Insurance Principles
25%of exam
RiskContractsUnderwritingInsurable InterestProvisions
Life Insurance
30%of exam
TermWhole LifeUniversal LifeRidersBeneficiaries
Health Insurance
20%of exam
Medical PlansDisabilityLTCMedicareManaged Care
Annuities
15%of exam
AccumulationAnnuitizationFixedVariablePayouts
Regulation + Ethics
10%of exam
LicensingReplacementSuitabilityTwistingRebating
Quick Facts
- Exam
- L&H
- Body
- State DOI
- Questions
- 100-150
- Time
- 2-3 hr
- Pass
- 70%
- Scope
- National concepts
- State law
- Varies
- Study
- 40-60 hr
Insurance Principles
- Risk
- Chance of loss
- Pure risk
- Loss/no loss
- Speculative risk
- Gain/loss possible
- Hazard
- Increases loss
- Peril
- Cause of loss
- Indemnity
- Restore financially
- Insurable interest
- Valid loss stake
Contract Traits
- Aleatory
- Unequal exchange
- Adhesion
- Insurer drafted
- Unilateral
- One enforceable promise
- Conditional
- Duties must occur
- Utmost good faith
- Full honesty
- Representations
- True statements
- Warranty
- Guaranteed truth
Life Products
Term ends; whole stays.
Term: temporaryWhole: permanentUL: flexibleVUL: market
Term vs Whole
Term
- Temporary
- No cash value
- Lower premium
Whole
- Permanent
- Cash value
- Fixed premium
Rent vs own
Life Product Picker
- Temporary need→Term(Low premium)
- Lifetime guarantee→Whole life(Cash value)
- Flexible premium→Universal life(Adjustable)
- Investment risk→Variable life(Securities)
- Estate planning→Survivorship(Second death)
- Mortgage need→Decreasing term(Declining face)
Life Products
- Term
- Temporary death benefit
- Whole life
- Permanent fixed premium
- Universal life
- Flexible premium
- Variable life
- Securities risk
- VUL
- Flexible + separate
- Joint life
- First death pays
- Survivorship
- Second death pays
UL vs VUL
UL
- Flexible premium
- Interest crediting
- General account
VUL
- Flexible premium
- Separate accounts
- Securities license
Interest vs market
Life Provisions
- Grace period
- Late-pay window
- Incontestability
- Challenge limit
- Suicide clause
- Early exclusion
- Reinstatement
- Restore lapsed policy
- Assignment
- Transfer rights
- Free look
- Refund review
- Beneficiary
- Receives proceeds
Riders + Options
- Waiver premium
- Disability waiver
- ADB
- Extra accident death
- Guaranteed insurability
- Future purchase
- Accelerated benefit
- Early death benefit
- Cash surrender
- Take cash
- Reduced paid-up
- Smaller permanent policy
- Extended term
- Same face temporary
Medicare ABCD
A hospital, B medical, C bundle, D drugs.
A: hospitalB: doctorsC: AdvantageD: drugs
HMO vs PPO
HMO
- PCP gatekeeper
- Network focus
- Lower cost
PPO
- Provider choice
- Out-network
- Higher cost
Gatekeeper vs choice
Health Plan Picker
- Lowest network cost→HMO(Gatekeeper)
- Provider flexibility→PPO(Out-network)
- Network only→EPO(No referrals)
- HSA wanted→HDHP(High deductible)
- Hospital coverage→Part A(Medicare)
- Drug coverage→Part D(Medicare)
Health Plans
- HMO
- Gatekeeper network
- PPO
- Preferred network
- EPO
- Network only
- POS
- Referral blend
- HDHP
- HSA eligible
- Deductible
- Before plan pays
- Coinsurance
- Cost percentage
- Out-of-pocket
- Annual limit
Advantage vs Medigap
Part C
- Private alternative
- Parts A/B
- Often networked
Medigap
- Supplement policy
- Original Medicare
- Pays gaps
Replace vs supplement
Medicare Map
- Part A
- Hospital insurance
- Part B
- Medical insurance
- Part C
- Medicare Advantage
- Part D
- Prescription drugs
- Medigap
- Supplement gaps
- Medicaid
- Need-based aid
- CHIP
- Children coverage
Deductible vs Coinsurance
Deductible
- First dollars
- Annual amount
- Before sharing
Coinsurance
- Percentage
- After deductible
- Shared cost
Before vs after
Disability + LTC
- Own occupation
- Cannot perform job
- Any occupation
- Cannot perform work
- Elimination period
- Waiting period
- Benefit period
- Payment duration
- ADLs
- Daily living tasks
- LTC trigger
- ADL/cognitive need
- Inflation rider
- Benefit grows
Annuity Flow
Pay in, then pay out.
AccumulationAnnuitizationPayoutSurrender
Annuity Picker
- Income now→Immediate(Annuitize soon)
- Income later→Deferred(Accumulation)
- Guarantee needed→Fixed(General account)
- Market upside→Variable(Separate account)
- Index crediting→Indexed(Cap/floor)
- Lifetime income→Life option(Longevity)
Annuity Types
- Immediate
- Income starts soon
- Deferred
- Income later
- Fixed
- Guaranteed interest
- Variable
- Separate accounts
- Indexed
- Index-linked crediting
- Single premium
- One payment
- Flexible premium
- Multiple payments
Ethics Line
Suitability first; commissions never first.
Client needDisclosureReplacement care
Twisting vs Rebating
Twisting
- Misleading replacement
- Policy switch
- False comparison
Rebating
- Illegal inducement
- Premium return
- Unlisted benefit
Lie vs gift
Ethics + Regulation
- Twisting
- Misleading replacement
- Churning
- Commission replacement
- Rebating
- Illegal inducement
- Suitability
- Appropriate recommendation
- Fiduciary
- Trust duty
- Replacement
- Existing policy swap
- CE
- License education
Common Traps
Agent vs broker
Agent represents insurer ≠ Broker represents client
Hazard vs peril
Hazard increases risk ≠ Peril causes loss
Owner vs beneficiary
Owner controls policy ≠ Beneficiary receives proceeds
Fixed vs variable
Fixed is guaranteed ≠ Variable has risk
Part C vs Medigap
Part C replaces ≠ Medigap supplements
Twisting vs churning
Twisting uses lies ≠ Churning seeks commissions
Last Minute
- 1.State law changes exact rules
- 2.Life needs insurable interest
- 3.Term = temporary coverage
- 4.Whole = permanent cash value
- 5.Variable products need securities license
- 6.Annuities protect longevity risk
- 7.HMO = gatekeeper
- 8.PPO = choice
- 9.Medigap supplements Original Medicare
- 10.Rebating is an illegal gift
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