MO Life & Health cheat sheet

Insurance in Missouri is regulated by the Department of Commerce and Insurance; the Director is appointed by the Governor and has authority to license, examine, and discipline insurers and producers.

Life and health producer licenses renew on a biennial basis; 16 hours of approved continuing education per term, including at least 3 hours of ethics, must be completed.

Individual life insurance policies must give the owner at least 10 days after delivery to return the policy for a full premium refund (free look).

Premium grace periods: individual life policies at least 30 days; health policies 7 days when premiums are payable weekly and 10 days when payable monthly.

The Missouri Life and Health Insurance Guaranty Association covers up to $300,000 in death benefits, $100,000 in cash surrender value, and $100,000 in health benefits per insured.

Commissions may be paid only to a licensed producer appointed by the paying insurer, and only for business written under that license; rebating and twisting are prohibited unfair trade practices.

A producer who replaces existing life insurance or an annuity must deliver a signed replacement notice to the applicant, and the replacing insurer must notify the existing insurer.

Temporary producer licenses may be issued for up to 180 days when a licensed producer dies or becomes disabled, permitting continuation of the business.

Premiums collected from policyowners are held in a fiduciary capacity and must be remitted to the insurer promptly; misappropriation is grounds for license revocation.

Insurance transfers pure risk from an individual to a group; speculative risk, which offers a chance of gain as well as loss, is not insurable.

Insurable risks normally involve many similar exposure units, accidental and definite losses, measurable loss amounts, and no catastrophic concentration of risk.

Insurable interest must exist at policy inception for life insurance; it need not exist at the time of the insured's death.

The principle of indemnity restores the insured to the pre-loss financial position and never allows profit; life insurance pays a stated sum because a life has no measurable value.

Insurance contracts are contracts of adhesion (written by the insurer), aleatory (unequal value exchange), unilateral (only the insurer makes an enforceable promise), and conditional (benefits depend on stated conditions).

Utmost good faith requires true representations by the applicant; a material misrepresentation or intentional concealment gives the insurer grounds to rescind.

Adverse selection is controlled through underwriting, risk classification, exclusions, and policy limits; it explains why insurers ask detailed health and avocation questions.

A warranty is a statement guaranteed to be true, while a representation is a statement believed true to the best of the applicant's knowledge; states treat application statements as representations.

Reinsurance occurs when a ceding insurer transfers part of a risk to a reinsurer; the original policyowner's rights against the ceding insurer are unaffected.

A death benefit paid to a named beneficiary is generally free of federal income tax, but interest paid on delayed proceeds is taxable to the recipient.

Cash value grows tax-deferred; on a modified endowment contract, loans and withdrawals are taxed income-first and may incur a 10% penalty before age 59 1/2.

Common mandatory policy provisions: 2-year incontestability, 2-year suicide exclusion, 3-year reinstatement window, grace period, and adjustment for misstatement of age.

Nonforfeiture options on lapse of a cash-value policy: cash surrender, reduced paid-up insurance, extended term insurance, and automatic premium loan if elected.

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

Settlement options: lump sum, interest only, fixed period, fixed amount, life income, and joint-and-survivor income.

Renewable term may be continued without new evidence of insurability; convertible term may be exchanged for permanent coverage at the attained or original age as the contract specifies.

Universal life death benefit option A is level (corridor widens as cash value grows); option B equals the specified amount plus accumulated cash value, producing an increasing benefit.

Annuity exclusion ratio = investment in the contract divided by expected return; that percentage of each payment is an untaxed return of basis.

Renewability, from least to most protection for the insured: cancellable, optionally renewable, conditionally renewable, guaranteed renewable, noncancellable.

Individual health policies commonly include a 2-year time limit on certain defenses, after which only fraud or nonpayment of premium can void coverage.

Own-occupation disability income pays when the insured cannot perform their own job; any-occupation pays only when unable to perform any job for which reasonably fitted.

Accidental death and dismemberment pays the principal sum for accidental death and a capital sum (a stated percentage of the principal sum) for covered dismemberment or loss of sight.

Coordination of benefits rules set the order of payment so combined benefits never exceed the actual expense; the plan covering the person as an employee pays before a plan covering them as a dependent.

Long-term care benefits are triggered by inability to perform 2 of 6 activities of daily living without help, or by cognitive impairment requiring substantial supervision.

Employer-paid health premiums are deductible to the employer and excluded from employee income; disability benefits paid for entirely by the employer are taxable to the employee when received.

Medicare consists of Part A (hospital), Part B (medical), Part C (Medicare Advantage) and Part D (prescription drugs); Medigap policies supplement Original Medicare.

Contributory group health plans require a stated minimum participation (commonly 75%) of eligible employees, while noncontributory plans require 100% participation.