WI Life & Health cheat sheet

The Wisconsin Office of the Commissioner of Insurance (OCI) enforces state insurance law, licenses producers and insurers, reviews policy forms and rates, and examines market conduct.

The commissioner heads OCI and is appointed by the governor; OCI may hold hearings, issue orders, and impose penalties for violations.

A producer must hold a valid Wisconsin license for each line sold and generally be appointed by the insurer to represent it; selling without authority can lead to penalties.

Resident producer licenses renew biennially; Wisconsin requires 24 continuing education hours per term, including at least 3 hours of ethics.

Premiums and fiduciary funds collected by a producer belong to the insurer or insured and may not be commingled with the producer's personal or business funds.

Prohibited conduct includes misrepresentation, twisting, coercion, unfair discrimination, false advertising, and unfair claim settlement practices.

A producer must act within the scope of license authority; selling without a license or appointment can result in cease-and-desist orders, fines, license suspension, or revocation.

Insurers must file policy forms and rates as required by Wisconsin law; OCI may disapprove forms or rates that violate statutes or are unfair or deceptive.

Risk is uncertainty about loss; pure risk involves only loss or no loss, while speculative risk involves possible gain or loss and is generally not insurable.

A peril is the cause of a loss, such as fire or death; a hazard is a condition that increases the chance or severity of loss.

The principle of indemnity restores the insured to approximately the pre-loss financial position and generally prohibits profit from insurance.

Insurable interest is a financial relationship to the subject of insurance; life insurance requires it at application, while property insurance requires it at loss.

Adverse selection is the tendency of higher-risk persons to buy or keep coverage; underwriting, exclusions, waiting periods, and pricing control it.

The law of large numbers allows insurers to predict losses more accurately as the number of similar exposure units increases.

Risk management techniques include avoidance, reduction, retention, sharing, and transfer; insurance is a transfer technique.

Reinsurance transfers part of an insurer's risk to another insurer; the ceding insurer retains a stated portion and pays a reinsurance premium.

Human life value estimates life insurance need as the present value of future earnings available to dependents after personal consumption.

The needs approach adds income replacement, debts, education, and final expenses, then subtracts existing assets and survivor income.

Gross premium equals the net premium for mortality plus expense loading; interest earnings reduce the premium needed for a given benefit.

Premium payment mode affects cost: annual is usually least expensive, while monthly is most expensive because of lost interest and added billing expense.

A level premium remains constant; early premiums exceed current mortality cost and build reserves for higher mortality cost at older ages.

Life insurance underwriting evaluates age, sex, health, occupation, avocations, family history, and financial justification; risk classes include preferred, standard, and substandard.

Policy ownership rights include naming or changing a revocable beneficiary, surrendering the policy, taking loans, assigning the policy, and selecting settlement options.

Beneficiary designations may be primary or contingent and may use per capita or per stirpes distribution; irrevocable beneficiary rights cannot be changed without consent.

Term insurance provides temporary death protection with no guaranteed cash value; it may be level, decreasing, increasing, renewable, or convertible.

Whole life insurance provides permanent level-premium coverage with guaranteed cash value, guaranteed death benefit, and nonforfeiture values.

Limited-pay whole life shortens the premium-paying period; single-premium whole life is paid once and has immediate cash value.

Universal life separates mortality, expense, and interest; flexible premiums and adjustable death benefits depend on cash-value sufficiency.

Variable life and variable universal life invest cash value in separate accounts; the producer needs a securities license, and cash value fluctuates with market performance.

Indexed universal life credits interest based on an external index subject to a cap, participation rate, and floor, while cost-of-insurance charges are deducted.

Decreasing term is often used for mortgage protection; increasing term helps offset inflation; renewable term allows continuation without new evidence within age limits.

Convertible term allows exchange to permanent coverage without evidence of insurability, usually before a stated age or policy year.

The entire-contract clause makes the policy and attached application the complete agreement; only an authorized officer can modify the contract in writing.

A free-look period allows the owner to return a newly delivered life policy for a full premium refund within the period stated in the policy.

The incontestability clause generally bars the insurer from contesting the policy for material misrepresentation after two years from issue, except for nonpayment.

A grace period, commonly 30 days for life insurance, keeps coverage in force after a missed premium; unpaid premium may be deducted from a claim.

Reinstatement usually requires evidence of insurability and payment of overdue premiums within three years; the insurer may contest statements in the reinstatement application.

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

Policy loans reduce cash value and the death benefit if unpaid; an automatic premium loan uses cash value to prevent lapse.

Nonforfeiture options include cash surrender, reduced paid-up insurance, and extended term insurance; settlement options include lump sum, life income, period certain, fixed amount, and interest.

An annuity is a contract that liquidates a sum of money over time; the owner controls the contract, the annuitant's life measures payout, and the beneficiary receives death benefits.

Immediate annuities begin income payments soon after purchase; deferred annuities accumulate value before annuitization or withdrawal.

Fixed annuities guarantee a minimum interest rate; variable annuities invest in separate accounts; indexed annuities credit interest linked to an index with caps and floors.

Surrender charges and market value adjustments can reduce early withdrawals; many contracts allow a limited free withdrawal each year.

Payout options include life only, life with period certain, joint and survivor, fixed period, and fixed amount; life-only pays the highest income but no refund.

The exclusion ratio equals investment in the contract divided by expected return; it determines the tax-free portion of each annuitized payment.

Taxable annuity distributions before age 59½ generally incur a 10% federal penalty unless an exception such as death, disability, or qualifying periodic payments applies.

A Section 1035 exchange allows tax-free replacement of a life insurance policy, annuity, or qualified long-term care policy for a like-kind contract.

Health insurance may be indemnity-based or managed care; HMOs typically require in-network care and primary care referrals, PPOs allow broader provider access, and POS plans combine features.

A deductible is the amount the insured pays before benefits begin; coinsurance is the insured's percentage share of covered costs after the deductible.

Copays are fixed dollar amounts for specified services; an out-of-pocket maximum limits covered in-network cost sharing for the year.

Renewability clauses range from cancelable and optionally renewable to conditionally renewable, guaranteed renewable, and noncancelable; noncancelable cannot cancel or raise rates.

Under the ACA, individual and small-group health plans cannot deny coverage or charge more because of health status and must cover essential health benefits.

Coordination of benefits determines which plan pays first when a person has multiple coverages; the secondary plan does not duplicate the primary payment.

HIPAA provides portability, privacy protections, and special enrollment rights; creditable coverage reduces preexisting-condition waiting periods where still permitted.

A waiting period is the time before new employees or dependents become eligible; an elimination period is the time before disability benefits begin.

Disability income insurance replaces a portion of earned income, commonly 50% to 70%, and does not reimburse medical expenses.

Own-occupation disability pays if the insured cannot perform their own occupation; any-occupation pays only if unable to perform any occupation for which reasonably suited.

The elimination period is the waiting time before benefits begin; a longer elimination period lowers premium, and a longer benefit period raises premium.

Residual or partial disability benefits pay a reduced amount when the insured returns to work at lower income; recurrent disability provisions treat same-cause relapse as continuation.

Medical expense insurance covers hospital, surgical, physician, and related costs subject to deductibles, coinsurance, copays, and benefit limits.

HSA eligibility requires coverage under a qualifying high-deductible health plan, no disqualifying coverage, and not being enrolled in Medicare; qualified withdrawals are tax-free.

FSAs are employer-established cafeteria plans funded with pre-tax salary reductions; unused funds may be forfeited subject to limited carryover or grace-period rules.

Long-term care insurance pays for chronic care when the insured cannot perform at least two of six activities of daily living for a specified period or has cognitive impairment.

Group health insurance is issued as a master policy to an employer or sponsor; covered employees receive certificates summarizing coverage.

Group underwriting evaluates the entire group rather than individual medical evidence; experience rating uses the group's claims, while community rating averages broad populations.

Contributory plans require employees to pay part of the premium and usually require a minimum participation level; noncontributory plans are employer-paid.

Eligibility may include a waiting period, full-time work requirement, and dependent status; HIPAA special enrollment rights apply after certain life events.

COBRA requires continuation of group health coverage after qualifying events, generally 18 months for termination or reduced hours, 29 months for disability, and 36 months for divorce or death.

A conversion privilege lets a covered person convert group coverage to an individual policy without evidence of insurability within a stated period.

Section 125 cafeteria plans let employees pay health premiums and eligible expenses with pre-tax dollars through salary reduction.

Life insurance death proceeds are generally income-tax-free to the beneficiary; estate inclusion can occur if the insured holds incidents of ownership at death.

Cash value inside a life policy grows tax-deferred; policy loans are generally not taxable while the policy remains in force, but lapse or surrender can create taxable gain.

A modified endowment contract fails the seven-pay test; distributions are taxed as gain first and may incur a 10% penalty before age 59½ unless an exception applies.

Personal life insurance premiums are not deductible; employer-paid group term life coverage above $50,000 creates imputed taxable income for the employee.

Employer-paid health premiums are generally tax-free to employees; self-employed individuals may deduct eligible health insurance premiums subject to income limits.

Disability benefits are taxable when employer-paid premiums were not included in employee income; benefits are tax-free when the employee paid premiums with after-tax dollars.

Annuity accumulation is tax-deferred; annuitized payments use the exclusion ratio, and taxable distributions before age 59½ may incur a 10% penalty.

Section 1035 exchanges defer gain when a life policy, annuity, or qualified long-term care policy is exchanged for a like-kind contract.

Qualified retirement plans meet IRS and ERISA rules; employer contributions are generally deductible, and employee contributions may be pre-tax or after-tax depending on plan type.

Defined benefit plans promise a specified retirement benefit; defined contribution plans such as 401(k), 403(b), and profit-sharing plans set aside contributions with benefits based on account value.

Vesting schedules determine when employer contributions become nonforfeitable; top-heavy and nondiscrimination rules protect rank-and-file employees.

Traditional IRA contributions may be deductible depending on income and workplace plan coverage; Roth IRA contributions are after-tax and qualified withdrawals are tax-free.

Required minimum distributions generally begin at age 73 or later depending on birth year; Roth IRAs have no lifetime RMDs for the original owner.

A buy-sell agreement sets a price or formula for transferring a business interest at death, disability, or retirement and is often funded with life insurance.

Key person insurance reimburses a business for loss of an essential employee; split-dollar and executive bonus plans are used to fund or supplement executive benefits.

Entity-purchase and cross-purchase buy-sell arrangements differ in who owns the policies and who buys the departing owner's interest.