ID Life & Health cheat sheet

Idaho insurance law is codified in Title 41 of the Idaho Code and administered by the Director of the Idaho Department of Insurance, who licenses insurers and producers and reviews policy forms.

A person must hold a valid producer license in the line being sold (life, disability/health) and be appointed by the insurer before soliciting; transacting for an unauthorized insurer is prohibited except under surplus lines rules.

Idaho producer licenses renew every two years and renewal requires 24 approved continuing education credit hours, including at least 3 hours of ethics.

A producer holds premiums in a fiduciary capacity: funds belong to the insurer or insured, must be remitted promptly, and may not be commingled with personal funds.

Unfair trade practices include misrepresentation, twisting (inducing replacement by misrepresentation), rebating, defamation, boycott/coercion, and false advertising; penalties range from fines to license suspension or revocation.

Rebating is offering money or anything of value not stated in the policy as an inducement to buy; the policy remains valid but the producer is subject to penalty.

The Idaho Life and Health Insurance Guaranty Association pays covered claims up to statutory limits when a member insurer is insolvent; it does not cover insurers never licensed in Idaho.

Idaho replacement rules require a signed notice and policy comparison whenever existing life insurance or an annuity is being replaced, and the replacing insurer must notify the existing insurer.

Insurance transfers pure risk (only the chance of loss); speculative risk (chance of gain or loss, as in gambling or investing) is not insurable.

Insurable risks share these traits: many similar exposure units, accidental and measurable losses, determinable probability of loss, and losses that are not catastrophic to the insurer.

Hazards increase the chance of loss: physical hazard (icy road, faulty wiring), moral hazard (dishonesty or intent to defraud), and morale hazard (carelessness or indifference).

The law of large numbers holds that as the number of similar insured units grows, actual losses more closely approximate predicted losses, enabling stable rates.

Elements of a valid insurance contract: offer and acceptance, consideration (premium and promise to pay claims), legal purpose, and competent parties.

Insurance contracts are contracts of adhesion (insurer drafts; ambiguity is construed against the insurer), aleatory (unequal exchange contingent on chance), unilateral (only the insurer makes an enforceable promise), and conditional (benefits depend on conditions).

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

The principle of indemnity restores the insured to pre-loss condition without profit; life insurance is a valued contract, so indemnity does not limit the face amount.

Subrogation allows the insurer, after paying a loss, to pursue the negligent third party, recovering only up to the amount it paid.

Insurable interest and the written consent of the insured are required at the time the life policy is issued; the interest does not have to continue until death.

The three premium factors are mortality (death claims), interest (earnings on invested reserves), and expense (operating costs); a higher assumed interest rate produces a lower premium.

A mortality table shows, for each age, the number of deaths per 1,000 lives in a given year and is the statistical basis for life insurance pricing.

Personal uses of life insurance include survivor income replacement, estate liquidity, debt and mortgage payment, charitable giving, and business continuation funding.

Underwriting sources include the application, the producer's (agent's) report, medical examinations and attending physician statements, the MIB, prescription databases, and inspection or consumer reports.

Risk classifications are preferred, standard, substandard (table-rated or rated-up), and declined; substandard risks pay extra premium or receive a modified policy.

A conditional receipt provides interim coverage effective on the application or medical exam date if the proposed insured proves insurable; a binding receipt covers regardless of insurability.

The Fair Credit Reporting Act requires notice and disclosure when a consumer report is used, and HIPAA and state law restrict the use and sharing of medical information.

The application becomes part of the contract under the entire contract provision; a producer has no authority to waive policy provisions or change the contract.

Term insurance provides pure protection with no cash value; it ends at the end of the term, and renewable and convertible features allow continuation without new evidence of insurability (renewal premiums rise with age).

Term forms include level term, decreasing term (mortgage or loan protection), increasing term, and annually renewable term.

Whole life charges a level premium for life and builds guaranteed cash value; limited-pay versions (20-pay, paid-up at 65) and single premium compress the payment period.

Universal life has flexible premiums and an adjustable death benefit; cash value earns a declared interest rate with a guaranteed minimum and is reduced monthly by cost of insurance and expense charges.

Universal life death benefit options: Option A (level specified amount with cash value inside it) and Option B (specified amount plus cash value, so the benefit increases).

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

Indexed universal life credits interest based on an external index subject to a participation rate, a cap, and a floor (often 0%), with a guaranteed minimum crediting rate.

Modified and graded premium whole life start with lower premiums that step up to a level premium, with cash value building slowly at first; graded versions also limit the early death benefit.

Survivorship (second-to-die) life insurance covers two insureds and pays at the second death; it is used for estate planning and costs less than two separate policies.

The entire contract provision makes the policy and attached application the whole agreement; only an authorized officer may modify it, and only in writing.

The grace period (typically 30 or 31 days) keeps coverage in force after a missed premium; if death occurs during grace, the unpaid premium is subtracted from the benefit.

The incontestability clause bars the insurer from contesting the policy for misrepresentation after it has been in force two years during the insured's life.

The suicide clause limits the death benefit to a return of premiums if death by suicide occurs within the first two years.

Reinstatement, usually allowed within 3 years of lapse, requires evidence of insurability and payment of overdue premiums with interest; new contestable and suicide periods begin.

Policy loans let the owner borrow up to available cash value; unpaid principal and interest reduce the death benefit and can cause the policy to lapse.

Nonforfeiture options on lapse: cash surrender, reduced paid-up insurance (smaller face amount, same end date), and extended term insurance (same face amount for a limited time).

Dividend options are cash, premium reduction, accumulate at interest, paid-up additions, and one-year term additions; settlement options are lump sum, interest only, fixed period, fixed amount, and life income with period certain or refund.

Common riders include waiver of premium, disability income, accidental death and dismemberment, guaranteed insurability, child/term, long-term care, accelerated death benefit, and return of premium.

An annuity liquidates a sum of money into periodic income and transfers longevity risk to the insurer; the annuitant's lifetime determines the payout period.

Two phases exist: the accumulation phase (premiums paid, values grow tax-deferred) and the annuitization or payout phase, which is generally irrevocable.

An immediate annuity begins payments within one payment interval after a single premium; a deferred annuity accumulates value before any income begins.

Fixed annuities guarantee a minimum interest rate and level payments; variable annuities invest in separate accounts with the owner bearing investment risk and require a securities license and prospectus.

Indexed annuities credit interest linked to an index subject to a cap, participation rate, and floor (often 0%) with a guaranteed minimum contract value.

Payout options: life only (largest payment, no refund), life with period certain, installment refund, cash refund, joint and survivor, fixed period, and fixed amount.

Exclusion ratio = investment in the contract divided by expected return; that fraction of each annuitized payment is a tax-free return of basis and the remainder is taxable.

Nonqualified annuity contributions are after-tax; growth is tax-deferred, pre-annuitization withdrawals are taxed gain-first (LIFO), and a 10% penalty applies before age 59½ with limited exceptions.

Surrender charges usually decline over 7 to 10 years, most contracts allow about 10% free withdrawal annually, and a 1035 exchange moves annuity or life policy funds tax-free.

Health premiums are driven by morbidity (rates of illness and injury) plus interest, expense, and claims experience, rather than by mortality as with life insurance.

Cost-sharing elements are the deductible, coinsurance (a percentage of covered charges), copayment (flat dollar amount), out-of-pocket maximum, and any benefit maximums.

Indemnity (fee-for-service) plans reimburse a percentage of usual, reasonable, and customary charges, while managed care plans use provider networks and utilization controls.

HMO: closed panel with a primary care gatekeeper, in-network coverage except emergencies, and copays; PPO: discounted network with no gatekeeper and out-of-network benefits at higher cost; POS: hybrid allowing in- or out-of-network care.

Renewability categories, from least to most favorable to the insured: cancellable, optionally renewable, conditionally renewable, guaranteed renewable, and noncancellable.

Group health underwriting evaluates the group as a whole, and the employer must meet minimum participation and contribution requirements for the plan to be issued.

Probationary (waiting) periods exclude specified conditions for a stated time after issue; elimination periods delay benefits for each new disability.

Blanket health insurance covers a defined group (students, travelers, passengers) under a single master policy without individual certificates of insurability.

Uniform mandatory provisions found in most states include entire contract, time limit on certain defenses (2 years), grace period, reinstatement, notice of claim (20 days), claim forms (furnished within 15 days), proof of loss (90 days), and time of payment (immediately or within 30 days after proof).

Additional uniform provisions cover physical examination, legal actions (no suit before 60 days or after 3 years), change of beneficiary, change of occupation, unpaid premium, misstatement of age, and overinsurance/coordination of benefits.

Under the change of occupation provision, moving to a more hazardous occupation reduces benefits to what the premium would have purchased; moving to a less hazardous one reduces the premium.

Reinstatement of a lapsed health policy requires payment of overdue premiums and may require evidence of insurability; a new contestable period applies to the reinstatement application.

Coordination of benefits determines payment order: the plan covering the person as an employee pays before the plan covering them as a dependent, and for children the birthday rule applies.

Pre-existing condition clauses cannot be applied to major medical coverage under the ACA, but disability and long-term care policies still use look-back and elimination periods.

Common health riders are the impairment/exclusion rider, guaranteed insurability rider, hospital indemnity rider, surgical schedule rider, and waiver of premium rider.

Internal limits cap specific services while the out-of-pocket maximum or stop-loss limits the insured's total cost sharing for covered in-network care.

The ACA requires essential health benefits, preventive services at no cost, dependent coverage to age 26, guaranteed issue, and no annual or lifetime dollar limits on essential benefits.

Disability income replaces roughly 50% to 70% of earned income; benefits are income-tax free to the insured when the insured paid the premiums with after-tax dollars.

Total disability definitions: own occupation (most favorable to the insured), any occupation (stricter), and split definitions such as own occupation for two years then any occupation.

Partial disability pays when the insured cannot perform some duties or must work reduced hours; residual disability pays a proportional benefit based on the percentage of income lost.

The elimination (waiting) period is the time between disability onset and the start of benefits; a longer elimination period lowers the premium, and the benefit period may be 1-2 years, to age 65, or lifetime.

Presumptive disability pays full benefits without an elimination period for losses such as sight, hearing, speech, or two limbs.

Occupational coverage includes work-related disability, while nonoccupational coverage excludes it because workers' compensation covers job injuries.

Business disability policies include business overhead expense, disability buy-out, and key person coverage.

Long-term care covers skilled, intermediate, custodial, and home care; benefit triggers are inability to perform 2 of 6 activities of daily living without help or cognitive impairment.

Long-term care features include the elimination period (often 0-180 days), inflation protection (for example 5% compound), nonforfeiture provisions, and tax-qualified status under HIPAA.

Medicare Part A covers hospital, skilled nursing after a hospital stay, hospice, and some home health, and is premium-free with 40 work quarters; Part B covers medical/outpatient care with an income-related premium; Part C is Medicare Advantage; Part D covers drugs.

The Medicare initial enrollment period is the 7 months around the 65th birthday, and late enrollment can trigger penalties for Parts B and D.

Medigap (Medicare Supplement) policies are privately sold, federally standardized by letter, cannot be combined with Medicare Advantage, and have a 6-month open enrollment after Part B begins.

Medicaid is a joint federal-state program based on income and assets and covers custodial long-term care, which Medicare generally does not.

ACA marketplace plans are guaranteed issue with no pre-existing condition exclusions and cover essential health benefits; metal tiers are bronze 60%, silver 70%, gold 80%, and platinum 90% of average costs, with premium tax credits tied to silver plans.

Life insurance death benefits are generally received income-tax free, and premiums paid by an individual on personal coverage are not deductible.

Cash value inside buildup is tax-deferred; policy loans are not taxable unless the policy lapses or is surrendered with gain, and dividends are taxable only to the extent they exceed premiums paid.

A modified endowment contract fails the 7-pay test, so distributions are taxed gain-first with a 10% penalty before age 59½; the transfer-for-value rule removes the income-tax-free death benefit unless an exception applies.

Employer-paid group term life premiums are deductible to the employer and excluded from employee income up to $50,000 of coverage; employer-paid health premiums are likewise deductible and excluded, HSA contributions are deductible with tax-free qualified withdrawals, and medical expenses are deductible only above 7.5% of AGI when itemizing.