CIC Life & Health common mistakes
CIC Life & Health · Understand the traps and how to avoid them.
Treating the entire life insurance contract as contestable for two years, so questions about reinstatement, misstatement of age, and incontestability after reinstatement get answered as if the original contestable period simply restarted.
Candidates memorize 'two-year contestable period' as a single rule and never separate the three distinct clauses (incontestability, misstatement of age, reinstatement) that each have their own timing and remedy. Reinstatement in particular resets a new contestable period only for statements in the reinstatement application, while the misstatement-of-age clause has no time limit and adjusts the benefit instead of voiding the policy.
What to do instead
Build a three-column comparison chart: clause, time limit, remedy (void/rescind, adjust benefit, or contest new application only). For every practice question, first ask 'which clause is being tested?' and write the clause name next to your answer choice before selecting. Drill reinstatement scenarios specifically, since they are the most commonly misanswered.
Confusing the nonforfeiture options (cash surrender, reduced paid-up, extended term) and the policy loan/automatic premium loan provisions, choosing an option that does not match the described outcome such as 'keeps the same face amount but stops premiums.'
The options are learned as a list of names rather than as a matrix of what changes (face amount, premium, duration, cash value). Candidates also mix up the automatic premium loan, which prevents lapse by borrowing against cash value, with a nonforfeiture election, which only applies after lapse or surrender.
What to do instead
Memorize a three-row matrix: reduced paid-up (lower face, no more premiums, permanent), extended term (same face, no more premiums, limited term), cash surrender (policy ends, lump sum). Then add a separate note that APL is a lapse-prevention feature elected at application, not a nonforfeiture option. Rehearse with word problems where you must state which of the four variables changes.
Mixing up the settlement options and annuity payout structures, for example calling a life-income-with-period-certain option a joint-and-survivor arrangement, or labeling a straight life annuity as providing a refund of the unpaid principal.
Settlement options on a life policy and payout options on an annuity use overlapping vocabulary (life income, period certain, joint and survivor, refund), so candidates answer from the label rather than from the defining feature: whether payments continue to a beneficiary, whether a minimum number of years is guaranteed, and whether a second annuitant is involved.
What to do instead
For each option, write one sentence naming who receives money after the annuitant dies and for how long. Practice converting a described fact pattern into the option name in under ten seconds. Pay special attention to straight life versus life with period certain versus installment refund, since these three are the most frequent distractors.
Applying the wrong tax treatment to a business life insurance arrangement, such as deducting premiums for a key person policy or treating buy-sell proceeds as taxable to the surviving owner in a cross-purchase plan.
Candidates learn entity-purchase and cross-purchase structures as diagrams without attaching the tax consequences: premiums are generally not deductible when the business or owners are the beneficiaries, death proceeds are generally received income-tax-free under the transfer-for-value rules, and basis and ownership flow differently in each structure. The exam tests the consequence, not the diagram.
What to do instead
For each arrangement (key person, entity-purchase buy-sell, cross-purchase buy-sell, split-dollar, group term), write four lines: who owns, who pays, who receives, and the tax result. Then answer questions by locating the arrangement in that table before reading the answer choices. Flag any answer that assumes a deduction for premiums benefiting the business.
Treating business continuation planning as a single concept, so questions about funding a buy-sell with disability income versus life insurance, or about valuation and funding shortfalls, are answered as if any policy automatically solves the problem.
Study material often presents buy-sell agreements as a life insurance topic, and candidates overlook that the agreement must be paired with a funding mechanism matched to the triggering event (death, disability, retirement, termination). Disability buy-out coverage and life insurance solve different triggers, and valuation formulas determine whether the funding is adequate.
What to do instead
Map each trigger event to its funding tool in a two-column list, then add a note on valuation method (fixed price, formula, appraisal) and on the mismatch risk when funding lags value. Answer questions by identifying the trigger first, then the funding tool, then the tax consequence.
Confusing coordination of benefits with Medicare Secondary Payer rules, for example assuming Medicare always pays first for a working enrollee covered by an employer group plan, or applying the birthday rule to a situation governed by the working-aged rule.
Both topics involve 'who pays first,' so candidates collapse them into one rule. Coordination of benefits among group plans uses the birthday rule for dependent children, while MSP uses distinct order-of-payment tests based on employer size, active employment status, and the type of coverage (group health versus Medicare Advantage).
What to do instead
Create a decision tree: is the dispute between two employer plans (use birthday rule or active/inactive rule) or between Medicare and an employer plan (use MSP tests by employer size and active status)? State the test out loud before choosing. Review MSP exceptions for small employers and for disability and ESRD situations separately.
Misclassifying health plan types and their network and cost-sharing features, such as describing an HMO as covering out-of-network care at the in-network rate, or treating an HDHP with an HSA as identical to a traditional PPO with a flexible spending account.
Plan types share features (deductibles, copays, networks, formularies), and candidates rely on broad impressions rather than the defining structural difference: gatekeeping and network exclusivity in an HMO, provider choice and balance billing in a PPO, and HSA eligibility requirements such as minimum deductible and no disqualifying coverage.
What to do instead
Build a feature grid across HMO, PPO, POS, EPO, and HDHP/HSA covering network rules, referral requirements, out-of-network coverage, and account eligibility. For HSA questions, verify the four eligibility conditions before answering. Practice by writing the plan name from a described fact pattern rather than matching keywords.
Answering employee benefits questions from a general impression of ERISA rather than its specific reporting, fiduciary, and preemption provisions, and confusing COBRA notice deadlines with HIPAA special enrollment or portability rules.
ERISA, COBRA, and HIPAA are studied as a block of federal regulation, and candidates remember that 'federal law governs' without attaching the specific duty, deadline, or remedy. COBRA has distinct election and notice periods for employers, plan administrators, and qualified beneficiaries, and HIPAA portability rules operate on creditable coverage rather than on continuation rights.
What to do instead
Make a regulation-by-duty table: law, who owes the duty, the deadline or standard, and the penalty. Memorize COBRA's 30-day employer notice, 14-day administrator notice, and 60-day election window as separate line items. For HIPAA, separate portability (creditable coverage), privacy, and special enrollment into three distinct notes.
Treating commercial property and commercial casualty coverage as interchangeable, for example assuming a commercial package policy automatically includes business income or that a CGL occurrence-form policy covers damage to the insured's own completed work.
Candidates learn coverage forms as lists of names and never build the coverage trigger into memory: property responds to direct physical loss to covered property, while liability responds to bodily injury or property damage to third parties. Business income, extra expense, and the care-custody-control exclusion are frequently confused because they sit at the boundary between the two.
What to do instead
For every form, write the trigger, the covered subject, and the principal exclusion. Specifically drill the CGL 'your work' and 'impaired property' exclusions and the difference between the occurrence form and the claims-made form, including the retroactive date and extended reporting period. Answer by identifying the trigger before reading choices.
Applying personal lines concepts with the wrong policy or endorsement, such as placing a homeowners loss under the wrong coverage part (Coverage A versus B versus C versus D) or assuming the PAP covers a vehicle used for business delivery.
Homeowners and personal auto policies are organized into lettered or numbered coverage parts that candidates memorize as a sequence but not as a set of distinct triggers. The PAP's business-use and available-for-hire exclusions, and the homeowners coverage limits for structures versus personal property versus loss of use, are the most commonly blurred distinctions.
What to do instead
Draw the homeowners policy as five labeled buckets and place each fact pattern into exactly one before answering. For the PAP, list the exclusions that appear most often on the exam (business use, delivery, racing, intentional acts, vehicle for hire) and test each scenario against them. Rehearse endorsement names, since the exam often asks which endorsement restores coverage.