OH Life & Health common mistakes
OH Life & Health · Understand the traps and how to avoid them.
When a question asks who has primary authority to regulate the business of insurance, the candidate selects 'the federal government' because the insurer operates across state lines.
The candidate remembers the phrase 'interstate commerce' from the McCarran-Ferguson discussion and pattern-matches it to federal authority, instead of recalling that McCarran-Ferguson returned regulatory power to the states.
What to do instead
Memorize the one-line rule: states regulate insurance; the federal government acts only in specific carved-out areas (ERISA/group benefits, COBRA, HIPAA, taxation). When an answer choice says 'federal,' ask which named federal law gives that authority before choosing it.
The candidate answers that insurable interest in a life insurance policy must exist at the time of the insured's death, or must be re-proven at claim time.
The candidate carries over the property/casualty rule (interest must exist at the time of loss) and applies it to life, where the timing rule is different and it is tested heavily.
What to do instead
Drill the contrast as a two-line fact: life insurance needs insurable interest only at the time of application (a policy can later become a 'stranger-owned' investment contract and is still valid); property insurance needs it at the time of loss. Say the timing word out loud before answering.
When asked which of the three premium factors increases the premium, the candidate selects 'interest' alongside mortality and expense.
Mortality and expense are intuitive costs, so the candidate lumps the third factor in with them and ignores that interest is an offset that reduces what the insurer must collect.
What to do instead
Use the equation form rather than a word list: premium rises with mortality and expense, falls with an assumed interest rate. Any answer choice pairing 'higher interest assumption' with 'higher premium' is wrong by definition.
The candidate picks a term life policy as the answer when the question asks which product accumulates cash value or can be surrendered for a living benefit.
Term and permanent products share the same basic policy architecture, so under time pressure the candidate defaults to 'life insurance = cash value' without checking whether the stem says term.
What to do instead
Before answering any product question, tag the stem with one of three words: pure protection (term), permanent protection with cash value (whole/universal/variable), or endowment. Eliminate every choice that violates the tag, then read the remaining choices.
The candidate selects a 30-day grace period for a life insurance premium, or selects 'coverage terminates immediately on the due date.'
Thirty days is the most familiar contract number in other contexts, and the candidate has not separated life (31 days) from health (7 days weekly / 10 days monthly, or 30-31 depending on the policy) from the free-look period (typically 10 days).
What to do instead
Build a small number sheet and review it before the exam: life grace period 31 days; free look typically 10 days; reinstatement allowed with evidence of insurability and back premiums with interest; contestability and suicide clauses generally 2 years from issue. Answer these from the sheet, never from feel.
The candidate selects the fixed annuity as the contract where the owner bears investment risk, or selects the variable annuity as the contract guaranteeing a fixed dollar payout.
The candidate anchors on the word 'annuity' meaning 'guaranteed income' and does not reconnect it to how the underlying funds are invested.
What to do instead
Anchor on where the money sits: fixed annuity = insurer's general account, insurer bears investment risk, guaranteed fixed payment; variable annuity = separate account, owner bears investment risk, payments fluctuate with unit values. If the stem mentions the separate account or securities registration, the answer is variable.
The candidate treats a policy loan on a life insurance contract as taxable income in the year it is taken.
Any money received feels like income, and the candidate does not recall that a loan is a loan against the insurer until the contract is surrendered, lapses, or matures with the loan outstanding and exceeds basis.
What to do instead
Apply the test: did the policy terminate? If no, the loan is not income. If yes, the amount over the owner's cost basis is taxable. Also lock in the companion facts: cash value growth is tax-deferred, and death proceeds are generally income-tax-free to the beneficiary.
The candidate calculates the insured's share of a medical bill by applying the coinsurance percentage to the full charge before subtracting the deductible.
The percentage is the most visible number in the problem, so the candidate multiplies first and reasons about order of operations afterward.
What to do instead
Run every cost-sharing problem in a fixed three-step script: (1) charge minus deductible = the base; (2) base times coinsurance = insured's share; (3) compare to the out-of-pocket maximum. Write the three steps down before touching the numbers, and never multiply the full charge.
The candidate chooses the 'any occupation' definition of disability when the question asks which definition is broader in coverage, harder to qualify for, or more expensive.
Both definitions are about occupation, and the candidate reasons that 'any occupation' sounds more generous because it covers any job at all, when actually it is the stricter standard.
What to do instead
Anchor on who benefits: 'own occupation' pays if the insured cannot do their own job - broader coverage, higher premium, harder to underwrite. 'Any occupation' pays only if the insured cannot do any job for which they are reasonably suited - narrower, cheaper. State that sentence before evaluating choices.
The candidate assigns prescription drug coverage to Medicare Part B, or picks COBRA when the stem describes a group member's right to buy an individual policy after group coverage ends.
Both items sit in the same chapter of the study material, so they get filed under a vague 'continuation of coverage' heading instead of being separated by mechanism and cost.
What to do instead
Split the two into distinct triggers: COBRA = continuation of the group plan itself, employer-sponsored, limited time, full group premium plus admin. Conversion = an individual policy issued to the departing member, no evidence of insurability, individual premium. For Medicare, memorize the four-part map: A hospital, B medical/outpatient, C Medicare Advantage, D drugs.