Accident & Health cheat sheet

The McCarran-Ferguson Act (1945) reserves regulation of insurance to the states, exempting it from most federal antitrust laws.

A person who solicits, negotiates, or sells insurance must hold a state-issued producer license; licensing is administered by the state insurance department.

A producer must be appointed by an insurer before soliciting business on its behalf; appointment authority is filed with the state.

Continuing education requirements: most states require 24 credit hours every 2 years, including ethics hours; exact hours vary by state.

A producer must notify the state insurance department of a change of address within a specified period (commonly 30 days).

Commissions may only be paid to licensed producers; paying commissions to unlicensed persons is an illegal rebate.

The state insurance commissioner has authority to examine insurers, issue cease-and-desist orders, revoke licenses, and impose fines.

Unauthorized insurers (not admitted in the state) may not transact insurance except through limited exceptions such as surplus lines.

Insurable interest in health insurance must exist at the time of application; it is not required at the time of loss.

Indemnity principle: health insurance benefits are intended to reimburse actual expenses, not to create profit.

Utmost good faith requires both parties to disclose all material facts; concealment or misrepresentation can void the contract.

Adhesion: the insurer drafts the contract and any ambiguity is construed against the insurer (contra proferentem).

Aleatory contract: the amounts exchanged by the parties are unequal and depend on chance.

Unilateral contract: only the insurer makes a legally enforceable promise; the insured pays premium to keep the policy in force.

Conditional contract: the insured must satisfy conditions (e.g., timely premium payment, proof of loss) to receive benefits.

Law of large numbers allows insurers to predict losses accurately by pooling a large number of similar risks.

Risk transfer and risk sharing are the core mechanisms of insurance; adverse selection is the tendency of higher-risk individuals to seek coverage.

Health insurance policies are classified as individual, group, or government-sponsored.

Accident-only policies cover accidental bodily injury; sickness policies cover illness; comprehensive policies cover both.

A policy's free-look period (typically 10–30 days) allows the insured to return the policy for a full premium refund.

Premiums are based on age, gender, health status, occupation, and geographic location; community rating uses broad factors.

The consideration clause states that the insured pays premium and the insurer provides coverage in return.

The entire contract clause means the policy plus the application (and any attached riders) constitutes the whole agreement.

A conditional receipt provides temporary coverage beginning on the date of application or medical exam, subject to underwriting approval.

A binding receipt provides coverage immediately upon payment of the initial premium, regardless of later underwriting.

Coordination of benefits (COB) determines which plan pays first when an insured is covered by multiple health plans.

The incontestability clause prevents the insurer from contesting the policy after it has been in force for 2 years (except for nonpayment of premium).

The grace period is the time after premium due date during which coverage remains in force; typically 7 days for weekly, 10 days for monthly, 31 days for other modes.

A reinstatement provision restores a lapsed policy upon proof of insurability and payment of overdue premiums; a new contestable period may apply.

The claims provision requires the insured to submit proof of loss within a specified time (commonly 90 days) and the insurer to pay claims within a specified time (commonly 30–60 days).

The time limit on certain defenses (2 years) bars the insurer from denying a claim based on misstatements after that period, except for fraud.

The change of beneficiary provision allows the insured to change beneficiaries unless the designation is irrevocable.

A rider is an amendment that adds or modifies coverage; common riders include waiver of premium, guaranteed insurability, and accidental death benefit.

Exclusions typically include war, self-inflicted injury, commission of a felony, and injuries covered by workers' compensation.

Disability income insurance replaces a portion of earned income (typically 50–70%) during disability.

The elimination period is the waiting period before benefits begin; longer elimination periods lower premium.

Own-occupation definition pays benefits if the insured cannot perform the duties of their own occupation.

Any-occupation definition pays benefits only if the insured cannot perform any occupation for which they are reasonably suited.

The benefit period is the maximum duration benefits are paid; it can be short-term (e.g., 6 months) or long-term (to age 65 or lifetime).

Residual disability benefits pay a partial benefit when the insured returns to work at reduced income.

A waiver of premium rider waives premiums during total disability after a waiting period.

A cost-of-living adjustment (COLA) rider increases benefits to keep pace with inflation.

Occupational coverage: disability income policies typically exclude work-related injuries covered by workers' compensation.

Basic medical expense insurance covers hospital, surgical, and physician expenses; major medical insurance covers catastrophic expenses with a high maximum.

A deductible is the amount the insured pays before benefits begin; a coinsurance clause splits costs between insurer and insured (e.g., 80/20).

An out-of-pocket maximum limits the insured's total cost sharing; after reaching it, the insurer pays 100% of covered expenses.

Managed care plans include HMOs, PPOs, and POS plans; they control costs through provider networks and utilization review.

HMO: members must use network providers and a primary care physician (PCP) for referrals; care is capitated.

PPO: members may use in-network or out-of-network providers, but pay higher costs out of network.

POS (point-of-service) plans combine HMO and PPO features; members choose in-network or out-of-network at the point of service.

Preventive care services are often covered at 100% without a deductible in managed care plans.

Utilization review includes preauthorization, concurrent review, and case management to ensure medical necessity.

Group health insurance covers a group (e.g., employees) under a single master policy; individuals receive certificates of coverage.

Eligibility for group coverage is based on employment status, not individual health; this avoids adverse selection.

Group underwriting considers the group's size, industry, and claims experience; individual health questions are not asked.

COBRA requires employers with 20+ employees to offer continued group coverage for up to 18 months (or 36 months for dependents) after a qualifying event.

HIPAA limits preexisting condition exclusions and prohibits discrimination based on health status in group plans.

The coordination of benefits (COB) provision determines the primary and secondary payer when a person has multiple group plans.

Group life and health plans often include a conversion privilege allowing departing employees to convert to an individual policy.

Experience rating sets premiums based on the group's past claims; community rating sets premiums based on the broader population.

The employer typically pays a portion of the premium; employee contributions are often made through payroll deduction.

Medicare is a federal health insurance program for people 65+, certain younger people with disabilities, and those with end-stage renal disease.

Medicare Part A covers inpatient hospital, skilled nursing facility, hospice, and some home health care; premium-free for most with 40+ quarters of work.

Medicare Part B covers outpatient care, physician services, preventive services, and durable medical equipment; requires a monthly premium.

Medicare Part C (Medicare Advantage) is a private plan alternative to Original Medicare, often including prescription drug coverage.

Medicare Part D provides prescription drug coverage through private insurers.

Medigap (Medicare Supplement) policies are sold by private insurers to fill gaps in Original Medicare coverage.

Medicaid is a joint federal-state program providing health coverage to low-income individuals and families; eligibility varies by state.

The Children's Health Insurance Program (CHIP) provides coverage to children in families with incomes too high for Medicaid but too low for private insurance.

TRICARE provides health care for active duty and retired military personnel and their families.

An annuity is a contract that pays a series of income payments in exchange for a premium; it is used for retirement income.

Accumulation phase builds cash value; annuitization phase converts the value into income payments.

Fixed annuities guarantee a minimum interest rate; variable annuities invest in subaccounts and carry market risk.

An immediate annuity begins payments within one payment period; a deferred annuity begins payments at a future date.

A life annuity with period certain guarantees payments for a minimum number of years even if the annuitant dies.

A joint and survivor annuity pays benefits to two annuitants and continues to the survivor after the first dies.

A surrender charge is a fee for early withdrawal during the surrender period; annuities also have a free withdrawal amount (e.g., 10% per year).

Qualified annuities are funded with pre-tax dollars (e.g., IRA); nonqualified annuities are funded with after-tax dollars.

The exclusion ratio determines the taxable portion of annuity payments; it applies to nonqualified annuities.

Twisting is the unethical practice of inducing a policyholder to lapse or surrender a policy to buy another, based on misrepresentation.

Churning is the replacement of a policy by the same insurer primarily to generate new commissions.

Rebating is offering any inducement (e.g., cash, gifts) not specified in the policy to encourage a sale; illegal in most states.

Misrepresentation is making false statements about policy benefits, terms, or insurer financial condition.

Defamation is making false statements about an insurer's financial condition to harm its reputation.

Boycott, coercion, and intimidation are unfair trade practices that restrain competition.

The Fair Credit Reporting Act (FCRA) regulates consumer reporting agencies and gives individuals the right to know what is in their credit report.

The Gramm-Leach-Bliley Act (GLBA) requires financial institutions to protect consumer privacy and disclose information-sharing practices.

The Health Insurance Portability and Accountability Act (HIPAA) protects the privacy and security of health information.