Health, Life exam notes

"Variable" means tied to the market. -Ben Miller
To place: consider opportunity costs, ability to pay, and goals/needs.
mortality = death, morbidity = sickness, annuity tables = longevity
3 classes of loss: In general – what could cause financial hardship?

·         Property

·         Liability

·         Human and personnel

Cause must be speculative, random (fortuitous), calculable, economic hardship, not catastrophic (government and war are ruled out as exceptions)

Must have insurable interest (potential for financial hardship) from morbidity loss.

·         Lenders have an interest to the extent of the debt

·         Business partners, company chiefs and directors, and family

Underwriting classifies risks to terms, conditions, and premiums. Based upon:

·         Current health

·         Health History

·         Occupation/hobbies

·         Personal Habits

·         Age

·         Gender (Women pay less than men in Life, Men pay less in Health)

·         Military, driving record, smoking, other factors.

Blood is tested, medical records, phone interviews, financial information, and job information is needed.

Agents cannot bind, only can get applications from candidates. Because life contracts are not cancellable once written and are long-term. The underwriters investigate and review to bind.

A beneficiary can kill an insured in self defense or insanity and receive proceeds.

Anything ambiguous or vague in a contract will settle on the INSUREDS favor

Condition precedent enforces the right to insurance, and a condition subsequent nullifies.

Fraud- up to 5 years in jail; $150K or twice amount of crime, whichever is greater. Also $10K if state prosecutor is called to the case.

Concealment may be intentional or un-.

Warranty: Any statement made may be held as truth if material and if false can void a contract.

Representation: Insured does not know, but gives a guess that can hold up (i.e. do you have a respiratory disorder?). Can be altered or withdrawn before issuance.

Terms, benefits, or dividends may not be misrepresented by a producer.

Twisting -lying about a client's current policy to get them a new policy.

• Twisting, misrepresentation are $25K or 3x victim's loss (greater of). Maybe 1 year jail.
• License maybe suspended for 3 years.

Waiver refuses to enforce a certain nullifying condition (i.e. payment deadline) and estoppel forbids the insurer from re-enforcing. Election: may create estoppel if insurer elects to ignore a material representation (i.e. fainting).

Void: no parties can enforce. Voidable: One party can choose to enforce

Rider AKA endorsement

Life ins: Rate is $ amount per $1000 in coverage, Disability is $ amount per $100.

Fair Credit Reporting Act: Courts, credit agencies, employers, landlords, licensing companies, and the client himself are the only ones able to view credit information.

negative items (i.e. Suits, BK, Tax Liens, etc.) stay on record 7 years. Bankruptcies are 10 years, tax liens are 7 years from payment date. One credit report per year can be obtained by client.

Medical Information Board was designed by Life Insurance Companies to protect INSURERS against fraudulent consumers, consumer misrepresentation, or substandard risks. Info kept only for 7 years and cannot serve as grounds for denial of life insurance.

• Disability Income Record System: Part of MIB, If $300 or more is applied for for a year, this stays on record for 5 years.

MGA's can: Accept/decline risks, can employ agents, negotiate reinsurance, collects premiums, and produces more than 5% of policy holder surplus.

Home Service agents are in 'debit' territories, and sell 75% small and ordinary policies. Stockbrokers, financial Planners, and even banks sell insurance.

Moral Hazard is a habit or behavior that increases chance of loss.
Aleatory: a promise to pay based on uncertainty.
All applications taken by an agent must be submitted by law!
I must contact customers when premiums are due, inform them about claim making and coverages.
Someone acting as an agent without a license maybe fined $50K and maybe a year in jail
Analyst vs. Agent: analyst must have 5 years experience as a licensed Life & A/H.
22 insurance classes, and any of the following requires a license:

• Solicitation of insurance
• Negotiations of contracts
• Execution of contract
• Transactions subsequent

Broker may charge the insured a fee, so L/D/H agents cannot be brokers. Settlement brokers "help policyowners find a suitable buyer for their policies and only are required one year licensed experience. Brokers sell life insurance policies to others, which is called a viatical settlement and makes the former owner money and the new owner pays monthly premiums thenceforth.
Need to have E & O: Suits may come up for failure to change beneficiary or inform client, improper coverage, etc.
Free insurance: Newspaper bundle, credit union shares bundle, Goods warranty,
Policy owner is the person named. premium outlay is premium out of pocket, and other is contributory (non-term group).
Self-supporting Illustration:
Illustrations: for quotations greater than minimum death benefit and those who request. Both parties must sign each illustration.
Guaranteed vs. non-guaranteed items.
Denial or suspension or revocation of a license without a hearing: Felony, Misdemeanor in insurance, suspension or denial within last 5 years.
Records kept 5 years minimum for life insurance. Exam required to be an analyst.
Not illegal for broker to accept BF from insurer and insured
An administrator must be contracted with the insurer.
3 branches to govern insurance: executive interprets laws, judicial makes rulings, and legislative enacts laws
NAIC protects interstate commerce of insurance.

CHLIGA covers: direct and nondirect, annuities, and health insurance claims for domeciled policies. 80% of up to $100K for cash and up to $250K for an insured's life or annuity. Health payouts can't exceed contract value up to $200K.
Discontinued group health- extension of benefit must be incorporated after the group health is cancelled if someone becomes completely disabled. Group Life must provide extension of benefit after discontinuance as though the employee had lost their job on the date of discontinuance. If hospital and medical benefits are discontinued and replaced within 60 days, All prior employees of other policy must be covered. Level of benefits must be equal on new policy until earlier of prior policy's x-date or the end of the extension period.

Disclosing genetic tests to others will result in civil penalty $1,000 + court costs. Willful is between $1000 and $5000. If causing any harm, fine up to $10,000 and misdemeanor. Dept. of Health can request though. If an insurer is guilty of this, 1st offense is <$2500, and each after is <$5000. Willful is between $15K and $100K. Cannot require race disclosure.
A gene such as sickle cell may void a contract (?)
Domestic Violence OK, experimental tests maybe OK, and mental illness (outpatient/inpatient/medications, and partial services)
"Shall" indicates mandatory action.
Commissions records kept for 3 years
Claims are to be responded to within 21 calendar days, 15 days if a response is needed. Insurer must accept or deny a claim within 40 days. If need more time, notify claimant ever 30 days by writing.
Payment of claim within 30 days of decision made. 80 if fraud is suspected. Med exams only if in good faith.
Life insurance may have up to 3 parties: Applicant, Policyholder, and Insured. 3rd party ownership is normally for a key employee of a business or an estate.
Life Insurance: Personal planning.

• Final expense Fund for burials, etc.
• Readjustment Period - income gained by insured will be paid for time adequate for beneficiar(ies) to adjust.
• Housing Fund - Pay off mortgage or establish a fund for coverage
• Education fund for beneficiary
• Survivor income
• Emergency Fund - AKA cash value provided
• Special Needs - Charitable Giving

Gather info: Assets, Liabilities, net worth, income information and expenditures, Investments, tax situation, employee benefits, estate plans (wills/trusts), and inheritance prospects. Also needed are interests, lifestyle, attitudes, values, desires, family, health, and though these maybe different from mine, I must guide them reasonably toward goals.

Assessment of objectives (trust needed)

Analysis can be performed only after the assessment of dreams and goals, and includes: plan development. Shows all achievable goals to identify which ones the client wants to insure, share (employer programs), avoid (eliminate debt), reduce (cash left for the mortgage), and retain (Adding a % to an emergency fund each month).

Revisions occur for the rest of client's changing life

Ways of assessing needs:

Human Life Approach:

• Determine insured's after tax income from now to retirement
• Deduct annual expenses for food, clothing, and medical, etc.
• Calculate number of years to retirement
• Estimate inflationary effect

Needs-based approach (most commonly used):

• Quantify objectives, subtract assets, and fill in the difference with products. 
• Death is immediate in this approach
• Focuses on needs of survivors

Understand products to constraint with needs!

• Client's preferences and priorities first
• Amount of insurance truly needed
• Client's ability to pay
• The need's duration

Insurance needs are:

• Avoided (i.e. not skydiving)
• Retained (deductibles, copay)
• Transfer (insurance, hold harmless agreements)
• Sharing (families sharing death/burial costs, tuitions, reinsurance)
• Reduction (Wearing seatbelts, staying under 3 stories on a ladder

 Business life insurance:

• Key employee protection (Proceeds are not in the employees estate)
• Credit protection
• Business longevity
• Special Compensation Plans
• Buy-Sell Insurance
• Cross purchase is when partners make a deal # policies = n(n-1)
• Entity: The entity has policy on owner, premiums not tax-ddt's 
• 303 redemption plan: If insured is majority shareholder Premiums not ddt's
• Split-dollar arrangement - similar to employer matching but for the purchase of life insurance. Employer can discriminate freely.

Insurable interest: proven for life at application only, P & C at application and loss, A&H only Loss.

For Life: Financial or estate dependency (lender, family), Any person in whom a vested interest depends (employer), the trustee of benefit plans (signed off by insured), Charitable organization. Must have insured's consent to open policy and must pass 2 years before a settlement occurs to ensure interest (incontestability).

Purpose of a mortality table: probability of death and the expectation of life.
Age 78 is the most common age of death. Whole Life policies Endow at age 100. If the policy is in effect, an immediate estate has been created for the beneficiary, even if only one payment has been made.

Beneficiary that is not exempt from probate for death benefits: estate (no beneficiary is names - goes to the estate)
"Death Benefit" is the same as face value of policy or limit of liability
Only the owner is required notification by mail.
Death benefits are not recorded, not part of an estate (no extra estate fees), and normally not taxable. Cash value policies are tax deferred.
Participating (par) policies earn a non-taxable dividend that is optioned. Current assumption policies pay no dividend, but the cash values appreciate in the policy quicker if the insurer has a favorable 'experience'.
Nonpar policies have no dividend, and any gains by the insurer go to its bottom line or to STOCKholders as dividends.
Life insurance Markets: Credit, Industrial, Group, Ordinary (CIGO)
Credit life: pays off outstanding debts, for the benefit of the creditor, normally decreasing term, where creditor is policyowner and beneficiary. Premiums paid with other loan installments. Typically covers all people (ages, genders) at the same premiums, and very few are denied.
Industrial insurance (AKA burial ins.) face value=$15000. For factory workers. 4 weeks grace period; cash value option after year 5.
Ordinary Life: Medical note of insurability, no group, most expensive to insurer, and most common. 30 day grace period
Group Life: no underwriting and 31 day grace period. Considered a master policy
"cash surrender value" (CSV) is amount of cash given if a policyowner sells contract before maturity. Maturity date is the endow date, when guaranteed value meets the contract death benefit.
Pure protection and permanent contracts: Permanent policies also provide cash value (aka csv, loan, or non-forfeiture) in addition to death benefits. Many policies under each type.
Surrender charge, normally 10 years, has a decreasing 'back-end charge' (from 8%-0% on year 10)
Living benefits are cash distributions
Traditional Policies are considered guaranteed. These are 'Front-end charge' policies that have the insurer's expense up-front.
Flexible policies have adjustable premiums, face values, investment objectives. Products include adjustable life, universal life, and variable life/universal.
Term policies: insured dies for proceeds and only in a specified time frame. this is pure protection, and policies are identified by death benefits (increase, level, or decrease?), convertible or renew only, and the premiums are level throughout the policy and are paid on time for benefits. Applies to all 4 life types CIGO
Term is good for career changes (when no policy exists), funds key person/buy-sells. Packaged with Permanent policies. No proof of insurability needed. Rates based on age, gender, period (can be until a specified age or for a set # years). Substandard risks barred. All endow at age 100, even UL (even though not guaranteed). Like excess coverage
Premium paying for life: continuous

• Straight whole life
• Modified Whole (on premium Increase)
• Graded Premium whole (more than one)
• Current Assumption Whole (moves with interest rates and CSV appreciates)
• Indeterminate Premium Whole (Initial premium for 3 years, then anything)
• Indexed whole
• Adjustable Life

Premium Paying: Limited (pay quicker)

• 10/20/30 year pay (endow at age 100)
• Life 'paid up' at 65 (endow at 100)
• Can be 10/20/30 year pay
• Face value = cash value at age 65, but matures at 100.
• Single premium (endow at 100)

**Insurer guarantees mortality, interest, expenses; premium, death benefit, and CSV so accepts all the risks. 

CSV cannot be forfeited once accrual begins, normally 3rd year at a specified rate.
Pure insurance = Face value - total cash value. At first year, FV=100% and CV=0%.
Modified whole life- payments for the policy lifetime, where first five years of 1/2 price. After, the premium rises to just above the standard value. Graded has multiple increases.
consumer price index (CPI): a basket of normal goods showing inflation, supply and demand.
Indexed whole life is based on CPI, if policyholder assumes risk, must pay rising premiums; If insurer assumes risk, death benefit increases (to a limit) w/o premium increase
Intermediate premium: Nonpar, Max premium with possible discounts for insurer performance.
Current assumption: hybrid of traditional and universal policies. Recalculates premium after each 2-5 years. If premium decreases, insured can elect to pay prior premium and have difference added to the accumulation fund or higher death benefit. If it decreases and insured pays new premium, the prior death benefit is used. If new premium increases, pay higher premium with prior death benefit. Or pay previous premium with less benefit. Paying higher premiums decreases installments. Has surrender charges between 9 and 15 years and is completely transparent.
Universal Life has mortality charges that, if become 100% and Cash is 0% after 30 days, will expire the contract. adjustable death benefit. Current interest rates determine cash account. **It is unbundled because it has a decreasing term and a cash account. Most popular because it changes to your needs. tax-deferred. Premiums can be stopped altogether. Group policies commonly used, key man, nonqualified comp plans, buy/sells. Cash value is credited with current interest rate earned by insurer+guaranteed interest rate and charged mortality expense. No death benefits are ever guaranteed (AKA face value).
If the UL has death benefit linked to S&P 500, only a life license is required. Anything tied to a mutual fund requires a license.
Only premiums under UL can ever be waived.

• Option A or Level - death Benefit = face value. Protection decreases, cash increases.
• Option B or Increasing - death benefit increases with cash value plus a fixed face value.
• Every policy has access to cash amount through a policy loan!!!!!
• UL and Variable UL have a smaller fee to surrender than whole life.
• Premiums fund the cash value, from which mortality charges are taken; if $0 in cash value, no protection exists.
• Disadvantage is flexibility; lapsing is a common occurrence.

Variable policies:

• Premiums buy units of different investments (any security really)
• can switch between units 1 to 4 times per year.
• Insurers general account is separate from units.
• SEC regulated, prospectus and license required
• owners get 1 vote per every $100 Cash value
• Convert to traditional every 24 month (option)
• VUL has flex premium and VL has fix premium.
• Risk is on policyowner in Variables, since rate of return is not fixed.
• VUL: All premium goes into the units, so no death benefit is guaranteed (any mutual can crash)
• VL: Death benefit is set at a minimum but can increase above.
• Death benefit is guaranteed but the cash value is not

Joint life: (first to die policy)

Joint survivorship: All must die; face values are huge.

Endowments: used as investment vehicles to accrue cash; not protect lives really. Any endowment that matures before age 95 is not considered life insurance. More expensive than other Life policies, protects only in endowment window. a 20 pay endowment has a level death benefit and increasing cash value until the face value.
Premiums must be paid on whole and term insurance.
Mode is how often payments are made. If the total premium is not paid, the insured pays an extra fee, since the insurer could not gain the interest on the premium. Mode is a choice: annual, quarterly, semi-annual
Companies rate policies based on annual mode.
Higher life expectancy means lower costs of insurance.
Level premium concept!!*** - overpay before middle age, and the amount overpayed is set aside to earn interest to balance out underpayments after middle age. The younger the investor, the lower the premium because that money will accrue longer.
Single premiums are heavily discounted because interest accrued is greater.
Term insurance cannot be paid up (or paid before maturity).
Mortgage redemption rider: decreasing term insurance purely to pay off a mortgage if death occurs
Family Rider:

• Term insurance covers wife and kids if father is principal insured (aka they are named to die)
• This is an additional insurance to cover everyone else in family.
• Future children are covered (from 15 days to 18 years old)
• Sold in units, $3000 each, with more units for the adults.
• Used to get income instead of DB

Family Income: Half paid at death and half paid after income period of principal, or all death benefit paid if died after income period. If dies after income period, no annual payments, only death benefit. Income specified in contract will be paid annually if dies in income period.
Family Maintenance: Level rider with whole life base, provides an income for a specified # years after death. More expensive than Family income, pays death benefit at death and an income for the rest of the term.

*Equity index life insurance:

• Combines features of life insurance with potential to earn interest on an equity index. 
• Whole or universal.
• Guaranteed interest rate so protected against market risks.
• Tax-deferred
• Has withdrawal loan provisions to access cash
• Hedges inflation

Juvenile Policy (payor's benefit): for children 15 days to 15 years. If premium payor is disabled or dies, premiums will be waived until end of paying period or until a certain age, whichever is first. Jumping Juvenile: at age 21 or 25, death benefit (FACE) increases to 5 times original amount
Return of Premiums policy: term normally has no advantage other than a DEATH benefit, but with this policy, the insurer sends you back the full amount of your premiums tax-free. Maybe a rider or packaged with an endowment.
Graded benefit: death benefit decreases over time. Substandard risks, where premium is higher than face value indicates.
Term: Premium increase with renewals, great for when children are at home or if career changes occur. As a rider for Family maintenance policy (this produces the income, and the whole life produces the death benefit)
Only level term policies (level DB increasing premiums) are renewable, and at a small charge.
*Only pays if insured dies, which is the MATURITY DATE or endow.

Convertible Term:

• **No insurability needed, higher premium than regular term b/c more risk for insurer
• This option of term is costly and converts to lifetime coverage
• If convertible and renewable, age limit is lower to convert. the policy continues until the renew date and cannot be converted. 
• When converted, the attained age policy acts like it is new at that date, but no proof of insurability required. This is most common
• The original age policy bases premium on insured's age

Decreasing Term:

• Select initial coverage, and DB gradually increases to 0.
• For 10,15,20, or 30 years, normally with family income policy
• AKA mortgage protection policy

Increasing term is only a rider, and is RETURN of premium benefit, b/c face value + premiums paid are given at the insured's death. Premiums increase.
Reentry term: screened early, so all applicants are paying low premiums early. Adverse selection occurs when the more healthy applicants drop out and the unhealthy stay in in later years. To stay competitive with potential claim charges, renewal premiums are charged for adverse insureds. Reevaluation will lower premiums if you are a "select" insured.


Annuity: form of insurance that is systematic distribution of wealth and liquidates an estate. Tax deferred, withdrawals before 59.5 has 10% penalty. recipient is an annuitant. Recipient is called annuitant must be human. Annuities are for living too long (outliving your money). accumulation period is the growing (prior to annuitization). Beneficiary receives greater of amount put in or final amount of savings. Athletes and other high income people who have short, high income periods should use.
Annuitant receives payment and may also be the owner, but not necessarily.
Lotteries use annuities to give the full amount in installments, and lump sum is taken at a very small amount.
Qualified annuity: deductible?
A level annuity must have same payment price, but nothing is ever due. Flexible can be any payment price. Deferred annuity: Payout (annuitization) starts in the future (after a year).
Single premium is giving all the money up front.
Variable annuities purchase units
Equity index annuities: Invest money that you cannot touch for 5-10 years, generates based on either: An index performance or guarantees minimum interest. Tax deferred (unlike a CD).
*page 13
MVA - if market increases, there is an extra charge for surrender of money.
Tax sheltered are for schools.
An IRA simply uses a type of annuity (EIA, Fixed, etc.) to accrue.
Roth IRA is NOT TAX DEDUCTIBLE, but earnings are.
Minimum amounts may be needed after withdrawals.
Life annuities: check until the day you die, but when you die (at any age), insurer collects premium
Health is never a pretext for an annuity, but qualified must be started before age 70.5 or incur 50% penalty.
Senior at age 60 for life, 65 for disability and LTC, Medicare. 30 day free look, or cancellation period, for seniors.
Cannot sell to Medi-cal beneficiary seniors.Fines are minimum $1000 on first, but $5-50,000 others. Insurance companies are $5,000 first, $300K after, may lose license.
Installment certain: If an annuitant dies in the certain # years (i.e. dies in year 8 out of a 10 year certain), the annuity pays out only until the end of such period (i.e. year 10). If the person dies outside threshold, no payments to beneficiary.
*Know senior citizen rules.

• During free-look, money is placed in a money market account or other account.
• Notices of visit 24 hours in advance with agent's name, license info, and in 14 point type.
• 
  

Applicant, policyholder, owner must all sign life insurance, with agent.
Buyer's guide compares indices and potential accrual rates.
Life ins. Provider will oversee the entire process for the buyer; may be the buyer (agent or credit card company). Broker may also do this; and it's always for a commission.
Coupon Book: Monthly mode. Annual premium mode is cheapest mode.
Free look begins upon delivery and SIGNED receipt.
Conservation is an insurer's attempt to dissuade from replacement. Replacing insurer provides illustration to former insurer within 3 days.
Life Settlement disclosures at application:

• Accelerated benefit options and other options can be used for life insurance
• Taxation of settlement is possible
• Creditors may get the proceeds
• Financial advisor should be asked before settling a policy
• May rescind the contract within 30 days, effective if both sides give notice of rescission
• Name of distributor and date thereof
• Permission to sell the policy if settling (information given to buyer). Renew permission every 2 yrs
• Every 3 months, insured may be contacted to ensure health and address. If life expectancy less than one year, may be contacted each month.

At policy:

• Affiliations settled between all parties
• 
  

Annuitization has many factors to consider in distribution:

• Age and Sex
• Amount of money used to fund the annuity
• Interest rate
• Payout guarantees and expenses
• Life expectancy: older paid more (beneficiary causes you to receive less money)

10% penalty is only for deferred annuity, and interest is always taxed as income when surrendered.

Joint life annuities: Payments cease if either dies.

Variable annuities are paid out in units

An entire contract:

• Policy, application, riders, and modifications
• Part 2 is medical history (present condition, medical visits in past few years, family medical history, hobbies, driving record)
• Policy summary includes:
• Premiums paid for first 5 years
• Cash values for first 5 years
• Death Benefit for first 5 years
• Dividends for first 5 years
• Buyer's Guide and Summary are due no later than policy delivery
• All printed communications for presentation are given to applicant
• NAIC - Net payment index and surrender cost index are illustrated with every policy issued
• Agent is not considered a party to a policy, only insurer and applicant
• A notice of replacement must be signed by agent/applicant before application submission

Surrender or interest adjusted cost method invests premiums and earns 4-5% to hedge inflation.

Free look:

• Money markets and fixed income funds are good for the 30 day look. 
• No term conversions can get a free look
• 60+ always get a free 30 day look, replacements or not
• All others get 10 day look and 30 for replacements
• From delivery date (must have signed receipt)

Surrender charges for universal and current assumption

Beneficiaries:

• Primary, contingent and tertiary beneficiaries can all be multiple with equal split in each class
• Employers cannot self-fund death benefit plans
• If noone is named beneficiary, the policyowner is given the benefit (may be different from insured) 
• Beneficiary can be a trust, corp, business, etc. 
• Trusts are used when no direct access is given to beneficiary, fees are charged by trustee and they have TOTAL power in many cases.
• Proceeds may be probated - go through courts and have fees.
• Per capita means direct family (children), per stirpes means blood line (grandchildren)
• If 3 children, one dies with insured... That child's children get 1/3.
• If a disaster kills the beneficiary and insured, insured is deemed died first. If beneficiary briefly survives, length must be stipulated.
• **Spendthrift Clause: Insurance companies cannot pay debtors, can only do what insured assigns. The beneficiary can do whatever they please with the estate. Not a provision, a CLAUSE

Policy will lapse after 30 days if no premium paid. May have automatic Premium Loan, which will be subtracted if you die or if you sell. Lapses surrender no monetary value
Reinstatement:

• 3-5 years, premiums plus interest, 
• reprove insurability
• Pay original premium (on original age), *restore cash value (completely)
• Original policy may have better provisions

Loans:

• From Cash value and only up to cash value, only pay down after (think equity)
• Not taxable, but includes interest charges.

*Life* insurance has incontestability for 2 years, so even fraud or suicide will pay out after 2 years. Cannot settle until after 2 years. Suicide before 2 years gives refund of premium. The following are contestable:

• Intent to Murder
• Impersonation
• No insurable interest

The DB is always adjusted for a misstatement of age or sex. DB is less if older than stated (less pymts)

Nonforfeiture options are in perm policies, ordinary life policy by year 3, industrial by year 5; used if lapse of policy, surrender, or can't afford. Options are:

• CSV: if policy is surrendered, minus loans. Reinstatement impossible afterward
• Reduce paid-up. Uses CSV as SINGLE Premium to fund reduced DB policy.
• Within 60 days of lapse. Good for permanent policy (Endow remains 100)
• Extended Term: has same DB but changes perm to term for as long as CSV will fund
• Reinstatement impossible
• Nonforfeiture values are considered guaranteed values and are mandatory in presentations

*VERY IMPORTANT:
Settlement options:

•  Option chosen by the policy owner or beneficiary
•  The beneficiary can choose, but can't change option. 
• Options are mode of payment (yearly, monthly, etc.), where if death occurs, next in line receives proceeds (contingent, tertiary, etc.). 
• Tax exempt for lump sum and principal, but not interest. 
• Many times insurers put money in escrow until an option is chosen.
• Fixed period (period certain); constrains a number of years to exhaust settlement. Has minimums.
• Fixed amount chooses amount apportioned. 
• Life payment: guarantees payment for life (i.e. age 100)
• Viatical - Pay cash for sale of insurance rights (and Benefits)
• Interest Only???
• A policy transferred for money would be taxable.

Dividends come from excess mortality, interest, or expenses. Not guaranteed. Options:

• Cash
• Accumulate at interest: guaranteed minimum, like a savings account.
• Paid up addition, if elected after issue, insurability may be requested. Each mini policy accrues cash and dividends also that grow policy
• Vanishing premium (may suspend premium if greater than) or
• Paid up extension (shortens installments)
• Term: dividend is used as a different type of policy. If elected after issue, insurability may...
• Accelerated endowment - Attempts to convert policy to an endowment (earlier maturity)

Provisions:

• Policy loan only in policies with a cash value
• irrevocable beneficiary: give up right to borrow from policy, change beneficiaries, and surrender the policy for CSV without beneficiary permission
• Beneficiary takes legal action if nonpayment of DB
• Policyowner must pay all premiums

Exclusions:

• War
• Aviation
• Suicide before incontestability
• Felonies and dangerous hobbies
• Return of premiums if death occurs in these cases, but no DB.

DEDUCTIONS:

• Businesses can ddt group premiums if not the beneficiary
• Businesses can ddt if premiums are a bonus
• If a policy is owned by a charity
• Premiums as alimony payments

Most DB's are tax-exempt but must pay estate tax:

• Owner is deceased, 
• policyowner transfer within 3 years of death (no matter health)
• Incidence of ownership (if boss allows you to choose beneficiary, if you own grandchild's policy)
• Can give the estate away up to $13K per year to any number of donees.
• Annuities are part of an estate

Qualified annuity plan (on the side, think 401k) has payments that are completely taxable, whereas annuities on their own (non-q) have principal (exempt) and interest (taxable) b/c principal was after tax.Annuities beneficiary pays taxes as owner would, but no taxes on life ins. Only individuals can be annuitants. 10% penalty before 59.5 Q and non-Q. Continues to estate if received as DB.

Exclusion ratio is investment in contract (principal) divided by expected return (# years payout X payment)

Group life

• 70% employees covered
• 85% participating cannot be participating
• Underwriting based on Group characteristics and makeup.
• Excess over $50K per employee will be included as gross income (aka imputed income)
• Business ddt's any payments
• Only individual term policies are convertible (life).within 31 days of policy xdate (?) 
• Cert of insurance including brief of policy, Statement showing converted policy will = group protection, and statement that policy is convertible if employment is terminated.
• No medical exams, but often pre-employment physicals to decrease adverse selection.
• Employees cannot contribute more than $1 per 1000 of coverage
• Conversion:
• 31 days, notice in 15 from employer
• Attained age is used at conversion
• Min enrollment is 2 for single company, 25 for small associations, 100 for large
• Dependents of employees extensions:
• Up to age 20 unmarried,
• up to 24 if in school
• mental/physically handicapprd
• In most policies

1035 exchange: switch from one company to another (non-q annuities)

• Life for life, endowment, or annuity
• Endowment for endowment or annuity
• Annuity for annuity

Accelerated benefits are income tax free if a person expects to die in next 12 months. 

Modefied Endowment (MEC) if premiums for first 7 years exceed IRS maximums.. If so, 10% penalty if withdrawn before age 59.5. Life policies may be deemed MEC also, where loans/surrenders are taxed. All single premium policies are considered MEC.

LUMP SUM, DEATH BENEFITS, LOANS, and DIVIDENDS are all tax free

All policies can be bought in groups, only if not solely to save money. Employer controls the policy
At least 90% of people must accept blanket insurance

FEGLI - Government life blanket.
ERISA Act - IRAs, and financial statement at year end for group plan employees

• Employee contributions are ddts
• Lump sum distributions have special tax treatments
• Life policies cannot be used as funds for IRAs.

IRAs

• Traditional has max set at allowable limit or 100% of earned income (lesser thereof), 
• Must withdraw before 70.5 or incur 50% penalty
• Rollover IRAs: switch money to different plans, can occur once per year. Reinvest 60 days from distribution
• Tax sheltered annuity plan: 403b, like 401k, but 403b's can only invest in annuities and mutual funds. Values are nonforfeitable (100% vested) and tax deferred.
• SEP (simplified pension) IRA: used on employee plans and also a business owner's if self-employed. Cash contributions up to 25% of a maximum allowed amount.
• 401k - normally matched 50% of contribution up to 6% of income.
• Cannot contribute 100% of income, but Roth you can (?)
• CODA (Cash/deferred account), pre-tax
• Roth: no need to distribute before 70.5, can still contribute. must have for 5 years before dist.
• Restricted to AGI limits, and Roth 401k is not, which is great for higher incomes
• Not restricted to a minimum distribution but Roth 401k is, lessening the accrual potential
• Distribution acceptable early if for higher ed (Coverdell ESA) used before age 30, is transferrable
• Keogh plan: for unincorporated (sole props.) Deduction for the business is much smaller than other corporate plans, and employee is smaller

NONQUALIFIED plans: Not filed with the IRS, even though they are retirement plans. Employer receives no deduction. Annuities and Deferred compensation. TSP for gov't employees

Categories of Qualified: Defined benefit plan and Defined contribution (always for retirement)
Contributions plan defines employers contributions, benefit plan defines employee's retirement
Profit sharing: a % shared up to a % of salary
Tax deferred. Must complete one year with employer before eligible
Benefits are 100% vested after 5 years or 7 in a graded schedule (consisting of last 5 years)
Qualified plans must be fully funded, or have assets needed to fund the plan and for adult employees working more than 1000 hours per year.
Vesting (ownership of benefits) must be for entire workforce, can't discriminate.
Q plans: contributions are deductible, distributions are taxable.
KSOP: stock options that you vest in. Receive when you leave the company.
Social Security: Gov't taxes us to provide:

• FICA: retirement benefits to elderly
• OASDI: Survivorship benefits for dependents of deceased workers
• OASDI: Disability payments for disabled
• HI: Medical benefits for elderly (Medicare)
• Gov't is a monopoly and system does not factor how much to pay each, it's all equal division.
• Not fully funded and contributions not related to benefits (which are based on avg. earnings)
• Based on:
• Quarters of coverage (credits), minimum earnings in 2010: $1,120 = 1 credit.
• Minimum needed 6, max is 40 to be fully insured
• Need a QC each year from age 21 to:
• Year before death
• Year of disablement
• Year before you are 62
• Disability-insured status if you are fully insured and have at least 20 QCs in last 10 years if over 31.
• Properly Insured - Means both fully and disability insured (worked 20 quarters in last 40)
• Currently insured status if 6 QCs during full 13 Q period ending with Quarter of death, disability, or retirement age
• Coverage means wages are taxed (We are paying gov't our retirement)
• Anyone who pays in is eligible
• Need to have worked within 5 years of death or disability
• Calculates average of period of 35 best working years.
• Age 62 for retirement benefits but depends on the year you were born.
• Work 1.5 years out of last 3 years before death, as long as currently insured.
• Pays $255 to dependents
• Widow (father/mother) receives income at 62 until youngest child is age 16
• Spousal Benefit at age 60
• Married dependents or disabled children can get retirement benefits
• Types: Supplemental security income, disabled widow, and disability insurance.
• Disability is difficult to get, and you will be covered by medicare and get a paycheck
• Must be totally and perm disabled (at least 12 months or result in early death)
• Medicare
• Part A - Hospital Insurance Pays for inpatient care (hospices etc.) 
• Depends on Credits but others will require a premium.
• Part B - Medical Insurance helps pay for doctors and supplies, outpatient
• Part C - Part C is managed care for seniors
• Part D - for Medications
• Tricare - Health care for active duty and the retired
• State Programs::
• State Disability Insurance - Provides a temporary income for a limited time, funded by payroll
• Medi-cal/medicaid - 65+, Blind/disabled, or prove limited income for a family, Pregnant, Refugees less than 18 months, Foster kids under 21.
• Worker's Comp

UNDERWRITING:

Net premium based on: (mortality - interest = net or pure)

• Age and sex
• Benefits provided
• Mortality rates
• interest rate

Interest Adjusted cost method: Cost of life policy with time value of money.  Premium - (Dividends+Cash value)/interest)

Traditional net cost: Premium = (cash + dividends)*Number of years and then /# of 1000s of DB

               Where cash and dividends are pure speculation
To file a claim:

• Completed statement of claim (like dec page)
• Certified death certificate
• Original insurance policy
• Agent should get policy number, date issued, date, and cause of death.

Insurers' investments are in:

• Gov't securities
• Corp secuities (bonds, stocks, etc.)
• Mortgages and Real Estate
• Policy loans and other assets

Earned surplus is dividend surplus (policyholder surplus) and Shareholder surplus. Dividends come from this, and is wholly underwriting profit, where it is not a distribution, but vanishing premium since an insurer only charges the premium it needs based on the pool of capital.

Riders are pure protection. Accidental death, and waiver of premium are examples. Charged more premium but give no added value. LTC, Guaranteed insurability (if you want to tack on more insurance), disability income (waives premiums and provides income), cost of living (which raises premiums and DB to keep with inflation of CPI). Riders normally fall off at 65.

Waiver of premium:

• Dividends still paid
• Must be totally disabled, normally waiting period of 6 months
• Retroactive (disability income is not)
• This is on all life/health/disability policies

Accidental death

• Doubles or triples the face amount of DB. 
• Direct result of death is an accident
• Policy loans do not affect this rider, simply taken from FINAL amount
• Accidental death and dismemberment pays extra if insured loses 2 limbs or goes blind due to an accident, may pay half benefits for half the injury

Living accelerated benefit:

• If diagnosed as terminal and to die in under 12 months
• Gets up to 50% DB in advance
• Nursing home: In a home for 6 months before benefits begin
• Distributions are a certain period annuity.
• Chronic Illness (def. is unable to perform at least 2 Activities of Daily life w/o aid for over 90 days) Similar to LTC riders
• Critical Illness benefit: Lump sum paid to Owner at insured's first diagnosis. Results in decreased DB (based on face value), and for heart attack, organ transplants, strokes, etc.

Guaranteed insurability has provision for marriage or child birth (stork option). Ceases at age 40.
LTC rider has 90 day waiting period and qualifying conditions.
Annuity riders (guaranteed living Benefits)

• Guar. Min income- greater of contract or payout base (or capital with 5% int.) will be annuitized.
• Guar. Minimum Withdraw- Can withdraw a Guar. % (i.e. 7) until entire amount is paid
• Guar. Payout Annuity Floors - guar. that monthly payment won't be lower than i.e. 80%
• Guar. account value - obvious
• Guar. Min death benefit- Greater of contract value or premiums paid (for beneficiary)
• LTC - Can access up to 100% of annuity w/o surrender charge.
• No lapse guar. for UNIVERSAL life - policy acts like  whole life policy with no endow or guaranteed DB

HEALTH INSURANCE:

Disability pays if ill or injured. Health insurance pays for hospital, medical, or surgical benefits. Nothing outside the hospital. Not Worker's comp or LTC.

20 15 90. 20 days to notify insurer of a claim, 15 days for a claim form to insured and 90 days to submit proof of loss. Claims paid at least monthly, pay within 30 days in California.

Provisions:

• Change of occupation
• misstated age
• Other insurance with this insurer (premiums are refunded for excess coverage)
• Insurance with other companies (also refunds premiums, each company pays a %)
• Premiums unpaid (ddt from claim)
• Cancellation (Insurer notice at least 5 days prior)
• Short rate cancellation on the side of insured (part of unearned retained)
• Pro Rata Cancellation (Part of insurer)
• State statutes
• Illegal occupations (Nothing will be paid)
• Drunken or high will never pay

Ambulatory surgery - admitted and discharged on the day of surgery.

Acute illness - The body can recover from this with proper medical attention

Dependent is unmarried up to age 20 with exceptions.

Overinsurance - have more insurance than needed, so if disabled - more than normal income

Out of pocket is total of ddt (for covered exps) and coinsurance (copay is a flat rate before any service)

Principal Sum - max an AD&D policy will pay within 90 days

Probationary - After issue, only for accidents (after 30 days will include illness also), Elimination - after disability before payment Pre-existing - before effective date

Stop loss - A limit for out of pocket expenses

Uniform provisions law for AD&D - 12 mandatory and 11 optional

Waiting period - policy is in effect throughout.

TERMS FOR MANAGED CARE:
**Capitation - monthly rate for HMOs to pay providers, but other managed care programs pay for services (fee-for-service)

Gatekeeper or closed access model - Insured has one primary care physician

Closed panel gets one physician that can only work with a certain group. get paid for all clients whether or not they see clients.

Service provider - paid in advance thru premiums. Has 'subscribers'.

DDTs

• Flat - has amount paid of ddt before benefits can begin.
• Per cause - To each covered person per claim.
• Common accident - If several members of family in an accident, on ddt is good.
• Carryover - If expenses don't overcome the ddt, the last 3 months expenses will be carried into new year.
• Corridor DDT - DDT that is paid basic before supplemental major medical begins paying.
• Integrated - The DDt paid for basic counts toward major medical plans.
• First Dollar - No DDT and usually no coinsurance
• Restoration of benefits (i.e. LTC not used for 180 days)
• Recurrent hospitalization - Insured returns for same ailment w/in 6 mo. only 1 DDT.

Renewable/recall provisions:

• Noncancellable - for disability income policies until 65, medicare and LTCs also. Most expensive and best provision
• Guaranteed renewable - like above but up to a certain age
• Conditionally renewable (premium increase by class) i.e. make $50K can nonrenew
• Optionally renewable
• Cancellable

Service plan says 30 days in the hospital. Indemnity says 30 days at 80% in hospital.

Multiple Employer Trust has sponsors that will develop underwriting rules, the plan, and Admin thereof (Self-fund). Like a Multiple Employer Welfare Arrangement.

Any OPTIONAL provision gives insurers the right to decrease DB, so will be lower premium.

Erisa - Employee Retirement income security act. Provides for ALL benefit plans.

Indemnity you submit your own claim forms. 

Self funding can be - Admin services only (only self-fund admin), Min Premium Plan - Stop loss plan if claim is over self fund threshold)

Cafeteria plan or 125 plan - employee benefits.

Contributory plan - requires 75% of eligible employees. Convertible - 31 days, NOT for Group AD&D. If employee contributes any, it is contributory.

Extension of benefits - For pregnancy or disability.

Franchise plan - individual policies written for smaller groups. no convrsion, but maybe physicals.

*Blue Cross blue shield - Subscribers pay monthly fee for individual or group plans. Cross is hospital plan, and shield is doctor plan.
Contributory health plan requires 75% enrollment.
occupational policy is for on/off the job (mostly just for disability)
COB (if both parents have benefits) - Employee primary, spouse secondary, if minor is injured, the parent with earliest birthday pays first. H & D policies only change if insurer's CEOs approve.
\Providers:

• Physicians (own their own practice)
• Hospitals (emergency and outpatient care included)
• Urgent care (no appt. necessary)
• Home health - May also be post-hospital care
• Surgicenter - Outpatient surgery

Sefl-insuring (aka fully insured) must use a special fund to pay claims. Open for Unions.
Managed care plan should include comprehensive case mgmt.
30 day free look for health policies (no age req.)
Non cancelable cannot change premium, but cancelable renewable can
Copayment is a fee for service directly to provider
90% of health claims are sickness, not accidental.
Indemnity plans, PPOs, HMOs and POSs are managed cares. differences b/w indem and MCO's is out of pocket, bill payment, and provider choices.
Unions or associations have at least 25 members.
Group Disability replaces income, does not pay medical bills.

Hippaa - groups 2 - 50 will not be turned down a group. Prior coverage credit is required if less than 63 days break in coverage. Associations >100 members
MIB only gets info from underwriters, who get their info from physicians.
Life insurance is tax exempt
What plan is a CODA?
If insurer pays no DB in 30 days, interest from death is paid also
How is dependent care elected for groups?
What are surrender charges for annuities?
Grace period DB = DB - overdue premiums
Irrevocable consent:
Fixed period vs. period certain
All statements are representations except fraud.
Nonforfeiture always means guaranteed values, and start when pure protection ends.
"Inflation" = "CPI"

MEDICAL EXPENSE PLANS
basic medical is combo of hospital, surgical, and physician. Have low limits, are first dollar (no out of pocket) and like a coupon book. Major medical kicks in after any of those 3 above limits are exhausted (supplemental). May require corridor ddt to get the supplemental.
Managed care includes: (HMO is most restrictive)

• Access of providers
• Case management
• preventative care (no cap HMO)
• High quality care
• Risk Sharing with service providers

HMOs:

• Gatekeeper is a specialist that gives referrals, and HMOs do not emphasize specialists.
• All parties should live 50 miles of each other.
• Kaiser is closed, only sees HMO patients, with doctors from Kaiser Permanente (diff. company)
• Pay co-pay, but no ddt. or coinsurance
• Capitation - only HMO, monthly.
• Prescription drugs always optional - anything self-administered **
• IPA - legal entity of doctors altogether (independent practice model HMO)

PPOs:

• can select own provider or their provider, but with limited benefits if out of network
• Do not need referral

EPOs cannot go out of network, have a list of providers but are the best.

Managed Care Indemnity plan - Pick a provider and after, submit all of the paperwork yourself.
Dual choice:

• Point of service (POS) - open-ended HMO (leaky) can be out of network for higher O-O-Ps
• No choice made until needed.

Optional coverages

Dental Includes

• Preventative and diagnotsic care
• Restoration (crowns, fillings, etc.), Oral surgery
• Prosthodontics (bridgework)
• Periodontics (gum disorder)
• Endodontics (root canals, dental pulp)
• Orthodontics

Vision includes contacts, exams, etc.

18 months of COBRA if terminated b/ca qualifying event (6 total) and pay 102% premiums

May get 11 month extension if disabled and pay 150% premium.

Normally for up to 20 employees, but Cali has from 2-19. After qualifying event, pay 110%

arthritis, diabetes or heart problems are all chronic ailments

Blanket plans accepted by 90%+ employees.

ADA - can't deny disableds from employ only b/c they will increase costs of insurance.

FMLA - 12 weeks unpaid but job protected leave for all employers 50+.

• 1250 hours+ is eligible 50 employees w/in 75 miles.
• Incapacity b/c preggo
• family health concerns
• Personal health condition 
• 12 weeks in any 12 months (not calendar), can be intermittent.
• 26 weeks for a servicemember's care needs.

Hipaa

• A new hire with prior group coverage cannot be denied health insurance even if self-ins.
• If worker unemployed more than 63 days, waiting period of pre-existing condition and group benefits occurs.
• Employer can only look back 6 months prior to effective date. Which means have to have medical advice about a condition, it may be imposed.
• 12 months for exclusion of pre-existings,

Flexible spending plan uses pre-tax dollars to pay health costs in advance,
End stage Renal disease - Kidneys cannot function 10%, normally caused by diabetes
Anyone 65 years old for MEDICARE - Pay premium if under 40 credits, younger than 65 must receive Social Security Disability for 2 years at least.
Even if free, medicare has a ddt established by CONGRESS. Any extra insurance is Medigap.
PACE - All-Inclsive Care, 55+ Medicare will not pay for nursing homes, but Medical (Medicaid) does.
To get Part C, must have part A and B. Part D is available under any plan except HMOs, where you need a referral from gatekeepers. DDT plans are offered with policies.
Part A - pays for FACILITY, those working in Facility, and services of Facility. Covers home health or post hospital (20% you pay for medical equipment)
Medicare is good for 60 consecutive days with a 60 day gap. 60 lifetime reserve days.
Receive Medicare card on 25th month of SS benefits or 3 months before age 65.
Pay according to a national fee schedule and non-assignment providers can only charge 15% over that. Of the amount, insured pays 80%. A provider must accept 'assignment' of medicare.
Have 8 months to switch from group to medicare (special enrollment)
Hospice care is for the terminally ill.
Appeals to a claim are only for >$100.
Part B:

• Medical insurance (i.e. provider care)
• DDT is $135 per year.
• Supplementary Medical Insurance 20% coinsurance (not co-pay!)
• eligible for part B if eligible for Part A, both are needed to purchase supplements.
• Every year not taking part B will be 10% higher premium
• If enrolled in A, must sign document to opt out of B

Part C: MCO Medicare. Pay monthly premium for Part B and for part C if selected (voluntary)Must live in area of MCO. May not have a DDT.

Part D has premium sharing and a ddt.

Summaries are sent each quarter (Med. Summary Notice).
Medicare doesn't cover:

• glasses
• Dental care
• LTC
• Prescription Drugs
• no policies limited to one ailment (multiple ok)

Worker's Comp is always primary, group is primary unless opted out.

After enrolling in Part B, has 6 months to purchase supplemental insurance without (penalty). 

First Year Commission cannot be 200% of renewal.

Must ask if this policy is replacing

Loss ratio for individual policies is 65%, group is 75%.

Medi-cal administered by CMS and Dept. of Health care services, and funded by state gov. Looks back at credit and income for 5 years.

Long-term care:

• Not for acute ailments, not for convalescence or hospitals
• HHHARP
• Hospice, Home health, Homemaker, Adult Day Care, Respite care, Personal care
• Definition: Coverage for institutional care, when convalescing
• Coverage for home care, think HHHARP
• Coverage for community care, Adult day care, Hospice, or respite, meals on wheels
• If non-contributory, this is tax ddt.
• if non qualified, benefits are easier to get, if qualified, tax advantages.
• If buy 3 policies in 12 months, considered unnecessary replacement
• Includes skilled, intermediate, home care, and assited living.

Benefit standards:

• 30 day Free look
• Renewal at least as good as prior
• Must offer inflation protection on group and individual.
• Always include alzheimer's
• Max daily benefit if indemnity
• Availability of HICAP (Counseling Advocacy)

Partnership program allows insured to apply for Medicaid.
Waiting period, length of coverage, and daily benefit all affect premiums
Indemnity policy is also nown as per diem.
3 classes of LTC: Home care/community, comprehensive LTC, and Nursing facility/res. facility
HICAP is for new applicants.
Total disability - Unable to WORK includes total loss of senses.
Permanent disability - loss of body part or something unrecoverable. Might be able to work
Partial disability - 50% income for 3-6 months. AKA Residual disability (after total disability, this covers you until policy end)
Workers' comp payout:

• Perm /partial disb - $818 per week (paatial must = 2/3 income up to $818)
• Death - $5000 for burial, beneficiary gets weekly check max is $160K per year.
• "common law" = negligence of employer
• Second injury fund - rehiring an injured, government subsidizes you if total disb occurs.

• If you only make 50% of normal income after Disab, 50% of total benefits will be awarded (max total benefit is $5K). May have a flat-dollar minimum.

Presumptive disability - Loss of sense(s) or multiple limbs. Pays lump sum
Disability policies have a choice of elimination periods (waits) and an extra 30 days for sickness coverage from policy date (probationary period)
Max benefit is 70% after tax income.
If disability recurs within 180 days, considered a continuation and elimination is waived.
Return of premium rider returns 80% of premiums if no claim (is costly)
Can waive premium pmt 90 days if disabled.
Capital Sum benefit - pays 12x monthly benefit for loss of a single limb or eye.
MRMIP

• PPO or HMO
• State money
• $2500 ind. out-of pocket, $400 household.
• $75K max benefit per year, $750K per life
• pre-existing exclusion waived if on waiting list 180+ days
• Had a prior health policy for 3 months+ consecutive
• Submitted w/in 63 days after losing prior health coverage
• Dependents are covered up to age 23 and unmarried (!)

Obamacare

• age 26 for dependents
• Erisa was adopted by obamacare (PPACA)
• 85% loss ratio on group, 80% individual/small group
• Qualifying medical expense ddt increases 7.5% to 10%
• All contributions (employer) will be valued on W-2's

Health exchange - use tax credits to buy high value policy, solely funded by federal gov't and only in CA.ONLY place where tax credits can be used to purchase health ins.
AIM: Access for infants and Mothers, Women that don't qualify for medi-cal. If no other insurance, ddt may be $500+. Up to 3rd birthday. Apply before 30 months pregnant.
Healthy Families - Under 19 uninsured children in last 3 months, income must be greater than 100% of federal guideline. Pay max $72 per month, normally $24.
OOM compliance (out-network) prevents fraud, claim denial, delays, and all providers.
PCIP - Pre-existing Condition plan (FEDERAL)

• Uses Federal money
• Only PPOs
• $1,500 ddt, $500 Brand name drug ddt, $2,500 Out-of pocket
• 15% in-network co-insurance, 50% outside co-insurance 

Unfair trade practices penalties are $5000, if willful - $10000.
GLBA penalty - $10K first, $50K if normal practice.

auto fraud is 20% of claims. penalty fraud is $150K or 2X fraud. 1/5 years in jail
discrimination $1000, $5000 if intentional, $10K if harmful.
Financial report on or before March 1st.
CIGA pays up to $500K, has 9 appointed members.
Commissioner cannot change the code, and regulates agent/insurer conduct mostly
40 days to accept a claim after receiving proof. Within 15 days must acknwledge, furnish forms, and begin investigation of claim. After accepting, must remit payment in 30 days. Fraud increases 40 days to 80 days to accept/deny.
Portfolio vs. new money method of crediting returns.
Group premiums are always DDT for businesses, but over $50K benefits will trigger employee taxes.

Basic health = Basic Hospital/physician/surgical, may have corridor ddt if supplemental added.
Capitation for HMO subscribers
Cal-COBRA small (<20) - pay 110%, for 36 months
4 months Maternity leave in CA
Part B comes with Part A
Know ADL's!!!
**HRA - Employers, HSA - Employees
63 day rule for transfer of group policies.
Accidental death is 2x Face.
Disability has different underwriting techniques. Rates are per $100.
Life rates are per $1000 and Health rates are per $1
QC's -start at 21, need 6 and then can get SS for disability. Need 40 (one each year) if not disabled. Disability years (partial too) are exempt. Disability insured - 20 QC's in 10 years age 31 or older
Group LIFE policy taken for 70% of employees, 85% non-key. Premiums over $50K will be included on W-2. No conversion for AD&D. Group health Contributory - 75%. Non-contr. - 100%
"incidental" is less than 25%
401k = CODA plan
Social Security AKA OASHDI
Defined benefit = defined retirement.
1035 exchange - Life, endowments, or NONQ annuities.
Annuities are after tax dollars, but interest is taxed at distribution, and are part of an estate (!) Deferred income is taxable. Qualified=tax-deferred
Gifts up to $13K don't incur estate tax. If deceased owns policy w/in 3 years of death, has estate tax. Total estate is assets + life policy and is typically 45% after a threshold of 2 MM. Spouse gets money tax free and no estate tax. Premiums for charity policies are DDT.
MEC - Cash rich Permanent policy (10% penalty)
Universal Life Grace = 60 days
Seniors require 14 point type.
TSAs have loan provisions and are 403b.

Social security has a 5 month waiting period.
3x more likely to become disabled during working years than die.
KNOW ADLs in LTC
What are credits??????
What are loss ratios? Percentage of premiums paid in benefits.
What is cash value used for? (nonforfeiture values?)
529 plans are qualified, but not annuities. For college savings.
What are death benefits on all types (term, perm). Paid up policies have lower DB.