Michigan Insurance Regulation
11%of exam
DIFS + RegulatorsMI Licensing + CEEthics + Unfair PracticesMLHIGA guarantyCut score 75%MI Compliance Picker
General Insurance Concepts
10%of exam
Life Insurance + Annuities
29%of exam
Accident, Health, Disability + Senior
44%of exam
Health Plan TypesProvisions + DisabilitySenior MarketMedicare supplementLong-term careCOBRA timeline
Federal Tax Considerations
5%of exam
Quick Facts
- Exam
- Series 16-80
- Credential
- Life, Accident & Health
- Questions
- 150 items
- Time
- 150 minutes
- Pass
- 75% (113/150)
- Fee
- $41
- Regulator
- DIFS / PSI
- Format
- In-person, multiple choice
Michigan CE Numbers
40 | 24 | 3 | 12 | 90
40: prelicensing hours24: CE hours3: ethics hours12: carryover hours90: grace days
Twisting vs Churning
Twisting
- Uses misrepresentation
- Different insurer
- Replace coverage
Churning
- Same insurer
- New commissions
- Replace coverage
Other vs same insurer
MI Compliance Picker
- New L&H license→40 prelicensing hours
- Each renewal term→24 CE hours
- Selling LTC policies→8-hour LTC course
- Recommending annuities→4-credit training
- Address or name change→Report within 30 days
- Missed CE deadline→90-day grace
- Replacing a policy→Replacement notice forms
DIFS + Regulators
- DIFS
- Michigan insurance regulator
- DIFS Director
- Governor-appointed, not elected
- Insurance Code
- MCL Chapter 500 (1956)
- PSI
- Administers Series 16-80 exam
- MLHIGA
- Insolvency claim backstopGuaranty
- Cease + desist
- Director enforcement order
- NIPR
- Producer license application portal
MI Licensing + CE
- Prelicensing
- 40 hours combined L&H
- Per line
- 20 hours (14 + 6)
- CE hours
- 24 every 2 years
- Ethics CE
- 3 hours, no carryover
- Carryover
- 12 non-ethics hours max
- Grace period
- 90 days, no sales
- Reporting
- Changes within 30 days
- Cut score
- 75%, 113 of 150
Ethics + Unfair Practices
- Rebating
- Value to induce sale
- Twisting
- Misrepresent to replace
- Churning
- Replace, same insurer
- Commingling
- Mixing client funds
- Misappropriation
- Using client funds
- Defamation
- False injurious statements
- Coercion
- Force via pressure
- Fraud
- Intentional deception
Three Hazards
Physical | Moral | Morale
Physical: tangible conditionMoral: dishonestyMorale: carelessness
Risk + Contract Law
- Pure risk
- Loss or no loss
- Speculative risk
- Gain or loss; uninsurable
- Peril
- Cause of loss
- Hazard
- Increases loss chance
- Law of large numbers
- Losses become predictable
- Insurable interest
- Required at policy issue
- Adverse selection
- Bad risks seek coverage
- Utmost good faith
- Honest mutual disclosure
Nonforfeiture Options
Cash | Reduced Paid-Up | Extended Term
Cash: lump sumRPU: smaller permanentETI: full face default
Term vs Whole Life
Term
- No cash value
- Temporary protection
- Lowest premium
Whole Life
- Guaranteed cash value
- Permanent coverage
- Level premium
Temporary vs permanent
Life Product Picker
- Temporary low cost→Term
- Match mortgage balance→Decreasing term
- Lifelong guarantees→Whole life
- Flexible premium→Universal life
- Market growth potential→Variable life(FINRA license)
- Estate tax funding→Survivorship
- Insure a child→Juvenile policy
Life Policy Types
- Term life
- Temporary, no cash value
- Whole life
- Level premium, guaranteed values
- Universal life
- Flexible premium, unbundled
- Variable life
- Subaccounts, FINRA licenseSecurities
- VUL
- Flexible plus subaccounts
- Decreasing term
- Face matches mortgage
- Survivorship
- Pays on second death
- Endowment
- Matures as living benefit
Whole vs Universal Life
Whole
- Fixed premium
- Guaranteed values
- Bundled charges
Universal
- Flexible premium
- Adjustable death benefit
- Unbundled charges
Fixed vs flexible
Provisions + Riders
- Grace period
- 31 days (MCL 500.4012)
- Incontestability
- Locked after two years
- Suicide clause
- Two-year exclusion
- Misstated age
- Benefit adjusted, not void
- Reinstatement
- Restore a lapsed policy
- Free look
- Return within 10 days
- Waiver of premium
- Disability pays premiums
- Accelerated benefit
- Terminal-illness advance
- Nonforfeiture
- Cash, paid-up, extended term
Fixed vs Variable Annuity
Fixed
- Guaranteed minimum rate
- Insurer bears risk
- General account
Variable
- Market returns
- Owner bears risk
- Separate account
Who bears risk
Annuities
- Accumulation
- Tax-deferred pay-in phase
- Annuitization
- Irreversible income payout
- Fixed annuity
- Insurer bears risk
- Variable annuity
- Owner bears riskSecurities
- Immediate
- Payout within a year
- Life only
- Largest income payment
- Best interest
- PA 266 of 2020
- Annuity training
- One-time 4 credits
COBRA Timeline
18 | 29 | 36 months
18: job loss29: disability36: divorce or death
HMO vs PPO
HMO
- PCP gatekeeper
- In-network only
- Low copays
PPO
- No referral
- Out-of-network allowed
- Higher cost
Restrict vs choose
Health + Disability Picker
- Lowest cost network→HMO
- Out-of-network freedom→PPO
- Gatekeeper plus flexibility→POS
- Replace lost income→Disability income
- Nursing home care→LTC policy
- Fill Medicare gaps→Medigap
- Left group job→COBRA
Health Plan Types
- HMO
- PCP gatekeeper, in-network
- PPO
- No referral, out-of-network
- POS
- HMO PPO hybrid
- Basic medical
- First-dollar, low caps
- Major medical
- Deductible plus coinsurance
- Comprehensive
- Basic and major merged
- EHBs
- 10 ACA-required benefits
- Capitation
- Per-member HMO payment
Own-occ vs Any-occ
Own-occ
- Own job standard
- Broadest definition
- Higher premium
Any-occ
- Any suitable job
- Strictest definition
- Lower premium
Broad vs strict
Provisions + Disability
- Free look
- 10 days on delivery
- COB
- Caps combined payment
- Birthday rule
- Earlier birthday is primary
- COBRA
- 18 to 36 months
- Elimination period
- Disability time deductible
- Own-occ
- Cannot do own job
- Any-occ
- Any suitable job
- Probationary period
- Wait for new sickness
Senior Market
- Medigap OE
- 6 months, guaranteed issue
- Plans C + F
- Closed after 2020
- Plan G
- Closest current substitute
- LTC free look
- 30 days to return
- LTC training
- One-time 8 hours
- LTC partnership
- Medicaid asset protection
- Medicare Part A
- Hospital inpatient coverage
- Medicare Part B
- Outpatient medical coverage
MEC vs Non-MEC
MEC
- Fails 7-pay test
- LIFO taxation
- Loans taxable
Non-MEC
- Passes 7-pay test
- FIFO withdrawals
- Loans tax-free
Overfunded vs normal
Federal Tax
- Death benefit
- Income-tax-free lump sum
- Cash value
- Grows tax-deferred
- MEC
- Fails 7-pay test
- Section 79
- First $50,000 excluded
- Annuity earnings
- Taxed as ordinary income
- LIFO
- Gain taxed first
- 59 rule
- 10% early-withdrawal penalty
- Qualified plans
- Pre-tax contributions
Common Traps
Michigan cut score
Not 70 percent ≠ Michigan uses 75%
Ethics CE carryover
General hours carry over ≠ Ethics never carries
CE grace period
May service policies ≠ Cannot sell new
Insurable interest timing
Required at issue ≠ Not at death
Annuity taxation order
Gain out first ≠ LIFO not FIFO
Medigap Plans C and F
Closed after 2020 ≠ Plan G open
Twisting vs churning
Twisting: other insurer ≠ Churning: same insurer
Last Minute
- 1.150 items, 150 minutes
- 2.Pass = 75% (113 correct)
- 3.Exam fee is $41
- 4.DIFS Director appointed, not elected
- 5.Prelicensing = 40 combined hours
- 6.CE = 24 hours per term
- 7.Ethics CE never carries over
- 8.Insurable interest at policy issue
- 9.Incontestable after two years
- 10.Extended term = default nonforfeiture
- 11.Life-only annuity pays most
- 12.Medigap Plans C and F closed
- 13.Death benefit paid income-tax-free
- 14.MEC taxed LIFO, gain first
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