disabled after midnight on the first day of a month will not being a full month of disability until the first day of the following month)

Determining Cost in Multi-State Groups

in multi-state groups, cost is also determined by the state in which the majority of the employees are located and the policyholders' principal office location - evidence of insurability is not required since an annual re-evaluation makes premium adjustments possible, based upon the group's claim experience - the group's age, gender, and size will also attribute to the cost

Accident Death Benefit Rider (Double or Triple Indemnity)

in the event of a claim, the policy normally pays double or triple the face amount if death was a result of an accident - the benefit is payable only if death occurs before a specific age and within 90 days of the accident - it does not add any additional values to the base policy - it may be added to any type of individual life policy - Among other exclusions, death due to sickness is excluded - it usually expires at age 65

Disability Income Benefit (Disability Riders)

in the event of total disability and after an initial waiting period (such as 6 months), premiums are waived and the insured is paid a monthly income - the monthly disability income benefit is typically limited to a percentage, usually 1% of the face value - the benefit paid from the rider does not reduce the death benefits paid out upon death

Coinsurance and Deductible Carryover (Change in Insurance Companies or Loss of Coverage)

in the event that a group health plan changes insurers in mid-year, employees must be fully credited with all expenses that have accumulated toward the annual deductible and/or out-of-pocket limit - this includes copayments for prescription medications in companion or stand-alone prescription drug plans

Waiver of Premium Rider (Disability Income Riders)

in the event total disability continues beyond a specified period, future premiums will be waived by the insurer for the duration of the disability

Variable Annuity

in this annuity the contract owner bears the investment risk and receives the return earned on invested assets, less any charges assessed by the insurer and investment managers - there is no guaranteed return - the premium paid during the accumulation period is invested in separate account; the underlying investment in the separate account is similar to a mutual fund

Entire Contract Clause (Mandatory Provision)

includes the policy and provisions, a copy of the application, and any riders, waivers or endorsements. Changes to the policy must be requested in writing, signed by the insurer, and attached to the contract in the form of an amendment. The agent does not have the authority to directly make changes to the policy or waive any policy provisions

Option A vs. Option B

individuals purchasing Option A will benefit from larger cash value accumulations while individuals purchasing Option B will benefit from greater death benefits

Substandard Risks (Higher Risk Exposure)

individuals who are not acceptable at standard rates because of poor health, bad habits, or occupational hazards - individuals in this category are issued "rated policies", known as surcharges

Standard Risks

individuals who have the same health, habits, sex/gender, and occupational characteristics as those reflected in the mortality table - individuals in this category have an average life expectancy

Preferred Risks

individuals who meet certain requirements and qualify for lower premiums because of ideal health, height and weight - individuals in this category have a longer than average life expectancy

Advertisement Requirement (Health Insurance)

insurance companies responsibility for the accuracy of their personal testimonial

Errors and Omissions

insurance covering the liability of a producer or agency, typically written w a deductible to reduce claims frequency. Claims are filed due to client reports (complaints) and for a number of reasons. The most common complaints are: - Inadequacy - Negligence

Preventive Services (Affordable Care Act)

insurance plan must include coverage for preventive health services such as: - well-child care from birth to the age of 19, including necessary immunizations - mammography screening - cervical cytology screening - prostate cancer screening

Legal Actions (Mandatory Provision)

insured must wait 60 days, but no later than 3 to 5 years (differs from state to state) after proof of loss, before legal action can be brought against the insurer

Attained Age

insured's age at any point in time, typically used at renewal or conversion

Small Employer Non-Renewability of Coverage (Small Employer Medical Expense Insurance)

insurer cannot cancel for frequency of claims

Cancellable

insurer or insured may cancel at any time (has lowest premium). This is the least favorable to the insured

Pre-Existing Conditions and Affordable Care Act

insurers are required to cover children under 19 with pre-existing conditions and are prevented from dropping policyholders if they get sick. All health plans are prohibited from discriminating against or charging higher rates to any individual on the basis of pre-existing conditions

HIPAA and HIV

insurers are required to maintain strict confidentiality of personal information obtained through testing and must have written consent of the applicant before testing for HIV. The HIV Consent Form explains the purpose of the test, confidentiality, and specifies how individuals may receive the test results - insurance companies may refuse to issue a policy to individuals based on positive HIV test results

Advertising Requirement

insurers may include statistical information as long as it is accurate and the source is named

Experience vs. Community Rating

insurers may use experience or community rating when determining cost.

Lifetime and Annual Limits (Affordable Care Act)

insurers offering group or individual health insurance coverage are prohibited from imposing lifetime or annual limits on the dollar value of health benefits

Interest

interest earnings are also used in calculating premium. - Insurance premiums are paid in advance and insurance companies invest these premiums and assume a certain rate of interest will be earned. - the earned interest reduces the amount of premium paid

Fraudulent Act

involves a misstatement of material fact by a person who knows or believes that statement to be false. The statement is made to another person who relies on its accuracy to make a decision or to act and is subsequently harmed by relying on the deliberately false statement.

Underwriting

involves analysis of the applicant to determine if he is acceptable for the proposed insurance. It also attempts to eliminate conditions with more frequent and higher claims than the insurer's rates anticipate

Credit Term Life Insurance

is a special form of decreasing term - unlike the standard decreasing term, it automatically names the creditor as the beneficiary - the policy cannot be written for more than the outstanding debt, since that is the limit of the creditor's insurable interest - once loan is paid out, the policy ends

Federally Regulated ERISA-covered Group Health Plan

is an employment-based plan that provides coverage for medical care, including hospitalization, sickness, prescription drugs, vision, or dental - these plans can provide benefits by using funds in a plan trust, the purchase of insurance, or by self-funding benefits from the employer's general assets

Juvenile Insurance (Specialized Policies)

is any policy written on the life of a minor - a common form is a "Jumping Juvenile" policy which provides an automatic increase in the face amount at a given age (usually age 21 to 25) without evidence of insurability - the premium remains level for the life of the policy, and the usual increase in the face amount is 5 times the issue amount

Admitted (Authorized) Insurer

is authorized by this State's Commissioner of Insurance to do business in this state and has received a Certificate of Authority to do business in this state

Group Insurance Contract

is between the group sponsor and the insurance company. - Group sponsor receives the Master Policy, and individuals receive a Certificate of Insurance and a Summary of Benefits - all employees have same coverage - group sponsor applies for coverage, provides information for underwriting, maintains the policy, and makes premium payments

Interest (Universal Whole Life Insurance Feature)

is credited to the cash value on a monthly basis at the current interest rate, but will never be less than the guaranteed minimum rate established at the time the policy was issued

Characteristics of Traditional Whole Life (Permanent Insurance)

is designed to provide coverage for an entire lifetime - it is permanent protection that matures (endows) at the insured's age 100 (or to age 121 if the policy is based on the 2001 Mortality Table) when the face amount equals the cash value - insurers assume that the insured will not live to age 100 - if the insured is still living at age 100, however, the insurer pays the face amount to the owner - unlike term insurance, a whole life policy cannot be convertible

Credit Life Insurance (Individual and Group) (Specialized Plans)

is either a form of individual coverage on the life of a debtor, or group insurance issued to a creditor providing coverage on debtors for the benefit of creditors - both types of plans are normally a form of Decreasing Term and the amount of insurance reduces as the amount of obligation reduces

General Account (Variable Whole Life Insurance)

is fixed and guaranteed and provides for guaranteed minimum death benefit to age 100. Policy loans are available from this account

Insuring Clause (Proof of Death)

is found on the first page of the policy and is considered the most important clause in the policy. It identifies the parties to the contract and the perils or conditions in which it will pay - it is the insurance company's promise to pay the policy's death benefit to the named beneficiary, are receiving proof of death of the insured, as long as the policy is in force

Separate Account (Variable Whole Life Insurance)

is invested in equity securities as offered by the insurance company - the owner may select which separate account they want the premium to be invested in - the cash value in this account will fluctuate based on market conditions and performance, which is similar to a mutual fund - the policyowner has an opportunity to achieve higher investment returns and may also act as a hedge against inflation - there is no guaranteed minimum return on the cash value in this account

Long-Term Disability Elimination Period

is most commonly 30, 60, 90, or 180 days. It may be possible to obtain a LTD w a 2-year period to be used in conjunction with a short term disability policy that pays benefits for 2 years

Declined

is not a ratings classification, but a decision that the risk is one for which the insurer refused to issue insurance - in this case the applicant is deemed uninsurable

Death Benefit Proceeds Taxation (Claims)

is not generally considered taxable income when paid as a lump death benefit to a named beneficiary. If a settlement option is used instead of a lump sum payment, any interest or earnings component of each payment would be considered taxable as ordinary income

Trial Application

is one submitted without a premium. The policy would not take effect until the policy is issued by the insurer, delivered by the agent and the premium is paid

Funding of Social Security System

is provided by both employee and employer through the Federal Insurance Contributions Act (FICA) tax. The employer withholds the employee's tax and pays it along with the employer's portion. Self-employed individuals pay an amount equal to the total of an employer and employee payment - it is based on one's taxable income and number of years in the workforce, each covered employee earns credits toward the eligibility of Social Security benefits - the credits are based on annual income and allow a worker to accumulate up to four credits, or quarters of coverage, per year - once eligible, the amount of monthly Social Security benefits is based on a basic formula which determines each worker's Primary Insurance Amount (PIA)

Beneficiary Designation

is selected at the time of application. a beneficiary can be change by endorsement to the policy, or by written request filed or recorded with the insurer - a change by endorsement requires the insurer to add an endorsement to the policy, naming the new beneficiary, and mailing it to the policyowner

Mortality Charge (Universal Whole Life Insurance Feature)

is the cost of pure insurance, and is deducted monthly - although it is deducted monthly, it is determined annually based on the mortality risk of each age group - the increase in the cost of the mortality charge is limited to a policy maximum - the insurance protection is considered annual renewable term

Issued Rated-Up

issue the coverage requested but at a higher rate. Higher premiums are required due to the greater potential for a larger number of claims (this may be referred to as a surcharge)

Conversion Privilege (Change in Insurance Companies or Loss of Coverage)

it allows an employee to convert the group coverage to an individual policy, without proof of insurability, upon termination of eligibility or termination of the group plan, providing the request is submitted to the insurer within 31 days after the qualifying event - not all insurers offer this privilege, but if offered the employee can convert the group plan into an individual plan. The premiums will be higher and the coverage will not be as comprehensive as the group plan

Accounts in VULs (Variable Universal Whole Life Insurance)

it does not have a general account, only a separate account, and there is no guaranteed minimum death benefit - all values in the policy will fluctuate based on the performance of the separate account - because there is no guaranteed return, the owner bears all investment risk

Individual Plan and Eligibility under HIPAA

it guarantees that individuals who meet the eligibility requirements will have access to and will be able to renew an individual health plan

Exclusive Provider Organizations (EPO)

it is a type of PPO that requires a subscriber to seek treatment from a network provider. Unlike an HMO, use of a primary care physician and referral to a specialist are not required and the provider is paid a negotiated fee-for-service

Notice of Claim (Mandatory Provision)

it is the insured's responsibility to notify the insurer of a claim. It must be given in writing and is required within 20 days of loss or as soon as reasonably possible. A notice to the agent is the same as notice to the insurer. If the insured is receiving continuing disability benefits, the insurer can require notice of continuance of claim every 6 months

Consequences of Incomplete Applications

it is the producer's responsibility to make certain the application is filled out completely, correctly, and to the best of the applicant's knowledge. The underwriter will most likely return an incomplete application to the producer for completion by the applicant. If a policy is issued based on an incomplete application, it is assumed the information is not material to the issuance and the insurer waives the right to challenge a claim based on the incomplete application

Short-Term Disability Elimination Period

it may be as short as zero days for accidents and 7 days for sickness but is rarely more than 15 or 30 days

Group Risk Selection

it may have several aspects, such as size, stability, and industry - underwriters are also concerned about stability. It is important to know how long the group has existed, how often the group switches providers, and what is the group's unifying characteristic. Individual turnover is less important - Unlike an individual plan, the departure of an individual does not mean the policy is cancelled. Instead, the sponsor may drop one employee and pick up another. Also, the sponsor is doing some of the administration

HIPAA (Health Insurance Portability and Accountability Act of 1996

it was designed to provide coverage for people with pre-existing conditions. The Act allows for portability fo coverage - prior to this legislation, an employee with pre-existing conditions might not have been able to obtain coverage when changing employers. - it provides protection for both individuals enrolling in group or individual plans

Intoxicants and Narcotics (Optional Uniform Provisions)

liability is denied if an injury is caused by the insured being intoxicated or under the influence of drugs unless administered on the advice of a physician

Illegal Occupation/Act (Optional Uniform Provisions)

liability is denied if the insured is injured while committing an illegal occupation/act. also, an illegal occupation will result in an application being declined for coverage

Estate Creation (Personal Life Insurance)

life insurance proceeds paid in a lump sum provide financial assets to create an immediate estate the insured can pass on the survivors

Presumptive Disability

loss is presumed to be total and permanent due to the loss of sight, hearing, speech, or the loss of 2 limbs. Benefits paid under this policy are usually paid in a lump sum. Lump sum payments are baed on the assumption the insured will not be able to return to work

Term Life Insurance

lowest of initial premium outlay and designed for someone w a large insurance need but w limited cash flow - is often referred to as temporary, as it is usually written to cover a short time period - the policy does not build cash values and the benefit will either remain level, increase, or decrease depending on the type of policy - is typically used to cover mortgages, short term obligations, or for younger couples with one more children

Lump Sum Structured Settlements (Annuity Personal Uses)

lump sum payments from lawsuits, lottery winnings, or an inheritance can be used to purchase a structured settlement in the form of an annuity - the annuity can then be used to provided guaranteed lifetime income to the annuitant

Cost Containment in Health Care Delivery

managed health care has been implemented to contain or reduce costs associated with health care delivery. Managed health care plans usually include cost-saving services

Additional Monthly Benefit (AMB) Rider (Disability Income Riders)

many insurance companies offer a short-term additional benefit in the form of a rider. The rider normally covers the first 6 to 12 months of a disability. Some insurers refer to the rider as a Social Security Rider as it pays benefits while the insured is awaiting Social Security Benefits. The rider is not related to Social Security and , therefore, this rider is used to define the benefit. The short-term benefit could supplement either a government or private benefit plan. Unlike the SIS, this rider does not consider the amount of a Social Security Benefit. It is strictly in addition to all other disability benefits

Blanket Payment

maximum dollar limit set, with no itemizing of costs, used for groups covered under a blanket policy for a specified period or event

Secondary Beneficiary

may also be named in case the primary beneficiary dies before the insured

Savings Incentive Match Plan for Employees (SIMPLE) (Characteristics of some Qualified Plans)

may be established as either a IRA or 401(k) plan. The employer's contribution must be immediately vested at 100% which means that the employee is entitled to all the employers' contributions immediately - only available to companies that have fewer than 100 employees and must be the only type of plan company has available for employees - an advantage is the elimination of high administrative costs

Issued with Exclusions/Limitations

may be temporary or permanent; limits the insurer's obligation to pay. The rider used to exclude coverage for existing conditions is sometimes referred to as an Impairment Rider

First-Dollar Plan (Basic Expense Policies)

means that there is no deductible which must be satisfied by an insured before a claim is payable by the insurance company

Prepaid

medical benefits are provided to a subscriber in exchange for predetermined monthly premiums paid in advance. They provide benefits based on a designated fee, regardless of any services provided

Maternity Benefits (Medical Expense Benefit)

medical plans will usually cover the "complications of pregnancy" as an illness, but normal birthing costs may be limited or excluded. These benefits typically provide 96 hours of inpatient care following a caesarean birth. Normal birth inpatient care is 48 hours. A shorter stay may be allowed if approved by the attending physician

Exemption under Affordable Care Act

members of a federally recognized Indian tribe

Exemption under Affordable Care Act

members of a religion opposed to acceptance of health care benefits

Adverse Selection (Employer Group Dental Expense)

minimizing adverse selection is a goal and concern of underwriting group dental plans. The policy may include a 1-year benefit reduction of up to 50%, or exclude certain benefits altogether for a specified period for those who enroll after the initial eligibility date. Frequent open enrollments would add more exposure to immediate claims and concerns of increasing adverse selection

Cash Value

money accumulated in a permanent whole life policy that is considered a living benefit which the policyowner may borrow against or receive if the policy is surrendered before the insured dies

Primary Care Physician (Gatekeeper)

monitors health care needs and helps to control costs by not recommending unnecessary services (including referrals to other physicians and specialists). Not utilizing the primary care physician will cause a claim to be denied. - they will determine if the covered person needs ongoing care from a specialist - also known as a Gatekeeper

Hearing (Medical Expense Insurance Optional Benefits)

most insurance plans do not cover the cost of hearing aids. Some insurance programs and supplemental programs do provide hearing and coverage. A few health insurance plans allow you, for an extra premium, to add additional hearing coverage

Federal Subsidies and Affordable Care Act

most legal residents will qualify for these to help them pay their insurance premiums or cost sharing obligations (co-insurance, deductibles, and co-payments) under a plan they purchase through a state or federal exchange if they meet the following criteria: - they do not have employer-sponsored coverage available to them - their household incomes are 133% to 400% of the federal poverty level (FPL) - (in states that have opted to expand Medicaid, the household incomes are between 138% and 400% of the FPL

Convicted Felon Applicants

must apply for Consent to Work (1033 Waiver) in the business of insurance--prior to applying for an insurance license

Change of Contract (Modifications)

must be in writing, signed by an executive office of the insurer, approved by the policyowner and made part of the entire contract - a producer cannot alter, change, modify or waive any policy provisions

Privacy Notices

must explain: - the information collected about the consumer - where that information is shared - how that information is used - how that information is protected - must also identify the consumer's right to pot out of the information being shared with unaffiliated parties pursuant to the provisions of the Fair Credit Reporting Act

Qualified Plans Taxation

must meet the requirements of ERISA (Employee Retirement Income Security Act). They receive favorable tax treatment - employer contributions are tax-deductible to the employer immediately, and are not taxable to the employee until withdrawn - Employee contributions are either pretax or tax-deductible - Distributions taken prior to age 59 1/2 are subject to taxation and a 10% penalty. The penalty may be waived for death, disability, qualified educational costs, medical expenses, first-time home buyers, and substantial equal payments over life expectancy - since most qualified plans defer taxes, taxable distributions must begin by April 1, 2020 and for people who turned age 70 1/2 before January 1, 2020. - Persons who turned (or will turn) age 70 1/2 on January 1, 2020 or later must begin taking distributions by April 1st of the year after the year they reach age 72 - there is a tax penalty if these withdrawals are not made

Prohibited Form of Advertising

no advertisement of a hospital or facility confinement benefit shall advertise that the amount of the benefit is payable on a weekly or monthly basis when, in fact, the amount of the benefit is based on a daily pro rata basis related to the total amount of days in confinement

Hazardous Hobbies or Avocation Exclusion

no coverage if death is related to a hazardous hobby as stated in the policy, such as sky diving or hot air ballooning

Hazardous Occupation Exclusion

no coverage if death is related to a hazardous occupation as stated in the policy, such as stunt drivers or auto racers

Results Clause Exclusion(War Clause)

no coverage if death is the result of war declared or undeclared. If death occurs during the period of war, only the premiums are refunded

Time Limit on Certain Defenses (Incontestable) (Mandatory Provisions)

no statement or misstatement (except fraudulent misstatements) made in the application at the time of issue shall be used to deny a claim after the policy has been in force for 2 years. - False statements on the application may exclude coverage for the first 2 years when material to the risk. In other words, if the insurer had the correct information at the time of application, they would not have issued the policy in the first place. The only exception to the time limit is for fraud; fraudulent statements can be used to deny coverage without limitation. - This provision also provides that a pre-existing condition cannot be excluded beyond the 2-year limit unless specifically excluded by name in the contract

Small Employer Non-Renewability of Coverage (Small Employer Medical Expense Insurance)

nonpayment of required premiums

Policy Summary

normally, a computer-generated illustration detailing: - Premiums to be paid and current interest rates - guaranteed and non-guaranteed cash value and project dividends, if any. Is not require to show time value of money - surrender values and other guaranteed data pertaining to the policy being shown - The producer's name and address, along with the address of the insurance company

HIPAA Eligibility Requirement

not have prior coverage terminated due to nonpayment

Emergency Services (Cost Containment Measure)

obtaining services in an emergency situation, which includes directives for the contact of an HMO before case is received, and what to do in case of life-threatening emergencies - Non-Emergency Hospital Pre-authorization Admissions - Out-of-Area Benefits and Services

Dental Insurance Exclusions

occupational injuries covered by Workers' Compensation

Constructive/Legal Policy Delivery

occurs only if the premium was paid at the time of application - once insurer issues the policy, a legal contract has been form - once the policy is mailed to the producer it is considered constructive or legally delivered - it still the producer's responsibility to obtain delivery signatures and explain policy benefits to the policyowner/insured

Subrogation

occurs when a claim is paid by the insurer who has the contract and the right to take legal action against a negligent third party who may have caused the loss. Life policies has no right of subrogation

Alternatives to Hospital Services (Cost Containment Measure)

oftentimes, care may be provided in a setting other than a hospital. Many procedures can now be performed in a surgical center on an outpatient basis as opposed to a hospital admission. Treatment may also be provided by a visiting nurse in one's home, or hospice for the terminally ill

Annuity Payments

once a contract is annuitized, the insurance company takes ownership of funds in the account. In return, the annuitant is entitled to a guaranteed income stream based on the terms of annuitization - depending on option chosen, the annuitant may be able to name a beneficiary to receive any remaining benefits available upon the annuitant's death - annuity income is based on annuity tables which are similar to mortality tables used for life insurance - other factors that determine the income include the accumulation period, interest rate return, age and gender of the annuitant, and the payment option selected

Determining Insurability when Underwriting Disability Policies

once all the underwriting information has been reviewed, the underwriter must determine if the risk is insurable or not. If uninsurable, the risk will be declined. If insurable, the risk may be standard or substandard, if substandard, the insurer may want to reduce the risk. This may be accomplished by a few things

Accident (Injury)

one of the following may be used: - Accidental Results - Accidental Means

Beneficiary

one or more "parties" named in the policy to receive the policy proceeds, or death benefits, if the insured dies while the contract is in force

Contract of Adhesion

one party (insurer) prepares the contract and presents it to the other party (applicant) on a "take-it-or-leave-it" basis, without negotiation. - any doubt or ambiguity in the document is construed in favor of the party that did not write it (insured)

Dental Insurance Exclusions

oral hygiene instruction or training

Limited Choice (Point of Service)

other plans may only provide benefits to a limited choice of providers who must be pre-approved by the insurer or service provider. These providers have typically agreed to reduce their fees

Supplemental Benefits of HMOs

other supplemental benefits such as medical equipment, dental care, vision, physical therapy, chiropractic services, and some pharmaceutical benefits are optional

Rehabilitation Benefits (Disability Income Riders)

paid while the insured is totally disabled and receiving benefits. If the insured elects to participate in some form of vocational rehabilitation approved by the insurer. Total disability benefits will be continued as long as the insured is actively participating in the training program and remains totally disabled

Factor for Needs Analysis

pay off a mortgage or other debt

Fixed Amount (Life Settlement Option)

payments are for a specified dollar amount paid monthly until the benefits, along w the interest, are exhausted - with this option, the interest will extend the time period in which the benefits are paid. Only the interest portion of the benefit is taxable

Fixed Period (Life Settlement Option)

payments are guaranteed for a specified period of time, such as 10 to 20 years after which time payments will cease - the proceeds and interest are used to make the payments - the interest will increase the amount of each payment, and the interest is taxable

Joint and Survivor Income Option

payments are guaranteed for the lifetime of 2 or more recipients - Upon death of the first recipient, payment continues to the survivors until death of the survivor - the survivors payment may be full (100%), 2/3, or 1/2 of the original payments - The payout option may be referred to as joint and Full Survivor, Joint and 2/3 Survivor, or Joint and 1/2 survivor, depending on which option is selected

Straight Life (Pure or Life Income Only)

payments are guaranteed for the lifetime of the recipient - upon death, payments will cease - the dollar amount of each payment will depend upon the age and gender of the recipient - this is an example of a single life option since payments will not be made to anyone other than the original recipient

Life Income Period Certain

payments are guaranteed for the lifetime of the recipient or a specified period of time, whichever is longer - if the recipient dies prior to the end of the period certain, the payments continue to another person until the end of the period certain

Joint Life Income Option

payments are guaranteed to 2 or more recipients until the first recipient dies, then all payments cease

Life Refund

payments are made for the lifetime of the recipient - Upon death, if a recipient has not received an amount equal to the total death benefit, the balance is refunded to the beneficiary either in a lump sum called Cash Refund, or in installments as in the Installment Refund

Buy-Sell Agreement or Disability Buyout (Disability Income Special Uses)

pays a lump sum, enabling a partnership or business to buy out the totally disabled principle's interest in the business. A cross-purchase plan requires each partner to purchase a separate disability policy on each of the other partners. An entity plan provides for the business to purchase a disability policy on each partner

Cash or Indemnity Payment (Hospital Income)

pays a specified daily amount up to the stated maximum number of days, or even lifetime. Benefits often double or triple while an insured is confined in an intensive care unit

Indemnity Contract

pays a specified dollar amount as stated in the contract up to the amount of the actual loss. These contracts are considered reimbursement plans

Hospital Income or Indemnity (Cash Payment) (Limited Policy)

pays directly to the insured a specified dollar amount per day during hospitalization. Payment is based solely on the number of days the insured is hospitalized. It pays the daily amount stated in the policy

Basic Hospital Expense (Basic Expense Policies)

pays for a hospital room and board (semi-private) with a daily limit of coverage. Miscellaneous hospital expenses may also be provided up to a specified limit per day for inpatient x-rays, lab work, operating room expense, medication, and cost of the anesthesia

Basic Medical Expense (Basic Insurance Policy)

pays for office visits, diagnostic x-rays, laboratory charges, ambulance, and nursing expenses when not hospitalized, Some plans include coverage for prescription drugs

Social Insurance Supplement (SIS) Rider (Disability Income Riders)

pays in addition to regular disability policies until Workers' Compensation or Social Security payments begin. It is also designed to provide benefits if Social Security is declined. If either benefit stops, the SIS will pay benefits. The SIS, which was developed by private insurers to reduce over insurance by matching Social Security as closely as possible, is normally written for a specified period of time

Paid-up Option (Dividend Option)

pays off the policy more quickly than scheduled. If the company's overall performance declines, premiums may have to be resumed

Basic Surgical Expense (Basic Expense Policies)

pays surgeon and anesthesiologist fees for the cost of a surgical procedure. These policies usually provide benefits based on a surgical schedule to specify benefit limits for each surgical procedure. If a surgery is not listed in the policy, the company will pay based on the coverage of a comparable surgery. Using a relative value scale is another approach that may be used to calculate benefits.

Option A Death Benefit (Universal Whole Life Insurance)

pays the face amount of the policy and provides a level death benefit - as cash value increases, the company's risk decreases - if cash value approaches the face amount, the death benefit must increase so as to provide for this amount of risk - the minimum separation between the cash value and the death benefit is called the "risk corridor" - this corridor of insurance is automatic and does not require insurability and prevents the policy from maturing too earl

Option B Death Benefit (Universal Whole Life Insurance)

pays the face amount stated in the contract which is level term, plus any cash values accumulated over the years - this provides for an increasing death benefit - the mortality charge for this option is greater than Option A

Accidental Death and Dismemberment

pays the principal sum (face amount) upon accidental death, loss of sight, or loss of 2 limbs. It pays the capital sum per policy schedule (up to 50% of face amount) for the loss of vision in 1 eye or loss of 1 limb. It may be a stand-alone policy or added as a rider to a Disability Income, Medical Expense, or a Life Insurance policy

Security (Personal Life Insurance)

peace of mind knowing that future insurability is not an issue, and benefits will be in place as long as the required premiums are paid

Contract Law

pertains to the formation and enforcement of contracts

HMOs

physician services include care provided by a primary care physician or primary care provider (PCP). It will require subscribers to seek treatment through a PCP before seeing a specialist - after it has been in operation for 24 months, it may nave an annual open enrollment period of at least 1 month during which it accepts enrollees up to the limits of its capacity - they provide payments to member hospitals on a predetermined basis. - Care outside of the network is covered but not limited to specific treatment. - Emergency care must be covered for necessary services at the nearest emergency room

Self-Employed Plans (HR-10 or KEOGH Plans)

plans available to unincorporated sole proprietors and their eligible employees - silent partners not eligible - contribution for eligible employees are mandatory and based on percentage of contribution made by employer for his or her own account - these contributions are deductible - Before a tax law change in 2001, these plans were a popular choice for high-income self-employed people. Today, they've been largely replaced by SEP IRAs, which have the same contribution limits but much less paperwork

Health Savings Account (HSAs)

plans that are available to any employer or individual for an account beneficiary (who the account was established for) who has high deductible health insurance. They are funded with pretax income, grow tax-deferred, and may be used tax-free to pay for unreimbursed qualified medical expenses. - non qualified withdrawals prior to age 65 are subject to 20% penalty tax. After 65, funds may be withdrawn and used for any purpose without a purpose, but if not used for health care expenses, it will be subject to ordinary income tax. - the penalty does not apply when taxpayer is 65 or older, or in the event of the account owner's death or disability - no income limitations imposed on establishing an HSA, but contributions may only be made in years in which the taxpayer purchases a High Deductible Health Plan

High Deductible Health Plans (HDHP)

plans that contain restrictions pertaining to the individual and family deductibles, as well as annual out-of-pocket limits. To qualify as this type of plan, the annual deductible must meet a minimum dollar amount, and the maximum out-of-pocket expense may not exceed the maximum dollar amount identified by the IRS. - other than preventive care, which must be made available with no cost-sharing, all covered health care expenses are an out-of-pocket expense until the annual deductible has been satisfied. - after that point, depending on plan design, an insured may have little or no out-of-pocket expense, or claims will be subject to coinsurance until the annual out-of-pocket limit is reached - they also limi the contributions an individual may make to an HSA, MSA, HRA, or FSA

Medical Expense Policies

policies covering sickness and accident that usually required that an illness must be diagnosed and treated while the policy is in force for coverage to apply. The terms of the policy determine the amount of benefits paid upon claim. They normally provide coverage with a benefit period of January 1 through December 31 of each year. These policies do not cover a loss of income while hospitalized

Major Medical Policies

policies that provide benefits for potentially catastrophic and/or prolonged injury or illness. These policies include a lifetime limit. The limit does not include out of pocket expenses the insured pays, including deductibles and coinsurance amounts. Hospice and Home Health Care are normally not covered. These policies are characterized by these provisions: - Deductible - Coinsurance - Stop-Loss Provision - Common Accident Deductible - Family Deductible - Carryover Provision

Conditionally Renewable

policy is renewable unless a termination notice is given by the insurer or is nonrenewable for specified conditions that must be stated in the policy when issued

Policy Loan Rate Provisions

policy loans with fixed rates can have a minimum fixed interest rate of 8% or less as stated in the policy - for policy loans w a variable interest rate, the maximum rate is based upon Moody's corporate bond yield average and is stated in the policy - the policy loan amount cannot exceed the available cash surrender value

Unearned Premium

portion of a premium for which policy protection has not yet been given

Earned Premium

portion of a premium for which protection has already been given

Assumptions and Calculations of Premiums

premiums are always paid in advance, are invested and earn interest for the insurer

Blue Cross and Blue Shield Associations (BCBS)

prepaid plans, with plan subscribers paying a set fee, usually monthly, for the services of doctors and hospitals at a predetermined price (negotiated fee) - Blue Cross is a hospital service plan with a contractual agreement with the hospital - Blue Shield is a physician plan with a contractual agreement with the physicians - In most states, the Blues are considered not-for-profit organizations and are regulated under special legislation. They are also given some special consideration by the IRS - The Blues have traditionally offered benefits in the form of services, not indemnity or reimbursement plans. They payments are made directly to the providers under a contractual agreement (fee for service)

Extended Term (Nonforfeiture Options)

present cash value is used to buy a single premium term policy of the same face amount for as long a period it will buy, expressed as a combination of years and days. - this option provides the largest death benefit and is sometimes referred to as the Automatic (or Default) option if no other option has been selected. - The insured no longer has rights to the cash value under this option, and the policy will expire prior to age 100

Reduced Paid-Up (Nonforfeiture Option)

present cash value is used to buy a single premium, permanent paid-up policy of a reduced face amount - this option provides the longest period of coverage provided by a nonforfeiture option - Coverage, although reduced in face value, will continue to age 100

Tier 1 Plans (Consumer-Driven Health Plans)

pretax account, such as a Health Savings Account (HSA), Archer Medical Saving Account (MSA), Health Reimbursement Account (HRA), and Flexible Spending Account (FSA)

Death Benefit Payments

principal payments made after an insured's death are not taxable as income. However, any interest received from a settlement option distribution is taxed as ordinary income. Benefits paid in a lump sum are income tax free

Advertisements

printed or published material, audiovisual material and descriptive literature, to include newspapers, magazines, radio scripts, television scripts, billboards, sales talks, presentations, and personal testimonials

Pre-Existing Conditions

prior medical conditions for which the applicant has received, or should have received, medical advice or treatment within a specified period before the effective date of a policy

Advertising

producers are governed under the rules and regulations (referred to as Unfair Trade Practices) with regard to what they can and cannot use or say when soliciting insurance

Sales Presentation

producers are required to provide all prospective buyers the following: - Buyer's Guide - Policy Summary and they must be provided no later than at the time the policy is delivered

Long-Term Care Expense

product designed to provide coverage for personal care services in a setting other than an acute care unit of a hospital, such as a nursing home or even one's own home

Fair Credit Reporting Act

protects consumer privacy and protects the public from overly intrusive information collection practices. It ensures data collected is confidential, accurate, relevant, and used for a proper and specific purpose. - when an application is taken, it must inform the applicant a credit report can be obtained to determine financial and moral status of an applicant - an applicant has the right to review the report

Factor for Needs Analysis

provide funds for children's education

Factor for Needs Analysis

provide lifetime income to the spouse

Graded Premium Whole Life Insurance

provides a level death benefit and requires that premiums be paid for the life of the policy - the premium starts off lower than traditional whole life and increases each year for the first 5-10 years and then remains level for the life of the policy - in the later years of the policy, the premium is greater than a Whole Life policy

Modified Premium Whole Life Insurance

provides a level death benefit and requires that premiums be paid for the life of the policy (to age 100) - the premiums do not remain level - the policy begins with a premium lower than ordinary whole life for the initial 5 years. After the first 5 years, the premium will increase and remain level throughout the balance of the life of the policy - this type of policy was designed for individuals who cannot afford the premiums of ordinary whole life in the earlier years - because the premium are lower in the first few years, the cash value will take longer to accumulate, and it does not offer immediate cash value

Interest Adjusted Method (Policy Cost Comparison Method)

provides an estimate of the average annual out-of-pocket net premium which is adjusted for the time value of money

Limited Accident (Limited Policy)

provides benefits for accidental injuries associated with specific events, such as traveling out of the country or on a common carrier

Residual Disability

provides benefits for loss of income after the insured returns to work usually following a total disability. Benefits are based on the reduction of earnings as a result of the disability

Nonfamily Rider

provides coverage on an additional insured, other than a spouse or child, such as a business partner - Insurable interest must exist at the time the rider is added

Ordinary Whole Life Insurance

provides insurance protection to age 100, cash accumulation to age 100, and fixed level premium payments. These premium payments can be structured as: - Straight Life or Continuous Premium - Limited Payment - Single Premium

Child Rider

provides level term coverage on the life of all the insured's children - this rider is usually offered at one premium rate and may cover newborns after 14 days of life and adopted children who can be added to the coverage without increasing the premium - the children have coverage to a specified age (21 to 25) and are usually given the option to convert to a permanent policy without evidence of insurability

estate conservation (Personal Life Insurance)

provides money to pay any estate taxes or loans which must be settled upon the death of the estate owner (the insured) preserving the insured's estate

Critical Illness (Dread Disease or Limited Sickness Plans) (Limited Policy)

provides specific benefits for a specified sickness, such as Cancer Plans and Heart Disease Plans

Common Disaster Clause

provides that if an insured and primary beneficiary are in the same accident, the primary beneficiary must survive the insured by a specific number of days (usually 90) or the insurance company will assume the insured dies last - the provision is designed to pay the benefits to either the contingent beneficiary or the insured/policyowner's estate if no contingent beneficiary has been designated

Coordination of Benefits Provision

provides that if more than one plan covers a loss, the plans will coordinate so the insured does not get paid more than the entire loss. For example, if a disability occurs on the job, Workers' Compensation will be the primary payor and will coordinate benefits with Social Security Disability and any other private disability insurance

Accident Death and Dismemberment (Limited Policy)

provides that the face amount, or principal sum, will be paid if the insured dies due to an accident within 90 days from the date of the accident. The principal sum will also pay if an insured loses total eyesight (both eyes) or the loss of any two limbs, double dismemberment, due to an accident. The capital sum, typically 50% of the principal sum, may be paid for the loss of one limb, single dismemberment, or sight in one eye due to and within 90 days of the accident

Business Overhead Expense (Disability Income Special Uses)

provides the funds to cover the overhead expenses of a business when the owner becomes disabled. The benefits include expenses such as office rent, utilities, and employee labor. However, the owner cannot collect for loss of income under this policy

Survivor Protection (Personal Life Insurance)

providing funds for surviving spouses and dependents

1-Year Term (Dividend Option)

purchases a single premium, 1-year term benefit - premiums are calculated at the insured's attained age; also referred to as the fifth dividend option

Way to Obtain Minimum Essential Coverage (Affordable Care Act)

purchasing insurance directly from an insurer in the individual market

Way to Obtain Minimum Essential Coverage (Affordable Care Act)

purchasing insurance offered by an employer

Way to Obtain Minimum Essential Coverage (Affordable Care Act)

purchasing insurance through a state exchange

Dental Insurance Exclusions

purely cosmetic services (unless necessitated by an accident)

Tax-Sheltered Annuities (TSAs)

qualified annuity plans benefiting employees of public schools under the Internal Revenue Cod (IRC) Section 403(b), as well as other nonprofit organizations qualified under Section 501(c)(3) - employees of nonprofits may have arrangement with the employer whereby the employer agrees with each participating to reduce employee's pay by a specified amount and invest it in a retirement fund or contract for the employee - employees do not make direct contributions to the plan - these accounts are owned by the employee and are nonforfeitable and will be paid upon death, retirement, or termination of the employee - contributions are pre-tax and interest earned grows tax deferred

Negligence (Errors and Omissions)

quoting inflated information or misrepresenting a plan of coverage neglecting the effect the information might have on the client as a later date. The producer may be guilty of this whether the mistakes are intentional or unintentional

Negligence (Errors and Omissions)

quoting inflated information, misrepresenting a plan of coverage, or neglecting to reveal the effect information might have on the client at a later date. The producer may be guilty of negligence whether the mistakes are intentional or unintentional

Rated-Up Age

rates an insured at older than actual age

Contingent or Secondary Beneficiary

receives the death benefit only if there is no primary beneficiary alive following the death of the insured.

Mode of Premium Payment

refer to the frequency in which a premium may be made. Premiums can be paid: - Monthly - quarterly - semi-annually - annually The more frequent the premium is paid, the higher the premium due to the company's administration costs and loss of investment income

Disability Income Insurance

referred to as "the forgotten need". Many workers think they have coverage through Workers' Compensation insurance without realizing it does not provide coverage for disabilities which occur outside of work. Social Security does provide disability benefits, but qualifying for Social Security Disability Income is less likely due to the restrictive requirements needed to qualify. Having a disability that leaves an insured unable to work not only eliminates income. but also increases expenses due to cost of medical care, rehabilitation, and possibly assistance in the home. Because of the extra expense, the financial impact of a disability may be greater than that of premature death. To protect against these losses, an individual may choose to purchase a disability income policy

Dishonesty (Violent Crime Control and Law Enforcement Act of 1994)

refers to misrepresentation, untruthfulness, falsification

domicile

refers to the jurisdiction where an insurer is formed or incorporated

Persistency (Plan Design Factor)

refers to the renewal quality of a plan and preventing it from lapsing due to nonpayment or being replaced. Insurance companies striver for a high percentage of this. - it is an important underwriting factor

Admitted vs. Non-Admitted

refers to whether or not an insurer is approved or authorized to write business in this state - the domicile does not impact whether an insurer may be admitted to do business in this state

Health Maintenance Organizations (HMOs)

regarded as a managed health care system providing a comprehensive array of medical services on a prepaid basis, which means little or no out-of-pocket expenses. Members enrolled are called subscribers, as opposed to insureds. All subscribers must live within a specific geographic region called the service area. The HMO has a contract with medical providers within the service area and subscribers must seek treatment from a contracted provider. Typically, the HMO provider is paid a set fee, known as a capitation fee, per enrollee. Coverage will not be provided outside the service area, except in cases of an emergency

Optionally Renewable

renewable only at the option of insurer (on renewal or anniversary date)

Guaranteed Renewable

renewable without proof of insurability, at insured's option, to age 65 or for the insured's lifetime. Premiums are not guaranteed, and may be changed on a class basis only, not an individual basis

Gramm-Leach-Bliley Act (The Financial Services Modernization Act of 1999)

repealed parts of the Glass-Steagall Act of 1933 to allow the merger of banks, securities companies, and insurance companies. It also established the Financial Privacy Rules and Safeguards Rule for the protection of consumers' privacy

Dental Insurance Exclusions

replacement of prosthetic devices

Disallowed Information (FCRA)

report must not include lawsuits over 7 years old or bankruptcies more than 10 years old

MIB Coded Reports

represent general medical information and other conditions (typically hazardous hobbies and adverse driving records) affecting the insurability of the applicant. If the coded reports are inconsistent with the information provided by the applicant, underwriters are required to conduct a further investigation to obtain more information about the reported medical histories or conditions prior to making an underwriting decision. Because the MIB information is general, the report cannot solely be used to decline an applicant for insurance.

MIB Coded Reports

represent general medical information and other conditions affecting the insurability of the applicant. - if the reports are inconsistent w the information provide by the applicant, underwriters are required to conduct a further investigation to obtain more information about the reported medical histories or conditions prior to making an underwriting decision - because the information is general, it cannot solely be used to decline an applicant for insurance

Dividends

represent the favorable experience of the insurer and result from excess investment earnings, favorable mortality and expense savings

Financial Privacy Rule

requires "financial institutions," which include insurers, to provide each consumer with a privacy notice at the time the consumer relationship is established and annually thereafter. In insurance, the consumer relationship is created when the policy is issued to the client. Application information remains confidential and cannot be used for other purposes without prior notice to the consumer.

Prime (TRICARE)

requires a premium, but has no out-of-pocket expenses for tests, operations, etc. as long as a primary care manager or a TRICARE approved referral is used. There is a $12 co-pay for office visits and an $11 per day charge for hospitalization

Accidental Means

requires both the injury and the cause of the injury to be unintended and unforeseen; considered more restrictive. - this definition is not allowed in some states

Standard (TRICARE)

requires no premiums on the member's part but does require a $12 co-pay for office visits and a 25% co-pay for procedures

Accidental Results

requires only that the injury be unintended and unforeseen

Precertification (Cost Containment Measure)

requires the insured to notify his insurer in advance of certain procedures (not emergency). The physician may submit claim information prior to treatment to know in advance if the procedure is covered and at what rate benefits will be paid

Diagnostic/Preventive (Dental Care)

routine diagnostic and preventive care services includes routine checkups, x-rays and cleaning

TRICARE for Life

serves as a second insurer for those on Medicare, Parts A and B. Medicare will be the primary payor and TFL will be secondary. There are no enrollment fees but the member must pay his own Medicare Part B premiums

Endodontics

services covering dental pulp care and root canals

Orthodontics

services for teeth alignment and other irregularities of the teeth

Periodontics

services for the treatment of gum problems and disease

Dental Insurance Exclusions

services furnished by or on behalf of government agencies

Prosthodontics

services provide bridgework and dentures

Restorative Care

services to restore the functional use of natural teeth

Simplified Employee Pensions (SEPs)

set up by any private sector company that does not offer another type of qualified plan. - very popular with self-employed individuals - uses employer funded IRA's - employer makes contributions and deducts the payments as a business expense - all distribution to employees are taxable upon receipt

Surrender Charge Schedule

shows what percent of the cash value is subject to a surrender charge - it typically shows the percentage charge, reducing on an annual basis

Medical Savings Account (MSAs)

similar to HSAs, however they have different contribution limits, minimum annual deductibles, and maximum out-of-pocket limits. They were designed specifically for small businesses and self-employed individuals who cannot establish HRAs or FSAs

Tax-Deferred Growth (Deferred Annuity Characteristics)

since an annuity is an insurance contract, the accumulation value grows tax deferred - deferred annuities allow for the naming of a beneficiary to receive any policy values if the annuitant dies prior to annuitizing - withdrawals prior to age 59 1/2 are subject to income tax and generally receive a 10% tax penalty as well - systemic withdrawals are allowed as a way to access the policies values without having to elect a settlement option

Medical Expense Coverage for Sole Proprietors and Partners

sole proprietors and business partners qualify for a deduction that lets them write off the entire amount of insurance premiums without worrying about an adjusted gross income threshold. This also includes medical insurance premiums for spouse, dependents, and any children who are under age 27. Benefits are not taxable

Annual Renewable Term (Disability Income Riders)

some companies will allow an insured to add a life insurance rider to a disability income policy in the form of annual renewable term. This provides additional death benefits if the insured dies due to a disability

Any Occupation (Total Disability)

some policies are stricter and require the insured to be unable to perform the duties of any occupation for which he is reasonably suited by education, training, and experience - it is more restrictive and harder to qualify for benefits - it may be required that the insured be under the care of a physician, regardless of the definition used in the policy

Own Occupation (Total Disability)

some policies require the insured's inability to perform the main duties of his occupation - this definition often applies for the first 2 years of a disability, then changes to any occupation - this definition is the least restrictive and is easier to qualify for benefits - it is typically reserved for more skilled occupations and may result in a higher premium

Probationary Period

specified period of time after the effective date and before new coverage goes into effect for specified conditions, such as losses due to sickness or pre-existing conditions

Consideration Clause

specifies the amount and frequency of premium paid by the owner as something of value provided in exchange for the company's promise to pay (insuring clause)

Warranties

statements in the application or stipulations in the policy that are guaranteed true in all respects - if warranties are later discovered untrue or breached, coverage is voided

representations

statements that are believed to be the true to best of the knowledge and belief of the applicant/insured at time of application

Material Representations

statements that impact the acceptance of an insurable risk--whether involving the rating of an acceptable risk, or the decision as to whether to accept or decline a risk

Factor for Needs Analysis

subtract any assets available to fund financial needs after death

Individual Annuities Taxation

tax-qualified annuities are generally funded w pre-tax dollars. They're also fully taxable at ordinary income rates when money is withdrawn because the premiums paid and subsequent premiums do not establish a cost-basis. Non-qualified annuities are generally funded with after-tax dollars - if the policy is cashed out for a lump-sum, then any amount received in excess of the cost basis is taxable as ordinary income - If the policy is annuitized then the original investment is returned in equal tax-free installments over the payment period - these payments are not taxed since they are simply a return of principal while the balance of monies received in annuity payments is the taxable gain or earnings - this is taxed at ordinary income rates even if the gains come from the investment separate accounts found within a variable annuity

Re-Entry Term Option

term policies with this option will allow the insured, upon the end of the original term, to renew based on attained age and may qualify at a discounted rate by providing evidence of insurability - typically w an annually renewable term policy the term automatically renews as long as the premiums are paid - it will allow the insured to renew at a lower rate than renewable term as long as the insured meets the qualifications of insurability

Advertisement Requirement (Health Insurance)

that the public must be aware of any control the insurer may have over a group, if that group endorses a certain health product

Group Model (HMOs)

the HMO contracts with an independent medical group to provide a variety of medical services to subscribers - Under the agreement, the HMO pays a capitation fee to the medical group entity directly - The medical group will then pay the individual physicians who remain independent of the HMO

Federal Level Regulation

the McCarran-Ferguson Act of 1945 established that the federal government will not regulate the business of insurance in areas where the state has historically had the authority to do so unless the state fails to cooperate - congress created federal agencies to provide regulatory oversight impacting insurance practices

Labor Unions (Eligible Health Groups)

the Taft-Hartley Act was an amendment to the National Labor Relations Act. Among the provisions of the act, labor unions were permitted, under certain conditions, to establish primarily employer-funded trusts for the provision of health and welfare benefits to union members

Insurability

the ability of an applicant to meet an insurer's underwriting requirements

Conservation

the act of saving or keeping the existing policy and preventing it from being replaced

Advertising Requirement

the agent must include the full name of the insurer when advertising a certain type of policy

Expenses (Health Insurance)

the amount charged to cover each policy's share of expenses of operation (salaries, commission, and cost of doing business) is called expense loading. This can vary from company to company based on its operations and efficiency

Expense

the amount charged to cover each policy's share of expenses of operation is called expense load - this can vary from company to company based on its operations and efficiency

Cost Basis (Cash Value Policy)

the amount of premiums paid into the policy less any dividends or withdrawals previously taken

Tier 2 Plans (Consumer-Driven Health Plans)

the amount the individual chooses to pay, out-of-pocket, after the funds in the pretax account have been exhausted and before the health insurance plan's deductible is met

Lump Sum (Annuity Period)

the annuitant has the option of cashing out the annuity in a lump sum instead of electing to receive a stream of income - there could be tax consequences and tax penalties depending upon when this occurs

The Annuity Period (Pay-Out/Liquidation)

the annuitization period begins once the policyowner elects to convert a deferred annuity into an income benefit payment - the settlement option selected can provide a temporary or lifetime payment - if a lifetime benefit is selected, in most cases it is an irrevocable election - the cash value goes towards paying for the income benefit

Total Disability (Workers' Compensation)

the benefit amount is subject to maximum and minimum weekly limits

Workers' Compensation (Coordination of Benefits)

the benefits are primary to either individual or group disability income benefits,. The individual or group benefit will be reduced dollar-for-dollar by the amount of Workers' Compensation benefits paid, so that the total disability income benefit payable from all sources combined will not exceed the amount that would be payable by the individual or group disability policy on its own

Children in Family Protection Plan

the children are covered by a single level term insurance rider with one premium covering all of the children under age 18 who meet underwriting guidelines - newborn or adopted children will automatically be covered once they are 15 days old without an additional premium as long as the insurer is notified in writing - the children's coverage is also convertible to a whole life policy at a specified age (up to age 25) without proof of insurability

COBRA Continuation of Coverage (Consolidated Omnibus Budget Reconciliation Act of 1985)

the continuation coverage if the insured carried dependent coverage on the group, dependent coverage must be made available on the continuation policy

COBRA Continuation of Coverage (Consolidated Omnibus Budget Reconciliation Act of 1985)

the continuation of coverage requires no evidence of insurability and provides the same benefits as the group policy

COBRA Continuation of Coverage (Consolidated Omnibus Budget Reconciliation Act of 1985)

the continue coverage covers pre-existing conditions if covered under the group policy

Group Insurance Cost

the cost of the plan is determined by the average age of the group, size, industrial classification (nature of the work involved), experience rating (the group's claims), and the personnel turnover history - these factors are more important than the actual overall health of the group

Coinsurance

the cost sharing between the insurer and the insured stated as a percentage of the claim amount, payable after the deductible has been met

Acceptance (Approval) Conditional Receipt

the coverage becomes effective application approval. If the company doesn't approve the application, coverage was never in effect

Issued as a Standard Risk

the coverage requested at the rate that was quoted. Some health insurance may only be issued with standard rates. Premium rate-up would still be permitted for tobacco users

Effective Date

the date when insurance coverage begins

Expiration Date

the date when insurance coverage ends

Face Amount

the death benefit amount payable or coverage provided on a life insurance policy. This is also referred to as the limit of liability

Decreasing Term Insurance

the death benefit decreases, but premiums remain level for the policy term - they are often sold as mortgage protection w the amount of insurance decreasing as the balance of mortgage decreases - if insured dies, the proceeds of the policy can be used to pay off the mortgage - the premiums paid are lower than the premiums payable for level term since the benefit decreases throughout the term of the policy

Increasing Term Insurance

the death benefit increases over the life of the policy while the premiums remain level - is usually written as a rider to provide cost of living return of premium benefits

Death Benefits and Separate Accounts (Variable Whole Life Insurance)

the death benefit is tied to the separate account and also varies along with the performance of the separate account - death benefits are recalculated annually - while the account value may decrease, the policy will never pay less than the guaranteed death benefit in the general account - since there is no guaranteed return on this account, the owner bears all investment risk

Interest Only (Life Settlement Option)

the death benefit proceeds may be left with the insurer while interest payments are paid at least annually or more frequently - the principal amount does not decrease, and the interest generated is taxed as ordinary income when paid to the beneficiary - this method of providing incomes is known as capital conservation - the principal is left with the insurer at interest, conserving the capital - when this option is selected, the owner or beneficiary must direct the insurer as to when the principal will be paid as a benefit

Level Term Insurance

the death benefit remains level and the premiums remain level during the policy term

Surrender Charge

the difference between the cash value and the cash surrender value - this provides a means for the insurer to recapture the upfront expenses involved in issuing the policy

Accumulate at Interest (Dividend Option)

the dividends are retained by the insurer and the interest rate paid the policyowner is compounded annually

Annuitization (Annuity Period)

the election to receive payments from the annuity for life, or for a specified period depending on the settlement option selected

If the Plan is Incorporated as a Profit Sharing Plan (Profit-Sharing and 401-k Plans)

the employer defines the circumstances under which profit-based contributions will be made, and contributions must generally be made in at least 3 out of 5 consecutive years

HIPAA Exemption from Renewability

the employer is no longer a member of the association that sponsors a plan

Single Premium (Ordinary Whole Life Payment)

the entire premium is paid in a lump sum at the time of purchase and creates immediate cash value - the face amount remains level and cash value continues to earn interest and mature at age 100 - this policy has the lowest total premium outlay for the life of the policy

Estate (Beneficiary Designations)

the estate may be the tertiary beneficiary in case the insured outlives all other beneficiaries - by default, if the insured outlives all other beneficiaries, benefits are paid to the insured's estate - the death benefit increases the estate value and may have tax implications

HIPAA Exemption from Renewability

the failure of the plan sponsor to comply with a material provision, such as maintaining a minimum required percentage of participation

HIPAA Exemption from Renewability

the failure of the plan sponsor to pay premiums timely

Primary Beneficiary

the first in line to receive a benefit

Retirement Income (Annuity Personal Uses)

the funds accumulated inside an annuity can be used to fund all or part of a consumer's retirement income. The accumulated funds can be used to purchase a settlement option which can provide for a lifetime income stream or an income stream that can end prior to the annuitant's death - the income received will be tax-free as far as the portion of the payments is counted as a return of premium while the balance would be taxable as ordinary income - if premiums were deductible, then the entire income received would be subject to tax - Guaranteed Minimum Withdrawal Benefit (GMWB)

Underwriter's Greatest Concern (Group Health Insurance)

the greatest concern is adverse selection

Individual Life Insurance

the greatest difference between this and group life insurance is the full latitude of ownership - unlike group policies, individual policies may be of any classification or type of insurance - they may also build or preserve an estate or provide a living benefit for the terminally ill - they leave the decision of keeping the policy to the policyowner

Essential Health Benefits Package (Affordable Care Act)

the health insurance benefits of this package must provide at least the following: - ambulatory patient services - behavioral health treatment - emergency services - hospitalization - laboratory services - maternity (including prenatal and delivery care) - mental health services - newborn care - pediatric services, including dental and vision care - prescription drugs - preventive, wellness, and chronic disease management - rehabilitative and habilitation services and devices - substance use disorder services

Advertising Requirement

the history of a very high or unique claim settlement cannot be used in advertising by the agent or insurance company

Annuitant Beneficiary

the individual or the person named in the contract to potentially receive benefits if the owner and/or annuitant die prior to annuitization or if the settlement option selected offers any residual benefit after the annuitant's death - as with life insurance, annuities may have beneficiaries named and designated by the owner prior to the annuitization or guaranteed payment period. The beneficiary may be named at receipt of the first purchase payment and may only be changed by the owner - During accumulation period, if contract owner and annuitant are the same person and the designated beneficiary is the annuitant's spouse, the IRS code allows the spouse to assume ownership of the annuity option upon death of the annuitant - all rights of ownership are assumed to include tax deferment

Annuity Owner

the individual who controls the contract and is responsible for making payments into the contract as well as having all of the contractual rights in the policy

Policyowner

the individual who has ownership rights in a policy. Any changes made to a policy must be approved by this person in writing with his/her signature

Annuitant

the individual whose life the contract is base upon. Upon a lifetime annuitization, payments will be made to this person based on their age, gender, settlement option selected, and dollar amount used to fund the income benefit payments

Deductible

the initial amount payable by the insured before insurance benefits apply

Notice of Information Practices and Disclosure (FCRA)

the insurance company must meet requirements under the FCRA when gathering info from a 3rd-party to use during underwriting - the applicant must be notified and give consent for information to received by the third party - this info is disclosed as part of the application - the signature on the application by the applicant serves as the notice of information practices and gives the insurance company the right to obtain various investigative, medical, and financial reports to complete the underwriting process - if insurer declines coverage, the applicant will have the right to obtain a copy of all reports from the reporting agency, this is referred to as post application consumer review

Notice of Information Practices and Disclosure - Fair Credit Reporting Act (FCRA)

the insurance company must meet requirements under the FCRA when gathering information from a third party to use during underwriting. The applicant must be notified and give consent for information to be received by a third party. This information is disclosed as part of the application. The signature on the application by the applicant serves as the notice of information practices. This gives the insurance company the right to obtain various investigative, medical, and financial reports to complete the underwriting process

Indemnity (Reimbursement) Plan

the insured can choose any doctor or hospital without referrals or a primary care physician. The plan requires the insured to pay up front for services, and then submit a claim for reimbursement. The insurer will pay benefits directly to the insured as specified in the policy up to the amount of expenses incurred. These plans are generally marketed through commercial insurers

Adjustable Face Amount (Universal Whole Life Insurance Feature)

the insured can increase or decrease the face amount of the policy. An increase in the face amount will require evidence of insurability

Underwriting Disability Income

the insured's occupation is the single most important rating factor because a worker in America is more likely to suffer a disability than die prior to age 65 - insurance companies writing disability income generally have an occupational classification system based on considerations, such as job duties, claims history of the occupation, and stability of the industry. - concept of morbidity is used to determine the frequency of illness and injury that occur within a group of individuals over a stated period of time - this is used to help predict losses that lead to disability claims

Plan Design Factors

the insurer can require a minimum percentage of the group to enroll in the plan to guard against adverse selection. -- Contributory Plans -- Noncontributory Plans - Persistency - Administrative Capability

Cancellation (Optional Uniform Provisions)

the insurer may cancel with written notice to the insured. Unearned premium is refunded on a pro rata basis if cancelled by the insurer. - The insured may cancel after the initial policy term with written notice to the insurer at any time. The unearned premium is returned on the short rate basis, which includes a cancellation fee

Replacing Insurer

the insurer responsible for issuing the new policy

Individual Selection Criteria

the insurer uses all of the information collected by the field underwriter and other sources, to determine the acceptability of an individual. It is ultimately the home office underwriter's responsibility to determine if this individual meets all the underwriting requirements set forth by the insurer

Individual Selection Criteria

the insurer uses information collected by the field underwriter and other sources to determine the insurability of an individual - is ultimately the home office underwriter's responsibility to determine if an individual meets the underwriting requirements of the insurer

Existing Insurer

the insurer who issued the policy to be replaced

Waiver of Premium Provision

the insurer will waive the premiums if an insured becomes disabled and qualifies for the benefit. In order to qualify for the benefits, the insured must be disabled for a specified time period, typically 90 days - 6 months. During the waiting period, premiums must continue to be paid - once the qualifications have been met, the premiums are waived retroactively to the start of the disability and the insured receives a refund of any premium paid during the waiting period. Premiums continue to be waived until the insured has recovered from the disability, at which time the premiums are resumed at the same amount and frequency

Excess Interest Provision (Provisions Specific to Cash Value Policies)

the interest earned on the cash value above the minimum guaranteed rate - this interest is added to the cash value and may be applied to pay future premiums payments

Interest Rate and Variable Annuity

the investment return varies according to the separate account selected based on the assumed interest rate (AIR) - if the actual return is lower than the AIR, the monthly annuity payment will be reduced - if the actual return is equal to the AIR, the monthly annuity payment will remain the same as the previous month - If the actual return is greater than the AIR, the monthly annuity payment will increase from the previous month

HIPAA Exemption from Renewability

the issuer of coverage ceases to offer coverage in a particular market

Key Employee Insurance

the life insurance proceeds provide the necessary funds to recruit, hire, and train a replacement employee, restore lost profits, and reassure customers that the business operations will continue - either term or permanent coverage can be used to fund the plan

Metal Plans

the main difference between the plans is the percentage the plan pays of the average overall cost of providing essential health benefits to members. The plan category chosen affects the total amount an individual will spend for essential health benefits during the year

Lifetime Limit

the maximum a policy will pay for covered losses during the lifetime of an insured

Per-Cause

the maximum a policy will pay for covered losses per claim

Annual Limit

the maximum a policy will pay for covered losses per year

Risk Corridor (Universal Whole Life Insurance)

the minimum separation between the cash value and the death benefit - it is automatic and does not require insurability - it prevents the policy from maturing too early

IRA Transfer

the movement of funds between the same type of plan, such as two IRA accounts. The money is transferred directly from one financial institution to another. In many cases, IRA assets can be transferred directly into a new account. Transfers are not taxable and can take place as often as desired

Policy Reserves

the net premiums paid plus interest earned; reflect possible contract obligations - a reserve is an amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. A reserve is usually treated as a liability

Absolute Assignment

the original owner, the assignor, will name a few owner, the assignee of the policy. Since a new owner is named, this is considered a permanent assignment. The full amount of the policy is assigned, and this is referred to as a transfer of ownership

Surrenders

the owner of a cash value policy may surrender the entire policy. This will cancel insurance coverage - the policyowner is entitled to receive the cash surrender value in the policy - Universal Life and Variable Universal Life policies may have a surrender charge schedule which might last 10-20 years

Insurer

the party who indemnifies for losses

Accelerated Death Benefits Taxation

the payment of an accelerated death benefit is tax free to a recipient if the benefit payment is qualified. To be a qualified benefit, it must meet the following conditions: - a physician must give a prognosis of 24 months or less life expectancy for the named insured - the amount of the benefit must at least be equal to the present value of the reduced death benefit remaining after payment of the accelerated death benefit - the insurer provides a monthly report for the insured showing the amount paid and the amount of benefit remaining in the life insurance policy

Grace Period (Mandatory Provision)

the period of time after the premium due date before the policy lapses for nonpayment of premium. The period varies based on frequency or mode of premium. The period must not be less than 7 days for weekly premiums, 10 days for monthly premiums, and 31 days for all other modes of premium

Accumulation (Pay-In) Period

the period of time from the first deposit to the selection of a settlement option, and taxes during this period are deferred - they are only found within deferred annuities, not immediate annuities

policyowner

the person applying for insurance coverage and is responsible for completing the application

Insured

the person being covered for a loss under the policy. It may or may not be the owner of the policy. Typically, the benefits are paid to this person in a health insurance contract

Birthday Rule (Coordination of Benefits)

the plan covering the parent whose birthday occurs first in the calendar year will be the children's primary coverage - is applied when a child is covered by more than one group plan

Service Plan

the plan pays benefits directly to the providers of health care rather than as a reimbursement to the subscriber. Plan participants are called subscribers and pay a premium or subscription fee. Service plan providers include Blue Cross and Blue Shield, Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Point of Service Plans (POS). The plans can be prepaid or have a contractual agreement with a healthcare provider to accept a negotiated fee for services

HIPAA Exemption from Renewability

the plan sponsor committed an act of fraud or intentional misrepresentation of a material fact regarding the terms of the plan

TRICARE Plans

the plans are standard, prime, and TRICARE For Life. As long as the person is on active duty, Prime coverage is mandatory with no out-of-pocket expenses for treatment at a military medical facility. Dependent coverage is not mandatory, but most active duty personnel select Prime coverage for their dependents

Endow (Mature)

the point at which the policy's cash value in a whole life policy accumulates to equal the face amount and the proceeds are paid to the policyowner

Occupational Policy

the policy covers a disability due to injury and sickness which occurs either on or off the job

Nonoccupational Policy

the policy covers a disability due to injury or sickness which occurs off the job only

Fixed Life Insurance

the policy has a fixed amount of coverage, benefits and premium. Without riders, future inflationary trends will cause the purchasing power of the policy's benefits to be reduced

Rejection

the policy is not issued and will be declined since the application is considered an excessive risk

Period of Time (Nonrenewable)

the policy is written for a specified period of time and cannot be renewed

Exemption from Creditor Claims/Probate (Personal Life Insurance)

the policy's value are normally exempt from any creditor claims, unless the policy was assigned as collateral for a loan that still exists at the time of the insured's death

Revocable beneficiary

the policyowner may change this beneficiary at any time. They do not have a vested interest in the policy. - Most beneficiaries are this type and have no rights

Regulatory Jurisdiction/Place of Delivery

the policyowner may have a choice of place of delivery if the above locations differ, most insurers are hesitant to issue a group contract in any state unless a corporate official who can accept the contract is located in that state and the primary duties related to the administration of the contract are carried out in that state

Irrevocable beneficiary

the policyowner may not change an irrevocable beneficiary unless the beneficiary dies or provides written consent for the change - if one is named, the owner may not make changes to the policy without consent of the beneficiary - these changes include assigning the policy, canceling or surrendering the policy, or taking a policy loan - they have a vested interest in the policy benefits - a divorced spouse has a vested interest in the policy is an example

Beneficiary

the policyowner may select this person who will receive benefits under the contract if a loss occurs - if the policy provides a death benefit and the insured dies before the benefits are paid out, the named beneficiary will receive payment from the claim

Policy Loan or Partial Withdrawal in VULs (Variable Universal Whole Life Insurance)

the policyowner may take a policy loan or partial withdrawal from the cash value without terminating the contract

Owner's Rights (Ownership Provision)

the policyowner retains all rights in the policy. The policyowner has the right to name or change revocable beneficiaries, borrow against the cash values or access living values, receive dividends and select among the dividend options available, and assign the policy on a collateral basis or an absolute basis, to name a few. It is also the policy owner's responsibility to make premium payments. The beneficiary does not have rights in the policy - unless the insured is the policyowner, the insured does not have rights

Morbidity

the predicted number of medical claims in any given year for a specific group of insureds. Morbidity Tables are used

Fixed Premium (Variable Whole Life Insurance)

the premium is determined by the insurer and remains fixed and level throughout the contract

Straight Life or Continuous Premium (Ordinary Whole Life Payments)

the premium is level and payable to age 100 or death of the insured, whichever comes first - the face amount remains level throughout the life of the policy - this policy has the highest total premium outlay

Conditional Approval

the premium paid by the applicant is the offer and the policy issued by the insurer is the acceptance. The insurer will send the policy to the producer for delivery, but coverage is in effect as of the date of application if it is accompanied by premium, or the date of a completed medical exam, if required

Premiums and Nonqualified Annuities (Individual Annuities)

the premium paid for nonqualified annuities, along with subsequent premiums, establishes the cost basis for a non-qualified annuity. In simple terms, the cost basis equals the the total amount paid for a deferred annuity. The basis is the starting point form establishing gain or loss. Any interest or gains during the accumulation phase of the annuity are tax-deferred

Fixed Premium

the premiums are scheduled as to time and amount, such as $100 per month, and cannot fluctuate

Premium Payments and Variable Annuity

the premiums made during the accumulation period may be flexible in amount and frequency limited only to the contract's provisions - premiums purchase accumulation unit of the separate account - they are similar to shares of a mutual fund - upon annuitization, accumulation units are converted into annuity units - the number of annuity units liquidated remains level, but the unit value fluctuates, based upon the performance of the separate account

Medical Information Bureau (MIB)

the primary purpose is to collect adverse medical information about an applicant's health and act as an information exchange - it is a member-owned corporation that operates on a not-for-profit basis in the US and Canada - The Underwriting services are used exclusively by member life and health insurance companies to assess an individual's risk and eligibility - these services "alert" underwriters to fraud, errors, omissions or misrepresentations made on insurance applications and it may help lower the cost of life and health insurance for consumers

Underwriting

the process of selecting, classifying, and rating a risk for the purpose of issuing or not issuing insurance coverage

Advertising Regulations (Group Health Insurance)

the purpose is to give a complete and accurate description to the public, prevent unfair competition, a set a minimum standard of conduct. In most states, each insurer must provide the Department of Insurance a copy of any advertisement prior to its use

Advertising Regulations (Solicitation and Marketing Requirements)

the purpose is to give a complete and accurate description to the public, prevent unfair competition, and set a minimum standard of conduct. In most states, each insurer must provide the Department of Insurance a copy of advertisement prior to its use - each insurer must maintain at its home or principal office, a complete file containing every printed, published, or prepared advertisement of its individual, blanket, franchise, and group policies

Social Security Disability Insurance

the qualification for these benefits is contingent upon the employee having the proper insured status, either "fully" insured (40 quarters or credits), disability insured (20 of which were earned in the last 10 years), or "currently" insured (a sliding scale based on age, beginning with 6 credits in the past 13 quarters for persons age 21 to 24), and satisfying the waiting period

insurable interest

the relationship that must exist between the applicant and insured, at the time of application and policy issuance, in order for the contract to be valid

Utilization Review (Cost Containment Measure)

the review that determines whether provided or proposed health care services were or are medically necessary. - this does not apply to emergency services but involves "before, during, and after" medical services

Notification of Right to Continue Coverage (COBRA)

the right to continuation is required at two times. The first time is when a group plan commences or is amended to include the continuation of coverage provision. The second time that an insured must be notified is when a qualifying event occurs

Convertible (Special Features of Term)

the right to convert the existing term policy to a permanent policy without evidence of insurability during the conversion period specified in the contract - the premium can be based upon attained age or issuer age - the premiums will be higher than the original policy since the permanent policy will provide a cash value and coverage can last to age 100 or beyond - if the conversion is based on the issuer or original age, back premiums plus interest will be required to be paid out at the time of conversion

Interest (Health Insurance)

the second factor used in calculating the premium. Companies invest premiums in bonds, stocks, mortgages, real estate, etc. and assume it will earn a certain rate of interest on these invested funds

Annually Renewable Term

the simplest form of term insurance is for one year - the death benefit remains level and the premiums increase yearly as the policy renews up to a specified age - while it is very inexpensive initially compared to other types of life insurance, over time it can become cost prohibitive - the death benefit is paid by the insurer if the insured dies while the policy is in force

Family Policies (Specialized Policies)

the special needs of families with young children can be addressed with "Family Income" or "Family Maintenance" policies - both policies being with a base policy of whole life insurance usually written on the parent with the largest income and greatest risk of death - this provides insurance protection to the insured's age 100 - to this base policy, a term insurance rider is attached that is designed to provide a monthly income to the survivor if the insured dies during the specified term which greatly increases the total insurance amount without affecting the cash accumulation feature of the base policy - each policy provides insurance protection on one parent - A third policy, the Family Protection Plan, provides insurance protection on the entire family

Acceptable Place of Delivery (Regulatory Jurisdiction/Place of Delivery)

the state in which the greatest number of individuals are employed

Acceptable Place of Delivery (Regulatory Jurisdiction/Place of Delivery)

the state where the policyowner is incorporated

Acceptable Place of Delivery (Regulatory Jurisdiction/Place of Delivery)

the state where the policyowner's principal place of business is located

Blackout Period (Survivor Benefits)

the time between when the youngest child reaches age 16 and the spouse is eligible for retirement benefits at age 60

Elimination Period (Waiting Period) (Disability Income Policy)

the time period an individual must be disabled before benefits become payable. This period is usually longer than for an injury due to an accident - the period can be selected by the policyowner at the time the policy is purchased. The length of the period will directly affect the premium. A shorter waiting period will result in a higher premium

Grace Period

the time period provided after the premium due date before a policy lapses - if the insured dies during this period, the death benefit is payable minus any premiums or loans due - the typical time period is a month unless state law specifies otherwise - Coverage continues during the grace period, but if the premium is not paid, the policy lapses at the end of the grace period

Benefit Period (Disability Income Policy)

the time the insured is eligible to receive payments after the elimination period has been met - this period may be written for a specified number of years (2, 5, or 10 years), to age 65 or for life - the policyowner can purchase a policy w a short or long benefit period - a longer benefit period will result in a higher premium

Assignment

the transfer of ownership. There are two types: - Absolute Assignment - Collateral Assignment

Exclusion Ratio

the way in which taxation is computed. The IRS has tables and formulas to determine which part of the income benefit payment is tax-free return of premium and which part is taxable. After the entire cost basis is recovered then any future income benefit payments received are fully taxable

Concealment

the willful holding back or secretion of material facts pertinent to the issuance of insurance - it may result in denial of coverage and may void the policy

Choice of Providers (Dental Insurance)

there are as many choice of dental coverage as there are choice of health insurance. Dental plans must offer the insured a choice of provider regardless of the dental coverage selected - conventional insured plans offered by insurers - Dental service plans - Blue Cross/Blue Shield - managed care plans or prepaid dental plans

Determining Amount of Personal Life Insurance Needed

there are two approaches to determine the amount of life insurance needed: - Human Life Value - Needs Analyses

Types of Beneficiaries

there are two types of beneficiaries: - Revocable - Irrevocable

Qualifying for Disability Benefits

there are two types of disability policies that can be purchased as an individual plan or part of a group plan that determine how a worker qualifies for benefits - Occupational -Nonoccupational

Group Conversion

there is a conversion period of 31 days in which the employee may, upon termination of eligibility and without evidence of insurability, convert his/her group life insurance benefit to an individual permanent policy - if converted, the premium will be at a higher rate than normal rate to include the insurer's guaranteed convertible surcharge, since the majority of all conversion are on persons that would otherwise be uninsurable - premiums will also be higher because the conversion policy will be issued at the attained (current) age of the insured and the policy will build cash values - conversion period is also a grace period - in the event of a terminated or ineligible employee dies during the conversion period, whether they were going to elect individual coverage or not, a death claim will be paid by the group policy, less the premium due for the benefit

Scheduled Injury (Workers' Compensation Income Benefits)

there is a schedule of benefits for specific permanent partial injuries, such as a specific amount for loss of an eye or specific amount for loss of a hand

HIPAA Exemption from Renewability

there is no covered employee that lives or works in the service area of a network plan

Any Provider (Point of Service)

these are more flexible plans that allow the insured or subscriber to choose any provider to receive benefits

Ambulatory Outpatient Care (Cost Containment Measure)

these facilities monitor the cost effectiveness of outpatient services and provide, in addition to diagnosis and treatment: - preventive care - health education - family planning - dental/vision care

Customer Groups (Eligible Health Groups)

these groups include depositor, creditor, and debtor groups

Associations (Eligible Health Groups)

these groups must have a minimum number of members (usually 100) and be organized for a purpose other than buying insurance. It is the Master policyholder and handles all the funds for the group. Examples include: - teacher associations - trade associations - professional associations - alumni associations

Limited Heath Policies

these health plans are designed to cover limited benefits, based on the type of loss as stated in the policy or a limited dollar amount

Comprehensive Health Policies

these health plans cover a broader range of losses and have larger policy limits

Private Health Insurance Policies

these insurers are commercial companies such as stock and mutual insurers that sell to the general public. Most insurance is written through this type of insurer

HIPPA Law (Groups 2 or more)

these laws limit the ability of a new employer plan to exclude coverage for pre-existing conditions

HIPPA Law (Groups 2 or more)

these laws prohibit discrimination against employees and their dependent family members based on any health factors they may have, including prior medical conditions, previous claims experience, and genetic information

HIPPA Law (Groups 2 or more)

these laws provide additional opportunities to enroll in a group health plan if you lose other coverage or experience certain life events

Nonforfeiture Options (Guaranteed Values)

these options are found in policies that accumulate cash values and protect the policyowner against total loss of benefits if the policy should lapse due to nonpayment of premium or is intentionally cancelled - there are three different types: -- Cash Surrender --Reduced Paid-Up -- Extended Term

Key Person (Business Uses of Life Insurance)

these people are employees whose contributions have a significant impact on the revenue and profitability of the company, especially in small business. This person contributes substantially to the success of a company. They are typically: - part of the management team - more highly paid - respected by customers, creditors, suppliers, and vendors - have direct responsibilities for sales, production, or service

Consumer-Driven Health Plans (CDHPs)

these plans allow individuals to use a 3-tiered approach to funding the cost of medical services and treatment. The various types of these plans help individuals control benefit costs by allowing them to decide how their health plan funds are used Options include: - Tier 1 Plans - Tier 2 Plans - Tier 3 Plans

Short-Term Disability (STD) (Group Disability Income)

these plans are characterize by maximum benefits for periods of rather short duration, such as 13, 26, or 52 weeks. Often, benefit period are coordinated with the employer's "sick pay plan". These plans will not pay benefits for disabilities lasting longer than 2 years - benefits are typically paid weekly and range from 50% to 100% of the individual's income

Stand-alone Plans

these plans are issued separate from other types of group insurance and require a separate deductible

Dental Referral Plans (Dental Insurance)

these plans are not insurance and are of limited value. These plans may or may not be associated with a group or individual Health Insurance plan and may charge monthly fees. - they only offer consumers a list of dentists willing to accept reduced payments for dental treatments - complaints surrounding these plans include listings for dentists who are either no longer offering such discounts or who are no longer in business - Uninsured persons can often negotiate fee reductions on their own - these plans incorporated into group or individual health insurance plans are more likely to include participating dental providers

Worksite Plans

these plans are voluntary benefit plans offered by insurance companies and premiums are withheld as payroll deductions by the employers - they allow employees to pick and choose among various types of insurance coverage to supplement other employer-sponsored benefits - They are issued as individual coverage and are portable (employees can keep them following termination of employment by paying premiums directly to the insurer)

Uses of Worksite Plans

these plans can be used to complement, supplement, and/or enhance other benefit plans offered by the employer. Although they can be offered under a Master Contract issued to the employer, the employer generally only acts as a conduit for premium payments via payroll deduction. These kind of plans are rarely governed under ERISA

Point of Service (POS)

these plans combine PPO and HMO benefits. Members can choose (at the point of service) which part of the plan to use. If the subscriber stays in network (open-panel HMO), benefits are paid as an HMO. A primary care physician, or gatekeeper, will apply and referrals will be necessary if the plan is being utilized as an HMO - if the subscriber uses an out-of-network provider, they will have a higher out-of-pocket responsibility. This feature is similar to an indemnity plan and the provider will be paid based on a fee-for-service

Nonqualified Plans Taxation

these plans do not meet the requirements of federal law to be eligible for favorable tax treatment. Because of this, contributions to this plan are not tax deductible - in many cases, the earnings are still tax deferred until withdrawn. Upon withdrawal, only the earnings are taxable

Basic Expense Policies

these policies traditionally cover an insured for nonsurgical doctor visits while in the hospital (medical expense), the charges for room and board while hospitalized (hospital expense), and can be expanded to include payment for office visits, diagnostic x-rays, laboratory charges, ambulance, and the cost of the operating room (miscellaneous expense), and the surgeon's fees associated with surgery (surgeon expense). For an additional premium, maternity benefits may also be provided

Basic Expense Policies

these policies typically do not cover routine vision or dental care. The insured is free to choose any physician, surgeon, hospital, or other health care provider. Referrals to specialists are not a requirement for coverage. These policies specify the benefit limit for covered expenses as either a flat dollar amount or a schedule of benefits. The benefit limit may be less than actual expenses incurred. Basic plans do not have a deductible; therefore, they are known as providing "First Dollar" coverage

Death Benefit Proceeds (Taxation of Group Life Insurance)

these proceeds from a group life insurance plan to an employee's named beneficiary are received income tax free

Optional Uniform Provisions

these provisions are included at the insurer's option; however, if used they must conform to the state's insurance code. These provisions are designed to protect the insurer

Policy Loans in VULs (Variable Universal Whole Life Insurance)

they are allowed in Variable Universal Whole Life policies and are available based on the amount in the separate account - typically 75-90% of the cash value can be borrowed

Premium Determination (Life Insurance)

they are based on expected mortality, interest, and expenses

HMO and Reducing Medical Expenses

they are deemed to be both a health care financing and serving mechanism. The principle objectives are to reduce medical expenses by: - stressing preventive medicine through physical exams and diagnostic screening - reducing the number of unnecessary hospital admissions - reducing the average number of days per hospital visit - reducing duplication of benefits - saving on administrative costs

Concept of an Annuity

they are used primarily to provide a steady stream of income to an individual typically upon retirement - in theory, an annuity is designed to protect against outliving an individual's retirement income by providing lifetime income - one of the primary functions of an annuity is to liquidate an estate, or to pay benefits until the death of an annuitant - in direct comparison to life insurance, an annuity could be referred to as the opposite of a life insurance policy - they are funded and sold through life insurance companies and require at least a life insurance to sell

Annuitant's Owner's Rights

they begin at the time of purchase. They may also be the annuitant and may change the annuity date, beneficiary, and payout option

Dividends Taxation

they by themselves are not taxable since they are considered a return of unearned premium When dividends: - are left on deposit with the insurance company, interest earned on dividends is taxable as ordinary income in the year earned - received exceed the total premium paid for the life insurance policy, the excess dividends are then often considered taxable income

Term Riders

they may be attached to any permanent policy, interest sensitive, or term policy to provide additional insurance protection for a fixed period of time - if the need for additional coverage is temporary, this rider is more cost effective than buying another policy

Contracting Agency PPOs

they might be a commercial insurance company, Blue Cross/Blue Shield, local group of hospitals and physicians, an HMO, large employers, or trade unions

Preferred Provider Organizations (PPOs)

they share the concept of cost reduction by health care management and differ from HMOs in that they do not have separate physical facilities and are less stringently regulated since any group agreeing upon the arrangements may be a PPO

COBRA Continuation of Coverage (Consolidated Omnibus Budget Reconciliation Act of 1985)

this Act states employers with 20 or more employees must provide a health coverage continuation option to all covered employees and dependents up to 18 months in the event of: - termination of employee (unless it is for cause as defined by federal law) - reduction of hours for employee, so they no longer qualify as a full-time employee - coverage may continue up to 29 months if an employees qualifies for Social Security disability

The SECURE Act

this act made major changes to the RMD rules: - Persons who reached the age of 70½ prior to January 1, 2020 must take their first RMD by April 1, 2020 - Persons who reached, or will reach, age 70½ on January 1, 2020 or later must take their first RMD by April 1st of the year after the year they reach age 72

Buy-Sell Agreement

this agreement contractually establishes a price with the intent to purchase, at a predetermined value, the assets of a business should one of the contract participants predecease the others. It may be used with a sole proprietorship, a partnership or w stockholders of a closed corporation - any type of life insurance may be used to provide funds for this agreement - premiums are not deductible, and policy proceeds are received income tax-free

Deferred Annuity

this annuity will pay periodic benefits starting at some specified time in the future; benefits being more than 1 year from the issue date

Needs Analysis

this approach determines a need for coverage upon the premature death of an individual - it always assumes the death of the individual to be immediate and factors different items to determine the amount of coverage needed

Human Life Value

this approach is a measure of the projected future earnings of a person at risk in the event of a premature death - the objective is to provide the proper amount of coverage as determined by the value of the individual to his/her dependents using certain factors - this method takes inflation into consideration when determining the amount of insurance coverage needed

Prescription Drugs (Medical Expense Provisions)

this benefit is most often found in a group health insurance policy. However, some individual health insurance policies may integrate benefits with a medical plan or provide benefits for an additional cost. This benefit may be written requiring a small copayment, a flat amount, or an out-of-pocket percentage for each prescription

Change of Occupation Provision (Disability Income)

this could result in a change of benefits depending on the new occupation, or the insurer could change the amount of premium to fit the occupational rating for the current level of benefit. The more hazardous the occupation, the less benefit and/or the higher the premium. Consideration is also given to any hazardous hobbies, such as bull riding, skydiving, and bungee jumping, which would affect the rating or require an exclusion rider

Workers' Compensation (State Workers' Compensation Benefits)

this coverage applies to bodily injury and or occupation disease that arise from and in the course of employment. There are 4 "statutory claims" for benefits under most states' Workers' Compensation laws: Disability Income, Rehabilitation (job retraining), Medical Expenses, and Survivors' Income (including a burial benefit)

Long-Term Disability (LTD) (Group Disability Income)

this coverage is often characterized by benefit periods of 2 or 5 years, to age 65, or lifetime. Benefit amounts are usually limited to typically 2/3 of the participant's income. Benefits stated in the policy are the maximum benefit amounts and maximum period of time covered. Normally, the waiver of premium for disability applies after a period specified in the policy

Blanket (Limited Policy)

this coverage is sold to organizations whose need to cover specific persons varies, such as common carriers, camps, amusement parks, schools, and athletic teams. It may provide disability income and/or medical and surgical benefits as excess coverage over any primary health insurance coverage - it is not individually written and no certificate of policy is issued to anyone other than the contracting organization

Class or Classification

this designation is used in instances where each beneficiary is not directly identified by name - the wording must be specific and carefully worded to remove any doubt of the owner's intentions

Individual/Named

this designation is very specific. An individual is specified by name as the beneficiary, such as Mary Doe or John Doe. This prevents probate proceedings

Cash Value (Surrender) Rider (Disability Income Riders)

this form of a return of premium begins building values equal to a percentage of premiums paid for a disability policy. The values start building around the third year and build to 100% at age 65, which can be returned to the insured at that time, less any claims

Blanket Insurance (Eligible Health Groups)

this group covers a group of individuals whose membership changes frequently, such as students, passengers traveling on a common carrier, sports teams, volunteer firefighters, or other groups of people while being exposed to a specific risk

TRICARE (The Uniformed Services Health Program)

this health plan is primarily for active duty and retired members of the U.S. military and their dependents. There are three plans now available, depending on the member's service status, such as active duty, National Guard/Reserves, or retired.

Nonduplication and Coordination of Benefits (Group Health Insurance)

this is a method of determining primary and secondary coverage when an insured is covered by more than one group policy, and to help prevent overinsurance, which is having more than 100% of a claim paid. The plan that covers a person as an employee is that person's primary coverage, and coverage as a dependent under their spouse's group plan is secondary. - in the event children are covered by more than one group plan, the "birthday rule" applies. - secondary carriers will only pay claims that are not covered or are not paid in full by the primary carrier, and only to the extent that the claim would be paid if the secondary carrier was in the primary position, such as deductibles, copayments, and/or coinsurance

No Loss-No Gain for Existing Claims and Pre-Existing Conditions (Change in Insurance Companies or Loss of Coverage)

this legislation requires that when group health insurance is being replaced, ongoing claims under the former policy must continue to be paid under the new policy, overriding any pre-existing conditions exclusion and establishing mandatory risk transfer

Probationary Period (Disability Income Policy)

this may be included in some disability income policies to protect the insurer from immediate claims. The insurer may have a 15-30 day waiting period before losses due to pre-existing conditions. It usually does not apply to losses due to an accident

Relative Value Scale

this method assigns a number of points and a dollar value per point based on the level and difficulty of a procedure

Independent Practice Association (IPA Model (Open-Panel))

this model gives HMO members the maximum freedom of choice of physicians and locations because the HMO is allowed to contract with a network of independent physicians who are part of an independent practice association - Physicians operate out of their own private offices and subscribers may be individuals the physician were already treating - payment to physicians is by capitation fee (per subscriber) or on a fee-for-service basis negotiated in advance - Since this model contracts with physicians in private practice who also treat non hMO patients, this is considered an open panel plan

Life Income Options (Life Settlement Option)

this option allows the insurer to use the death benefit to purchase an annuity on behalf of the beneficiary - as with other settlement options, any interest paid is taxed as ordinary income - There are several options w the Life Income Option

Surviving Spouse Survivor Benefits

this person w a dependent child under age 16 is entitled to a monthly income until the youngest child reaches age 16 (or a disabled child reaches age 22) - once the youngest child reaches age 16, the payments stop. - an unmarried spouse may start receiving retirement benefits at age 60

Supplemental Major Medical Policy

this plan provides for Major Medical coverage designed to supplement a basic plan. It is written to pay benefits once the Basic Plan benefits are exhausted. The Basic plan provides first dollar coverage. Once the basic plan benefits are exhausted, a Corridor Deductible is required to be paid before the start of coverage under this policy

Disability Income (Indemnity) Policy (Disability Policies)

this policy pays an income benefit when the insured is unable to work due to illness or injury (even if injured on vacation). - benefits paid weekly or monthly and determined as a flat benefit or a percentage of the insured's current earnings, normally 60-70% - full income is not paid in order to reduce malingering - in other words, if the insured received 100% income replacement, he would not be very motivated to recover and return to work

Jumping Juvenile Policy

this policy provides an automatic increase in the face amount at a given age (usually age 21 to 25) without evidence of insurability - the premium remains level for the life of the policy, and the usual increase in the face amount is 5 times the face amount

Return of Premium Term (Specialized Policies)

this policy provides for a full refund of premiums if the insured is still living at the end of the term - these policies charge a higher premium than level term insurance

Family Protection Plan (Family Policies) (Specialized Policies)

this policy provides protection on the entire family

Vision Care (Medical Expense Insurance Optional Benefits)

this provides for 1 routine annual examination (refraction). It may provide payment for the cost of lenses, frames, contact lenses, but not the cost to replace frames or lenses that are lost or broken. It does not pay for sunglasses or safety glasses. This coverage does not pay for medical expenses incurred from disease or injuries to the eye

First Dollar Coverage Provision

this provides that the insured is eligible for coverage starting with the first dollar and no deductible or out-of-pocket expenses will apply

Mode of Premium

this provision addresses the frequency of premium payments and to whom the premiums are payable - the more frequent the premium, the greater the cost - the policyowner has the right to change the premium mode

Unpaid Premiums (Optional Uniform Provisions)

this provision allows an insurer to deduct unpaid premiums from a claim that has occurred during a grace period

Reinstatement (Mandatory Provision)

this provision allows the insured, at the insurer's discretion, to put back in force a policy that has lapsed for nonpayment of premium by paying past due premiums plus interest. The insurer may also require a reinstatement application to prove insurability. if the insurer does not reject the reinstatement application within 45 days coverage will be automatically be reinstated. Accidents are covered immediately and sickness coverage generally begins 10 days after reinstatement

Change of Plan

this provision allows the policyowner to exchange a policy to another policy issued by the same company - as long as the benefits do not increase, most companies do not require evidence of insurability - term insurance may have a conversion option allowing the policyowner to exchange the policy for a cash value policy - permanent policies are typically exchanged for other types of permanent policies - if a plan switches from a higher premium, to a lower premium, the insurer will reimburse the difference in cost between the two plans

Entire Contract Clause

this provision describes the parts of the life insurance contract. It consists of the policy, riders (endorsements), amendments, and a copy of the application - all statements made in the application, in the absence of fraud, deemed to be representations and not warranties - all parts to a contract must be attache and in writing - nothing can be incorporated by reference

Guaranteed Issue and Affordable Care Act

this provision in the Affordable Care Act is designed to eliminate discrimination based on health status by insurers. - it mandates that insurers provide health insurance to any person, regardless of medical history or current state of health - the health care premiums must be offered at an average and restricts the ability of the insurer to limit the scope of coverage

Military Suspension Provision

this provision is designed to protect active duty and reserve members of the armed forces. Individual plans may suspend coverage (and premium) during active military service. When no longer serving, these individuals will be permitted to resume coverage and premiums without any waiting periods

Proof of Loss (Mandatory Provision)

this provision limits the amount of time the insured has to submit proof of loss to the insurer. It is required within 180 days of loss or in the shortest period of time possible, but not to exceed 1 year unless the insured suffers legal incapacity

Automatic Premium Loans (APL)

this provision must be elected by the policyowner and can be cancelled at any time. It enables the insurer to automatically borrow against the cash value to cover a premium payment to prevent the contract from lapsing unintentionally - available on cash values only and does not require an additional premium - it becomes effective at the end of the grace period - is treated as all other loans - if used to pay premiums, interest on the loan accumulates on an annual basis

Insuring Clause (Provision)

this provision states who is insured, the insurer, the amount of coverage, the time period and covered perils or loss. The premium rate or rate calculations are not part of this provision

Mandatory Second Surgical Opinion

this requirement may be included in policies that offer surgical expense benefits, requiring the insured to consult a physician, other than the attending physician, to determine if the necessity of surgery and/or alternate methods of treatment. If the insured should fail to obtain the second opinion, benefits are greatly reduced

Accidental Death and Dismemberment Rider

this rider provides a benefit in addition to the base of the policy - it pays 100% of the amount of the rider, known as the principal sum, upon accidental death - if the insured suffers an accidental dismemberment loss, such as loss of a limb or eyesight, the rider pays 50% of the rider amount, known as the capital sum - Double dismemberment benefits (loss of 2 limbs or total eyesight) are provided at 100% of the rider - benefits of the rider are only payable if the loss is accidental and occurs within 90 days of the accident - typically expires at age 65

Multiple Indemnity Rider (Health Insurance)

this rider provides additional benefits to a health insurance policy for losses due to an accident. It can be written as Double Indemnity or Triple Indemnity to provide double or triple the face amount if a death or dismemberment occur within 90 days of an accident. This rider is added for a small additional premium

Guaranteed Insurability Rider (Health Insurance)

this rider will allow an insured to increase limited benefits at specified intervals in a policy without evidence of insurability. Typically the rider drops from the policy around the insured's age 50. This rider is added to the policy for an additional premium. This rider, which may also be referred to as the Future Insurability Option, is commonly found in disability income and long-term care policies.

Spouse (Other Insured) Rider

this type of rider will provide level term coverage on the life of the insured's spouse - it will also provide a conversion provision permitting the spouse to convert to permanent coverage without evidence of insurability prior to the termination of the rider or upon the death of the insured under the basic policy

Exemption under Affordable Care Act

those eligible for a hardship exemption, such as the homeless and victims of eviction from their homes and natural or human disasters

Exemption under Affordable Care Act

those who must pay more than 9.5% of their income for health insurance, after application of any employer contributions and tax credits

Exemption under Affordable Care Act

those whose household income does not require the filing of a tax return

COBRA Termination of Continuing Coverage Event

timely premium payments are not made

Income Objective

to analyze the insurance needs in, Human Life Value, and Needs Analysis, the producer must also take into consideration the income objective of the proposed insured - the producer can use two method of income objectives to arrive at the amount of insurance needed to fill the human life value or needs analysis requirement -- Capital Liquidation -- Capital Retention/Conservation

Eligibility for Coverage (Employer Group Health Insurance)

to be eligible, an employee must be considered full time (minimum of 30 hours/week) and must be actively at work before they can enroll in the group plan. - employer maintains control over the plan, determines benefits, oversees the enrollment process, and makes premium payments - employer cannot discriminate when determining eligibility and employee benefits

Definition of Disability under Social Security

to collect these benefits, an employee must be unable to engage in any substantial gainful activity due to a medically determined physical or mental condition that has lasted or is expected to last at least 12 months or result in an early death

Business Uses of Life Insurance

to cover the unexpected death of business partners, executives, and key employees by providing funds for the continuation of the business, not for the heirs of the decedent

IRS and Annuity Taxes

to determine which part of each payment is taxable and which is not, the IRS allows the annuitant to use an exclusion ratio. According to the IRS, the part of each annuity payment that represents the cost basis is in the same proportion that the investment in the contract is to the expected return. The expected return is affected by the settlement option chosen and is based on the total amount the annuitant can expect to receive under the contract

Tax Penalty (Annuity Nonforfeiture Provisions)

to discourage the use of annuities as short-term tax shelters, a 10% penalty tax is levied against any premature withdrawals prior to 59 1/2 years of age - this discourages withdrawals - the tax penalty does not apply if premature distributions occur due to the death or disability of the contract owner

Charities (Personal Life Insurance)

to help fund favorite charitable organizations upon the insured's death

Long-term Care Benefit (Annuity Personal Uses)

today's annuities may offer riders which will help offset some of the costs associated with providing long-term care. As with most riders there is an additional cost associated with it - a few companies offer a combination deferred annuity and long-term care policy that allows for the leverage of single premiums 3-to-1 or 2-to-1 - generally the annuity values must be used then if needed the long-term care benefit kicks in - the annuity funds used for long-term care costs are tax-free

Subrogation

transfers an insured's legal right of recovery to the insurer that has paid a claim. This prevents the insured from collecting twice for the same loss and holds the responsible 3rd party accountable for the loss

Collateral Assignment

typically used when an insurance policy is used as collateral for a loan. this is a temporary assignment until the debt is paid in full - in this case, the assignor is the original owner and the assignee is the creditor - the assignment takes precedence over the beneficiary - it can reduce the dollar amount of the beneficiary's claim at the time of the insured's death because the assignee has a priority claim against the policy and must be paid first - no assignment will be binding on the insurer unless it is in writing and received at the insurer's home office - insurer is not responsible for determining the validity of the assignment - does not cause a change in ownership, but the rights of the owner will be subject to the assignment

Entity Plan (Type of Buy-Sell Agreement)

under this plan, a business entity enters into an agreement in which it is obligated to purchase the deceased owner's interest - the entity typically buys life insurance policies on each of the owners - the entity would then name itself as the beneficiary of each policy - the death benefit of the policy would be equal to the pre-agreed upon purchase price which would be spelled out in the buy-sell agreement. - Upon death of one of the owners, the entity would use the death proceeds to purchase that owner's interest

Pure Loss of Income (Income Replacement) Policy (Disability Policy)

under this policy, the insured will receive benefits is loss of income is due to a covered accident or sickness, even if the insured is able to work full-time doing all the same duties as before the loss occurred - w traditional disability policies there has to be a loss of time or duties to trigger coverage, but under this policy the insured is eligible based solely on a loss of income - Insurer will consider any other sources of disability income the insured may be entitled to when underwriting the policy. The purpose is to prevent over insurance that could cause a moral hazard or fraudulent claim - the benefits are paid monthly, but can be paid on a weekly basis. The amount of benefit payable is found in the policy and is based on income reported at the time of application

Exemption under Affordable Care Act

undocumented immigrants

Loans and Partial Withdrawals (Universal Whole Life Insurance)

unlike other cash value policies, Universal policies give the policyowner the option to take a policy loan, but also to take a partial withdrawal from the cash value without terminating the contract

Unused Funds in HRAs (Health Reimbursement Account)

unused funds may be carried over from year to year. Employers have full control over how the roll-over is managed and determine whether all or only a portion of unused funds carries over to the next year. The employer may determine that all fund balances reset to zero after the close of an HRA plan year. - if an employee leaves their place of employment, any remaining funds revert to the employer. an employee does not own any contributions made by the employer

Rating Applicants

upon receipt of the information, such as the application, medical exam, blood and urine test results, etc. underwriters analyze the information and determine if the applicant is an acceptable risk. - If acceptable, underwriters then determine the classification to be used in calculation of the premium

Cash Surrender (Nonforfeiture Option)

upon surrendering the policy back to the insurer, the policy owner will receive the cash surrender value stated in the policy less any outstanding loans and accrued interest - any amount that exceeds the premiums paid into the policy will be taxable as ordinary income - the insured no longer has insurance coverage if this option is selected

Attending Physician Statement (APS)

used in cases in which the individual application and/or medical reports reveal conditions of which more information is required. The applicant's treating physician will complete this as a part of the applicant's medical history. An applicant must sign a written release to enable a release of the APS. The insurer pays for this

Mortality Tables

used to give the company a basic estimate of how much money it will need to pay for death claims each year. - by using it, a life insurer can determine the average life expectancy for each age group, based on the year of birth - it shows the life expectancy and death rate per 1,000 people living in the US - it allows the insurer to rate policies using the law of large numbers so accurate mortality predictions are extremely important - the higher the age group, the higher the mortality rate, meaning a higher premium - it shows that males have a higher mortality rate than females, so males will pay a higher rate than females

Cross Purchase Plan (Type Buy-Sell Agreement)

used when the partners of a business purchase life-insurance on each other. At the death of one of the partners, policy proceeds are used to purchase that person's interest in the business from his/her heirs. Each partner owns insurance on each of the other partners

Statement of Good Health

verifies that the insured has not suffered any injury or illness, had any surgeries, or been admitted to a hospital since the application date

Waiver

voluntary surrender of a known right, claim or privilege

Hospital Confinement Rider (Disability Income Rider)

waives the elimination period if insured is hospitalized during the period of elimination, but only pays when being treated as an inpatient

Patient Protection and Affordable Care Act (PPACA)

was signed into law on March 23, 2010 - it consists of a combination of measures to control healthcare costs, and an expansion of coverage through public and private insurance which includes broader Medicaid eligibility and Medicare coverage, and subsidized, regulated private insurance - It was enacted with the goals of increasing the quality and affordability of health insurance, lowering the uninsured rate by expanding public and private insurance coverage, and reducing the costs of healthcare for individuals and the government. Important to remember it does not mandate that employers provide health insurance to their employees - established the Health Insurance Market - also known as the Affordable Care Act (ACA)

Mandatory Uniform Provisions

were developed by the NAIC and must, by law, be included in every individual accident and health insurance policy. Different wording may be used as long as it is at least as favorable as the original wording. No additional provisions may be included which otherwise restrict or modify a uniform provision. There are 12 Mandatory Provisions that are designed to protect the insured's interests

Reasonable Expectations Doctrine

what a reasonable and prudent policy owner would expect; the reasonable expectations of policy owners are honored by the Courts although the strict terms of the policy may not support these expectations

Surrender Charges (Annuity Nonforfeiture Provisions)

when a contract is fully surrendered, these charges will lessen the contract payout - this is referred to as a back-end load - these charges diminish over a stated number of years, set by the insurer, until the disappear

Extension of Benefits (Change in Insurance Companies or Loss of Coverage)

when a group health insurance policy is terminated or replaced, covered individuals who are being treated for a medical condition must continue to have their claims covered - when new group insurance replaces existing coverage within 60 days of the termination of the first policy, either the former insurer will continue paying the claim until is finally resolved, or the new insurer will take over the claims payments - employees and their dependents who are on claim at the time of policy cancellation/termination (or termination of employment) will continue to be covered by the former group health insurance plan until the claim has ended

Regulatory Jurisdiction/Place of Delivery

when a group insurance contract insures persons living in more than one state there must be an understanding as to which state has regulatory jurisdiction over the contract - is generally accepted that the state where the group contract is delivered to policyowner has governing jurisdiction - contract must conform to the laws of that state even though certificates of insurance may be delivered in other states - regardless of which state's law governs the contract, the policy must provide benefits as required by each state in which an employee works or resides

Trust (Beneficiary Designation)

when a recipient is not to have direct access to the death benefits, such as in the case of minor children, and the proceeds are to be distributed as per the insured's directions set forth in a trust - a trust beneficiary may also be used in estate tax planning strategies when using an irrevocable life insurance trust

Recurrent Disability

when a second disability is suffered due to the same cause within a certain period of time (usually 6 months), the elimination period will not apply and the disability will be considered continuous

Advertising Requirement

when an agent misleads the public in an advertisement, both the insurer and agent are held accountable

Transplant Donor Benefit

when an insured is totally disabled because of the transplant of an organ to another individual, the insurer will deem the insured to be disabled as a result of sickness

Policy Delivery

when an insurer determines that an applicant is an acceptable risk, the insurer will send the policy to the producer for delivery - it is the insured's responsibility to deliver the policy and collect any premiums - the producer should explain the policy to ensure the policyowner/insured understands the benefits, including any ratings, endorsements, exclusions, and riders

Assumptions and Calculations (Premium Determination for Life Insurance)

when calculating premium rates, life insurer's assume that all: - premiums paid in advance of the period of coverage - premiums will be invested and earn interest - claims will be paid by the end of the year

Naming Multiple Primary Beneficiaries

when doing this it is important to indicate each beneficiary's share of the proceeds in percentages rather in dollar amounts unless they are to share the proceeds equally

No Initial Premium (Policy Delivery)

when initial premium is not paid w the application, the producer must collect the premium before coverage can begin - they must also get a signed Statement of Good Health from the applicant/insured at the time of policy delivery - if applicant is not in good health, the policy should be returned to the insurer for further underwriting

Advertising Requirement

when insurers advertise by comparison of like products, the comparisons must be complete to include rates, policies, benefits, and dividends

Advertising Requirement

when insurers advertise that a group endorses a certain health product, the public must be made aware of any control the insurer may have over the group

Coordination of Benefits

when it comes to receiving disability benefits, both Workers' Compensation and Social Security Disability Income benefits have an effect on other benefits to which a person may be entitled. Because Worker's Compensation benefits are mandated by state (or federal) law, they are primary to any other insurance benefits

Replacement of Group Policies

when replacing a group policy, the agent should always provide a comparison of benefits between the present and the proposed plan of coverage. Carriers replacing hospital, medical, or surgical benefits within 60 days of discontinuance must cover all employees and dependents covered by or eligible for coverage under the previous policy as of the date of discontinuance - although insurers are supposed to coordinate these credits, HIPAA confidentiality rules may impair the insurers' ability to communicate with one another. For this reason, employees must be made aware of the need to maintain records of their health care expenditures, and to supply the information to the new insurer(s) as necessary

Reclassifications

when reviewing an application, the underwriter may find it necessary to reclassify the risk. This could either increase or decrease the risk

Distributions at Death Taxation (Annuities)

when the annuitant dies during the accumulation phase of the annuity, the beneficiary receiving the death benefit must pay income tax on any gain embedded in the policy, at ordinary income tax rates

No Beneficiaries Alive

when there is no beneficiary alive, the proceeds are payable to the policyowner if living or to the insured's estate

Underwriting Group Disability Plans

when underwriting these policies, there is no medical underwriting. The field underwriter's job is to guard against adverse selection and overinsurance. - It is usually offered only on a nonoccupational basis, which will not cover work-related disabilities. Work-related disabilities are usually covered under Workers' Compensation Insurance. Most insurers require that a minimum number of employees participate in the plan. This enables the insurer to issue the plan without evidence of insurability - The Age Discrimination in Employment Act (ADEA)

Advertisement Requirement (Health Insurance)

when using comparison of like products, the comparisons must be complete to include rates, policies, benefits, and dividends

Withdrawing Cash (Cash Value Taxation)

when withdrawing cash from a cash value life insurance policy, the amount of withdrawals up to the policy's basis will be tax free. This is referred to as First In, First Out, or FIFO. Any withdrawals in excess of basis will be taxed as ordinary income - The Cost Basis is the amount of premiums paid into the policy less any dividends or withdrawals previously taken

Changes in the Application

whenever an answer to a question needs to be corrected, the applicant or producer makes the correction and the applicant initials the change, or the producer can complete a new application

Policy Delivery

will be accomplished by: - personal delivery, with signed receipt of delivery - registered or certified mail w a signed receipt of delivery

Specialist Physician

will treat a member if the Primary Care Physician has made a referral, usually after all other treatments have been exhausted. Examples of this physician include: - neurologists - cardiologists - oncologists They are also referred to as a Referral Physician

Premature Distributions (Traditional IRA)

withdrawals before age 59 1/2 are generally subject to a 10% penalty tax

Termination of Coverage Notice Requirement (Affordable Care Act)

within at least 30 days prior to the last day of coverage, insurers must provide notice of termination/cancellation of coverage and include the reason for termination - if termination is for nonpayment of premium, a 3-month grace period is required (during which any advance payment of tax credits continues to be collected) - if premiums remain delinquent at the end of the 3 months, the policy may be terminated provided that the 30 day notice requirement has been met

Suicide Exclusion

within the first 2 years, death due to suicide is excluded from coverage as stated in the suicide clause

Incontestability Clause

within the first 2 years, the insurer may contest a claim and void the contract upon proof of a material misstatement or fraud. Except for nonpayment of premiums, the policy will be incontestable after it has been in force for typically 2 years from the policy issue date, even in cases of fraud