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141 Cards in this Set
- Front
- Back
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Grace period
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Provision 1 - after 3 months of premium has been paid insured is entitled to a grace period of no less than 30 days to make payments. Insurer can charge interest not to exceed 6% for the number of days elapsed during grace period. Policy is still legally in effect during the grace period.
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Incontestability
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Provision 2 - policy cannot be contested after 2 years of date of issue or readmittance
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Entire Contract
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Provision 3 - Entire contract consists of the application and any riders attached to the policy. No contract can reference bylaws or any other regulations of an organization.
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Misstatement of age
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if the age of the insured was misstated the amount payable shall be adjusted to equal what the premiums would have been at the correct age.
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Lapse and reinstatement
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if a premium was not paid by the end of the grace period the policy lapses and may be reinstated during a specific period of time if the premiums are paid, insurability is proven, an application is submitted and any outstanding policy loan is repayed.
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Single premium deferred annuity
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lump sum premuim deposit with payout deferred until a future date usually more than 1 year away
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Flexible Premium Deferred Annuity
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Initial deposit followed by numerous flexible premium payments with deferred payout. Cash grows on tax deferred basis.
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Single premium immediate annuity
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One lump sum payment and periodic paybacks begin for a certain number of years or until the occurrence of a specific event (like death)
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Level Premium deferred annuity
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equal premium amounts at regular intervals until the date scheduled for benefit payouts.
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flexible premium annuity
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annuity that allows varying amount of premium or to stop payments at will as income fluctuates.
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fixed dollar annuity
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guarantees a fixed minimal dollar amount during each payout period
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Variable annuity
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amount of periodic benefit varies, usually in relation to security market values, a cost of living index or some other variable factor. These were designed to help protect against inflation by depositing into equity based securities.
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accumulation period
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period of time prior to retirement that an annuitant is making payments or investments in an annuity which is done on a tax deferred basis
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annuity period
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period of time usually at retirement in which the annuitant begins to receive annuity payments or benefits from the insurance company
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general account
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an investment portfolio used by the insurer for investment of premium income. This portfolio generally consists of safe, conservative guaranteed investments such as real estate and mortgages
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separate account
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qualified annuity
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paid with pretax dollars
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non-qualified annuity
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paid with taxed monies. Funds withdrawn past the cost base are taxed.
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cost base
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money which has already been taxed
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group annuity
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Equity index annuity
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fixed annuity variation that earns interest linked to an external equity index such as standard and poors composite stock price index
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qualified annuity
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paid with pretax dollars
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non-qualified annuity
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paid with taxed monies. Funds withdrawn past the cost base are taxed.
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cost base
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money which has already been taxed
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Roth IRAs
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single person with income up to 114K and marrieds up to 166 may opt for this plan that allows interest dividends and capital gains to accumulate tax free but the contributions are not deductible and the interest cannot be withdrawn for 5 years . Advantage is that qualified distributions are not taxable and distributions do not need to start by 70.5
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Pure or straight life annuity
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guarantees income for life no matter how long or short a person lives.
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Refund life
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entitles the annuitant to receive income for the rest of their life, but if the annuitant dies before receiving payments equivalent to the premiums paid the annuitant's beneficiary will receive at least a refund equal to purchase price of the annuity.
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Installments certain annuity
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Size of installments during the payment period are fixed
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joint life
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pays the insurance when the first of the two people in the policy die
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joint and survivor annuities
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income is payable through the joint lifetimes of two or more annuitants and continues throughout the life of the last survivor
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the 4 criteria that should be evaluated prior to making an annuity recommendation to a senior over 60
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Senior's financial tax statuses, senior's investment objectives, other info which may be a consideration regarding the purchase
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insurance policy
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contract between 2 parties that for consideration the insurer will pay a claim providing that a loss occurs during the term of the contract.
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Fraud
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knowing misrepresentation of the truth or concealment of a material fact to induce another to act to their detriment.
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Concealment
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neglecting to communicate or failure to disclose facts that are know (or should be known) and are material to a contract.
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warranty
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statement that is guaranteed to be true. ???A REPRESENTATION IN AN INSURANCE CONTRACT QUALIFIES AS AN IMPLIED WARRANTY????
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Materiality
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Information that would influence a party's assessment of a proposed contract. 3 questinos to determin materiality: are the facts important enough to influence the decision? Do they affect insurability of the risks? Does the information create any disadvantages to either party? The materiality of concealement is used to determine the importance of a missrepresentation.
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rate
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the price of insurance for each exposure unit
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Define funeral insurance contract –
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Limited death benefit contract issued and delivered in this state on the life of any person who makes a premium over a period of time. No contract can contain provisions that scales down or reduces the benefits payable below the face amount.
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Grace Period
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no less than 30 days during which the insured has the time to pay past-due premium. During the grace period the policy is still valid.
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Misstatement of age
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identify the effects of misstatements of age – is age is misstated premiums are changed to reflect the premiums of the correct age
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be able to identify when an insurer may pay the proceeds of an undertaker or funeral director
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before payment to funeral director the insurer requires proof of services rendered. If no proof within 30 days of demand or 1 year of death insurer pays to beneficiary in the policy.
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When may a funeral director be changed
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at any time
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What assessments can a insurance company require
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Only those assessments that are prominently displayed in the application for a contract
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Limited Deaths benefit contract
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Made in the state where the individual lives for a maximum of $15,000 and provides funds for funeral and burial expenses
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Know when a reduction of the benefit to a funeral insurance contract is allowed
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Only for misstatement of age, suicide, war, or policies issued on a juvenile
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Know the duration of limited death benefit periods
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???
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is authorized to issue a policy for a company
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only admitted insurers
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know the license requirements for one selling funeral insurance contracts
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Limited to selling policies of $15K or less designated for payment of funeral and burial
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Annuity
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tax deferred savings contract issued by life insurance companies that provides payment to an annuity holder that begin at a specific date or age. These create an estate that is liquidated provide a guaranteed income for the annuitants life. Considered an investment product.
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Annuitant
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holder of an annuity contract
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Owner
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person who pays policy
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Beneficiary
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person who is paid by policy
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Be able to identify the business and personal uses for individual or group annuity products
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Individual – protect against not having an income if you live a long time b) Group – annuity payments are made by life expectancy of the individuals in the group, length of period for which payments are guaranteed, time before payments start, number of lives on which payments are continued
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Differentiate and identify: Immediate and deferred annuities including single-premium deferred and flexible premium deferred annuities
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Annuities are protection for living too long and not having income. Tax is deferred. All the various types vary in how many payments in are paid and how many payments out are made and when they start.
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Single Premium Deferred Annuity
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Single lump sum deposit with payout deferred (tax deferred) until a future date usually over a year away
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Flexible Premium Deferred Annuity
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Initial deposit with numerous flexible payments with deferred payout with tax on growth deferred.
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Fixed and variable annuities
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Fixed annuities guarantee a certain amount per payment variable attempts to protect against inflation by being attached to various market indices.
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Accumulation period and annuity period
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Accumulation period is the time they pay into it and it earns interest, the annuity period is
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Variable annuity
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Premiums go into a separate account, instead of a fixed payment the account will fluctuate during both pay in and pay out. Premiums are used to buy accumulation units based on amount contributed. Value is linked to investment portfolio. When retired accumulation units are converted to annuity units that are valued each month to determine that months payment. Premiums still flexible can have immediate or deferred payout, individual or joint contracts. . To sell variable annuities you must be also licensed as a securities representative. Like variable life they are used as a hedge against inflation.
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General vs separate account
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General account is an investment portfolio used by the insurer for investment of premium income that is safe and conservative, guaranteed investments. Separate accounts are used for variable products as ways to grow or hedge for inflation.
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Group vs individual annuities
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Individual the amount and number of payments are decided by age, gender, amount to be liquidated and rate of return. Group premiums are based on life expectancy of the individuals in the group, the length of period payments are guaranteed, time elapsing before payments start and number of lives on which payments are continued.
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Pure / straight life annuity
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guarantees income for life no matter how long or short a person lives. No refund provision so if they die early the insurance company keeps the extra.
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Installments certain annuity
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????
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joint and survivor annuities
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Identify the following b) the standards for determining whether agents recommended transactions meet the senior consumer’s needs and financial objectives
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Financial status, tax status, investment objectives, other information which may be a consideration for the purchase
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Life insurance and annuities – policy replacement/cancellation
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Rights to cancel a recently purchased policy when age:Over 60
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The policy must include a right of return offering policy cancellation of full premium during first 30 days of policy
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Rights to cancel a recently purchased policy when age:under 60
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No less than 10 days
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Identify the requirements and penalties of the “replacement of life insurance and annuity policies” article and know the responsibilities of the agent replacing a policy
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Presentation of full and clear information, accurate, complete disclosure. The agent MUST have a written statement from the applicant saying if there will be a replacement of existing insurance and give a statement to the insurer saying if the agent knows if a policy replacement is involved. The company trying to retain their old business must submit a policy summary within 20 days of getting the notice regarding replacement. Customers have the right to a full refund within 20 day period.
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Punishment for inaccurate comparisons
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agent first offense is min $250, and $1000 to $25,000 for each thereafter. Insurers first offense $2500 and 10,000 to 100,000 for each thereafter
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Taxation of life insurance and annuity premiums and proceeds
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if qualified they are pre-tax income and if not they are post-taxed. If paid in a lump sum it is not considered income. Qualified plans are taxed at payment and are subject to estate tax if; payable to owner’s estate, the insured was the owner of the policy or the policy was transferred within 3 years before death. If paid in installments principal is tax free but interest is taxed.
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Taxation of personal life insurance premiums
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Not tax deductible
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Business purchases life insurance for its employees
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tax deductible business expense unless it is to perpetuate the business, so they must not be the beneficiary
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Cash Value accumulation / dividends for annuities and endowments
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return of principal for an endowment or annuity not taxable but excess over that amount is.
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modified endowment contract
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Paid up in less than 7 payments or 7 years. They are treated differenty under the tax code. Loans are taxed. MECs are considered retirement accounts
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identify and compare contract and tort law
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contract law covers written agreements and tort law arises from forseeable neglect causing damages.
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Four major elements of a contract
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a) Consideration – something valuable exchanged (premium and statements in the application)b) Legal purpose – must not violate any laws or be detrimental to the public goodc) Agreement - (offer and acceptance) d) Competent parties – must not be a minor (16 yrs old), intoxicated, or mentally incompetent
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Contract of adhesion
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Take it or leave it so if written ambiguously the law sides with the insured because they did not write the language
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Conditional Contract
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each party has condition that must be met. Insured must show proof of loss before insurers pay.
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Aleatory
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equal value not exchanged between the parties. Depends on occurrence of uncertain event.
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Unilateral
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Only the insurer makes an enforceable promise (cannot cancel policy)
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Personal contract
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cannot transfer policy from one person to another without written permission of the insurer.
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Utmost Good Faith
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parties are entitled to rely on each other to be honest
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identify the term insurance policy
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contract between 2 parties that for consideration the insurer will pay a claim providing that a loss occurs during the term of the contract.
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identify the meaning and the effect of each on a contract: Fraud
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knowing misrepresentation of the truth or concealment of a material fact to induce another to act to their detriment.
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identify the meaning and the effect of each on a contract: b) Concealment
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neglecting to communicate or failure to disclose facts that are know (or should be known) and are material to a contract.
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identify the meaning and the effect of each on a contract: c) Materiality
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Information that would influence a party's assessment of a proposed contract. 3 questions to determine materiality: are the facts important enough to influence the decision? Do they affect insurability of the risks? Does the information create any disadvantages to either party? The materiality of concealment is used to determine the importance of a misrepresentation.
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identify the meaning and the effect of each on a contract: d) Warranty
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statement that is guaranteed to be true
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When can a representation be withdrawn
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before the insurance is effective but not afterwards.
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When is a representation false
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when the facts fail to correspond to assertions or implications
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Be able to identify what info does not need to be included in a contract
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a) Known info b) Info that should be known c) Info the other party waives d) Info not material to the risk
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Six required specification for all insurance policies (financial rating is NOT required in the policy)
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a) Parties involved b) Property or life being insured c) Interest of the insured/owner of the property d) Risks insured against e) Period of contract/insurance f) Statement of costs or how costs are to be Figured
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Rescission
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cancellation of policy with full refund that must be paid a) Rescission period under age 60 – no less than 10 days b) Rescission period over age 60 - no less than 30 days
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Rider
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an amendment attached to a policy that modifies the conditions of the policy by expanding or decreasing its benefits or excluding certain conditions
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rate
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per unit cost of insurance
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earned premium
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portion of premium for which the policy protection has already been given during the now expired prtion of the term
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unearned premium
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portion of premium for which the policy protection has not yet been given during but has been paid for
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Preferred risk
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risk which only has a chance of occuring
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standard risk
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Risk that meets the same conditions of health, physical condition and morals as the tabular risks of which the rate is based.
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substandard risk
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Risk that does not meetsthe conditions of health, physical condition and morals as the tabular risks of which the rate is based.
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With regard to the underwriting of applicants be able to Identify a producers responsibility
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they must accept legal ethical and moral responsibility for the clients and companies they represent
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Differentiate between the limitations placed on insurer pre-selection and post selection activities
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pre-selection helps target the lowest risk clients. Is done in the office when the company underwriters review and rate the applicant pre-selected by the agent. All underwriting must take place before the policy is accepted (no post-claim underwriting)
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definition of Life Limited to Payment of Funeral and Burial Expenses Agent
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an agent limited by the terms of a contract with an insurer to transact only life insurance policies or annuities having an initial face amount of $15K or less that are designated for funerals or burials.
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Identify Code definition of transact and why the definition is important
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Solicitation, negotiations before a contract is written, and execution of a contract.
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what actions does the Code prohibit from unlicensed persons
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may not act as an agent broker or solicitor without a license. Penalty is $50K or 1 year or both.
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Identify the differences between agent and broker
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agent works for the company or multiple selling to the consumer, the broker works for the consumer to find a company to purchase a policy from
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8. For insurance agent’s errors and omissions insurance be able to identify: Types of coverage available
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errors and omissions covers any loss due to an error or oversight, all agents must have this before they conduct business . Malpractice similar to E and O with regard to negligence but also covers possibly bodily harm.
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free insurance
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illegal in california
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Be able to identify the code requirements for the following: An agency name
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Any name other than bone fide given name must be approved by the commissioner but cannot use the name underwriter without legally earned credential. Name cannot imply the licensee is an insurer, or be in any other way misleading.
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Be able to identify the code requirements for the following: change of address
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if an address is changed the commissioner needs to be informed in writing immediately
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Be able to identify the code requirements for the following: Records
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agents keep informational records for 18 months, bank and financial records for 5 years, life and life only agents keep records for 5 years, premium finance infor for 3 years and the insurance company keeps records for 2 years
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Be able to identify the code requirements for the following: Filing license renewal application
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must be renewed every 2 years by the last day of the month in which it was originally issued. Fees must be paid and continuing ed must be completed by the end of that month. The department is slow so there is a 60 day grace period to keep transacting business
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Be able to identify the code requirements for the following:Printing license number on documents
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Must include license number and the word insurance in type same size as phone number (at least 10 pt) on all proposals, cards, or ads.
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Know the duties of a co-partnership whose membership has changed
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An organization cannot hold a license if the partnership dissolves or is terminated or if a corporation is dissolved. A continuing partnership can continue to operate for 30 days after registering a change in membership, paying a fee, and furnishing a bond so long as one person continues to act as an agency or broker.
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Identify special concerns with dealing with seniors regarding pretext interviews
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Cannot pretend to be someone you are not, misrepresent the purpose of the interview, refuse to identify yourself. All policies need to include a right of return statement offering cancellation within 30 days.
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The California insurance Code and how it may be changed
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made by the legislators and given to the governor to sign and becomes law if not signed in 12-30 days.
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The California Code of Regulations
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Policies issued by the California Insurance Commissioner that detail how the Insurance Code will be administered. All regulations are made by the commissioner and can be modified so long as they don’t go against any regulatory element of the
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California Insurance Commissioner and the responsibilities
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The code is enforced by the commissioner who is elected. The commissioner can change and enforce rules to implement the code
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Be able to identify the correct application of the Unfair Practices article including its prohibitions and penalties – these things are unfair if they are day to day activities
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penalties are $5K for each act or up to $10K for each if it is willful. a. Illegal dealings in premiums b. Commingling funds c. Charging too much and keeping the excess d. Charging premiums for coverage not in effect e. Selling insurance without a license or outside the scope of a license f. Getting a livense to write only controlled business g. Getting a license by fraud h. Coercion i. Intimidation j. Boycott k. Rebating – returning part of agent’s commission to insured to induce to buy l. Illegal inducements (more than $25 to buy a policy m. Misrepresentation n. Concealement o. Twisting – lying about current policy to get to switch p. Defamation q. Free insurance
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Identify the correct application of the conservation proceedings described in the code – Commissioner can become conservator of a financially impaired insurer and given all assets to conduct business if any of the following exist
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a. Refuses to submit books for inspection by the commissioner b. Person rejects to observe an order to make good any deficiency of capital or reserve c. Person transfers entire property of does a merger without consent of the commissioner d. Are found to be in bad financial condition e. Violates its state charter f. Refuses to be examined under oath g. Embezzles or wrongfully divert assets h. Does not comply with the requirements for a Certificate of Authority or gets it revoked i. Last report shows the insurer is insolvent
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Punishment for fraud
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$150K and/or 2-5 years in prison
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life Insurance
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Any insurance that guarantees a sum of money on the death of an insured is life insurance
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Applicant
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person who fills out the application and provides info
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Policy Owner
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Person that owns and controls the rights of a policy
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Insured
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covered by the policy
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Beneficiary
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named to receive the benefits of the policy
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Be able to identify the elements of the personal non—property/liability risk management process identifying quantifying and treating loss exposures – there are 5 methods of managing risk
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a. Sharing – risks with others in the same situation or with insurance companies. b. Transferring – spreading risk across a group of people (buying an insurance policy c. Avoidance – avoid the risk d. Reduction – reduce likelihood or severity of loss exposure e. Self-insurance or retention
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Define what is meant by the term limit of liability in a life policy
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Max an insurance company agrees to pay in case of a loss
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Be able to identify when insurable interest is required to exist under life insurance policies
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Interest is only required at the time of the application but not at the time of the loss
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Mortality
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number of deaths that on average for a group for a certain period of time
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Mortality tables and how they are made
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how many persons per 1000 in a given age group will die in a given year.
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Explain “Life insurance creates an immediate estate”
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the benefits life insurance provides a fully funded estate that transfers to the beneficiary and helps preserve the value of an existing estate.
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Par policy
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policy holders a share of any divisible surplus through dividends
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Non-par policies
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not pay policy dividends
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Industrial or Home service life
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coverage is usually low 1-10K with no suicide or loan provisions and is more expensive because it is usually very lenient, no med exam required,
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Ordinary life insurance
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includes most policies including whole life, endowments, and term life that are purchased on an individual basis.
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Group life
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business or organization usually pays the premiums usually sold on a 1 year term basis
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Endowment
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Most expensive type. More of a savings account with a death benefit. Provides a certain amount of money upon death. If the insured dies before the amount has been reached it provides the total amount
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whole life insurance
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protection for ones entire life span
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Universal Life
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Pure insurance and a cash value portion – a policy with a flexible premium and adjustable death benefit that accumulates a cash value for everything over the price of the insurance portion itself. it falls under the cash value or permanent life umbrella and formally separates the life insurance portion of the policy
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Variable life
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similar to other whole life products except the assets can be channeled to other investment options.
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