Teacher Reviewer Flashcards
• Under Part A of Medicare it is the provider
who submits the claim.
• Adult day care coverage in a Long Term Care policy will
cover part time care in a facility for a person who lives at home.
• A group contract is between
the insurer and the employer.
• A Keogh plan is
a retirement plan for those who are self employed.
• An “Illustration” is
a presentation or depiction that includes nonguaranteed elements of a policy of life insurance over a period of years.
• In a life insurance policy illustration “non-guaranteed elements” means
the premiums, benefits, values, credits or charges under a policy of life insurance that are not guaranteed or not determined at issue.
• A stock redemption buy/sell agreement
facilitates the purchase of a deceased shareholder’s shares from the shareholder’s heirs by a corporation.
• A widow or widower without children would be eligible for
Social Security survivors benefits at age 60.
• If a senior has purchased an annuity which is invested in a mutual fund and they cancel during the free look
the CIC requires they be refunded the value of the account.
• Medicare will send out a Medicare Summary Notice (previously known as the Explanation of Medicare Benefits)
each quarter which details the services which were provided under Part A and B, if they were covered, and how much they were covered for. The Medicare Summary Notice is not a bill. Money due will be billed directly by the provider who performed the services.
Every Qualified Long Term Care policy sold in California must state the following on the first page of the policy:
“This contract for long-term care insurance is intended to be a federally qualified long- term care insurance contract and may qualify you for federal and state tax benefits.”
• The free look notice for seniors must be printed
in no less than 10-point uppercase type, on the cover page of the policy or certificate and the outline of coverage.
• An agent, broker, or other person who contacts a consumer as a result of receiving information generated by a cold lead device, shall
immediately disclose that fact to the consumer.
If a policy loan is outstanding when the insured dies and the beneficiary selects the fixed period settlement option
the outstanding loan will effect the amount of the payments received, NOT the length they are received for
An equity indexed annuity
has a fixed minimum interest rate, and the chance to get a higher rate of return like that of the stock market.
A Modified Endowment Contract
has a 10% IRS early withdrawal penalty.
The agent’s commission comes from
the insurer expenses portion of the premium charged.
Life Insurance policy illustration regulations were NOT created to
eliminate disclosure.
The CIC defines Insurance as
a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.
An outline of coverage shall be
delivered to a prospective applicant for long-term care insurance at the time of initial solicitation.
A joint life policy covers
multiple lives and pays out when the first insured dies.
In addition to completing the pre-licensing requirement Life Agent, Fire & Casualty broker-agents and Personal Lines agents must also
complete a 12-hour Ethics and Code course.
In a non-contributory group disability income policy any policy benefits paid would be
included in the employee’s gross income (be taxable).
If an insurance agent hires a website designer to create a website
it is the insurance agent who is responsible for the content of the website.
The “exclusion ratio” is the formula used to
determine the amount of annuity distribution which is taxable.
The insured can change the beneficiary
anytime if they are revocable.
A collateral assignment
can be utilized to obtain a loan.
Coordination of benefits
is a provision which would prevent a family from collecting for the same loss twice in a group plan.
A representation may be
altered or withdrawn before the insurance is effected, but not afterwards.
With regard to long-term care insurance, all insurers, brokers, agents, and others engaged in the business of insurance owe a policyholder or a prospective policyholder.
a duty of honesty, and a duty of good faith and fair dealing
• If the premium for a group disability income policy is fully paid by the employee
benefits would be excluded from the employee’s gross income (not taxable).
• In life insurance insurable interest must exist
when a policy is first issued.
• In life insurance, the measure of liability is
the sum or sums payable as provided in the policy to the person entitled thereto.
• The premium is
the amount the insured pays the insurer for the coverage provided.
• The Insurance Commissioner shall be elected by
the people in the same time, place and manner as the Governor.
• Under the CIC all advertisements, policies and certificates of term life insurance sold to those age 55 and older must include
a term life insurance monetary value index, which is similar to the Life Insurance Surrender Cost Index. In developing a term life insurance monetary value index, the commissioner shall consider actual premiums and policy and certificate benefits and the manner in which they are affected with the passage of time. Any term life insurance monetary value index developed pursuant to this section shall assume an insured’s desire to retain coverage for at least 10 years.
• Term life insurance directed to individuals 55 years of age or older must prominently disclose any change
in premium resulting from the aging of the insured, policy duration, or any other factor. If the insurer retains any right to modify premiums in the future, that fact shall also be disclosed.
• The Social Security Blackout period is
a period of time when surviving family members are NOT eligible for Social Security survivors benefits (survivors benefits stop during this period).
• The Social Security Blackout period begins when
the youngest child reaches age 16.
• The Social Security Blackout period ends when the surviving spouse
reaches age 60.
• Social Security full retirement age is based upon
the year in which you were born.
• Retirement benefits under Social Security are only available to workers who
are fully insured.
• An Employee Stock Ownership Program (ESOP) is
a qualified, defined contribution, employee benefit plan designed to invest primarily in the stock of the sponsoring employer.
• A profit sharing plan is
a plan that gives employees a share in the profits of the company. Each employee receives a percentage of those profits based on the company’s earnings.
• A speculative risk is
a risk situation that includes a chance of loss and a potential for gain. Speculative risks are not insurable.
• The Law of Large Numbers states
the more similar risks the insurance company combines together the better they can guess approximately how many losses they will have in a given time period.
• The Doctrine of Utmost Good Faith
allows each party to rely on the representations made by the other party.
• Life insurance companies are required to give the policyholder
(free look)
a minimum 10 day free look, unless the policyholder is age 60 or older in which case they are considered a senior citizen and must receive a 30 day minimum free look.
• In order to transact insurance (sell insurance) agents must hold at least
one insurer appointment.
• A Tax Sheltered Annuity (TSA or 403-B) is
a qualified plan created for public school employees and non-profits.
• Roth IRAs have
non-deductible contributions.
• Annuity death benefits are NOT
tax deductible or tax free. Life insurance death benefits are tax free however annuities are not life insurance. The beneficiary of an annuity death benefit would have to pay ordinary income tax on any amount they receive over and above the cost basis (amount invested) of the annuity owner.
• Divorce is a qualifying event under COBRA which will
allow the employee to apply to continue their coverage under the group plan.
• The Consolidated Omnibus Reconciliation Act (COBRA) requires employers with 20 or more employees offer health insurance continuation to employees and employees dependents who
become ineligible for coverage due to a qualifying event. If the employee elects continuation they are responsible for paying the full premium for coverage and can only continue their coverage under the group plan for a limited period of time.
• If a daughter needs a break from caring for her father
her father may have coverage in his Long Term Care policy that would pay for a caregiver to come in to give her a break. This coverage is called respite care.
• An individual who needs terminal ill care would find this coverage provided in
their Long Term Care policy as hospice care.
• Long Term Care policies are underwritten on
the applicant’s ability to care for themselves (Activities of Daily Living), such as eating, bathing and transferring (moving around).
• There are three types of ordinary life insurance
that you can remember using the acronym W-E-T (Whole Life, Endowment, Term). Group insurance is not a type of ordinary life insurance.
• The insurance applicant is
the individual who is applying to purchase insurance.
• Each authorized insurer is required to establish a division within the insurer to investigate
fraudulent claims.
• The waiting period included in disability income policies is also known as
the elimination period.
• An insurance company based in Utah that is selling in California is
a Foreign insurer in California.
• The period of time (30 days, 60 days, 90 days or 180 days) the insured is not eligible for benefits once they become disabled is known as
the waiting period.
• Bob works for Alpha insurance company and does things necessary to transact insurance that are not specified in his contract. This is referred to as
implied authority.
• When an annuitant enters the payout period and annuitizes the contract the insurance company will
spread their cost basis (amount invested) over their lifespan. For example, if an annuitant had invested $50,000 into the annuity (their cost basis) and the annuity account balance was now $100,000 then the annuitant annuitized and was to receive payments of $4,000 per year they would NOT have to pay tax on the first $2,000 they receive each year.
How is this figured? First, divide the total amount ($100,000) by $4,000 (the annual payments the annuitant will receive) to find out the annuitants projected lifespan (25 years). Then divide their cost basis ($50,000) by 25 years ($2,000). The first $2,000 of payments the annuitant receives each year for the first 25 years is a return of their cost basis and is not taxable. Any amount over the $2,000 they receive each year is taxable as ordinary income. What happens if they live longer than 25 years? The $4,000 per year will continue to be paid but will now be fully taxable since all of their cost basis has been returned to them.
• If you no longer hold any insurer appointments your license is considered to be
inactive.
• The Employees Retirement Income Security Act (ERISA) states
that fiduciary pension plans were created for the benefit of plan participants and beneficiaries.
• If an employer holds your license and wants to cancel it they are required to
send written notice to the commissioner.
• If a retirement plan includes a 7 year vesting schedule
each employee must be vested 100% by the end of the 7thyear. Vesting means ownership of employer contributions.
Vesting means
ownership of employer contributions.
• If an annuitant selects the 10 year period certain annuity payout option it guarantees if they die within the first 120 payments, the remaining payments will be
made to the beneficiary. However, the annuitant will be paid as long as they live. Which could be substantially longer than 10 years.
• An individual that has contributed to Social Security 6 of the last 13 quarters who becomes disabled is
currently insured under the system.
• Claims forms are required to include the following statement related to fraudulent claims:
“Any person who knowingly presents a false or fraudulent claim for the payment of a loss is guilty of a crime and may be subject to fines and confinement in state prison”.
• An insurance company that has enough reserves to pay for all its liabilities is referred to as
a solvent .
The state insurance guarantee fund provides
protection to policyholders whose insurer becomes insolvent (financially impaired). This fund only covers member insurers (licensed insurance companies).
If an applicant has had a professional license revoked in the past 5 years the insurance commissioner can
deny their licensing application without a prior hearing.
The insurance company that purchases reinsurance is referred to as
the primary insurer (a.k.a. ceding insurer).
The waiver of premium rider will waive
the insured’s premium if the insured becomes disabled.
A disability income rider that is added to a life insurance policy will pay a replacement of the insured’s lost income if
they become disabled.
The Accidental Death Benefit rider will pay double the face amount if the insured dies in an accident, and is also known as
double indemnity.
An insured would name a contingent beneficiary to ensure where the policy proceeds will go if
the primary beneficiary dies prior to the insured.
Extended term is a
non-forfeiture option that provides a new term life insurance policy with the same face amount of coverage as the original policy. Extended term is not a settlement option.
A Settlement Options can be pre-determined by
the owner of the policy prior to their death, but is usually selected by the beneficiary upon the insured’s death.
Policies issued by Mutual insurers pay dividends to
policyholders. The dividend option is selected by the policyholder on the insurance application.
A non-participating policy owner will not
receive dividends. Non-participating policies are issued by stock insurers. Stock insurers pay dividends to stockholders, not policyholders.
Dividends are declared by
the board of directors and cannot be guaranteed.
The conversion feature allows an employee to go from group coverage to
an individual policy.
A family policy provides life insurance for
an entire family and allows the children to convert from term to whole life coverage without a physical exam.
A Hospital confinement policy will pay a set amount per day if the insured is
confined in the hospital. A corridor deductible applies in a major medical policy between the basic and excess coverage.
Major Medical policies include
a deductible, coinsurance and a stop loss. First dollar coverage is NOT a feature of Major Medical.
A capitation fee is
a per head (capitation) fee that is paid to doctors that treat subscribers of HMO’s. A capitation fee is NOT a feature of Major Medical.
A stop loss is
the maximum the insured would have to pay of the coinsurance.
Coinsurance is a feature of major medical insurance and is defined as
a sharing of the loss after the deductible has been satisfied. Coinsurance is usually expressed as a percentage sharing of the loss between the insurer and the insured, with the insurer paying the larger percentage, such as 90/10.
Co-payments are included in HMO and PPO plans and are
a fixed amount the subscriber must pay when they go to the doctor.
A gatekeeper (Primary Care Physician) cannot
be a specialist, they must be a general practice doctor.
If an employee wants to enroll without any restrictions they would enroll during
the eligibility period (open enrollment period).
A group contract where the employer pays 100% of the premium is referred to as
a non-contributory group plan.
A Multiple Employer Trust is a
a trust that small employers join to purchase health insurance.
If an individual increases their insurance policy limits, they are
NOT eliminating their risk, they are transferring more of their risk.
Social Security has the hardest
definition of total disability to meet.
Medicare Part C does NOT cover prescription drugs.
Medicare Part D covers prescription drugs.
Medicare Part A provides coverage for
hospital services and is free to those eligible once they reach age 65.
Medicare Part B is optional and if an eligible individual enrolls they must
pay a monthly premium for the coverage. Part B of Medicare provides coverage for doctors services.
Medicare supplement companies can offer whatever plans they wish as long as
they offer at least Plan A. They are not required to offer all 12 plans (A-L).
A specified disease policy is a policy that covers
only certain dread diseases such as cancer insurance.
Preferred risks receive the lowest
premium charges as they pose the lowest risk to the insurer.
An insurance binder always creates immediate
coverage which is the main difference between a binder and a conditional receipt.
The incontestability clause states that after a life insurance policy has been in effect for
2 years it becomes totally incontestable. This is very restrictive for the insurer and prevents them from contesting a claim for any reason after 2 years.
Replacement is when
you replace your customer’s current policy with a new one and is NOT illegal. However, you would NOT replace your customer’s policy if the new policy is worse and the premium is higher. This would be considered twisting and is illegal.
• A captive insurer is
an insurer created by a corporation to insure its own risks.
• If a company decides to self insure this decision would not
have any impact on claims severity.
• An occupational disability income policy provides
coverage on and off the job.
• Workers Compensation laws require the employer to
be responsible for employee injury on the job regardless of fault.
• The entire contract clause states
the application is part of the contract if attached when issued.
• Under Social Security in order to receive total disability benefits the disability must be expected to last
at least 12 months or end in death.
• Under Coordination of Benefits the coverage you have where you work is considered
to be primary.
• HMO’s stress
preventative medicine.
• Some health insurance policies include deductibles. Deductibles are
paid by the insured. The higher the deductible the lower the premium.
• A guaranteed renewable health insurance policy would have the highest
premium.
• Guaranteed renewable health insurance policies cannot
be changed except by class.
• If an insured wants to sell their life insurance policy to an investor (viatical/life settlement) they can do so by
requesting an absolute assignment.
• An absolute assignment is
a permanent transfer of ownership rights.
• In California Life only, Health only, Property only and/or Casualty only insurance licensees must complete
24 hours of continuing education each license renewal period (2 years). The 24 hour per licensing period requirement is the same regardless of the number of licenses held.
• Agents who sell Long Term Care are required to complete
Long Term Care specific continuing education within the core requirement, not in addition.
• Agents who sell Long Term Care are NOT required to
take an exam on the topic every 10 years.
• An insurance company that is based in Canada and doing business in California is
a alien insurer.
• The doctrine of utmost good faith states that
all parties to the contract can rely upon the statement of the other party.
• Concealment is when
a party fails to communicate that which a party knows, and ought to communicate, so that the other party may make a sound decision.
• Employees that are covered under a group policy receive
certificates of insurance as their proof of coverage.
Purchasing life insurance to fund a buy/sell agreement is a business use of
life insurance NOT a personal use.
Key person life insurance is used by
a business to protect themselves in case a valued employee dies. The death benefit would be paid to the company to hire and train a replacement.
In a contributory group policy the premium is shared between
the employer and employee. The employee contributes toward the premium.
The disability income coverage under Social Security was created to
provide a minimum floor of income in case of total disability. It was NOT created to provide a full replacement of lost income.
Most workers contribute to Social Security through
taxes levied on their earnings. Benefits are based on contributions, but are NOT equal to contributions.
The underwriting division within the insurance company selects
which risks the insurer will take on.
Decreasing term life insurance (aka — mortgage redemption insurance) is often used to
pay off an outstanding mortgage upon death of the borrower.
If a payor benefit rider is added to a juvenile life policy it will
waive the premium for the policy until the child reaches a certain age (often 21) if the parent dies.
Variable insurance products are regulated by
the state department of insurance and the Securities and Exchange Commission (SEC) since they are considered to meet the definition of a securities product.
If a rider is added to a cash value life insurance policy the
extra premium paid for the rider will NOT apply toward the cash value.
If an insured purchases a cost of living rider
this rider will automatically increase their policy limits tied to the consumer price index. However, if the policy limit increases, so will the underlying premium.
The misstatement of age clause allows the insurance company to
adjust the face amount at the time of death to what the premium the insured paid would have purchased them had they told the truth about their age when they purchased the policy.
In California senior citizens are those age 60 and older. Senior citizens who buy life insurance are required to receive
(Free look)
a 30 day minimum free look. People under age 60 who buy life insurance are required to receive a minimum 10 day free look.
The common disaster clause applies when
both the insured and primary beneficiary die as a result of the same accident. It states that the primary beneficiary always dies first and protects the interest of the contingent beneficiary.
