California Laws and Rules

Definition of Insurance (CIC)

A contract to indemnify against loss.

Insurable Events

Any contingent or unknown event (past or future) that may damnify a person with an insurable interest or create liability.

Policy Definition

A written contract promising to indemnify another against loss arising from an unknown event.

Concealment Definition

The neglect to communicate that which a party knows and ought to communicate.

Effect of Concealment (Section 331 CIC)

Whether intentional or unintentional, the injured party has the right to rescind the insurance contract.

Express Warranty

A statement in a policy relating to the person, thing insured, or risk, stated as a fact.

Representation

A statement made by the applicant considered true and accurate to the best of their belief.

Misrepresentation Prohibition

It is illegal to misrepresent policy terms, benefits, cost, or future dividends to an applicant or insured.

Materiality

Information that would probably influence a party's assessment of a proposed contract, determined solely by reasonable influence.

Licensing Requirement (Section 1633 CIC)

A valid license from the commissioner is required to solicit, negotiate, or effect insurance contracts.

Insurance Transaction Scope

Includes solicitation, negotiations, execution, and post-execution matters like advising on coverages and claims.

Felony Conviction & 18 U.S.C. § 1033

Engaging in insurance with a dishonesty felony conviction requires a Letter of Written Consent from the state insurance department.

Admitted Insurer

Entitled to transact insurance business in the state having complied with conditions precedent.

Nonadmitted Insurer

Not entitled to transact insurance business in the state; application denied or not applied.

Surplus Lines Broker Role

Places insurance with non-admitted insurers when coverage cannot be procured from admitted insurers.

Fictitious Business Names

Licensees must file their true name and all fictitious business names in writing with the commissioner.

Agent Address Change

Agents must notify the Department of Insurance immediately of any physical or email address change.

License Number Display Requirement

Licensees must prominently print their license number on business cards, written price quotations, and printed advertisements.

Financial Examination Frequency

The Commissioner must examine the financial affairs of each insurer operating in California at least once every 5 years.

Notice of Agent Appointment Effective Date

The authority to transact insurance under an appointment becomes effective on the date the notice of appointment is signed.

Termination of All Appointments

Upon termination of all appointments, an agent's license becomes inactive rather than canceled.

Unappointed Life Agent Sale

The insurer must submit a notice of appointment to the Commissioner within 14 days of an unappointed sale.

Fiduciary Responsibility of Agents

Agents hold client funds in trust, must not mingle them with personal funds, and diversion is punishable as theft.

Commissioner Term and Limits

An elected position held for a 4-year term with a two-term limit.

Cease and Desist Order Violations

Fines up to $5,000, or up to $55,000 if the violation of a cease and desist order was willful.

California Financial Information Privacy Act

Unites GLBA and IPPA to provide enhanced privacy protections and 'opt-out/opt-in' choices.

Insolvent Insurer Definition

Impairment of minimum paid-in capital or inability to meet financial obligations when due.

Conservation

Action where the Commissioner takes control of an impaired insurer's affairs to improve its condition.

Life and Health Insurance Guarantee Association

Fulfills the contractual obligations of member insurers that suffer financial failure.

Insurance Fraud Investigation

Every admitted insurer must maintain a unit to investigate possible fraudulent claims.

Anti-Discrimination (Sections 10140/10145)

Insurers cannot deny or rate up policies based on marital status, sex, race, color, religion, national origin, or ancestry.

Statutory Interpretation: Shall vs. May

In the insurance code, 'shall' is mandatory and 'may' is permissive.

Department Inquiry Response Time

Licensees must furnish a complete written response to Department inquiries within 21 calendar days.

Claim Acceptance or Denial Deadline

Insurers must accept or deny a claim within 40 calendar days of receiving proof of claim.

Life Insurance Basic Illustration Requirements

Must be dated, numbered by page, show issue age plus years in force, and identify guaranteed and nonguaranteed elements.

LTC Training Requirement

Requires 8 hours of specific long-term care training prior to selling, plus 8 hours annually for the first 4 years.

Insurable Interest in Life Insurance

Exists in oneself, dependents for support, debtors/obligors, and estates or vested interests depending on the life.

Human Life Value vs. Needs Approach

Human life value measures potential lost earnings; the needs approach is based on specific financial goals and objectives.

Blackout Period

The period from the insured's death until the surviving spouse is eligible to receive Social Security retirement benefits.

Senior Free-Look Period (Age 65+)

All disability and life insurance policies offered to persons 65 and older must include at least a 30-day free-look period.

Senior Home Visit Notice

A written notice must be delivered to a senior at least 24 hours prior to an initial meeting in their home.

Life Policy Specification Page Requirements

Must include names, ages, sex, premiums, benefit amounts, identifiable charges, effective dates, and duration of coverage.

Group Life Insurance Eligible Groups

Includes employee groups, trustee groups, state/local government groups, and labor/credit union/association groups.

Misstatement of Age in Group Life

Amounts payable are adjusted to what the premium paid would have purchased at the correct age.

AIDS Underwriting Requirements

Informed consent required for HIV testing, costs borne by insurer, strict confidentiality, and positive results reported to a designated physician.

Genetic Characteristics Testing

Requires written informed consent, and policy benefits cannot be limited due to the presence or absence of genetic characteristics.

Group Health Small vs. Large Group

A small group has 2 to 100 employees, while a large group has 101 or more employees.

Group Health Participation Requirements

Contributory plans require at least 75% employee participation; non-contributory plans require 100% participation.

Cal-COBRA Coverage

Provides employees of companies with 2 to 20 employees the right to convert health insurance to an individual plan.

Medi-Cal MAGI Eligibility (Ages 19-64)

Individuals qualify with household income up to 138% of the Federal Poverty Level (FPL).

Medicare Supplement Minimum Standards

Insurers offering Medicare Supplement policies must offer Plan A and either Plan C or Plan F.

Medicare Supplement Open Enrollment

An annual 30-day open enrollment period begins on the individual's birthday for purchasing equal or lesser coverage.

HICAP Overview

A federally funded program under the Department of Aging providing free counseling on Medicare and health insurance.