Life and Health Insurance Exam Last Minute Review

Hey, thanks for joining us for another episode of Ace Your Insurance Exams with insurancetesthelp.com. We are going through the life and health insurance exam today and we are doing a last minute review. So let's get started. So this is pretty much meant for you to do at the as you're getting close to the end and you're getting ready to test to sort of make sure that you've got all the things and to kind of do a last minute review on stuff. If you are struggling to get any of the concepts of the life and health insurance exam, please check out our other videos and like and share on our site. We like to share things regularly, so check it out, okay? Big part of the exam is going to be general insurance concepts. You got to know all the general insurance concepts that count for all your insurance exams. So here we go. First of all, what is insurance? Insurance is the transfer of risk to an insurance company by either you or a business. You pay a small amount, your premium, to transfer that risk to the insurance company in case something horrible happens, like your home burns down. Or in this case, since we're doing life and health, in case you die or in case you have a catastrophic illness where you have to go in the hospital or have a surgery. The law of large numbers is one of the things that insurance companies use to determine risk. So the larger the pool of people, the easier it is to predict the loss and the quantity of loss. So it is much easier to predict the loss for a large group of people who are over 60 and when they will die or when they will get cancer and things like that, as it is to try to figure it out for one person. So they know certain risk factors, like smoking increases your risk and those risks get higher as you get older. So they use a large pool of people. The larger the pool, the more accurate the prediction. That is the law of large numbers. Contract of adhesion. All insurance contracts are contracts of adhesion. A contract of adhesion is prepared by one party and accepted or rejected by the other. Take it or leave it. There's no negotiation. You don't get to negotiate how much the premium is going to be for your million dollar life insurance policy. The insurance company basically dropped that contract and say, you want it or you don't. Contract of adhesion, take it or leave it. Aleatory. Aleatory. All insurance contracts are aleatory. That means there's an unequal exchange of values. Insurance contracts are aleatory by the nature that you pay a very small amount of premium in comparison to the amount that the insurance company would have to pay for in a loss. The hundred dollars a month that you pay for your term life insurance policy or 25 if you're real young, that is nothing compared to the quarter million dollars, million dollars, five million dollars that they would have to pay in the event that you died. So all insurance contracts are aleatory. It is an unequal exchange of values. Okay, more general insurance concepts. Unilateral. All insurance contracts are unilateral. A unilateral contract means that only one party is bound to do anything. You are not bound to do anything. The insurance company is legally bound by the contract to pay losses if they occur. If you stop paying your premium, which you can do, your insurance will lapse, but you are not required by law to pay it, right? So unilateral means only one party is required by law to do anything and that is the insurance company. Conditional. All insurance contracts are conditional. Certain conditions must be met in order for you to fulfill the obligation of your contract. Obviously, when you fill out a life insurance policy or health insurance policy, they want to know the status of your health. They want to know if you have cancer, kidney disease, um, you know, liver problems. They want to know all that. If you're a smoker, those are conditions. So some of them are conditions that they won't give you an insurance policy. Like if you have cancer or kidney failure, you're not going to get an insurance policy. Those are conditions that you would be not insurable. Other conditions are that you have to maintain certain things like paying your premium. That's a condition of maintaining your insurance. A binder. A binder is a temporary agreement that puts your insurance in force. So when you decide to fill out your application, your, um, your insurance agent gives you a binder that is a temporary policy until the insurance company actually writes the actual policy. Um, if the underwriter declined the policy because you had something, you know, wrong with your health or something like that, then the policy would not be issued and your coverage would expire on the date of the expiration of the binder. Cancellation and non-renewal. Not the same thing. Cancellation is the termination of the policy by either party before the end of the term. So if you just decide you no longer want insurance, you want to cancel it, stop making payments, that's your right to do that. That would be a cancellation. Non-renewal is the termination at the end of the policy and not offering to continue to or to renew the policy. So non-renewal means it's ending at the term. Cancellation means that you can, you or the insurance company are cancelling it in the middle of the contract. Okay, these are all sort of related, so they're all on one slide. Utmost good faith. All insurance, um, contracts assume that you are using utmost good faith. That means you are being honest, you're not representing, you're not concealing, there's no fraud. You're being truthful on your, on your application. Representations are things that you believe to be true, but you're not guaranteeing them. That doesn't mean that you're concealing anything. It just means that you are saying you're in good health because you believe that to be true. Um, whereas a warranty is something that is absolutely true. You are saying you are a non-smoker. You are giving a warranty that you are a non-smoker. If they found out that you were actually a smoker, then it can void your contract. Anything that is a material information and warranty, that would be something that could void your contract. Concealment is the act of intentionally withholding information that is material for making a decision. It can void a policy. So for example, if you have a car and you, um, say you had a driver's license, but you really didn't, then your, your car insurance could be suspended, right? Um, it's also the same if you said you were a non-smoker and you turned out to be a smoker, then they could, um, void your policy for that. Insurable interest. This is that if something happened, you would incur a loss. There are three types of insurable interest, blood, financial, or business. The blood one is obviously relatives. If your spouse were to die, you might find it difficult to keep up with the bills and live the same way that you do right now. That is, um, both a blood and a financial reason. Um, if you were to lose a child, that would be a blood insurable interest. You can insure their life. Um, it's very hard to lose a child and it is, um, catastrophic on your life. Um, the other one is a financial. Obviously you, you can insure a business partner because they, if they died, right, or you would have, your business would be dramatically in effect, affected. So that would be a business, but as well as a financial insurable interest. Exposure. This is the level of risk that the insurer is assuming when they're giving you coverage. Insurers assess exposure to determine your premiums. So that's why some people, smokers, race car drivers, ice climbers, you might pay a, um, higher rate, um, through a table rating because you have a more exposure, better chance of dying than someone who is younger and doesn't do any of those activities. Indemnity. Indemnity is a important concept in insurance. You will see it come up on almost every exam. It's highly testable. Indemnity refers to the principle that the insured should be restored to the same financial position they were before the loss without profiting from the insurance claim. So you're basically made whole, like they put your pie back together. Humpty Dumpty gets put back together again, but Humpty Dumpty doesn't get, um, to benefit from it. Doesn't get to be super Humpty Dumpty. He just gets to be like he was before. Right? So this ensures that you receive fair compensation. It also prevents over-insurance and excessive payouts because it's just that amount that, um, would make you whole. A fiduciary. A fiduciary is a position of trust. It is a person or entity that holds a position of trust and is expected to act in the best interest of another party. For insurance agents, this means you have to act with an honesty and integrity handling clients' premiums and insurance matters with care. You are legally obligated to manage funds appropriately and prioritize clients' interests and the insurance company's interests over your own, ensuring the proper delivery of insurance services and claims. Mutual companies versus stock companies. I'm not even sure why this is testable, but it does appear on a lot of insurance exams. So make sure you know it. A mutual company is owned by their policyholders. A stock company is owned by their shareholders. So you will see some stock companies traded on the stock exchange. Mutual companies obviously are not. They are owned by their policyholders. And as a result, they can actually pay you dividends based on that. Sometimes you will get a check if you're part of a mutual company. Um, this is highly testable, even though I don't really know why you don't need it to be an insurance agent, but just make sure that you know the difference between a mutual company and a stock company. Free look period. This is extremely important, especially in health insurance. It is the right to examine. So you get your policy and you have several days to return it for a full refund. Uh, it is also on some health policies. So that's number, that number of days is determined by your state. It's often 10 days. So make sure you know your state specific rules for the free look period. Cause I will guarantee that this is extremely testable. It allows you to look over your policy. And if you don't like it to return it for a full refund within that period of time. Okay. In parts of insurance contract, this is going to be the contract law portion. Also going to have a significant amount of questions on this. Um, so the different parts of insurance country that have to be present to make it a legal contract or agreement, this is offer an acceptance. One party makes an offer. That's you. And you fill out your application for life or health insurance. And then one party accepts it. That's going to be the underwriter who accepts it and issues the policy. It also has to have legal purpose. That means that it has to be legal. You can't make a contract for illegal things, right? Consideration. This is the binding force of the contract. That's why your insurance agent wants you to make a payment rate. When you put in the application of your life insurance, if you haven't made that payment yet, it's, there's no consideration. So it's not binding yet, right? So you have to make that, you have to make that payment to make it a binding contract. That's the consideration on your part. That's you paying the premium and consideration on the part of the The other thing that has to be present in all insurance contracts is competent parties. This is highly testable. You will see this on your exam. I will almost guarantee it. You must be capable in the eyes of the law of being able to enter into a contract. That means you cannot be under the influence of drugs or alcohol. You cannot be a minor. You must be of legal age and you must be able to understand the contract. So no dementia, stuff like that, but you have to be a competent party to make an insurance contract binding. And that is extremely testable. I'd make sure you know that one. Okay. Parts of a policy. This is also highly testable declarations. This is where the basics underwriting details are. Who, what, where, how much premium coverage, the insuring agreement. This is where you'll find the parties to the contract, the effective date, the renewal date, the perils covered in the description of the coverage. Conditions. This is the rules, right? The general procedures that both you and the insurance company agree to follow and the exclusions. This is where you'll find things that are not covered by your insurance policy. So understand the parts of the policy. The easiest way to remember it is the acronym DICE, if you like acronyms, D for declaration, I for insuring agreement, C for conditions and E for exclusions. Okay. Let's get right into the parts of life insurance that are going to be on your exam. So you're going to be tested on the different kinds of life insurance. And it's good to know these for when you do get to your exam, you can hit pause here. If you want to read all of the things on the different kinds of whole life, the key things with whole life is to remember this is permanent life insurance. It has a guaranteed death benefit. And the extremely testable thing is that it has cash value that grows on a tax deferred basis. So you have level premiums. If you got your whole life policy, when you were a four year old, you would still be paying the rates of a four year old. Even now, if you got it when you were 25, that rate would last, you know, so it's, it's good to buy whole life, obviously when you're younger, um, you can take a loan on a whole life policy because you have the cash value. You can take a loan. Um, you have many non forfeiture options for whole life because you own the policy because it's permanent and there's cash value. Even if you stop paying premiums, some of those non forfeiture options are that it would continue to pay your premium out of your cash value. There are several types of whole life. I would know all of them. Ordinary whole life is the most common one. That's a level premium and a fixed death benefit. I would also know limited pay whole life. That is extremely testable. That means that you are paying the premium for a set number of years. You keep the insurance forever, but you pay the premium over a set number of years. So that's going to be called limited pay. Um, so you pay pay for 10 years, 20 years, like a 10 pay or 20 pay, but your coverage obviously lasts for life. Single premium whole life. This is where people pay one premium and that's it. So if you got a, someone died and you got an inheritance, you might decide you want to buy a life insurance policy and just pay everything all at once. That's a single, single premium whole life. And then there's modified and graded premium whole life. Those are lower initial premiums that increase over time. I don't think those are highly testable. I think in this one, it's going to be the ordinary whole life and the limited pay whole life. Okay. Things to know on whole life. Ordinary whole life is sometimes referred to as straight life. All whole life policies are permanent and have cash value as extremely testable. Universal life allows for a flexible premium, but has a minimum premium that must be met as well as a target premium. It suggests to avoid issues with underfunding later. Also know that variable whole life has an investment component. The agent must have both a life insurance license and a securities license to sell it. So anytime you see that word variable, whether it's variable whole life, variable universal life, variable annuity, anytime you variable, know that it requires both a life insurance license and a securities license. Variable whole life. This is regulated by the state and the federal government because of the securities part, the federal government is involved. So I would know that. The policyholder bears the investment risk and know that it is kept in a separate account. The insurance company must put the fund in a separate account and not in the general account because you as the policyholder bear the investment risk. So if the investment went up and down, that affects you, not the insurance company. So you have to be able to account for that, right? Know that variable whole life has an investment component and really know that you must be registered with FINRA for the securities and with the state for the insurance license. Universal life. Like we talked about flexible premiums, you can skip premiums if you have cash value. There are two death benefit options. Option A is a level death benefit that goes up as the policy ages in order to maintain the IRS gap. If the IRS gap is not maintained, the IRS no longer look at this as an insurance product, right? So it could be taxable. Life insurance is generally taxed, not taxable. So you want to probably in those cases pick option A. Option B is an increasing death benefit. It has higher expenses in later years than option A. And so it's just one to remember that option option A is the one with the IRS gap or the IRS corridor. Okay, moving on to term life. Term life is temporary life insurance. You buy it for a set number of years and it's gone at the end of that. There's no cash value. That is important to remember. It has no cash value. So temporary life insurance has a specific period of time, 10 years, 20 years, 30 years. And if you die during that term, they pay it out. So it's a fixed term coverage. It's also a pure death benefit. There's no cash value accumulation. It only pays if you die within the term. The appeal is that it's extremely low cost, right? And you can renew it sometimes. You can convert it to a permanent policy. And often those renewabilities and conversions sometimes allow you to do that without proving evidence of insurability. The types of term life insurance are the most common level term. That is just a flat rate you pay every month or once a year, depending how you like to for that entire 10 years or 20 years. The other is decreasing term. People often get this when they get a mortgage. I've never seen it in my actual job in insurance. I've seen it on tests, but decreasing term is a death benefit that decreases over time. So it might start out at half a million dollars and it goes down as the policy gets older, usually to pay off a mortgage. Renewable term. This allows you to renew it without proof of insurability, but the premium can go up because obviously premiums are based on your age. And convertible term. Convertible term can be converted into whole life or universal life insurance. And a lot of them have a term conversion option as long as they are over a certain amount of insurance. Key takeaways with term life insurance is that it is sometimes called pure life and it is just a death benefit. There are no cash value and there is no living benefits. So whole life sometimes has living benefits. If you are terminally ill, you can start to draw on your permanent life insurance policy. You can't do that with a term. Know that decreasing term goes down as the policy ages like a mortgage. And know that return of premium pays you back the premium if you do not die during the term. But know that it's much more expensive, but a lot of people like it. It gives you all your premiums back. Know that a convertible provision provides you with the right to convert the policy to a permanent policy without evidence of insurability. Combo plans. So this is sometimes the single ones just don't fit you. Joint life. That is considered first to die. That can be in the form of term or permanent insurance. The premium is based on your joint average age and the death benefit is paid on the first death only. So think of husband and wife. Statistically, husband's going to die first, right? Women live longer. So they would pay the death benefit when the husband dies and that would give her some income to live on for her life. Survivorship life. This is where you maybe want to have a build a legacy or an estate that is also called second to die or last survivor. Again, can be term or permanent. And the premium is based on the joint average age. The death benefit is paid on the last death. So on the first death, you get nothing. On the second death, you get the policy, you know, the death benefit. And that is often used to offset the liability of a state tax for people that might be looking at a higher estate tax bill. So you might want to freeze it here. And if you want to look at the comparisons between whole life and term life, we did them all. Obviously, the big things to remember are that whole life insurance is for your lifetime. Term life insurance is for a specific amount of time. Term life insurance is way cheaper, but it does not build cash value. Whole life builds cash value. Whole life allows you to borrow against it. You can get a loan and that loan could be for anything. That loan could be to buy a car. It can be to pay off some bills. You can take a loan on your whole life policy for anything you want. But term life insurance does not have any cash value, so it does not have any loan option. OK, so the best for best for whole life is best for long term financial planning and it's good savings for retirement. Term coverage is really good to pay off a mortgage and have a really large amount of life insurance for a really low cost. That is the major benefit of term life. And just to reiterate it, because it's going to be on your exam, know that term life is the most amount of insurance you can get at the cheapest price, the largest death benefit at the lowest cost. And on the other side of that whole life, know that term life does not have cash value. It is just a death benefit, but whole life builds cash value. Term insurance does not. Life insurance riders. These are all your extra add-ons and endorsements that you can add to a life insurance policy. First of all, what is a rider? A rider in insurance is an add-on provision that modifies or enhances the coverage. It can add certain things. It can add additional insurance for other people. It can add guarantee insurability options. It can add things for disability. So it's basically a little add-on tack-on that gives you an endorsement on your policy. There are a whole lot of riders. You may want to pause here if you want to read them all. Some of the key ones that I think are highly testable are going to be waiver of premium. Waiver of premium waives your premium if you become disabled. That means that the insurance company will pay your premiums for you so your life insurance won't lapse for non-payment. Return of premium. We talked about that. That basically gives you all of your premiums back if you outlive your policy. That's for term insurance. Guarantee insurability. That allows you to buy extra insurance. That is often on youthful whole life policies where you get certain benefits to add on more insurance as they get older. Accidental death benefit. Sometimes that doubles the death benefit. You hear that where someone got doubled because they died in an accident. And cost of living increase is also an endorsement. So you can pause here and look at the different riders if you want to know all of them in detail. And the second group because there's a whole lot of riders you can add on. Child term riders are extremely popular. That provides life insurance coverage for your policy's children. Doesn't matter how many children you have. It's basically a flat amount for how much insurance you want. Accelerated death benefit. That's where you could start to take part of your death benefit out early if you're diagnosed with a terminal illness. Long term care. That can be some of your death benefit can be used for long term care. And payer benefit. That weighs the premium on a child's policy if the policy holder dies or disabled. So I owned one for a child and I died and the child was like 12 or 14. They obviously don't have any income to pay their life insurance. They don't have to lose their life insurance policy. That payer benefit continues to pay it until you know until they're an adult. The spouse term is very much similar to the child term rider. That provides a set amount of temporary term life insurance for your spouse. And sometimes it's cheaper than buying a separate term policy for your spouse. Okay so tacked on to your life insurance part of the exam is going to be annuities. It doesn't really have that much to do with life insurance but it is part of the life insurance license. So here we go. Annuities is a contract between an individual insurance company to provide a stream of income. Typically you have an annuity to retire with. You put in a lump sum of money or you make periodic payments like you're saving for retirement and the insurer agrees to make regular payments either right away or at a future date. So if you received a lottery winnings or sometimes paid with annuity. If you received a judgment against someone that sometimes paid as an annuity. If you had someone in your family die and you received an inheritance like a life insurance policy and you didn't know what to do with it. Sometimes people put that into an annuity and then they start taking out monthly payments right away. So that is an immediate pay annuity. Some people are actually saving for retirement so they're putting in little amounts every month and they are saving for when they're older. That is a deferred annuity. So there are two different phases of an annuity. One is the accumulation phase. That is where you're building up the annuity. So that's where you're making those periodic payments and the value grows tax deferred. The other one is the annuitization period. That is when you switch to it being making you payments and at that point you know you have you have the payments coming to you during the annuitization phase. One thing to know about annuities is there are three different parties. Two of them can be the same. Sometimes they're not. So the annuitant. The annuitant is the person whose whole whose life the annuity is based on. They are going to be the one to receive the payout. They must be a natural person. They can often be the next one which is also the owner but they don't have to be. The owner can be the annuitant but the owner can also be something like a corporation. The owner has all the rights such as surrender and naming a beneficiary. The beneficiary is the person who receives the annuity's assets if the annuitant dies during the accumulation period or to whom the balance is paid of the annuity benefits. If one of the annuity payout options was one where there was a payout to a beneficiary that is where you would have those payments go to Key types of annuities. A fixed annuity provides guaranteed payments and is backed by the insurer's general account. Variable annuity. Remember that word. They are based on the performance of the insurance sub-accounts. That is a separate account. It is regulated as a security. You as the investor bear all the investment risk for that and the agent needs both an insurance license and a securities license to sell a variable annuity. Immediate versus deferred annuity. Immediate annuities begin payouts right away while deferred annuities begin at a later date in the future. Different payout options for an annuity. There's going to be a couple of these that are highly testable. One is life only straight life. That pays for the annuitant's lifetime only. After they die, no monthly income. So if you lived for 10 years, 20 years, two months, 35 years, six months, it doesn't matter. When you die, it stops. That is the highest monthly income. That is probably the testable part there is that life only straight life annuity has pays the monthly income. Then there's also life with period certain. That pays for life with a guaranteed period. So it would be like life with period certain 20 years. So it pays for your life, but it pays for at least the 20 years. If you die early, the beneficiary receives the payments. Joint and last survivor. This pays as long as either of the two people are alive, but it may go down when that first person dies. So husband and wife kind of thing, right? Husband dies and maybe it goes down, but she's still receiving an annuity payment until the end of her life. Period certain. This is a fixed period of time that pays for a set period of time only and continues to the beneficiary if the annuitant dies early and there is no lifetime guarantee. So if you chose period certain, that would be that you would get it for say 20 years. You would only get it for 20 years. If you died in 10, your beneficiary gets it. If you live to 25 or 30, you know, live for 25 or 30 years, you could actually outlive your income. And then a fixed amount. The fixed amount pays until all the funds are gone and the duration depends on your account performance. I think the highly testable ones here are going to be life with period certain, period certain fixed period, possibly joint last survivor that that would be for two people. But I think the biggest testable one here is that straight life pays the highest monthly income. Okay. Moving on to health insurance topics. We did another video on a bunch of the things that are in the health insurance thing. I'm not going to repeat them all here because it would just make this like the longest video in the universe. So please check that out. It's one on Medicare and social security. It has an awful lot on all the different programs that are in there. They are worth a good amount on your exam. So please check out that video. It does have lots of great details on lots of the retirement parts of the exam, as well as social security and Medicare and COBRA. So please check out that video on our site to get all the details on that. Now, let's move on to the other health insurance topics. Basic medical. Basic medical is often referred to as your first dollar medical. There's no deductible. It's very limited coverage. It has three parts, hospital, surgical, and medical. They can be bundled or they can be separate. It does have cost limits for the things covered, like for example, $600 per day. So I would know that for basic medical. But I think the main key takeaway for basic medical, if it's on the exam at all, is that it is your first dollar coverage. Major medical. This is a broader medical coverage. Takes over when the basic limits are exhausted. Provides comprehensive and catastrophic coverage. So there's comprehensive major medical and supplementary major medical. The basic would pay the first dollar, but there'd be deductible for the window between the basic medical and the major medical. I don't feel like basic medical and major medical are going to be highly testable other than the first dollar amount for basic medical. These two are going to be much more testable. They're also much more common for people to have. An HMO is a health maintenance organization that requires you to use a network of providers. Your primary care physician acts as a gatekeeper for referrals. I would know that. The primary care physician as a gatekeeper I think is highly testable. It has lower out-of-pocket costs, but no coverage for out-of-network care except emergency. I think that is extremely testable and the focus is on preventative care and cost control. PPO, that is a preferred providers organization that has more flexibility in choosing providers. There is no need to have referrals from your primary care physician. Your in-network care costs less, but out-of-network care can still be covered at a higher cost. It has higher premiums and deductibles compared to an HMO. I would know that a PPO is more flexible. I would know that it has higher premiums and deductibles than an HMO, but that you do not have that gatekeeper. I feel like the gatekeeper on the HMO is going to be a highly testable topic. Moving on to FSAs, HSAs, and HDHPs. FSA is a flexible spending account. That is a tax advantage account funded by deductions from your salary at your job. You can use it for qualified medical expenses such as your co-pays, prescriptions, and medical supplies. You can also use it for daycare because it is a flexible spending account. It is not all medical. It has a use it or lose it. You have to use it in that planned year or you get to the end. They may have a short grace period or a very small amount they let you carry over. It is exempt from income tax, those amounts that you deducted. If you took $2,000 off of your income for the year as a deduction off your paycheck, that would not be taxable. HSAs are a health savings account. They are just for health expenses. They are a tax advantage health savings account. They are only open to people that have a high deductible health plan. That is what the HDHP is, a high deductible health plan. I would know that an HSA is only available to people with a high deductible health plan. They are used to pay qualified medical expenses. The funds can roll over year to year. They are portable. They stay with you, not your employer. To qualify, you must have an HDHP. You can have no other medical insurance. You must not be eligible for Medicare. Non-health withdrawals are penalized 20%. After 65, they are taxed but not penalized. You really don't want to be taking anything out of this account that is not for medical care. Disability income. This is your short-term, long-term disability policies. This provides regular income payments when you are unable to work due to illness or injury. It replaces a portion, typically 60% to 70% of your lost income. The benefits are tax-free if you paid with it with after-tax dollars because they think you already paid your taxes. The key features that you need to know are an elimination period and a benefit period. The elimination period is how long you wait. The benefit period is how long you get your benefits for. Your definitions of disability may vary. Own occupation versus any occupation. Both of these are extremely highly testable for the insurance part of your exam. Elimination period is the waiting period you have to wait before you start benefits. The elimination period is 30 days on some of them. Then you'd wait 30 days from the date you became disabled until you receive benefits. The higher the elimination period, the lower the premium. Do not mix it up with the probationary period. The probationary period is the part that you have to wait for an illness. So if you started a disability thing and you had an illness, not an injury, but an illness, you would wait through the probationary period. It's to prevent people from going out and buying a disability thing when they're sick, right? Then they would get a disability right away. They would have a probationary period that they also have to wait. I would know that social security disability has a five-month elimination period. You will not start to receive your benefits until the sixth month for social security disability. Accidental bodily injury as opposed to accidental means. Accidental bodily injury is an unexpected unintended damage to your body. Whereas accidental means is that the cause of the accident is unexpected and unintended. So know that accidental bodily injury is broader coverage than accidental means. If it's on going to be on the exam at all, it's probably going to be which one of these is broader coverage. A presumptive disability, I feel like this is going to be on there and it's highly testable. These are conditions that automatically qualify you for full disability benefits. Some policies, it is the loss of any two limbs, some it's blindness, some it's loss of speech, some it's loss of hearing. Some policies require both of limbs to be gone. Others just require them to not be usable. But know that if it's a presumptive disability, it is a condition that automatically qualifies for someone for full benefits, even if they're perfectly capable of working, they still would be able to get their benefits because that presumptive disability would be paying, assuming that they would need it. Okay, next step is going to be some of the business sides of health insurance. This is business overhead insurance that is going to pay the basic costs of your business, the basic expenses in the event that you were disabled. So that would pay for the rent, the utilities, employee salaries, the basics until you were back at work. There is also a business disability buyout. That is a buy-sell agreement, usually among partners. So if me and you were in business, we own a small business, that business disability buyout insurance would pay me the amount I would need to give you or your family, your beneficiaries, right? The amount to buy out the entire business, your share of the business, in the event of your death or disability. So that the business would continue how we saw it, would not all of a sudden be in business with your beneficiaries. Okay, next one's going to be key person disability. This used to be known as key man insurance. We've modernized a little bit. Key person disability insurance is when an employer buys a policy to cover key people in the business. So they may cover the CEO, they may cover a key engineer in a project, somebody that basically if they were to be disabled or die, it has a massive impact on the business. The business is the contract owner, the payer, and the beneficiary. So they receive, they pay the bill, they own the policy, and they receive all the funds in the event of your disability or your death. Occupational versus non-occupational. Occupational means it provides coverage for sickness and accidents that occur both on and off the job. Non-occupational means it only covers claims that result from accidents or sickness off the job. So most group plans are non-occupational as they assume that sicknesses and accidents on the job are covered by workers' compensation. Group disability plans, usually group disability plans give you a specific percentage or a flat amount, right? Short-term plans might give you a benefit of 13 to 52 weeks with 26 weeks being the most common and the benefits being from 50 to 100 percent. So for example, I went out on maternity that was short-term disability under that company that I worked for at that time. I got my six weeks at 100 percent of my income. Some people have complications in their pregnancy before they have their baby, so they could be out for a period of time before they have their baby. And then normally a group plan has a short-term and long-term. Once you've exhausted the short-term, usually move into the long-term plan and that provides a benefit of whatever the company allow it up to and that gives you the long-term benefit. In cases like say you worked in a factory and you were hit by a fork truck, that could be a long-term disability, right? So group plans like for disability usually require that the employee has worked at the company for some sort of period of time, 30 to 90 days depending on the company. Accidental death and dismemberment. These can be written as separate policies or as a rider to a policy. It's almost always part of a group policy. It pays the full sum in case of accidental death and in the case of accidental dismemberment or loss of sight, it is paid in the based on severity. So if you lost both your eyes both your eyesight and lost sight in both eyes, that would be obviously more money than loss of sight in one eye. Losing two legs is more than one eye. I know it sounds morbid, but they pay based on the severity of the accident. Long-term care. I'm not sure you're going to see too many questions on this, but you probably will see a couple. Long-term care can be written as a separate policy or a rider. It must be guaranteed renewable, but insurers have the right to increase the premium. It is usually a fixed amount regardless of the cost of care. So if you are buying $150 per day and the care only costs $100 per day, you would be getting paid $150. It's not a reimbursement policy. It's a flat rate that you're buying. Flip side of that is long-term care could be $700 a day and you're only getting $150, right? So they don't care. You're still only getting the $150. It must provide at least 12 consecutive months. It normally has an elimination period, just like a disability where you have to meet that 30 days, 60 days, 90 days. And like a disability policy, the longer the elimination period, the lower the premium. That is one thing to really keep in mind because that is for sure on your exam. The longer the elimination period, the lower the premium. For long-term care, the insured must be able to perform their activities of daily living, their ADLs. I think this will be the long-term care question. You have to be able to do your bathing, your dressing, your toileting, your eating, your continence, and transferring positions with your mobility. If you cannot perform those, those are activities of daily living, long-term care would kick in. I think the ADLs is going to be the question, either that or the elimination period. So pay attention to both of those. So most of us have had group insurance, but it is an employer-sponsored program that provides group coverage to employees. Employees must meet certain service requirements and work full-time. So part-time employees usually are not eligible. Sometimes you have to work there for 90 days, things like that. So an association can also buy group insurance for their members, but they must have more than 100 members and be organized for the purpose other than just buying insurance. You can't make an organization just to buy insurance, but think of unions, right? Unions are organized for collective bargaining. They are not organized to buy insurance. They can also buy group insurance for their union members. The association must have been active at least two years and have bylaws and annual meetings. The actual policy in group insurance is called the master contract, and it is issued to the sponsor, the company, or whoever, you know, the union or whatever it is, and the individuals are issued a certificate of insurance. Those, I think, right there are your questions. The actual policy is called the master contract issued to the employer or sponsor, and your policy as an individual is called a certificate of insurance. So I think those are going to be the questions for the exam. The other one is obviously the COBRA. Terminated employees have the right to convert it to an individual policy without evidence of insurability or to go to a COBRA policy. That rolls us right into COBRA. COBRA is a plan that extends group health coverage to terminated employees and their families after a qualifying event, such as downsizing, voluntary termination, or changing from full-time to part-time. If your employer took you from full-time to part-time and you had insurance, you would be eligible for COBRA. I think the question is this next part right here. Any employer with 20 or more employees must offer COBRA. I think that is going to be the question. Coverage is up to 18 months, and the terminated employee must exercise their COBRA extension within 60 days of separation. That could be the question. 60 days of separation. You got 60 days to decide if you want COBRA, because it's expensive. The employer may collect 102% of the group premium rate, so they can collect the full amount from you and an extra 2% for their administrative costs. COBRA can be 36 months long if it is from a divorce or a separation or if the employee dies. Otherwise, it's 18 months. That might be the question, but I really feel like the question is going to be, any employer with 20 or more employees must offer COBRA, so know that one right for sure. Grace period. This is all people that tend to not pay their bills on time, so this is directly tied to your premium mode. The period of time after non-payment where the premiums can still be made before the policy lapses. These are state-specific, so I would know your state-specific laws. In most states, it cannot be less than seven days for weekly premium policies. Who's ever buying these weekly policies? 10 days for monthly, 31 days for all other modes. I would know what your state-specific ones are. If it's monthly policies, is it 10 days? Your coverage remains enforced during the grace period. That's something people, even once you become an agent, don't know. They call up and they think they've lost their insurance when they're just two or three days late and they're still in the grace period. Reinstatement. This is conditions on the policy where you may reinstate the policy if you haven't paid against about non-payment by the end of the grace period if you haven't, right? So what the conditions are for you. Reinstatement is automatic. If you pay an authorized representative, you walk into your insurance agent's office, you hand the money and they accept it, then you are reinstated. If a reinstatement application is required, it's just like starting over. It can be approved or denied. So if you have a certain, sometimes there's a certain time limit on when you can just make a payment, that goes beyond what your state allows. I would know what reinstatement is. When you reinstate a health policy, accidents are covered immediately, but sickness has a waiting period of 30 days. So remember sickness had a probationary period when you first got your thing of 30 days. Now it has 10 days on the reinstatement because obviously you got, they don't want you to get sick and then decide you're going to roll down and finally pay that bill so that you can get coverage. It's going to have a 10-day waiting period for reinstatement. Okay, these are all things that you have to do when you have a claim. Notice of claims. This is where you are telling them I've had something happen. This spells out what you have to do to give notice in the event you had a loss. Normally 20 days or as soon as reasonably possible. Obviously if you're in the hospital, you can't do, or unconscious, you can't do 20 days, right? So that's why there is the reasonably possible, ideally 20 days, but something reasonably possible and notifying your agent is the same as notifying your insurer. This is a more a more informal way of telling them. The company must supply claim forms within 15 days. That can vary from state to state. I would know that. That could very well be the question on notice of claims is what time frame does the company have to supply claim forms. After they have given you your claim forms, it becomes a formal process. This is your written official document. That's your proof of loss. You have to submit your proof of loss within 90 days or as soon as reasonably possible, but not to exceed one year. So if you were in that catastrophically injured sort of way, you could be over the 90 days, but you can't be over a year. And that is going to be your formal written process, your proof of loss. The time limit on certain defenses. This is similar to the incontestability clause on life policies. So this is that no statement or misstatement other than fraudulent things that you made in the application can be used against you in a claim once it's been enforced for two years. So if they missed it and it took them two years, then you just get to keep rolling with it. And that's the insurance company's problem, not yours. Okay, so this is prohibited acts and ethics. I think there are going to be all of these on the exam. If there's not, there's going to be a significant number of them. So let's get going. First up, twisting. This is where you are using deception to convince somebody you are twisting the facts to make it so that they can buy it. It's a four-member special representation. It's illegal. You cannot use deception to convince anyone to cancel, change, or elapse their policy when it's not in their best interest. Next up is churning. This is rewriting policies for the sole purpose of commission. You tend to see this in life insurance where people decide they're just going to rewrite it because it gets them a big fat commission check. And it is illegal to replace an existing life policy with a new one if you cannot demonstrate that the replacement will benefit the insured. That is called replacement. You actually have to fill out when you do a life insurance application specifics on replacement. If they are replacing a policy, you have to provide the reasons why it's being replaced. Sometimes it's because they're replacing with life insurance a $25,000 thing with $100,000. They just want a better policy, right? They're just getting a change of plan to a bigger policy because they've had some life changes and that makes perfect sense. It's still replacing it, but it's not an illegal act of replacement or churning. You are doing what is in the best interest of them by giving them more coverage. The next one is commingling. This is more how you behave with the insurance company. You are a fiduciary to the insurance company. You cannot take the insurance company's money and go stick it in your own bank account and not give it to them and kind of slow roll it. That's their money. You have to hold it as a fiduciary and forward it to the insurance company as quickly as possible. The next one is rebating. All of these prohibited acts come down to being a good human, right? They're basically being common sense. Rebating is more you are trying to induce somebody to buy insurance by giving them a present. I'll give you these baseball tickets if you go ahead and buy your insurance policy. I'll give you your premium back today. First premium free if you those are all not legal. You cannot give an inducement to convince somebody to buy an insurance policy. Most states have a limit because obviously you can give them like a little tchotchkes, right? Like your little insurance company cup or hat. Those are allowed, so there's usually a state limit. In my state it's a hundred dollars. Please know exactly what it is in your state for it to be an allowed gift or rebating. Issue or circulate anything that is deceptive, false, or misleading. Everything has to be pretty easy for people to understand, and this is as it relates to benefits, terms, premiums, and payments, and dividends, and it's an illegal act. False advertising is just advertising things that aren't true, like that you have the, you know, it could be something as much as you have the lowest rates or you have the highest coverages. If those things aren't necessarily true, you can't advertise them that way. You have to be true and honest in your representations and your advertising. Defamation. Defamation is saying malicious things like a trash talk in the other insurance company. You are intending to injure other people in the insurance industry, usually your competition. Don't make comments that are not true, and you won't be guilty of this one either. Discrimination. Don't discriminate against people. It's illegal. You can't discriminate based on race, national origin, gender identity, sexual orientation, creed, ancestry, marital status. Those things are against the law. Rates and premiums and benefits cannot be different for persons within the same class. It is legal, however, to discriminate for factors of social lifestyle. So, smokers can pay different rates. People with chronic illness. People with brachygene, for example, for breast cancer. People that are race car drivers. Those things can pay different rates for insurance because they are not, they're not something that's discriminatory. There's something that is a lifestyle or something specifically about you, not about your race or your creed or your sex. Okay, controlled business. Controlled business is writing coverage on yourself, your family, or on your business associates. Most states have laws about how much controlled business you can have. In my state, a lot of states, it's 25 percent or less, but check your state rules because this is highly testable, how much controlled business you can have, and most states will not issue you a license if your sole purpose is to just write controlled business. Insurance fraud covers a whole host of things. I would know what the penalty in your state for insurance fraud is. In my state, two years minimum in jail, 10 years maximum. You're going to prison for 10 years for insurance fraud and a $10,000 fine. Know what is in your state. I feel like that's a highly testable question. There are many different things that encompass insurance fraud. Good luck on your exams. As we mentioned earlier, please be sure to check out the Medicare Social Security Retirement video we did. It covers an awful lot of the things that are going to be on this exam and it covers them in great detail. That's why we did not repeat them here because we didn't want this to be the longest video in the world. Please check that one out to go over all of your Medicare topics, all of your Social Security topics, COBRA, as well as the retirement things that could be on your exam. Good luck on your exams. Please like our videos and let us know in the comments when you pass. We hope that this helps you pass your exam and get on to your career as an insurance agent. Take care. Bye.