WA Life & Health cheat sheet

The Washington State Office of the Insurance Commissioner (OIC), headed by a statewide elected Commissioner serving a four-year term, administers RCW Title 48 and adopts rules under WAC Title 284.

A producer must hold a license for the specific line of authority (life, disability, property, casualty, etc.) before soliciting; commissions may be paid only to licensed producers.

An insurer must file notice of appointment with the OIC within 30 days after executing a producer contract, and must report termination of the appointment within 30 days.

Continuing education: 24 credit hours per two-year license term, including at least 3 hours of ethics, completed before biennial renewal.

Premiums collected belong to the insurer; a producer holds them in a fiduciary capacity and may not commingle them with personal or agency funds.

Producers must notify the Commissioner within 30 days of administrative actions taken by another jurisdiction, criminal prosecutions, and changes of address.

Unfair trade practices include misrepresentation, twisting, rebating, coercion, unfair discrimination, defamation, and failure to meet claim-handling standards.

Replacement of life insurance or an annuity requires delivery of a signed notice regarding replacement so the applicant can compare the existing and proposed contracts.

The Washington Life and Disability Insurance Guaranty Association pays covered claims up to statutory limits, such as $300,000 for life death benefits, $100,000 for cash surrender value, and $250,000 for annuity present value.

Insurable risk requires loss due to chance, definiteness and measurability, a large number of similar exposure units, and losses that are not catastrophic to the insurer.

Pure risk involves only the chance of loss or no loss and is insurable; speculative risk (investment, business) is not insurable.

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

Elements of a valid contract: offer and acceptance, consideration, competent parties, and legal purpose.

Insurance is a contract of adhesion (ambiguities construed against the insurer), aleatory (unequal exchange of values), unilateral (only the insurer makes an enforceable promise), conditional, and of utmost good faith.

Indemnity restores the insured to pre-loss financial condition; life insurance is a valued contract that pays a stated amount rather than indemnifying a measured loss.

Insurable interest must exist at policy inception; for life insurance it must exist at the time of application, not at the time of death.

Subrogation transfers to the insurer, after paying a claim, the insured's right to recover from the party that caused the loss.

Risk management techniques are avoidance, retention, transfer (insurance), reduction, and sharing.

The amount of coverage is determined by the human life value approach (present value of future earnings) or the needs approach (income replacement, debt, education, and final expenses).

Gross premium reflects mortality cost plus expense loading minus assumed interest earnings; more conservative assumptions produce a higher premium.

Mode of payment changes total cost: annual is least expensive, followed by semiannual, quarterly, and monthly (modal) payment.

Underwriting sources include the application (Part I general information, Part II medical), the agent's report, medical or paramedical exams, the attending physician statement, the MIB, inspection reports, and prescription databases.

Risk classifications are preferred, standard, substandard (table-rated or rated), and declined.

Policyowner rights include naming and changing revocable beneficiaries, surrendering, borrowing, assigning, and selecting dividend and nonforfeiture options.

Beneficiary designations may be primary or contingent and revocable or irrevocable; per capita splits proceeds equally among survivors while per stirpes lets descendants take a deceased beneficiary's share.

Death benefits are generally income-tax free to the beneficiary, cash value grows tax-deferred, and policy loans are not taxable unless the policy lapses or is surrendered with gain.

A policy failing the 7-pay test is a modified endowment contract (MEC): loans and withdrawals are taxed income-first and a 10% penalty applies before age 59½.

Term insurance provides temporary death protection with no cash value; variations include level, decreasing, increasing, renewable, convertible, and return-of-premium term.

Whole life provides a level guaranteed premium, guaranteed cash value, and a death benefit payable to age 100 or 121; limited-pay forms (20-pay, paid-up at 65, single premium) compress the premium-paying period.

Universal life has flexible premiums, an adjustable death benefit, and cash value credited current interest; the cost of insurance increases with the insured's age.

Universal life death benefit option A is a level amount, while option B increases the death benefit by the accumulated cash value.

Variable life cash value is invested in separate-account subaccounts; the owner bears investment risk, and sales require a securities registration plus a life license and a prospectus.

Indexed universal life credits interest based on an external index, subject to a floor (often 0%), a cap, and a participation rate.

Survivorship (second-to-die) coverage pays at the second death and is used for estate planning; joint life coverage pays at the first death.

Modified or graded premium whole life charges lower premiums in early years and higher premiums later.

The entire contract clause makes the policy and the attached application the whole agreement; only an officer of the insurer may modify it.

The incontestability clause bars the insurer, after two years in force, from denying a claim because of misstatements on the application, except for nonpayment of premium.

The grace period (commonly 31 days for life insurance) keeps coverage in force after the premium due date before the policy lapses.

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

The suicide clause, usually two years, limits the insurer's liability to a refund of premiums if the insured dies by suicide within that period.

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 insurance.

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

Common riders include waiver of premium, disability income, accidental death and dismemberment, guaranteed insurability, cost of living, term, return of premium, accelerated death benefit, and long-term care or chronic illness.

The owner controls the contract and pays premiums, the annuitant's life measures the payout, and the beneficiary receives any remaining value at death.

An immediate annuity is bought with a single premium and begins payouts within one year; a deferred annuity has an accumulation phase followed by annuitization.

Fixed annuities guarantee principal and a minimum interest rate; variable annuities invest in separate accounts with the owner bearing investment risk; indexed annuities credit index-linked interest subject to a floor.

Accumulation is tax-deferred; withdrawals before annuitization are taxed last-in, first-out (gains first), with a 10% penalty before age 59½.

Exclusion ratio equals investment in the contract divided by expected return; that percentage of each annuitized payment is a tax-free return of principal.

Surrender charges decline over the surrender-charge period, and most contracts permit a free withdrawal of about 10% of value each year.

Payout options include life only (largest income, ends at death), life with period certain, installment refund, cash refund, and joint and survivor.

Variable annuity sales require a securities registration and delivery of a prospectus, and a 1035 exchange can move funds between contracts tax-free.

Cost-sharing components are the deductible, coinsurance (a percentage of covered expenses), copayments (flat fees), and the out-of-pocket maximum that caps annual member spending.

Indemnity plans reimburse care from any provider, while managed care plans (HMO, PPO, POS, EPO) use provider networks; HMOs usually require a primary care physician and referrals.

ACA market rules include guaranteed issue, no preexisting-condition exclusions, essential health benefits, preventive care with no cost sharing, and dependent coverage to age 26.

Metal tiers: Bronze covers about 60%, Silver 70%, Gold 80%, and Platinum 90% of expected costs; cost-sharing reductions are available only with Silver plans.

Open enrollment runs November 1 to January 15 federally; special enrollment periods, generally 60 days, follow qualifying events such as marriage, birth, or loss of other coverage.

Individual health premiums are generally not tax-deductible, while employer-paid group premiums are deductible to the employer and excluded from employee income.

Health savings accounts require a qualifying high-deductible health plan and allow pre-tax contributions with tax-free withdrawals for qualified medical expenses.

Washington runs its own exchange (Washington Healthplanfinder) and imposes a state individual coverage mandate reported on state tax returns.

Coordination of benefits rules determine which plan pays first when the insured is covered under more than one health plan.

Uniform provisions include the entire contract clause, the two-year time limit on certain defenses, the grace period (7 days weekly, 10 days monthly, 31 days otherwise), and reinstatement.

Claim handling requires the insurer to supply claim forms within 15 days of notice and the insured to provide written proof of loss within 90 days, with payment immediately or within 30 days.

The legal actions provision bars suit before 60 days after proof of loss and after 3 years from the date proof of loss was required.

Change of occupation and misstatement of age provisions reduce benefits to what the premium paid would have purchased; losses from illegal occupations are excluded.

Renewability categories are cancellable, optionally renewable, conditionally renewable, guaranteed renewable, and noncancellable (the insurer cannot raise premiums or cancel).

Mandated benefits include mental health parity, maternity and newborn coverage, reconstructive surgery following mastectomy, and preventive services without cost sharing.

HIPAA privacy rules restrict disclosure of protected health information and support portability through creditable coverage.

Optional riders and provisions include impairment/exclusion riders, additional insured endorsements, waiver of premium, hospital indemnity, return of premium, and cost-of-living increases.

Total disability may be defined as own occupation (usually the first 24 months), any occupation thereafter, or presumptive disability from loss of sight or limbs.

The benefit amount is a percentage of predisability income, most commonly 60% to 80%, and is limited by a benefit period and an elimination (waiting) period.

Residual or partial disability benefits pay a proportionate amount when the insured returns to work at reduced income.

Disability benefits are tax-free when premiums were paid with after-tax dollars and taxable when the employer paid the premiums.

Disability policy features include waiver of premium, cost-of-living adjustment, future increase option, noncancellable and guaranteed renewable provisions, and Social Security offset.

Long-term care benefits are triggered when the insured cannot perform two of six activities of daily living (bathing, dressing, transferring, toileting, eating, continence) or has a severe cognitive impairment.

Long-term care design features include the elimination period, benefit period, daily or monthly maximum, inflation protection, and coverage for home care, adult day care, respite, hospice, and bed reservation.

Tax-qualified long-term care policies allow age-based premium deductions, and benefits up to the federal per-diem limit (for example, $420 per day in 2025) are received tax-free.

Group underwriting considers group size, industry, participation level, and prior claims experience; contributory plans typically require about 75% participation, noncontributory plans require 100%.

COBRA applies to employers with 20 or more employees: 18 months of continuation for termination or reduced hours, 29 months for disability, and 36 months for dependents, at up to 102% of premium.

HIPAA group rules guarantee availability and renewability of coverage and give credit for prior creditable coverage toward any preexisting-condition period.

Medicare Part A covers inpatient hospital, hospice, and limited skilled nursing care and is premium-free with 40 quarters of work; Part B covers physician and outpatient services with a premium and 20% coinsurance.

Medicare Part C (Advantage) delivers Part A and Part B benefits through private plans, and Part D provides prescription drug coverage.

Medicare enrollment: a 7-month initial enrollment period around age 65 and an annual election period October 15 to December 7; late Part B penalty is 10% per 12 months, late Part D penalty is 1% of the base premium per month.

Medigap plans are standardized (A, B, D, G, K, L, M, N), Plans C and F are closed to those newly eligible after January 1, 2020, and Washington requires insurers to offer Medigap on a guaranteed-issue basis year-round.

Other coverages include Medicaid, CHIP, workers' compensation for occupational injury, dental and vision plans, accident and critical illness policies, hospital indemnity, and short-term medical.