Texas General Lines — Life, Accident, Health and HMO flashcards

Concealment is the intentional withholding of a material fact by an applicant for insurance that is crucial for the insurer to properly assess the risk.

• Intentional act of omission
• Information must be material to the risk
• Can void a policy, especially within the incontestability period
• Different from misrepresentation (false statement)

Memory trick: Concealment: 'Con'cealing a 'Deal' of truth.

A life insurance policy provision stating that the policy document, the application, and any attached riders or endorsements constitute the complete and exclusive agreement between the policyowner and the insurer.

• Prevents insurer from referencing external documents.
• Ensures all terms are within the policyholder's reach.
• Protects policyholder from undisclosed provisions.

Memory trick: Entire Contract: Policy, App, Add-ons, ALL in your hands.

Any act or omission intended to gain a benefit or advantage to which one is not otherwise entitled, or to deny a benefit that is due, by means of misrepresentation or concealment.

• Requires intent to deceive (scienter).
• Involves material misrepresentation or concealment.
• Aims for personal gain or to cause harm to another.
• Can result in civil and criminal penalties.

Memory trick: Fraud is the grand scheme, misrepresentation is just a false dream.

Experience rating is a method of determining group insurance premiums based on the historical claims experience of that specific group, rather than the broader community.

• Used for larger groups
• Premiums reflect the group's actual claim history
• Can lead to lower premiums for healthy groups
• Can lead to higher premiums for high-claiming groups

Memory trick: Experience Rating: Your group's 'experience' directly impacts the price.

A provision in a life insurance policy that prevents the insurer from denying a claim due to statements in the application after the policy has been in force for a specific period (typically two years), except for non-payment of premiums.

• Usually a 2-year period
• Protects policyholders from post-claim investigations
• Does not apply to non-payment of premiums
• Does not apply to lack of insurable interest at inception

Memory trick: Incontestability: After two years, they Can't Contest you.

A fundamental principle of insurance stating that the insured should be restored to the same financial position they were in before the loss, without making a profit from the loss.

• Prevents the insured from profiting from a loss.
• Restores the insured to their prior financial state.
• Common in property and casualty insurance, adapted for life and health.

Memory trick: Always remember, insurance aims to restore, not to make you more.

In insurance, risk refers to the uncertainty of a financial loss occurring. It is the possibility of an event causing financial detriment.

• Uncertainty of loss
• Can be pure or speculative
• Insurable risks are typically pure risks

Memory trick: Risk is the 'what if' of your wallet.

A life insurance policy provision that authorizes the insurer to automatically pay any premium in default by borrowing from the policy's cash value.

• Prevents policy lapse due to unpaid premiums.
• Available only if policy has sufficient cash value.
• Loan accrues interest and reduces death benefit/cash value if not repaid.

Memory trick: APL: Auto-Pay Loan, no policy gone.

An insurance company owned by its policyholders, who elect the board of directors and may receive dividends from divisible surplus.

• Owned by policyholders.
• Dividends are a return of unused premium.
• Non-taxable dividends to policyholders.

Memory trick: Stock for profit, Mutual for us.

A standard life insurance policy provision that allows a policyowner to restore a lapsed policy to full force and effect, usually within a specified period, by paying back premiums, interest, and providing proof of insurability.

• Typically available for 3-5 years after lapse.
• Requires payment of all back premiums plus interest.
• Requires proof of insurability (e.g., medical exam).
• Policy returns to its original status, including cash values and incontestability period.

Memory trick: Grace saves before it's gone; Reinstatement brings it back on.

A hazard is a condition that increases the chance or severity of a loss, while a peril is the actual cause of the loss itself.

• Hazard: a condition.
• Peril: a cause of loss.
• Hazards lead to perils, which lead to losses.

Memory trick: A 'Hazard' is a 'HINT' of danger, a 'Peril' is the 'PUNCH' that causes the damage.

Life insurance death benefit proceeds received by a beneficiary are generally exempt from federal income tax.

• Beneficiary receives income tax-free.
• Exception: transfer for value rule.
• Estate tax may apply if policy included in insured's estate.

Memory trick: Death Benefit: Tax-Free, you see!

An unintentional error in information provided by an applicant that is not material to the insurer's underwriting decision.

• No intent to deceive.
• Information is not material.
• Typically does not void a policy.

Memory trick: Don't get 'stuck' on minor errors, if they're innocent and don't matter, it's just a misstatement.

A false statement of a material fact made by an applicant for insurance. If intentional and material, it can void the policy.

• Must be a false statement.
• Must be material (important to the insurer's decision).
• Can be innocent or fraudulent (intentional).

Memory trick: Truth on the form, or face the storm.

The tendency of individuals with a higher-than-average risk of loss to seek out or continue insurance coverage more often than those with an average or lower-than-average risk.

• Leads to higher claims for insurers, potentially higher premiums for all.
• Insurers use underwriting, deductibles, and waiting periods to manage it.
• Common in health insurance where unhealthy individuals are more motivated to buy.

Memory trick: Adverse selection: the sickest sign up, making the pool adverse.

A type of risk where there is only a possibility of loss or no loss, with no chance of financial gain. These are generally insurable.

• No chance of gain.
• Only loss or no loss outcomes.
• Insurable.

Memory trick: Purely loss, or nothing at all.

The financial or emotional relationship between the policyowner and the insured person that must exist at the time the life insurance policy is issued.

• Required at the time of application/issuance, not necessarily at the time of death.
• Examples: self, spouse, children, business partners, financial dependents.
• Prevents gambling on human lives.

Memory trick: Life's interest starts at the beginning, property's interest needs to keep on spinning.

A type of managed care health plan that allows members to choose any provider but offers financial incentives to use providers within a network.

• No gatekeeper (PCP referral not required).
• Higher cost for out-of-network care.
• More flexibility than an HMO.

Memory trick: PPO: Pick your doc, pay less in-network.

A health insurance policy provision ensuring the insurer cannot cancel or refuse to renew the policy, but reserves the right to increase premiums by class of insureds.

• Insured has right to renew.
• Insurer cannot cancel.
• Premiums can be increased, but only for an entire class, not individually.

Memory trick: Guaranteed Renewable: Renew, but rates might move.

Moral hazard is the increase in the probability of loss due to an insured's dishonest or unethical behavior after obtaining insurance, often to gain from the policy.

• Behavior changes AFTER insurance is obtained
• Involves dishonesty or intent to defraud
• Distinct from morale hazard (carelessness)
• Insurers use underwriting and claims investigation to mitigate

Memory trick: Moral Hazard: 'M' for Malicious, 'H' for Hiding the truth.

A contingent beneficiary is the person or entity designated to receive the life insurance policy proceeds if the primary beneficiary dies before the insured.

• Secondary beneficiary
• Receives benefits only if primary beneficiary cannot
• Important for estate planning
• Can be multiple contingent beneficiaries

Memory trick: Contingent: They're 'Counting' on being next in line.

An alien insurer is an insurance company that is organized under the laws of a country other than the United States, but is authorized to transact insurance business in a U.S. state.

• Organized outside the U.S.
• Must be authorized (admitted) to operate in a U.S. state
• Subject to state regulations where admitted
• Distinct from domestic (in-state) and foreign (out-of-state U.S.) insurers

Memory trick: Alien: 'A'lien, 'A'nother country.

A type of life insurance that pays the face amount upon the insured's death during a specified term, or pays the face amount to the policyowner if the insured survives to the end of the term.

• Matures at a specific age or time.
• Guarantees payout whether insured lives or dies within the term.
• Highest premium among traditional life policies.

Memory trick: Endow: Live or die, payout's nigh.

The insurance company that provides coverage and agrees to pay claims as specified in the policy.

• Assumes the financial risk.
• Issues the insurance policy.
• Promises to pay benefits for covered losses.

Memory trick: The 'InsurER' is the 'givER' of protection and promises.

Life insurance that provides coverage for a specific period (term) and pays a death benefit only if the insured dies within that term.

• Coverage for a defined period.
• No cash value accumulation.
• Policy terminates if insured outlives the term.

Memory trick: Think of a 'TERM' paper – it has a deadline, and then it's over.

A period, typically 10 days in Texas for individual health policies, during which a new policyholder can review the policy and return it for a full refund if not satisfied.

• Starts upon policy delivery.
• Allows for full refund of premiums paid.
• Purpose is consumer protection and review.

Memory trick: Health: A quick 10-day peek.

The period of time, mandated by Texas law, during which a new health insurance policyowner can review the policy and return it for a full refund of premiums if not satisfied.

• Standard individual health policies: 10 days.
• Medicare Supplement policies: 30 days.
• Long-Term Care policies: 30 days.
• Period starts from the date of policy delivery.

Memory trick: Health is quick (10), but Medicare and LTC give you more (30).

The voluntary relinquishment of a known right. It can occur explicitly (in writing) or implicitly (through actions).

• Often involves an insurer giving up a right it had under the policy.
• Can prevent an insurer from later enforcing that right.
• Related to 'estoppel', which prevents a party from reasserting a right after a waiver.

Memory trick: Waiver gives up a right, Estoppel stops a fight.

An insurance contract is a contract of adhesion, meaning it is prepared by the insurer and accepted by the insured on a 'take-it-or-leave-it' basis, with little to no negotiation of terms by the insured.

• Insured has less bargaining power.
• Courts typically interpret ambiguities in favor of the insured.
• Applies to most insurance policies.

Memory trick: Adhesion: stick with what they give you, no changes for you.

An insurance company that is organized and domiciled in a state other than the state in which it is currently operating.

• Operates out-of-state from its incorporation.
• Must be authorized to do business in the operating state.
• Distinct from domestic (in-state) and alien (out-of-country) insurers.

Memory trick: Foreign: From afar, but still in the USA.

In Texas, an HMO that has been in operation for more than 5 years must maintain a minimum net worth of $3,000,000 to ensure financial stability and protect enrollees.

• Applies to established HMOs (>5 years).
• Minimum required net worth is $3,000,000.
• Ensures solvency and ability to provide services.

Memory trick: After 'five' years, a Texas HMO needs 'three million' to stay 'strong'.

In Texas, when an insurer requires a medical examination for underwriting an individual health insurance policy, the insurer must pay for the examination.

• Applies to individual health insurance.
• Insurer-required medical exams.
• Insurer pays, regardless of policy outcome.

Memory trick: The insurance company pays the 'doc's' 'bill' for the 'check-up'.

Texas law allows HMO enrollees with life-threatening illnesses to request an independent external review of an HMO's denial of coverage for experimental or investigational treatments.

• Applies to life-threatening illnesses.
• Covers experimental/investigational treatments.
• Right to independent external review.

Memory trick: When 'life' is on the line, an 'external' voice can 'review' the HMO's 'NO'.

In Texas, an insurance agent has a fiduciary duty to clients, meaning they must act in the client's best interest and handle client funds (like premiums) with the highest level of trust and integrity, keeping them separate from personal funds.

• Position of trust and confidence.
• Applies to handling client money (premiums).
• Prohibits commingling funds.

Memory trick: A 'trusting' client gives 'money', so the agent must be a 'fiduciary' and keep it 'separate'.

Texas HMOs must provide enrollees with at least 90 days' written notice for any material change in benefit structure, service availability, or other significant policy changes.

• Applies to material changes in benefits/services.
• Minimum 90 days written notice.
• Ensures enrollees have time to adapt or choose alternatives.

Memory trick: For big 'HMO' changes, 'ninety' days 'notice' is the 'rule'.

The Texas Department of Insurance can impose various disciplinary actions on agents for violations, including administrative penalties (fines), license suspension, and license revocation.

• Applies to violations of insurance laws/rules.
• Penalties vary by severity.
• Can include fines, suspension, revocation.

Memory trick: The 'TDI' can 'penalize' and 'suspend' agents who don't 'disclose'.

In group health insurance, when an individual has coverage under two plans, the plan covering them as an employee (their own coverage) is typically primary over a plan covering them as a dependent.

• Applies to group health insurance.
• Determines which plan pays first.
• Own employee coverage is primary to dependent coverage.

Memory trick: Your 'own' job 'plan' always comes 'first' in the 'COB' line.

In Texas, an HMO enrollee must first utilize the HMO's internal grievance system to address complaints regarding medical care or service denials before pursuing external review or regulatory action.

• Mandatory first step for complaints.
• Allows HMO to resolve internally.
• A prerequisite for external review.

Memory trick: First, 'grieve' with the 'HMO', then 'escalate' if needed.

In Texas, a small employer (1-50 employees) can be eligible for a group health benefit plan if they employ at least one eligible employee and contribute to the cost of coverage.

• Employer size: 1-50 employees.
• Minimum participation for eligibility: 1 eligible employee.
• Employer must contribute to the cost.

Memory trick: Small businesses in Texas only need 'one' person to start their 'health' journey.

A standard health insurance policy provision that allows an insurer to adjust benefits or premiums if the insured's age was misstated on the application, to reflect what the premium paid would have purchased at the correct age.

• Part of standard policy provisions.
• Addresses incorrect age on application.
• Adjusts benefits or premiums, not voids policy.

Memory trick: Don't 'misstate' your 'age', or your 'benefits' will 'change'.

A life insurance policy provision that allows the insurer to adjust the death benefit to the amount that the premiums paid would have purchased at the insured's correct age, rather than voiding the policy.

• Adjusts death benefit, not voids policy.
• Applies regardless of the incontestability period.
• Based on premiums paid vs. correct age rate.
• Can result in higher or lower benefit depending on age misstatement.

Memory trick: Age misstated, benefit is re-rated, not negated.

A provision in whole life policies allowing the policyholder to borrow against the policy's cash value. The loan amount cannot exceed the cash surrender value and is repaid with interest, or deducted from the death benefit.

• Available once cash value accumulates.
• Loan amount cannot exceed cash surrender value.
• Interest is charged on the loan.
• Outstanding loans reduce the death benefit.

Memory trick: Cash value is your collateral, don't forget the interest call.

A life insurance rider that waives the payment of premiums if the insured becomes totally and permanently disabled, keeping the policy in force without further cost to the policyholder.

• Covers total and permanent disability.
• Premiums are waived, not paid out.
• Policy remains in force.
• Usually includes a waiting period.

Memory trick: Disabled, no pay; policy stays, hip hip hooray!

A nonforfeiture option in a cash value life insurance policy where the accumulated cash value is used as a single premium to purchase a new, fully paid-up policy with a reduced face amount. Coverage continues for the life of the insured, with no further premiums required.

• Uses cash value as a single premium.
• Results in a smaller, fully paid-up policy.
• No further premiums required.
• Coverage continues for the insured's lifetime.

Memory trick: No more payments, but a reduced payout, forever stout.

Naming a trust as the beneficiary of a life insurance policy allows the policy owner to dictate specific, often complex, distribution terms for the death benefit, managed by a trustee.

• Provides control over distribution.
• Useful for minor or special needs beneficiaries.
• Avoids probate if properly structured.
• Trustee manages funds according to trust terms.

Memory trick: Trust takes control, individuals take cash.

A type of group life insurance plan where the employer pays the entire premium, and all eligible employees must participate to prevent adverse selection.

• Employer pays 100% of premiums.
• 100% eligible employee participation required.
• Prevents adverse selection.
• Simplifies administration.

Memory trick: Non-contributory: No cost to you, everyone's in the crew.

A provision in a life insurance policy that prevents the insurer from denying a claim due to misstatements or omissions on the application after the policy has been in force for a specific period (usually two years), except for non-payment of premiums.

• Protects beneficiaries from post-death claims denials.
• Typically a two-year period in Texas.
• Promotes policy stability and certainty.
• Does not apply to non-payment of premiums.

Memory trick: Incontestability: Two years pass, policy's a solid mass.

A provision in a life insurance policy that states if the insured and primary beneficiary die in the same accident, and the primary beneficiary dies within a specified period (e.g., 10-30 days) after the insured, the death benefit will be paid to the contingent beneficiary.

• Prevents proceeds from going to primary beneficiary's estate.
• Specifies a survival period for the primary beneficiary.
• Ensures contingent beneficiary receives funds.
• Part of Uniform Simultaneous Death Act principles.

Memory trick: Common disaster: If they don't last, the next in line is fast.

A change in beneficiary designation on a life insurance policy is typically effective only when it is recorded by the insurer, or when the insurer receives satisfactory written notice of the change.

• Requires notice to the insurer for validity.
• Agent's knowledge alone is insufficient.
• Insurer's records are paramount.
• Protects against fraudulent or disputed changes.

Memory trick: Change needs to be seen, or it's never been.

A mandatory provision in Texas individual life insurance policies that allows the policyowner a specified period (at least 10 days) to review the policy and return it for a full refund of premiums if not satisfied.

• Mandated by Texas insurance law.
• Minimum 10 days for individual life policies.
• Starts upon policy delivery.
• Full refund of premiums if returned.

Memory trick: Free-look: Ten days to read, or your money's freed.

A mandatory provision in Texas individual life insurance policies allowing the policyholder to return the policy for a full refund within a specified period after delivery.

• Applies to individual life insurance policies.
• Minimum 30-day period in Texas.
• Starts from the date of policy delivery.
• Full refund of premiums paid.

Memory trick: Thirty days to decide, or send it back, no pride.

Under a group life insurance policy, individual employees (certificate holders) have specific rights, primarily the ability to name and change their beneficiaries, while the employer (policyowner) controls the master policy.

• Can name/change beneficiary.
• Does not own the master policy.
• Usually no cash value in group term life.
• Cannot modify policy terms.

Memory trick: Group policy: Employer holds the book, employee picks the look.

A temporary and partial transfer of the rights of a life insurance policy to another party, typically a creditor, as security for a debt. The assignee's rights are limited to the amount of the outstanding debt.

• Used as security for a loan.
• Temporary transfer of partial rights.
• Policyowner retains residual ownership.
• Assignee's rights limited to outstanding debt.

Memory trick: Collateral for a loan, a partial claim, not alone.

A standard provision in Texas life insurance policies limiting the insurer's liability to a return of premiums paid, without interest, if the insured commits suicide within two years of the policy's issue date.

• Mandated by Texas law.
• Typically a two-year exclusion period.
• Applies to life insurance policies.

Memory trick: Suicide's short window, premiums are all you've got.

A mandatory policy provision that provides a period (usually 30 or 31 days) after the premium due date during which a policy remains in force, even if the premium is not paid. If death occurs during this period, the death benefit is paid, less the overdue premium.

• Prevents immediate policy lapse.
• Typically 30 or 31 days.
• Policy remains in force during this time.
• Death benefit still paid (minus overdue premium) if insured dies.

Memory trick: Grace period gives you time, to pay your premium, so divine.

A provision in a life insurance policy that protects the death benefit proceeds from claims by the beneficiary's creditors and prevents the beneficiary from assigning or encumbering the proceeds.

• Protects against creditor claims.
• Prevents assignment by beneficiary.
• Ensures proceeds reach the intended beneficiary.
• Often used when payment is made in installments.

Memory trick: Spendthrift: Protects the purse from the thirst of others.

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

• Employer pays 100% of premiums.
• 100% of eligible employees must participate.
• Helps prevent adverse selection.
• Simplifies administration.

Memory trick: No contribution, no choice, everyone's in the group's voice.

Texas requires specific disclosure documents, including a Buyer's Guide and Policy Summary, to be provided to applicants for individual life insurance to ensure informed decision-making.

• Mandatory for individual life insurance.
• Buyer's Guide explains general features.
• Policy Summary details specific policy features.
• Must be given at application or policy delivery.

Memory trick: Disclosure is key, if not at first, then at delivery.

Laws requiring health plans, including HMOs, to provide mental health and substance use disorder benefits at a level comparable to medical and surgical benefits.

• Applies to financial requirements and treatment limits
• Mandated by state and federal laws (e.g., MHPAEA)
• Aims to prevent discrimination against behavioral health

Memory trick: Mental health parity: Equal access, equal pay, no more hiding away.

HMOs prioritize preventive care, wellness programs, and early intervention to maintain member health and reduce long-term healthcare costs.

• Core component of managed care
• Reduces need for expensive treatments
• Often includes free or low-cost screenings/vaccinations

Memory trick: HMOs prevent, indemnity pays when you're bent.