WV Life & Health cheat sheet

In West Virginia, the Insurance Commissioner is appointed by the Governor and administers W.Va. Code Chapter 33.

A producer license is required to solicit, negotiate, or sell insurance; licenses are renewed biennially and producers must complete 24 hours of continuing education per term, including 3 hours of ethics.

Twisting is misrepresentation that induces a policyholder to lapse or surrender a policy; rebating is offering inducements not stated in the policy; both are prohibited unfair trade practices.

Commingling premiums with personal funds is prohibited; premiums received in a fiduciary capacity must be accounted for and remitted promptly.

Insurers must maintain reserves and meet minimum capital and surplus requirements; the Commissioner may examine insurers and conduct market conduct examinations.

A life and health producer license is required for life and health products; a property and casualty license does not authorize life or health sales.

Unfair claim settlement practices include misrepresenting policy provisions, failing to act promptly on claims, and failing to conduct a reasonable investigation.

The Commissioner may issue cease-and-desist orders, impose fines, and suspend or revoke a license after notice and hearing.

A free-look period gives the policyowner a right to return a newly delivered policy for a full premium refund within the period stated in the policy and set by statute.

Insurance transfers pure risk from an individual to an insurer in exchange for a premium; speculative risk, which involves gain or loss, is generally uninsurable.

Insurable risk generally requires many similar exposure units, accidental loss, definite and measurable loss, calculable probability, and no catastrophic concentration.

The law of large numbers states that as the number of similar exposure units increases, actual loss experience approaches expected loss experience.

Adverse selection is the tendency of higher-risk individuals to seek or retain insurance; underwriting and exclusions reduce it.

Moral hazard is increased loss probability due to dishonest or careless behavior; morale hazard is carelessness; both increase premiums.

Indemnity means restoring the insured to approximately the same financial position, not profit, after a loss.

Insurable interest must exist at the time of loss for property insurance and at policy inception for life insurance.

A contract of adhesion is drafted by the insurer and interpreted against the drafter; an aleatory contract has unequal exchange of values; a unilateral contract is enforceable only by the insured; a conditional contract requires conditions to be met.

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

The human life value approach values a person's future earnings and services; the needs approach totals survivor income, expenses, debt, and education needs minus existing resources.

Life insurance premiums reflect mortality, interest, and expense; a higher assumed interest rate lowers premiums, while higher expenses or mortality raise premiums.

A level premium stays constant while the risk of death rises; the insurer builds a reserve in early years to fund later mortality costs.

Risk classification groups include preferred, standard, substandard, and declined; higher risk classes pay higher premiums.

The policyowner controls ownership rights: naming the beneficiary, taking loans, surrendering, assigning, and receiving dividends on participating policies.

Insurable interest must exist when a life policy is issued, not at death; a person has insurable interest in self, spouse, dependents, business partners, and key employees.

Underwriting sources include the application, medical exam, attending physician statement, prescription database, MIB, and credit-based insurance score where permitted.

A conditional receipt provides coverage from the date of application or medical exam if the applicant is insurable under the insurer's rules; a binding receipt provides immediate coverage.

A beneficiary must have insurable interest at policy inception; an irrevocable beneficiary must consent to a beneficiary change or certain policy actions.

Term life pays a death benefit only if death occurs during the term and builds no cash value; level, decreasing, increasing, renewable, and convertible term are variations.

Whole life provides permanent coverage with guaranteed premium, guaranteed cash value, and a death benefit; limited-pay and single-premium whole life shorten the premium period.

Universal life separates the policy into a cash-value account and a cost-of-insurance charge; premium payments are flexible and the death benefit may be level or increasing.

Variable life and variable universal life cash values are invested in separate accounts; the policyowner bears investment risk and a securities license is required to sell them.

Indexed universal life credits interest based on an index with a floor and cap; it is not a direct index investment.

Endowment policies mature at a stated age, paying the face amount if the insured is living; they are largely obsolete.

Joint life pays on the first death; survivorship, or second-to-die, pays on the second death and is used for estate planning.

Modified and graded premium policies charge lower premiums in early years and higher later; they may build little early cash value.

Return-of-premium term refunds premiums if the insured survives the term, at a higher premium than ordinary term.

The incontestability clause bars the insurer from contesting a policy after it has been in force for two years from issue, except for nonpayment of premium.

The suicide clause limits payment to return of premium if death by suicide occurs within two years of issue, or as stated in the policy.

The grace period is usually 30 or 31 days after the premium due date; coverage remains in force during the grace period.

Reinstatement restores a lapsed policy upon evidence of insurability and payment of overdue premiums with interest; contestability and suicide periods may restart.

Misstatement of age or sex adjusts the death benefit to what the premium would have purchased at the correct age and sex.

Nonforfeiture options on cash-value life insurance include cash surrender, reduced paid-up insurance, and extended term insurance.

Settlement options include lump sum, interest only, fixed period, fixed amount, and life income, including straight life, life with period certain, and joint and survivor.

Riders include waiver of premium, disability income, accidental death, guaranteed insurability, term, payor benefit, long-term care, and chronic illness; riders add benefits for extra premium.

A policy loan accrues interest and reduces the death benefit and cash value if unpaid; an automatic premium loan uses cash value to pay overdue premiums.

An annuity is a contract that pays a stream of income for a specified period or life; it addresses the risk of living too long, while life insurance addresses dying too soon.

During accumulation, the annuity value grows tax-deferred; during annuitization, payments are made and taxed under the exclusion ratio.

Immediate annuities begin payments within one payment period after purchase; deferred annuities accumulate before payments begin.

Fixed annuities guarantee a minimum interest rate; variable annuities invest in separate accounts and shift investment risk to the annuitant.

Indexed annuities credit interest based on an index with a floor and participation rate or cap; they are fixed annuities with index-linked crediting.

Annuitization options include life only, life with period certain, joint and survivor, fixed period, and fixed amount.

The exclusion ratio equals investment in the contract divided by expected return; that portion of each payment is tax-free until basis is recovered.

Withdrawals before age 59½ from a nonqualified annuity may incur a 10% federal penalty plus ordinary income tax on gains; 1035 exchanges defer tax.

A deferred annuity has an owner, annuitant, and beneficiary; the owner controls the contract and the annuitant's life measures payments.

Morbidity is the incidence and severity of sickness or injury; mortality is the incidence of death; health premiums reflect morbidity, expenses, interest, and reserves.

A deductible is the amount the insured pays before benefits begin; coinsurance is the percentage of covered costs shared after the deductible; a copay is a fixed dollar amount.

An out-of-pocket maximum limits the insured's covered in-network cost sharing; after it is met, the plan pays 100% of covered benefits.

A waiting period, or elimination period, is the time before coverage or benefits begin; a preexisting condition is a condition diagnosed or treated before coverage starts.

HMO plans generally require a primary care physician and referrals; PPO plans allow out-of-network care at higher cost; EPOs cover only network providers; POS plans combine HMO and PPO features.

Managed care controls cost and utilization through networks, gatekeeping, preauthorization, utilization review, and case management.

Coordination of benefits determines primary and secondary plans when a person is covered by more than one plan; the primary plan pays first.

ACA marketplace plans must cover essential health benefits, cannot exclude preexisting conditions, and must allow dependent coverage to age 26.

Individual health insurance is medically underwritten except in guaranteed-issue situations; group health insurance is generally guaranteed issue.

Renewal provisions: noncancellable guarantees renewal and rate; guaranteed renewable guarantees renewal but not rate; conditionally renewable permits insurer nonrenewal only for stated conditions; optionally renewable permits insurer cancellation on a renewal date.

The grace period is a stated period after the premium due date during which coverage remains in force; typical periods are 7 days for weekly, 10 days for monthly, and 31 days for other modes.

The incontestability clause generally prevents the insurer from contesting the policy after two years, except for fraud or nonpayment where permitted.

A preexisting condition exclusion may apply for a limited period; HIPAA and ACA restrict or prohibit such exclusions in many plans.

The insurer may require proof of loss within a stated time, usually 90 days after loss; legal action may not begin until 60 days after proof and within the policy's limitation period.

A change-of-occupation provision adjusts benefits if the insured changes to a more hazardous occupation; misstatement of age adjusts benefits to the correct amount.

A conversion privilege allows an insured to convert group or individual coverage to another policy without evidence of insurability, usually within a stated period.

Subrogation allows the insurer to recover benefits paid from a third party responsible for the loss; coordination of benefits prevents duplicate payment.

A free-look period allows the policyholder to return a new health policy for a refund, typically 10 days, with longer periods for Medicare supplement policies.

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

The elimination period is the waiting period before disability benefits begin; longer elimination periods lower premiums.

The benefit period is the maximum time disability benefits are paid; it may be a number of years, to age 65, or for life.

Residual disability pays a proportionate benefit when the insured can work but has a loss of income; partial disability pays a reduced benefit for a limited period.

Presumptive disability pays full benefits for specified losses such as total and permanent blindness or loss of two limbs, often with no elimination period.

Recurrent disability provisions count a relapse within a stated period as a continuation of the prior claim.

Business disability policies include key person disability and business overhead expense; buy-sell disability funds a business purchase.

Medical expense insurance reimburses covered medical costs; hospital indemnity pays a fixed daily benefit; critical illness pays a lump sum on diagnosis of a covered condition.

Long-term care insurance pays for chronic care needs such as ADL limitations or cognitive impairment, often after an elimination period.

A group health plan uses a master contract between the insurer and the plan sponsor; participants receive certificates of coverage.

Eligibility is defined by the employer's plan; newly hired employees may have a waiting period before coverage begins.

Open enrollment allows eligible employees to join the plan; a qualifying event such as marriage, birth, or loss of other coverage permits a special enrollment period.

COBRA continuation coverage generally lasts 18 months for termination or reduced hours, 29 months for disability, and 36 months for certain family events.

Contributory group plans generally require at least 75% employee participation; noncontributory plans require 100% participation of eligible employees.

Group underwriting considers group size, industry, age and gender mix, and prior claims; group health is generally guaranteed issue and community rated for small groups under ACA rules.

Experience rating sets premiums based on the group's own claims; community rating sets premiums based on the broad pool.

Self-funded plans pay claims from employer funds and may use a third-party administrator and stop-loss insurance.

Section 125 cafeteria plans allow employees to pay premiums with pre-tax dollars; HSAs, HRAs, and FSAs provide tax-advantaged medical spending.

Medicare Part A covers inpatient hospital, skilled nursing facility after a 3-day stay up to 100 days, hospice, and some home health; most people pay no Part A premium with 40 quarters of work.

Medicare Part B covers physician services, outpatient care, durable medical equipment, and preventive services; it generally pays 80% of approved charges after the deductible, leaving 20% coinsurance.

Medicare Part C, or Medicare Advantage, is an alternative to Original Medicare offered by private plans; it must provide at least the same benefits as Parts A and B and often includes Part D.

Medicare Part D covers outpatient prescription drugs through private plans; the coverage gap has been reduced under recent law and catastrophic coverage applies after the out-of-pocket threshold.

The initial enrollment period is the 7-month window beginning 3 months before the month of age 65; general enrollment is January 1 through March 31 with coverage starting July 1.

Annual open enrollment for Medicare Advantage and Part D is October 15 through December 7; Medicare Advantage open enrollment is January 1 through March 31.

Medigap policies help pay Part A and B cost sharing; the Medigap open enrollment period is 6 months, starting when Part B begins, with guaranteed issue.

Late enrollment penalties apply to Part B and Part D if enrollment is delayed without creditable coverage; the Part B penalty is 10% for each 12-month period of delay.

Medicare does not cover custodial long-term care; Medicaid may cover long-term care for those who qualify financially.

Employer-paid health premiums are deductible by the employer and generally excluded from the employee's gross income.

Employee contributions to health premiums made through a Section 125 cafeteria plan are pre-tax and reduce taxable wages.

Self-employed individuals may deduct health insurance premiums for themselves and dependents, limited to earned income from the business.

HSA contributions are deductible or pre-tax through payroll, grow tax-deferred, and are tax-free for qualified medical expenses; nonqualified withdrawals are taxable and subject to a 20% penalty before age 65, with exceptions.

FSA salary reductions are excluded from income; unused FSA funds are generally forfeited under the use-it-or-lose-it rule unless the plan offers a carryover or grace period.

Disability benefits are taxable to the recipient to the extent the employer paid the premiums; if the employee paid with after-tax dollars, benefits are tax-free.

Long-term care insurance premiums are deductible as medical expenses subject to age-based limits; benefits from a qualified LTC policy are generally tax-free.

Medical expenses are deductible only if itemized and exceed 7.5% of adjusted gross income; health insurance premiums, including Medicare premiums, count as medical expenses.

Group term life insurance coverage over $50,000 creates imputed income for the employee; employer-paid premiums for coverage up to $50,000 are tax-free.

Employer-paid health premiums are deductible by the employer and generally excluded from the employee's gross income.

Employee contributions to health premiums made through a Section 125 cafeteria plan are pre-tax and reduce taxable wages.

Self-employed individuals may deduct health insurance premiums for themselves and dependents, limited to earned income from the business.

HSA contributions are deductible or pre-tax through payroll, grow tax-deferred, and are tax-free for qualified medical expenses; nonqualified withdrawals are taxable and subject to a 20% penalty before age 65, with exceptions.

FSA salary reductions are excluded from income; unused FSA funds are generally forfeited under the use-it-or-lose-it rule unless the plan offers a carryover or grace period.

Disability benefits are taxable to the recipient to the extent the employer paid the premiums; if the employee paid with after-tax dollars, benefits are tax-free.

Long-term care insurance premiums are deductible as medical expenses subject to age-based limits; benefits from a qualified LTC policy are generally tax-free.

Medical expenses are deductible only if itemized and exceed 7.5% of adjusted gross income; health insurance premiums, including Medicare premiums, count as medical expenses.

Group term life insurance coverage over $50,000 creates imputed income for the employee; employer-paid premiums for coverage up to $50,000 are tax-free.