Florida 2-14 Insurance Exam Master Flashcards

Comprehensive vocabulary flashcards covering Florida insurance statutes, administrative authorities, annuity and retirement taxation, contract principles, underwriting laws, and policy provisions for the Florida 2-14 license examination.

Secondary Addressee Age Requirement

Applies to insured individuals age $64$ or older on covered life policies.

Secondary Addressee Policy Duration

The life policy must have been in force for at least $1$ year for the rule to apply.

Secondary Addressee Lapse Notice Period

Requires at least $21$ days advance notice prior to policy lapse under the applicable Florida rule.

Secondary Addressee Rights

The secondary addressee does not become a beneficiary and receives notices only, possessing no ownership or beneficiary rights.

Secondary Addressee Residency Requirement

The secondary addressee is not required to live in Florida.

Florida Life Premium Grace Period

A mandatory grace period of at least $30$ days for premiums due after the first.

Death During Grace Period

Death benefit is generally payable, subject to permitted deduction of unpaid premium.

Free-Look Period Inception

The free-look period begins upon delivery or receipt of the policy under applicable terms.

DFS versus OIR

DFS (Department of Financial Services) licenses and oversees agents; OIR (Office of Insurance Regulation) oversees insurers, rates, forms, and solvency.

Certificate of Authority versus Appointment

A Certificate of Authority authorizes an insurer to operate; an appointment authorizes an agent to represent an insurer.

Twisting

Making misleading statements or comparisons to induce the replacement of an existing insurance policy.

Churning

The deceptive use of existing policy values to fund the purchase of new insurance.

Sliding

Misrepresenting optional ancillary coverage as required by law or adding it to a policy without the consumer's consent.

Defamation

Making false statements intended to injure the reputation of an insurer or person.

Annuity Best-Interest Obligation

Requirement that an annuity recommendation must consider consumer needs, financial objectives, liquidity, fees, and risks rather than agent compensation.

Annuity Replacement Considerations

Mandatory evaluation of surrender charges, new surrender periods, lost benefits, guarantees, fees, and consumer objectives.

Florida Guaranty Association

Entity providing limited statutory protection for eligible policies of insolvent member insurers.

Guaranty Association Advertising Prohibition

Statutory rule barring the use of guaranty association protection as an inducement to purchase insurance.

Revocable versus Irrevocable Beneficiary

A revocable beneficiary designation is generally changeable without consent; an irrevocable beneficiary designation gives the beneficiary protected consent rights.

Collateral versus Absolute Assignment

A collateral assignment transfers a security interest to a creditor; an absolute assignment transfers all ownership rights.

Incontestability Period

A statutory time limit of generally $2$ years after policy issue, subject to applicable exceptions, after which an insurer cannot contest statements on the application.

Viatical Settlement

A qualifying sale of an existing life insurance policy, typically by a terminally or chronically ill insured.

Immediate versus Deferred Annuity

An immediate annuity starts paying income soon after purchase; a deferred annuity has a delayed income start date.

Fixed versus Variable Annuity

A fixed annuity features insurer-backed guarantees; a variable annuity exposes the contract owner to separate-account investment risk.

Annuitization

The process of converting accumulated contract value into an ongoing stream of income payments.

Straight Life Payout

An annuity settlement option that provides income for the life of the annuitant with no guaranteed minimum payment period.

Life with Period Certain

An annuity settlement option providing lifetime income with a guaranteed minimum number of payments.

Joint and Survivor Annuity

An annuity payout option where income continues to the surviving annuitant at an elected percentage after the first annuitant dies.

Survivor Payout Calculation ($75\%$ Option)

Under a $\\text{\$}4,000$ joint payout with a $75\%$ survivor election, the survivor receives $\$3,000$ per month.

Survivor Payout Calculation ($66\frac{2}{3}\%$ Option)

Under a $\$3,600$ joint payout with a $66\frac{2}{3}\%$ survivor election, the survivor receives $\$2,400$ per month.

Fixed Amount versus Fixed Period Settlement

A fixed amount option pays specified dollar increments until funds are exhausted; a fixed period option pays benefits over a specified length of time.

Nonqualified Deferred Annuity Withdrawal Taxation Order

Pre-annuitization withdrawals are taxed on a last-in, first-out basis, meaning earnings are distributed first as ordinary income, followed by basis.

Nonqualified Withdrawal Tax Calculation ($\$100,000$ Value / $\$70,000$ Basis)

A $\$40,000$ withdrawal results in $\$30,000$ taxable earnings and a $\$10,000$ return of basis.

Nonqualified Withdrawal Tax Calculation ($\$110,000$ Value / $\$80,000$ Basis)

A $\$35,000$ withdrawal results in $\$30,000$ taxable earnings and a $\$5,000$ return of basis.

Nonqualified Withdrawal Tax Calculation ($\$100,000$ Value / $\$60,000$ Basis)

A $\$25,000$ withdrawal results in the entire $\$25,000$ being taxable as earnings.

Exclusion Ratio

A formula used to allocate annuitized payments between nontaxable return of investment and taxable earnings.

Early Taxable IRA Withdrawal Penalty

A federal tax penalty of an additional $10\%$ on taxable distributions made prior to age $59\frac{1}{2}$, unless an exception applies.

Early IRA Withdrawal Penalty Calculation (Age $45$)

A taxable distribution of $\$24,000$ at age $45$ triggers an additional penalty tax of $\$2,400$, absent an exception.

ERISA

The Employee Retirement Income Security Act of $1974$, which regulates many private-sector employee benefit plans.

Defined Benefit versus Defined Contribution

A defined benefit plan promises a specified formula payout; a defined contribution plan provides a payout dependent on deposits and investment performance.

401(k) Plan

A qualified employer-sponsored retirement plan classified as a defined contribution plan.

Traditional versus Roth IRA

Traditional IRA distributions are generally taxable; qualified Roth IRA distributions are generally tax-free.

Direct Rollover / Trustee-to-Trustee Transfer

A direct transfer of retirement funds between trustees that generally avoids a current taxable distribution.

Modified Endowment Contract (MEC)

A life insurance policy that fails the statutory seven-pay test.

MEC Distribution Treatment

Distributions from a modified endowment contract are taxed on an earnings-first basis and may be subject to an additional early-distribution tax.

Section 1035 Exchange

A provision of the Internal Revenue Code allowing the tax-free exchange of qualifying life insurance or annuity contracts.

Employer Group Term Life Tax Exclusion

The cost of the first $\$50,000$ of employer-provided qualifying group term life insurance coverage is generally excluded from gross income.

Group Term Life Excess Coverage Calculation

For $\$175,000$ of group term coverage, the excess subject to calculation is $\$125,000$; imputed income is determined by calculated cost rather than the face amount.

Participating Policy Dividends versus Interest

Dividends represent a return of premium and are generally tax-free up to basis; interest earned on dividends held on deposit is generally taxable.

Transfer-for-Value Rule

The transfer of a life insurance policy for valuable consideration, which can cause a portion of the death proceeds to become taxable, subject to exceptions.

FICA

Federal Insurance Contributions Act payroll taxes that fund Social Security and Medicare, generally shared equally by employer and employee.

Conditional Receipt

A receipt providing temporary coverage only if all specified conditions of the receipt are satisfied.

Conditional Coverage Initial Premium Effect

Paying the first premium does not by itself guarantee conditional coverage.

Inception of Conditional Coverage

Conditional coverage can take effect prior to policy delivery if all conditions in the receipt are met.

Policy Issued on Different Terms

An altered policy issued by the insurer constitutes a counteroffer that requires acceptance by the applicant.

Application Without Premium Effective Date

When an application is submitted without premium and issued as requested, coverage ordinarily takes effect when the applicant accepts the policy and pays the premium under applicable terms.

Material Misrepresentation

A false statement on an application that is material to the insurer's underwriting acceptance of the risk or terms.

Representation versus Warranty

A representation is an applicant statement believed to be true to the best of knowledge; a warranty traditionally carries a strict requirement of absolute truth.

Insurable Interest Inception Timing

In life insurance contracts, insurable interest must generally exist at the inception of the contract.

Preferred versus Substandard Risk

A preferred risk represents a better-than-average mortality risk; a substandard risk represents a higher-than-average risk.

Attending Physician Statement (APS)

A detailed medical report completed by an applicant's treating physician, utilized during the underwriting process.

Medical Information Bureau (MIB)

A cooperative insurance information service that helps underwriters detect potential inconsistencies and omissions on applications.

Fair Credit Reporting Act (FCRA)

Federal law governing the collection and use of consumer reports and regulating required adverse-action notices.

Investigative Consumer Report

A specialized consumer report that involves personal interviews regarding an applicant's character, reputation, and lifestyle.

USA PATRIOT Act Date

Federal legislation enacted on October $26$, $2001$, establishing enhanced anti-money laundering requirements.

Bank Secrecy Act

A federal framework establishing anti-money laundering (AML) recordkeeping and reporting standards.

FinCEN

The Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury.

ERISA versus FCRA versus USA PATRIOT Act

ERISA governs private retirement plans; FCRA regulates consumer reporting; the PATRIOT Act targets terrorism financing and AML enforcement.

Gramm-Leach-Bliley Act

A $1999$ federal financial-services modernization law that established privacy and safeguarding provisions for nonpublic personal information.

HIPAA

Health Insurance Portability and Accountability Act of $1996$, which includes statutory standards for the privacy and protection of health information.

McCarran-Ferguson Act

A $1945$ federal act affirming that the continued regulation of the business of insurance by the states is in the public interest.

STOLI (Stranger-Originated Life Insurance)

Life insurance transactions initiated for the benefit of third-party investors who lack a legitimate insurable interest.

Elements of a Valid Contract

The four required elements: agreement (offer and acceptance), consideration, competent parties, and legal purpose.

Aleatory, Adhesion, Unilateral Contract Characteristics

Aleatory entails an unequal exchange of values; adhesion means contract terms are drafted solely by the insurer; unilateral means only the insurer makes legally enforceable promises.

Applicant's Consideration

The statements made on the application combined with the payment of premium.

Nonforfeiture Options

The three statutory options available when discontinuing a cash value life policy: cash surrender, reduced paid-up, and extended term.

Cash Surrender Option

A nonforfeiture option allowing the policyowner to receive the accumulated cash surrender value and terminate coverage.

Reduced Paid-Up Option

A nonforfeiture option that uses accumulated cash value to purchase a smaller amount of paid-up permanent coverage without further premiums.

Extended Term Option

A nonforfeiture option that uses policy cash value to purchase term insurance equal to the original face amount for a limited duration.

Automatic Premium Loan (APL)

A provision that uses cash value as a policy loan to pay an overdue premium; it is not a nonforfeiture option.

Ordinary Whole Life

Permanent life insurance that provides protection for life with generally level premiums and guaranteed cash values.

Limited-Pay Whole Life

Permanent life insurance offering lifetime protection where premiums are paid only for a specified number of years or until a stated age.

Single-Premium Whole Life

A permanent life insurance policy funded entirely by one lump-sum premium paid at inception.

Modified versus Graded Premium Whole Life

Modified whole life features an initial lower premium that increases in one single step; graded premium features premiums that increase gradually each year during the early policy years.

Universal Life

A flexible-premium permanent life policy that allows adjustments to the death benefit and premium schedules, subject to cash value funding.

Variable Universal Life

A life insurance policy that combines the premium and death benefit flexibility of universal life with investment options in separate accounts.

Convertible versus Renewable Term

Convertible term allows conversion to permanent coverage without new evidence of insurability; renewable term allows extension of the term period without new evidence of insurability.

Decreasing Term

A term policy where the death benefit gradually decreases over the coverage period, frequently used for mortgage protection.

Joint First-to-Die versus Survivorship Life

First-to-die pays the death benefit upon the death of the first insured; survivorship (second-to-die) pays only after both insureds have died.

Waiver of Premium versus Disability Income Rider

Waiver of premium waives policy premiums during total qualifying disability; a disability income rider pays a specified periodic income benefit during disability.

Payor Benefit Rider

A rider attached to a juvenile policy that waives future premiums if the premium payor dies or becomes totally disabled.

Guaranteed Insurability Rider

An optional rider that permits the insured to purchase specified amounts of additional life insurance at future dates without submitting evidence of insurability.

Contributory Group Life Participation Requirement

A group insurance plan where employees share premium costs, requiring participation by at least $75\%$ of eligible employees.

Noncontributory Group Life Participation Requirement

A group insurance plan where the employer pays all premiums, generally requiring participation by $100\%$ of eligible employees, subject to exceptions.

Group Master Policy versus Certificate

The sponsoring employer or entity receives the master policy; individual covered employees receive certificates of insurance verifying coverage.

Group Conversion Privilege

A right allowing an individual to convert group life coverage to an individual permanent policy within a set period without evidence of insurability.

Credit Life Insurance

Life insurance designed to pay off an outstanding covered debt to a creditor in the event of the debtor's death.

Stock versus Mutual Insurer

A stock insurer is owned by stockholders/shareholders; a mutual insurer is owned by its policyholder-members.

Demutualization

The structural reorganization process in which a mutual insurer converts into a publicly owned stock insurance company.

Reciprocal Exchange

An unincorporated insurance organization in which subscribers mutually exchange insurance risks through an attorney-in-fact.