AZ Life & Health flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Arizona DIFI

The Arizona Department of Insurance and Financial Institutions is the state agency that licenses producers and insurers and enforces Title 20 insurance laws.

Arizona producer license

A person must hold an active Arizona producer license in life, accident and health, or both before soliciting, negotiating, or selling insurance in the state.

Arizona CE requirement

Arizona producers complete 24 credit hours of continuing education every two years, including at least three hours of ethics, to renew their license.

Fiduciary premium handling

Premiums collected by a producer are held in a fiduciary capacity; commingling with personal funds and misappropriation are prohibited and may lead to license revocation.

Replacement notice

In a life insurance replacement, the producer must give the applicant a notice comparing existing and proposed coverage, and the replacing insurer notifies the existing insurer.

Arizona free look

A life insurance owner may return a newly delivered policy within the free-look period, typically 10 days, for a full refund of premium.

Unfair trade practices

Misrepresentation, twisting, rebating, coercion, and false advertising are prohibited insurance practices and can result in fines, suspension, or license revocation.

Pure versus speculative risk

Pure risk involves only loss or no loss and is insurable; speculative risk involves the possibility of loss or gain and is generally not insurable.

Peril and hazard

A peril is the cause of a loss, such as fire or death; a hazard is a condition that increases the chance or severity of loss.

Principle of indemnity

Indemnity restores an insured to approximately the pre-loss financial position and prevents profit from loss; life insurance is valued rather than strictly indemnity.

Utmost good faith

Both parties must disclose material facts; concealment or material misrepresentation can allow the insurer to void the insurance contract.

Contract of adhesion

The insurer drafts the policy and the insured accepts or rejects it; ambiguities are interpreted against the insurer that wrote the contract.

Insurable interest timing

Insurable interest must exist when a life insurance policy is issued, not at the insured's death; lack of interest makes the policy void.

Incontestability clause

After a life policy has been in force two years, the insurer cannot contest it for misrepresentation, except for nonpayment of premium.

Suicide clause

If the insured dies by suicide within the policy's stated period, usually two years, the insurer refunds premiums and pays no death benefit.

Misstatement of age or sex

The insurer adjusts the death benefit to the amount the premium paid would have purchased at the insured's correct age or sex.

Grace period

A life policy remains in force for 30 or 31 days after a missed premium due date; if death occurs, the unpaid premium is deducted.

Nonforfeiture options

Upon lapse or surrender of a cash-value policy, the owner may choose cash surrender value, reduced paid-up insurance, or extended term insurance.

Policy loan

The owner may borrow up to the cash value; interest accrues, and an unpaid loan reduces the death benefit; an excessive loan can lapse the policy.

Modified endowment contract

A life policy that fails the seven-pay test is a modified endowment contract; loans and withdrawals are taxed income first, with a 10% penalty before age 59½.

Exclusion ratio

For a nonqualified annuitized contract, the exclusion ratio equals investment in the contract divided by expected return; that portion of each payment is tax-free.

Immediate versus deferred annuity

An immediate annuity starts payments within one payment period of purchase; a deferred annuity accumulates value before payments begin later.

Variable annuity separate account

Variable annuity cash values are held in a separate account and fluctuate with subaccount performance; the owner bears the investment risk.

Annuity early withdrawal penalty

Taxable amounts withdrawn from an annuity before age 59½ generally incur a 10% federal penalty, with exceptions such as death or disability.

Joint and survivor annuity

Payments continue as long as either annuitant is alive, often at a reduced level after the first death; this option is common for married couples.

Annuity surrender charge

Insurers may impose a declining surrender charge for early withdrawals from an annuity, often with a free withdrawal percentage allowed each year.

Coordination of benefits

When two health plans cover a claim, the primary plan pays first and the secondary plan pays up to its limit, avoiding duplicate payment.

HMO gatekeeper

In an HMO, the primary care physician coordinates care and referrals; non-emergency care outside the network is generally not covered.

Medicare Part A and B

Part A covers inpatient hospital and skilled nursing care; Part B covers physician and outpatient services; together they are Original Medicare.

COBRA continuation periods

COBRA gives 18 months of continuation for termination or reduced hours, 29 months for disability, and 36 months for divorce, death, or aging out.

Medigap

Medicare supplement plans pay some Original Medicare cost-sharing but cannot be used with Medicare Advantage; plans are standardized by letter.

Disability own occupation

Own-occupation coverage pays if the insured cannot perform their own job; any-occupation pays only if unable to work in any suitable job.