tx need to know Flashcards
insurance
the transfer of risk of loss. the cost of an insured loss is transferred over to the insurer and spread among other insureds.
insurer’s consideration
the promise to pay for losses; insured’s consideration is the payment of premium and statements on the application
representations
statements believed to be true. insured’s statements on the application are representations.
field underwritter
a life insurance producer is company’s field underwriter
conditional receipt
the applicant may be covered as early as the date of the application
insurable interest
must exist at the time of application. the policyowner must have insurable interest in the life of the insured.
insurance application
the key source underwriters use for information about the applicant
can not refuse coverage
insurer’s can not refuse coverage solely on the basis of adverse information on an MIB report.
the higher the risk
the higher the premium
a buyers guide
provides generic information on various types of policies. a policy summary provides specific information on the policy being issued.
No premium
No coverage
term insurance
provides the greatest amount of coverage for the lowest premium. Term insurance has no cash value.
whole life insurance
provides lifetime (permanent) protection and accumulates cash value
skips a premium on universal life
the missing premium may be deducted from the policy’s cash value. The policy will not lapse.
Variable contracts
the policyowner bears the investment risk ( assets in a separate account)
Premium rates
on a joint life policy are determined by averaging the ages of both insureds
Joint life
first to die
survivorship life
second to die (last survivor)
annuities are based on
the life expectancy of an annuitant, the annuitant must be a natural person, regardless of who owns the policy
annuity accumulation period
funds are paid into annuity
annuity period
funds are paid out to the annuitant
shorter life expectancy
higher benefit
longer life expectancy
lower benefit
Annuity premium payment methods
single premium vs periodic
annuity payments being
immediate vs deferred
annuity premium investment
fixed vs variable
annuity proceeds disposal
pure life, annuity certain, life refund annuity
immediate annuity
purchased with a single premium, income payments from a deferred annuity begin sometime after 1 year from the date of purchase
pure life annuity
provides the highest monthly benefit, but there is no guarantee that the entire principal will be paid out
fixed life option
pays for a specific time only, whether or not the annuitant is living
entire contract
policy + copy of application + any riders or amendments.
absolute assignment
the complete and permanent transfer of ownership rights; collateral assignment is the partial and temporary transfer of rights
no beneficiary named
policy proceeds go to the insured’s estate
grace periods
protect policyholders from losing insurance coverage if they are late on a premium payment
misstatement of age
results in adjustment of premiums or benefits
policy loans
Only available in policies that have cash value (whole life)
Waiver of premium rider
waives the premium for a total disability after a waiting period
Childrens term rider
one premium for all children
accelerated benefit
early payment of part of death benefit to the insured from the insurer for qualifying medical expenses
nonforfeiture options
triggered by policy surrender or lapse
extended term
the automatic nonforfeiture option: same face amount, shorter term of coverage
dividends
a return of excess premiums; therefor not taxable when paid to the policyowner
settlement options
triggered by the insured’s death or age 100
under life income
(straight life) settlement option, the recipientent cannot outlive the benefit payments
life settlement
the owner sells an existing life policy to a third party
group insurance
is written as annually renewable term insurance. in group insurance, the master contract if for the employer and certificates of insurance are for individual insureds
group to individual life insurance conversion
evidence of insurability is not required
qualified plans
have tax advantages
traditional IRA’s and Roth IRA’s
for individuals with earned income. Contributions to a traditional IRA are with pre-tax dollars (tax deductable) contributions to a Roth IRA are with after tax dollars (Not tax deductible)
traditional IRA distributions
are taxable. roth IRA distributions are not taxable
403 (b)
for nonprofits and public school systems
contributions to qualified plans
are limited to a maximum amount (established by the IRS)
policy loans
are not income taxable from cash value
lump sum cash payment
from life policy are tax free for the beneficiary
settlement options
the principal is tax free, but the interest is taxable
taxes must be paid
either upon contribution or upon distribution, not both. (if taxed on one end, will not be taxed on the other)
MEC
is an overfunded life insurance policy= failed the 7-pay test. once an MEC, always an MEC
agent’s responsibility
to make sure that an application for insurance is complete and accurate to the best knowledge of the applicant
changes in the application
must be initialed by the applicant or insured
coverage gap
there cannot be any coverage gap between the existing coverage and replacement coverage
No deductible
for basic hospital expense coverage
HMO main focus
preventative care
HMO gatekeeper
helps control the cost of healthcare by only making the necessary referrals
PPO’s
allow more flexibility between in-network and out-network providers in exchange for a higher premium than a HMO
Out of pocket costs
in network=lower out of pocket costs, out of network= higher out of pocket cost
FSA
may be used to pay medical and dental expenses for employees and dependants
nonhealth withdrawal penalties
before age 65: 20%; after 65 no penalty
HRA
allow employees to roll over unused benefits to the following calendar year; in addition to new benefits
elimination period
a “time’ deductible designed to eliminate coverage for short term disabilities. and reduce the filing of excessive claims
probationary periods
apply to sickness, not accidents or injury
group disability plans
benefits are based on a percentage of the workers income; individual policies specify a flat amount
key person disability insurance
the business is the contract owner, premium payer and the beneficiary
AD&D policies
the principle sum means the full face amount and the capital sum is the percentage of the face amount
LTC policies
must be guaranteed renewable
skilled care and intermediate care
require the assistance of medically licensed personnel, custodial care may be administered by nonmedical personnel
coverage for dependents
under COBRA may be extended to 36 months in the event of the employee’s divorce or death
limited policies
cover a specific sickness or accident only
health insurers must offer
pediatric dental coverage ( 18 or younger) as an essential health benefit under a health plan or as a stand alone dental plan
insurers must include
individual health insurance policies the standard provisions established under the NIAC’s uniform accident and sickness policy provision law
insurers are prohibited
from making changes to a health insurance policy without an insured’s consent
accident and health grace period
directly tied to the premium payment mode
insured’s duties
notice of claim and proof of loss
insurer duties with claim
claim forms and the time of payment of claim
misstatement of age
on insurance application, benefits are adjusted per the current premium
insuring clause
defines the scope of coverage, as well as identifies the rights and the duties of each party of the contract
insured may cancel
an insurance policy at any time
guaranteed renewable policy
requires the insurer to continue coverage as long as premiums are paid
Medicare Part A
hospital insurance
Medicare Part B
medical insurance
Medicare Part A does not cover
outpatient hospital care, that is covered under Medicare part B
Medicare Part C
expands original medicare benefits through private health insurance programs
medicate supplement plans
sold through private insurers, not federal insurance programs
initial benefit limit is reached
a prescription drug benefit plan will pay75% of all generic and brand name drug costs
Medicare supplement plans
must offer the core benefits available in Plan A
Coordination of benefits provision
ensures that benefits are not paid in excess of the total losses incurred
Occupational Basis policies
cover accidents or sickness that occur on or off the job. when written on a nonoccupational basis, policies cover claims that result solely from accidents or sicknesses occurring off the job
partial disability
covers a partial loss of income for disabled insureds who are unable to perform some, but not all of their regular job duties
residual disability
calculated as a percentage determined by current earnings and earnings prior to disablement
disability insurance premiums
are deductible as business expense, benefits are taxable income for employee
premiums paid by employer
are tax deductible as the employer’s business expense
a domicile
refers to the location where an insurer is incorporated, not necessarily where the insurer conducts business
insurers require state to do business
certificate of authority
credit life insurance
cannot pay out more than the balance of the debt
