NH Life & Health cheat sheet

Insurance is regulated mainly at the state level; in New Hampshire the Insurance Department, headed by the Insurance Commissioner, administers and enforces the state insurance code.

A producer must hold an active license for each line of authority (life, accident and health, property, casualty, and so on) before soliciting, negotiating, or selling that line.

An insurer must appoint a licensed producer before that producer may solicit or submit business on the insurer's behalf; the appointment must be in force when the business is written.

Producers owe a fiduciary duty: premiums collected belong to the insurer or the insured, must be held in trust, and may not be commingled with personal or agency funds.

Unfair trade practices include misrepresentation, twisting, rebating, coercion, intimidation, boycott, and unfair discrimination among insureds of the same class and expected mortality.

Rebating means giving or offering any inducement not stated in the policy, such as part of the commission; it is prohibited and can lead to fines, suspension, or revocation.

New Hampshire producers must complete state-required continuing education credit hours, including ethics, during each renewal term, and report address changes and administrative actions to the Department.

The Commissioner may examine insurers and producers, issue cease-and-desist orders, hold hearings, impose fines, and suspend or revoke licenses.

State guaranty associations pay covered claims of insolvent insurers within statutory limits, commonly $300,000 in life death benefits, $100,000 in life cash values, and $250,000 in annuity present value.

Risk is uncertainty about loss; peril is the cause of loss (fire, death, illness); hazard is a condition that increases the chance or severity of loss and may be physical, moral, or morale.

Only pure risk, which offers the chance of loss or no loss, is insurable; speculative risk, which offers the chance of gain as well as loss, is not.

Insurable risks share common traits: a large number of similar exposure units, accidental and measurable losses, determinable probability of loss, and losses that are not catastrophic to the insurer.

Indemnity restores the insured to approximately the pre-loss financial position; health and property-casualty insurance are indemnity contracts, while life insurance is a valued contract paying a stated face amount.

The law of large numbers holds that as the number of similar exposure units increases, actual loss experience more closely matches the predicted rate.

Adverse selection is the tendency of those most likely to suffer a loss to seek insurance; underwriting, waiting periods, exclusions, and ratings are used to control it.

The elements of a valid contract are offer and acceptance, consideration, competent parties, and legal purpose.

Insurance contracts are aleatory (values exchanged are unequal), unilateral (only the insurer makes an enforceable promise), conditional (benefits depend on conditions), and contracts of adhesion (ambiguity is resolved against the insurer that drafted the policy).

Utmost good faith underlies warranties, representations, concealment, and fraud; a material misrepresentation on the application can void coverage or reduce a claim.

Insurable interest must exist at policy inception; the purchaser or beneficiary must have a reasonable expectation of financial benefit or a close blood or affectional tie to the insured's continued life.

The amount of coverage is set by the needs approach (income replacement, debts, education, final expenses) or the human life value approach (present value of the insured's future earnings).

Policyowner rights include naming and changing a revocable beneficiary, taking policy loans, surrendering the policy, assigning it, receiving dividends, and choosing settlement options.

The applicant, insured, owner, and beneficiary can be four different people; the owner controls all contract rights and is the party who receives tax reporting.

Underwriting relies on the application, medical and paramedical examinations, attending physician statements, prescription history, the MIB, and inspection reports; results place the risk in preferred, standard, or substandard (table rating or flat extra) classes.

A conditional receipt provides interim coverage when the application and initial premium are submitted, effective the application date or medical examination date, whichever is later, if the insurer would have issued the policy as applied for.

Mortality minus assumed interest equals the net premium; adding expense loading produces the gross premium the policyowner pays.

Premium mode affects total cost: annual mode is the least expensive because of lower billing expense and less lost interest, while monthly mode is the most expensive.

Beneficiaries may be primary or contingent, revocable or irrevocable, and are paid per stirpes (by branch of family) or per capita (equally by head count).

Term insurance covers a stated period, builds no cash value, and pays only if death occurs during the term; forms include level, decreasing, increasing, renewable, and convertible term.

Whole life is permanent, level-premium coverage with guaranteed cash value that matures or endows at a stated age, traditionally age 100 or 121.

Limited-pay whole life (for example 20-pay or paid-up at 65) compresses premiums into a shorter period while keeping lifetime coverage.

Universal life separates the policy into a cash value account and a monthly cost-of-insurance deduction; premiums are flexible and the death benefit is Option A (level) or Option B (increasing).

Universal life interest is credited at a current rate that may change but can never fall below the guaranteed minimum rate written in the contract.

Variable life and variable universal life invest cash value in a separate account; the owner bears the investment risk and the sale requires a securities registration in addition to a life insurance license.

Indexed universal life credits interest linked to an external market index, subject to a cap and participation rate, with a floor (often 0%) that protects the cash value from index losses.

A policy that fails the seven-pay test is a modified endowment contract; loans and withdrawals are taxed income first and a 10% penalty applies before age 59½.

Survivorship (second-to-die) coverage pays on the death of the last insured for estate planning, while a joint first-to-die policy pays at the first death.

The entire contract clause states that the policy plus the attached copy of the application constitute the whole agreement, and no outside document can alter it.

The free-look provision lets the owner return a newly delivered policy within a stated period, commonly 10 days, for a full premium refund.

After two years in force the incontestability clause bars the insurer from contesting the policy for misrepresentation; a suicide clause limits payment to a premium refund if death by suicide occurs within the first two years; misstatement of age or sex adjusts the benefit to what the premium would have bought.

The grace period, usually 30 or 31 days, allows a late premium payment; the automatic premium loan provision borrows from cash value to prevent lapse, and an outstanding loan plus interest reduces the death benefit.

Reinstatement within about three years of lapse requires evidence of insurability and payment of overdue premiums with interest; a new contestable period may begin.

Nonforfeiture options are cash surrender, reduced paid-up insurance (smaller face amount, same maturity date), and extended term insurance (full face amount for a limited term).

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

Settlement options are lump sum, interest only, fixed period, fixed amount, and life income (straight life, life with period certain, joint and survivor, and refund life).

Riders include waiver of premium, disability income, accidental death (double indemnity), guaranteed insurability, cost-of-living, return of premium, term, other insured (spouse or child), payor benefit, and long-term care.

An annuity is a contract that liquidates a sum of money into periodic income, protecting the owner against the risk of outliving available assets.

The owner controls the contract and its taxation, the annuitant's life measures the payout, and the beneficiary receives any remaining value if death occurs during accumulation.

The accumulation phase builds value; annuitization, the payout phase, converts accumulated value into a stream of income payments.

Immediate annuities begin income within one payment period, while deferred annuities accumulate first and pay later; premiums may be a single deposit or flexible and periodic.

Fixed annuities guarantee a minimum interest rate, indexed annuities credit index-linked interest with caps and floors, and variable annuities invest in a separate account and require a securities license.

Payout options are life only (largest payment, nothing to survivors), life with period certain, installment refund, cash refund, and joint and survivor.

The exclusion ratio equals the investment in the contract divided by the expected return; that fraction of each payment is tax-free until the basis is recovered, after which all income is taxable.

Annuity earnings grow tax-deferred; nonqualified withdrawals are taxed income first, and a 10% early withdrawal penalty applies before age 59½ with limited exceptions.

A 1035 exchange moves life insurance or annuity funds into a new annuity or life policy without current taxation; surrender charges and a free-withdrawal allowance (often 10% a year) may apply, and sales must meet suitability or best-interest standards.

Health insurance either reimburses medical expenses on an indemnity basis or arranges and pays for care through a managed care network of providers.

Basic medical expense coverage handles hospital, surgical, and physician costs; major medical extends protection to larger, broader expenses after a deductible and coinsurance.

Cost-sharing terms: the deductible is paid first by the insured, coinsurance is the insured's percentage share (commonly 20%), a copayment is a flat dollar charge, and the out-of-pocket maximum caps the insured's annual share.

An HMO uses a closed panel, a primary care gatekeeper, capitation payments to providers, and generally covers no non-emergency care outside the network.

A PPO contracts with a network for discounted rates, requires no referrals, and covers out-of-network care at a higher cost to the insured.

A POS plan blends HMO and PPO features through a gatekeeper with limited out-of-network benefits, and an EPO covers only network providers except in emergencies.

ACA market rules require guaranteed issue, prohibit pre-existing condition exclusions, mandate essential health benefits without annual or lifetime dollar limits, and allow dependent coverage to age 26.

Government programs include Medicare (Parts A, B, C, and D), Medicaid, and Medigap policies that supplement Original Medicare.

Managed care controls cost through provider networks, capitation, utilization review, case management, and preventive care incentives.

The NAIC uniform provisions set minimum standards for individual health policies covering claims, grace periods, reinstatement, and defenses; individual policies also carry a free-look right, commonly 10 days.

Grace period: 7 days for weekly premium mode, 10 days for monthly mode, and 31 days for all other modes.

The time limit on certain defenses clause bars the insurer after two years from contesting the policy for misrepresentation or denying a claim because a condition began before coverage, except for fraud.

The insured must give notice of claim within 20 days of a loss, or as soon as reasonably possible, and file proof of loss within 90 days.

Claims are paid immediately after proof of loss and no later than 45 days; the insured cannot sue before 60 days after proof of loss and must sue within 3 years.

Reinstatement of a lapsed policy requires payment of overdue premiums; coverage for accidental injury begins immediately and coverage for sickness begins after 10 days.

Renewability clauses are cancellable, optionally renewable, conditionally renewable, guaranteed renewable, and noncancellable, which guarantees both renewal and premium.

The change of occupation provision may reduce benefits if the insured moves to a more hazardous occupation, and misstatement of age adjusts benefits to the correct amount.

Coordination of benefits rules establish which plan is primary and which is secondary when a person has duplicate coverage so total payments never exceed 100% of expenses.

Disability income replaces part of earned income, typically 50% to 70% of gross income, and pays a monthly benefit for the stated benefit period.

The elimination (waiting) period is the number of days of disability that must pass before benefits begin; a longer elimination period lowers the premium, and the benefit period sets how long benefits last.

Definitions determine payment: own-occupation pays when the insured cannot perform the duties of their own occupation, any-occupation pays only when unable to do any work for which reasonably fitted, and total, partial, and residual definitions set the amount.

Occupational coverage pays for both work-related and non-work-related disability, while nonoccupational coverage excludes work-related injury because workers' compensation covers it.

Benefits are taxable to the employee when the employer paid the premium and tax-free when the employee paid the premium with after-tax dollars.

Common riders are residual disability, cost-of-living adjustment, future purchase option, return of premium, waiver of premium, and accidental death.

Business disability coverages include key person disability, business overhead expense, and disability buy-sell.

Medical expense products include hospital indemnity, critical illness, cancer, dental, vision, and long-term care; HSA-qualified high-deductible health plans pair with tax-advantaged health savings accounts.

Long-term care benefits are triggered by inability to perform two of six activities of daily living or by severe cognitive impairment, and pay for nursing home, assisted living, or home care.

Group underwriting evaluates the group as a whole rather than individuals, using group size, average age, industry, participation, and past claims experience.

Eligibility usually requires the employee to be actively at work on the effective date; otherwise coverage is delayed until the employee returns to work.

Noncontributory plans, paid entirely by the employer, generally require 100% employee participation; contributory plans require a minimum percentage, commonly 75% of eligible employees.

The insurer issues a master policy to the employer or plan sponsor, and each participant receives a certificate of coverage summarizing benefits, exclusions, and provisions.

COBRA applies to employers with 20 or more employees and provides 18 months of continuation for termination or reduced hours, 29 months when a disability extension applies, and 36 months for dependents after death, divorce, or Medicare entitlement.

HIPAA provides portability, credits prior creditable coverage against pre-existing condition periods, and grants special enrollment rights for new dependents or loss of other coverage.

Group life is usually yearly renewable term and includes a conversion privilege letting a departing employee buy individual coverage without evidence of insurability.

Group disability is divided into short-term coverage (often 13 or 26 weeks) and long-term coverage (starting after 90 or 180 days), each paying a percentage of income.

Other coverages include workers' compensation, Medicare, Medicaid, TRICARE, credit insurance, blanket insurance, and association group plans; Medicare secondary payer rules make the employer plan primary for active employees in larger groups and Medicare primary for retirees.