Life and Health Producer License
Stock Insurer
An insurer that is owned by its stockholders and formed as a corporation for the purpose of earning a profit for the stockholders. it is nonparticipating
HIPAA
creditable coverage mandated benefits preexisting conditions privacy disclosures
contributory employer group plan
employee pays part of premium. at least 75% of employees must participate
Deferred compensation
employer agrees to pay employee a stated amount of income beginning at retirement rather than paying them now
comprehensive major medical insurance
stand alone plan, benefits available after deductible is met, coinsurance, OOP max
Classifications of risk
standard, preferred, substandard, declined
exclusions of disability coverage
war/military service attempted suicide, other self-inflicted injury non-commercial aviation commission of felony living overseas
withdrawal penalties and surrender charges
when a withdrawal is taken from an annuity the earnings are taxed as ordinary income. 10% tax if withdrawn before 59 1/2
Per Stirpes beneficiary
"by the branch" signifies children of a deceased class beneficiary are entitled to that beneficiary's share of the proceeds
per capita beneficiary
"by the head" divides policy's benefit equally among the surviving members of the class does not transfer below a generational level
Fraud/False Statements
- Fine and/or imprisonment (10-15 years) - Embezzlement included
basic total disability plan
1. benefits (monthly indemnity) - monthly amount paid, benefit referred to as indemnity 2. elimination benefit period (waiting period) - time insured must be disabled before benefits begin, the longer the waiting period, the lower the premiums 3. benefit period - the longer the benefit period, the higher the premiums
other health insurance provisions
1. free look 2. insuring clause - promise to pay 3. consideration clause - promise to pay, application provides information and pays premium 4. renewability - more favorable the renewability provision to the insured, higher the premium 5. military suspense - coverage suspended if serving in military
standard policy provisions
12 MANDATORY standard provisions insurance companies may reword as long as they are not less favorable to the insured 1. entire contract - application, policy, riders 2. time limit on certain defenses (incontestability clause) 2 years from the date of policy issue, no misstatements shall be used to void the policy, fraud can be tested indefinitely 3. grace period - 7 days for weekly policies, 10 days on monthly, 31 days all other during this time losses covered minus premium due 4. reinstatement - 10 day waiting period for sickness coverage 5. notice of claim - 20 days after occurrence, for disability, every 6 months 6. claims forms - insurer provides within 15 days of notice of claim 7. proof of loss - insured provides within 90 days of date of loss 8. time of payment of claims - pay lump sum immediately after proof of loss 9. payment of claims - optional provision for payment up to $1,000 to any relative that appears to be entitled to benefits. or directly to medical provider 10. physical examination and autopsy - insurer will pay the cost 11. legal actions - no legal action can be brought to the policy prior to 60 days after proof of loss or after 3 years after proof of loss 12. change of beneficiary - right to change is up to policyholder, permission needed from beneficiary needed if irrevocable
Conditional Contract
A contract that requires certain conditions to be fulfilled in order for performance under the contract to be enforced. Insured must pay the premium for coverage and file a claim if a loss occurs
Morale Hazard
A condition of carelessness or indifference that increases the frequency or severity of loss.
Estoppel
A legal doctrine that prevents a party from denying an action if it had been accepted previously
Fiduciary
A person in a position of financial trust
Treaty Reinsurance
A reinsurance agreement that covers an entire class or portfolio of loss exposures and provides that the primary insurer's individual loss exposures that fall within the treaty are automatically reinsured.
Misrepresentation
A representation that is actually false. To void the contract it must be a material misrepresentation
Death benefit options A and B
A: death benefit of the policy B: death benefit of the policy + cash value
Mutual Insurer
An insurer that is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them.
Implied Authority
Authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal.
legal contract
CLOAC - consideration, legal purpose, offer, acceptance, competent parties
Indemnity Contract
Contract is intended to restore insured to the financial state enjoyed prior to the occurrence of a loss - applies to health but not life
Conditional Receipt
Date of the application is the effective date of a conditional receipt, as long as the applicant is found to be insurable under company's standard UW rules. Premium paid with application, must be standard or preferred risk, can be determined after death
Binding receipts
Effective for 30-60 days from date of application even if applicant is found to be uninsurable. not common in life insurance
Three parts to UW application
General information, health information, producer's report
health reimbursement accounts (HRA)
HDHP not required for HRA employee can obtain reimbursement from HRA for medical expenses HRA contributions are pretax and made only by employer employer may restrict use of funds in HRA funds roll over YoY
open panel vs closed panel
HMOs = closed-panel, closed network PPOs = open-panel, open network
credit disability insurance
If the debtor becomes disabled the policy's benefit is paid to the creditor to pay off the loan
Surplus Lines Insurance
Insurance provided by individual UW not insurance companies. may insure unusual risks. UNAUTHORIZED, NONADMITTED Examples of exposures that might need surplus: gaming, casinos and entertainment, mining, skyscrapers hole-in-one contests
Premium elements
Mortality Interest Expenses
Net premium
Mortality - interest
Gross premiums
Mortality - interest + expenses
Industrial Life Insurance
Premiums are due weekly and collected in person by producers who go door to door
Disability income rider
Provides the insured with a monthly benefit check if they become disabled. benefit amount is 1% of face value
Faculative Reinsurance
Reinsurance of individual loss exposures in which the primary insurer chooses which loss exposures to submit to the reinsurer, and the reinsurer can accept or reject any loss exposures submitted.
Fair Credit Reporting Act
Requires consumer reporting agencies to adopt reasonable procedures for exchanging information on credit, personnel, insurance, and other subjects in a manner that is fair and equitable to the consumer with respect to the confidentiality, accuracy, relevancy, and proper use of this information. Federal law requiring an individual to be informed if that individual is being investigated by an inspection company
Warranty
Statement that is guaranteed to be true. Breach of warranty voids the contract
Personal uses of life insurance
Survivor protection Mortgage payoff Estate creation Estate conservation Liquidity Cash accumulation
federal health insurance programs
TRICARE - active and retired military Veterans Benefit - discharged military Medicare - senior citizens & recipients of social security Medicaid - poor individuals/families Social Security disability - individuals who become permanently disabled
Apparent Authority
The appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created. Name on signs, etc.
Waiver
The intentional and voluntary giving up of a known right
Statement of Good Health
The statement required to be signed by the applicant upon policy delivery to assure the insurer their health is the same as when they applied for the policy
Attending Physician's Statement (APS)
Used to find out about applicant's current condition and medical history with the physician
Third Party Ownership
When a person(s) other than the insured is the owner of the insurance policy.
Aleatory Contract
a contract where the values exchanged may not be equal - small premium, large loss
Physical Hazard
a physical condition that increases the chance of loss
Representation
a statement believed to be true to the best of one's knowledge
Term rider
add term insurance to permanent. coverage is similar to term but premium is lower than purchasing a separate policy. Level, decreasing, increasing
medicare part c
advantage plans contracts with and pays private companies medical expenses paid by private plan must be enrolled in A and B private company may charge enrollee a fee may provide outpatient drug coverage 4 types of plans - medicare managed care plans (HMO, POS), medicare preferred provider organization (PPO), medicare private fee for service plans (PFFS), medicare specialty plans
medicare
age 65 or older have end stage renal disease (kidney failure) have been receiving social security disability benefits for at least 24 months individual must be fully insured according to social security - 40 credits initial enrollment is 7 month period that begins 3 months before individual turns 65, includes month they turn 65, ends three months after 65
Buy-sell funding
agreements provide for the sale of a business interest at the death or disability of an owner. Often referred to as business continuation plans. agreements can be funded with life insurance plans Entity and cross purchase plans
401(k) plans
allow taxpayers a break on taxes on their deferred income can save and invest part of paycheck before taxes - won't be taxed until money is withdrawn
withdrawals or partial surrenders
allowed on universal life insurance policies but not whole life policies. results in a reduction of the cash value and the death benefit amount. cannot be repaid
taxation of health ins - sole proprietors/partnerships
allowed to deduct 100% of what they pay for health insurance (including qualified LTC) from gross income must show net profit for the year cannot claim deduction for any month in which they were eligible to participate in a health plan subsidized by another employer benefits not taxable
Convertability
allows a policyholder to convert a term insurance policy to a permanent type policy without evidence of insurability and without having to submit an application. converted policy premium will be based on attained age or original age. must convert before term policy expires
nonforfeiture clause
allows for insured to receive all or a portion of the benefits or a partial refund on the premiums paid if the insured misses premium payments, causing the policy to lapse three options: cash surrender, reduced paid-up insurance, extended term insurance
1035 Exchanges
allows individuals to move cash values from one contract to another without having any gain taxed at that time to qualify - old and new policies must both have the same insured and beneficiary applies to life insurance and annuities qualifying transfers: from one life insurance policy to another from one annuity to another from a life insurance policy to an annuity if annuity to life insurance -> gains taxed
Guaranteed insurability rider
allows insured to purchase additional life insurance at specified intervals in the future for certain amounts without having to provide evidence of insurability typically at 3 year intervals from 25-40
future increase option rider
allows insureds to buy additional amounts of disability income coverage at stated future times without having to provide proof of insurability. rate based on insured's attained age at time of purchase, not when originally issued. insured's income must have increased. every three years from 25-50
facility of payment provision
allows insurer to pay all or part of policy's death benefit to someone other than a designated beneficiary if beneficiary is a minor or deceased, someone other than the beneficiary incurred the insured's medical/funeral expenses
policy loans
allows policyholder to borrow up to the cash value of the policy. if loan isn't paid back and insured dies, amount borrowed plus any interest is deducted from death benefit
factors in determining life annuity payment amount
annuitant's age annuitant's gender payment guarantee assumed interest rate
pay-out/distribution phase
annuitization period. series of regular income payments that continue for life or a stated period of time. accumulated value no longer belongs to the owner: no additional payments can be made no withdrawals can be taken annuity cannot be surrendered owner can't change the contract
Required signatures on Application
application form - signed by applicant and producer/agent proposed insured must sign if applicant is not insured company officer must sign a corporate owned policy parent/legal guardian signs juvenile policy for minor
Moral Hazard
arises from an individual's character (example: dishonesty) intentionally causing a loss
Insurable interest is only required
at the time of the application
presumptive disability
automatically qualifies insured for disability benefits whether or not they can work conditions include: loss of or loss of use of any two limbs total and permanent blindness in both eyes total loss of speech total loss of hearing in both years
Cost of living rider
based on the Consumer Price Index (CPI) as inflation increases, so does death benefit premium based on attained age
long term disability (LTD)
begins paying benefit when STD ends elimination period same as benefit period of STD benefit period 2 year - age 65 benefit payments from workers comp and social security
Increasing term policy
benefit begins near zero and grows over the term of coverage.
life insurance riders
benefit options to tailor a policy to the owner's needs
LTC policy provisions
benefit period is at least 12 months most policies, can choose from 2-5 years longer the benefit period, higher the premiums benefit amount - dollars/day, higher daily benefits means higher annual premiums (indemnity = stated amount/day, reimbursement = lesser of actual expense or daily benefit) longer the elimination period, lower the premium optional benefits = guaranteed insurability, nonforfeiture benefits, inflation protection exclusions HIPPA qualified plans
Blackout period
benefits for surviving spouses with children under 16. When the youngest child turns 16, benefits stop and do not resume until the surviving spouse turns 60
ACA metal tiers
bronze plan 60% silver plan 70% gold plan 80% platinum plan 90%
Key person coverage
business owns, pays for, and is the beneficiary of the policy on the key person's life
Executive bonus plan
business pays the premiums on a life insurance policy which the employee owns
flexible spending arrangement (FSA)
cafeteria plan benefit that is funded with employee money by means of a salary reduction (employer puts this money in FSA account) employee contributions are pretax plan is funded by employee contributions, employer's expenses are just administrative costs salary reduction method results in reduced payroll and payroll expenses for employer spend it or lose it
Backdating
can occur for up to 6 months
eligibility of coverage - group health
cannot discriminate employees - only requirements are full time and actively at work dependent eligibility - up to 26 probationary (waiting) period - 1 to 6 months eligibility period and OE - 30-31 days
medicare supplemental (medigap)
cannot sell to someone in part C core benefit plan A covers medicare part b coinsurance must be offered if company sells medicare supplement plans doesn't cover part a and b deductibles
dividend options (CARPPO)
cash accumulation at interest reduced premium paid up additions paid up insurance one year term insurance
Policy surrender
cash surrender value of the whole life policy arises from the policyholder's rights to quit the contract and reclaim a share of the reserve fund attributable to the policy
death benefits components - whole life
cash value (savings element) insurance protection element that must be paid in addition to the cash value so that the death benefit equals the policy's face amount = Net Amount of Risk to the insurance company
Interest-sensitive (current assumption) whole life
cash value can increase beyond the stated guarantee if economic conditions warrant. has fixed, level death benefit and a premium schedule fixed in regard to the timing of payments
dental coverage features
choice of provider scheduled vs non-scheduled combination plan deductibles, coinsurance, limits for various benefit categories predetermination of benefits
Producer's Report
client will never see. producer records information on insured including producer's relationship to insured and anything they know about financial status, habits, and character
Advantages of flexible policies
combines guarantees of whole life insurance with the affordable premiums of term life insurance in one policy - policyholder can adjust this mix policyholder can skip premiums without losing their coverage as long as there is enough cash value to cover the policy's monthly expenses can adjust death benefit withdrawals allow access to policy cash values without requirement to pay back
joint and survivor annuity (settlement)
continues paying a benefit for as long as either beneficiary lives, often used when a married couple will be receiving payments. after death of first beneficiary, same or reduced amount paid to second
Roth IRAs
contributions are never deductible qualified distributions/withdrawals are tax free if: Roth IRA has been set up for a least 5 years distribution is after age 59 1/2 or due to death, disability, or being first time homebuyer
exclusions of dental
cosmetic, oral hygiene, replacement of teeth missing prior to coverage, completion of services prior to coverage, replacement/duplicate dentures, occupational injuries, treatments received in govt facilities
Individual policy
cost based on the individual insured, more expensive than group
accident-only policies
cover accidents as perils and exclude sickness or disease premiums are smaller may also pay benefit if accident results in dismemberment, disability, or death
medicare SELECT
coverage offered through a restricted provider network, like a managed care plan may not sell policies to individuals outside network service area policyholder must have option to switch to medigap policy without a restricted provider network
Juvenile policies
coverage written on the life of a child or minor. most often permanent life insurance. locks in lower premium for child's entire life. face amount may automatically increase when child is 18 or 21 and no change to premium (jumping juvenile)
specified or dread disease/critical illness policies
covers catastrophic illnesses specified in policy (cancer, heart disease) strictly only diseases outlined in policy inexpensive policies compared to comprehensive coverage may not cover full cost of every treatment
Level term policy
death benefit = face amount throughout term of coverage. premium remains level. term expressed in years or at a certain age
Decreasing term policy
death benefit decreases over coverage period until it reaches zero at the end of the term
Fixed, level death benefit
death benefit of whole life insurance is fixed and level
Term Life Insurance
death benefit only, increasing premiums temporary coverage, expires at the end of the term. no cash value - cheap - usually to protect against debt (mortgage)
provisions
describe how certain common situations will be handled, as well as rights and obligations of the policyowner and insurer
Universal life insurance
designed for people who want flexible premiums and flexible coverage over the course of their lifetime. premiums are flexible, not fixed and accumulate as interest in the policy's cash value. holder can choose between two options of death benefits
US Patriot Act
deters terrorist activity. establishes measures to prevent, detect, and prosecute international money laundering and financing of terrorism
Uniform Simultaneous Death Act
directing that the primary beneficiary is assumed to have died first
aviation exclusion
does not apply to commercial flights - exclusion applies to private pilots, test pilots, military, crew
Advantages of whole life insurance
does not expire after a specified term cash values accumulate tax deferred options if policy lapses after premiums have been paid
employer sponsored qualified retirement plans tax advantages
employer contributions tax-deductible to the business employee contributions are tax-deductible to employee neither employee or employee contributions are taxable as current income to employees all earnings (except Roth 401(k)) grow tax deferred
eligible groups for group health insurance
employer group multiple employer trust multiple employment welfare arrangements (MEWAs) - welfare benefits to two or more unrelated employers, provides affordable health coverage to small employers Taft-Hartley trust - labor unions association group plan - trade, professional, association group credit disability insurance - lender, creditor
employer responsibilities
employer notification responsibilities - required to inform employees about their rights to affordable coverage and possible subsidies employer mandate - employer shared responsibility - 50+ FT employees must pay $2,000 penalty per EE if they do not offer coverage and at least one FT EE receives a premium subsidy 50+ FT employees that offer coverage but have at least one FT EE receiving premium subsidy will pay lesser of $3,000 for each receiving subsidy or $2,000 per EE excluding first 30 <50 employee exempt
noncontributory employer group plan
employer pays entire premium. at least 100% of employees must participate
Accelerated benefits rider
enables policyholder to apply for an advance on the death benefit proceeds during the lifetime of the insured. insured must have limited life expectancy or meet medical circumstances. payment will be reduced by ay outstanding loans and death benefit reduced by amount of accelerated benefit payment
ERISA
enacted to protect interests of participants in employee benefit plans as well as the participants' beneficiaries. mandates detailed standards for fiduciaries. reporting and disclosures required (summary of plan description, etc.)
primary care provider designation
every insured and dependent must have a PCP
consideration
exchange of value - MONEY
grandfathered health policy
existed prior to ACA costs cannot be increased, benefits cannot be reduced
misstatement of age
face amount of the policy will be adjusted to an amount the premium would have purchased at the insured's correct age at the time of purchase of the policy
market value adjusted annuities
flexibility of various guarantee terms combined with the potential for higher interest rates than traditional fixed investments. guarantee rate only valid if held until maturity. early surrender and withdrawal penalty
medicaid
for persons of all ages whose income and resources are insufficient to pay for health care jointly funded by federal and state, managed by the state, state establishes eligibility guidelines recipients must be US citizens poverty alone does not necessarily qualify person must qualify for either 1. temporary assistance for needy families (TANF, welfare) or 2. supplemental security income (SSI, assistance program for people near poverty line who are age 65+, blind, disabled) covers most health costs, pays medicare premiums, deductibles, coinsurance
workers compensation
form of insurance providing wage replacement and medical benefits to employees injured on the job. Can only obtain if employee relinquishes right to sue employer for negligence.
naviagtors
funded by federal government who help educate consumers cannot legally provide advice to consumers on which plans to select not permitted to sell insurance
Flexible policies
give policyholder numerous options in terms of premiums, face amounts, and investment objectives
Adjustable life insurance
gives the policyholder the options to adjust the face value/death benefit, premium, length of coverage without having to change policies. offers the ability to have term and whole life coverage in one policy
blanket coverage
group members identified as all persons engaged in similar activity (passengers on a plane, spectators at sporting event) members automatically covered when part of group membership changes quickly - no application for insurance or certificate of coverage
eligible groups for group insurance
group must have been formed for a purpose other than for obtaining group insurance for its members employer group plans multiple employer trusts labor unions (Taft Hartley) association group plans group credit life insurance
Renewability
guarantees the policy will renew (extend) at the end of its term. will be renewed for the same term as originally purchased. premium for new renewal period will increase based on insured's age at renewal (insured's attained age)
Graded premium whole life
have an even lower initial premium than modified whole life policies
hospital indemnity
hospital income pays a flat dollar amount as a daily benefit for each day the insured is hospitalized as an inpatient payment made directly to insured (not to hospital) used to provide an income to the insured
Premium payment mode
how frequently premiums are due
coordination of benefits
if a loss is payable under two group health policies, one plan is considered primary and one is secondary benefit pays up to limit first on primary, then secondary spouse or birthday rule
suicide clause
if an insured commits suicide during the first two years after a contract has been issued, company will pay only the premium paid by the insured, not the face amount of the policy
life with refund (annuities)
if annuitant dies and total payments received are less than amount paid, difference paid to beneficiary
grace period
if insured does not pay premium on date when due, policy will stay in force for a limited time before the coverage actually lapses. if insured dies during grace period, policy will pay the benefit minus amount of past due premiums
policy loan provision
if policyowner needs cash but doesn't want to surrender the policy, they can access cash value using policy loan
disability defined as
inability to work either your own occupation or any occupation
Return of premium rider
increasing term rider death benefit = total premiums paid for rider and underlying permanent policy limited duration and expire at specified age or number of years
Long term care rider
independent approach - LTC benefit is independent from life policy because benefits paid will not impact life policy's face amount or cash value integrated approach - links LTC benefits paid to life policy's face amount and/or cash value
prohibition on lifetime and annual limits
individual and group plan carriers are prohibited from putting annual and lifetime limits on EHBs plans are allowed to have limits on non-essential health benefits grandfathered plans are allowed to have limits on EHB
Individual Retirement Accounts (IRAs)
individual must be under age 70 1/2 must have earned income from salary, wages, commissions, bonuses, tips, or money from a divorce decree contributions capped at lesser of 100% of earned income or a flat dollar amount adjusted annually phase out of deduction based on adjusted gross income no deduction if income above max AGI earnings are tax deferred - tax not due until earnings withdrawn 10% penalty tax on withdrawals before age 59 1/2 rollovers and transfers required minimum distributions (RMDs) begin at 70 1/2 and penalty of 50% if not taken
cognitive impairment
individual's ability to perceive, reason, remember LTC benefits triggered when cognitive impairment requires someone to be supervised for their own safety of the safety of others
long term care (LTC)
individuals can plan for future needs bought from insurance company insured chooses type and amounts of coverage protects assets upon death
medicare part b
individuals who enroll in part a are automatically enrolled in part b part b is optional, monthly premium tied to income level and deducted from SS monthly check if initially declines, can enroll jan 1 - march 31 each year (coverage begins on july 1) annual deductible and 20% coinsurance patient must pay difference between actual charge and what medicare pays (reasonable charge)
Disadvantages of whole life
initial premium is higher than term premiums cannot be decreased, and are not flexible death benefit cannot be increased policyowner has no control over how cash value is invested
Needs approach
instead of focusing on income, needs approach looks at the financial situation the survivors will face if the individual will die, more accurate approach and more common
Unilateral Contract
insurance company promises to pay for covered loss, insured does not promise to pay premiums
qualified health plans (QHP)
insurance plans sold on health insurance exchange the only plans that provide premium tax credits and cost sharing reductions for eligible individuals
right to examine (free look)
insured can return policy for full refund of premium common period is 10 days LTC and Medicare 30 days contract then void and insurer not liable for any claims
joint life and survivor
insurer makes payments until last survivor of two annuitants die
interest income only settlement option
insurer retains the death benefit and pays a stated amount of interest on the money. interest is paid to beneficiary at regular intervals, death benefit paid later
payment of claims
insurer will pay the death benefit promptly. required to pay within 60 days after receiving notification of claim
Survivorship policy
insures two individuals and will pay death benefit when the last insured dies. (second to die, last to die). costs less than two individual policies
health insurance exclusions
intentional self inflicted injuries war or act of war elective cosmetic workers comp commission or attempted felony
master policy
issued to the sponsoring group and applicant is policyowner - could be employer or labor union. individual employee will receive a certificate of insurance
state LTC partnership programs
joint effort of commercial insurers, state's insurance department, state Medicaid agency dollar for dollar approach - person may keep assets equal in amount of the benefits received under the partnership policy and assets are exempt from medicaid estate recovery and so are preserved for heirs
variable annuities
keep pace with inflation (supported by investments). investment risk because values not guaranteed against loss. assets that support variable annuities are kept in a separate account where risk is borne by annuity owner. dual regulation
business uses of disability insurance
key person business overhead expense disability buy sell
Disadvantage of term insurance
lasts only for the term of the policy (like renting, not owning the policy) premiums increase as insured gets older renewability features expire before age of average life expectancy (individuals may not be able to obtain or afford coverage at older ages when risk of death is greater)
trust
legal entity which can hold title to property while its managed for the benefit of others three parties: grantor, trustee, beneficiary
Characteristics of whole life insurance
level premium, fixed premium schedule, fixed level death benefit, cash value, guaranteed interest crediting, policy surrender, policy loans, death benefits components,
Certificate of Authority
license to sell insurance - state requirement of companies
annuitization payout options
life annuities (payment guaranteed to last for as long as annuitant lives) temporary annuities (not guaranteed)
Stranger-Owned Life Insurance (STOLI) or Investor-Owned Life Insurance (IOLI)
life insurance arrangements involve investors who persuade seniors to take out a new life insurance policy with the investor's name as the beneficiary. Most states are banning
life insurance vs annuity
life insurance: can be used to create an estate protects against dying too soon uses series of lump sum payments to guarantee lump sum upon death annuities: can be used to liquidate estate protects against living too long uses a lump sum of accumulated money to guarantee a series of income payments while living
personal uses for annuities
lifetime income at retirement, accumulating funds prior to retirement, funding individual retirement accounts, accumulating education funds
Modified premium whole life
lower premiums during the first 3-5 years. initially have lower costs, then premiums increase and are level for the rest of the policy - making them higher in cost than a continuous premium whole life policy
Preferred provider organizations (PPO)
managed care fee for service pre-negotiated rates insured pays less in-network of PPO providers
SHOP marketplace
marketplace where small employers can shop and compare plans - employer must have less than 50 FT employees
qualifying events
marriage birth/adoption of child permanently moving to an area that offers different health plans loss of coverage due to divorce, job loss, loss of eligibility for coverage
small employer tax credit
maximum credits: 50% of premiums paid for small business employers 35% of premiums paid for small tax-exempt employers eligible for two years
pension plans
may either be defined benefit or defined contribution require employers to make funding contributions each year defined benefit - retirement benefit specified defined contribution - retirement benefit not specified
fixed premium schedule
mode of payment for the policy's level premium. if premium not paid when it's due, policy will lapse
common disaster provision
more lenient timespan between the timespan between death of the insured and primary beneficiary when by common accident 30-90 days
renewability ranking
most favorable to least favorable 1. cancelable - insurer can cancel anytime 2. optionally renewable - option to renew on anniversary date 3. conditionally renewable - insurer may terminate coverage for reasons not relating to health 4. guaranteed renewable - policy cannot be canceled except for nonpayment of premium, premiums can be raised 5. noncancelable - insurer cannot cancel coverage except for nonpayment of premiums, premiums cannot be raised
medigap regulations
must be given buyers guide 30 day free look guaranteed renewal guaranteed acceptance if bought within 6 months of enrollment in part B cold lead advertising not allowed sales commissions cannot exceed 200% of renewal commissions renewal commissions must be level in years 2-5 replacement sales commissions cannot be greater than new policies renewal commission preexisting conditions cannot be excluded for more than 6 months
changes in UW application
must be initialed by the applicant
endorsements (modifications)
must be made in writing and agreed to by both the insurer and policyowner. must be signed by an executive officer
Income needs
needs created by living expenses: food, clothing, utilities, mortgage. Family dependency Pre-retirement Retirement
Cash needs
needs that can be met with a lump of money: final expenses, debt payoff, child's education, emergency fund
Disadvantages of variable policies
no guaranteed rate of return complex and complicated highly regulated
group underwriting
no individual medical information is usually requested. considerations include: stability of the group, persistency of the group, existence of the group
ACA provisions
no lifetime or annual limits on essential health benefits (EHBs) no cancellations except for fraud specific preventative services covered dependent coverage until 26th birthday pre-existing conditions must be covered for all eligible individuals guaranteed issuance of health insurance policies no discrimination based on gender, health status, or pre-existing conditions community rating for premiums health insurance exchanges/marketplaces qualified health plans premium tax credits and cost-sharing subsidy creation of navigators
non-qualified retirement plans
not regulated by ERISA can discriminate in favor of executives contributions usually not tax deductible
optional policy provisions
not required 1. change of occupation - more hazardous then less benefits, less hazardous then less premiums 2. misstatement of age - adjust premium to amount at correct age, younger than stated then benefits increased, older than stated then benefits reduced 3. other insurance with this insurer - limit benefits paid under all contracts, premiums may be refunded 4. insurance with other insurers - amount paid by two insurers will be prorated (each pays a share), excess premium refunded 5. relation of earnings to insurance (average earnings) - if disability income exceeds actual average income in past 2 years, benefit reduced and premium refunded 6. unpaid premium - premium deducted from benefit 7. cancellation - 5 days notice from insurer of cancellation, unearned premium returned on pro-rata basis. if insured cancels, unearned premium on short rate basis 8. conformity with state statues - amends any policy provisions to meet state's requirements 9. illegal occupation - insurer not liable, no benefits 10. narcotics - insurer not liable, no benefits
disability underwriting
occupational considerations benefit limits policy issuance alternatives
indemnity plans
offered by commercial insurers fee for service billing and submission of claim forms deductibles and coinsurance complete freedom on choice of provider ability to access specialists without a referral
Single premium whole life
one payment at the time of purchase
Guaranteed minimum death benefit
original face amount of the policy
basic hospital, medical, and surgical policies
original medical expense plans no "out of pocket" expenses low coverage amounts no deductible
medicare part a
over age 65 and covered by SS, enrollment is automatic on first day of the month they reach 65 and is free does not cover: private duty nursing, first three pints of blood, charges for non-medical services coverage based on benefit periods, not calendar year (begins when admitted, ends 60 days after discharge) patient pays deductible days 1-60 fully paid by Medicare days 61-90 medicare pays most, patient pays daily copay SNF days 1-20 fully paid by Medicare, 21-100 daily copay home healthcare = visits, 80% of DME
utilization management
oversight on provision of medical care to make sure it's appropriate and effective prospective review (preauthorization) concurrent review (while treatment is provided) retrospective review (after treatment is complete)
ownership rights
owner of a policy may exercise all policy rights and privileges without the consent of any beneficiary
Medical exams/tests requested during UW process
paid for by the insurer
medicare parts a-d
part a = hospital, skilled nursing, hospice, home health care part b - medical care provided by physicians and other medical services part c - health care delivered by managed care plans part d - prescription drugs
ERISA requirements for retirement plans
participation - plans must benefit al employees, participation open to employees over age 21 with one year of service non-discrimination - plans may not provide benefits to executives that are out of proportion to other ranked employees and cannot discriminate on basis of sex vesting - employees 100% vested in their contributions and vested in employer contributions after 6 years (determines when EE's own money in their plan) reporting and disclosure - participants must receive plan description, notification of changes, and annual report when they enroll fiduciary - anyone with control over the plan or its assets are fiduciaries
Step rate premiums
payment of the higher premium at each renewal
life only (annuity)
payments stop when annuitant dies - pays highest monthly income amount disadvantage: annuitant may die before life expectancy and total payout much less than amount paid
additional monthly benefit rider (AMB)
pays an additional benefit amount with the regular monthly benefit for a limited period of time (6-12 months). paid even if receiving government benefits
Accidental death benefit
pays an extra benefit if insured dies as the result of an accident double or triple indemnity (death benefit is 2x or 3x face value) insured must die within 90 days of accident
life with refund annuity (settlement)
pays an income for as long ad beneficiary is alive, but also guarantees total payments will be at least the amount of the death benefit. if beneficiary dies before total payments reaches death benefit, balance paid to another person
fixed period option (settlement)
pays both an amount of principal and interest to the beneficiary over a certain stated period of time. if beneficiary dies before all proceeds are paid out, remainder of money paid to contingent beneficiary. payments based on: amount of death benefit, guaranteed interest rate, length of chosen period
social insurance supplements (SIS)
pays for additional benefits, less and legislative benefits like social security and workers comp. in addition to other benefits payable under the policy. benefits continue only as long as regular benefits under the policy
life with period certain annuity (Settlement)
pays income as long as beneficiary is alive. beneficiary selects payment period and payments guaranteed for this amount of time. if beneficiary dies, payments continue to another person for the period
life with period certain (annuities)
pays income for as long as annuitant lives, annuitant selects payment period and payments guaranteed for this time (even if they die, they stop even if they live)
joint life (annuities)
pays income until the death of the first of two more annuitants
life only annuity (settlement)
pays largest amount to beneficiary for as long as they live. upon death, no further payments made
AD&D (accidental death and dismemberment)
pays the principal sum (full benefit) if insured dies loses two limbs loses sight in both eyes capital sum (half benefit) if insured loses one limb or sight in one eye monthly benefit
Variable policy
permanent insurance policy designed to provide lifetime coverage for the insured and have cash value and a death benefit major advantage = allow the policyholder to participate in various types of options while not being taxed on the earnings until the policy is surrendered has a separate account instead of guaranteed cash value two death benefit options
Equity indexed universal life insurance
permanent life insurance policy that allows policyholders to tie accumulation values to a stock market index
Whole life insurance
permanent life insurance policy which is guaranteed to remain in force for the insured's entire lifetime, provided required premiums are paid, or to the policy maturity date - premiums will never increase
partial disability benefits
person can perform some, but not all, essential duties of occupation 50% of full disability benefit only paid for 3-6 months
beneficiary
person or entity who will get death benefit - person of interest to the insured
Limited payment whole life
policies allow for a lifetime of premiums to be paid in a shorter amount of time (10 pay or 20 pay whole life) life paid-up at age 65. annual premiums will be higher than continuous payment policies
Disadvantages of flexible policies
policies are more complex important policyholder understands complexities
dividends
policies that pay dividends are participating policies. dividends are a refund of a portion of the premium. not taxable and not guaranteed
Return of premium term
policies will return all or a part of the premium paid for a policy if the insured is still alive at the end of the term. premium higher than typical term policy. premium dependent on % of premium that will be returned
entire contract
policy plus copy of application (plus any riders)
Guaranteed interest crediting
policy's cash value increases steadily over the life of the contract because it is regularly credited with a guaranteed rate of interest
sponsoring group
policyholder/owner controls master policy
Advantages of variable policies
potential of higher returns than the guaranteed rates paid on traditional life insurance products
payment of premium
premiums are due in advance - on or before the date on which the next period of coverage begins. modes are usually annually, semi-annually, quarterly, monthly
Advantages of term insurance
premiums are lower than other types of life insurance policies - initially least expensive form of life insurance
taxation of annuities
premiums are not tax-deductible interest during accumulation not taxed - taxable when paid out interest out first, income tax on interest - 10% penalty if money withdrawn from annuity in lump sum - severe tax penalties exclusion ratio = nontaxable portion of each monthly payment (premiums paid / total expected payments) gain on lump sum = taxable 5 year withdrawals = gain taxable annuity payout = use exclusion ratio spousal option = no tax consequences
taxation of individual life insurance
premiums not tax deductible cash value accumulations are tax deferred (as long as it remains in policy) when policy is surrendered, any gain on cash value is taxable (cash value accumulations not necessarily tax free) withdrawals taxable to extent of any gain - when withdrawal exceeds cost basis policy loans not taxable interest paid on policy loans not tax deductible dividends not taxable, but interest is taxable lump sum benefit not taxable as income (interest earned on payments other than lump sum is taxable) accelerated death benefits = tax exempt
business insurance taxation
premiums not tax deductible (except for executive bonus) death benefits not taxable premiums for executive bonus policies are taxable income to the employee
group life insurance taxation
premiums paid by employer are tax deductible premiums paid by employee are NOT tax deductible death benefits to a named beneficiary are not taxable premiums paid by employer for insurance above $50k is taxable income to employee
Continuous Premium Whole Life
premiums same each year for the duration of the contract. also referred to as straight or ordinary life. if policyowner discontinues payments, they'll receive cash value of the policy
HMOs (health maintenance organization)
prepaid services - individuals pay HMO a specified amount, HMO provides whatever care individual needs out-of-network provider - HMO pays nothing provides both health care service and financing limited providers and limited service area
medicare part D
prescription drugs standalone prescription drug plan (PDP) monthly premium annual deductible with max amount 25% coinsurance once beneficiary reaches coverage gap, PDP pays all drug costs coverage gap = donut hole gap ends in 2020
HMO categories of care
preventative - big emphasis emergency care - must reimburse for OON hospital services other services - diagnostic, rehab, lab, outpatient surgery, prescription drug, dental, vision, LTC, etc
cost savings measures (cost containment)
preventative care reducing hospital care costs - outpatient benefits, second surgical opinions, preauthorization, limits on lengths of stay, alternatives to hospital care (SNF, intermediate nursing facility, rehab, home health care)
Insurance agent acts on behalf of the
principal
pay-in/accumulation period
principal and periodic deposits grow with credited interest. annuity is being funded, before the payout begins. owner can generally: make additional premium payments or deposits take withdrawals from the accumulated value surrender the annuity for its cash value make other changes to the contract
fixed amount option (settlement)
proceeds paid out in a fixed amount over time until both principal and interest have been completely paid to the beneficiary. recipient of payments can change amount. minimum length of payment period based on: amount of death benefit, guaranteed interest rate, chosen payment amount. if interest > guaranteed rate earned, money will last longer than expected (length of payment period)
recurrent disability
protects employees who return to work but become disabled again for the same or related cause. insured considered still disabled and not subject to new elimination period
incontestability
protects insured. after a policy has been in effect for two years the company cannot claim that a statement made in the application for insurance was meant to defraud the insurer
Other insured riders
provide convertible term insurance for a spouse or immediate family member of the primary insured
level premium
purpose is to make lifetime coverage affordable at older ages. results in overpaying for the risk of dying at younger ages and underpaying in later years
Keogh plans
qualified retirement plans set up by self-employed persons/sole proprietorships (individuals)/partnerships
Cash value
reflect the reserves necessary to assure payment of the guaranteed death benefit
waiver of premiums
refunds any premiums paid during the waiting period (usually 90 days), waives future premiums during waiting period
COBRA
requires employers with 20 or more employees to allow former employees and their dependents to continue the benefits provided by the employer's group health insurance plan coverage continued for 18-36 months pay entire premium for coverage employers must provide notification within 14 days option to elect expires 60 days after notification
reinstatement
restoration of a lapsed policy as originally purchased insured must submit application within 3 years, pay all past due premiums with interest, provide evidence of insurability
conversion privilege
right to convert group coverage to individual policy (within 31 days) if events occur
free look
right to examine, gives policyowner a period of time to return a policy for any reason within 10 days of delivery and receive all premiums paid
Characteristics of variable policies
separate account policyowner choice of separate account investments no guaranteed rate of return and risk of loss producer/agent registration
insuring clause
sets forth the insurer's promise to pay benefits upon the insured's death. includes what the company will pay, death benefit amount, and to whom it will be paid
STARR
sharing, transfer, avoidance, retention, reduction
short term disability (STD)
short elimination periods benefit period 6 -24 months benefit amounts 60% or 70% of compensation
ACA summary
signed in 2010, supreme court upheld in 2012 reforms to affordability, quality, availability of healthcare and regulations for public and private insurance reforms in 2014
simplified employee pension
significantly less paperwork and easier administration than qualified retirement plans each employee sets up an IRA and employer makes contributions employees 100% vested in employer contributions
life income option (settlement)
similar to annuity, policy beneficiary guaranteed to receive income for the rest of their life, regardless of how long. choices for annuity: life only, life with period certain, life with refund, joint and survivor life
Indeterminate premium whole life
similar to nonparticipating whole life policy except that it provides for adjustable premiums. company will charge a current premium and may adjust
residual disability
similar to partial disability, but benefits based on amount of income lost income must be reduced by a stated percentage loss (earnings reduced by) * total disability benefit = benefit payment
savings incentive match plans for employees (SIMPLE)
simplified retirement plan for small employers with 100 or fewer employees and no other type of retirement plan may be structured as IRA or 401(k) employees can contribute employees 100% vested for employer contributions
Group life insurance
single contract that covers an entire group of people (employer/employees)
group health insurance UW criteria
size of group composition of group (age, sex, income) flow of members through the group plan design contributory or noncontributory persistency administrative capability
levels of LTC
skilled nursing care (24/7) intermediate care (only 7) custodial care (ADLs)
short term medical expense plans
sold as means of temporary health insurance coverage 90 days, 6 months, 12 months not renewable
Modified Endowment Contracts (MEC)
special type of life insurance under federal income tax law. law prescribes a test that is intended to differentiate between policies that are purchased primarily for certain tax advantages vs policies that are purchased primarily for death protection. once a policy is a MEC, it's a MEC forever passed law to prevent tax shelter 7 pay test limit MEC hit with 10% tax withdrawals taxed on a first in first out basis
gatekeeper concept
subscribers in HMOs must choose PCP and always see them first when seeking care NEED a referral to see a specialist
subsidies
sum of money given by federal government could be in the form of advanced premium tax credits cost sharing reduction only available on silver tier
Accidental death and dismemberment (AD&D)
supplementary coverage pays an extra benefit if insured lives after suffering a severe dismemberment principal sum = amount of the rider and 100% of death benefit paid upon accidental death capital sum = dismemberment benefit, is 50% of the principal sum
Disability Waiver for Flexible Premium Policies
suspends the monthly cost of insurance deductions that are made from the cash account instead of waiving the premium payment. waiting period and standard expiration
equity-indexed annuities
tax deferred annuity whose credited interest is linked to an equity index. guarantees minimum interest rate. returns higher than fixed but not variable.
health savings account (HSA)
tax-advantaged medical savings account available to taxpayers enrolled in a HDHP contributions are tax deductible earnings in HSA grow tax deferred HSA distributions are tax-free when used to pay qualified medical expenses 20% penalty for nonmedical expenses
Express Authority
the authority of an agent, stated in the document or agreement creating the agency. WRITTEN
Insurable interest
the person applying for the policy must be at risk of suffering a significant loss if the insured dies. loss can be emotional or economic
Human life value
the purpose of life insurance is to replace an individuals economic value. Calculation: annual income x number of years until retirement
probationary period
waiting period before eligibility for insurance. typically 1-12 months. employees must enroll within 31 days after probationary period ends
social security benefits
to qualify - paid social security payroll (FICA) taxes to earn 6 credits during last 13 quarters to be currently insured. number of credits increases up to age 62. fully insured status - paid social security for 10 years (40 credits) totally and permanently disabled (any occupation, lasts 12 months or end in death, total blindness) 5 month waiting period amount of benefit based on PIA - primary insurance amount
assignment
transfer of owner's rights, in whole or part, to another individual or entity collateral assignment - does not change ownership absolute or permanent assignment - transfers all rights
endodontics, periodontics, prosthodontics
treatment of the pulp (root canal) treatment of the supporting structures (gums) artificial replacements (bridges, dental implants)
Point of service plan (POS)
type of HMO that allows subscribers to go out of network subscribers can choose their point of service gatekeeper PPOs in-network care = HMO out-of-network care = PPO
Reciprocal Insurers
unincorporated groups of people that provide insurance for one another through individual indemnity agreements
Variable universal life policy
universal life with a separate account. type of permanent insurance. can lapse if cash value falls below amount needed to cover monthly insurance premiums (does not have guaranteed min death benefit)
activities of daily living (ADLs)
used as measurements to determine someone's ability to live independently bathing, dressing, toileting, transferring, continence, eating insureds become eligible for benefits under LTC policy if they are unable to perform 2ish ADLs by themselves
supplemental major medical insurance
used to back up or enhance basic policy has a corridor deductible to begin using supplemental plan coverage
Exchange privilege rider
used to change the insured to a different person
settlement options
used to determine how the proceeds will be distributed to the beneficiary. if option not specified, benefits distributed as lump sum
Joint life policy
usually covers two or more lives with the death benefit being paid when the first insured dies (first to die policies). may be right product for married couples who want benefit for surviving spouse but want to pay less than two individual policies
Payor benefit rider
usually found in juvenile policies. if the person responsible for the premium payments (ex. child's parents) becomes disabled or dies before child is legally an adult, rest of premiums are waived until 18 or 21
fixed annuities
values are guaranteed against loss. supported by the insurer's general account, interest rate guarantee over full year, level payment amount
Waiver of premium rider
will pay the premiums so the policyholder can continue to have coverage for the duration of the policy. insured must be unable to work for a certain period before the waiver takes effect.
403(b) plans
work like 401(k) plans but for employees of non-profit organizations (public schools, churches, hospitals)
ACA essential health benefits
· Ambulatory patient services · Emergency services · Hospitalization · Maternity and newborn care · Mental health and substance use (must be treated with parity) · Prescription drugs · Rehab services · Lab services · Preventative and wellness screenings and chronic disease management · Pediatric services, including oral and vision care