a prospective agent must be 18 years of age or older. In addition, they must be fingerprinted and cleared by the state; and also take the pre-license class or self-study program and pass the insurance exam.

No minimum residency period in the state is required.
U.S. Citizenship not required but you must read/write english

Solicitors

Producers may hire licensed reps to help them sell or service business. They are the agent's employee - not the company's employee.
They may hire as many as they want; but the solicitor can only rep one agent.

Contract of adhesionSince the insurance company makes the contract, the courts rule AGAINST the company if the contract is vague or unclear. Any AMBIGUITIES in the contract are settled in favor of the insured.Essential features of a legal insurance contractRequirements are: 2 or more competent parties, legal purpose, promise in exchange for consideration (the premium and honest answers on the application) and offer and acceptance.AleatoryUnequal value is given - a small premium may produce a large death benefit.UnilateralInsurance is a one-sided contract - only the insurance company makes an enforceable promise. The customer can drop the company anytime - the company can't drop the customer."Consideration"This requires an exchange of value. The client gives money and accurate honest answers on the application. The company gives the promise to pay benefits. There is no contract if either the money or the application is missing or incomplete.Agent and fiduciary responsibilitya legal representative of the "principal" (their company). Their acts & knowledge are considered the acts & knowledge of their company. They have a fiduciary responsibility (financial) to their company and the client, when money is held on behalf of another.Change of addressAgents corporations and partnerships must report their change of address or name within 30 days to the Insurance Dept. Agents may represent more than one company.WaiverGiving up a known right. For example, waiver of premium.Human life value conceptHow much a worker represents in earnings. Projecting your income x number of working years. what are you worth?Total needs selling conceptHow much insurance is needed for: final expenses, paying off mortgage or other debts, education for children, family income, pay death taxes. It measures how much you owe.Living benefits of life insuranceThe cash value of a policy can be used during your lifetime - by loans, or surrenders, or taken as income at retirement.Re-entry Term PoliciesThis type of term policy permits the insured to change to a lower premium, if they can prove their medical insurability.Level Term InsuranceA term policy that has the same death benefit for its entire coverage period. For some policies, the premiums increase each year (annual renewable term) to their termination age. The death benefit stays level, while the premium incureases.Term Insurancea type of policy that pays a death benefit only and builds no cash value.Decreasing Term InsuranceThe type of policy that reduces in value over time - often purchased to protect a mortgage. The premium stays level, while the death benefit decreases.Permanent InsuranceAny type of life insurance policy that builds cash values. It could be Ordinary, Variable, or Universal life.Face value or face amountThe amount of benefit that will be paid at death. This is shown on the face page of the policy.Whole lifeA type of insurance that has premiums paid to age 100 or beyond, with coverage that continues to that age. The policy then endows and pays it's face value.Cash valuesThe savings portion of a policy that builds up within a permanent policy. It is created by a premium overcharge. The cash values can be accessed by surrender or with a loan.Convertible TermA feature in some term policies that permits "conversion" to permanent Whole Life policies without evidence of insurability (health, occupation, hobbies, etc.) Not "automatic" in all policies - this must be written into the contract.Renewable termA feature in some level term policies that permits the policy to be renewed (at the option of the insured), without proof of insurability, to it's termination age. The policy will state the maximum renewal age.Attained agethe age the insured is now.Original agethe age the insured was when they bought the policy.Uses of term insuranceterm insurance is most appropriate when there is a temporary need (like paying off a mortgage) or a large need, with little money to pay for insurance.Endowment policiesThis is a life insurance policy that lasts for only a few years (ex: endowment in 20 years). The cash value equals the face value and is paid to the owner - no insurance remains.Jumping Juvenile policyA policy issued to a child where the death benefit is reduced in the early years. The DB jumps 5 times at age 21 and remains level to age 100. The premiums don't change.Survivorship Life or Joint and Survivor Life (2nd to die)One policy that insures two people, with the death benefit paid at the last death (or after the 2nd insured dies). It is often designed to pay federal estate taxes. It is cheaper to but one Survivorship policy than two individual policies.Juvenile InsuranceA cash value policy that is issued to an insured who is under age 15. It is owned by a parent or guardian.Limited payment lifeThe type of policy that can be "paid up" before age 100. The premiums stop but the insurance continues to age 100. The premiums are higher per year, but are paid for fewer years.Single premium life policiesthe most compressed form of limited payment life - one premium keeps the policy in force until age 100.When must cashed value be credited?Cash value must be credited by the permanent policy's 3rd year.Joint LifeOne policy that insures 2 people. The death benefit is paid at the death of the first person -- no insurance remains on the other.Benefit RidersAdditions to or modifications that can be added to a policy at issue, or later if the customer is insurable.Securities and exchange commission (SEC)The federal regulatory organization for the securities industry. They are the parent of FINRA/NASDCorridorThe difference in value between the cash value and the death benefit in a Universal Life or Variable Life policy. The policy must maintain this minimum separation to qualify as life insurance.Variable Universal LifeA policy that includes the flexibility of Universal Life and the securities separate accounts of Variable Life. Both Securities and Life licenses are required to sell any variable policy.Variable LifeA permanent insurance policy, with premiums invested in "separate accounts", NOT the company's general account. The minimum death benefit is guaranteed but may increase over time. No guarantee of cash value is provided.Target premiumIf the client pays this premium annually, the policy will remain in force.Universal Lifean adjustable policy with "interest sensitive" flexible premium insurance policy. It develops cash value and has 2 death benefit options. Option A: level death benefit Option B: increasing death benefit Guar. min. interest is added and cost of insurance is deducted each month.Adjustable Lifethe death benefit of insurance can be increased (if insurable), as well as the amount of premium paid or the number of premium years. The changed can be made simultaneously.Factors that make up a premiumThe factors that determine the gross cost of a policy are: 1. Mortality, minus 2. Interest, plus 3. Expenses - including commissions & profitMutual Companya company that is "owned" and controlled by it's policy holders who receive non taxable dividends from "participating" policies.Stock Companya company that is owned by it's shareholders or stockholders, who receive any dividends.Payor benefit rideran extra cost rider that will pay the premiums for a juvenile insured, if the adult owner dies or is disabled. (because the owner is an adult, and the insured is a child.)Family term benefit riderWhen a family is covered in one policy. Permanent Whole Life insurance on "insured", with term insurance on the spouse and/or children. Insurability is required for existing spouse & children. One fee covers all children, natural born or adopted, who are automatically covered at age 15 days (without insurability).Guaranteed Insurability Benefit RiderAn extra cost rider that permits the policy owner to buy additional policies, at specific ages without evidence of insurability.Accidental Death BenefitAn extra cost rider that requires the insurance company to pay an additional benefit if the insured dies within 90 days of an accident - often called "double indemnity".Waiver of premium benefitan extra cost rider that requires the insurance company to take over and pay the insurance premiums if the insured is totally disabled for 6 months. A refund is made for the 6 months paid. No taxable event for the insured.BeneficiaryThe person (or trust, corporation, charity, etc.) named to receive the proceeds of a policy at death. Goes to the primary (if they survive the insured), otherwise to contingent or tertiary. "Estate" is the last choice. A divorced souse beneficiary is considered to have "died" and will not be paid.Per CapitaLeaves the proceeds equally to all surviving beneficiaries.Per stirpesLeaves the share of proceeds of a beneficiary that has died before the insured, to the children of the decedent.C.O.L.A. Cost of living adjustmentThis rider increases the amount of death benefit automatically, as the Consumer Price Index (CPI) increases.R.O.P. Returns of premiumsa rider that increases the amount of death benefit, with term insurance equal to the cumulative premiums.Policy Sales IllustrationsSales proposals/ Illustrations must show guaranteed values and clearly identify dividends as estimates only. A sales illustration must be left with the client and signed by the agent, or it is a violation of state laws.Dividendsa return of a portion of the surplus of a "participating policy". These are considered to be a return of excess premiums and are not taxable. Dividends are NOT guaranteed, and are based on current estimates only.Dividend optionsC- cash, receive a check, not taxable R- reduce next year's premium A- accumulate at taxable interest P- paid up additions (give the most if die) P- paid up insurance, pays policy up early Y- early renewable term (5th option)Participating policiespolicies that return a portion of the company's surplus to policy holders are called participating policies.Non-participating policiespolicies that do not return any surplus to policy holders are called non-participating policiesLegal reservesthe money required by the state to be held by the insurance company to pay expected future death claims. They are regulated by the state.Applicationthe written request to an insurance company with personal facts (Part I), medical history (part II), and an agent's statement (Part III), signed by the insured. A photocopy is included in the policy.Warrantya 100% true statement. This degree of accuracy is not required on an insurance application. Any error will create a breach of contract and void the policy.RepresentationsThese answers on an insurance application are true "to the best of the insured's knowledge." Non-material facts could be forgotten or left out and still be okay.MisrepresentationsFalse representations (answers) on an insurance application. If intentional and with intent to gain a financial advantage, then can be fraud. May be contested for 2 years.Incontestable clausethe insurance company can only contest a policy for 2 years after issue - and only for "willful misrepresentations." If the company would have charged extra or declined had they known the information, it is a contestable event. After two years - all claims are paid; policy is "incontestable".Suicide clauseThe insurance company will refund only the premiums paid (without interest), if the insured commits suicide within the first 2 policy years. After 2 years, claims due to suicide will be paid.Conditional receipta receipt given by the insurance company during the underwriting process. Insurance will be in force only if the company finds the insured an acceptable risk. The receipt does NOT BIND the company to accept the risk."Offer"when the prospective client sends a complete and signed application and the first months premium to the company, they are making an offer. A "counter offer" kills the original offer - no contract is yet in force.Lapsethe premiums were not paid, so following the grace period the policy is not in force. No death benefit is paid if the insured dies.Grace periodIncluded in all life policies. A period of time after the premium is due, when the policy will remain in force without payment. The time limits are 31 days for Ordinary Life and Variable Life and 61 days for Universal Life. If an insured dies during this time, the death benefit is paid, minus any premiums due.Backdatinga policy may be issued up to 3 months before application to save an age change, and have the policy issued at a lower premium. Premiums start at the issue date.Owner's rightsChange the beneficiary Make loans or surrenders Assign - give away the values or ownership Change premiums or dividend payment optionsAssignmentsthere are ways a policy holder can give away the values of a policy. Absolute - gives away forever to an "assignee", ex: college/charity Collateral - gives away temporary, as for a loan to a bankMisstatement of age clauseThe company will adjust the death benefit (to the right amount) if the insured gave their wrong age or gender at issue. For example, if the premium should have been $20 per $1000 and was issued at $15 per $1000. Actual benefit paid will be 15/20th of the issued amount (75%).Inter Vivos TrustA trust created and funded during a person's lifetime. The death benefit is paid to the trust, which will administer the funds for a small fee.HIV/ AIDS TestInsurance companies now need written permission to do blood tests for HIV. No questions on app about sexual orientation, or frequency HIV tests. The forms ask who can be informed of a positive test - applicant, physician, etc.Spend thrift clausethe policy holder restricts the amount of money that the beneficiary can receive. The beneficiary can't borrow against or commute, assign or in any way receive the proceeds in a lump sum. This can protect the beneficiary from claims of their creditors.False statements on appsany false statement on an app or claim Form is a criminal action and can result in jail.Insurable interestYou must benefit from the continued life of the insured - a "love and affection" or economic benefit from the insured. You can't buy insurance if the only relationship is as a friend. Everyone has an unlimited interest in their own life.Federal fair credit reporting actApplicants for insurance must be told of (and give their okay) to the insurance company's right to check the MIB and obtain their medical history. With this law, the applicant can correct any errors on their report, by getting the report from the inspection company. The agent or insurance company cannot disclose this information to the applicant.Medical Information Bureau (MIB)A non-profit computer center that stores medical information (by code) that has been developed by cooperating insurance companies on their applicant. The issue decision of the company is not reported. Only other insurance companies can access this information - not the public.Insurability factorsFactors in underwriting are: LAMPHO - Life style - Age - Medical history - Physical condition - Hobbies - OccupationPreferred standard substandardThese classifications of risk are assigned by the insurance company after underwriting: "Preferred" is a discounted cost. "Standard" is average risk. "Substandard" policies are issued, but at an extra charge - "rated up."Exclusions (to life insurance coverage)These are the few times in which a life insurance policy will not pay the proceeds. They may be: war, high risk flying as a crew member (military or student pilot, crop duster, aerobatics, etc.), high risk hobbies (example, car racing).Attending Physical Statement (APS)the insurance company underwriter sends a request to the physician, signed by the applicant, releasing personal medical information to the company. The doctor will not release information without clients signed permission, because of HIPAA regs.Retention limitsThis is the maximum amount a company is willing to insure any single life for. Beyond this amount, it will "reinsure" (share the risk) with other companies.AnnuityA contract issued by an insurance company designed to grow tax-deferred and distribute money over a lifetime. Income can be paid for the rest of one or more person's life. Can grow fixed (guaranteed) or variable (separate account - investment risk).When are Annuity payments received?This is the "pay-out" period. "Immediate" payouts start one modal interval (one month to one year) from purchase. There is no accumulation period. Deferred annuities start payouts at some time in the future (over 1 year from the purchase).How can annuities be purchased?Single premium - one single deposit for a payout within 1 month to 1 year. Periodic flexible - make deposits at occasional intervals - as often as desired, for a benefit to be paid later. This is the "pay-in" period.Contingent deferred sales chargeA "back end" charge taken from an annuity surrendered before it's maturity date. It gradually decreases to 0. it can be waived for death, disability, or admission to a Long Term Care facility.Non-forfeiture valuesWays the insured can access the cash value of their LIFE POLICY or ANNUITY. Options are: -Use cash- surrender or take a loan -Buy reduced paid up policy (longest) -Extended term - auto option (most)Settlement optionsOptional ways (other than a lump sum) for the proceeds of a policy to be paid at death or surrender. Leave at (taxable) interest Fixed period or amount Life annuityMarket value adjusted annuityThis annuity is invested in bonds, so if it is surrendered before bond maturity, any gain or loss is passed through to the owner.Annuity payout options (1st three)-Pure life- income is paid for life, with remaining balance forfeited to the co. -Life income "refund" - income is paid for life, any balance of the principal paid to beneficiary at death. -Life income period certain - income is paid for a certain # of years to annuitant or their beneficiary, and the annuitant if they live longer than the certain period.Balance of annuity optionsJoint & Survivor - income is paid until the last of 2 annuitants dies. Larger payout to couple 70 & 70, than 70 & 69. Joint annuity - pays to the 1st death of two annuitants Temporary period- pay only a stated number of years (like lottery payout), not for life.Personal uses of annuities-Personal "tax-deferred" retirement fund. -Create an education fund for children -Fund retirement plans - IRA, 401k, SEP, SIMPLE, Keogh HR-10. Corporations can't own an annuity in their own name - they can create retirement plans for their employees.Equity indexed annuitiesThe client invests their money in an annuity that grows depending on the S&P 500 index. Their principal is guaranteed and they have a chance for larger gains than a fixed annuity. A minimum rate of interest is guaranteed, so they can be sold with a life license.Variable annuitiesThe premiums are invested in one of the separate accounts of the company. The annuitant is credited with "accumulation" units (like shares) during the prepayment years, and a fixed # of annuity units at payout. The value of the account is computed at the end of each business day - called forward pricing.Policy loansThe cash value of a policy may be pledged as collateral for a loan from the insurance company. The company will loan from it's assets and charge interest until loan is paid back. Loans are not taxed as a distribution. Loans can be postponed 6 months.Automatic premium loan (APL)An optional provision that gives the insurance company the right to pay an overdue premium from the cash values of the policy itself. The loan and interest not paid is added to the original loan. The client must give written permission on the application to make this kind of loan.Fixed loan rate Variable loan rateA maximum fixed rate of 8% is charged on outstanding loans. A variable loan rate is based on the Moody's Bond Index rate that is effective at the time of the loan (or similar S&P index).How much is paid at the insured's death?The face amount of a life insurance policy is paid at the insured's death - minus loans and past due interest, and overdue premiums during the grace period.Income taxation at surrender of an insurance policyThe gain in a life insurance policy is taxable as ordinary income (cash value minus net premiums paid), if the policy is surrendered.Accelerated death benefitA provision in life insurance that advances the death benefit, when the insured is terminally ill or in a nursing home. The balance of the death benefit is paid to the beneficiary when the insured later dies.Modified endowment contract (MEC)If a policy fails the 7-pay test, any gain will be taxed LIFO - plus a 10% penalty tax if before age 59.5. Death benefits are still income tax free. A material change requires a new 7-pay test.Business insurance3rd party life insurance plans used to buy the interest of business owner at their death. The premiums are not tax deductible; DB tax free. Stock redemption- for corporation (1 per owner). Cross purchase- for partnerships (1 on every other partner).Viatical settlementsThe sale of a life insurance policy by a terminally ill viator to a 3rd party. The rep shopping for the viator is the broker. The viatical settlement provider buying the policy is named as the beneficiary and at the death of the insured, they receive the DB. A special license is required. A 15-day "right of recission" must be included.Non-qualified plansCompanies may provide extra plans to selected employees (not all). Because of this discrimination, the premiums do not quality for a tax deduction to the employer.Group life insuranceA minimum amount of life insurance is provided by the employer who pays all of the premiums. It may be converted to whole life within 31 days of termination. The premium is deductible to the employer as a business expense. DB paid tax free.Business uses of life insuranceA business may buy individual policies on selected employees. Any kind of insurance may be used. 1. Buy Sell plans- tax free DB to buy stock 2. Key person- tax free DB to reimburse co. 3. Exec bonus- taxable income to special person.Traditional IRA (Individual retirement account)Workers with earned inc. may put up to $5500 in trad IRA (even kids). You can't buy insurance, but you can buy annuities. Deposits grow tax deferred. Distributions before 59.5 are taxed & 10% penalty tax. Must start to withdraw MRD at age 70.5. Spousal IRA's permit a non-working spouse additional $5500. Over 50+ may add $1000.ROTH IRAA ROTH IRA may be created by workers with qualifying adjusted gross income (AGI). Contribution are not tax deductible, but grow tax deferred & all distributions may be taken out tax fee if age 59.5 & the account open for 5 years. First time home buyers may take out $10,000 after 5 years, penalty free. Over 50+ may add $1000 per year.PremiumsThe "consideration" paid by the insured to the insurance company in exchange for the insurance protection provided. Paid annually, semi-annually, quarterly or monthly mode. The more frequently they are paid, the higher the cost (for example 12 monthly payments costs more than one annual).Taxes and insurance premiums and proceedsIndividual life insurance premiums are not tax deductible. Life insurance death proceeds (of any amount) are not taxable for federal income tax purposes, but are included in the estate of the deceased for federal estate tax purposes. Gifts of in-force insurance are recaptured in the estate for deaths within 3 years.Dividends and taxesDividends are considered a return of excess premiums and are not taxed as income. Dividends are NOT guaranteed, and must be shown clearly as estimates only on any sales illustrations.Powers of the insurance directorThe director of insurance can: - Enforce the insurance laws - Approve agent appointments - Hold hearings, levy fines & suspend licenses The director cannot prosecute agents for criminal action - must refer to Atty General.Revocation of license1. The director can revoke a license following a hearing. The resulting action can be appealed to a county court judge. 2. Agents with assumed names must tell ODI. 3. Felony convictions require written permission to get license.Requirement to notify state of legal actionAgents must notify state of any legal action against them within 30 days of action - in any jurisdiction.RebatingOffering as an inducement to buy, a refund of part of the commission, or anything else of value. Commissions can only be shared with other licensed agents.TwistingThe illegal replacement of an annuity or a life policy which occurs when the agent makes an incomplete or misleading comparison. The state is looking out for the consumer - not the agent or the insurance company.DiscriminationThis is an illegal act which occurs when you charge different rates to applicants of same class based on race, national origin, color. Legal acts include charging more to males than females, more to smokers or unhealthy applicants than healthy people.Who purchases group life insurance?1. Companies who may buy term life insurance are: employer-employee, labor unions, associations, MET, debtor-creditors, credit unions. 2. Contributory - require 75% participation; non-contributory, 100%. May be converted at termination to WL without insurability - in 31 days.ReplacementsReplacements occur when an agent replaces one policy already in force with a new one. To be legal, the old company must be notified. A signed copy of the sales illustration and replacement form must be left with the client. Both the agent and client sign the application question regarding replacements. 30-day free look.Types of companiesCompany home offices are: 1. Domestic if within the state 2. Foreign if in another state 3. Alien if in another countryCompany Financial auditsEach company undergoes a financial audit every 3 years, paid for by the company being examined. The audit may be postponed to a maximum of 5 years.1035 Exchange/ ReplacementsInstead of an insured surrendering a policy for it's cash value and buying another they assign (by form 1035) the policy to the company. The cost basis is maintained. This is a "tax free" exchange. MUST GO: Life to Life Endowment or Annuity Endowment to Endowment or Annuity Annuity to Annuity (across or down, NOT up)Ten day free lookThe insured may return a policy within 10 days of receiving it for a full premium refund. Return to any agent, or have it postmarked within 10 days of delivery receipt.Unfair claims practicesAny act that doesn't pay due claims. 1. not sending claim forms within 15 days 2. not paying fair and due claims within 5 working days of agreementDo not call listIf a customer asks that they not be contacted by other reps of that company, their name must be entered within 30 days. Customers sign up with the Federal Trade Commission (FTC). Calls to the customer can only be made between 8am - 9pm in customer's time zone.Life & health guaranty associationIf a company becomes "insolvent", state will assess all other admitted companies in state to make up $100,000 CV/Health claim and $300,000 death benefit. Guaranty Association cannot be advertised, but rep can answer questions.Health insurance exclusionsCommon accident and Health exclusions are: -pre-existing conditions -self-inflicted injuries (intentional & foreseen) -dental expenses -injuries that occur while committing a crime -cosmetic surgery -injuries during military service or warErrors & omissions coverage (E&O)This is insurance to pay for defense and claims of lawsuits for oversights and mistakes, (like malpractice insurance). Agents should document their interviews. It does NOT cover intentional acts such as fraud or theft or embezzlement.Disability IncomeA policy that will pay an income directly to a disabled worker (also called loss of time or income replacement coverage) if they are sick of injured.Own occupation disability definition Any occupation disability definitionOwn: a definition of a disability income contract that will pay the insured if they can't do all "the duties of their 'own occupation'". Any: A definition that provides an income only if the insured is unable to do the duties of "any occupation for which they are suited by training, experience or education".Presumptive disabilityThe disability benefit will be paid if the insured suffers a "loss of use" of 2 limbs, total blindness, or loss of speech/ hearing - even if able to earn an income.Partial DisabilityThe inability to do some of the important duties, but not all of the duties of your occupation.Residual disabilityA provision in some policies that will pay a disability income if there is a 20% or more reduction from prior income- even if still working.Benefit periodThe amount of time a disability benefit will be paid to a disabled insured.Short term disability income benefit VS. Long term disability income benefitShort: a disability income benefit period of 2 years or less. Long: a disability income benefit period of over 2 years - to age 65.Elimination periodThe waiting period between the onset of the claim event, and when the disability income benefits start to be paid. For example, a policy with a 60 day wait would start to pay benefits on the 61st day. Benefits are then paid 1 month in arrears.When are disability income benefits taxable?Disability income benefits are taxable if the policy is paid for by the employer. Benefits are NOT taxable if bought by the individual with non-tax deductible premiums. A proportionate amount is taxable if the premiums are shared.How do social security and group disability income plans integrate?Group insurance disability income benefits will be reduced by the amount paid by Social Security and/or Workers Compensation benefits. Personal policies are paid in addition to any other coverage.Disability income renewability optionsOptions are: 1. Cancelable- by co or for "stated period" 2. Optionally- at the option of the company, company can cancel at any premium date 3. Conditionally- can keep if continue to work 4. Guaranteed renewable- can increase premiums but can't cancel the policy 5. Non cancelable- cant' increase & can't cancelDisability income riders1. Waiver of premium- when receiving claims 2. COLA- cost of living adjustment increases benefits when Consumer Price Index (CPI) increases 3. Future increase option- client may buy more dI if income increases 4. Social Security offset- pays additional amount until SS startsBusiness overhead expense policies (BOE)A disability policy that pays benefits to cover the expenses of a business- like rent, utilities, and clerical expenses while the insured is disabled. Premiums are deductible. Benefits are taxable. Expenses paid out are then deductible."Basic" medical expense plansPays a defined and limited benefit for: 1. Room and board 2. Miscellaneous expenses 3. Surgical expenses Often first dollar coverage - no deductibles or co-insurance."Major medical" plansA medical policy that provides broad coverage. The characteristics are: deductibles, co-insurance, stop loss and large limits. Usual, customary and reasonable charges vary but geographic region.DeductiblesThe amount an insured must pay personally before the medical expense plan will begin to pay. For example $100 deductible, 80/20% coinsurance on a $1100 claim. $1100 - $100 deductible = $1000 80% of $1000 is $800 which is paid by insurance. Client pays $100 deductible and $200 balance= $300Co insuranceA cost sharing provision in a major medical policy that requires the insured to pay some of each claim; the company pays the rest (often 80/20%).Quality assuranceThe HIC will "credentialize" the doctors and hospitals, inspect the facilities and reputation of the providers, and provide sufficient providers to improve the health care of the client.Comprehensive "Major Medical" plansThis plan combines a traditional major medical policy with "basic" coverage which pays first. The plans are separated by a "corridor deductible".Blue cross/ Blue shieldA prepaid health care plan that pays benefits directly to providers for their "subscribers". Blue cross pays the hospital, Blue shield pays the physicians.Health savings accountsA high deductible medical expense plan is created. The employee may contribute pre-tax to a deferred HSA account. Claims for deductible are paid from the HSA, but can be invested and grow tax deferred to age 65. Funds taken out for non-covered expenses are taxable and 20% penalty taxed pre-65.Preferred provider organization (PPO)A commercial insurer that provides a medical expense plan with features of an HMO (listed doctors) and a regular plan. The insured will pay less of the claim if they go to a listed providers, or pay more if they go outside the PPO network (POS - Point of Service option).Health maintenance organizationsA health care system that emphasizes preventative care ("wellness") within a service area. The insured will sue doctors that are approved by the HIC, unless needed for an emergency.Experience rating VS. Community ratingExperience: the claims experience of the specific group will determine renewal premiums. Community: all the plans within the service area are increased by the same percentage.HMO coveragethe HIC must provide inpatient and outpatient care, 24-hour emergency care (in or out of the service area), annual physicals, without a lifetime benefit cap.HMO co-paymentsThe small charge (often $10-$30) that HIC patients are required to pay for each doctor visit. The hold-harmless clause forbids further charges to the patient.GatekeeperThe primary care physician (PCP) who refers the patient to other specialty physicians, if required by the plan.Case management provisionsCost savings measures include: 1. 2nd surgical option 2. Concurrent review - in-hospital monitoring to assure timely release 3. Prospective review- confirmation of payment and medical necessity 4. Credentialed providersNewborn children Handicapped childrenNewborn and adopted children are covered from the moment of birth and to day 31, then must be requested to be continued in the plan. Handicapped children may be continued beyond age 19 by request (within 31 days) and annual proof of continued dependency.Affordable care act (ACA)All states required to have "exchanges" effective Jan. 1, 2014, offering essential benefit plans, with no pre-existing conditions and no lifetime maximum benefit.ACA plansStandardized plans under ACA are Bronze, Silver, Gold, and Platinum (60-90%) coverage. Young adults covered to age 28 if: unmarried, students with no other benefits available.ACA objectivesPurpose is: 1. Offer competitive plans 2. Stabilize the economy 3. Reduce gov't healthcare spending 4. Info on enrollment & subsidiesWho has health savings accounts (HSA)- Company of any size can contribute (tax-deductible) to HSA, with funds invested tax deferred, to 65 - Combined with high deductible medical plan: small claims paid from HSA, large from insurance. - Portable job-to-job, year-to-year - Non-medical distribution prior to 65 taxed, plus 20% penaltyGroup insurancean insurance policy that covers several people (with a common interest) in a single master policy. The insureds receive a Certificate of Insurance instead of a policy. One certificate per family, no matter how many people are included.Eligible groups for insuranceEligible groups are: 1. Employer-employee - 2 or more employees get guaranteed issue coverage 2. Multiple Employer Trusts (MET's) 3. Labor unions or associations 4. Debtor-creditor (credit life) - flat premiums at all ages, pays creditor, only for actual loan balance.Adverse selectionPeople who are in poor health will enroll in a group plan in higher numbers than healthy people. Group plans will require a high percentage of eligible employees in the plan, be actively at work, have business purpose before obtaining group coverage.Contributory Non-contributoryIf the insured is required to pay part of their group premium, the company wants at least 75% participation - to avoid adverse selection. If the employer pays all of the group premium, then 100% participation is expected.Health reimbursement accounts (HRA)This plan is paid for by the employer, who reimburses the employee for deductibles and co-insurance not paid for by their insurance. Tax-deductible expense to employer - not taxable to employee.COBRAA federal law requiring a company with 20+ employees, to give terminating employees the right to continue health coverage in the group plan for 18 months. After completing COBRA, the employee can convert their health to a BASIC/ standard plan, without insurability.Self insurance plansCompanies with predictable claims and large enough income to meet claims expense, may pay their own claims from assets. They hire a TPA to administer and pay the claims, for market and record keeping - but not to "insure" the claims. The laws of the home state prevail.Coordination of benefitsWhen a person is covered under 2 health plans, the "primary" plan will pay first, then the "secondary" will pay what is left. Insured can't make a profit on the claim.Impairment exclusionsOn a personal accident & health policy, when an insured has a serious medical condition, the company will exclude coverage for the stated condition for the life of the policy. Group plans don't require insurability have a maximum 12 month pre-existing condition exclusion (offset by HIPAA).Cost containment provisions of Health policiesAttempts to hold down costs: 1. Second surgical opinion 2. Pre-certification 3. Concurrent review while in the hospital 4. Outpatient or ambulatory treatmentUniform health provisionsThere are uniform health insurance provisions" most of them are required; some are optional. If a state law changes, the policy will automatically change to meet the new minimum standards.Medical plans children coverageChildren are covered at birth and for 31 days. Newborn and adopted children are covered without insurability. To continue the child's coverage, and additional premium may be required.Mandatory provision: notice of claimThe insured must notify the company of a claim within 20 days of the event (or whatever is reasonable).Mandatory provision: claim formsThe insurance company must send claim forms within 15 days of being notified by the insured. If the company doesn't provide claim forms, the client should file on own.Mandatory provision: proof of lossThe insured must send proof of loss (bills) to the company, within 90 days or whatever is reasonable.Mandatory provision: Payment of claimsThe insurance company must pay claims "without delay" (within 60 days). If suit is made, it must be brought within 3 years of the claim. Unsubstantiated, fraudulent, or criminal action claims do not have to be paid.Optional provision: Relation of earnings to insurance (called "over insurance")If the insured has insurance with more than one company and has more than 2/3 of income in benefits - the plan will pay only a pro rata portion and will refund premiums on the excess coverage not paid. Can't profit by having multiple policies and duplicate claims.Social securityA social welfare plan paid for by taxes on earned income, from employers and their employees. Benefits are paid for death, disability, rehabilitation and retirement (not for legal expenses).Social security - fully insured Social security - currently insuredFully: a worker must be "fully insured" and have 40 QC's (10 years) to qualify for retirement benefits. Currently: A worker must be "currently insured" and have a minimum of 6 quarters of coverage of the last 13 quarters (QC's) to qualify for survivor & death benefits.Social security survivor benefitsA monthly income will be paid to dependent children (to age 18) and to a dependent spouse caring for the child under age 16. A widow(er) will receive benefits beginning at age 60. Between child's age 18 and widow(er)'s age 60 are called the "blackout years" because no benefit is received.Social security retirement benefitsA monthly income will be paid to a fully insured worker at full retirement age - 66 plus (full benefits) or age 62 (early retirement at 75% of benefit). Some of the SS retirement income is taxable, based on the workers PIA.Social security disability benefitsA monthly income will be paid to a worker who qualifies (can do no meaningful work). There is a 5 month waiting period and the disability must last 12 months or result in your death. They must have 20 of the prior 40 quarters of coverage (easier rules for young people).Workers compensationPays benefits for accidents and sickness, death, medical and rehabilitation claims, contracted on the job. The accident can occur away from the job site and still qualify. Workers comp is primary for on-the-job disabilities - group DI is secondaryDental specialtiesPlans that pay dental expenses for restoration (crowns, bridges, fillings) or prevention (cleaning, hygiene, fluoride); orthodontics may be optional. Periodontics- gum disease Endodontics- Root canals, treating nerves Prosthodontics- dentures, bridgework Orthodontics- braces, appliances Oral surgeon- Surgery of the face and mouth DDS- general dental careWorkplace marketing or Limited policiesTypes of policies (travel, cancer, hospital income plans) that pay benefits only for these stated and "limited" conditions. Blanket policies cover college students, sports teams, elem school kids. Critical illness plans pay insured if stroke, H.A., or transplant, and survive 30 days.MedicaidThis plan for healthcare and LTC is funded by the state and federal gov't and is administered by the state. To qualify, a person must have low assets and income or "spend down" assets to become poor.MedicareThe government's health care plan for people age 65 and over, or if disabled for 24 months, or with end- stage kidney failure. It is paid for by a tax on earned income. Have 7 months to enroll (3 months before birth month & 3 months after), or wait until next Jan- March (general enrollment), with benefits starting July 1st.Medicare Part A (details)In patient hospital care- 150 days Skilled nursing care - 100 days Home health care + 80% of durable medical equipment Hospice care for terminally ill Respite care - break for "caregiver" caring for a terminally ill patient if needed.Medicare part B (details) & Part C & DPays the physician after deductible and 80/20% co insurance. There is a monthly charge paid by the insured. Can select Medicare Part B when you are eligible to have Part A. Apply through the Social Security office. Part C (medicare advantage) provides benefits through HMO/PPO. Part D provides drug coverage through private companies.Medicare supplement policiesPolicies purchased from private companies to pay the deductible and coinsurance not paid by medicare. Sold as plans A-N and regulated by the states. All plans include "A" basic coverage- Part A co pays, Part B doctor charges, and 1st 3 pints of blood. Must give a Buyers Guide and outline at time of sale.Long term care policies (LTC)An insurance policy sold by private companies to persons concerned about a nursing home expenses. It will pay when an insured has "functional inability" to perform 2 Activities of Daily Living (ADL's) or for Alzheimer's. Provides: benefit period of at least 1 year, and a 30 day free look. State regulated with strict cancellation rules. Benefits are tax free to the insured. Must give outline coverage & Buying Guide with state aging services at application.Life policiesOrdinary - guar DB & CV with fixed premium Universal life - interest sensitive flexible premiums Variable life - use separate accounts, two licenses Decreasing term - level prem. decreasing DB Level term - with annual renewable prem, level DB Whole life - premiums and cash value to age 100/121 Limited pay - pay few years, in force pd to 100/121 Joint & survivor - covers two & pays at 2nd death Joint - covers two and pays at 1st death Juvenile - covers child with adult ownersInsurance LawsInsurance director enforces law of state Sends cease & desist order by certified mail No rebating- commissions to licensed agents only Defamation- malicious comments about competitor Replacement- ok w/ notice to co. & copay left w/ client Twisting- no notice to other company of replacement Ads- fair and honest, co. responsible for ads Domestic companies audited every 3 yrs, pay own cost Ohio LH Guar Assoc- if co. insolvent, assess other cos. Can't advertise to the publicSecurities LawsVariable life and variable annuity- require life and FINRA 6 or 7 securities licenses

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