Comprehensive Guide to Life and Health Insurance Policies

What is ordinary/straight whole life?

Permanent life insurance with level premiums, level death benefit, and cash value that grows under the policy guarantees.

What is limited-pay whole life?

Whole life in which premiums are paid for a limited period (such as 20-Pay or paid-up at 65), while coverage continues for life.

What is single-premium whole life?

Whole life funded by one lump-sum premium; it becomes paid-up immediately.

What is modified whole life?

Whole life with lower initial premiums that increase after an introductory period and then remain level.

What is graded-premium whole life?

Whole life with premiums that start low and increase gradually for several years before leveling off.

What is term life insurance?

Temporary protection for a stated period; generally no cash value.

What is level term?

Term insurance with a level death benefit for the term.

What is decreasing term?

Term insurance whose death benefit declines over time; often used for decreasing debts such as mortgages.

What is annually renewable term (ART)?

One-year term that can be renewed annually without proving insurability, with premiums generally rising as age increases.

What does renewable term mean?

The insured can renew coverage without evidence of insurability, subject to policy limits and increasing premium.

What does convertible term mean?

The insured can convert term coverage to permanent insurance without evidence of insurability, subject to the contract.

Why can an Automatic Premium Loan provision not be attached to ordinary term insurance?

APL requires cash value to borrow against; term generally has no cash value.

What is universal life?

Permanent insurance with flexible premiums, adjustable death benefit, and interest-sensitive cash value.

What is variable whole life?

Permanent insurance with generally fixed premiums and cash value/death benefit tied to separate-account investments; the policyowner assumes investment risk.

What does a waiver-of-premium rider do?

Waives premiums after the insured meets the rider's qualifying disability requirements.

What does a guaranteed-insurability rider do?

Allows the insured to buy additional coverage at stated times without new evidence of insurability.

What is a payor benefit rider?

On a juvenile policy, it can waive premiums if the person paying the premiums dies or becomes disabled as defined by the rider.

Which rider provides life coverage for a child under a parent's policy?

Child term rider.

What is the entire-contract provision?

The policy and attached application/riders make up the full contract; the agent cannot unilaterally change it.

What is the insuring clause?

The insurer's basic promise to pay benefits for covered losses in exchange for consideration.

What is consideration in an insurance contract?

The applicant's application and premium, exchanged for the insurer's promise to pay covered benefits.

What are the four basic elements of a valid contract?

Offer and acceptance, consideration, competent parties, and legal purpose.

What does unilateral mean in insurance?

Only the insurer makes an enforceable promise to pay if policy conditions are met.

What does adhesion mean?

The insurer drafts the contract; ambiguities are generally construed against the drafter.

What does aleatory mean?

The values exchanged may be unequal and depend on an uncertain event.

What does conditional mean?

The insurer's obligation depends on the insured satisfying policy conditions.

What is a primary beneficiary?

The first person/entity entitled to policy proceeds.

What is a contingent beneficiary?

Receives proceeds if the primary beneficiary cannot receive them.

What three factors are traditionally used in life premium calculations?

Mortality, interest, and expenses.

What is mortality?

The probability/rate of death.

What is morbidity?

The probability/rate of sickness or disability.

Are personal life-insurance premiums generally income-tax deductible?

No.

Are life-insurance death proceeds paid in a lump sum generally subject to federal income tax?

Generally no.

Is interest earned on life-insurance proceeds taxable?

Generally yes.

How is cash-value growth generally taxed while it remains in a life policy?

Tax-deferred.

What makes a life policy a MEC?

It fails the federal 7-pay test.

How are MEC distributions generally taxed?

LIFO: earnings are treated as coming out first and may be taxable; taxable distributions before 59½ can face a 10% federal penalty unless an exception applies.

What is underwriting?

Evaluating risk to decide whether and on what terms to issue coverage.

Who holds the master policy in group life insurance?

The employer/group policyholder.

What does an insured employee receive under group life?

A certificate of insurance.

What is a noncontributory group plan?

Employer pays the full premium; classic exam rule is 100% eligible employee participation.

What is a contributory group plan?

Employees share premium cost; classic exam rule is at least 75% participation.

What is the group-life conversion privilege?

A departing insured can convert eligible group coverage to an individual policy without evidence of insurability within the allowed period.

What is the Florida group-life conversion period?

31 days after termination of eligible group coverage.

What is key-person life insurance?

A business owns life insurance on an important employee; the business is generally owner, premium payer, and beneficiary.

What is a buy-sell agreement?

An agreement for transfer/purchase of an owner's business interest upon a triggering event such as death.

What is a cross-purchase buy-sell arrangement?

Owners buy policies on one another and use proceeds to purchase the deceased owner's interest.

What is an entity-purchase/stock-redemption arrangement?

The business owns policies on the owners and uses proceeds to purchase/redeem a deceased owner's interest.

What is the primary purpose of health insurance?

Protect against economic loss from sickness, injury, medical expense, or disability.

Comprehensive vs. limited health coverage?

Comprehensive is broad; limited coverage targets a specific risk, condition, or benefit.

What is accident-only insurance?

Limited coverage for losses caused by covered accidents, not ordinary sickness.

What does AD&D cover?

Accidental death and specified dismemberment losses.

Principal sum vs. capital sum in AD&D?

Principal sum generally applies to accidental death; capital sum applies to specified dismemberment/losses.

What is specified/dread-disease insurance?

Limited coverage for a named disease such as cancer.

What is critical-illness insurance?

Pays a stated lump-sum benefit after a covered critical diagnosis, subject to policy terms.

What is hospital-indemnity insurance?

Pays a stated cash amount, such as per hospital day, rather than reimbursing the exact hospital bill.

What is an HMO?

Managed-care plan emphasizing network care and often a primary-care physician/gatekeeper.

What is a PPO?

Plan using preferred providers with lower in-network costs while generally allowing more out-of-network flexibility than an HMO.

What is an EPO?

Exclusive Provider Organization; generally requires use of the plan network except limited situations such as emergencies.

What is a POS plan?

Point-of-Service plan combining HMO-style coordination with some out-of-network choice.

What is a PCP/gatekeeper?

Primary care provider who coordinates care and may control specialist referrals in managed-care plans.

What is capitation?

Provider payment based on a fixed amount per covered person for a period rather than per individual service.

What is the main purpose of disability income insurance?

Replace a portion of income lost because of covered disability.

What does own-occupation disability mean?

The insured cannot perform the material duties of their own occupation as defined by the policy.

What does any-occupation disability mean?

The insured cannot perform work for which they are reasonably suited by education, training, or experience, as defined by the policy.

Which is less restrictive for the insured: own-occ or any-occ?

Own-occupation.

What is partial disability?

The insured can work but cannot perform all duties or full-time work because of disability.

What is residual disability?

The insured is working but has a qualifying loss of earnings due to disability.

What is presumptive disability?

Specified severe losses are treated as total disability under the policy, such as certain losses of sight, hearing, speech, or limbs.

What is recurrent disability?

The same or related disability returns within the policy's stated period and may be treated as continuation of the original claim.

What is the elimination period?

The waiting period after disability begins before benefits are payable; a time deductible.

What is the benefit period?

The maximum period disability benefits can be paid.

Longer elimination period generally has what effect on premium?

Lowers premium.

Longer benefit period generally has what effect on premium?

Raises premium.

Medicare Part A covers what?

Primarily inpatient hospital, eligible skilled nursing facility, hospice, and certain home-health services.

Medicare Part B covers what?

Physician/medical and outpatient services, preventive care, durable medical equipment, and other covered services.

Medicare Part C is what?

Medicare Advantage: private-plan alternative for receiving Medicare Part A and Part B benefits, often with additional benefits.

Medicare Part D covers what?

Prescription drugs through approved private plans.

What is Original Medicare?

Part A + Part B.

What is Medigap?

Private Medicare Supplement insurance designed to help pay certain gaps/cost-sharing in Original Medicare.

Medicare Advantage vs. Medigap?

Advantage (Part C) is an alternative way to receive Medicare benefits; Medigap supplements Original Medicare.

What is Medicaid?

Joint federal-state program providing health coverage to eligible people based on program rules, including income/resource and categorical requirements.

Who performs field underwriting in health insurance?

The producer/agent.

Who makes the final health underwriting decision?

The insurer/home-office underwriter.

What is the primary underwriting information source?

The application.

What is an APS?

Attending Physician Statement from the applicant's doctor.

What law protects applicants when consumer/investigative reports are used?

Fair Credit Reporting Act.

What is preferred risk?

Better-than-average risk.

What does Florida DFS primarily regulate in the exam context?

Agents, agencies, adjusters, licensing, investigations, and consumer services.

What does Florida OIR primarily regulate?

Insurance companies, policy forms, rates, solvency, and market conduct.

What is a domestic insurer in Florida?

An insurer domiciled/incorporated in Florida.

What is a foreign insurer?

An insurer domiciled in another U.S. state or jurisdiction.

What is an alien insurer?

An insurer domiciled outside the United States.

What is an authorized/admitted insurer?

An insurer holding required Florida authority/certificate to transact insurance in the state.

What is a certificate of authority?

State authorization allowing an insurer to transact insurance in Florida.

Stock vs. mutual insurer ownership?

Stock insurers are owned by shareholders; mutual insurers are owned by policyholders.

What is the difference between a license and an appointment?

License is state qualification; appointment authorizes the agent to represent an appointing insurer/entity. Florida agents generally need both to transact for that insurer.

Minimum age for a Florida insurance agent?

18.

How often are Florida appointments generally renewed?

Every 24 months.

What is the standard Florida CE requirement for many 2-15 agents?

Typically 24 hours each 2-year cycle, including a 4-hour law/ethics update, subject to statutory experience-based reductions/exceptions.