MS Life & Health common mistakes
MS Life & Health · Understand the traps and how to avoid them.
On questions about a lapsed life insurance policy, the candidate states that coverage ends on the premium due date and ignores the grace period.
They memorize the grace period as a number of days but never connect it to the consequence of nonpayment, so they treat the due date as the termination date.
What to do instead
Build a one-page timeline: premium due date → grace period (commonly 31 days) → lapse. Note that if the insured dies during the grace period, the death benefit is payable with any unpaid premium deducted.
When a beneficiary designation uses 'per stirpes,' the candidate divides proceeds equally among all surviving descendants (per capita) instead of by branch.
The Latin terms look similar, and candidates memorize a vague association rather than the branch concept.
What to do instead
Draw a three-generation family tree with one deceased child. Trace the deceased child's share down to that child's children. Say the definition aloud: per stirpes = by branch or stem; per capita = by head.
For a life annuity with a 10-year period certain, the candidate says payments stop at the annuitant's death even if death occurs in year 2.
They conflate 'life only' with 'period certain' and do not isolate the word 'certain' in the payout option.
What to do instead
Write the payout rule for each option: life only stops at death; life with period certain guarantees payments for at least the stated period to a beneficiary. Compare the two in side-by-side columns.
The candidate applies an 'any occupation' definition to an own-occupation disability policy and denies a claim for a surgeon who cannot operate but can teach.
They treat all disability definitions as interchangeable and do not link the definition to the specific policy wording.
What to do instead
Create a three-row table: own occupation, any occupation, and split definition. For each, write the claim test and a one-line example. Re-read the policy definition before answering.
The candidate calculates out-of-pocket cost by adding the deductible to the full billed charge instead of to the coinsurance share, or ignores the out-of-pocket maximum.
They rush the arithmetic and mix up the order of deductible, coinsurance, and out-of-pocket maximum.
What to do instead
Use a fixed example such as a $10,000 bill, $1,000 deductible, 80/20 coinsurance, and $5,000 out-of-pocket maximum. Calculate step by step and repeat with a different bill until the sequence is automatic.
The candidate says insurance is primarily regulated by the federal government or that rebating is a legal sales practice.
They remember 'McCarran-Ferguson' as a name but not its effect, and rebating sounds like a legitimate discount.
What to do instead
Memorize the McCarran-Ferguson Act allocation: states regulate insurance, and Congress can regulate only through specific federal law. Define rebating as returning part of the premium to induce a sale, which is prohibited in most states.
The candidate treats a life insurance policy loan as taxable income or says the death benefit is income-taxable to the beneficiary.
They apply general income-tax intuition to life insurance without learning the specific tax exclusions and ordering rules.
What to do instead
Write the rules: the death benefit is generally income-tax-free under IRC §101(a); policy loans are not taxable unless the policy lapses or is surrendered with gain; MEC distributions are taxed LIFO with a 10% penalty before age 59½.
For group health coordination of benefits when a child is covered by both parents, the candidate applies a 'father's plan is primary' rule without checking the birthday rule or a court decree.
They rely on an outdated rule of thumb instead of the current coordination-of-benefits order.
What to do instead
Learn the current COB order: the plan of the parent whose birthday falls earlier in the year is primary under the birthday rule unless a court decree specifies otherwise; if both parents share the same birthday, the plan covering the parent longer is primary.
The candidate says Medicare Part A pays for custodial long-term nursing-home care or that Medigap replaces Medicare Advantage.
They group all senior coverage together and do not separate Medicare parts from supplemental policies.
What to do instead
Make a four-box chart: Part A (hospital and limited skilled nursing facility), Part B (medical), Part C (Medicare Advantage, which replaces Original A/B), Part D (prescription drugs). Note that Medigap supplements Original A/B and cannot be used with Medicare Advantage.
The candidate confuses a preexisting-condition exclusion period with a waiting period or says an insurer can rescind a policy for any misstatement at any time.
They memorize terms as synonyms and do not link each term to its timing and legal limits.
What to do instead
Define each term separately: waiting period = time before coverage starts; preexisting exclusion = look-back period plus exclusion period; rescission = voiding for material misrepresentation, limited by the contestability period (often 2 years).