FL Life & Health cheat sheet

Insurance transfers pure (not speculative) risk from an individual to a pool of similar exposure units in exchange for a premium.

A risk must meet these tests to be insurable: many similar exposure units, accidental loss, definite and measurable loss, non-catastrophic loss, and a calculable probability of loss.

Law of large numbers: as the number of similar exposure units grows, actual loss experience converges on expected loss, which makes rates more reliable.

Insurable interest in life insurance must exist at policy inception only; in property insurance it must exist at inception and at the time of loss.

Utmost good faith requires both parties to disclose material facts; concealment, material misrepresentation, or breach of warranty can void the contract.

Life insurance is a valued contract paying a stated face amount, while medical expense insurance is a contract of indemnity reimbursing actual loss.

Because the insurer drafts the contract (adhesion), ambiguities are construed against the insurer under the principle of contra proferentem.

Valid contract elements: offer (application plus initial premium in most cases), acceptance, consideration, legal purpose, and competent parties.

Aleatory means the values exchanged are unequal and depend on chance; the insured may pay many premiums and receive nothing.

Premium is built from three factors: mortality rate, assumed interest/earnings, and expense loading; higher assumed interest lowers the premium.

Level term insurance provides a fixed face amount and fixed premium for a stated period with no cash value; convertible and renewable features are common.

Whole life guarantees a level premium, guaranteed cash value, and lifetime death benefit, and includes nonforfeiture and dividend features for par policies.

Universal life separates the policy into a cash value account and a cost-of-insurance charge; premiums are flexible and the death benefit is adjustable, with a guaranteed minimum crediting rate.

Variable life and variable universal life place cash value in separate-account subaccounts; the owner bears investment risk and the sale requires a life license plus securities registration.

Indexed universal life credits interest linked to an external index, subject to a floor (often 0%) and a cap or participation rate; it is not a directly invested security.

A modified endowment contract fails the 7-pay test and loses favorable distribution treatment; loans and withdrawals are taxed gains-first.

Survivorship (second-to-die) coverage pays at the death of the last insured and is used mainly for estate liquidity and estate tax planning.

Group vs individual, participating vs nonparticipating, and ordinary vs industrial are classification distinctions; a policyholder in a par policy may receive dividends.

Entire contract clause: the policy and any attached copy of the application are the whole agreement; the insurer cannot rely on outside documents to change it.

Incontestability: after the policy has been in force for two years from issue, the insurer generally cannot contest it for misrepresentation in the application.

Grace period (commonly 30 or 31 days) keeps coverage in force after a missed premium; if death occurs in grace, the unpaid premium is deducted from the benefit.

Reinstatement is generally allowed within three years of lapse and requires evidence of insurability plus back premiums with interest; a new contestable period may apply.

Suicide clause (usually two years) limits the death benefit to a refund of premiums paid; the misstatement-of-age provision instead adjusts the benefit to the correct amount.

Nonforfeiture options on a lapsed cash value policy: cash surrender, reduced paid-up insurance, or extended term insurance.

Dividend options: cash, reduce premium, accumulate at interest, paid-up additions, or one-year term (fifth dividend option may buy term).

Settlement options: lump sum, interest only, fixed period, fixed amount, and life income (including period certain, refund, and joint and survivor variations).

Beneficiary rules: primary vs contingent, revocable vs irrevocable, per stirpes vs per capita, and a spendthrift clause shielding proceeds from a beneficiary's creditors.

An annuity is the mirror image of life insurance: life insurance creates an estate, while an annuity systematically liquidates an estate over a payout period.

Two phases: accumulation (premiums grow) and annuitization/payout (value converts to periodic income); surrender during accumulation may trigger surrender charges.

Fixed annuities guarantee a minimum interest rate and a fixed payout, placing investment risk on the insurer; variable annuities shift investment risk to the owner through separate accounts.

Exclusion ratio = investment in the contract ÷ expected return; the resulting percentage of each payment is a tax-free return of basis and the remainder is taxable.

Payout options: life only, life with period certain, installment refund, joint and survivor, and fixed period or fixed amount; life-only pays the largest income.

Withdrawals of gain before age 59½ may incur a 10% federal penalty in addition to ordinary income tax; a 1035 exchange moves contracts without current tax.

Nonqualified annuities are funded with after-tax dollars; qualified annuities (IRA, 403(b), qualified plan) are funded pre-tax with the entire payout taxable.

Indexed annuities credit interest based on an index subject to a floor and cap; suitability and best-interest review is required at sale.

Immediate annuities begin payout within one payment period; deferred annuities accumulate first, and flexible-premium vs single-premium describes funding.

Cost-sharing layers: premium, deductible, coinsurance (a percentage), copayment (a flat dollar amount), and the out-of-pocket maximum, after which the plan pays 100% of covered in-network costs.

ACA metal tiers reflect the share of expected costs paid by the plan: bronze 60%, silver 70%, gold 80%, platinum 90%; catastrophic plans are available to limited groups.

ACA market rules: no annual or lifetime dollar limits on essential health benefits, preventive services with no cost sharing, dependent coverage to age 26, and no pre-existing condition exclusions.

HMO: closed panel, primary care gatekeeper, care generally limited to the network except emergencies. PPO: broader network, no referrals, higher cost out of network. POS is a hybrid.

Medicare: Part A inpatient hospital, Part B physician/outpatient, Part C Medicare Advantage, Part D prescription drugs; initial enrollment spans the 7 months around age 65.

Coordination of benefits: the primary plan pays its full allowable benefit first and the secondary plan considers the remaining balance; the birthday rule governs dependent children of two covered parents.

Individual medical underwriting factors historically include age, gender, health status, tobacco use, and occupation; group plans generally use group-level rating instead of individual evidence.

Hospital indemnity and critical illness policies pay fixed benefits regardless of actual expenses, which differs from indemnity medical plans that reimburse actual charges.

Pre-existing condition, waiting period, and elimination period provisions define when benefits begin for a newly issued medical policy.

Disability benefit amount is limited to a percentage of earnings (commonly 60–70% of gross income) to preserve the incentive to return to work.

Own occupation pays if the insured cannot perform their own occupation; any occupation pays only if unable to perform any occupation for which reasonably suited; own-occ costs more.

Elimination period (waiting period) and benefit period drive cost: longer elimination and shorter benefit periods reduce premium.

Residual or partial disability benefits pay a proportionate amount for reduced income; a recurrent disability clause waives a new elimination period for a relapse within a stated time.

Noncancelable means the insurer cannot raise premiums or change benefits; guaranteed renewable means the insurer cannot cancel but may raise premiums by class.

Long-term care triggers: unable to perform at least 2 of 6 activities of daily living (bathing, dressing, transferring, toileting, eating, continence) for at least 90 days, or severe cognitive impairment.

LTC policy levers: elimination period, monthly benefit maximum, benefit period, inflation protection, and reimbursement vs indemnity payment; Medicare does not pay custodial care.

Business disability products: key person disability, business overhead expense, and disability buy-out, each funded to address a specific business need.

Accident and critical illness policies pay lump sums or fixed daily benefits on a diagnosed event, independent of other coverage.

The employer or sponsor holds the master policy; participants receive certificates that summarize coverage but are not parties to the contract.

Group underwriting looks at group size, industry, age/gender composition, turnover, and prior claims, rather than individual health evidence.

Contributory plans generally require about 75% participation; noncontributory plans require 100% participation of eligible employees.

Conversion privilege lets a terminating insured convert group coverage to an individual policy without evidence of insurability, typically within 31 days.

Portability keeps group coverage in force after termination, usually at the insured's own expense and often with benefit reductions.

COBRA applies to employers with 20 or more employees: 18 months for termination or reduced hours, 29 months for disability extension, 36 months for dependents and other qualifying events.

Group term life: employer-paid premiums are deductible to the employer, and employer-provided coverage up to $50,000 is excluded from the employee's income.

AD&D pays the principal sum for accidental death and a capital sum (a scheduled percentage) for accidental dismemberment or loss of sight.

Group health typically imposes a waiting period for new hires and an active-employee requirement; dependents are covered under the same master contract.

IRC Section 101(a): life insurance death proceeds paid to a named beneficiary are generally free of income tax; interest paid on an installment settlement is taxable.

Cash value growth inside a life policy is tax deferred; on surrender, gain equals cash value minus basis and is taxed as ordinary income.

Modified endowment contract distributions are taxed last-in first-out (gains first) and may incur a 10% penalty before age 59½.

Individual life and health premiums are not deductible; a self-employed person may deduct health insurance premiums above the line, subject to limits.

Employer-paid group term life: coverage up to $50,000 is excluded from employee income, and the cost of excess coverage (Table I) is imputed taxable income.

Employer-paid health premiums are deductible to the employer and excluded from the employee's income; employer-paid disability premiums using pre-tax dollars make benefits taxable to the employee.

Qualified long-term care premiums are deductible as medical expenses subject to age-based limits and the AGI floor; benefits from a qualified LTC policy are generally income tax free.

Annuity payments use the exclusion ratio; withdrawing gain before 59½ may trigger a 10% penalty, and a 1035 exchange defers gain.

Death proceeds are included in the insured's gross estate if the insured held incidents of ownership at death; an irrevocable life insurance trust can remove them.

The Florida Office of Insurance Regulation licenses insurers and reviews policy forms and rates; the Department of Financial Services, Division of Agent and Agency Services, licenses agents.

Florida license classes include the 2-15 (life, health, and variable annuity) and the 2-40 (health only); variable authority also requires securities registration.

An insurer must appoint a licensed agent before the agent may transact business; agents must hold a valid appointment and a current license.

Continuing education: 24 hours every two years, including required law and ethics update hours, with a state exam required for initial licensure.

Agents act in a fiduciary capacity for premiums collected and must not commingle premium funds with personal or agency operating funds.

Florida life insurance policies carry a 14-day free-look (right to return) period counted from delivery of the policy.

The Florida Insurance Guaranty Association responds to claims against insolvent member insurers, subject to statutory caps such as $300,000 of death benefit and $100,000 of cash surrender value on life policies.

A replacement requires a signed Notice Regarding Replacement and notification to the existing insurer; records of insurance transactions must be retained at least three years.

Florida statutes define unfair trade practices and specify grounds for license suspension, revocation, and administrative fines.

The agent is the field underwriter: the application must accurately record all material information given by the applicant, and the applicant signs to attest to it.

A representation is a statement believed true to the best of the applicant's knowledge; a warranty is a statement guaranteed true, and breach of warranty can void coverage.

A misrepresentation is material only if it would have changed the insurer's decision to issue the policy or the premium charged.

Conditional receipt makes coverage effective as of the application date (with premium) provided the applicant proves insurable under the insurer's rules; a binding receipt provides immediate coverage regardless.

Backdating a policy up to six months can save age and lower the premium, but it starts the contestable and suicide periods earlier.

Delivery and payment of the first premium complete the contract; a statement of good health may be required at delivery when no premium was collected with the application.

Advertising, illustrations, and sales presentations must be accurate and not misleading; a Buyer's Guide and a policy summary must be provided.

Suitability and best-interest standards require the recommendation to reflect the consumer's financial situation, needs, and objectives.

Errors and omissions coverage protects the agent; ethical duties include confidentiality, prompt remittance, and no commingling of funds.

Twisting is using misrepresentation or an incomplete comparison to induce a policyholder to lapse, surrender, or replace existing coverage.

Rebating is offering any inducement not specified in the policy (commission sharing, premium refunds, gifts) to make a sale; it is prohibited in Florida.

Unfair discrimination is charging different rates or terms to insureds of the same class and expected mortality; distinctions must be actuarially supportable.

Replacement process: present and deliver the Notice Regarding Replacement, provide a comparison, obtain the applicant's signature, and notify the existing insurer.

Unfair claim settlement practices include failing to acknowledge communications, refusing to pay without a reasonable investigation, and unreasonable delay.

Coercion, intimidation, defamation of an insurer, and false or misleading advertising are statutorily defined unfair trade practices.

Insurance fraud, including submitting false claims or false applications, is a crime investigated by the Florida Department of Financial Services' investigative unit.

Consumers may file complaints with the Florida Department of Financial Services, Division of Consumer Services, which also provides market assistance and education.

Prohibited conduct also covers commingling premium funds, transacting without a license or appointment, and forging a signature on an application.