IN Life & Health cheat sheet

Insurance regulation in the U.S. is primarily exercised by state insurance departments under the McCarran-Ferguson Act of 1945.

Producers must hold a license in the state where they solicit, negotiate, or sell insurance; a license is not valid in other states.

Premium funds held by a producer are fiduciary funds and must be segregated from personal or business funds.

Twisting is misrepresentation that induces a policyholder to lapse or replace coverage; churning is replacement primarily to generate commissions.

Rebating is offering part of the commission or anything of value not stated in the policy as an inducement to buy.

Unfair claim settlement practices include misrepresenting policy provisions and failing to acknowledge claims promptly.

A state guaranty association pays covered claims if an insurer becomes insolvent, subject to state limits.

Continuing education requirements are set by state law and commonly include ethics hours.

Pure risk involves only chance of loss or no loss and is insurable; speculative risk involves chance of gain and is not insurable.

Insurable risks generally require many similar exposure units, accidental losses, measurable losses, and losses that are not catastrophic.

Adverse selection is the tendency of higher-risk applicants to seek coverage; underwriting and risk classification reduce it.

The indemnity principle restores the insured to the pre-loss financial position and prohibits profit from a loss.

Insurance contracts are aleatory, contracts of adhesion, and require utmost good faith.

Valid contract elements are offer, acceptance, consideration, legal purpose, and competent parties.

A material misrepresentation on an application can allow the insurer to rescind the contract.

Subrogation lets an insurer pursue a third party after paying a claim, preventing double recovery by the insured.

Law of large numbers: as the number of similar exposure units increases, actual losses approach expected losses.

Human life value measures the present value of future earnings available to dependents; the needs approach totals specific financial needs.

Insurable interest must exist at policy inception; it need not exist at the time of death.

Policy rights belong to the owner: beneficiary designation, surrender, loans, and assignment.

Premiums reflect age, health, tobacco use, occupation, face amount, and policy type; higher risk means higher premium.

Level premiums overpay mortality cost in early years and build reserves used for later-year costs.

A modified endowment contract fails the 7-pay test; withdrawals are taxed income first and may incur a 10% penalty before age 59½.

Death benefits are generally income-tax-free to beneficiaries; cash value growth is tax-deferred.

A conditional receipt provides coverage when the proposed insured meets the insurer's insurability conditions.

Underwriting sources include the application, agent's report, medical exams, attending physician statements, and MIB.

Term insurance provides pure death protection for a stated period and has no cash value.

Renewable term allows renewal without evidence of insurability; convertible term allows exchange to permanent coverage.

Whole life is permanent, has guaranteed cash value, level premiums, and matures at a stated age.

Universal life separates the policy into cash value and cost of insurance; premiums are flexible and death benefit may be adjustable.

Variable life cash value is invested in separate-account subaccounts; sales require a securities license and prospectus.

Indexed universal life credits interest based on an index subject to a cap, floor, and participation rate.

Joint life pays on the first death; survivorship (second-to-die) pays on the last death and is used for estate planning.

Endowment policies pay the face amount at maturity or at death, whichever occurs first.

Modified premium whole life charges lower premiums in early years and higher premiums later.

The entire contract provision includes the policy, attached application, and riders; the insurer cannot incorporate outside documents.

The incontestability clause bars the insurer from contesting the policy after two years for misrepresentation, except for nonpayment.

Life insurance grace periods are commonly 30 or 31 days; coverage continues and unpaid premium is deducted from the claim.

Reinstatement requires evidence of insurability and payment of overdue premiums with interest; a new contestable period begins.

The suicide clause limits payment to return of premiums if death by suicide occurs within the stated period, usually two years.

Misstatement of age or sex adjusts the death benefit to the amount the premium would have purchased at the correct age or sex.

The free-look period allows the owner to return the policy for a full premium refund, commonly 10 to 30 days.

Policy loans accrue interest and reduce the death benefit if unpaid; loans are not taxable while the policy remains in force.

Common riders include waiver of premium, accidental death, guaranteed insurability, and cost-of-living.

An annuity liquidates a sum into periodic payments and protects against the risk of living too long.

Immediate annuities begin payments within one payment period; deferred annuities accumulate value before payout.

Fixed annuities guarantee a rate; variable annuities invest in separate accounts and carry market risk.

Payout options include life only, life with period certain, joint and survivor, and period certain.

The exclusion ratio divides investment in the contract by expected return to determine the tax-free portion of nonqualified annuity payments.

Qualified annuity payments are fully taxable because contributions were pre-tax.

Surrender charges and market value adjustments may apply to early withdrawals; many contracts allow 10% free withdrawal.

A 10% federal penalty generally applies to taxable annuity withdrawals before age 59½, with exceptions for death and disability.

A 1035 exchange transfers an annuity or life policy to another contract without current taxation.

Morbidity measures illness and injury rates; mortality measures death rates.

HMOs use a gatekeeper and provider network; PPOs allow out-of-network care at higher cost and generally do not require referrals.

Cost sharing includes deductibles, copayments, coinsurance, and out-of-pocket maximums.

HIPAA limits preexisting-condition exclusions when creditable coverage is maintained and provides special enrollment rights.

ACA plans must guarantee issue, cover essential health benefits, and cannot exclude preexisting conditions.

ACA metal tiers are Bronze 60%, Silver 70%, Gold 80%, and Platinum 90% of covered costs.

Coordination of benefits determines primary and secondary payers; the birthday rule often applies to dependent children.

Medicare Part A covers hospital care, Part B medical care, Part C Medicare Advantage, and Part D prescription drugs.

COBRA continuation may last 18, 29, or 36 months depending on the qualifying event.

Required uniform provisions include grace period, reinstatement, claim forms, proof of loss, and legal actions.

Health grace periods are 7 days for weekly premiums, 10 days for monthly, and 31 days for other modes.

The reinstatement provision restores coverage after lapse upon payment of overdue premiums and evidence of insurability.

A preexisting condition is a condition diagnosed or treated before coverage; lookback and exclusion periods are regulated.

Noncancelable policies guarantee renewal and fixed premiums; guaranteed renewable policies guarantee renewal but not premiums.

The change-of-occupation provision adjusts benefits if the insured moves to a more hazardous occupation.

The time limit on certain defenses typically makes the policy incontestable after two years.

Legal actions against the insurer are limited to a stated period, commonly three years after proof of loss.

The conversion privilege allows group coverage to be converted to individual coverage without evidence of insurability.

Own-occupation disability pays if the insured cannot perform the duties of their own occupation; any-occupation pays if unable to perform any occupation.

Total disability may be defined by inability to perform duties or by loss of income; partial disability pays a reduced benefit.

The elimination period is the waiting time before benefits begin; the benefit period is the maximum duration of payments.

Benefits typically replace 60% to 70% of gross income to preserve work incentives.

Residual disability benefits pay a percentage tied to lost income rather than requiring total disability.

Recurrent disability within a stated period, often six months, is treated as a continuation of the prior claim.

COLA and future increase option riders protect benefits against inflation and rising income.

Employer-paid disability premiums produce taxable benefits; personally paid premiums produce tax-free benefits.

Social Security disability integration reduces private benefits by the amount of Social Security received.

Major medical policies use deductibles, coinsurance, and out-of-pocket maximums to share costs.

Comprehensive major medical combines basic hospital, surgical, and medical coverage with a stop-loss limit.

ACA metal tiers pay 60%, 70%, 80%, or 90% of covered costs for Bronze, Silver, Gold, and Platinum plans.

Preventive services required by the ACA are covered without cost sharing when provided in-network.

Medigap plans are standardized by letter; Plans F and G are closed to newly eligible Medicare beneficiaries after 2020.

Medicare Supplement plans do not cover prescription drugs; Part D or Medicare Advantage provides drug coverage.

Usual, customary, and reasonable (UCR) limits determine the allowed amount for out-of-network claims.

Assignment means a provider accepts the insurer's payment as payment in full.

HSA contributions require a qualified high-deductible health plan and are tax-deductible.

Long-term care insurance covers custodial care, including help with activities of daily living and supervision for cognitive impairment.

Benefit triggers generally require inability to perform two of six ADLs or severe cognitive impairment, plus a plan of care.

Six ADLs are bathing, dressing, eating, toileting, transferring, and continence.

The elimination period is the waiting period before benefits begin; the benefit period is the maximum payment duration.

Home care, adult day care, assisted living, and nursing home care may be covered.

Inflation protection increases the benefit amount over time to maintain purchasing power.

Nonforfeiture benefits return a portion of premiums if the policy lapses.

Tax-qualified LTC benefits are generally tax-free up to limits; premiums may be deductible.

Medicare covers only limited skilled nursing facility care after a hospital stay, not custodial care.

Hospital indemnity policies pay a fixed daily or per-admission benefit regardless of actual expenses.

Critical illness policies pay a lump sum on diagnosis of a covered condition such as cancer or heart attack.

Accident policies pay for accidental injuries; AD&D pays for accidental death and dismemberment.

Dental and vision plans often have separate deductibles, maximums, and provider networks.

Short-term medical plans are not ACA-compliant and may exclude preexisting conditions.

HSAs require a high-deductible health plan and offer tax-deductible contributions, tax-free growth, and tax-free qualified withdrawals.

FSAs are employer-sponsored and generally use-it-or-lose-it, with a limited carryover allowed.

Workers compensation provides no-fault benefits for work-related injuries and excludes coverage outside employment.

COBRA lets qualified beneficiaries continue group health coverage after a qualifying event.