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

An employer-sponsored plan that allows employees to set aside pre-tax money to pay for qualified out-of-pocket medical or dependent care expenses.

• Funds are 'use it or lose it' (some carryover allowed by IRS rules)
• Established under IRS Section 125 (cafeteria plan)
• Cannot be combined with an HSA for the same medical expenses

Memory trick: FSAs are 'Flexible' with 'Spending' 'Accounts' for 'Pre-Tax' care.

If a policy loan is outstanding at the time of the insured's death, the loan amount plus any accrued and unpaid interest is deducted from the death benefit.

• Outstanding loans reduce the net death benefit.
• Both principal loan and accrued interest are deducted.
• Beneficiary receives the net amount.

Memory trick: Death Benefit = Face - Loan - Interest

A health insurance plan where an employer pays premiums to an insurance company, and the insurer assumes the financial risk and administrative responsibility for paying claims.

• Employer pays a fixed premium.
• Insurance company bears the risk of claims.
• Less administrative burden for the employer.
• Premiums are tax-deductible for the employer.

Memory trick: Who holds the money, who takes the risk?

Under Texas law, if an insurer requires a medical examination for health insurance underwriting, the insurer must pay for the cost of that examination, regardless of the policy's outcome.

• Applies to health insurance underwriting.
• Exam must be 'required' by the insurer.
• Insurer pays 100% of the cost.
• Applies whether policy is issued or declined.

Memory trick: If the 'Doc Exam' is 'Required', the 'Insurer Pays' the bill.

The Texas Department of Insurance (TDI) has administrative authority over licensed agents, allowing it to suspend/revoke licenses, issue cease and desist orders, and levy administrative penalties. It does not have the power to impose criminal penalties like jail time.

• TDI handles administrative actions.
• Can suspend/revoke licenses.
• Can issue cease and desist orders.
• Can assess administrative penalties.

Memory trick: The TDI is a 'regulator', not a 'jailer'.

In Texas, when an individual has both group health insurance and individual health insurance, the group policy is generally considered the primary payer under Coordination of Benefits (COB) rules.

• Applies when multiple policies cover the same loss.
• Group policy is usually primary.
• Individual policy is usually secondary.
• Prevents over-insurance.

Memory trick: Think 'Group First' – the bigger umbrella usually pays first.

For external reviews of adverse determinations by an HMO in Texas, the Texas Department of Insurance (TDI) is responsible for selecting and assigning an independent review organization (IRO) to conduct the review.

• Applies to HMO adverse determinations.
• Follows completion of internal grievance process.
• TDI selects the IRO.
• Ensures impartiality of the external review.

Memory trick: When an HMO says 'no,' the TDI steps in to pick an 'independent' referee.

The timeframe after a license lapses during which it can be reactivated without retaking the exam, typically by fulfilling CE and paying fees.

• Specific time limit set by state law
• Requires completion of all CE
• Requires payment of all applicable fees

Memory trick: A year to reset, or you're out of the 'gate'.

Making, publishing, or circulating false statements about the financial condition of an insurer, or critical statements calculated to injure any person engaged in the insurance business.

• Targets the reputation or financial standing of another insurer.
• Statements must be false and intended to harm or induce a switch.
• Is a prohibited unfair trade practice.

Memory trick: Defame a rival's wealth, that's defamation's stealth.

A Texas-licensed agent must notify the Commissioner of Insurance within 30 days of any final judgment or order in a criminal proceeding, especially for a felony.

• Applies to criminal proceedings resulting in a final judgment or order.
• Mandatory self-reporting requirement.
• Specific timeframe for notification to the Commissioner.

Memory trick: Felony conviction, thirty days to confess, or face more distress.

A life insurance dividend option where dividends are used to purchase small, single-premium, fully paid-up whole life policies that increase the death benefit and cash value of the original policy.

• Increases both death benefit and cash value.
• Each addition is a mini single-premium whole life policy.
• Dividends used this way are generally not taxable until the policy is surrendered or matures, and only if they exceed premiums paid.
• Can be chosen to accelerate policy growth.

Memory trick: Dividends are gifts, how they're used determines their shifts!

Universal Life insurance is a flexible premium, adjustable death benefit policy with unbundled components, offering a current interest rate that may fluctuate, typically with a guaranteed minimum.

• Flexible premiums.
• Adjustable death benefit.
• Unbundled (transparent) costs.
• Fluctuating interest rate (with minimum guarantee).

Memory trick: Universal: Flexible, Adjustable, Unbundled, but Interest is not always guaranteed.

A feature of cash value life insurance policies that allows the policyowner to borrow money from the insurer, using the policy's cash value as collateral.

• Not taxable income when taken
• Contractual right, cannot be refused
• Interest is charged
• Outstanding loan reduces death benefit

Memory trick: Policy loans are 'your money' with 'strings attached' (interest, death benefit reduction).

The formal process by which an insurance agent voluntarily gives up their license to the Texas Department of Insurance (TDI).

• Requires immediate return of the license to TDI.
• Voluntary action by the licensee.
• Different from license expiration or revocation.

Memory trick: To stop selling, the license must immediately land back at the TDI.

When life insurance dividends are left with the insurer to accumulate interest, the dividends themselves are non-taxable, but the interest earned on them is taxable as ordinary income.

• Dividends: non-taxable (return of premium).
• Interest on dividends: taxable as ordinary income.
• Interest is taxed in the year credited.

Memory trick: Dividends are free, but interest you'll see (taxed).

A provision in a life insurance policy that prevents the insurer from denying a claim due to misstatements or concealment after the policy has been in force for a specified period (usually 2 years), except for fraudulent misstatements.

• Typically 2-year contestable period.
• Protects against innocent misstatements.
• Fraudulent misstatements may still void policy within period.

Memory trick: After two years, the truth can't be denied, unless it's a lie.

A life insurance policy provision that grants the policyowner a specific period (e.g., 10 days) to review the policy and return it for a full refund if dissatisfied.

• Right to examine period.
• Full refund of premiums.
• Starts upon policy delivery.

Memory trick: Free-Look: Look it over, get your money back.

Offering anything of value not specified in the insurance policy as an enticement to purchase insurance.

• Prohibited in Texas.
• Designed to ensure fair competition.
• Includes gifts, special favors, or personal services.

Memory trick: Don't bribe for business, it's a Texas no-go.

Texas-licensed agents must promptly notify the Commissioner of Insurance of any changes to their residential or business address.

• Applies to both residential and business address changes.
• Notification must be made to the Commissioner of Insurance.
• Specific timeframe for notification is mandated.

Memory trick: New address, thirty days, Commissioner's notice always pays.

Monetary fines imposed by the Texas Department of Insurance for violations of the Texas Insurance Code or TDI rules.

• Can be imposed in addition to license suspension/revocation
• Maximum penalty often applies per violation
• Used to deter unethical and illegal conduct

Memory trick: A 'ten thousand' dollar lesson for a 'twisting' agent.

A formal process mandated for Health Maintenance Organizations to receive, investigate, and resolve grievances filed by their enrollees.

• Ensures consumer protection and satisfaction.
• Must be accessible and timely.
• Required by state regulatory bodies.

Memory trick: HMO complaints are for ENROLLEES to get their issues RESOLVED.

The act of using force, intimidation, or undue influence to compel a person to engage in or refrain from an insurance transaction or complaint.

• Prohibited unfair trade practice.
• Involves intimidation or threats.
• Can apply to policy purchase, claims, or complaints.

Memory trick: Don't coerce clients, defame competitors, or misrepresent policies.

Texas-licensed agents for Life, Accident, and Health insurance must complete specific continuing education (CE) hours in each two-year license period to maintain their license.

• Applies to all licensed agents, including newly licensed ones.
• Includes a mandatory ethics component.
• Ensures agents stay current with industry knowledge and regulations.

Memory trick: Twenty-four hours, two for ethics, keep your license, no tricks.

Any advertisement, announcement, or statement that is untrue, deceptive, or misleading in connection with the business of insurance.

• Prohibited unfair trade practice.
• Must clearly state policy limitations and exclusions.
• Aims to protect consumers from deception.

Memory trick: Advertising shouldn't lie; make sure it's truthful and clear.

A life insurance rider that provides a monthly income benefit to the insured if they become totally disabled and unable to work.

• Provides monthly income
• Triggered by total disability
• Supplements income during disability
• Separate from Waiver of Premium

Memory trick: Disability riders protect your pay and your policy, like a double shield.

Regulations governing how a licensed agent may advertise multiple professional services (e.g., insurance and real estate) on a single medium.

• Requires clear identification of the agent and insurance entity.
• Aims to prevent consumer confusion.
• Specific rules apply to prominent display of information.

Memory trick: When mixing business, make sure your NAME and AGENCY are loud and clear.

The right of an individual to review and receive copies of personal information collected about them by an insurer or agent.

• Requires a written request.
• Information must be provided within a specific timeframe.
• Part of consumer privacy protections.

Memory trick: Fifteen business days, not a day more, for your data to appear at your door.

Upon surrender of a life insurance policy, any amount received that exceeds the total premiums paid is considered taxable income.

• Only the gain above premiums paid is taxable.
• The policy's face amount is irrelevant for surrender value taxation.
• Premiums paid are considered the 'cost basis'.

Memory trick: Surrender for cash? Only gains get taxed, not your original stash!

After an insurance license is revoked by the TDI, there is a mandatory waiting period before the individual can reapply for a new license.

• Applies to licenses revoked due to serious violations.
• Aims to protect the public and allow for rehabilitation.
• The waiting period is a minimum, and reapplication is not guaranteed.

Memory trick: Revoked license, five years to wait, then reapply at the state's gate.

A type of term life insurance where the death benefit remains constant (level) for the entire policy term, and the premiums are typically level for that term.

• Death benefit is fixed.
• Premiums are fixed for the term.
• No cash value accumulation.
• Temporary coverage.

Memory trick: Term Life: Temporary, no cash, level if stated.

All insurance policy forms, including applications, endorsements, and riders, must be submitted to and approved by the TDI before they can be used in Texas.

• Applies to all types of insurance policy forms.
• Ensures compliance with state laws and regulations.
• Required before any use with policyholders.

Memory trick: No form flies, 'til TDI approves its guise.

The Texas Department of Insurance (TDI) is the state agency responsible for reviewing and approving all insurance policy forms used within Texas.

• Ensures forms comply with Texas insurance laws and regulations.
• Protects consumers from unfair or misleading policy language.
• Approval is required before any form can be marketed or used.

Memory trick: New policy form? TDI's the boss, or it's a loss.

A mandatory period following the delivery of a new life insurance policy during which the policyholder can review the policy and return it for a full refund.

• Also known as 'Right to Examine'.
• Typically 10 days for life insurance in Texas.
• Ensures consumer satisfaction and understanding.

Memory trick: Life policies give you TEN days to look and return.

An insurer that has not been granted a Certificate of Authority by the Texas Department of Insurance to conduct insurance business in the state.

• Cannot legally transact insurance business in TX without specific exemptions (e.g., surplus lines).
• Placing business with them is a violation for agents.
• Policyholders may have less protection from guaranty associations.

Memory trick: Authorization is key; without the 'A', it's a 'No-Go' for business.

If an insured dies with an outstanding policy loan, the loan amount plus any accrued interest is deducted from the death benefit before it is paid to the beneficiary.

• Both principal and interest are deducted.
• Reduces the net death benefit.
• Loans are not taxable as income.

Memory trick: Loan at death? Deduction is the path.

The illegal act of mixing personal funds with funds held in trust for others, such as client premiums.

• Violation of fiduciary duty
• Prohibited by Unfair Trade Practices Act
• Can lead to license suspension or revocation

Memory trick: Mixing money leads to a missing license.

A life insurance rider that allows the policyholder to receive a portion of the policy's death benefit while still alive, typically upon diagnosis of a terminal illness, critical illness, or long-term care need.

• Access to death benefit while living
• Triggered by specific health conditions (terminal, critical, LTC)
• Reduces the death benefit paid to beneficiaries
• Helps cover medical/living expenses

Memory trick: Living benefits are your 'early cash' for tough 'health' times.

The illegal practice of offering any valuable consideration or inducement not specified in the insurance policy, such as a portion of the agent's commission, to a prospective client to persuade them to purchase a policy.

• A direct financial incentive offered outside the policy contract.
• Considered an unfair trade practice.
• Prohibited to ensure fair competition and prevent discrimination.

Memory trick: Rebating a commission, that's a legal intermission.

A type of whole life insurance policy where the premiums start low and increase annually for a specified period (e.g., 5, 10, or 20 years), after which they level off for the remainder of the policy's life. It builds cash value.

• Premiums start low
• Premiums increase annually for a set period
• Premiums then level off
• Builds cash value

Memory trick: Whole life premiums can be 'level', 'modified' (two steps), or 'graded' (many steps up).

The financial or emotional relationship between the policyowner and the insured that must exist at the time a life insurance policy is issued to prevent gambling on human life.

• Required at policy inception
• Protects against moral hazard
• Lack thereof renders policy void

Memory trick: No 'heart' (interest), no 'start' (void from inception).

A term life insurance policy that allows the policyholder to convert it into a permanent life insurance policy without providing evidence of insurability.

• No evidence of insurability required for conversion
• Conversion must occur within a specified period
• New policy premium based on attained age
• Often more expensive than new term policy

Memory trick: Convertible term is your 'easy button' to permanent, but don't miss the 'deadline'!

The obligation for Health Maintenance Organizations to submit their proposed rates and any changes to these rates to the state's insurance department for review and approval before implementation.

• Ensures rates are fair and adequate
• Protects consumers from excessive charges
• Specific advance notice period required

Memory trick: HMO rates need 'sixty' days to be set straight.

A life insurance policy provision that allows the policyowner to transfer some or all of their ownership rights to another individual or entity.

• Transfer of ownership rights.
• Can be collateral (temporary) or absolute (permanent).
• Requires written notification to insurer.

Memory trick: Assignment: Assign your rights, transfer your mights.

An unethical practice where a policyholder is induced to replace an existing policy with a new one from the same insurer, primarily to generate new commissions.

• Involves the SAME insurer
• Often detrimental to policyholder
• Violation of Unfair Trade Practices Act

Memory trick: Churning means the same cream, just whipped again for profit.

A life insurance rider that automatically increases the policy's death benefit over time to keep pace with inflation, typically tied to an index like the CPI.

• Protects against inflation.
• Increases death benefit.
• No proof of insurability required for increase.

Memory trick: Riders add protection, COLA fights inflation.

All insurance policy forms, endorsements, and riders used in Texas must be filed with and approved by the Texas Department of Insurance (TDI) before they can be issued or delivered.

• Applies to all new and revised forms.
• Ensures compliance with state laws and regulations.
• Protects consumers from unfair or misleading provisions.

Memory trick: Before it sells, TDI must tell: 'It's approved, you're good to go!'

Making, publishing, or disseminating any untrue, deceptive, or misleading statement or representation in connection with the business of insurance.

• Applies to all forms of public communication (print, digital, broadcast).
• Prohibits claims that misrepresent policy benefits, terms, or conditions.
• Aims to protect consumers from being misled about insurance products.

Memory trick: If the ad's a lie, it's false advertising, don't deny.

Making false or maliciously critical statements about the financial condition of an insurer or any person engaged in the insurance business.

• Prohibited unfair trade practice.
• Aims to harm reputation or business.
• Can lead to penalties from the TDI.

Memory trick: Don't defame competitors; it's a foul play in insurance.

The power of the Texas Department of Insurance to conduct examinations of insurers and agents to verify compliance with the Texas Insurance Code and related regulations.

• Ensures financial solvency and fair market conduct.
• Can include reviewing records, procedures, and practices.
• A crucial component of consumer protection.

Memory trick: The TDI is the Texas insurance watchdog, always checking the books.

When an applicant is classified as a substandard risk (higher than average risk), insurers implement measures such as higher premiums or reduced coverage to compensate for the increased risk.

• Higher mortality or morbidity risk.
• Methods: table ratings, flat extra premiums, exclusion riders.
• Rarely issued at standard rates without modification.

Memory trick: Substandard: Higher risk, higher price, or no dice.

Making false statements about the terms, benefits, or dividends of an insurance policy to induce a person to purchase it.

• Involves direct interaction with a prospective client.
• Aims to persuade a purchase through deceit.
• Is a prohibited unfair trade practice.

Memory trick: Misleading words, a dishonest sale, that's misrepresentation's tale.

A group health insurance plan where the employer pays 100% of the premiums, requiring 100% of eligible employees to participate.

• Employer pays entire premium.
• Mandatory 100% participation of eligible employees.
• Designed to prevent adverse selection.

Memory trick: For 'Non-Contributory' plans, it's 'All-In' or nothing, the employer pays.

A period during which an individual health insurance policy will not pay for medical expenses related to a pre-existing condition, as defined by the policy and state law.

• Maximum 12 months in Texas for individual policies.
• Applies to conditions treated/diagnosed 6 months prior to enrollment.
• Creditable coverage can reduce or eliminate this period.

Memory trick: Texas health policies have a 'Pre-Ex' clause, but it's limited to a 'Year' to keep things fair.

Rebating is an illegal practice where an insurance agent offers a prospective client a portion of their commission or anything of value not specified in the policy as an inducement to buy insurance.

• Illegal in Texas and most states
• Considered an unfair trade practice
• Intended to prevent unfair competition among agents

Memory trick: Don't REBATE, or you'll be in a STATE of trouble!

The formal procedure an HMO enrollee must follow to appeal an adverse determination or complain about services, starting with filing a grievance.

• First step: File a grievance with the HMO.
• HMO must respond within specific timeframes.
• Must be exhausted before external review.

Memory trick: When an HMO says 'No,' the first 'Grievance' is your go.