SC Life & Health cheat sheet

Transacting insurance without a state-issued certificate of authority is unauthorized insurance and exposes the insurer or producer to cease-and-desist orders, fines, and criminal penalties.

Producer licensing is state-based: a life or health license is required to solicit, negotiate, or sell those products, and selling variable products also requires FINRA registration.

Continuing education commonly requires about 24 credit hours every two years, including a specified ethics component; failure to comply can result in license lapse or fines.

Premiums collected belong to the insurer or the client, never the producer; commingling premium funds with personal funds and late remittance are fiduciary breaches.

Unfair trade practices include rebating, twisting, misrepresentation, false advertising, boycott, coercion, and unfair claim settlement practices.

Insurable interest must exist at the time of application for life insurance but need not exist at the time of the insured's death.

Replacement rules require the producer to deliver a replacement notice to the applicant and notify the existing insurer, which may then exercise its own rights.

State guaranty associations pay covered claims of policyholders of insolvent insurers up to statutory limits, but they do not prevent insolvency or replace solvency regulation.

Insurance transfers pure risk from an individual to a pool of similar exposure units; speculative risk (loss or gain possible) is not insurable.

The law of large numbers holds that predicted loss experience becomes more accurate as the number of similar, independent exposure units increases.

Peril is the cause of loss (fire, accident, illness); hazard is a condition that increases the chance or severity of loss, classified as physical, moral, or morale.

Indemnity restores the insured to approximately the pre-loss financial position; life insurance is a valued contract rather than a strict indemnity contract.

Utmost good faith requires both parties to disclose material facts; concealment, material misrepresentation, and breach of warranty can affect enforceability.

Insurance contracts are aleatory (unequal exchange), unilateral (only the insurer makes an enforceable promise), conditional, and contracts of adhesion.

Reinsurance cedes risk from a primary insurer to a reinsurer; retention is the portion of risk the primary insurer keeps for its own account.

Gross premium equals the net premium (mortality or morbidity plus interest assumptions) plus expense loading for commissions, taxes, and administration.

Human life value measures the present value of future earnings; the needs approach totals income replacement, debts, education costs, and final expenses.

Term insurance provides pure protection with no cash value and may be level, decreasing, increasing, renewable, or convertible.

Whole life is permanent coverage with level premiums, guaranteed cash value, and maturity (endowment) at age 100 or 121 in older contracts.

Universal life separates cash value from the cost of insurance; premiums are flexible, and Option A pays a level death benefit while Option B adds the cash value.

Variable life and variable universal life invest in separate accounts, so the owner bears investment risk; sales require a securities registration and a prospectus.

Limited-pay whole life compresses premiums into fewer years (for example 20-pay or paid-up at 65) while coverage remains permanent.

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

Dividend options are cash, reduction of premium, accumulation at interest, paid-up additions, and one-year term; dividends are not guaranteed.

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

The entire contract provision states that the policy plus the attached copy of the application form the whole agreement, and only an authorized officer may modify it.

The incontestability clause generally bars the insurer from contesting the policy after two years in force based on misstatements in the application.

The grace period is typically 30 or 31 days, during which coverage remains in force; an automatic premium loan can use cash value to pay the overdue premium and prevent lapse.

The suicide clause limits the benefit to a return of premiums if the insured dies by suicide within the stated period, usually two years from issue.

Reinstatement is generally available within three to five years with evidence of insurability plus payment of overdue premiums with interest.

A misstatement of age or sex adjusts the death benefit to the amount the premium actually paid would have purchased at the correct age or sex.

Beneficiary designations may be primary or contingent and revocable or irrevocable; per stirpes splits a deceased beneficiary's share among that beneficiary's descendants, while per capita divides equally among surviving beneficiaries.

An absolute assignment transfers all ownership rights, while a collateral assignment transfers limited rights as security for a loan.

Common riders include waiver of premium, disability income, accidental death, guaranteed insurability, cost-of-living, and term (additional insurance) riders.

An annuity liquidates a sum of money into a stream of income; the accumulation phase builds value and the annuitization phase pays it out.

Immediate annuities begin payments within one payment period of purchase, while deferred annuities accumulate value before any payout begins.

Fixed annuities guarantee a minimum interest rate and a fixed dollar benefit, so the insurer bears the investment risk.

Variable annuities invest in separate accounts and shift investment risk to the owner; they require both a securities license and a prospectus.

Income options include straight life (largest payment, ends at death), life with period certain, installment refund, and joint and survivor.

Nonqualified annuity earnings grow tax-deferred, and the exclusion ratio determines the tax-free portion of each payment as a return of the investment in the contract.

Withdrawals before age 59½ generally trigger a 10% federal penalty plus ordinary income tax, and a 1035 exchange moves funds between contracts without current taxation.

Indemnity plans reimburse a percentage of covered charges, while managed care plans (HMO, PPO, POS) control costs through provider networks and utilization review.

A deductible is the amount paid before benefits begin, coinsurance is the insured's percentage share after the deductible, and a copay is a fixed fee per service.

The out-of-pocket maximum caps covered in-network costs for the year, including deductible and coinsurance but not premiums, after which the plan pays 100% of covered expenses.

Coordination of benefits rules determine which plan is primary and which is secondary when a person is covered by more than one plan, preventing duplicate payment.

The ACA requires essential health benefits, prohibits annual and lifetime dollar limits on those benefits, and requires many preventive services with no cost sharing.

Preexisting condition exclusions are prohibited in individual and group major medical coverage under the ACA.

Major medical plans carry high maximum benefits with deductibles and coinsurance; specified disease and critical illness plans pay a lump sum for listed conditions.

First-dollar coverage pays from the first dollar with no deductible, while a corridor deductible applies after basic hospital or surgical benefits are exhausted.

Disability income insurance replaces a portion of earned income, commonly 60% to 70%, and benefits are usually tax-free when the insured pays the premium.

An own-occupation definition pays when the insured cannot perform their own occupation; an any-occupation definition is stricter, and many policies use own-occupation for two years then any-occupation.

The elimination period is the waiting period before benefits begin; longer elimination periods and shorter benefit periods reduce the premium.

Residual (partial) disability benefits pay a reduced, proportional amount when the insured returns to work at a lower income after a disability.

Common disability riders include cost-of-living adjustment, future increase option, waiver of premium, and Social Security offset provisions.

Social Security disability requires inability to engage in any substantial gainful activity for at least 12 months or an expectation of death.

Long-term care benefits trigger when the insured cannot perform two of six activities of daily living without assistance or has a cognitive impairment.

Tax-qualified LTC policies pay tax-free benefits up to a per diem limit, and state partnership programs allow policyholders to protect assets from Medicaid spend-down.

A single master policy is issued to the employer or association, and participating employees receive certificates of insurance as evidence of coverage.

Eligibility generally requires active full-time employment plus a waiting period, and late entrants may have to provide evidence of insurability.

Noncontributory plans require 100% employee participation, while contributory plans typically require at least 75% of eligible employees to enroll.

COBRA allows qualified beneficiaries to continue group coverage for 18, 29, or 36 months after a qualifying event, with a 60-day election period.

HIPAA limits preexisting condition exclusion periods when coverage is continuous and creditable, and it also provides privacy and portability protections.

Conversion privileges let a departing employee convert group term life to individual coverage without evidence of insurability, usually within 31 days.

Section 125 cafeteria plans let employees pay premiums and qualified expenses with pretax dollars, lowering taxable income.

Medicare Part A covers inpatient hospital, skilled nursing facility, hospice, and some home health care, and is premium-free for most people with 40 quarters of work history.

Part B covers physician and outpatient services for a monthly premium, Part C is Medicare Advantage, and Part D provides prescription drug coverage.

The Medicare initial enrollment period is the seven-month window around the 65th birthday: the three months before, the birthday month, and the three months after.

Medicare does not pay for long-term custodial care; it covers skilled care only after a qualifying hospital stay and only for a limited number of days.

Medigap policies are standardized into ten plans (A, B, C, D, F, G, K, L, M, N), and the six-month open enrollment period begins with Part B enrollment at age 65.

Medicare Advantage plans are managed care alternatives that must provide at least the benefits of Original Medicare and often bundle Part D drug coverage.

Medicaid is a joint federal-state, income-tested program that covers long-term care, including nursing home care, for eligible individuals.

Medicaid long-term care eligibility applies a five-year look-back period to identify assets transferred below market value.