CT Life & Health common mistakes
CT Life & Health · Understand the traps and how to avoid them.
Insurance Regulation - treating an insurer's certificate of authority as if it also licenses the individual producer, or saying the insurer issues the producer license.
Both involve 'authority to do business,' and appointment/licensing terminology overlaps, so candidates merge entity regulation with individual licensing.
What to do instead
Separate the two: the Connecticut Insurance Department licenses producers; the insurer must hold its own certificate of authority and appoint the licensed producer.
General Insurance Concepts - choosing that insurable interest must continue until the insured dies in a life insurance policy.
Property insurance requires insurable interest at the time of loss, and candidates incorrectly transfer that rule to life insurance.
What to do instead
For life insurance, insurable interest must exist at policy inception/application; it need not exist at death. For property insurance, interest must exist at loss.
Life Insurance Basics - assuming the insured is automatically the policyowner and can change the beneficiary.
Applications often list the insured first, so candidates conflate the person whose life is insured with the person who owns the contract.
What to do instead
Identify owner, insured, and beneficiary separately. Only the owner controls beneficiary changes, loans, surrender, and assignments unless the policy states otherwise.
Life Insurance Policies - selecting term insurance as a policy that builds cash value or saying convertible term can be converted after the conversion period.
Term is often described as pure protection, but candidates merge it with permanent coverage features and ignore conversion deadlines.
What to do instead
Term provides a death benefit only for a stated period and generally has no cash value; conversion must occur before the policy's conversion deadline, usually without evidence of insurability.
Life Insurance Policy Provisions, Options and Riders - choosing reduced paid-up when the client stops paying premiums and wants coverage to continue for a limited number of years at a reduced face amount.
Reduced paid-up and extended term are both nonforfeiture options, and their names sound similar under exam pressure.
What to do instead
Extended term = original face amount for a limited term; reduced paid-up = reduced face amount for lifetime. Match the stem's 'limited period' or 'lifetime' wording to the correct option.
Annuities - treating a deferred annuity as one that begins benefit payments immediately after purchase.
'Deferred' refers to when income starts, but candidates confuse it with tax deferral or with immediate annuities.
What to do instead
Immediate annuity: income starts about one payment period after purchase. Deferred annuity: an accumulation phase precedes payout; tax deferral is a separate feature.
Federal Tax Considerations for Life Insurance and Annuities - reporting a named beneficiary's lump-sum death benefit as ordinary income.
Candidates remember that life insurance has tax advantages but overapply estate-tax or gain-tax rules to the income-tax treatment of death proceeds.
What to do instead
Death proceeds are generally income-tax-free under IRC §101(a). Estate inclusion and transfer-for-value issues are separate; only interest/gain beyond basis may be taxable in certain payout options.
Health Insurance Basics - saying a PPO requires a primary care physician referral for specialist visits.
HMO gatekeeping rules are memorized first and then overgeneralized to all managed-care plans.
What to do instead
HMOs often use PCP referrals and strict networks; PPOs generally allow out-of-network care at higher cost and typically do not require PCP referrals. Match the plan model to the stem.
Health Insurance Policy Provisions - applying coordination of benefits so that the policy with the larger benefit is always primary.
It feels intuitive that the bigger payer should pay first, but COB uses specific primary/secondary rules rather than benefit size.
What to do instead
Use COB rules such as active-employee plan vs. dependent plan and the birthday rule for children; do not select primary based on which policy pays more.
Connecticut-Specific Laws, Rules and Regulations - assuming a nonresident producer license or another state's license automatically permits Connecticut sales without a Connecticut appointment.
Reciprocity is confused with full authorization, so candidates skip the Connecticut appointment and compliance steps.
What to do instead
A nonresident producer must hold a Connecticut nonresident license and be appointed by the insurer; reciprocity simplifies licensing but does not eliminate Connecticut appointment and compliance requirements.