Florida 2-15 Life, Health and Variable Annuity Agent flashcards

An insurance policy that does not pay dividends to the policyowner, typically having lower premiums than participating policies.

• No dividends are paid.
• Premiums are usually lower.
• Profits belong solely to the insurer's shareholders.

Memory trick: Non-participating means 'No Pie' (no share of profits).

Federal rules that determine whether Medicare or a group health plan pays first for health care services for individuals aged 65 or older who are still working.

• Applies to employers with 20 or more employees.
• Employer's group health plan is primary.
• Medicare is secondary.
• Purpose is to reduce Medicare costs by shifting responsibility to private payers.

Memory trick: Who pays first? It depends on the situation!

When an employer pays all premiums for a group disability income policy, the benefits received by the employee are typically considered taxable income.

• Employer-paid premiums are tax-deductible for the employer.
• Employer-paid premiums are generally not taxable to the employee.
• Benefits received are fully taxable to the employee.

Memory trick: If the boss pays the premium, the benefit is a tax-trap.

Insurance that provides coverage for a variety of services, including personal care and custodial care, for individuals who are chronically ill or disabled and require assistance with Activities of Daily Living (ADLs).

• Covers chronic conditions, not acute.
• Includes home care, adult day care, assisted living, nursing home.
• Does NOT cover acute hospital stays.

Memory trick: LTC: Life's Tough Challenges, Not Hospital Stays.

A feature in major medical insurance that sets a maximum amount of out-of-pocket expenses an insured will have to pay in a policy period, typically including the deductible and the insured's coinsurance portion.

• Protects against catastrophic medical costs.
• Once reached, the insurer pays 100% of remaining covered expenses.
• Usually includes the deductible and the insured's coinsurance share.

Memory trick: Deductible first, then coinsurance, but a stop-loss saves the day.

A non-forfeiture option where the cash value of a lapsed whole life policy is used to purchase a single premium term policy for the same face amount as the original policy, for a limited term.

• Same face amount
• New policy is term insurance
• Duration is limited
• Automatic if no other option chosen

Memory trick: Don't Forfeit Your Future: Cash, Reduce, or Extend!

Accounts within a variable annuity where premiums are invested in a portfolio of securities, and their value fluctuates based on market performance.

• Values are not guaranteed.
• Investment risk is borne by the annuitant.
• Must be registered with the SEC as an investment company.

Memory trick: General is guaranteed; Separate is speculative.

A health insurance plan with a high deductible that typically has lower monthly premiums than traditional health plans.

• Required for eligibility to contribute to a Health Savings Account (HSA).
• Members pay more out-of-pocket before insurance coverage begins.
• Designed to encourage consumers to be more cost-conscious about healthcare.
• Specific deductible and out-of-pocket maximum limits set by the IRS annually.

Memory trick: Health plans: How much deductible, how much premium?

The method of determining the insurer's and insured's share of covered medical expenses after the deductible has been met.

• Deductible is paid first by the insured.
• Coinsurance percentage applies to the remaining balance.
• Insurer pays their percentage, insured pays their percentage.

Memory trick: Deductible first, then split the rest!

Medicare Supplement Insurance policies sold by private companies to fill 'gaps' in Original Medicare coverage. They help pay for out-of-pocket costs like deductibles, coinsurance, and copayments.

• Supplements Original Medicare (Parts A & B).
• Standardized plans (A-N).
• Covers deductibles, coinsurance.
• Does NOT replace Medicare Advantage.

Memory trick: Medigap: Bridges the Gaps in Medicare's Map.

A standard life insurance policy provision that allows the policyowner to change the designated beneficiary.

• Policyowner typically has this right unless beneficiary is irrevocable.
• Does not require the current beneficiary's consent.
• Part of the policy's general provisions.

Memory trick: Beneficiary changes, policyowner's choice, unless fixed by bond.

For non-qualified deferred annuities, withdrawals during the accumulation phase are taxed on a 'last-in, first-out' (LIFO) basis, meaning earnings are taxed before principal is recovered.

• Applies to non-qualified annuities
• Earnings taxed first
• Principal is tax-free when withdrawn (after earnings)

Memory trick: LIFO: Last In, First Out means Earnings are Taxed First Out!

A segregated investment account within an insurance company that holds the assets of variable annuity contracts, allowing policyholders to choose from various underlying investment options.

• Assets are separate from insurer's general account
• Subject to market fluctuations and investment risk
• Houses sub-accounts (mutual funds)

Memory trick: Separate account, separate choices, separate risks, separate voices.

During the accumulation phase of a non-qualified annuity, withdrawals are taxed on a 'last-in, first-out' (LIFO) basis, meaning earnings are withdrawn and taxed first, before the tax-free return of premium.

• Applies to non-qualified annuities
• During accumulation phase
• Earnings are taxed first
• Principal (cost basis) is tax-free return

Memory trick: Last In, First Out means 'E' for Earnings Exit First when you're taking money Out.

A type of managed care health insurance plan that provides healthcare services through a network of doctors, hospitals, and other providers. Members typically must choose a PCP and get referrals for specialists; out-of-network care is usually not covered.

• Strict network requirements.
• Requires PCP selection.
• Referrals needed for specialists.
• Out-of-network care generally not covered (except emergencies).

Memory trick: HMO: High walls, Must stay In.

Transfers of funds between sub-accounts within the separate account of a variable annuity during the accumulation phase are generally not considered taxable events.

• Applies to variable annuities
• During accumulation phase
• No current taxation on transfers
• Allows for portfolio rebalancing tax-free

Memory trick: Switching your variable annuity's investments doesn't trigger the tax man's bell!

An annuity contract designed to begin making periodic income payments to the annuitant almost immediately after purchase, typically within one payment interval (e.g., one month) but no later than one year.

• Single premium payment
• No accumulation phase
• Payments start quickly (within 1 year)

Memory trick: Immediate? Payments are fast, not meant to last in a waiting phase.

Rules determining which employees can join a group life plan where employees contribute to the premium, especially regarding participation rates.

• Minimum 75% participation for contributory plans.
• Prevents adverse selection.
• Employer pays part, employee pays part.

Memory trick: Contributory needs 75% 'yes' to cover the group.

A health insurance policy provision that guarantees the policy cannot be canceled and premium rates cannot be increased as long as premiums are paid.

• Strongest form of renewability for the policyholder.
• Insurer cannot change any policy provisions.
• Premiums are fixed for the life of the policy.

Memory trick: Renewability is like a shield: how strong is its protection?

An employer-funded health benefit plan that reimburses employees for out-of-pocket medical expenses and sometimes health insurance premiums.

• Solely funded by the employer.
• Contributions are tax-deductible for the employer.
• Reimbursements are tax-free for the employee.
• Funds may or may not roll over to the next year, depending on the plan.

Memory trick: Employer plans: Who funds it, and how does it flex?

The tax treatment of the amount paid to a beneficiary when the annuitant dies before annuitization, where earnings are taxed as ordinary income.

• Occurs during the accumulation period.
• Earnings above principal are taxed.
• Taxed as ordinary income to the beneficiary.

Memory trick: Death in accumulation means earnings are 'ordinary' tax, not free.

A single deductible amount that applies to all covered medical expenses incurred by the insured during a policy period, regardless of the number or type of illnesses or injuries.

• Also known as a 'calendar year deductible'.
• Must be satisfied once per policy period.
• Simplifies deductible application for comprehensive plans.

Memory trick: All-Cause: One deductible to rule all your medical bills for the year.

A period after the premium due date during which a policy remains in force and the policyholder can pay the premium without penalty.

• Minimum 31 days in Florida for individual life.
• Policy remains in force during this period.
• If insured dies during grace period, benefit is paid minus unpaid premium.

Memory trick: Grace gives 31 days of safety.

Investment gains within an annuity contract are not taxed until funds are withdrawn, allowing for tax-free internal reallocations.

• Earnings grow tax-deferred.
• Internal transfers between subaccounts are not taxable events.
• Taxes are paid upon withdrawal or annuitization.

Memory trick: Grow it, move it, don't show it (to IRS) 'til you blow it (out).

A provision in group health insurance policies that prevents overinsurance by determining which plan is primary and which is secondary when an individual is covered by more than one group plan.

• Avoids duplicate payments.
• Ensures total benefits do not exceed 100% of expenses.
• Establishes primary and secondary payer rules.

Memory trick: Coordination: two plans, one bill, no overpayment.

Specific services and expenses that are not covered by standard Medicare Supplement (Medigap) policies.

• Medigap covers gaps in Medicare Part A and B.
• Does NOT cover long-term care, vision, dental, hearing aids, private-duty nursing.
• These exclusions are consistent across all standardized Medigap plans.

Memory trick: Medigap fills holes, but not all of them!

A group life insurance plan where the employer pays 100% of the premiums, and all eligible employees must participate.

• Employer pays entire premium.
• 100% employee participation required.
• Helps prevent adverse selection.

Memory trick: Contribution dictates participation: full pay, full play; shared pay, shared say.

The percentage of eligible employees who must enroll in a group health insurance plan for the plan to be offered by the insurer. This rate helps prevent adverse selection.

• Mandated by insurers.
• Higher for non-contributory plans (employer pays 100%).
• Lower for contributory plans (employees pay part).
• HMOs often have higher requirements.

Memory trick: Participation Protects Plans from Picking the Sick.

A life insurance policy provision that specifies how death benefits will be distributed if the insured and primary beneficiary die in the same accident or within a short period of time.

• Prevents proceeds from going to primary beneficiary's estate
• Assumes primary beneficiary died first
• Benefits contingent beneficiary
• Often linked to Uniform Simultaneous Death Act

Memory trick: In a Common Disaster, the money doesn't just Vanish; it goes to the Next in line!

A type of life insurance characterized by small face amounts ($1,000-$2,500), frequent (weekly/monthly) premium payments, and often sold and collected by agents door-to-door.

• Small death benefits
• Frequent premium payments
• Often used for burial expenses

Memory trick: Industrial: Small sums, frequent runs.

The waiting period, starting from the onset of a disability, during which no benefits are payable under a disability income policy.

• Must be satisfied before benefits begin.
• Acts like a deductible for time.
• Longer periods result in lower premiums.

Memory trick: Wait the elimination, then get your money for the rest.

Shares purchased during the accumulation phase of a variable annuity, whose value fluctuates based on the investment performance of the underlying separate account.

• Value is not guaranteed
• Reflects separate account performance
• Used to calculate annuity payments in the annuitization phase

Memory trick: Variable value? Look to the separate account's market route!

In Florida, Medicare Supplement policies are subject to a mandatory 30-day free-look period, allowing the policyowner to return the policy for a full refund of premiums.

• Applies to Medicare Supplement policies
• 30-day duration
• Starts from policy delivery date
• Full premium refund

Memory trick: Medicare Supplement: You get a full '30' days to 'SEE' if it's right for you!

The tax treatment of benefits received from an individual disability income insurance policy depends on how the premiums were paid.

• If premiums are paid with after-tax dollars, benefits are tax-free.
• If premiums are paid with pre-tax dollars (e.g., through a Section 125 plan), benefits are taxable.
• Employer-paid premiums generally result in taxable benefits for the employee.

Memory trick: Tax on benefits depends on how premiums were taxed!

Coinsurance is the percentage of medical expenses a policyholder must pay after the deductible has been met. This sharing of costs is a common feature in major medical insurance policies.

• Applies AFTER the deductible is satisfied.
• Expressed as a percentage (e.g., 80/20, 70/30).
• Client pays the smaller percentage.

Memory trick: Deductible first, then split the bill!

A type of diminishing term life insurance that pays off a borrower's outstanding loan balance if the borrower dies before the loan is repaid.

• Death benefit decreases as loan balance decreases
• Creditor is usually the beneficiary
• Often sold with a loan or credit agreement

Memory trick: Credit Life: Loan's covered, no debt to hover.

A group health insurance plan where both the employer and the employee contribute to the payment of premiums. These plans typically have a minimum percentage of eligible employees (e.g., 75%) that must enroll.

• Employer and employee share premium cost.
• Lower participation requirement (e.g., 75%).
• Common type of group plan.

Memory trick: Contributory: Contributions from all, not just the company.

A managed care plan that requires members to use doctors, specialists, and hospitals within its network, similar to an HMO, but generally does not require a primary care physician referral for specialists.

• In-network care only (except emergencies).
• No out-of-network coverage.
• Often no PCP referral required for specialists.
• Emphasizes cost containment.

Memory trick: Managed care: networks for savings, rules for care.

An annuity payout option that provides income for the annuitant's lifetime, ceasing entirely upon their death, with no payments to beneficiaries.

• Highest periodic payout among life options.
• No death benefit or payments to heirs.
• Maximizes income for the annuitant's life.

Memory trick: Life's choices: just you, or a guarantee for two.

A rider on a disability income insurance policy that provides for periodic increases in benefit payments during a period of disability to help offset the effects of inflation.

• Benefits typically increase annually after 12 months of disability.
• Increases are often tied to the Consumer Price Index (CPI).
• Crucial for long-term disabilities to maintain purchasing power.
• An optional rider that adds to the policy premium.

Memory trick: Riders add special powers to your disability shield!

A mandatory period after a life insurance policy is delivered during which the policyholder can review the policy and return it for a full refund for any reason without penalty.

• Mandated by state law
• Starts upon policy delivery
• Full refund of premiums paid

Memory trick: Ten days to ponder, then you're free to wander.

A fundamental requirement for a retirement plan to be 'qualified' under ERISA and IRS regulations is that it must be established and operated for the exclusive benefit of the employees and their beneficiaries.

• Mandatory for 'qualified' status
• Prevents discrimination
• Benefits employees, not primarily owners/execs
• Ensures tax advantages

Memory trick: To be Qualified, a plan must EXCLUSIVELY benefit the E.M.P.L.O.Y.E.E.S.

A standard provision in cash value life insurance policies that allows the policyowner to borrow money from the insurer, using the policy's accumulated cash value as collateral.

• Available in cash value policies
• Borrow from the insurer
• Cash value acts as collateral
• Loan accrues interest

Memory trick: Need a loan? Your policy's cash value is your own bank!

A key feature of Variable Life insurance is that the policyowner has control over the investment allocation of the policy's cash value into various sub-accounts.

• Policyowner directs investments
• Cash value invested in sub-accounts
• Cash value and death benefit can fluctuate
• Requires securities license for agent

Memory trick: Variable means 'V'olatile investments, while Whole means 'W'hole lot of guarantees!

Services and costs that Medicare Supplement (Medigap) policies are specifically NOT designed to cover, as they only supplement Original Medicare.

• Long-term care.
• Hearing aids, eyeglasses, dental care.
• Private-duty nursing.
• Prescription drugs (if purchased after 2006).

Memory trick: Medigap fills Medicare's holes, but doesn't build new rooms.

Contributions to an annuity made with after-tax dollars, meaning they are not tax-deductible.

• Funds have already been taxed.
• Principal contributions are returned tax-free.
• Only earnings are taxable upon withdrawal.

Memory trick: Non-qualified means 'no deduction now, no tax on principal later'.

A state-created entity that protects policyholders in the event of an insurer's insolvency by paying covered claims up to certain limits.

• Funded by assessments on solvent insurers.
• Not an agency of the state or federal government.
• Exists to minimize financial loss to policyholders.

Memory trick: Guaranty Association: Your safety net, financially set.

The illegal practice of mixing client funds (such as premiums) with an agent's personal or business operating funds.

• Violates the agent's fiduciary duty to clients and insurers.
• Premiums must be held in a separate trust account or remitted promptly.
• Can lead to severe administrative penalties, including license revocation.

Memory trick: Trust funds are sacred, keep them separate and secure.

An illegal practice where an insurance agent offers any valuable consideration or inducement not specified in the insurance policy, such as a portion of their commission, to persuade a client to purchase a policy.

• Prohibited in Florida.
• Involves offering something of value not in the policy.
• Aims to induce policy purchase.

Memory trick: No secret rebates, only policy rates.

The practice of making or permitting any unfair distinction between individuals of the same class and equal expectation of life in insurance rates, benefits, or terms.

• Prohibited by Florida insurance law.
• Includes discrimination based on race, religion, national origin, etc.
• Applies to all aspects of the insurance business, including underwriting and claims.

Memory trick: Treat all fairly, no bias, no fraud.

A mandatory disclosure document provided to an applicant when a new life insurance policy or annuity will replace an existing one, outlining the potential disadvantages of replacement.

• Must be given at the time of application.
• Explains potential loss of benefits, surrender charges, and new contestable periods.
• Required by Florida insurance regulations.

Memory trick: Replacement Rules ensure fair play, disclosure is the key today.

In Florida, when an agent proposes to replace an existing life insurance policy, they must provide the applicant with a 'Notice Regarding Replacement of Life Insurance' form and obtain the applicant's signature on it.

• Required for all life insurance replacements.
• Must be signed by the applicant and the agent.
• A copy is given to the applicant and one sent to the replacing insurer.

Memory trick: When replacing a policy, always hand over the 'Notice' and get that signature, no excuses.

A Florida licensed insurance agent must notify the Department of Financial Services (DFS) in writing before using any assumed name in connection with their insurance business.

• Required before using an assumed name.
• Notification goes to the DFS.
• Ensures regulatory transparency and oversight.

Memory trick: Your alter ego for business must be known by the DFS, or it's a mess.

Any advertisement or communication that contains untrue, deceptive, or misleading statements or omissions regarding insurance products, services, or the insurer.

• Prohibited under unfair trade practices laws.
• Includes misrepresentations about policy benefits, terms, or agent qualifications.
• Aims to protect consumers from deception.

Memory trick: Truth in ads, or face the bad.

Monetary penalties imposed by the Florida Department of Financial Services (DFS) on licensed agents for violations of the Florida Insurance Code.

• Max fine for non-willful violation: $5,000.
• Max fine for willful violation: $10,000.
• Fines can be per violation or per occurrence.

Memory trick: Fines come in two flavors: 5 for non-willful, 10 for willful.

Florida licensed agents must maintain complete and accurate records of all insurance transactions and communications for a specified period.

• Minimum retention period is 3 years.
• Includes sales calls, policy information, applications, and client correspondence.
• Applies to all communication methods (e.g., phone, email, text).

Memory trick: Keep records for 3 years, like a triennial audit.

Insurance advertisements in Florida that include financial strength ratings must also disclose that these ratings are not guarantees of future performance.

• Required to prevent misleading consumers about future solvency.
• Applies to ratings from recognized independent rating agencies.
• Ensures transparency in marketing materials.

Memory trick: Ads must be clear, complete, and cautiously rated.

Prohibited advertising or sales practices that imply insurance policies are guaranteed by the state or that the guaranty association's coverage is unlimited or government-backed.

• Specifically prohibited by law.
• Guaranty associations are not state agencies.
• Coverage is subject to statutory limits and assessments.

Memory trick: Guaranty isn't government, don't make that statement.

The timeframe within which an insurer must refund premiums after a policy is returned during the free-look period.

• Applies to individual life, health, and annuity policies.
• Typically 10 days in Florida for health policies.
• Insured receives a full refund of all premiums paid.

Memory trick: Ten days to pay back, no delays on the track.

The illegal or improper use of funds belonging to another, typically a client's premiums, by an insurance agent for personal gain.

• Involves commingling client money with personal funds.
• Considered a serious unfair trade practice.
• Can lead to license suspension or revocation.

Memory trick: Agents must keep client money separate, or face a financial misappropriation penalty.