ME Life & Health cheat sheet

The Maine Bureau of Insurance, led by the Superintendent of Insurance, administers the state insurance code and oversees insurer solvency and market conduct.

The McCarran-Ferguson Act leaves primary regulation of insurance to the states; federal law applies only where it specifically preempts state law.

Unfair trade practices include misrepresentation, twisting, rebating, coercion, intimidation, unfair discrimination, and unfair claim settlement practices.

Twisting is inducing a policyholder to lapse or replace coverage through misleading comparisons; churning is repeated replacement to generate commissions.

Rebating is offering anything of value not stated in the policy as an inducement to purchase; it is generally prohibited for licensed producers.

Premiums and fiduciary funds must be held in trust and must not be commingled with a producer's personal or business funds.

Insurers and producers are subject to financial examinations and market conduct examinations and must maintain required records.

Advertising and policy illustrations must be truthful, balanced, and not misleading, with required disclosures about nonguaranteed elements.

The Maine Insurance Data Security Act requires licensees to maintain information security programs and report certain cybersecurity events.

A producer license is required to sell, solicit, or negotiate insurance; transacting insurance without a license is prohibited.

Maine resident producer applicants must meet age, application, examination, fee, and background requirements and must act in good faith.

Nonresident producers may obtain a Maine license through reciprocity when their home state license is in good standing.

Insurers appoint producers to act on their behalf; producers may not represent an insurer without an appointment, and terminations must be reported.

Maine resident producers must complete continuing education each biennial term; the standard requirement is 24 hours, including 3 hours of ethics.

Commissions may be paid only to licensed producers; sharing commissions with unlicensed persons is prohibited except for limited statutory exceptions.

Producers must keep license information current and report required changes and disciplinary actions to the Commissioner.

A temporary license may be issued in limited circumstances, such as death or disability of a producer, to allow continuity of business.

Prohibited conduct includes commingling premiums, falsifying records, forging signatures, submitting blank applications, and writing controlled business.

Risk is uncertainty about loss; pure risk involves only chance of loss, while speculative risk involves chance of gain or loss and is generally not insurable.

Insurable risks generally involve many similar exposure units, accidental loss, definite and measurable loss, calculable probability, and noncatastrophic potential.

The law of large numbers helps insurers predict losses; adverse selection occurs when higher-risk applicants seek coverage disproportionately.

Valid contracts require offer, acceptance, consideration, legal purpose, and competent parties.

Insurance contracts require utmost good faith; material misrepresentation or concealment can allow the insurer to rescind or deny coverage.

A waiver is the voluntary surrender of a known right; estoppel prevents a party from asserting a right after another party reasonably relied on contrary conduct.

Indemnity restores an insured to approximately the pre-loss financial position; life insurance pays a stated face amount rather than indemnifying actual loss.

Hazards increase the chance or severity of loss and include physical, moral, and morale hazards; perils are the causes of loss.

Risk management techniques include avoidance, retention, sharing, transfer, and loss reduction.

Insurable interest must exist at the time of application; for life insurance, the owner must benefit from the insured's continued life or suffer loss at death.

Life insurance premiums reflect mortality, interest earnings, and expenses; net premium uses mortality and interest, while gross premium adds expense loading.

Underwriting may use the application, medical examination, attending physician statement, prescription database, MIB report, and inspection report.

A conditional receipt provides temporary coverage only if the proposed insured meets the insurer's underwriting requirements.

Policy ownership carries rights to name beneficiaries, assign the policy, borrow cash value, surrender coverage, and receive dividends.

Beneficiaries may be primary or contingent and revocable or irrevocable; per stirpes distributes by branch, while per capita distributes equally among survivors.

A modified endowment contract fails the seven-pay test; distributions are taxed like annuity withdrawals, generally LIFO with a 10% penalty before age 59½.

Death benefits are generally income-tax-free to beneficiaries; cash value grows tax-deferred, but loans can create taxable income if the policy lapses.

Replacement of existing life insurance requires disclosure and notice so the applicant can compare coverage and costs.

Term life insurance provides a death benefit for a stated period, has no cash value, and may be renewable, convertible, level, decreasing, or increasing.

Whole life insurance has level premiums, guaranteed cash value, and coverage to maturity; dividends on participating policies are not guaranteed.

Universal life insurance offers flexible premiums and adjustable death benefits; cash value is credited with current interest and reduced by cost of insurance and expenses.

Variable life and variable universal life invest cash value in separate-account subaccounts and are securities requiring a prospectus and securities registration.

Indexed universal life credits interest based on an index formula, subject to caps, floors, and participation rates; it is not a direct stock market investment.

Endowment policies pay the face amount at maturity if the insured survives or at death if earlier; limited-pay and modified whole life shorten or change premiums.

Group life insurance uses a master contract and certificates; covered employees may have conversion rights when group coverage ends.

Joint and survivorship policies cover two or more lives; first-to-die pays on the first death, while second-to-die pays after the last death.

Return-of-premium term refunds premiums if the insured survives the term, usually with a higher premium than ordinary term.

The entire-contract clause limits the contract to the policy, application, and attached endorsements; the free-look period allows return for a refund.

Life insurance commonly includes a grace period for late premiums, often 31 days, during which coverage remains in force.

Reinstatement usually requires evidence of insurability and payment of overdue premiums and interest, often within three years.

The incontestability clause generally prevents the insurer from contesting the policy for material misrepresentation after two years.

A suicide clause generally limits payment if death by suicide occurs within two years; misstatement of age or sex adjusts the benefit.

Nonforfeiture options include cash surrender, reduced paid-up insurance, and extended term insurance.

Dividend options include cash, premium reduction, accumulation at interest, paid-up additions, and one-year term insurance.

Settlement options include lump sum, interest only, fixed amount, fixed period, and life income arrangements.

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

An annuity is a contract that accumulates funds and then pays income; the owner, annuitant, and beneficiary may be different persons.

Immediate annuities begin payments soon after purchase; deferred annuities have an accumulation phase before payout.

Fixed annuities guarantee principal and a minimum interest rate; variable annuities invest in a separate account and fluctuate with performance.

Indexed annuities credit interest using an index formula with caps, floors, and participation rates rather than direct market participation.

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

Variable annuity sales require both insurance and securities licensing, and the buyer must receive a prospectus.

Nonqualified annuity payments use an exclusion ratio to determine the tax-free return of basis; qualified annuity distributions are generally fully taxable.

A 10% federal penalty generally applies to annuity withdrawals before age 59½ unless an exception applies.

Surrender charges may apply to early withdrawals; annuitization converts accumulated value into a guaranteed income stream.

Traditional IRA contributions may be deductible depending on coverage and income; distributions are generally taxable as ordinary income.

Roth IRA contributions are made with after-tax dollars; qualified distributions are tax-free after age 59½ and a five-year holding period.

Employer retirement plans include 401(k), 403(b), 457, SEP, and SIMPLE plans; contribution limits are indexed for inflation.

A 60-day rollover allows funds to move between eligible plans or IRAs without tax if completed within the deadline.

Direct trustee-to-trustee transfers avoid withholding and are not subject to the 60-day rollover rule.

Qualified plans are subject to ERISA fiduciary, vesting, nondiscrimination, and reporting requirements.

A Section 1035 exchange allows tax-free replacement of life insurance, annuities, or qualified long-term care contracts for like-kind contracts.

Required minimum distributions generally begin at age 73 for traditional accounts; the penalty is 25%, reduced to 10% if corrected timely.

Health savings accounts offer tax-deductible contributions, tax-deferred growth, and tax-free qualified medical withdrawals when paired with an HDHP.

Health insurance transfers medical costs; indemnity plans reimburse expenses, while managed-care plans use networks and utilization controls.

An HMO typically requires a primary care physician, referrals for specialists, and in-network care; capitation pays providers per member per period.

A PPO allows care without a PCP and pays more for in-network providers; out-of-network care usually has higher cost sharing.

Cost-sharing terms include premium, deductible, copayment, coinsurance, and out-of-pocket maximum.

Coordination of benefits determines which plan pays first when a person has multiple health plans and prevents duplicate payment.

Group health underwriting considers the group as a whole; HIPAA provides portability, creditable coverage, and special enrollment rights.

The ACA requires guaranteed issue, essential health benefits, no preexisting-condition exclusions, and dependent coverage to age 26.

An HSA must be paired with a qualifying high-deductible health plan; funds can pay qualified medical expenses tax-free.

Utilization management includes preauthorization, concurrent review, case management, and claims review.

Required health policy provisions include entire contract, grace period, reinstatement, incontestability, claim procedures, and legal action limits.

Individual health policies commonly have a time limit on certain defenses, often two years, after which misstatements generally cannot void coverage.

Claims provisions require notice, proof of loss, and timely payment; insureds have appeal and external review rights.

Medicare Part A covers hospital insurance; Part B covers medical insurance; Part C is Medicare Advantage; Part D covers prescription drugs.

Medicare eligibility generally begins at age 65 or through disability or end-stage renal disease, with initial and annual enrollment periods.

Medigap policies are standardized and do not include prescription drug coverage; open enrollment lasts six months after Part B enrollment.

Medicaid and MaineCare are income-based federal-state programs that can cover long-term care for eligible persons.

COBRA allows continuation of group health coverage after a qualifying event, generally for 18, 29, or 36 months at the beneficiary's cost.

CHIP and ACA Marketplace subsidies provide coverage options for eligible children and lower-income individuals.

Disability income insurance replaces a portion of earned income; own-occupation coverage is broader than any-occupation coverage.

Disability policies use an elimination period, benefit period, benefit percentage, and definitions of total, partial, and residual disability.

Individually paid disability premiums produce tax-free benefits; employer-paid premiums generally produce taxable benefits.

Long-term care benefits are triggered by inability to perform two of six activities of daily living or by severe cognitive impairment.

The six ADLs are bathing, dressing, transferring, toileting, eating, and continence.

LTC policies may pay on a reimbursement or indemnity basis and may include elimination periods, benefit periods, and inflation protection.

Medicare does not pay for custodial long-term care; Medicaid may pay after eligibility and spend-down requirements are met.

Social Security disability requires sufficient work credits, a five-month waiting period, and Medicare eligibility after 24 months of benefits.

Senior health products include Medicare Advantage, Medigap, and Part D prescription drug plans, each with different networks, costs, and rules.