TN Life & Health cheat sheet

The Tennessee Commissioner of Commerce and Insurance is appointed by the governor, heads the Department of Commerce and Insurance, and enforces the state insurance code, licensing, and market-conduct rules.

A producer must hold a Tennessee license before soliciting insurance; licenses renew biennially, and renewal generally requires 24 continuing-education hours, including 3 hours of ethics.

Producers must notify the Commissioner within 30 days of a change of name or address and of administrative actions or criminal prosecutions affecting their insurance license.

Premiums and client funds are held in a fiduciary capacity; commingling producer funds with insurer or client funds is prohibited, and accurate records must be maintained.

Replacement of life insurance or an annuity requires a replacement notice, a list of existing coverage being replaced, and a copy left with the applicant; the insurer also notifies the existing insurer.

Tennessee free-look rules generally give the buyer 10 days to return a newly delivered life policy and 20 days for an annuity, with a refund of premium if returned timely.

Prohibited unfair trade practices include rebating, twisting, misrepresentation, false advertising, and unfair claim-settlement practices.

The Tennessee insurance guaranty association pays covered claims of insolvent insurers up to statutory limits; it does not excuse an insurer's or producer's sales misconduct.

Knowingly presenting a false insurance application or claim is insurance fraud; suspected fraud must be reported under Tennessee rules.

Risk is uncertainty about loss; a peril is the cause of a loss, such as death or accident; a hazard is a condition that increases the chance or severity of loss.

Insurable interest in life insurance must exist at policy inception, while property insurance requires insurable interest at the time of loss.

The principle of indemnity restores the insured to approximately the pre-loss financial position without profit; life insurance is a valued contract rather than a strict indemnity contract.

Insurance is a contract of utmost good faith: applicants must disclose material facts, and concealment or material misrepresentation can affect coverage.

An insurance policy is a contract of adhesion, so ambiguous language is generally construed against the insurer; it is also aleatory because the amounts exchanged depend on uncertain events.

The law of large numbers lets insurers predict losses more accurately as the number of similar risks increases; adverse selection is the tendency of higher-risk people to seek coverage.

Reinsurance transfers part of an insurer's risk to another insurer; the original insurer retains part of the risk and remains responsible to the policyowner.

Subrogation and coordination of benefits prevent double recovery by shifting loss responsibility to the party legally liable or by determining which plan pays first.

A valid insurance contract requires offer, acceptance, consideration, legal purpose, and competent parties.

The policyowner controls all policy rights, the insured is the person whose life is covered, and the beneficiary receives the death benefit.

Life underwriting may use the application, Medical Information Bureau reports, attending-physician statements, medical exams, and prescription or credit information.

A conditional receipt can provide temporary coverage when the initial premium is paid and the proposed insured meets the insurer's underwriting requirements.

The incontestability clause generally bars the insurer from contesting the policy for material misstatements after it has been in force for two years.

A suicide exclusion commonly limits or denies benefits if the insured dies by suicide within two years of issue; a misstatement of age or sex adjusts the death benefit rather than voiding the policy.

Term insurance provides pure death protection with no cash value; common forms include level, decreasing, increasing, renewable, and convertible term.

Whole life provides level premiums, guaranteed cash value, and lifetime coverage; universal life offers flexible premiums and an adjustable death benefit; variable life uses a separate account.

Cash-value policies include nonforfeiture options such as cash surrender, reduced paid-up insurance, and extended term insurance; policy loans reduce cash value and the death benefit if unpaid.

Dividends on participating policies may be taken in cash, used to reduce premiums, accumulated at interest, or used to buy paid-up additions.

Settlement options include lump sum, interest only, fixed period, fixed amount, and life income; common riders include waiver of premium, accidental death, guaranteed insurability, and accelerated death benefit.

An annuity is a life-insurer product designed to protect against longevity risk by converting accumulated funds into a stream of income.

The accumulation phase builds contract value; the annuitization phase converts value into payments; immediate annuities begin income soon, while deferred annuities postpone it.

Fixed annuities guarantee principal and a minimum interest rate; variable annuities invest in a separate account and fluctuate with market performance; indexed annuities credit interest linked to an index subject to caps, participation rates, and a floor.

Common payout options include life only, life with period certain, joint and survivor, period certain, and refund life income.

The exclusion ratio determines the portion of each annuity payment that is a tax-free return of after-tax basis; remaining amounts are taxed as ordinary income.

Withdrawals before age 59½ generally face a 10% federal tax penalty unless an exception applies, such as death, disability, or substantially equal periodic payments.

Qualified annuities are funded with pre-tax dollars and taxed as income; nonqualified annuities are funded with after-tax dollars; Section 1035 exchanges can defer tax on eligible replacements.

Surrender charges and market-value adjustments may apply to early withdrawals above any free-withdrawal amount, so liquidity and suitability must be disclosed.

Selling variable annuities generally requires both a life insurance license and a securities registration; annuity recommendations must be suitable for the buyer.

Health insurance includes medical expense coverage, disability income, long-term care, and supplemental products such as hospital indemnity, critical illness, dental, and vision.

Cost-sharing features include deductibles, coinsurance, copayments, and out-of-pocket maximums; coinsurance is the insured's percentage of covered expenses after the deductible.

HMOs typically use a primary care gatekeeper and in-network care; PPOs allow out-of-network care with higher cost sharing; POS plans combine HMO and PPO features; EPOs cover only network providers except emergencies.

The Affordable Care Act prohibits preexisting-condition exclusions, requires essential health benefits, allows dependent coverage to age 26, and imposes guaranteed-issue rules in the individual market.

HIPAA provides portability rules, creditable-coverage credit, and special enrollment rights when group health coverage changes.

COBRA continuation generally lasts 18 months for job loss or reduced hours and 36 months for divorce, death, or Medicare eligibility; it applies to employers with 20 or more employees.

Disability income policies define disability as own occupation or any occupation and include an elimination period, benefit period, and often residual or partial disability benefits.

Long-term care benefits are often triggered by inability to perform several activities of daily living or by cognitive impairment; policies include elimination periods and daily or monthly benefit limits.

Common health policy provisions include the entire-contract clause, two-year incontestability, grace period, reinstatement, claim forms, proof of loss, legal-action time limits, and coordination of benefits.