Primerica Life Insurance Vocabulary
Morale Hazards
Similar to moral hazards, except they arise from a state of mind that causes indifference to loss, such as carelessness.
Which two terms are associated directly with the way an annuity is funded?
Single payment or periodic payments
With whom do you complete your license application?
Sircon
Pure risk
Situations that can only result in a loss or no change. NO opportunity for financial GAIN.
Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option?
Size of each installments
Who doesn't have to be registered?
Someone who doesn't receive commissions.
Collateral
Something of value pledged for the payment of a debt
Events in which a person has both the chance of winning or losing are classified as
Speculative Risk
Events in which a person has both the chance of winning or losing are classified as
Speculative risk
Warranty
Statement made in an insurance application by the insured that is the absolute truth.
A man is enrolled in Part A of Medicare and not Part B. Three months into coverage, he applies for a Medicare supplement policy. Which of the following is true?
The insurer can deny coverage.
An insurer that holds a Certificate of Authority in the state in which it transacts business is considered
Authorize insurer
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be
Authorized
The risk management technique that is used to prevent a specific loss by not exposing yourself to that activity is called
Avoidance
Concerning group Medical and Dental insurance, which of the following statements is INCORRECT?
Employee benefits are tax deductible the year in which they were received.
Why do group health providers usually require a certain amount of participation in the plan by eligible employees?
To guard against adverse selection and reduce cost
Which of the following is NOT a goal of risk retention?
To minimize the insured's level of liability in the event of loss
What is the purpose of a fixed-period settlement option?
To provide a guaranteed income for a certain amount of time
Physical Hazards
Individual characteristics that increase the chances of the cause of loss. They exist because of a physical condition, past medical history, or a condition at birth.
Ken has a life insurance policy with a face amount of $500. He pays a premium each week to the agent who sold him the policy. What kind of policy did Ken purchase?
Industrial life
What do individuals use to transfer their risk of loss to a larger group?
Insurance
MGA
Managing General Agent - They hire producers, supervise a territory, manage producer activities, and must be licensed.
MOLAR ... Classification of Private Companies
Marketing & distribution systems Ownership Location (domicile) Authority to transaction business Rating (financial strength)
Nonparticipating stock policy
Traditionally issued by stock companies. Nonparticipating stock policy does not pay dividends to policy owners, however, taxable dividends are paid to stockholders
When an individual purchases insurance, what risk management technique is he or she practicing?
Transfer
Exclusive Agency System/Captive Agents
Type of marketing arrangement Characteristics: 1 agent represents 1 company, exclusive, commissions on personal sales, renewals can only be placed with the appointing insurer
Independent Agency System/American Agency System
Type of marketing arrangement Characteristics: 1 independent agent represents several companies, nonexclusive, commissions on personal sales, business renewal with any company
Managerial System
Type of marketing arrangement Characteristics: branch manager, salaried, agents can be insurer's employees or independent contractors
General Agency System
Type of marketing arrangement Characteristics: general agent-entrepreneur represents 1 company, exclusive, compensation and commissions, appoints subagents
Direct Response Marketing System
Type of marketing arrangement Characteristics: no agents, company advertises directly to consumers, consumers apply directly to the company
Insolvent
Unable to pay debts owed
Acceptance
Underwriter approves the application
According to the rights of renewability rider for cancellable policies, all of the following are correct about the cancellation of an individual insurance policy EXCEPT
Unearned premiums are retained by the insurance company.
What kind of policy allows withdrawals or partial surrenders?
Universal life
executive bonus plan
a plan under which an employer agrees to pay some or all of the premiums on a life insurance policy an executive owns
payor benefit
commonly associated with juvenile insurance, this benefit pays the policy premium when the policy owner becomes disabled or dies
When hearing is demanded 30 days of order, Commissioner must:
conduct a hearing with 10 to 60 after service of the demand
other insured rider
covers someone other than the base policy insured. These riders typically take the form of term insurance.
Disability income benefit
with this rider, in the event of disability the insurer will waive the policy premiums and pay a monthly income to the insured. The amount paid is normally based on a percentage of the face amount of the policy.
Prompt or promptly means
within 10 consecutive days of receipt of a communication concerning a claim. Primerica rule of thumb 24-48 hours
apparent athority
words and actions
The 30-day period for payment of a health claim begins...
when the insurer has sufficient information to determine eligibility for payment
Guilty/innocent policy of Dept. of Commerce
you're GUILTY until proven INNOCENT
Examples of Independent Rating Services
AM Best Fitch Standard and Poor's Moody's Weiss
Firm
a person that markets insurance but does not include an insurer
Elements of a legal contract
1. Agreement - offer and acceptance 2. Consideration 3. Competent parties 4. Legal purpose
total disability
the condition for which total disability benefits are payable as defined in a disability policy
insured buy and sell agreement
when life insurance is bought to provide the funds to support a buy-sell agreement
Rating
An approach used by insurers to accept substandard risks by increasing the premium due to the increased risk involved.
Acts of agent is...
when the agent fails to perform a required act or duty
Implied
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.
Kinds of Individual Agent Licenses
- Life insurance - Accident and health insurance - Property insurance - Casualty insurance - Personal lines insurance
Direct Response Marketing System
- No agents - Company advertises directly to consumers - Consumers apply directly to the company
Independent Agency System/American Agency System
- One independent agent represents several companies - Nonexclusive - Commissions on personal sales - Business renewal with any company
An agent is a person who assists in PANS
- Placing insurance or annuities - Advising about insurance needs and coverages - Negotiating insurance annuities - Soliciting insurance or annuities on behalf of another person
What is the Insurance Secure Fund's obligation?
- Single Risk: $300,000 - Aggregate (property, liability, disability):. $500,000
What is the maximum civil penalty for individual producers for violating the Insurance Code?
$1,000
Quincy's has a $1,000 HRA account. He incurred $750 in medical expenses the first year of the plan and $1,200 in the second year. What is the maximum amount Quincy is entitled to recover for his expenses under the plan?
$1,950 Employees are allowed to roll-over unused balances at the end of the year so Quincy could apply $250 to the second year's expenses
How much can fines be per violation per day?
$10,000
An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?
$10,000, no tax consequence
How much is the fine per day set by the Dept. of Commerce?
$10,000/day
M is the owner of a $225,000 life policy with a triple indemnity rider for accidental death. When M is killed in a car accident, it is determined that the accident was his fault and that he was intoxicated at the time of the accident. The triple indemnity rider in M's policy specifies that the death must not be contributed to by the insured in any manner. In this case, the beneficiary will receive
$225,000.
What is the range of fees for a company that fails to file a company appointment for a producer that has been writing contracts?
$25 per offense; The max per unappointed producer is $300.
If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually?
$3,000
An insured decides to surrender his Whole Life insurance policy which he had purchased 30 years ago. He had paid annual premiums of $500 while the policy was in force (which added up to $15,000). When he surrendered the policy, the cash surrender value was $18,000. What part of the surrender value would be income taxable?
$3,000 The difference between the premiums paid and the cash value would be taxable. In this example, he difference between the premiums paid ($15,000) and the cash value ($18,000) is $3,000.
How much is the license fee per line?
$50 (prop & cas are each lines so $100 total for them) (PLUS $35 technology fee)
Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000 straight life annuity. He was also the insured under a $50,000 paid-up whole life policy that named his wife as primary beneficiary. Considering both contracts, how much will the annuitant's spouse receive in benefits
$50,000
What is the penalty for rebating?
$60-$200 per violation
Cost of Commissioners examination of insurer is due when?
- 10 days after examinee has been served with detailed account if all costs - March 1st for annual billings
Intermediary Corporation/Partnership
- At least one executive must have an insurance license for a corporation to get licensed
Managerial System
- Branch manager - Salaried - Agents can be insurer's employees or independent contractors
Violation of insurance laws (Consequences)
- Commissioner may obtain temp or permanent injunction or restraining order (Cease and desist order) - If a person does not complete within 2 weeks, Commissioner may issue a compulsive forfeiture or fine of up to $5,000 each day
Regulation fee-agent
- Every 2 yrs - $35 - Expire last day of month of the agents birth
3 Year State Regulations
- Examinee domestic insurers and licensed rate service organizations
10-60 days State Regulations
- For Commissioner to give hearing after a request
20 day State Regulations
- For an aggrieved person to request a RE-HEARING - For Commissioner to act on a petition before it is considered denied
General Agency System
- General agent represents 1 company - Exclusive - Commissions on personal sales - Appoints subagents
Wisconsin Insurance Law is divided into 3 main parts
- Licensing of agents - Regulation of insurance marketing practices - Compensation of agents
Avoidance
Eliminating exposure to loss. Risk avoidance.
Effect of negotiations for a contract statement must be stated in one of the following:
- The policy -A written application signed by the person -A written communication provided by the insurer to the insured within 60 days after the effective date of the policy
30 day State Regulations
- To request a hearing after an order is issued - Test scores are valid after exam - Every significant change regarding an agent relationship status reported to Commissioner - Agents notify Commissioner of any felony, misdemeanor, or formal disciplinary action taken by any state regulatory agency, except: driving or fish & game. - Insurer notify Commissioner of termination of agent's appointment
Rehearing will be granted only if:
- a material error of law it fact exists OR - new evidence is discovered
Order issued without a hearing, aggrieved person may:
- demand a hearing in writing within 30 days from date order mailed
After a hearing, Commissioner my revoke, suspend, it limit in while or in part the license if any agent, if the licensee:
- is found unqualified - not if good character - has repeatedly and knowingly violated insurance laws
Immunity from prosecution
- no person excused from testifying - after claiming privilege of no self-incrimination, person may not be criminally prosecuted for testimony - Exception: Perjury, false swearing, contempt in testifying
Exclusive Agency System/Captive Agents
- one agent represents one company - exclusive - commissions on personal sales - renewals can only be placed with appointing insurer
Financial strength of an insurance is based on
- prior claims experience - investment earnings - level of reserves - management
Continuing education
-24 credit hours every 2 years, 3 hours of ethics included. -By last day of month of agents birth -Exempt: limited lines,nonresident
How long does a person have to wait to apply?
-5 years -If for non-payment or CE, may reapply immediately
Viatical Settlement Broker
-A person who receives a fee to negotiate settlement between policyholder and one or more viatical settlement providers - Annual renewals
Advertisements
-Accurate and not misleading -Insurers are responsible for all advertisements
Necessary disclosures
-Agents name -Name of the company the agent is representing -Statement that insurance is being sold -Name of the insurer the agent represents -Types of insurance being solicited
Persons required to promptly reply in writing to Commissioner
-Any officer, manager, or agent of any insurer -Any with a right to control an insurer -Any person with executive authority over insurer -Any insurance agent
The insurer may offer to renew the policy on less favorable terms or at higher premiums if the insurer notifies the policyholder...
-At least 60 days prior to the renewal date, the terms and premiums take effect on the renewal date -Within 60 days prior to the renewal date, the terms and premiums take effect 60 days after the renewal date.
NOT prohibited practices/DO NOT constitute unfair discrimination
-Canceling or refusing a policy for conviction of an offense if that offense is directly related to the risk insured. -Classifying risks only for the purpose of developing statistical data -Underwriting only the class of risks that are specified in the insurer's articles of incorporation -Setting a rate based on the record of all drivers of an insured automobile -Setting a rate based on the number of people living in a household.
Group Life Ins
-Evidence of Insurability: the right to require a person to furnish satisfactory evidence of insurability -Misstatement of age: Benefits or premiums will be adjusted accordingly -Facility of Payment: If no beneficiary, up to $1000 paid to person appearing to be entitled after showing proof of funeral expense -Nonforfeiture: Must include nonforfeiture provisions (if not a term policy) -Grace period: Must be 31 days. If insured dies during grace period, premium may be deducted from face value.
Group Life
-Evidence of insurability: insurer has the right require evidence of insurability -Misstatement of age: adjustment of benefits or premiums -Facility of payment: After the insured's death, the beneficiary is entitled to the benefit -Nonforfeiture provisions: must be available with permanent insurance -Grace period: 31 days
Purpose of Temporary License
-Give time for sale if the goodwill of a business. -Recovery of the agent to the business -Provide for the training and licensing of new personnel ..... May not be renewed it continue after disposal of business
1033 Waiver
-Granted by Commissioner of Insurance-written consent for individual who has been convicted of a crime involving dishonesty to work in the insurance field -Anyone who convicted of felony involving dishonesty who engages in insurance will be fined or imprisoned up to 5 years or both -Attorney General may bring a civil action in the appropriate U.S. District court against any person who engages in conduct in violation of Section 1033 of not more than $50,000 for each violation or the amount of compensation the person received as a result of the prohibited conduct, whichever is greater.
Interstate Insurance Product Regulations
-Interstate Insurance Product Regulation Compact (IIPRC) -Contract between member states: promote and protect consumers' interest, and establish uniform standards for insurance products -Single point of filing for the review and approval of insurance policy forms
Surplus Lines Agent or Broker
-Licensee able to place insurance with unauthorized insurers -Bond required up to$100,000 -Must collect 3% tax paid by policyholders...kept in separate account
Prelicensing requirements do not apply to:
-Limited line (credit, legal, crop, surety, travel, or title -Nonresident -Completed 2-yr tech degree in insurance -Completed 4-yr degree in business with insurance emphasis -Resident transferring to this state
State Life Insurance Fund
-Low-cost life insurance for state residents -Evidence of insurability is required -Policies purchased through the Office of the Commissioner of Insurance
Insurance Policy Readability
-Minimum score of 40 on the Flesch reading ease test. -Minimum score of 50 for Medicare supplement policies. -Must be printed in 10-point type. -Must be appropriately divided, captioned and presented in a meaningful sequence -Must have table of contents, exclusions, definitions, minimal cross-referencing -Must be accompanied by a certification stating that the policy meets the minimum standards
Life Insurance sold with a Mutual Fund
-Must show premium charge separate from any other charges or values. -Show the death benefit for the life insurance separately
Prohibited Unfair Trade Practices
-Offer or grant any special favor or advantage -Offer to deposit money to offset requirements of a loan -Offer to sell any capital stock, security of indebtedness of the insurer -Extension of the grace period in a group policy or more than 45 days in an individual policy.
Stock companies
-Owned by stockholders who share in profits/losses. -Issue nonparticipating policies where policyowners so not share in profits/losses but stockholders receive taxable dividends.
Mutual Companies
-Owned by the policyowners -Issue participating policies where policyowners are entitled to nontaxable dividends (return of premium)
Insurers cannot refuse, cancel or deny insurance coverage to a class of risks, or place a class of risk in rating solely on the following:
-Past criminal record -Physical condition or developmental disability -Past mental disability -Age -Marital status -Sexual preference -Moral character
Illustrations
-Presentation of nonguaranteed elements -General rule: include information about the insurer, insured, underwriting classification, policy benefits -Must be clearly labeled Life Insurance Illustration
Policy Issue and Delivery
-Provide policy summary at the time of delivery -Backdating: no more than 6 months
Reason for Commissioner to revoke agent license
-Repeated violation -Business practices or financial resources not adequate to safeguard customers and public -Fails to pay child support or comply with subpoena or warrant -Delinquent taxes -Provide false information -Did not provide their SSN or EIN
Fraternal Benefit Society
-Sell only to their members -Considered charitable institutions -Not subject to all the regulations -Ex: Lodge, religious organization, fraternal organization with a representative form of government
Suitability of Annuity Sales
-Standards for senior consumers -Recordkeeping 6 years
Conditions and Qualifications for License
-Submit an application and pay required fees -Complete prelicensing requirements -Take and pass exam -Must be 18.
Lloyd's
-Support facilities for underwriters or groups of individuals that accept insurance risk -NOT an insurance company -Each underwriter assumes a part of each risk in the event loss occurs -not subject to strict regulation
Credit Life
-Term insurance -Nonrenewable, non convertible (only when evidence of insurability is not required, and when the policy hasn't been in force for 5 years,)
The insurer is assumed o any fact material to the risk if
-The agent knew the fact -Any of the company's agents learn of the fact after or during the course of transacting business.
A policyholder has a right to have the policy renewed for addition period of time equal to the expiring term unless...
-The insurer has mailed or delivered a notice of intent not to renew at least 60 days before the expiration date -A notice of cancellation or non-renewal for nonpayment of premium must mailed or delivered between 10 to 75 days prior to expiration explaining the effect of nonpayment
Criminal Penalties
-Violate an insurance statute or rule:. -Individual: $5,000 or prison 3 yrs. -Corporation:. $10,000
Requirements Related to AIDS Testing
-Written consent form signed by the applicant to be tested -Record keeping: 1 year -Disclosure rules: to the applicant, health care provider, authorized person, MIB -Coverage cannot be denied based solely on AIDS or HIV test
Variable Contract
-a policy or contract which provides for insurance or annuity benefits that vary according to the investment experience of any separate account. -insurers must be licensed and be approved by Commissioner -Must have satisfactory record for 3 years
Anyone whose activities affect interstate commerce who knowingly makes false material statements...
-may be fined or imprisoned for up to 10 years or both -if it jeopardized the security of the accompanied insurer, the punishment can be up to 15 years.
Agent license remains in effect until:
-revoked, suspended, limited -surrendered by agent -death of agent -Court decision if mental competency -Commissioner funds person, corporation, partnership no longer qualified
Fine for violating order specifically issued to him
-up to $1,000 for each violation -pay back twice the gain realized from violation
What is the maximum annual billing for any insurer?
1% of net premiums earned
A licensed producer cannot transact business on behalf of the insurer unless the producer has either:
1) been appointed by the insurer 2) has the insurer's permission to transact business on its behalf and obtains an appointment within 15 days after submitting the first app. to the insurer
Requirements of a relationship between agents and principal
1. Agent represents the insurer, not the insured 2. Any knowledge of the agent is presumed to be knowledge of the insurer 3. if the agent is working within the conditions of his contract, the insurer is fully responsible 4. When the insured submits payments to the agent, it is the same as submitting a payment to the insurer.
Elements of a Legal Contract
1. Agreement: offer by insurer, acceptance by insured 2. Consideration: $$$ 3. Competent parties: legal age, mentally competent, not impaired by drugs or alcohol 4. Legal purpose: a reason, not against public policy
Market regulation
1. Conflict of interest 2. Gift or a loan as a condition to complete business 3. Supplying confidential information
Insurable risks
1. Due to chance: a loss that is outside the insured's control 2. Definite and measurable: a loss that is specific as to the cause, time, place and amount 3. Statistically predictable: insurers must be able to estimate the average frequency and severity of future losses and set appropriate premium rates 4. Not catastrophic: insurers need to be reasonably certain their losses will not exceed specific limits. 5. Randomly selected and large loss exposure: must be sufficiently large pool of the insured that represents a random selection of risks in terms of age, gender, occupation, health and economic status, and geographic location
Types of agent authority
1. Express 2. Implied 3. Apparent
Pure risk must have:
1. Loss due to chance 2. Loss definite and measurable 3. Loss statistically predictable 4. Loss not catastrophic 5. Large pool of insureds randomly selected with random risks.
3 Types of Hazards
1. Physical 2. Moral 3. Morale
Valid insurable interest
1. Policyowner's own life 2. The life of a family member (a spouse or a close relative) 3. The life of a business partner, key employee, or someone who has a financial obligation to the policyowner (such as debtor to a creditor)
Types of risk
1. Pure 2. Speculative
Insurance transaction includes
1. Soliciation 2. Negotiations 3. Sale 4. Advising an individual concerning coverage or claims.
How long is general free look period (includes life insurance)?
10 days
Must notify commissioner in writing within how many days of a criminal conviction?
10 days
Notify commissioner in writing within how long of a name or address change?
10 days
Anyone acting as an officer, director ,agent, or other insurance employee who is convicted of embezzling funds faces.....
10 to 15 years imprisonment unless it was less than $5,000 embezzled....than the time may be reduced to 1 year.
An AGENCY license renews when?
10/31 every 2 years
The proprietors of a business may deduct the cost of a medical expense plan because they are considered to be self-employed individuals instead of employees. What is the highest percentage that may be deducted?
100% of the taxpayer's annual earned income
Licensee reinstatement period
12 months
Max duration of temp license
12 mos
Within how many days of notifying the commissioner must the insurer sent written notice of termination to the producer?
15
Agent's appointment is effective probably too being entered in the licensing system
15 days
Insurer must notify the agent if termination of appointment
15 days
Minimum age for agent license
18
Temporary License
180 days (NOT 6 mo) Issued to surviving spouse or mom, dad, sister, bro, son, daughter of deceased agent or one going into active duty (Also to court-appointed rep)
For how long is your ins. lic. good?
2 years
Agents license period
2 yrs
Continuing Education
2 yrs
Following hospitalization because of an accident, Bill was confined in a skilled nursing facility. Medicare will pay full benefits in this facility for how many days?
20
How many hours of prelicensing program are required with 1 year of taking exam?
20 hours
How much continuing education is required during each licensed period?
24 hours (HALF must be offered by something other than your company)
How many hours of CD must be ethics?
3 hours
Minimum requirement for CE in ethics
3 hrs
How often must the Commissioner of Insurance examine every domestic insurer?
3 years
Ins companies must keep policy forms and applications and claim records for how long after the effective date?
3 years
All of the following may be excluded from coverage in a Major Medical Expense policy, EXCEPT
Emergency surgery.
You have to apply for a permanent insurance license within how long after passing the exam?
3 years
If an insurer terminates a producer, the insurer must notify the commissioner within how many days?
30
Policy must be delivered or mailed within how many working days of the producer's receipt from the insurer?
30
Within how many days of receiving notice of being terminated may the producer file written comments concerning the termination with the commissioner that will remain part of his file?
30
Insurer must notify the Commissioner of termination of agent's appointment
30 days
Must notify commissioner in writing within how long of a final disposition being decided upon concerning administrative action against you
30 days
Must notify commissioner in writing within how many days of your initial pre-trial hearing date?
30 days
Report changes in name, address, disciplinary actions, convictions
30 days
If additional evidence or proof of loss is necessary, the payment is not considered overdue until
30 days after receipt of such information
Complaint records must be kept for how long by the insurance company?
4 years
Agents must keep records of CE completion
4 yrs
A teacher may defer a portion of his earned income into a(n)
403(b) (TSA).
Oral binders must be followed up in writing to the insured within how many business days?
5
Refunds must be delivered or mailed within how many calendar days of receipt by the producer?
5
A claimant, who is totally and permanently disabled, is eligible for Social Security Disability benefits after an elimination period of
5 months.
Waiting period before reapplying for a license after revocation
5 years
What is the penalty for IRA distributions that are below the required minimum for the year
50%
How many accounts are there under the Insurance Security Fund?
6
The minimum number of credits required for partially insured status is
6
In a small employer medical plan, a pre-existing condition provision applies to conditions for which medical advice or treatment was received within what time frame before the effective date of coverage?
6 months A pre-existing condition provision in a small employer health benefit plan may exclude coverage for a condition for which medical advice, diagnosis, care or treatment was recommended or received 6-months before the effective date of the coverage.
What is the maximum period of coverage under Oregon state continuation rules for group health insurance?
6 months Continuation of coverage will last for a maximum of 6 months after the date that coverage would have ended if the person had not applied for continued coverage.
Financial & complaint records must be retained for how long by the agent?
6 years
Someone licensed as an insurance producer in another state who moves to this state has how many days after establishing legal residence to become a resident licensee without taking prelicensing education or an exam?
90 days
Under the uniform required provisions, proof of loss under a health insurance policy normally should be filed within
90 days of a loss.
Which of the following is NOT true regarding annuity payments?
A "deferred annuity" is characterized by the time during which payments are made into the annuity and gain interest on a nontaxable basis
What must an insurance company obtain to do business?
A certificate of authority - this makes them an admitted carrier
Timely Payment of Claims
A claim is considered overdue if not paid within 30 days after the insurer received full or partial written notice.
Which of the following would be considered an unfair claims settlement practice?
A claims adjuster advises the insured that if the claim goes to arbitration, the insured would probably receive less than what is currently being offered
What must an agent obtain to be able to solicit business?
A company appointment (aka contract)
Insurance policy
A contract between a policyowner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events
Contract of Adhesion
A contract drawn by one party that must be accepted as is on a take-it-or-leave-it basis
Unilateral Contract
A contract that results when only one of the parties is legally bound to do anything
Reinsurance
A contract under which one insurance company (the reinsurer) indemnifies another insurance company for part or all of its liabilities. Insurance for insurers. The purpose of reinsurance is to protect insurers against catastrophic losses.
If a company has a Simplified Employee Pension plan, what type of plan is it?
A defined contribution plan for a small business
Fraud
A deliberate deception intended to secure an unfair or unlawful gain. Grounds for voiding a policy
Certificate of Authority
A document that authorizes a company to start conducting business and specifies the kinds of insurance a company can transact. It is illegal for an insurance company to transact insurance without this kind of certificate States who have been approved are considered authorized or admitted, states who have not been approved are considered unauthorized or non admitted.
All of the following could own group life insurance EXCEPT
A group needing low-cost life insurance.
Homogeneous
A large number of units having the same or similar exposure to loss
Homogenous
A large number of units having the same or similar exposure to loss.
Estoppel
A legal process that can be used to prevent a party to a contract form re-asserting a right or privilege after that right or privilege has been waived. Estoppel is a legal consequence of a waiver
Agent/Producer/Intermediary
A legal representative of an insurance company
Risk retention group
A liability insurance company owned by its members. The members are exposed to similar liability risks by virtue of being in the same business or industry. Purpose of risk retention group is to assume and spared all or part of the liability of its group members.
Insurance companies may be classified according to the legal form of their ownership. The type of company organized to return any surplus money to their policyholders is
A mutual insurer
Applicant or proposed insured
A person applying for insurance
Beneficiary
A person who receives the benefits of an insurance policy
This state provides for a temporary license for all of the following EXCEP
A producer's retirement.
Indemnity
A provision in an insurance policy that states that in the event of loss, an insured or a beneficiary is permitted to collect only to the extent of the financial loss, and is not allowed to gain financially because of the existence of an insurance contract.
Which of the following would be required to be licensed as an insurance producer
A salaried employee who advertises and solicits insurance
Which of the following conditions would a disability income policy most likely NOT require in order to qualify for benefits?
A specified income status prior to the disability
Material Misrepresentation
A statement that, if discovered, would alter the underwriting decision if the insurance company
Exposure
A unit of measure used to determine rates charged for insurance coverage.
Exposure
A unit of measure used to determine rates charged for insurance coverage. 1. Age of insured 2. Medical History 3. Occupation 4. Gender
Censure
A warning; a formal reprimand of a producer. Becomes permanent part of producer's record, but doesn't affect status of being licensed.
Promissory warranty
A warranty in which certain things will be done or not be done after the policy takes effect.
The two types of assignments are
Absolute and collateral.
Warranty
Absolutely true statement upon which the validity of the insurance policy depends
Agent responsibility
Accurately complete application, submit application, delivery policy
What qualifies as a gross misdemeanor on the first offense?
Acting as a producer without a license Making false statements on an app. for insurance Forging a signature
Brokers
Acts in procuring insurance. Does not act on behalf of the insurer but the insured.
What is the amount a physician or supplier bills for a particular service or supply?
Actual charge
Returning Indicia of Agency
Agents cannot refuse or fail to promptly return all indicia of agency to any insurance company they represent whenever the company requires it.
Fiduciary responsibility
Agents must treat applicants and insureds in an ethical manner when handling the funds of the insured and the insurer. It is illegal for insurance producers to commingle premiums collected from the applicants with their own personal funds
What are parts of a legal insurance contract? (NOT life & health)
Agreement (offer & acceptance) Consideration Competent parties Legal purpose
What is a characteristic of a 501(c)(9) trust?
All of the above are characteristics of a 501(c)(9) plan Some small employers do not have enough employees to form a group large enough to qualify for group insurance. These employers may join with other employers in the same or similar industry and form a trust to provide health coverages. They may operate as a non-profit trust under the IRS code. The plan may be "employer-pays-all" (noncontributory) or may require the employee to pay a portion of the costs (contributory).
When an insured purchased her disability income policy, she misstated her age to the agent. She told the agent that she was 30 years old, when in fact, she was 37. If the policy contains the optional misstatement of age provision
Amounts payable under the policy will reflect the insured's correct age.
Warranty
An absolutely true statement upon which the validity of the insurance policy depends.
Contract
An agreement between two or more parties enforceable by law
Contract
An agreement between two or more parties that is enforceable by law
Which of the following would be considered a nonmedical insurance application?
An application on which the medical information is completed by the applicant and the agent only
Under which condition would an employee's group medical benefits be exempt from income taxes?
An employee's group medical benefits are generally exempt from taxation as income.
Risk purchasing group
An entity which offers insurance to groups of similar businesses with similar exposures to risk.
While a claim is pending, an insurance company may require
An independent examination as often as reasonably required. While a claim is pending, an insurance company may require an independent exam as often as reasonably required.
consumer
An individual about whom a financial institution collects information - became this way because of the Gramm Leach Bliley Act.
To which of the following policies would the State regulations on illustrations NOT apply?
An individual variable life policy
customer
An individual with whom a financial institution has an ongoing relationship - became this way because of the Gramm Leach Bliley Act.
Foreign
An insurance company incorporated in another state
Domestic
An insurance company incorporated in its own state
Domestic Insurer
An insurance company incorporated in this state
Alien
An insurance company incorporated outside the US
Gramm-Leach-Bliley Act
An insurance company may not disclose nonpublic personal information to a non-affiliated third party except for: -Ins. co. discloses to consumer in writing that info may be disclosed to a 3rd party -Consumer is given the change to direct that information not be disclosed. -Consumer is told how he can exercise a nondisclosure option Requires 2 disclosures: 1) when policy is purchase or relationship is established. 2) before disclosing protected info Requires annual privacy disclosure and right to opt out
Foreign Insurer
An insurance company that is incorporated in another state.
Alien Insurer
An insurance company that is incorporated outside the United States
Solvency
An insurer is able to pay its debts and meet its obligations
pretext interviews
An interview when a person attempts to obtain information from another person...and they pretend to be someone else.
inducements
An offer that attempts to influence the other party
Fraternal benefit society
An organization formed to provide insurance benefits for members of an affiliated lodge, religious organization, or fraternal organization with a representative form of government. Considered charitable institutions
Suitability of Annuity Sales-Wisconsin
Any consumer: before insurers or agents can make recommendations to consumers regarding a purchase of exchange of an annuity, they must have reasonable grounds to believe that the recommendation is suitable based on the facts disclosed by the consumer.
Albert and Bryan are partners in a business. They purchase a Buy-sell agreement, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?
Any form of life insurance
rebating
Any inducement offered to the insured in the sale of insurance products that is not specified in the policy
Unfair inducements
Any special favor or advantage in dividends or benefits, stocks, bonds, securities, accrued dividends, profits, anything of value
Offer
Applicant makes the offer when submitting the application
Offer
Applicant makes when submitting application
Morale Hazard
Arises from a state of mind that causes indifference to loss, such as carelessness.
SIMPLE Plans require all of the following EXCEPT
At least 1,000 employees.
When must an insurance company present an outline of coverage to a person?
At the time of application
When must the Medicare Supplement Buyer's Guide be presented?
At the time of application
When must there be an insurable interest?
At time of application
Express
Authority a principal intends to grant to an agent by means of the agent's contract. It is the authority written in the contract
A dental plan that provides coverage based upon a specified maximum scheduled amount for each procedure and pays on a 'first dollar' basis with no deductible or coinsurance is a
Basic or scheduled plan.
Favor of the insured
Because only the insurance company has the right to draw up a contract (ambiguities in a contract of adhesion), and the insured has to adhere to the contract as issued, the courts have held that any ambiguity in the contract should be interpreted in favor of the insured
Which of the following is NOT true regarding an annuity certain?
Benefits stop at the annuitant's death.
An individual is insured under his employer's group Disability Income policy. The insured suffered an accident while on vacation that left him unable to work for 4 months. If the disability income policy pays the benefit, which of the following would be true?
Benefits that are attributable to employer contributions are fully taxable to the employee as income.
Personal Contract
Between insurance company and an individual
Consideration
Binding force in any contract. Consideration is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representation made in the application. The consideration on the part of the insurer is the promise to pay in the event of loss
The First Street Church plans to sponsor a summer camp for the youth of their congregation. They would like to purchase insurance that would pay benefits should one of the youth get injured while participating in the camp activities. The type of policy they would likely need is a/an
Blanket.
Disclosure of personal medical information
Both insurers and those who collect medical information are restricted by statute in the state of WI. The law specifies what form, , the timeframe, etc.
controlled business
Business written on the producer's own life or interests.
ERISA
Employee Retirement Income Security Act: defines federal standards for private pension plans
Details about "assumed names"
CANNOT conduct business under an assumed name until receiving prior approval from Commissioner. The name must be filed with the Sec of State. (Ex - HD Insurance Services)
Policies regarding insuring an armed forces member:
Cannot refuse to insure someone because they are a member, except if they are on active duty. Once they're back from active duty, you cannot refuse to reinstate coverage. The armed forces member must apply for reinstatement within 90 days after being done with active duty. The reinstatement is guaranteed.
Carol is insured under her employer's group life insurance plan at her place of employment. All of the following statements about her coverage are true EXCEPT
Carol could choose what type of insurance her conversion policy provided (Term or Permanent).
When an insurer offers services like preadmission testing, second opinions regarding surgery, and preventative care, which term would best apply?
Case management provision
Peril
Causes of loss insured against in the policy 1. Life insurance: Financial loss caused by premature death of insured. 2. Health insurance: Insures against medical expenses and/or loss of income caused by sickness or injury 3. Property insurance: Insures against loss of property or loss of its income-producing abilities. 4. Casualty insurance: Insures against the loss and or damage of property and resulting liabilities
All of the following LTC coverages would encourage an insured to receive care at home EXCEP
Child care.
Market conduct
Code of ethics for agents, market regulations
Declaratory Order
Commissioner issues when new law changes occur
General public hearing
Commissioner may hold any time
Hazards
Conditions or situations that increase the probability of an insured loss occuring
Hazards
Conditions or situations that increase the probability of an insured loss occurring
The Commissioner of Insurance has what powers?
Conducting investigations and examinations Making reasonable rules and regulations Approving insurance policy forms sold within the state (NOT promulgating (put a law into effect by official proclamation) insurance law)
What document must be made part of the insurance policy entire contract?
Copy of the original application
A long stretch of national economic hardship causes a 7% rate of inflation. Devonne notices that the face value of her life insurance policy has been 7% as a result. What is the name of the provision that caused this change?
Cost of living rider
Life insurance
Coverage on human lives
Insurance Secure Fund
Created to protect policyowners, insureds, beneficiaries from excessive delay and loss in the event of liquidation of insurer
Which of the following is NOT allowed in credit life insurance?
Creditor requiring that a debtor buys insurance from a certain insurer
Criteria used to assess trustworthiness and competence
Criminal record, accuracy of information, regulatory and other actions
Date of Payment
Date a check or payment was properly mailed or delivered.
Which of the following would be tax free?
Death benefit received in a lump-sum settlement
When must an IRA be completely distributed when a beneficiary is not named?
December 31 of the year that contains the fifth anniversary of the owner's death.
An individual has just been diagnosed with a quickly-spreading, fatal form of cancer; his oncologist predicts that he will live for 5 months. He applies for individual life insurance. What risk classification will he most likely receive?
Declined
Which of the following types of insurance policies is most commonly used in credit life insurance?
Decreasing term Credit insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor. It is usually written as decreasing term insurance.
Law of agency
Defines the relationship between the principal and the agent/producer. The acts of the agent/producer within the scope of authority are deemed to be the acts of the insurer
Unfair claims settlement examples:
Delaying or refusing a settlement because claimant retains an attorney or public adjuster. Demanding irrelevant info that has nothing to do with the loss. Failing to adopt reasonable standards for prompt investigation of a claim. Refusing to pay a claim without conducting a reasonable investigation. Compelling an insured to commence litigation by offering an inadequate settlement. Making settlement on one part of a claim contingent on agreement to settle on another part of the claim. (2 independent adjustors) Denying a claim without disclosure; the insurer must cite the specific policy provision that applies. Making an arbitrary assignment of comparative negligence; the insurer must have reasonable evidence and documentation. Denying a claim because the insured didn't "officially" report it or use the proper forms. Refusing to pay a claim because the insured might collect somewhere else Requiring inspections at specific places or far away. Failing to reply to customer inquiries within 10 days. Making claim payments without setting forth the coverage under which the payment is made.
Which of the following is not covered under Part B of a Medicare policy?
Dental Care
Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?
Depreciation period
Personal Contract
Distinct characteristic of an insurance contract An insurance contract is between the insurance company and an individual. The company has a right to decide whit whom it will and will not do business, the insured cannot be changed to someone else without the written consent of the insurer, nor can the owner transfer the contract to another persons without the insurer's approval.
Unilateral Contract
Distinct characteristic of an insurance contract Only one of the parties to the contract is legally bound to do anything. The insured makes no legally binding promises. However, an insure is legally bound to pay losses covered by a policy in force
Contract of adhesion
Distinct characteristic of an insurance contract Prepared by one of the parties (insurer) and accepted or rejected by the other party (insured). Insurance contracts are offered on a "take-it-or-leave-it" basis by an insurer
Aleatory Contract
Distinct characteristic of an insurance contract There is an exchange of unequal amounts or values. The premium paid by the insured is small in relation to the amount that will be paid by the insurer in the event of loss
Conditional Contract
Distint characteristic of an insurance contract Requires that certain conditions must be met by the policy owner and the company in order for the contract to be executed, and before each party fulfills its obligations
Which of the following terms is used to name the nontaxed return of unused premiums?
Dividend
Which of the following is true regarding dividend-related taxation?
Dividends are not taxable. Dividends are not considered to be income for tax purposes, since they are the return of unused premiums. The interest earned on the dividends, however, is subject to taxation as ordinary income.
Revocation
Done for serious misconduct. They're prohibited from license reapplication for 2 years from the effective date of revocation. Along with reapplication comes $20,000 bond
A policy which covers medical costs related to a specific condition is called a
Dread Disease Policy.
What does the Commissioner have power/not have power to do?
ENFORCE laws & establish rules & procedures...he cannot put you in jail.
When a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount
Equal to the original policy for as long a period of time that the cash values will purchase.
Notice of Right of File Complaint
Every insurer is required to notify its policyholder and insureds of their right to file a complaint in the form specified by the state and must be provided for each policy issued by an insurer.
What is the difference between the Medicare approved amount for a service or supply and the actual charge?
Excess charge
Which of the following statements is correct concerning taxation of long-term care insurance?
Excessive benefits may be taxable.
Immunity
Exemption from a duty or legal obligation, or protection against a liability
Even though "sickness" is a peril covered by a health insurance policy, coverage may be limited or excluded because of all of the following EXCEPT
Exemption periods.
Affirmative warranty
Express (written) or implied positive representation that affirms an existence of a fact at the time the policy was entered into.
The authority granted to an agent through the agent's contract is referred to as
Express authority
Unfair Method and practice
Failure to: - Acknowledge communication in a prompt manner - promptly complete claims investigations - provide forms, instructions, and assistance to insured and claimants. - attempt fair and equitable settlement - misrepresentation
An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of?
False advertising
Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?
Family term rider
The requirement that agents not commingle insurance monies with their own funds is known as
Fiduciary responsibility
How many pints of blood will be paid for by Medicare Supplement core benefits?
First 3
Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits?
Fixed amount Under the installments for a fixed amount option, the annuitant selects the amount of each payment, and the insurer determines how long they will pay benefits. This option pays a specific amount until the funds are exhausted. There are no life contingencies.
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid
For 20 years or until death, whichever occurs first.
Nonpublic Personal Financial Information
For a licensee to disclose nonpublic personal health information about a consumer, the consumer must have written or electronic authorization or the disclosure must be authorized by law.
For how long does a company appointment remain in force?
Forever until voluntarily terminated by the producer or insurer. If you quit, you let the company know, and they'll let the commerce dept. know.
Proper exchange of business
Forwarding of insurance business from one agent to another when the forwarding agent is not able to place business with any of the companies for which the agent is listed
Free choice of insurer
Free to choose the insurer of his or her choice
Private insurance
Funded by premiums
Government insurance
Funded by taxes
Fiduciary capacity
Funds received must be promptly accounted for and paid to the insured, insurer, or producer as enitled.
Physical Hazard
Individual characteristics that increase the chances of the cause of loss. (i.e. physical condition, past medical history, condition at birth)
Regarding long-term care coverage, as the elimination period gets shorter, the premium
Gets higher. LTC policies also define the benefit period for how long coverage applies, after the elimination period. The benefit period is usually 2 to 5 years, with a few policies offering lifetime coverage. Obviously the longer the benefit period, the higher the premium will be; and the shorter the elimination period, the higher the premium will be.
Waiver
Giving up a legal right
Certificate of Insurance
Group insurance: Each individual plan participant receives one. It outlines the contract provisions and benefits. Must include right to file complaint. Master policy is issued to the group sponsor
In life insurance policies, cash value increases
Grow tax deferred.
A new employee who meets HIPAA eligibility requirements must be issued health coverage on what basis?
Guaranteed
A Universal Life insurance policy has two types of interest rate that are called
Guaranteed and Current
If Tom's policy allow him to make periodic additions to the face amount at standard rates, without proving insurability, his policy includes a
Guaranteed insurability option
What insurance concept is associated with the words "Weiss" and "Fitch"?
Guides describing company financial integrity
Events or conditions that increase the chances of an insured loss occurring are referred to as
Hazards
HIPPA
Health Insurance Portability and Accountability Act of 1996. Privacy and security regulations that apply to entities that have access to information about a person's health.
The purpose of the Life and Health Insurance Guaranty Association is to
Help protect policyowners and beneficiaries against financial loss caused by the insolvency of an insurance company.
Units with the same or similar exposure to loss are referred to as
Homogenous
Location of incorporation
How insurance companies are classified
A projection of insurance needs that is based upon the capitalization of an applicant's future earnings is
Human life value approach.
An insurance contact is or is not valid even if sold or serviced by an unlicensed agent.
IS VALID
Reasonable expectations
If an agent implied through advertising, literature, or statements that a person will be covered, the insured can expect coverage
Ashley purchases a $90,000 annuity with a single premium and begins taking payments 2 months after that. What type of annuity does Ashley have?
Immediate
Utmost good faith
Implies that there will be no fraud, misrepresentation, or concealment between the parties
Annually renewable term policies provide a level death benefit for a premium that
Increases annually.
In long-term care (LTC) policies, as the benefit period lengthens, the premium
Increases.
What type of insurance would be used for a Return of Premium rider?
Increasing Term
Contestability
Individual and group life insurance policy may not be contested after 2 years from the date of issue, except for nonpayment of premiums.
Insurance company tree
Insurance companies ->ownership ---->stock or mutual ->domicile ---->domestic, foreign, or alien ->authority ---->admitted/authorized, nonadmitted/nonauthorized ->marketing/distribution system ---->independent agency, exclusive agency, general agency, managerial system, or direct response marketing ->rating/financial status
Protection from adverse risk
Insurance company has the option to refuse or restrict coverage for bad risks or charge higher rates
Effect of notice to agent
Insurance company is considered to be notified if the company's authorized agent has been notified.
Insurance
Insurance is a contract in which one party (the insurance company) agrees to indemnify (make whole) the insured party against loss, damage, or liability arising from an unknown event. Insurance transfers the risk of loss from an individual or business entity to an insurance company, which in turn spreads the costs of unexpected losses to many individuals
Reciprocal
Insurance resulting from an interchange of reciprocal agreements of indemnity among persons known as subscribers, collectively known as Reciprocal Insurance Company Exchange.
Producer's fiduciary responsibility is to the:
Insurer first (because of the contractual agreement), then the consumer
Who makes up the Medical Information Bureau?
Insurers
Concealment
Intentionally withholding of information if a material fact that is crucial in making a decision. May void a policy
COLLATERAL ASSIGNMENT
Involves a transfer of partial rights to another person. It is usually done in order to secure a loan or some other transaction.
Speculative Risk
Involves the opportunity for either loss or gain. These types of risks are not insurable
Which of the following best describes a misrepresentation?
Issuing sales material with false statements about policy benefits Misrepresentation is issuing, publishing or circulating any illustration or sales material that is false, misleading or deceptive as to policy benefits or terms, the payment of dividends, etc. This includes oral statements
What is NOT a benefit of a POS plan?
It allows guaranteed acceptance of all applicants
What is the benefit of choosing extended term as a nonforfeiture option?
It has the highest amount of insurance protection
All of the following statements about Medicare Part B are correct EXCEPT
It is a compulsory program.
Which of the following best describes annually renewable term insurance?
It is a level term insurance.
All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT
It is a life contingency option.
Which of the following best describes the MIB?
It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance. The Medical Information Bureau (MIB) is a nonprofit trade organization which receives adverse medical information from insurance companies and maintains confidential medical impairment information on individuals.
Restraint of competition
It is illegal to be involved in any activity of boycott, coercion, or intimidation intended to restrict fair trade or to create a monopoly
An insurer invests the money it receives from premiums paid by its insureds. Which of the following is true regarding the interest earned on these investments?
It is used to lower premiums.
Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices?
Making comparisons between different policies
Which of the following is true regarding the annuity period?
It may last for the lifetime of the annuitant. The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected.
Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option?
It provides a higher monthly benefit than a pure life annuity.
Which of the following is true about the premium on the children's rider in a life insurance policy?
It remains the same no matter how many children are added to the policy.
Which of the following statements about the reinstatement provision is true?
It requires the policyowner to pay, with interest, all overdue premiums before the policy is reinstated.
Sue has an HSA and is planning to leave her current job for a new job. When she leaves her job, what will happen to her HSA?
It will continue because it is owned by Sue, not her employer
Which of the following statements is true concerning the Accidental Death Rider?
It will pay double or triple the face amount.
Every insurer marketing Long-Term Care insurance must establish marketing procedures to ensure all of the following EXCEPT
LTC policies are marketed effectively to prospective insureds.
PRODUCER's license renews when?
Last day of the producer's birth month (used to be 10/31)
Estoppel
Legal process that can be used to prevent a party to a contract from reasserting a right or privilege after that right or privilege has been waived. Legal consequence of a waiver.
Reduction
Lessen the possibility or severity of a loss. (smoke detectors, physicals)
Temporary License for agents
License up to 12 months to the personal representative of a deceased, mentally or physically disabled agent or one in military service
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?
Limited pay whole life insurance
An example of a surplus line carrier
Lloyd's of London
Domicile
Location of incorporation. Insurance companies are classified by location
Transfer
Loss borne by another party. Insurance transfers risk from insured to insurer. Safest method
Which of the following is excluded in a dental insurance plan?
Lost dentures
All of the following statements describe a MEWA EXCEPT
MEWAs are groups of at least 3 employers.
All insurance companies admitted to sell life and/or health insurance contracts in Oregon must, as a condition to maintain their certificate of authority,
Maintain membership in the Oregon Life and Health Insurance Guaranty Association.
Which type of service under a nonscheduled plan typically has large deductibles and pays around 50% for the services provided?
Major service Major services under nonscheduled plans, which cover treatments such as inlays, crowns, dentures and orthodontics, either have large deductibles or the insured pays 50% of the costs.
In group insurance, what is the policy called?
Master policy In group insurance the policy is called the master policy and is issued to the policyowner, which could be the employer, an association, a union, or a trust.
Insurers or agents may or may not use the Insurance Security Fund's protection as a reason for buyers to purchase.
May Not
Per Stirpes
Means by the bloodline, distributes the benefits of a beneficiary who died before the insured to the beneficiary's heirs.
reciprocal
Members of an unincorporated group insure each other and share the losses with each other. Is managed by an attorney-in-fact (POA)
What is a retrospective-rating arrangement?
Method of establishing a premium on an a large group
A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard?
Morale
The three main differences between fixed and variable annuities include all of the following EXCEPT
Mortality
Parties to a contract
Must be capable of entering into a contract (legal age, mentally competent, not under influence of drugs or alcohol.
Competent Parties
Must be capable of entering into a contract in the eyes of the law. Generally this requires that both parties be of legal age, mentally competent to understand the contract, and not under the influence.
Legal Purpose
Must be for a legal act. A contract for an illegal act isn't valid.
NAIC
National Association of Insurance Commissioners - an association of state commissioners that influences the industry's self-regulation
NAIC
National Association of Insurance Commissioners... organization compared of insurance Commissioners from all 50 states, D.C., and 4 U.S. territories
Can a producer pay commission to someone for helping sell insurance in MN if that person isn't licensed?
No
Can you carry over credits from one license period to another?
No
Is speculative risk insurable?
No
Garrett is involved in a car accident. In addition to general, less serious injuries, he permanently loses the use of his leg and is rendered completely blind. The blindness improves a month later. To what extent will he receive Presumptive Disability benefits?
No benefits Presumptive Disability plans offer full benefits for specified conditions. These policies typically require the loss of use of at least two limbs, total and permanent blindness, or loss of speech or hearing. Benefits are paid, even if the insured is able to work. Because Garrett's blindness was only temporary and the loss of use in only 1 leg, he does not qualify for presumptive disability benefits
Utmost Good Faith
No fraud, misrepresentations, it concealment. Accuracy, clear and truthful, both agent and applicant
Influencing employers
No insurer, agent, or employee may attempt to influence any employer to refuse employment or terminate employment of any person in connection with an insurance contract
Occasional Exchange of Business
No more than 5 insurance risks per calendar year with a single insurer. No more than 25 insurance risks per calendar year with all insurers
Use of Official Position
No one holding a position in government may us decision-making power to coerce a person to purchase insurance.
Life Insurance and Annuities
No one may perform, offer to perform, or advertise any service in life insurance and securities, unless the person is licensed and authorized in both areas
Are surplus lines carriers admitted or non? Can they sell insurance in MN without a cert of authority?
Non-admitted; they can sell insurance in MN without a cert. of auth.
A prospective deferred annuity owner is concerned about what would happen if he surrendered the annuity before the annuitization period. The agent most likely explained which of the following
Nonforfeiture option guarantees that the owner will receive a surrender value of the contract.
A prospective deferred annuity owner is concerned about what would happen if he surrendered the annuity before the annuitization period. The agent most likely explained which of the following?
Nonforfeiture option guarantees that the owner will receive a surrender value of the contract.
Lloyd's associations
Not an insurance company, provides support facilities for underwriters or routs of individuals that accept insurance risk. Lloyd's associations are a group of individuals who operate an insurance mechanism using the same principles of individual liability of of insurers that Lloyd's of London uses. Each individual underwriter assumes a part of each risk. Most states have laws which prohibit the organization or licensing of American Lloyd's.
Premium payments for personally-owned disability income policies are
Not tax deductible.
Which provision concerns the insured's duty to provide the insurer with reasonable notice in the event of a loss?
Notice of Claim
During replacement of life insurance, a replacing insurer must do which of the following?
Obtain a list of all life insurance policies that will be replaced
In long-term care insurance, what type of care is provided with intermediate care?
Occasional nursing or rehabilitative care Intermediate care is nursing and rehabilitative care provided by medical personnel for stable conditions that require assistance on a less frequent basis than skilled care.
How often may a life settlement provider contact an insured regarding the insured's health status if the insured's life expectancy is more than one year?
Once every 3 months
Sharing
One method of handling risk for a group of individual persons or businesses with the same or similar exposure to loss to share the losses that occur within that group
Transfer
One method of handling risk, most effective. Transfer the risk so that the loss is borne by another party. Insurance is the most common method of transferring risk from an individual or group to an insurance company.
Avoidance
One method of handling risk. Eliminating exposure to a loss. Effective but seldom practical
Reduction
One method of handling risk. Includes actions such as installing smoke detectors, having an annual physical to detect health problems early, or making a change in lifestyle
Retention
One method of handling risk. The planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance. The purpose of retention is: 1. To reduce expenses and improve cash flow 2. To increase control of claim reserving and claims settlements 3. To fund for losses that cannot be insured
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the
One-year term option.
An insured had paid only part of her total number of IRA premiums before she died. What effect will this have on the insured's estate?
Only the premiums paid will be included in the estate
Speculative risk
Opportunity for either loss or gain
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the
Other-insured rider.
Stock companies
Owned by stockholders who provide the capital necessary to establish and operate the insurance company and who share in any profits or losses
Mutual companies
Owned by the policy owners and issue participating policies.
Sam has a life insurance policy from a participating company and receives quarterly dividends. Sam has instructed the company to apply his dividends to the policy to increase the death benefit. The dividend option that Sam has chosen is called
Paid-up additions.
Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends plus interest and the policy cash value to pay the policy up early?
Paid-up option
The part of Medicare that helps pay for inpatient hospital care, inpatient care in a skilled nursing facility, home health care and hospice care, is known as
Part A.
A participating insurance policy may do which of the following?
Pay dividends to the policyowner
A prospective insured receives a conditional receipt and dies before the policy is issued. The company will
Pay the policy proceeds only if it would have issued the policy.
What is the term that most accurately describes the provision designed to relieve life insurance premium payment for minors whose parents have died or become disabled?
Payor Benefit
Which of the following riders would NOT cause the Death Benefit to increase?
Payor Benefit Rider
Which of the following riders would NOT cause the Death Benefits to increase?
Payor Benefit Rider
Forfeit
Penalty; something surrendered as punishment
What type of beneficiary designation allows the benefit to pass from a deceased primary beneficiary to the beneficiary's heirs, instead of splitting the benefit among surviving primary beneficiaries?
Per stirpes Per stirpes class designation provides distribution by family line or branch in the event a beneficiary predeceases the insured.
Fiduciary
Person in a position of special trust and confidence
Retention: defined and purpose
Planned assumption of risk by and insured through the use of deductibles, co-pays, or self-insurance Purpose: 1. Reduce expenses & improve cash flow 2. Increase control of claim reserving and claims settlements 3. Fund for losses that cannot be insured.
Parts of a life & health contract:
Policy face (title page) Insuring clause Conditions Exclusions
Lapse
Policy termination due to nonpayment of premium
Assignment of Insurance Rights
Policyholder has the right to transfer the policy to another person and right to designate a beneficiary. The assignee may change the beneficiary unless irrevocable.
Irrevocable beneficiary
Policyholder must first obtain the beneficiary's consent to make the change
Participating policies
Policyowners are entitled to dividends, which are a return of excess premiums and are therefore nontaxable. Dividends are generated when the premiums and the earnings combined exceed the actual costs of providing coverage, creating a surplus. Dividends are not guaranteed.
Transfer of ownership of life policy
Policyowners have the right to transfer ownership to another person
Express authority
Powers given to the agent as part of the agency agreement in writing. (Commissions, non-compete agreement, etc)
Implied authority
Powers not given by the agency agreement, but necessary to complete the functions allowed in the agency agreement.
Apparent authority
Powers not given by the agency agreement, but that a reasonable person would presume the agent has (perceived)
Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value?
Predicted needs of the family after the insured's death.
MCHA won't cover:
Preexisting conditions during the first 6 months of coverage if the person was diagnosed or treated for the condition during the 90 days immediately preceding the date the app. was received. (Medicare & LTC is opposite and must cover this.)
Which of the following is correct concerning the taxation of a Key Person Life Insurance Policy premiums and death benefit?
Premiums are not deductible as a business expense and the death benefit is not taxable to the company.
Which of the following are the main factors taken into account when calculating residual disability benefits?
Present earnings and earnings prior to disability
1995 Agent Disclosure Law
Prior to a personal solicitation, the producer must disclose in writing (verbally if on phone) their name, the insurance co., and the fact he's selling insurance. (NOT LICENSE #) Best way to do it = have it all on business card Any material relating to specific insurance products must include the insurer's identity.
Sources of insurance
Private companies and government
Which of the following statements is an accurate comparison between private and government insurers?
Private insurers may be authorized to transact insurance by state insurance departments.
What is not consideration on the part of an insured?
Promise to submit timely claims
A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability?
Proof of insurability is not required.
A couple owns a life insurance policy with a Children's term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability?
Proof of insurability is not required.
Fair Credit Reporting Act
Protects consumers by requiring insurer to notify consumer when insurer accesses their credit report. Advises how consumer can correct info on a credit report Ensures that credit reporting agencies exercise their responsibilities in a fair way. Applicant must be notified verbally AND in writing that the applicant has right to request a copy of the report from the CREDIT AGENCY and that the applicant may request to be interviewed. Client has right to challenge any erroneous info in report. (Must report probs to CREDIT AGENCY and they must respond within 30 days) Client can make a written statement regarding negative info in credit report, which must be included in credit report. Ins Companies need: driving records, info on app provided by applicant, medical records, credit reports
Guaranty Association
Protects policyholders from an insurer's inability to pay claims due to insolvency. Notice of policyholder rights must be given AT TIME OF APP. (If app. isn't taken in person, notice must be sent within 72 hrs of taking app.) Funding of Guaranty assoc. comes from contributions made by admitted carriers Can't use the assoc. as a selling tool. Can talk about it once selling is done.
Which of the following is the most common way to transfer risk?
Purchase insurance
The risk of loss may be classified as
Pure and speculative risk
Legal purpose
Purpose of contract must be legal and not against public policy. To ensure legal purpose of a life insurance policy, it must have both insurable interest and consent.
In what way can an agent demonstrate a high standard of ethics?
Putting the client's best interest before their own
What factor is not considered by an underwriter when determining the premium rates for an individual seeking insurance?
Race
Unfair discrimination
Rates, premiums, policy benefits, dividends, bases of age, sex, marital status, sexual orientation, race, color, national origin, creed, ancestry, mental or physical disability unless med info provides an uninsurable diagnosis
If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept?
Reasonable expectations
An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of
Rebating.
Paul is a producer in Washington and wants to become a producer in Oregon. The Director will waive certain examination requirements, provided that Washington would waive these same requirements if an Oregon producer sought licensure in Washington. What term is used to describe this phenomenon?
Reciprocity
Which of the following distinguishes a Group Life Policy from an Individual Life Insurance Policy?
Reduced adverse selection
Which nonforfeiture option provides coverage for the longest period of time?
Reduced paid-up
Loss
Reduction , decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril.
Pure Risk
Refers to situations that can only result in a loss or no change. There is no opportunity for financial gain. Pure risk is the only typ insurance companies are willing to accept
Indemnity
Reimbursement. In the event of a loss, reimbursement is only made to the extent of the loss
An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this?
Reinstatement provision
Policy Replacement
Replaces: -Lapsed, forfeited, surrendered, or terminated -Reissued with a reduction in cash value -Converted to reduced paid-up insurance *Notice regarding replacement: provided by agent
Churning
Replacing insurance policies for the sole purpose of making commissions
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy
Required a premium increase each renewal.
Gramm-Leach-Bliley Act
Requires insurance cos to disclose their privacy policy and how a customer's personal info may be used and shared. **Requires companies to provide their privacy policy when a policy is issued and at least one a year.
Conditional Contract
Requires that certain conditions must be met by the policyowner and the company
Disability income policies can provide coverage for a loss of income when returning to work only part-time after recovering from total disability. What is the benefit that is based on the insured's loss of earnings after recovery from a disability?
Residual disability
Because of financial obligations, John felt that he needed more insurance that the insurer was willing to issue. John's insurance producer told him that he could maximize the death benefits without increasing the face amount by the use of?
Return of premium rider- the policy will pay benefits equal to the face amount plus an amount equal to all the premiums paid on the contract.
Disclosure
Revealed information to help someone make an intelligent and educated decision
Risk
Risk is the uncertainty or chance of a loss occurring.
An individual has been contributing to a retirement account after taxes are taken out of his paycheck. His financial advisor told him that he will be allowed to make contributions after age 70½. The account owner does not have to pay taxes on the growth of his account. What type of retirement account is it?
Roth IRA Roth IRAs have several distinguishing features. Unlike traditional IRAs, the account owner can continue beyond age 70½, and distributions do not have to begin at age 70½. The contributions are not tax-deductible.
What is required to sell variable products?
Securities license AND insurance license
Equity indexed annuities
Seek higher returns.
Contract Ambiguity
Should always be interpreted in favor of the insured
Representations
Statements believed to be true to the best of one's knowledge, but they are not guaranteed to be true. For insurance purposes, representations are the answers the insured gives to the questions of the insurance applications
Testimonials
Statements or endorsements made by clients based on their experience with products or services
McCarran-Ferguson Act
States (not the fed. gov.) are responsible for regulating insurance
Law of large numbers
States that the larger the number of people with a similar exposure to loss, the more predictable actual losses will be
When an employee covered under a health reimbursement account changes employers, the HRA
Stays with the employer.
Acceptance
Takes place when an insurer's underwriter approves the application and issues a policy
Which of the following would help prevent a universal life policy from lapsing?
Target premium
Wisconsin Commissioner of Insurance
Ted Nickel - appointed by governor - broad powers and duties
Moral Hazard
Tendencies towards increased risk. Evaluating character and reputation, lying on an application, past fraudulent claims.
Moral Hazards
Tendencies towards increased risk. Involve evaluating the character and reputation of the proposed insured. Refer to those applicants who may lie on an application for insurance, or in the past, have submitted fraudulent claims against an insurer.
Adverse selection
Tendency of poorer risks to seek insurance.
Children's rider attached to whole life policies are usually issued as what type of insurance?
Term
Who heads up the Dept of Commerce?
The Commissioner of Commerce
What oversees the insurance industry?
The Dept of Commerce (they're the regulatory authority)
Which of the following is NOT covered under a "core" policy, Plan A in Medigap insurance?
The Medicare Part A deductible.
Your client has a Social Insurance Supplement (SIS) rider on his disability policy. After he becomes disabled, he receives payments from the company. Shortly thereafter, he also begins receiving Social Security benefit payments. Which of the following will happen?
The SIS payment will be reduced dollar-for-dollar by the Social Security benefit payment.
Split Commission-Proper exchange of business
The agent forwarding the business is entitled to split the commission
Death Benefit
The amount paid upon the death of the insured in a life insurance policy
Which of the following is NOT true regarding the annuitant?
The annuitant cannot be the same person as the annuity owner.
Apparent
The appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstance the principal created.
Under what conditions would a contract between an insurer and prospective insured be legal?
The applicant has been convicted of a felony
Express Authority
The authority granted to an agent by means of the agent's written contract
Peril is most easily defined as
The cause of loss insured against
Peril
The causes of loss insured against in an insurance policy
Which of the following is a characteristic of a Reciprocal Insurance Exchange?
The chief administrator of the insurer is called an "attorney-in-fact". A "reciprocal" is an unincorporated aggregation of individuals, called subscribers, who exchange insurance risks. If the premiums charged for coverage are not sufficient to pay the losses of the group, subscribers may be assessed an additional premium. A reciprocal is administered by an attorney-in-fact who is empowered to bind each subscriber to assume a share of the losses of the group.
Insurer/principal
The company who issues an insurance policy
How are funds contributed to a tax-sheltered annuity treated for taxation?
The contributions are not included as income for the employee, but are taxable upon distribution. Funds contributed are excluded from the employee's current taxable income, but are taxable upon withdrawal.
Jim is covered by a high deductible health plan. He makes regular contributions to this HSA. How are those contributions treated in regards to taxation?
The contributions are tax-deductible
Which of the following statements about group life is correct?
The cost of coverage is based on the ratio of men and women in the group.
What type of information is NOT included in a certificate of insurance?
The cost the company is paying for monthly premiums
Which of the following describes the tax advantage of a qualified retirement plan?
The earnings in the plan accumulate tax deferred.
Which of the following statements concerning group health insurance is CORRECT?
The employer is the policyholder.
For an individual who is eligible for Medicare at age 65, and who is still employed and covered under the employer's plan, which of the following is true?
The employer plan is primary coverage, and Medicare is secondary coverage.
Who appoints the Commissioner of Commerce?
The governor - he's NOT elected
Life insurance benefits for minors must be placed in the hands of either a guardian or a trustee. Which of the following is true?
The guardian may or may not be accountable for assets
Commissioner
The head of the state department of insurance
In order for an insured under Medicare Part A to receive benefits for care in a skilled nursing facility, which of the following conditions must be met?
The insured must have first been hospitalized for 3 consecutive days. Part A covers the cost of care in a skilled nursing facility as long as the patient was first hospitalized for 3 consecutive days, and the services are medically necessary and only up to amounts deeme
An insured submitted a notice of claim to the insurer, but never received claims forms. He later submits proof of loss, and explains the nature and extent of loss in a hand-written letter to the insurer. Which of the following would be true?
The insured was in compliance with the policy requirements regarding claims.
A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums?
The insured's premiums will be waived until she is 21.
Who guarantees a conventional fully-insured group plan?
The insurer A conventional fully-insured plan is administered and guaranteed by an insurance company. In return for the premium collected from the insured by the insurer, the insurer assumes the risk of paying the cost of medical expenses that may or may not occur during the policy period
Which of the following statements is true regarding the cash value in a Universal life policy?
The insurer credits the cash value in the policy with a current interest rate
Principal
The insurer, an agent/producer is an individual licensed to sell, solicit, or negotiate insurance contracts on behalf of the principal.
Fraud
The intentional misrepresentation or intentional concealment of a material fact used to induce another party to make or refrain from making a contract, or to deceive or cheat a party.
FALSE statement regarding the accumulation at interest option
The interest credited under this option is not taxable since it remains inside the insurance policy. THIS IS TAXABLE WHETHER OR NOT THE POLICY OWNER RECEIVES IT.
Applicants for insurance must be given advance notice including what? (concerning information collecting)
The kind of information collected The reason it's being collected How the information will be used The sources of information The persons with access to personal information (NOT the persons who are collecting information)
Law of Large Numbers
The larger the number of people with a similar experience to loss, the more predictable the actual losses will be.
Law of Agency
The law that governs the relationship between a principal and his or her agent.
Agency agreement
The legal agreement that establishes the relationship between the principal and agent. It also outlines the powers & responsibilities of the agent.
Concealment
The legal term for the intentional withholding of information of a material fact that is crucial in making a decision
Which of the following will vary the length of the grace period in health insurance policies?
The mode of the premium payment
Premium
The money paid to the insurance company for the insurance policy
market conduct
The non-financial regulatory activities of an insurance department. You conduct insurance fairly and responsibly. (Non-financial regulatory activities of an insurance dept. fall under the borad heading of market conduct)
An agent is in the process of replacing the insured's current health insurance policy with a new one. Which of the following would be a proper action?
The old policy should stay in force until the new policy is issued.
Ceding insurer
The originating company that procures insurance on itself from another insurer
In a life settlement contract, whom does the life settlement broker represent?
The owner
Which of the following is true regarding a modified guaranteed annuity?
The owner is guaranteed a fixed interest rate for a specific period of time.
All of the following statements are true regarding installments for a fixed amount EXCEPT
The payments will stop when the annuitant dies.
Insured
The person covered by the insurance policy. This person may or may not be the policyowner
Policyowner
The person entitled to exercise the rights and privileges in the policy
All of the following are true of Key Person insurance EXCEPT
The plan is funded by permanent insurance only.
All of the following are true of the federal tax advantages of a qualified plan, EXCEPT
The planned premium pays for mortality charges and expenses and any excess is returned to the policyowner
All of the following are characteristics of a Universal Life policy EXCEPT
The planned premium pays for mortality charges and expenses and any excess is returned to the policyowner.
An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history 1 year later. What will probably happen?
The policy will not be affected.
The owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance producer say?
The policyowner can specify the way proceeds are split in the policy.
Insurable interest
The policyowner must face the possibility of losing money or something of value in the event of loss.
Incorporation by reference
The practice of making one document a part of another.
Loss
The reduction, decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril. They are the basis for a claim
Fiduciary Responsibility
The requirement that agents act in the best interest of their principals. However, insured should be treated with trust.
Which is true about a spouse term rider?
The rider is usually level term insurance
Which state has jurisdiction over a group policy that covers individuals that reside in more than one state?
The state in which the policy was delivered
Reinsurance
The transfer of insurance risk from one insurer to another through a contractual agreement
Risk
The uncertainty or chance of loss occurring
Waiver
The voluntary act of relinquishing a legal right, claim or privilege
All of the following are characteristics of a group life insurance plan EXCEPT
There is a requirement to prove insurability on the part of the participants. There is no individual underwriting for group life insurance.
Immunity
There is no liability against any insurer, authorized representative, agents, employee, or any firm, person, or corporation furnishing information to the insurer relating to the reasons for cancellation or non-renewal.
Which of the following statements regarding deferred compensation funds is INCORRECT?
They are usually qualified plans.
Which of the following is true regarding benefits paid to disabled employees?
They may be subject to taxation if the premium was paid by the employer.
What do long-term care policies offer to policyholders to account for inflation?
They offer the option of purchasing coverage that raises benefit levels accordingly.
What is another name for an Administrative-Services Only arrangement
Third-party administrator An Administrative-Services Only is an arrangement whereby an insurer agrees to provide certain services to a self-insured entity, such as providing printed claim forms, and the processing and auditing of claims. The insurer does not provide any insurance protection under an ASO arrangement.
Which provision states that the insurance company must pay Medical Expense claims immediately?
Time of Payment of Claims
A life insurance policyowner has the flexibility to increase the amount of premium and then decrease it at a later date. The person is also allowed to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount. What type of policy is this?
Universal life The policyowner has the flexibility to increase the amount of premium going into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of premium.
Misrepresentation
Untrue statements on the application and could void the contract
A medical expense policy that establishes the amount of benefit paid based upon the prevailing charges which fall within the standard range of fees normally charged for a specific procedure by a doctor of similar training and experience in that geographic area is known as
Usual, customary and reasonable The usual, customary and reasonable approach for determining insurance benefits is based upon the fees normally charged for specific procedures in the geographic location where the services are provided.
The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as
Utmost good faith
An insurance company receives an application with some information missing and issues the policy anyway. What is this called?
Waiver
The insure may suspect that a moral hazard exists if the policyholder
Was not honest about all aspects regarding his health on the application for insurance
Social insurance programs
What federal and state governments provide where private insurance is not available. Social security, medicare, medicate, federal crop and national flood insurance
Adverse selection
What insurance companies strive to protect themselves from. The tendency of risks with higher probability of loss to purchase and maintain insurance more often than the risks who present lower probability
notice of the scope
What the commissioner must provide to the examinee...once it's been given, the insurer/producer must give free access to everything.
Recission
When an insurance applicant intentionally fails to communicate information the insurance needs, the insurer has the right to cancel the policy
When is the earliest a policy may go into effect?
When the application is signed and a check is given to the agent
Makes the laws
Wisconsin legislature
After hearing, aggrieved person may request a rehearing within how much time?
Within 20 days of original hearing
When can a Long-Term Care policy deny a claim for losses incurred because of a pre-existing condition?
Within 6 months of the effective date of coverage
How soon following the occurrence of a covered loss, or after the insurer becomes liable for periodic payments for income benefits, must an insured submit written proof of such loss to the insurance company?
Within 90 days or as soon as reasonably possible but not to exceed one year.
Controlled Business
Writing business in one's self or immediate family or business associate No commissions paid above limit Must have placed insurance on others with the insurer in past 12 months Total of other premiums must exceed controlled business premium
Can the commissioner publish info collected in investigations & hearings?
Yep
Can LTC premiums be deducted for tax purposes?
Yes
Can renewal or deferred commission be paid to a retired producer?
Yes
Can the commissioner refuse to issue a license to someone who has previously committed an act that would have resulted in disciplinary action if the person had been licensed at that time?
Yes
If you want to reinstate a policy, might the insurer require a reinstatement application and proof of insurability?
Yes
Is committing ANY unfair trade practice or fraud grounds for disciplinary action?
Yes
Can producers act as agents representing insurance companies and brokers representing individuals?
Yes (MN doesn't acknowledge brokers)
Are qualified LTC policies guaranteed renewable?
Yes - premiums may be increased (individual ones are noncancelable - premiums cannot be increased)
Can an individual who belongs to a POS plan use an out-of-network physician?
Yes, and they may use any preferred physician, even if not part of the HMO
Can licensed producers charge service fees?
Yes, but only if the fee is reasonable and fully disclosed in writing.
Can producers accept loans from clients?
Yes, provided the loan agreement is in writing. All records relating to it must be kept for 6 years after repayment.
Non-resident producer
You can hold 49 of these There is a fee, but no test for each
Resident producer
You can only hold 1 resident producer license If you live & work here, your res. prod. lic. will be in MN. If you live here, but office is in WI, you are a MN producer If you live in WI, but office is in MN, you are MN producer
Estoppel
You can't let someone consistently pay late, but then all of a sudden cancel their policy because they paid late once a new CEO takes over.
If you hold a resident and non-resident licenses and you lose one license, what happens?
You lose them all.
Twisting
a misreprentation or incomplete or fraudulent comparison of insurance policies that persuades an insured, to his detriment, to cancel, lapse, or switch policies.
deferred compensation plan
a benefit plan under which an employee, normally a senior executive, agrees to defer a portion of his or her salary or some element of his or her compensation until a future point
corporate owned life insurance
a business life insurance plan that typically covers lower level employees who are insured for the benefit of the corporation. Such a plan is reserved for very large corporate employers or organizations
participating policy
a class of life or health insurance policy in which the owner is paid a dividend out of the insurance company's earnings that are available for distribution (the divisible surplus)
spendthrift clause
a common clause in life insurance policies that states that creditors cannot claim any death proceeds from the policy before the proceeds are paid out to the beneficiary
Insurance
a contract in which one party (the ins. co) agrees to indemnify (make whole) the insured party against loss, damage, or liability arising from an unknown event. Transfer of loss from insured to insurer.
Aleatory Contract
a contract where the values exchanged may not be equal but depend on an uncertain event
fifth dividend option
a dividend option in which the declared dividend each year buys one term insurance. The insurance is bought in an amount equal to the policy's value. aka combo dividend option
combo dividend options
a dividend option in which the declared dividend each year buys one year term insurance. The insurance is bought in an amount equal to the policy's cash value.
paid up additions option
a dividend option in which the dividend buys additional paid up insurance of the same type as the base policy
accumulation option
a dividend option in which the insurance company holds the dividends in an interest bearing account for the policy owner. The policy owner can withdraw the accumulated dividends and interest at any time
premium reduction option
a dividend option in which the insurance company keeps the dividend and uses it to reduce the next premium due
paid up insurance option
a dividend option that lets the policy owner use the dividends to pay up a life insurance policy early.
nonforfeiture options
a guarantee given to to the policy owner that prevents the loss of the cash value. This option applies when the policy is surrendered or lapses. Th purpose of the option is to identify how the cash value will be issued.
paid up policy
a life insurance policy for which all required premiums have been paid, but the policy has not matured. No more premiums are necessary or possible
adjustable life insurance
a life insurance policy that lets the policy owner change the three elements of a life insurance policy as often as he or she wants: 1. premium 2. cash value 3. death benefit In changing these elements the policy can function at any one time as a term life policy, an ordinary whole life policy or a limited payment life policy
installment refund option
a life insurance settlement option with a life contingency in which income payments continue to a contingent payee in the same amount as were paid to the primary beneficiary. They continue until the amount placed under the settlement option is fully paid out.
cash refund option
a life insurance settlement option with a life contingency in which the contingent payee receives a lump sum of any unpaid amounts
life income with refund
a life insurance settlement option with a life contingency that provides income payments for the life of the payee. If the payee dies before receiving payments equal to the amount placed under the settlement option, then the remainder goes to a contingent payee in the form of a refund.
life income with period option
a life insurance settlement option with a life contingency under which a payee receives income payments for life. However, he or she is guaranteed that the payments will be made for a specified term.
straight life income option
a life insurance settlement option with a life contingency under which the policy's proceeds are converted into payments that are made for the life of the payee. The payments stop upon his or her death.
life income options
a life insurance settlement option with a life contingency; this type of settlement option is based on the lifespan of the payee.
fixed period settlement option
a life insurance settlement option without a life contingency in which either the policy owner or beneficiary selects a payment period. The the insurer makes payments consisting of both principal proceeds and interest over the term of the period
Reciprocity
a mutual interchange of rights and privileges
medicaid
a program funded by state and federal funds and administered by the states. This program pays for healthcare for the financially needy regardless of age
waiver of premium
a provision in an insurance policy, sometimes provided by rider, under which the policy's premiums are waived if the insured becomes totally disable for a stated period
chronically ill
a term describing a person with an illness that is a permanent or residual disability, requires rehabilitation training, or requires a long period of supervision, observation or care.
cross- purchase buy sell agreement
a type of buy sell agreement that is a contract between individual partners or shareholders. In this agreement, the partners or shareholders agree to buy the interest of the others in the event the individual dies or withdraws form the business.
entity plan
a type of buy-sell agreement in which the business itself is a party to the agreement. In this plan the business buys the interest or shares of a deceased partner or shareholder. The business can be a partnership or a close corporation
home health care
a type of long term care received in the home.
Commissioner Powers and Duties
administering, interpreting, and enforcing the insurance laws of WI -Adopt standards set by NAIC -Prescribe forms for use -Prescribe minimum standard for accounts and data handling
Reinstatement provision
allows a lapsed policy to be put back in force. The maximum time limit for reinstatement is usually 3 years after the policy has lapsed. Will be required to pay back all back premiums plus interest, and may be required to repay any outstanding loans and interest. All values will be restored!
The life-income option
also known as straight life, provides the recipient with an income that he or she cannot outlive. Installment payments are guaranteed for as long as the recipient lives, irrespective of the date of death.
Reserves
amount of money kept in a separate account to cover debts to policyowners
buy sell agreement
an agreement in which someone agrees to buy a deceased business owner's interest in the business upon the owner'd death. Typical for small businesses
family term rider
an alternative to either a separate spousal rider or children's rider
needs approach
an approach for determining how much life insurance is appropriate for a person. This approach determines personal life insurance needs based on a detailed review of each person's specific situation. It mandates that the person's and family's income, liabilities, and assets be examined to calculate the right amount of life insurance.
split dollar plan
an arrangement under which a permanent life insurance policy is bought on the life of a key executive. Either the executive or the employer owns the policy. The premiums for the policy and the death benefits provided under it are split between the employer and the key executive.
rider
an attachment to an insurance policy that changes the benefits either by adding new benefits or by excluding certain benefits from coverage
viatical settlement purchaser
an investor who funds a viatical settlement on behalf of the viatical settlement provider
extended term insurance option
an option under which the insure applies the cash value of a lapsed policy to buy a term insurance policy. The term insurance is bought in an amount equal to the face amount of the lapsed policy.
automatic premium loan (APL)
an optional life insurance benefit whose purpose is to prevent a policy from lapsing if the policy owner fails to pay the premium.
It is considered INSURANCE FRAUD for
any person engaged in the business of insurance to willfully, and with the intent to deceive, make any oral or written statement that are either false or omit material fact
offer made
application submitted
viatical settlement agreement
arranges the agreement between the viatical settlement purchaser, provider and viator. The broker works on behalf of the viator in his agreement
viatical settlement broker
arranges the agreement between the viatical settlement purchaser, provider and viator. The broker works on behalf of the viator in this agreement
Midterm cancellation based on permissible grounds is only effective if written notice was given to the policyholder...
at least 10 days prior to cancellation
Worker's compensation cancellation notice must be
at least 30 days prior to cancellation
Kevin owns a whole life insurance policy, issued on a standard basis, that has lapsed for nonpayment of the premium. If Kevin has NOT chosen a nonforfeiture option, which of the following actions will the insurer most likely take?
automatically apply the extended term option
Disciplinary hearing
before issuing an order
Nonforfeiture values
benefits in a life insurance policy the policyowner cannot lose
immediate annuity
bought to regularly distribute income. A person who buys an immediate annuity exchanges a lump sum amount of money for a series of monthly income payments.
Producers banding together with others to not sell anything until their commission is raised is an example of:
boycotting
single life option
can provide a single beneficiary income for he rest of his/her life. Upon the death of the beneficiary, the payments stop.
Professionalism
person engaged in an occupation requiring an advanced level of training, knowledge, or skill
If the Commissioner does not act on a petition within 20 days, it is considered
denied
human life value approach
developed by Dr. Solomon S. Huebner, this approach is one of the first systems for determining how much life insurance is appropriate for a perosn. Involves estimating a persons personal earnings each year to retirement. Then the costs of self maintenance and income taxes are deducted. The result is residual income that is set aside to provide for family members. The residual income stream is discounted to its present value. The present value thus determined is the value of that human life.
options
enable policy owners to apply the provisions of a policy to suit their needs.
Who pays for examination of insurer by the Commissioner?
examinees
When selling health plans to small employers in MN, a health carrier can:
exclude an eligible employee's pre-existing condition up to 12 months from the enrollment date
Misrepresentation
false or misleading information
Security
financial investment product for profit and trade (stocks, bonds, options)
waiver of stipulated premium
in UL policies, waives a present premium payment if the insured becomes disabled for at least 6 months
waiver of cost insurance
in UL policies, waives only the cost of insurance that is deducted monthly from the policy's cash value
partial surrenders
in a permanent (non-universal) life insurance policy; a partial surrender is the actual surrendering of a portion of the policy. the death benefit under a partial surrender is reduced proportionately by the amount of the surrender.
viatical settlement provider
in a viatical settlement, the third party to whom the chronically ill or terminally ill policy owner sells his or her life insurance policy
The Commissioner may disapprove a form if the form is....
inequitable, unfairly discriminatory, misleading, deceptive, obscure, or encourages misrepresentation, has provisions that endanger the solidity of the insurer, fails to provide the exact name and address of the insurer's home office, violates a statute or rule
Implied authority
the authority that the agent has that is not specifically listed in their contract but is needed to transact business
ABSOLUTE ASSIGNMENT
involves transferring all rights of ownership to another person or entity. This is a permanent and total transfer of all the policy rights. The new policyowner does not need to have an insurable interest in the insured.
Premium Mode
is the manner or frequency that the policyowner pays the policy premium. Most policies allow for annual, semi-annual, quarterly or monthly payments. If the insured selects a premium mode other than annual, there will be an additional charge to offset the loss of earnings since the company does not have the entire premium at once, and there are additional administrative costs associated with more frequent billing.
Grace Period
is the period of time after the premium due date that the policyowner has to pay the premium before the policy lapse. (usually 30-31 days)
Beneficiary
is the person or interest to which the policy proceeds will be paid upon the death if the insured.
Certificate of Authority
issued by state department of insurance after company applies and meets financial requirements of the state. Authorized or Admitted into the state to transaction business.
Per Capita
means by the head, evenly distributes benefits among the living named beneficiaries.
Flesch scale analysis
measures the ease of readability - must be at 8th grade reading level
Suspension
minimum time period = 3 months, can go up to 2 years
The first criminal penalty is a ____, each one thereafter is a _________.
misdemeanor; gross misdemeanor
False advertising
misrepresenting terms, benefits, conditions, or advantages, dividends, financial condition of any person or the ins. co.
Adverse info stays on credit report for how many years?
most info - 7 years bankruptcy - 10 years
Notice of Proof of Loss Claim
must be provided as soon as reasonable possible to the insurer and within 1 year after the time required by the policy
Permissible grounds for midterm cancellation do not apply to...
new insurance policies which have been in effect less than 60 days
Is misstatement of age provision a required provision of an accident and health policy?
no
Civil penalty
non-criminal restitution for wrongdoing resulting in a fine
Extra charges
none over the amount of the premium or premium finance charges are allowed
Unauthorized or Unadmitted
not approved to do business in the state
Exempt
not subject to a duty or obligation
Apparent authority
occurs when the powers of the agent are created by actions or words of the principal. Insurer cannot later deny that such a relationship existed.
life income joint and survivor
option guarantees an income for two or more recipients for as long as they live. Most contractsprovide that the surviving recipient will receive a reduced payment after the first recipient dies.
Common "living benefit" uses for a life policy's cash value include
paying for a child's college education; supplementing retirement income; and serving as a source of funds in an emergency.
lump-sum cash payment
payment of insurance policy proceeds in a single lump sum
Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have dies or become disabled?
payor benefits
disability income benefit rider
pays a certain sum of monthly income to the insured if he or she becomes disabled
accelerated benefits rider
pays out part or all of the policy's face value while the insured is still living. In this way the benefit is accelerated. Most of these riders pays less than the full face value as an accelerated benefit
Home solicitation selling
personal solicitation of insurance by an agent at the residence or place of business of the buyer, direct and indirect contacts by telephone, person to person, or in writing for the clear purpose of selling insurance
LTC incontestability periods
policies new within 6 months: insurer can rescind for lies on app. policies between 6 mo - 2 years: insurer can rescind for lies on the app. if they're related to the benefits sought policies over 2 years: can't do anything except if insured lied about their health on app.
Backdating
predating an application of insurance to affect a lower premium
Insurance advertising examples:
printed material audiovisual material descriptive literature in radio, tv, and billboards descriptive literature and sales ads in circulars, leaflets, and form letters PREPARED SALES TALKS & PRESENTATIONS - AKA SCRIPTS OR SALESTRACKS
Suicide Provision
protects the insurers from individuals who purchase life insurance with the intention of committing suicide. The policy will not pay death benefits if the insured committed suicide within the first 2 years of the policy being written. If it happens after the insurer will pay the normal death benefits.
Accelerated Benefits or Living Needs Rider
provided for an early payment of part of the policy death benefit if the insured is diagnosed with a terminal illness that will result in death within 2 years or has other qualifying conditions.
long term care rider
provides financial support for the costs of medical care, nursing home care, and assisted living care for extended durations
Common needs that survivors face and that life insurance can help meet are
providing income to meet daily living expenses; retiring a mortgage on the survivor's home; setting up an education fund for the children of the decease; paying off existing debts; and paying death expenses, such as medical and funeral costs.
Entire Contract
provision stipulates that the policy and a copy of the application, along with any riders or amendments, constitute the entire contract. No statement made before the contract was written can be used to alter the contract.
settlement options
provisions in a life insurance policy or annuity that provide the payee with various ways to receive periodic payments of benefits
These most common options, known as dividend options, are
receiving the dividend in cash; applying the dividend to reduce the premium; leaving the dividends with the insurer to accumulate at interest; using the dividends to buy additional paid-up life insurance; and using the dividends to buy one-year term insurance.
Which nonforfeiture option provides coverage for the longest period of time?
reduced paid-up
Unfair trade practice for the insurer to...
refuse, cancel, deny, restrict, modify or reduce benefits, term or coverage on the basis of the sex of the applicant or insured.
Assuming insurer
reinsurer
Restitution
restoration to the original condition or repayment
Waiver of premium
rider waives the premium for the policy if the insured becomes totally disabled. Coverage remains in force until the insured is able to return to work.
reciprocal
risk sharing, mutual agreements among
Interest on overdue payments
simple interest of 12% per year
There are four lifetime income options:
single (straight) life income life income with period certain life income with refund joint and survivor life income
Consideration
something of value that each party to a contract must receive
warrenty
statement in insurance that is guaranteed to be true
disclosure
statements that identify the kind of information that will be gathered about the applicant. The disclosures also include how the information will be used and shared for the purposes of evaluating and issuing a policy.
All forms and rates used by insurers in this state must be filed with and approved by....
the Commissioner
The insurer is liable for....
the acts of its agents
Except for new policies and umbrella or excess liability policies, an insurance policy may not be cancelled by the insurer prior to the expiration of...
the agreed term or 1 year from the effective date of the policy or renewal except for: -Failure to pay premium -Material misrepresentation -Substantial change in the risk assumed -Substantial breaches of contractual duties -Attainment of the age specified which coverage is no longer provided
viator
the insured in a viatical settlement
No misrepresentation, breach of an affirmative warranty, or failure of a condition by a policyholder constitutes grounds for rescission of, or affects an insurer's obligations under an insurance policy if.....
the insurer had any knowledge of the facts.
stock redemption agreement
the name of the agreement when a close corporation buys the interest or shares of a deceased partner or shareholder
Effect of negotiations for a contact is defined as
the only time a statement, representation, or warranty made by an insured in the negotiation of an insurance contact can affect the insurer's obligations.
The information in the application cannot be used by the insurer to avoid its obligations to the insured if...
the policyholder or insured requests a copy of the application and does not receive it within 15 working days after receipt of the request
viatical settlement
the sale of the rights and benefits in an existing life insurance policy to an investor; when a terminally ill person transfers ownership of life insurance policy to another in return for payment of some amount less then the policy's death benefit
Representations
the truth to the best of your knowledge and belief
Waiver
the voluntary relinquishment of a known legal right
A policy may be issued for a term longer than 1 year or for an indefinite term as long as ...
there is a a clause in the policy providing for cancellation by giving a 60-day notice prior to the anniversary date.
here are two categories of settlement options:
those without a life contingency those with a life contingency
Promulgate
to announce; to make known
Exclusions
types of risks the policy will not cover. Certain exclusions are standard for all policies, while others are attached to the policy as an exclusion rider. Aviation, hazardous occupation and war and military service are the most common.
"own occupation"
under a health insurance policy using the own occupation definition of total disability, the policy's benefits are payable if the insured cannot perform the duties of his or her own regular occupation
cash surrender option
under this option, the policy is surrendered and the insurer simply pays the cash value to the policy owner in a lump sum. At the point the policy is cancelled. (surrendered policies cannot be reinstated.
Binders and oral contacts are valid in Wisconsin for...
up to 30 days
Misrepresentation defined
use of false, misleading or deceptive oral or written statements
Coercion
use of force to get someone to obey
dividend options
ways to pay out dividends, policy owners choose which option they want
dividends options
ways to pay out dividends. Policy owner can choose which options they want
key person life insurance
when a business applies for, owns and is the beneficiary of the policy covering the life of a key employee.
Collusion is...
when an agent and policyholder or insured act together to deceive or defraud insurer.
Spendthrift Clause
when included in a life insurance policy, protects beneficiaries from the claims of their creditors. The clause applies to the benefits that are paid in a fixed-period or fixed-amount installments.