Insurance CH 6
What is a "participating life insurance policy"?
A participating life insurance policy is one in which the insured receives policy dividends. These dividends are part of the divisible surplus and are considered a return of premium based on the financial success of the insurance company.
Advertising and Sales Requirements
Advertising must be accurate.Must establish and maintain a system of control over the content, form and method of dissemination of all policies. INSURER IS RESPONISBLE FOR ALL ADVERTISING CONTENT.
Free Look Period
Allows insured a period of specified days from delivery date of the policy to look over the policy and if desired refuse and get a full refund. Florida Free Look Period is 14 days for Life Insurance and Annuity Policies.
Designation of Beneficiaries
Designation of Beneficiaries: • If a Former Spouse of the policy owner is designated as beneficiary, the designation will be void as of the legal dissolution of the marriage (divorce) poor declared invalid by court order if the designation was not made prior to divorce. • Life Agents cannot be designated as beneficiary accept in cases of family members. (Controlled business)
Group life conversion privilege
Employee terminates membership in insured group with right to convert to individual life policy without proving insurability at a standard rate based on attained age. Within 30 days of terminating
Group policy eligible groups
Employee/employer groups, debtor groups, labor unions, credit unions, trustee groups, associations
disclosure statement
Help applicant make informed decision; must be given to every applicant, no later than the time of application is signed; provides basic information about the cost and coverage of the insurance being solicited.
CLAUSE AND PROVISIONS How are life insurance beneficiaries protected from creditors?
How are life insurance beneficiaries protected from creditors? the policy names a beneficiary, the proceeds must inure solely to that benefi-ciary. They are not subject to the claims of creditors of the insured. However, if the policy is payable to the estate of the insured, the proceeds become part of that estate and are subject to the claims of the insured's creditors. Also, the cash surrender value of life insurance policies and annuities are not subject to garnishment, attachment or legal process in favor of a creditor unless the policy was specifically taken out for the benefit of the creditor. [
INS Advertising requirements
INS company must establish and maintain a system of control over the content. Form. And message. Of dissemination of all advertising at its policies. INS is responsible for all its advertisements. Regardless.
Senior Consumers
Is a person over age of 65
Policy loans
Maximum interest rate on a fixed rate loan is 10% annually. Adjustable loans interest rates may vary based on publish monthly average.
Florida life insurance solicitation law
Spells out the infirmation and procedures required of agents and insurers when proposing life insurance to a prospective buyer
How can the dividends on a participating policy be used by the policyholder?
The dividends can be taken in cash, used to reduce the premiums, left with the insur-ance company to accumulate at interest, used to purchase paid-up additions to the face value or used to purchase one-year term additions.
What is family plan insurance?
The family plan life insurance policy covers the family breadwinner, spouse and all children in a single policy. It can be written as a separate contract or as a rider on a basic plan. The format is usually to provide whole life insurance on the policyholder, term or whole life on the spouse, and term insurance on the children until they reach a specified age.
What is "variable life insurance"?
The term variable life insurance refers to a relatively new form of whole life insur-ance being sold in the United States. Instead of the traditional fixed face value and cash-surrender values, the variable life insurance contract varies these benefits to reflect the investment experience of a separate pool of equity investments supporting the reserves for such policies. These contracts were designed to counteract the effects of inflation on the value (purchasing power) of fixed-face-amount whole life policies.
What is "universal life insurance"?
Universal life insurance is a relatively new product that utilizes a fund into which premiums are paid regularly or intermittently. Annually (or more frequently), the insurance company withdraws an amount sufficient to pay the premium for annual renewable term coverage for the amount selected by the policyowner for the current period. The unused funds in the account are credited with interest and debited with expenses
Prohibited practices
Using misleading terms. False information and advertising. Advertising gifts. Free insurance. Value of gifts limited to $25.
What is the rule for conversion (change of plan)?
What is the rule for conversion (change of plan)? When an insured has industrial life insurance policies with a single insurance com-pany which total $3,000 or more in face value, the insured has the option to convert
Are there any limitations placed on the universal life policy by law in order that the cash value accumulations receive favorable tax treatment?
Yes. A specific percentage of all premiums must be used to purchase death benefits or the product will not receive favorable tax treatment on its cash value.
Are variable life insurance and variable universal life insurance subject to the same type of dual regulation as variable annuities?
Yes. Variable life insurance and variable universal life insurance must comply with both state Office of Insurance Regulation and regulations of the Securities and Exchange Commission. License and appointment as a life including variable annuity agent is required.
defamation
act of harming or ruining another's reputation
Rebating or Unlawful Inducement (Unfair Trade/marketing Practice)
*Giving or offering something of value *to induce the purchase of insurance
What is the nature of the favorable tax treatment accorded to qualified retirement plans?
1. Employer contributions are considered an ordinary and necessary business expense and are deductible from the business's income in determining its income tax. 2. The earnings of investments in a qualified plan are exempt from income taxation. 3. Employer contributions are not taxable to employees as income in the years contributed, but rather at such time as they are received in the form of benefits (usually at retirement).
Under what conditions, if any, can the company contest the validity of a life insurance policy?
A policy may be contested for misrepresentation or fraud by the applicant in obtaining the policy provided this is done within the contestable period.
Secondary addressee Grace Period
If more than 51 days, notice must be given to policy owner and secondary contact at least 21 days before expiration of Grace period.
Fraternal benefit society's
Regulation on life insurance solicitation applies even to these nonprofits
ERISA. Employee Retirement Income Security Act of 1974.
est. standards for company retirement plans
Protection of Benefits from Creditors
All individual life insurance policies must entitle the beneficiary all proceeds due under the policy. Regardless of any creditors claims against the insured. The cash surrender value of life insurance policies and annuities are not subject to: 1. Garnishment 2. attachment 3. Legal process in favor of the creditor HOWEVER, IF THE POLICY PROCEEDS ARE TO GO TO THE ESATET, THEY ARE SUBJECT TO CLAIMS OF THE INSURED CREDITORS.
Do regulations exist restricting the types of investments that can be made to support variable life insurance?
The only regulatory and practical limitation which exists is that the investments must be securities whose market value can be readily determined.
Why was variable life insurance developed in the United States?
Variable life insurance was developed as a product that could help offset the effects of inflation on the death benefits of a life insurance policy. The underlying concept was that over the long term, the investment experience of common stocks supporting the policies would increase with inflation, and it was a that the variable benefits would increase as the value of the underlying stocks increased, providing a hedge against inflation. Even with favorable stock market returns, the fixed-premium vari-able life policies permitted in the United States have not provided a complete hedge against inflation.
Solicitation of Insurance
An attempt to persuade a person to buy an insurance policy whether written or spoken. INCLUDES: 1. Information about available products 2. Describing the policy benefits 3. Making recommendations about a specific policy 4. Trying to secure a contract between the applicant and the insurance company
Grace Period
Florida requires a 30 day grace period. Insurers may impose an interest rate charge not to exceed 8% per year for the # of days elapsing before the premium is paid. If a policy claim happens during a grace period, insurer may deduct the amount of the premium due and up to 8% interest per year from the settlement.
Replacement rule exemptions
Industrial life. Credit life. Good life and annuity's. Variable life in a Knooty's. Converting policies with the same insurer. Nine convertible and not a renewable term policy that expires in no more than five years.
Replacement
Means any transaction where a new life insurance contract replaces an existing one.
Replacement duties of agents
Notice to applicant regarding replacement of life insurance signed by applicant and a copy left with applicant. Leave original or copy of all sales proposals. Submit to replacing ensure a copy of NRR and copy of all sales proposals
Replacement In life insurance or annuity
Old policy: 1. Terminated. 2. Re-issued with any reduction in cash value. 3. Converted to reduced nonforfeiture option. 4. Amended to reduce benefits or term. Used in a financed purchase.
How does the universal life product work?
Premium payments accumulate depending on the insurer's investment experience and the amount of withdrawal required to fund the face value of the policy. The accumu lations in the policy grow on a tax-sheltered basis as in other life insurance policies.
Spendthrift clause
Protects proceeds while being held by the insurer from the claims of the beneficiaries creditors; does not apply to lump sum payments
The question "Have you made your policies creditor-proof for your beneficiaries?"
Refers to which of the following? 1. Spendthrift 2. Premium Waiver Provision 3. Change of Beneficiary Provision 4. Automatic Premium Loan The spendthrift clause protects the proceeds held under a settlement option from attachment by creditors of the beneficiary. The proceeds are not available to the cred-itors of the beneficiary until they are actually paid to the beneficiary.
What is the character of universal life insurance?
This is a life insurance product that has a flexible premium and adjustable benefits. The premiums can be made in varying amounts and at different intervals of time. The death benefits may be changed, but insurability is required if the net amount at risk increases. The policy has a fixed maturity date at the time of issue, but that too may be changed by the policyowner.
What is required by the Florida Replacement Rule?
This rule sets forth the requirements and procedures to be followed by insurance companies and insurance producers when a proposal is being made to a client who plans to replace existing life insurance contract(s) with the proposed new life insurance policy. The replacement of existing life insurance policies with new contracts of life insurance requires a written comparison and summary statement at the request of the policyholder as provided in Rule Chapter 69B-24. Instructions regarding replacement should be obtained from your appointed life insurance company.
Secondary addressee
Coverage for elderly insurance, 64+, cannot laps for nonpayment of premium after expiration of grace. Without notification of specific Secondary contact after policy has been enforced for one year
Duties of replacing producer
Notice regarding replacement. Obtain list of existing life INS or annuity policies to be replaced including policy. Leave applicant with original/copy of communications used in presentation. Submit replacing INS company copy of replacement notice with application.
Nonforfeiture options
Privileges allowed under terms of a life insurance contract after cash values have been created. Guarantees benefit cannot be forfeited by PO. Reduced paid up option becomes effective unless otherwise specified by PO. Payment due within 60 days
Items included in Policy Summary
Prominently placed title. Producer Name and address. Issuing INS co. Full name and address. Generic name of basic Policy & each rider. And. All amounts for policy and benefits. Statement That dividends are not guaranteed. Date policy summary is prepared. Life insurance cost indexes statement.
Replacing insurers must
Require "Notice to Applicant Regarding Replacement of Life Insurance" and "Sales Proposals".
Purpose of life insurance solicitation regulation
Help buyers: 1. select the most appropriate policy. 2. Understand the basic features of the policy. Three. Evaluate the relative costs of similar plans of life insurance
Life insurance cost index statement
Must be printed close to the life insurance cost index as follows. "an explanation of the intended use of these indexes is provided in the life insurance buyers guide"
Group Life Insurance
Characteristics: • Is written as a master policy • Issued to the sponsoring organization • Covers the lives of more than 1 person • Participants receive a Certificate of Insurance from master policy • Amount of coverage is determined according to non-discriminatory rules. • Rate and coverage are based upon group underwriting w/ all individuals covered fro the same amount and rate • Cost of coverage paid by employer in excess of $50,000.00 is taxed to the employee. • Group must exist apart from the desire of obtaining insurance • Individual members covered under the group plan must have the right to convert their coverage to an individual policy without proof-of-insurability should they leave their group
Buyers guide
Document that contains generic information about life insurance policies. Must be in compliance with the Buyers Guide adopted by NAIC
What is a "policy assignment"?
How may an assignment be effected? An assignment is an agreement between the policyowner and a second party in which the policyowner assigns certain ownership rights to the second party. An assignment is filed with the company and acknowledged by the company, but the company assumes no responsibility to carry out the assignment. An assignment may be executed at the local branch office by completion of blanks provided for that purpose. These are sent to the home office for recording and endorsement, after which one copy is returned to the assignee.
Compare participating and nonparticipating life insurance as to premiums, surrender values and general policy provisions.
The premium payments for a participating policy are usually higher, although dividends can be used to reduce premiums. The surrender values are generally the same for both types of policies. The general policy provisions are the same, except the par-ticipating policy includes a dividend provision and options on how the policyholder can use the dividends.
What is the definition of "churning" as it relates to life insurance and annuities, and how is it regulated?
What is the definition of "churning" as it relates to life insurance and annuities, and how is it regulated? Churning is defined as the practice by which policy values in an existing life insurance policy or annuity contract are use to purchase another policy or contrac with the same insurer for the purpose of earning additional premiums or commissions under any of the following conditions: (I) without an objectivily reasonable basis for believing that the new policy will result t in an actaul and demostrable benefit 2. in a deceptive or misleading manner 3, without informing o the aplicant that the policy value of the existing policy will be used to purchase the new policy Or 4, without informing that the new policy will not be a paid up policy or that additional premiums will be due An insurer must provide specific notice and disclosure to an applicant for any life insurance policy or annuity contract if the contract values of an existing policy are used to purchase a new policy with the same insurer. The notice must be provided to the applicant at the time of offer on a form adopted by rule by the Office of Insurance Regulation disclosing the premium and death benefit of the new policy, and the date when the policy values of the existing policy will be insufficient to pay the premiums of the new policy. Insurers are also required to adopt written procedures to reasonably avoid churning of policies or contracts that it has issued, and failure to do so constitutes an unfair trade practice subject to disciplinary action by the Office of Insurance Regulation. Instructions regarding churning and the required disclosures should be obtained from an agent's appointing company. An agent engaged in "churning" is guilty of a first degree misdemeanor if he or she is proven to have exhibited fraudulent conduct. A violation is also punishable by an administrative fine of $5,000 for each non-willful violation or $30,000 for each willful violation.
What does the term "vesting" refer to in regard to pension plans?
Vesting refers to the employee's rights to benefits or contributions accrued on behalf of the employee in a pension plan. Employees are always 100 percent vested in their own contributions to the pension plan, but their vested interest in employer-funded benefits normally goes from 0 percent to 100 percent on a time schedule.
Converting from Group to Individual Policy
• The amount of individual's life insurance protection ceasing because of the termination, MINUS the amount of life insurance the insured becomes eligible under any group policy • $10,000.00 • If insured under group policy dies during the conversion period, death benefit the insured would've been entitled to under new policy will be paid by the Group Policy, whether or not the application for Ind. Plan or the first premium has been made.
Group life required provisions
Grace period 31 days. Incontestability Period Two years. Representations. Entire contract. Evidence of Individual insurability. Mistake meant of age. Payment of benefits. Certificate of insurance to individual insurance. Assignment power of PO, no approval from the insurer
How are participating and nonparticipating life insurance contracts compared for a prospect?
These policies are compared by showing the participating premiums, less dividends at the current rate being paid by the insurance company versus the fixed premium pay-ments for the nonparticipating policy.
How is the family plan policy structured?
Generally the family plan policies will provide whole life insurance on either the father or the mother, who is the designated insured, with the plan premium based on his or her age. Term insurance is then provided on the spouse and the children. The spouse's coverage can be a stated amount or it may decrease with age. It can be term insurance that ceases when the insured reaches age 65, or whole life insurance may be used. Coverage for the children is normally term insurance in a fixed amount. Natural children as well as adopted children are covered. Even children born after the policy is purchased are automatically covered. The coverage terminates at a stated age, such as 18 or 21, and is generally convertible to any whole life plan without evidence of
Duties of Replacing Producer
Duties Are: • Present to applicant a Notice Regarding Replacement that is signed by both the applicant and producer. • Copy must be left with applicant. • Obtain a list of all existing insurance contracts being replaced. • Obtain replaced contract policy numbers and the names of all companies • Leave the applicant with a soppy of written of printed communication used for presentation to the applicant. • Submit to the replacing insurance company a copy of replacement notice w/ the application.
What are the characteristics of group life insurance?
Group life insurance is provided under a master contract for members of qualified groups. It is generally written as a one-year renewable term plan, without medical examinations, and at rates that are more favorable than individual policies. The cost may be paid by the organization, the members or both.
A policyowner has assigned a $10,000 policy to cover a $5,000 mortgage. How will the company pay the claim at the insured's death?
If an absolute assignment was made, the company will pay the entire proceeds to the assignee. If a collateral assignment was made, the company will usually make the check payable jointly to the assignee and the beneficiary. If a partial assignment was made, the unpaid mortgage balance will be paid to the assignee and the remainder will be paid to the beneficiary named in the policy.
Does Florida law regulate retirement plans?
No. The federal Employee Retirement Income Security Act of 1974 (ERISA) over-rides any state laws on retirement plans. ERISA sets forth standards for funding, participation, vesting, termination insurance, disclosure, fiduciary responsibility and tax treatment of private pension funds. Pen-sion plans that qualify under Internal Revenue Service regulations can receive favor-able income tax treatment. All plans that are established by businesses engaged in interstate commerce and that seek favorable tax treatment are subject to ERISA regulations.
Policy Summary
A written statement describing the FEATURES AND ELEMENTS of the policy being issued. Summary Includes: • The name and address of the insurer • Generic name of the basic policy • List each rider • Include the premium amount, cash value, dividends, surrender values, death benefit figures for the specific policy years. • Policy summary must be provided when the policy is delivered.
What is meant by "incontestability"?
All policies provide that they shall be incontestable after a certain period, usually two years. This means that the company cannot contest the validity of the policy after this time period has passed. During the contestable period the company may, through appropriate legal action, demand the return of a policy if it finds the insured has mis-represented facts material to the risk and if it refunds the premiums
Policy Replacement
An agent should know that with the purchase of proposed policy will replace and existing policy would have the Florida Replacement Rule apply.
Regulation does not apply to the sale of these
Annuities. Credit life insurance. Group life insurance. Variable life insurance. And life insurance policy is issued in connection with pension and welfare plans that are subject to ERISA
Non-Forfeiture
Are the values of the benefits of a life insurance policy that the policyowner does not forfeit even if the policy lapses. All cash value life insurance policies issued in Florida must include non-forfeiture provisions.
Can the proceeds of a group life insurance policy be assigned?
Can the proceeds of a group life insurance policy be assigned? Any person insured under a group life insurance policy is not prohibited from making an assignment of all or part of his or her incidents of ownership under that policy. This includes but is not limited to the privilege of having an individual policy issued to him or her and the right to name a beneficiary. This assignment shall be made without prejudice to the insurer because of any payment it may make or individual policy it may issue in accordance with Florida statutes prior to receipt of notice of an assignment
Churning relates with life insurance and annuities
Churning relates with life insurance and annuities Is defined as the practice by which policy values in an existing life insurance policy or annuity contract are use to purchase another police or contract with the same insurer for the purpose of earning additional premiuns or commissions under any of the following conditions: (1) without an objectively reasonable basic for believing that the new policy will result in an actual and demonstrable benefit, (2) in a deceptive or misleading manner , (3) without informing the applicant that the policy value of the existing policy will be used to purchase the new policy, or (4) without informing the applicant that the new policy will not be paid up policy or that the additional premiums will be due.
Annuity suitability
Consider clients age, income, financial status, investment objectives etc. Special rules for senior consumers as follows. Age 65+, reasonable recommendations at all times. No surrender or deferred sales charges on a Knooty with drawls. Keep records of transactions for five years.
Replacing Producer Procedures
Each Producer who initiates the application MUST SUBMIT THE FOLLOWING to the insurance company with our as part of each application: • A statement signed by the applicant whether a replacement of existing insurance may or may not be involved. • A signed statement whether the producer knows replacement is or is not involved in the transaction.
Eligible Groups
Eligible Groups: • Employee Groups - includes retired employees • Debtor Groups ( policy can only be issued if the group of eligible debtors is receiving new entrants at the rate of at least 100 persons per year)] • Labor Union Groups - (eligible members must be all of the members of the Union) • Trustee Groups - (established by 2 or more employers in the same industry; by one or more in a Labor Union; or by one or more labor union and one or more employer.) • Association Groups - must be in existence for for at least 2 years and hold regularly meetings annually, and have at least 100 members. • Credit Union Groups (must be issued for the benefit of all eligible members of a credit union; the credit union is the policyholder) • Other group receiving special approval from the Department
Code of Ethics of the Florida Association of Insurance and a Financial Advisers
Establishes a broad outline defining appropriate and inappropriate business behavior for life insurance agents. It also establishes the activities of agents as one of public trust.
Disclosure
Every applicant must be given a written disclosure that provides basic information about cost and coverage of the proposed insurance being solicited. THIS MUST BE GIVEN TO THE APPLICANT NO LATER THAN THE TIME OF APPLICATION FOR INSURANCE IS SIGNED. This will help the applicant make an informed and educated decision about their choice of insurance.
Is an insurance company required to notify members of the cancellation or expiration of a group life insurance policy?
Every insurance company shall notify each certificate holder (member) when the master policy has expired or has been cancelled. The insurance company may take this action through the policyholder (i.e., employer) by notifying it and requesting that it notify the certificate holders. The policyholder shall advise each certificate holder, as soon as practicable, of the notice of expiration or cancellation
Replacement duties of replacing insurers
Get list of applicants life insurance contracts to be replaced. Send applicant completed comparative information form within five working days. Send copy of replacement notice to existing insurance immediately. Keep copies of replacement notices statements any sales material an application for at least three years
Coverage for Dependents
Group Life insurance benefits may be extended to insure the employees spouse and dependent children. Amount of insurance cannot exceed amount of insurance for the insured employee.
Coverage for dependents
Group life policy may be exposed tended to ensure employee spouse independent children. amount of insurance may not exceed amount for the insured employee.
Conversion Priviledge
Group plan participants can cancel their group coverage and must be allowed to convert their group plan to an individual plan without proof of insurability at a standard rate. Rates will be based on attained age, the face amount will be the same as group coverage but premium will be higher. Employee has 31 days to convert to Individual plan after termination of group plan. During the 31 days the employee is still covered under the group policy. Group Policies must have a provisions that if the group policy terminates insurance for any class of insured, everyone affected who's been insured for at least 5 years as of the date of termination is entitled to convert to an individual policy.
How does Florida law restrict an agent regarding the agent as beneficiary of a life insurance policy?
How does Florida law restrict an agent regarding the agent as beneficiary of a life insurance policy? A life insurance agent cannot be named as beneficiary of a life insurance policy covering the life of a person who is not a family member of the agent, unless the agent has an insurable interest in the life of such person. The phrase "not a family member," with respect to a life agent, means an individual who is not related to the life agent as father, mother, son, daughter, brother, sister, grandfather, grandmother, uncle, aunt, first cousin, nephew, niece, husband, wife, father-in-law, mother-in-law, brother-in-law, sister-in-law, stepfather, stepmother, stepson, stepdaughter, stepbrother, stepsister, half brother or half sister.
Marketing Practices
Insurance agents are required to be familiar with ALL Florida insurance regulations. The MOST important of these are: 1. Florida Life Insurance Solicitation Law - details information and procedures required of agents and insurers when proposing life insurance to a prospective buyer. 2. The Florida Replacement Rule - establishes requirements and procedures that the agents and insurers MUST follow when a propsal is being offered that would replace an exsiting insurance contract with the new proposed insurance. 3. The Code of Ethics of the Florida Association of Insurance and Financial Advisors - felines appropriate and inappropriate Business behavior for life insurance agents. It also establishes the activities of agents as one of public trust.
Competent parties
Must be of legal age, in Florida age 15. Must not be under influence of drugs or alcohol when entering Contract
Notice regarding replacement
Must be signed by both applicant and producer. Happy must be left with the applicant
Group Plan Certificates of Insurance
Must have the following information: • Group Policy Number • Description of insurance protection cardholder is entitled • Name of Insured, beneficiaries, and dependents, • The rights and conditions
Separate document
Policy summary as it relates with sales illustration
How is "replacement" defined in Florida's Replacement Rule?
Replacement means any transaction in which new life insurance is to be purchased, and it is known or should be known to the proposing agent, or to the proposing insur-ance company if there is no agent, that by reason of such transaction, existing life insurance has been or is to be: 1. lapsed, forfeited, surrendered or otherwise terminated; 2. converted to reduced paid-up insurance, continued as extended term insurance or otherwise reduced in value by the use of nonforfeiture benefits or other policy val-ues; 3. amended so as to effect either a reduction in benefits or in term for which cover-age would otherwise remain in force or for which benefits would be paid; 4. reissued with any reduction in cash value; or 5. pledged as collateral or subject to borrowing, whether in a single loan or under a schedule of borrowing over aperiod of time for amounts in the aggregate exceed-ing 25 percent of the loan value set forth in the policy.
Replacement Duties of existing insurers
Send policy summary to policy owner within 10 days of receiving written communication every placement. Upon request. Keep all replacement notifications for either three years or the examination by the department whichever is later
Florida replacement rule
Sets forth the requirements and procedures when proposing replacement life insurance. Requires agent to give applicant a written comparison and summary statement at the request of the policyholder.
What is a "nonparticipating life insurance policy"?
The nonparticipating policy does not share in the surplus earnings of the insurance company. Because of this, the insured does not receive dividends.
Why is it common to limit the amount of term insurance that can be purchased under the fifth dividend option to the current cash value of the contract?
The original purpose for developing the fifth dividend option was to allow a policy-owner to fill the gap in coverage created by borrowing on life insurance contracts. Thus the option limits the amount of term insurance available to the maximum amount that can be borrowed on the contract in order to be consistent with the purpose for which the option was developed and to protect the insurer from potential adverse mortality experience.
Definition of the "suicide clause" of a life insurance policy.
The suicide clause of a life insurance policy provides that in the event the insured commits suicide within a specified time after issuance of the policy (usually one or two )ears). the beneficiary will not be paid the face amount of the policy but only the amount of premiums paid.
What is the so-called "fifth dividend option"?
This is the newest dividend option available in many newer participating life insurance contracts. It allows the policyowner to buy one-year term insurance at net rates with the dividends received. In most cases the policyowner is limited to purchasing term insurance equal to no more than the current cash value on the contract.
What is the purpose of a Common Disaster Provision?
To provide a sequence of beneficiaries for the distribution of proceeds in the event of the simultaneous death of both the insured and the primary beneficiary. Definition of the "suicide clause" of a life insurance policy. The suicide clause of a life insurance policy provides that in the event the insured commits suicide within a specified time after issuance of the policy (usually one or two )ears). the beneficiary will not be paid the face amount of the policy but only the amount of premiums paid.
What are the major types of groups eligible for group life insurance under Florida law?
Under the Florida law, the eligible groups are the following: 1. Employer-Employee group. The full-time employees of a single employer. 2. Labor Union group. Members of a particular labor union. The policy is held by the union since the members may work for several employers during the year. 3. Trustee group. A group of the employees of two or more employers together. The trustee holds the policy for the members. 4. Debtor group. Debtors of a single creditor. For example, those whopurchase furniture from a particular store on the installment plan can obtain credit life insurance. If the debtor dies, the debt is paid by the insurance. 5. Association group. Any association of professionals who are licensed by the state can obtain association group life insurance. The association must have been in existence for two years and formed for a purpose other than obtaining insur-ance. It must hold regular meetings at least on an annual basis. If the premium is contributory, at least 100 members must participate. If it is noncontributory. all members must be covered. 6. Credit Union members. Credit unions and their members are permitted to have a group life insurance policy which provides coverage equal to the amount of share balance held by the member. If the member has $4,000 in his or her account, then automatically there is $4,000 in group life insurance on that member until age 65. 7. Dependent group. The dependent spouse and children of a member of a group may be covered for a maximum of 50 percent of the employee coverage.
Florida replacement rule applies
When agent proposes life insurance they should know if the purchase of such policy will replace an existing life insurance policy
Explanation of the Uniform Simultaneous Death Act of Florida.
Where the insured and the beneficiary in a policy of life or accident insurance hay died and there is insufficient evidence that they have died other than simultaneous' the proceeds of the policy shall be distributed as if the insured had survived the beneficiary.
Group policy payment of proceeds
Within 30 days after receipt of proof of death
Does the Florida Insurance Code give the Chief Financial Officer power to regulate financial planners?
Yes, the Florida law states the following as part of the General Rules Relating to Solicitation: Terms such as "financial planner" "investment adviser," "financial consultant" or "financial counseling" shall not be used in such a way as to imply that the insurance agent is generally engaged in an advi-sory business in which compensation is unrelated to sales unless such is actually the case. The primary purpose of this law is to require agents to adequately disclose to the pro-spective buyer that an insurance agent is selling insurance. The law points out that financial planners generally receive income from fees for advisory services rather than for a particular product's sale. It also protects the insurance consumer from paying double for the same service; that is, paying a consulting fee in addition to the premium for an insurance policy, when the insurance premium includes a sales commission. An agent is prohibited from unlawfully using a designation or misrepresenting his or her qualifications in a way that falsely implies that he or shepossesses special financial knowledge or has obtained specialized financial training or is certified or qualified to provide specialized financial advice to senior citizens. However, an agent may disclose and make recommendations in accordance with those designations which he or she has earned, such as certified financial planner (CFP), chartered life underwriter (CLU), chartered financial consultant (ChFC), life underwriter training council fellow (LUTC), or an appropriate license to sell securities from the Financial Industry Regulatory Authority (FINRA).
Are there rules regarding the policy loan interest rate?
Yes. An insurance company can charge a fixed rate of up to 10 percent annual interest subject to restrictions. Or, the insurance company can use an adjustable rate of interest with the limit based on the average monthly published interest rate determined by Moody's corporate bond index.
Senior Consumers and Annuities
• Recommendations must be reasonable under all circumstances known to the agent at that time • Unless the consumer refuses to disclose pertinent information • If senior consumer decides to enter an insurance transaction not based on the recommendation or if the consumer fails to provide complete or accurate information. • Annuity contracts issued to seniors may not contain a surrender or Deffered sales charge for the withdrawal of money from an annuity exceeding 10% of the amount withdrawn • Exchange or recommendation of purchase to seniors must have reasonable grounds proving the suitability for the consumer based on facts disclosed by the consumer about: 1. Investments 2. Other insurance products 3. Financial situation 4. And needs • Before executing a purchase the agent tour insurer must make a reasonable effort to obtain information concerning the seniors: 1. Financial status 2. Tax status 3. Investment objectives 4. Along with other information used or considered reasonless by agent or insurer • Insurer, agents, insurance agencies, and managing general agents must maintain records of the information collected from senior consumers and supporting information used for the recommendation for 5 years after the insurance transaction is completed by the insurer.
Duties of Replacing Insurance Company
• Require from the producers list of the applicants life insurance contracts to be replaced. • A copy of the replacement notice provided by the applicant. • Send each existing insurance company a written communication advising of proposed replacement within the specified time frame which starts at the time the application is received in the replacing insurers home or admin office. • A policy summary or ledger statement containing policy data on the prosper life insurance or annuity must be included.
Replacement definition and purpose
Must be in clients best interest and serve their needs. New policy replaces existing policy that is Terminated re-issued or converted.
List of existing life INS/annuity policies
Must include policy numbers and names of companies being replaced
Does the Uniform Simultaneous Death Act eliminate the need for a Common Disaster Clause?
No. it does not. All it does is to clear the way for paying claims. If there is sufficient evidence that a beneficiary survived the insured, the proceeds will still pass through the beneficiary's estate and then to the beneficiary's heirs. The law applies and clears the way for claims to be paid only where there is -no evidence that the insured or the primary beneficiary survived each other.-
What conversion rights belong to a surviving spouse of a group life insurance certificate holder?
The survivor has the same conversion rights the insured employee possessed. An individual policy can be procured covering the spouse and dependents, subject to certain limitations.
What is the Florida Viatical Settlement Act and how does it affect life insurance agents?
This law provides for regulation of viatical settlement contracts and providers by the Office of Insurance Regulation. A viatical " settlement contract is an agreement under which the owner of a life insur-ance policy sells the policy to another person (a viatical settlement provider) in exchange for a bargained-for payment, which is generally less than the expected death benefit under the policy. The person who buys the policy from the original policy-owner takes over premium payment, and upon the death of the original policyowner, collects the death benefit under the policy. The law provides for licensing of viatical settlement providers and viatical settlement sales agents, and regulates the terms of viatical settlement agreements. As a result of legislation passed in 2005, Florida will no longer issue viatical settle-ment broker licenses. Only a licensed life insurance agent may offer or attempt to negotiate on behalf of another person a viatical settlement contract. The licensed life insurance agent must appoint himself or herself pursuant to procedures established by the Department of Financial Services to perform such services under the life agent's license. A viatical settlement sales agent must be licensed as a life agent. The Florida Viatical Settlement Act was amended in 2005 to establish a registration requirement for persons who determine, or hold themselves out as determining, life expectancies or mortality ratings used to determine life expectancies on behalf of viat-ical settlement providers or licensed life agents engaged in the business of viatical set-tlements. Compensation received by a life agent for activities performed as a viatical settlement broker may not be shared with another person unless the other person is also licensed as a life agent according to Florida law and properly self-appointed with regard to viatical settlement contracts. This life agent owes a fiduciary duty to the via-tor to act pursuant to the viator's instructions and in that person's best interest. In this context, the viator is the owner of the life insurance policy or the certificate holder under a group policy that is being sold in the viatical settlement.
Assignment of Proceeds
An insured under a group plan may make assignments of any or all of the incidents of ownership such as: 1. Assign all or part ownership 2. Exercise the Conversion Privilege 3. Have the right to name a beneficiary
Non-Forfeiture Options
Provisions must include: • In event of default, any premium payment for at least 1 year, a PAID-UP NON-FORFEITURE BENEFIT will become effective as specified in the policy unless otherwise indicated. The person entitled to it elects another option within 60 days after the due date of of the premium in default. • Upon policy surrender within 60 days after the due date of any premium payment in default (as long as the premium has been paid for at least 3 full years, in ordinary insurance, or 5 years in industrial, the insurer will pay, in lieu of any paid-up non-forfeiture benefit in CASH SURRENDER VALUE. • If the policy is paid-up or is continued under the paid-up non-forfeiture benefit, the insurer will pay a cash surrender amount if the policy is surrendered within 30 days after the policy anniversary. • A Mortality Table, interest rate and method used in calculating cash surrender values and the paid-up non-forfeiture benefits must be available under the policy. • A statement that the policy's cash surrender values and a paid0up Non-Forfeiture benefits meet the minimum alum benefit requirement for the state in which the policy is delivered. THE INSURER RESERVES THE RIGHT TO DEFER THE PAYMENT PF ANY CASH SURRENDER VALUE FOR A PERIOD OF 6 MONTHS AFTER DEMAND WITH SURRENDER OF THE POLICY..
What are the requirements in Florida regarding the policy grace period for persons 64 years of age and older?
An additional lapse notice is required for individual life contracts that have been in force for at least one year, and that cover natural persons 64 years of age or older. Insurers are required to issue a notice of possible lapse after the applicable statutory grace period has expired. That notice must allow at least 21 days beyond the grace period for payment of premiums before a policy may lapse because of nonpayment. If the policy provides a grace period of more than 51 days, the lapse notice must be mailed at least 21 days before expiration of the grace period provided in the policy. The lapse notice must be sent to a secondary addressee if such an addressee has been designated in the policy. Insurers are required to provide notice of the right to desig-nate the secondary addressee in policy applications. These requirements do not apply to contracts where premiums are payable monthly or more frequently and are regu-larly collected by a licensed agent or those paid by credit card or any preauthorized check processing or automatic debit service of a financial institution. If the option for an automatic loan against cash value for defaulted premium payments is offered in the insurance application, such option is deemed elected unless affirmatively rejected by the applicant. Instructions regarding these requirements should be obtained from your appointing company
Review of the rules on disclosure (including 14-day free look)
An insurance company is required to provide to each prospective purchaser a "Buyer's Guide" and a policy summary prior to accepting an initial premium unless the policy being applied for has a provision for unconditional refund for a period of at least 14 days or unless the policy summary contains an offer of such an uncondi-tional refund, in which event the Buyer's Guide and policy summary must be deliv-ered with the policy or prior to delivery of the policy. The insurer must provide the guide and policy summary to any prospective purchaser upon request. The existence of the "14-day free look" must be disclosed. It provides that after the policyholder has received and read the policy, if the decision is made that it is not the coverage desired, the policy may be returned and a full refund of premium received. This would not apply to short-term single-premium policies (e.g., aviation accident policies), but does apply to fixed annuities
