LUTCF Course 1 cheat sheet

Risk management sequence: identify exposures, measure frequency and severity, select a technique (avoid, reduce, retain, transfer), implement, then monitor and revise.

Insurable risk criteria: large number of similar exposure units, accidental and measurable loss, definite in time, place, and amount, no catastrophic concentration, and premium economically affordable.

Human life value approach measures economic value as gross earnings less self-maintenance costs and taxes, discounted to present value over remaining work years; needs approach totals survivor income, debt, education, and final expenses.

Legal elements of a valid contract: offer and acceptance, consideration, legal purpose, and competent parties; insurance adds insurable interest, utmost good faith, adhesion, and aleatory characteristics.

Insurable interest in life insurance need only exist at policy issue for the applicant; it is not required at death, unlike property insurance where it must exist at loss.

Incontestability clause bars the insurer from contesting the policy for material misrepresentation after two years from issue; fraudulent misrepresentation of material fact may still void coverage in most states.

Grace period is typically 31 days for monthly premium modes; coverage continues during grace, and if death occurs the overdue premium is deducted from the proceeds.

Nonforfeiture options on a whole life lapse: cash surrender, reduced paid-up, or extended term; the extended term option provides the largest death benefit for a limited period.

Dividend options for participating policies: cash, reduce premium, accumulate at interest, paid-up additions, and one-year term; paid-up additions increase both death benefit and cash value.

Disability definitions ranked from most to least favorable for the insured: own occupation, modified own occupation (own occupation for a stated period, then any occupation), any occupation, and loss of earnings tests.

Elimination period is the waiting period before benefits begin; a longer elimination period lowers premium, and the benefit period is the maximum duration benefits are payable.

Residual (partial) disability benefit pays a pro rata amount based on lost income percentage; presumptive disability pays full benefits for specified losses such as loss of sight or two limbs, with no elimination period in many contracts.

Coordination of benefits order for a dependent child with dual coverage: the parent whose birthday falls earlier in the calendar year pays first (month and day, not year); the birthday rule.

Medicare eligibility begins at 65 with 40 quarters of work history; Part A covers inpatient hospital, Part B covers physician and outpatient, Part C is Medicare Advantage, and Part D covers prescription drugs.

Medicare Part A benefit periods use a deductible per benefit period with a 60-day full-coverage window and days 61-90 requiring a daily coinsurance; lifetime reserve days are 60 additional days used once.

Health insurance renewability provisions ranked from least to most guaranteed: cancelable, optionally renewable, conditionally renewable, guaranteed renewable, and noncancelable (guaranteed renewable with premium locked).

HIPAA guaranteed issue and portability: group-to-individual eligibility requires 18 months of creditable coverage with no gap over 63 days; preexisting condition exclusion periods are offset by creditable coverage.

Long-term care benefit triggers typically require inability to perform 2 of 6 activities of daily living (bathing, dressing, eating, toileting, transferring, continence) or cognitive impairment, certified by a licensed professional.

Annuity accumulation vs. annuitization: during accumulation the contract builds value; annuitization converts the accumulated value into a guaranteed income stream and is generally irrevocable.

Immediate annuity pays one period after purchase; deferred annuity delays income. Fixed annuities guarantee a minimum interest rate, while variable annuities invest in subaccounts and shift investment risk to the owner.

Exclusion ratio for nonqualified annuities: investment in the contract divided by expected return, multiplied by each payment, determines the tax-free portion until basis is recovered; thereafter all payments are taxable.

Settlement options: life only pays the highest income with no survivor benefit; life with period certain, joint and survivor, and refund (installment or cash) options reduce income to fund guarantees.

Qualified plan contribution limits and catch-up provisions: traditional and Roth IRA allow an additional catch-up contribution for those age 50 and older; Roth IRA contributions are not deductible but qualified distributions are tax-free.

Required minimum distributions begin at age 73 for those born 1951-1959 and age 75 for those born 1960 or later; the first distribution deadline can be extended to April 1 of the following year.

Social Security full retirement age is 67 for those born 1960 or later; claiming at 62 reduces benefits permanently, and delayed credits of 8 percent per year accrue to age 70.

Pension plan types: defined benefit promises a benefit formula (often final average pay times years of service times a percentage); defined contribution specifies only contributions, leaving investment risk with the participant.

Annuity free-look period typically 10 to 30 days depending on state, allowing the owner to return the contract for a full refund of premium.

Six-step financial planning process: establish and define the relationship, gather data and goals, analyze the client situation, develop recommendations, present and implement, then monitor and review.

Fiduciary duty components: duty of care (competence and diligence), duty of loyalty (client interest first), duty to disclose conflicts, and duty to act in good faith; suitability alone is a lower standard.

Compensation disclosure must be in writing before or at the time of engagement, covering commissions, fees, and third-party compensation that creates a conflict of interest.

Client information protection: written privacy policy, opt-out rights for nonpublic personal information sharing with nonaffiliates, and secure retention and disposal procedures.

Scope of engagement should be documented in writing, specifying services, timeframe, fees, and what is excluded, to limit liability and manage client expectations.

Know-your-client and suitability analysis requires documenting financial status, tax status, investment objectives, time horizon, risk tolerance, and liquidity needs.

Errors and omissions insurance covers negligent acts, errors, and omissions in professional services; it typically excludes fraud, intentional acts, and uncovered business activities.

Practice management metrics: client segmentation by revenue and complexity, service standards per segment, and a documented referral and center-of-influence strategy.

Continuing education and designation maintenance require documented ethics hours and renewal cycles; lapse in renewal forfeits the right to use the designation.