DC Life & Health common mistakes
DC Life & Health · Understand the traps and how to avoid them.
When a scenario says the insurer supplied the agent with application forms, rate manuals and business cards and the client reasonably relied on that, the candidate answers 'implied authority' instead of 'apparent authority.'
The three authority types are taught in one block and sound interchangeable; both implied and apparent authority come from something other than the written agency contract, so candidates match on 'not written down' rather than on the source of the authority.
What to do instead
Build a three-column table and apply a one-line rule: express = written words in the agency contract; implied = acts necessary to carry out those written powers; apparent = the insurer's own conduct or 'clothing' that a third party reasonably relies on. Sort ten short scenarios and write which of the three sources (contract / necessity / insurer behavior) created the authority.
Asked to name the term for conditions that increase the chance or severity of a loss (icy steps, smoking, faulty wiring), the candidate selects 'peril.'
Peril and hazard are both short abstract nouns introduced together; candidates latch onto the phrase 'cause of loss' and attach it to the wrong word, then reuse the error on every related item.
What to do instead
Anchor the pair with a single sentence: a peril is what causes the loss (fire, windstorm, illness, death); a hazard is what makes that loss more likely or worse (the condition). Then sort fifteen items into two columns and force yourself to state the reason for each in one clause.
The candidate states that a modified endowment contract still enjoys favorable tax treatment and that loans and withdrawals from a MEC are tax-free.
The word 'modified' sounds favorable, and the 7-pay test is memorized as a funding formula without its consequence, so the tax result never gets attached to the definition.
What to do instead
Memorize the chain in one direction only: fails the 7-pay test = MEC = loses favorable treatment, meaning distributions are taxed LIFO (gain first), a 10% penalty applies before age 59½, and loans are treated as distributions. Contrast with a non-MEC, where withdrawals come out FIFO to basis.
On a universal life question the candidate selects 'fixed, level premium with guaranteed cash value' as the description of the policy.
Whole life is learned first and becomes the default answer; candidates read 'guaranteed minimum crediting rate' in the UL material and silently convert it into 'guaranteed cash value.'
What to do instead
Build a three-row comparison of whole life, universal life and variable life across premium, death benefit and who bears the investment risk. Record explicitly that UL has a flexible premium and adjustable death benefit, and that the guaranteed minimum interest rate is a floor on crediting, not a guarantee of cash value.
A premium is still unpaid at the end of the grace period and the fact pattern says the automatic premium loan provision was elected, but the candidate answers that the policy lapses.
Grace period and lapse are drilled as a pair, while APL is an optional provision that is easy to skip; candidates also forget that APL only works if there is sufficient cash value.
What to do instead
Memorize the sequence as a single chain: premium due, grace period, then if APL was elected a loan advances the premium, and only if APL was not elected or cash value is insufficient does the policy lapse. Train yourself to underline 'elected' in the stem before answering.
The candidate says annuity payments are taxed entirely as ordinary income, or that the annuitant's death before annuitization is income-tax free to the beneficiary.
'Annuities are tax-deferred' is over-learned to mean 'everything is taxable later,' and the exclusion ratio involves arithmetic that candidates avoid under time pressure.
What to do instead
Split by contract type. Nonqualified: each payment is part return of basis (tax-free) and part gain (taxable) using the exclusion ratio = investment in the contract ÷ expected return; a death before annuitization is taxable to the beneficiary only to the extent of gain. Qualified: 100% taxable because there is no basis.
Asked which plan requires a primary care physician referral before seeing a specialist, the candidate selects the PPO.
Both are 'managed care' and candidates over-learn 'HMO = network' without learning the gatekeeper function, so the referral detail has nothing to attach to.
What to do instead
Use a three-column table. HMO: PCP gatekeeper, referral required, essentially no out-of-network coverage except emergencies. PPO: no PCP, no referral, in-network versus out-of-network cost tiers. POS: PCP plus referral, but out-of-network allowed at higher cost.
On a disability income item asking how long the insured must be disabled before benefits begin, the candidate selects 'probationary period.'
Both terms are described as waiting periods, and the textbook phrasing overlaps enough that candidates pick whichever term they saw more recently.
What to do instead
Attach each term to a fixed point in time. Elimination period attaches to the claim: it starts when disability begins and is the time deductible before benefits are paid. Probationary period attaches to the policy: it starts at issue and is the window during which a condition is not yet covered.
The candidate says COBRA continuation lasts 36 months when an employee voluntarily quits, or 18 months when a spouse divorces the covered employee.
The durations 18, 29 and 36 months are memorized as a bare list with no trigger attached, so under exam pressure the number and the qualifying event get separated.
What to do instead
Memorize qualifying-event-to-duration pairs. Termination or reduction in hours: 18 months. Social Security disability qualified beneficiary: 29 months. Death of employee, divorce, Medicare entitlement, or a child aging out: 36 months. Add the election window: 60 days to elect, 45 days to pay the first premium.
The candidate says a Medigap policy can include prescription drug coverage, or that buying Medigap means giving up Original Medicare.
Medigap and Medicare Advantage both sound like private supplements to Medicare, so their distinct roles and their mutual exclusivity get blurred.
What to do instead
Anchor the two in contrast. Medigap is standardized letter plans (A through N) that pay alongside Original Medicare, cannot include drug coverage, and cannot be held at the same time as Medicare Advantage. Medicare Advantage replaces Original Medicare, is network-based, and usually bundles Part D.