Florida Life Insurance

Mutual Insurance Companies

organized and incorporated under state laws. No stockholders.

Mutual companies

Participating, they pay dividends.

Stock company

Owns Stock. Nonparticipating (no dividends)

Risk Retention Group

Mutual company formed to insure ppl in the same business, occupation, profession (pharmacists, dentists, engineers)

Fraternal Benefit Societies

Non profit organization, lodge system that includes ritualistic work, and maintain a rep form of gov with elected officers.

FICA

Made up of Social Security and Medicare

Variable Product

Dual license. One license issued by FINRA & the other Life & Annuity (issued by the state)

Fair Credit Reporting Act

Consumers have the right to question what is on their credit report

Domestic insurer

company doing business in the state in which it is incorporated

Foreign insurer

company licensed & doing business in states other than the one in which it is incorporated

Buyers Guides

generic (explain various types of life insurance products, including variable annuities)

Policy Summaries

Specific to the Policy - ids the agent, insurer, policy, each rider, and includes info about premiums, dividends, benefit amounts, cash surrender values, policy loan interest rates, and life insurance cost indexes of the specific policy being considered

National Association of Ins Commissioners (NAIC)

Encourage Uniformity, Assist in admin of laws & regs, Protect interest of policy owners, Preserve state regulation

Warranty

a statement guaranteed to be true

Representation

statement by client (best of their knowledge). We give the client the benefit of the doubt

Concealment

failure by applicant to disclose a known material fact at time of application

Insurable interest

Interest must exist at the inception of the policy

Fiduciary

a person holds a special FINANCIAL trust and confidence (agent)

Producer

Broker or agent

Professional Liability Ins

protect against legal liability (like malpractice ins)

Fraud

Insurer reason to void a contract (2 years from date insurance issued)

Fudiciary

special financial trust

Twisting

External - Illegal if not in the best interest for the client

Churning

Internal - replacing policies within the same company. Illegal if not in the best interest for the client

Coercion

apply physical or mental force or threat to persuade (the mafia)

Unfair Discrimination

making a distinction, in sales, underwriting, pricing, claims handling, or other ins applicant function, between 2 diff individuals of substantially the same classification

Term Life Insurance

simplest type of life ins plan. Provides protection for a specified period (term) & pays a benefit only if the insured dies during that period

Level Term Ins

provides a level amount of protection for a specified period, after which the policy expires.

Decreasing Coverage Level Premium

characterized by benefit amts that decrease gradually over the term of protection (cover debt or mortgage)

Whole Life

Ordinary Straight Life - cash values & maturity @ age 100

Living benefits

If loan outstanding at the time the insured dies, the amount of the loan + interest due will be subtracted from the death benefit before it is paid.

Basic Forms of Life Insurance

Straight whole life, limited pay whole life, single premium whole life

Limited Pay whole life

Level premiums limited to a certain period (less than life). ie, a 10-pay life policy is one in which premiums are payable for 20 yrs from policy inception, after which no more premiums are owed.

Adjustable life policies

distinguished by flexibility that comes from combining term & permanent ins into a single plan. Policy owner determines how much Face Amt protection is needed & how much premium the policy owner wants to pay. The insurer selects the appropriate plan to meet such needs

Adjustable life

1) Face Amt, 2) Premium, 3) Plan type (Policy owner picks 2, Insurer picks the 3rd.)

Universal Life

-Premiums can be decreased by insured

-Death benefit can be changed

-Cash Value used to pay the premium

-No new policy needs to be issued for policy changes

UL Options

Level A - Face Amt

Level B - Face Amt & Cash

Variable

2 licenses

Variable products

Separate Accounts

Variable Life

death benefit not fixed or guaranteed

Policyholder or policyowner

the person who pays the premium on insurance contract

Policyowner rights

1) pay premium

2) choose beneficiary

3) Cash value

Provisions

pizza - Crust, Cheese, Sause

Entire Contract Provision

Riders, Application, Policy

Found at beg of policy states that the policy doc, the application (attached to the policy), and any attached riders constitute the ENTIRE CONTRACT.

Insuring Clause

Company's promise to pay benefits upon the insured's death

Free-Look Provision

14 days from policy delivery to rescind the contract

Consideration Clause

value given in exchange for a contractual promise. Specifies the amount and frequency of premium pmts to keep ins in force

Grace Period Provision

If ins dies during grace period & premium has not been paid, the policy benefit is payable. However, the premium amt is deducted from the benefits paid to beneficiary

Reinstatement Provision

to the same age. Must Pay premiums, interest, loans, prove insurability.

Policy loan provision

if policy is surrendered for cash, the cv avail to policy owner is reduced by amt of outstanding loan plus int

Incontestable clause

Insurer has the right to contest validity of life ins policy (2 years from the issue date & while insured is living)

Incontestable clause does not apply

Impersonation

No insurable interest

Intent to murder

Assignment Provision

life ins contract sets forth the procedure necessary for ownership transfer.

Assignment types

Absolute - transfer complete & irrevocable

Collateral - policy assigned to creditor as security or collateral for debt

Accelerated benefits provision

if terminally ill, 75% death benefit before die

Suicide Provision

Insurance doesn't pay if commit suicide within 2 years of getting policy. After 2 years, it's ok.

Misstatement of Age or Sex

Adjust, cross out with pen, fix and have insured initial

Automatic premium loan provision

authorizes insurer to withdraw from policy's cv to pay premium due if has not been paid by end of grace period. No lapse in coverage.

War

exclusion provides that death benefit will not be paid if insured dies as result of war.

Non-forfeiture options

Reduced paid up (longest period of coverage)

Extended term (highest amt of coverage)

Cash (no more coverage)

Dividends

if fewer insureds have died than original estimate, company pays dividends

Dividend Options

Cash

Reduced premium pmt

Accumulate interest

Paid up additions

One year term

Policy Riders

policy owners can customize policy to meet their needs

Guaranteed insurability rider

permits insured, at specified intervals in the future, to buy specified amts of additional insurance w/o evidence of insurability

Waiver of Premium rider

disabled, premiums waived, death benefit stays same, cv increase at normal rate, divd for participating policy paid as usual

Payor Provision of Rider

provide for waiver of premiums if adult premium-payor should die or become totally disabled

Accidental Death Benefit Rider

provides an additional amount of insurance, usually equal to the face amt of base policy, if death occurs under stated conditions

Long Term care rider

allows the insured to receive a monthly income to help pay the cost of confinement in a nursing home or other long-term care facility

Primary beneficiary

the party designated to receive the proceeds of a life ins policy when they become payable

Secondary beneficiary

may also be named and stands second in line to receive the proceeds of a life ins policy if the primary beneficiary dies before the insured

Irrevocable beneficiary

has a vested right in the policy & the policyowner cannot exercise any right that would affect the vested rights. Signature required by beneficiary.

Mortality Factor

Mortality (highest effect rate making)

Interest

eXpense

Underwriters

Select

Classify - Preferred, Standards, Substandards

Rate

Settlement Options (death benefit)

Cash

Lifetime income

Interest only

Fixed period (time)

Fixed amount ($)

Fixed Period Option

beneficiary gets equal amounts of $ at regular intervals over a specified period of years

Tax treatment

Death benefit paid under a life insurance policy to a named beneficiary are FREE of federal income taxation

Risk

Selection

Rating - Preferred, Standard, Substandard

Classifying

Underwriting

term for risk selection, process of reviewing the characteristics that make up the risk profile of an applicant

Insurable Interest

individual on his life

husband or wife

parents on children

child on parent/grandparent

business partners on each other

creditor on debtor

Agent

also acts as a witness

Mistakes on application

no White out, must cross out mistake and have applicant initial the correction

Conditional contract

the applicant and the company from this contract, contingent upon conditions that exist at the time the application is signed (or when the medical exam is completed, if req)

Noncontributory plan

employer pays all premiums of group insurance

Contributory plan

group ins requires members to pay a portion of the premium

Florida

no min # of participants as long as the organization is eligible for group ins

How are benefits determined

Flat benefit

Employment position

Earnings

Conversion provision

allows individual insured members to convert to an individual plan w/o evidence of insurability, if their employment is terminated (usually the employee has a limited period of time following termination (typically 31 days) in which to exercise the conversion privilege.

Annuity periods involved

accumulation period and payout or annuity period

Accumulation period

funds being paid into the annuity, in the form of payments by the contract holder and interest earnings credited by the insurer

Flexible Premium Deferred Annuities (FPDA)

periodic payment annuities

Single Premium Deferred Annuities (SPDA)

deferred annuities funded with single premiums

Equity indexed annuities (EIA)

a type of fixed annuity that offers the potential for higher credited rates of return than the traditional counterparts and also guarantee the owner's pricipal

OASDI

Old Age, Survivors, and Disability Insurance.

SS prog enacted in 1935 & administered at the federal level.

ERISA

protect the rights of workers covered under an employer sponsored plan

Who administers insurance laws of FL

CFO, Financial Services Commission, and the Commissioner of the Office of Insurance Regulation

Office of Insurance Regulation (OIR)

responsible for all activities of the FSC relating to the regulation of insurers and other risk-bearing entities

OIR specific duties

Agent licensing

Policy forms approval

Assessing insurer solvency

Office of Financial Regulation (OFR)

responsible for all activities of the FSC relating to the regulation of banks, credit unions, other financial institutions, finance companies, and the securities industries.

Entities of state government involved in the regulation of the insurance business in FL

State legislature, Dept of Fin Srvcs, Commissioner of the Office of Insurance Regulation, and the state court system

Why is insurance business subject to gov supervision and control?

Public interest

Financial importance and extent of the operations of the ins companies affect the stat and national economy

Technical character of the insurance contract requires expert control