🎯 AZ Life & Health

Producer: Licensed to sell, solicit, or transact insurance (includes agents AND brokers)
Agent: Represents the INSURER — authorized to solicit and bind coverage
Broker: Represents the INSURED (client) — CANNOT bind coverage

Mutual: Owned by POLICYHOLDERS — issues participating policies with potential dividends
Stock: Owned by STOCKHOLDERS — typically issues nonparticipating policies
Participating Policy: Allows policyowner to receive dividends and elect board of directors
Nonparticipating Policy: No dividends, no voting rights

Facultative: CASE BY CASE — single risk or defined package
Treaty: AUTOMATIC — each party accepts specific percentages of business

Captive Insurer: Writes only OWNER'S exposures — confines/limits to its owners
Reciprocal: UNINCORPORATED association where members insure EACH OTHER — managed by ATTORNEY-IN-FACT
Risk Retention Group: Group-owned — assumes and spreads LIABILITY risks of members

Underwriting Dept: Reviews applications, approves/declines coverage, assigns RISK CLASSIFICATIONS
Claims Dept: Processes, investigates, and pays claims

Hazard: The CONDITION (sets the stage) — e.g., Icy sidewalk
Peril: The CAUSE/EVENT (what happens) — e.g., Falling
Risk: The UNCERTAINTY (could you lose?) — e.g., Might get hurt
Loss: Unintentional decrease in value due to a covered peril

Pure Risk: Only possibility of LOSS — no chance of gain — INSURABLE
Speculative Risk: Possibility of LOSS OR GAIN — NOT insurable

Avoidance: ELIMINATE the hazard entirely
Reduction: MINIMIZE the severity or frequency of losses
Retention: Self-insure or accept the risk
Transfer: Shift risk to another party (buying insurance)

The larger the number of similar risks insured, the more accurately FUTURE LOSSES can be PREDICTED.

Tendency of HIGHER-RISK individuals to seek insurance more frequently than lower-risk individuals.

Insurance = ALEATORY — involves potential for UNEQUAL EXCHANGE of value.
One party may receive significantly more than they paid (e.g., $100 premium → $100,000 claim).

ALL describe aleatory: Unequal exchange ✓, Element of chance ✓, Legal wager ✓

Unilateral: Only ONE party (insurer) makes legally enforceable promise
Bilateral: BOTH parties make enforceable promises

Contract prepared by insurer with no negotiation — "take it or leave it." Ambiguities interpreted in favor of INSURED.

Both policyowner and insurer must disclose all MATERIAL FACTS — no attempt to conceal or deceive.

Required: Offer & Acceptance, Consideration, Competent Parties, Legal Purpose
NOT required: Written evidence

Applicant's consideration: Material information + premiums
Insurer's consideration: Promise to pay covered claims

Financial or economic interest that would cause FINANCIAL LOSS if the insured person/property is damaged.
Must exist at: Policy ISSUE for life insurance
Has insurable interest: Spouses, blood relatives, business partners
Own life: UNLIMITED insurable interest

Void: NEVER legally in force — lacks essential element
Voidable: May be SET ASIDE by one party for valid reason

False statement that INFLUENCES insurer's decision to accept risk or pricing. Can make contract VOIDABLE.

Waiver: VOLUNTARY giving up of a known legal right
Estoppel: Prevents asserting a right previously waived

Principal: The INSURER
Agent: The PRODUCER — represents the insurer
Fiduciary Responsibility: Agent owes duty to BOTH insurer and policyowner

Agent's authority to bind the insurer comes from:
1. Agent's CONTRACT (the agreement with the insurer)
2. Insurance company's APPOINTMENT

NOT from: agent's license, certificate of authority (that's the insurer's permission to operate in the state)

Express: WRITTEN in the agent's contract
Implied: UNWRITTEN — necessary incidental acts (derived from express)
Apparent: What PUBLIC reasonably believes agent has (business cards, brochures)

Within authority: INSURER is liable
Beyond authority: NOT backed by insurer
Prohibited acts: Agent PERSONALLY liable

The MOST FLEXIBLE life insurance policy:
• FLEXIBLE premiums (pay more or less)
• ADJUSTABLE death benefits
• Accumulation account grows at guaranteed rate (often higher credited rate)

Temporary protection for specified period — NO cash value.
Decreasing Term: Face amount REDUCES each year (used for mortgages/loans)
Convertible Term: Can convert to PERMANENT whole life WITHOUT evidence of insurability

Permanent protection with CASH VALUE that grows.
Single Premium: Paid-up policy with LIFETIME protection from one payment
Cash Surrender Value: Amount available if policy is surrendered

Adjustable Life: Flexible premiums, adjustable death benefit, cash value grows at GUARANTEED FIXED rate
Universal Life: Same flexibility, but accumulation account may credit HIGHER rate

JOINT LIFE: Pays at FIRST death — then policy ENDS
SURVIVORSHIP (Second-to-Die): Pays at LAST death — continues until both die

Life insurance covering TWO people — pays death benefit when the LAST one dies. Premium is LOWER than two separate policies.

Type: Typically LEVEL TERM insurance
Master policy: Held by EMPLOYER
Certificate of Insurance: Given to EMPLOYEE — evidence of coverage (NOT the contract)
Conversion: Employee can convert to INDIVIDUAL PERMANENT policy within 31 DAYS of termination

Group life: Generally NOT required for basic coverage
Required when: Death benefit is INCREASED, late enrollment, amounts above guaranteed issue

Assets backing NON-GUARANTEED values of variable life insurance are held in a SEPARATE ACCOUNT set up by the INSURER.

General Account: Backs GUARANTEED values (whole life, fixed annuities)
Separate Account: Backs NON-GUARANTEED values (variable life, variable annuities)

Pays face amount after fixed period (10, 20 years, or at age 65) OR upon death if earlier.

An adjustment in DEFERRED ANNUITIES affecting crediting rates based on market conditions.
Interest rate is guaranteed ONLY IF held for SPECIFIED PERIOD.

Employer holds MASTER contract — employees receive CERTIFICATES of participation.
Used for group pension plans.

Immediate: Single payment — income begins within 12 MONTHS
Deferred: Income payments are DEFERRED (delayed) to a future date — typically retirement

Fixed: GUARANTEED rate of return — INSURER bears investment risk
Variable: Investment risk shifted to CONTRACT OWNER — payments fluctuate based on securities value — requires FINRA + state license

A FIXED deferred annuity with interest LINKED to an equity market index.

Accumulation Period: Premiums credited as ACCUMULATION UNITS before payout
Annuitization: Accumulation units converted to ANNUITY UNITS for payments

Life Only (Straight Life): Payments for annuitant's lifetime — nothing to beneficiary at death — LARGEST payments
Life with Period Certain: Lifetime income with guaranteed MINIMUM period
Joint and Survivor: Income payments to TWO+ people — continues until LAST one dies — SMALLER payments

TAX-FREE exchange of insurance/annuity contracts.
Allowed: Life → Life, Life → Annuity, Annuity → Annuity
NOT allowed: Annuity → Life insurance

Life policy that FAILS the 7-pay test (overfunded in first 7 years).
Penalty: 10% on premature distributions before age 59½
Tax treatment: LIFO (Last In, First Out) — GAINS taxed FIRST
Triggers penalty: Policy loans, withdrawals, dividends
Material change: 7-pay test reapplies (adjusted for cash value)

Qualified Annuity: Purchased with PRE-TAX dollars inside a qualified plan (IRA, 401(k), 403(b))
• Contributions may be TAX-DEDUCTIBLE
• ENTIRE distribution is taxable as ordinary income
• Subject to Required Minimum Distributions (RMDs) at age 73

Non-Qualified Annuity: Purchased with AFTER-TAX dollars (outside qualified plans)
• Contributions are NOT tax-deductible
• Only the EARNINGS are taxable at distribution
• NO RMD requirements during owner's lifetime

Life Insurance (regular, NOT MEC):
• Death benefit: INCOME TAX-FREE to beneficiary
• Withdrawals: FIFO — basis (premiums) comes out FIRST = tax-free until you exceed basis
• Policy loans: NOT taxable (unless policy lapses with loan outstanding)

Annuities:
• Death benefit: TAXABLE to beneficiary (earnings portion)
• Withdrawals: LIFO — EARNINGS come out FIRST = taxable immediately
• 10% penalty before age 59½
• Exclusion Ratio: Formula to determine tax-free portion of annuitized payments

Life Insurance: Protects against dying TOO SOON — creates estate/funds at death
Annuity: Protects against living TOO LONG — liquidates funds during lifetime

They are OPPOSITE products solving opposite problems.

Owner: Has ALL the power — can surrender, withdraw, name/change beneficiary, choose payout options
Annuitant: Person whose LIFE determines the payout — NOT necessarily the owner
Beneficiary: Receives proceeds if annuitant dies — has NO control over contract

Owner can be the annuitant, beneficiary, or NEITHER.

Taking a sum of money and DECREASING it in size over time. This is the PRIMARY PURPOSE of an annuity — to create a stream of income by liquidating accumulated funds.

If the credited interest rate FALLS BELOW a specified level, the surrender charge is WAIVED. Protects owner from being locked into a low-rate annuity.

Interest earned by annuities owned by BUSINESSES is NOT tax-deferred — it is taxed in the year it is earned. Exception: if entity is acting as agent for an individual who will be the annuitant.

When a life annuitant OUTLIVES their life expectancy, additional payments are funded by money NOT distributed to annuitants who DIED BEFORE their life expectancy. This is the "mortality credit" — the pooling of longevity risk.

In a joint and survivor annuity, OLDER co-annuitants receive LARGER monthly payments because their expected payout period is SHORTER. Ages 71 & 73 get more than ages 60 & 80.

Joint & 100% Survivor: Survivor continues receiving FULL original amount
Joint & 2/3 Survivor: Survivor receives TWO-THIRDS of original joint income
Joint & 1/2 Survivor: Survivor receives ONE-HALF of original joint income

Lower survivor percentage = HIGHER initial payments (less insurer risk).

Both guarantee that the TOTAL annuity fund will be paid out (no forfeiture to insurer).

Cash Refund: If annuitant dies early, beneficiary receives LUMP SUM of remaining balance
Installment Refund: If annuitant dies early, beneficiary receives CONTINUED PAYMENTS until fund exhausted

Revocable: Policyowner CAN change without consent
Irrevocable: CANNOT change without beneficiary's WRITTEN consent
Contingent: Receives benefits if PRIMARY dies before insured
Class Designation: Names a GROUP (e.g., "children") not specific individuals

Proceeds go to the INSURED'S ESTATE — NOT beneficiary's estate.

Lump Sum: Full amount at once
Interest Only: Insurer holds proceeds, pays interest — principal intact
Fixed Period: Payments over set NUMBER OF YEARS — amount determined by years chosen
Fixed Amount: Set DOLLAR AMOUNT until proceeds exhausted
Life Income: Payments for beneficiary's LIFETIME — if dies early, INSURER KEEPS balance
Joint & Survivor: Pays TWO+ people until LAST dies — SMALLER payments than single life

Prevents beneficiary from "commuting, encumbering, withdrawing, or assigning" proceeds BEFORE receipt. Protects from CREDITORS.

Cash Surrender: Receive policy's cash value — coverage ENDS
Extended Term: Same face amount continues for specified PERIOD
Reduced Paid-Up: Lower face amount, coverage continues for LIFE

Face Amount: SAME as original policy (equals NET death benefit = face minus loans)
Cash Value: Used as ONE-TIME PREMIUM to purchase term coverage
Duration: Determined by how much term the cash value can buy
Cash Value Growth: STOPS — it's been spent to buy the term coverage

$25,000 policy with $6,000 cash value → Extended term = $25,000 coverage (NOT $6,000, NOT $19,000, NOT $31,000)

A policy becomes PAID-UP (no more premiums due) when:
Cash Value + Accumulated Dividends = Net Single Premium
for the same face amount at the insured's ATTAINED AGE.

Net Single Premium = the one-time lump sum needed to buy paid-up coverage at current age.

Used when someone OTHER than the insured pays the premiums (e.g., parent paying for child's policy).
If the PAYOR dies or becomes disabled, premiums are WAIVED until child reaches specified age.

Different from Waiver of Premium: Regular waiver covers the INSURED's disability. Payor benefit covers the PAYOR's death/disability.

Entire Contract: Policy + riders + application = entire contract
Grace Period: Life insurance = typically 30-31 days
Free-Look Period: 10 days (30 for mail-order) to return for full refund
Automatic Premium Loan: Insurer deducts overdue premium from cash value

Accidental Death Benefit (ADB): Additional sum if death is accidental — often DOUBLE or TRIPLE
Accelerated Benefits: Portion of death benefit paid early for TERMINAL ILLNESS (1-2 years to live)
Waiver of Premium: Premiums waived during DISABILITY — NOT a loan

Requirements for ADB to be paid:
• Death must occur within stated number of days after accident
• Accidental bodily injury must be cause of death
• Injury must occur prior to stated age (typically 60-70)

NOT required: Death from JOB-RELATED injury

WAIVER OF PREMIUM (Rider):
• Triggered by: TOTAL DISABILITY
• Mechanism: Premium is FORGIVEN — no money changes hands
• Repayment: NOT required — waived premiums are a gift
• Effect on death benefit: NONE
• Cost: INCREASES policy premium (rider adds cost)
• Cash value: Still grows as if you paid

AUTOMATIC PREMIUM LOAN (Provision):
• Triggered by: MISSED PREMIUM payment
• Mechanism: Insurer uses cash value as a LOAN to pay premium
• Repayment: YES — loan balance accrues INTEREST
• Effect on death benefit: REDUCED by outstanding loan

Rider added to parent's policy that covers children.
Provides LEVEL TERM insurance on all children covered.
Same premium regardless of how many children.

Given when initial premium paid WITH application.
If found insurable, coverage effective from DATE OF RECEIPT.

Lump sum death benefit = EXEMPT from federal INCOME tax
Included in deceased's GROSS ESTATE for ESTATE tax
Named beneficiary = NOT subject to insured's CREDITORS

Three factors: MORTALITY + INTEREST + EXPENSES
Interest income DECREASES premium (subtracted from mortality cost)

Purpose: Get premium rate based on EARLIER (younger) AGE.

Protects business against loss of vital member with special skills.
Purpose: Pay for finding and TRAINING A REPLACEMENT.
NOT for: funeral costs, family income, pension liability.

Cross-Purchase Plan: Surviving owners purchase deceased's interest — best for LIMITED number of partners
Entity Plan: BUSINESS purchases deceased owner's interest

Employer and employee SHARE cost of life insurance. Employee selects beneficiary.

Viator: The policyowner who SELLS the policy
Payment: LESS than death benefit (discounted)

Method to determine HOW MUCH life insurance is needed by analyzing family/business needs.
Emergency reserve fund = cover UNEXPECTED EXPENSES.

Qualified: Meets IRS rules — favorable TAX treatment
Non-Qualified: Does NOT meet IRS requirements — no favorable tax treatment

401(k): Employer-sponsored — save/invest BEFORE taxes
403(b): For PUBLIC SCHOOLS, tax-exempt organizations, ministers — also called TSA

Defined Benefit: Formula determines future BENEFIT (based on years + compensation)
Defined Contribution: Formula determines annual CONTRIBUTIONS — benefits vary

Traditional IRA:
• Contributions may be TAX-DEDUCTIBLE
• Growth is TAX-DEFERRED
• Distributions are TAXED as ordinary income

Roth IRA:
• Contributions are AFTER-TAX (NOT deductible)
• Growth is TAX-FREE
• QUALIFIED distributions are completely TAX-FREE

Keogh: For SELF-EMPLOYED individuals
SEP: Employers contribute to employees' IRAs
SIMPLE: Small employers (less than 100 employees)
Section 457: State/local government and specific nonprofits

A QUALIFIED retirement plan for SELF-EMPLOYED individuals. Also called HR 10 plan. Same tax treatment as other qualified plans — tax-deductible contributions, tax-deferred growth, taxable distributions.

Employer can have a MAXIMUM of 100 EMPLOYEES earning at least $5,000 to be eligible for a SIMPLE retirement plan.

You have 60 DAYS to complete a rollover from an IRA or qualified plan. Miss the deadline = funds are taxed as income + 10% penalty if under 59½.

Rollover to PARTICIPANT: 20% mandatory federal tax withholding
TRUSTEE-TO-TRUSTEE transfer: NO withholding (0%)
IRA-to-IRA direct transfer: NO withholding (0%)

A "holding tank" for funds from a qualified plan on their way to ANOTHER qualified plan. Avoids the 20% mandatory withholding tax. Keeps funds eligible for future rollover to employer plan.

IRS imposes 25% EXCISE TAX on individuals aged 73+ who fail to take Required Minimum Distributions.
Deadline: April 1st of the year following the year participant attains age 73
Reduced to 10%: If corrected in a timely manner

First-time homebuyers can withdraw up to $10,000 from qualified IRAs WITHOUT the 10% early withdrawal penalty. Still subject to income tax.

Transfer of a decedent's IRA balance to a SURVIVING SPOUSE qualifies for the Unlimited Marital Deduction (generally exempt from estate taxes). Surviving spouse can roll it into their own IRA.

Vesting = percentage of employer contributions the employee OWNS.
80% vested = employee keeps 80%, could FORFEIT 20% if employment terminates
100% vested = employee owns it all, nothing forfeited

Form 5500: Annual return/report — describes plan's insurance contracts
Summary Plan Description: Must be provided within 90 DAYS of eligibility
Exempt from ERISA: CHURCH PLANS

A plan is "TOP HEAVY" if more than 60% of plan assets are attributable to KEY EMPLOYEES. Top heavy plans have additional requirements to protect rank-and-file employees.

Assets in a qualified retirement plan must be maintained for the EXCLUSIVE BENEFIT of employees and their beneficiaries. Company CANNOT repossess funds for business purposes.

Generally PROHIBITED to assign retirement plan benefits to another person. Exceptions: certain participant loans and certain domestic relations orders (QDROs for divorce).

IRS requires qualified plans to benefit a BROAD CROSS-SECTION of employees. Cannot discriminate in favor of HIGHLY COMPENSATED employees.

Morbidity: Probability of becoming ILL or DISABLED — used in HEALTH insurance
Mortality: Probability of DEATH — used in LIFE insurance

Accidental Means: MORE restrictive — cause AND result must be unexpected/unintended
Accidental Bodily Injury: LESS restrictive — only RESULT must be unexpected (even if act was intentional)

Principal Sum: DEATH benefit — face amount, maximum benefit
Capital Sum: DISMEMBERMENT benefit (loss of limbs, sight, hearing) — typically 50% of principal sum

Waiting period before benefits begin — functions like a deductible expressed in TIME rather than money. Longer elimination period = LOWER premiums.

Dread (Specified) Disease: Limited benefits for SPECIFIC disease (cancer, heart disease)
Critical Illness: LUMP SUM upon DIAGNOSIS of critical illness (heart attack, stroke) — can use for non-medical expenses
Hospital Indemnity: Pays specified amount (daily/weekly/monthly) DIRECTLY TO INSURED while hospitalized
Accident-Only: Covers accidents only, not sickness

Limited Risk: Covers COMMON risk but in a LIMITED manner
Special Risk: Covers UNUSUAL hazard not normally covered

Covers monthly DEBT PAYMENTS while insured is disabled.
Owner: LENDER/Creditor
Beneficiary: LENDER/Creditor
Insured: DEBTOR/Borrower
Premium payor: DEBTOR typically pays

Covers group/association members while exposed to defined set of risks. Composition of covered group CONTINUALLY CHANGES as different individuals become exposed (e.g., sports teams, bus passengers).

Coverage period: 90 days to 364 days (just under one year)
CANNOT BE RENEWED — policyholders must apply for NEW policy when coverage ends
Lower premiums but more restrictions than ACA-compliant plans
Used as interim/bridge coverage

Individual: Requires EVIDENCE OF INSURABILITY
Large Group: EXPERIENCE RATING (based on group's claims history)
Small Group: COMMUNITY RATING (based on broader community data)

Medicare: Primarily for SENIORS (65+)
Medicaid: For LOW-INCOME persons
TRICARE: Federal plan for MILITARY — active duty, retired, families, survivors
Social Security Disability: For disabled workers

Diagnostic/Preventive: Exams, cleanings, X-rays
Restorative: FILLINGS and CROWNS
Oral Surgery: Tooth EXTRACTION
Endodontics: ROOT CANALS (dental pulp)
Periodontics: GUM DISEASE
Prosthodontics: DENTURES and BRIDGEWORK
Orthodontics: BRACES and RETAINERS

Scheduled: Benefits for specific services per published schedule — typically NO deductibles, FIRST-DOLLAR coverage
Non-Scheduled (Comprehensive): UCR basis — includes deductibles and coinsurance:
• Preventive: 100%
• Restorative: 80%
• Major (crowns, ortho): 50%

Weekly premium: 7 days
Monthly premium: 10 days
Other frequencies: 31 days

Claim during grace period: Unpaid premium may be DEDUCTED from reimbursement

Entire Contract: Policy + application + attached papers = entire contract
• Agent has NO AUTHORITY to change policy or waive provisions

Time Limit on Certain Defenses: Policy incontestable after 2-3 years
• After this period, claims CANNOT be denied for misrepresentation

Reinstatement: If insurer accepts delinquent premium without application = AUTOMATIC
• If application required, insurer has 45 days to respond or automatic reinstatement
• Accidents covered IMMEDIATELY; sickness has 10-day probationary period

Physical Exam/Autopsy: Insurer can require at ITS expense
• Autopsy allowed only when NOT PROHIBITED BY STATE LAW

Change of Occupation:
• MORE hazardous job = REDUCE BENEFITS
• LESS hazardous job = INCREASE BENEFITS (or reduce premium)

Misstatement of Age: Benefits adjusted to reflect correct age

Other Insurance with THIS Insurer: Protects INSURANCE COMPANY
• Maximum benefit from one policy payable; other policy terminated with premium refund

Insurance with OTHER Insurers: Pay PRO-RATA when not notified of other coverage

Relation of Earnings to Insurance: Total benefits cannot exceed income lost

Illegal Occupation: Can deny claims if injured during felony

Intoxicants/Narcotics: Excludes losses while under influence

Insuring Clause: Specifies AMOUNT OF BENEFITS to be paid
Consideration Clause: Sets forth PREMIUM REQUIREMENTS (premium + application)
Free-Look: 10 days to return policy for full refund (begins at delivery)

Noncancelable: Cannot cancel, CANNOT increase premiums (locked in)
Guaranteed Renewable: Cannot cancel, but CAN increase premiums for entire CLASS
Conditionally Renewable: Can terminate for SPECIFIC REASONS stated in contract
Optionally Renewable: INSURER can refuse renewal at anniversary
Cancelable: EITHER insured OR insurer can terminate (5 days notice)

To cancel: Insured must notify insurer IN WRITING

Notice of claim: 20 days (insured notifies insurer)
Claim forms sent: 15 days after RECEIPT OF NOTICE (insurer sends forms)
Proof of loss: 90 days (insured submits proof)
Legal action wait: 60 days after proof of loss
Legal action deadline: 3 years

Periodic claim payments: Must be made at least MONTHLY (disability income)

Time Limit on Certain Defenses: Policy incontestable after 2-3 years
Subrogation: Insurer can pursue third party who caused covered loss
Coordination of Benefits: Prevents duplicate payments when covered by multiple plans
Assignment of Benefits: Makes claim handling MORE CONVENIENT for insured

Rider attached to health policy: Must be signed by BOTH INSURED AND PRODUCER

At policy delivery, producer may need to:
• Collect signed GOOD HEALTH STATEMENT
• Gather initial premium (if not collected at application)
• Review policy with applicant

NOT at delivery: Conditional receipt (given at APPLICATION)

Pays LUMP SUM benefit for:
• Accidental death
• Accidental dismemberment (loss of limbs)
• Loss of VISION or HEARING

A&H policies exclude losses from: WAR

HSA (Health Savings Account): PORTABLE, tax-advantaged, funds ROLL OVER — requires HDHP
FSA (Flexible Spending Account): "USE IT OR LOSE IT" — through employer cafeteria plan
HRA (Health Reimbursement Arrangement): EMPLOYER-FUNDED ONLY — may roll over (employer decides)

Bronze: 60% actuarial value
Silver: 70%
Gold: 80%
Platinum: 90%

Limits pre-existing condition exclusions — treats all group insurance as single pool.
Creditable coverage gap: 63 days maximum
Pre-existing exclusion max: 12 months (regular enrollees)
Late enrollee exclusion max: 18 months
Look-back period: 6 months

HIPAA does NOT apply to: Disability income plans

Basic Medical/Surgical:
• FIRST-DOLLAR coverage (no deductible)
• Limited in scope and benefits
• Covers specific services

Major Medical:
• HIGH maximum benefits
• Includes DEDUCTIBLE and COINSURANCE
• Does NOT pay on first-dollar basis
• Does NOT pay on capitation basis (that's HMO)

Individual medical expense insurance: Typically written for 1 YEAR

Major medical typically EXCLUDES:
• CUSTODIAL CARE (covered by LTC policies)
• MILITARY DUTY
• Treatment in GOVERNMENT FACILITIES
• EXPERIMENTAL/INVESTIGATIVE services

Room and board COVERS: Room occupancy, GENERAL NURSING CARE, food, personal hygiene
Room and board does NOT cover: Surgeon's fees, prescription medication, diagnostic services

Cover ONLY specific illness or event (e.g., cancer policy)
Cover LIMITED PERILS and AMOUNTS
NO age restriction (not limited to under 65)
May pay on reimbursement OR indemnity basis

Fee Schedule: Shows HIGHEST amount payable for each procedure
Usual, Customary, Reasonable (UCR): Based on average charges in GEOGRAPHIC REGION
Fee-for-Service: Each service priced/paid SEPARATELY according to schedule

PPO and Indemnity plans: Both pay on FEE-FOR-SERVICE basis

Purpose: Avoid OVER-INSURANCE (duplicate payments)

How it works:
• PRIMARY plan pays first up to its maximum
• SECONDARY plan pays remainder up to its maximum
• Total payment cannot exceed actual expenses

Example: Plan A max $5,000, Plan B max $4,000, expenses $7,000
Plan A (primary) pays $5,000, Plan B (secondary) pays $2,000

If loss occurs while policy is ACTIVE, claim must be paid even if:
• Policy was cancelled AFTER the loss date
• Proof of loss submitted after cancellation

Key: Date of LOSS determines coverage, not date of claim submission

HMO (Health Maintenance Organization):
• Combines medical care DELIVERY and FUNDING in one organization
• LIMITED choice of providers
• Participants called SUBSCRIBERS
• Primary Care Physician (gatekeeper) provides routine/preventative care
• SPECIALISTS provide specialty care (e.g., neurologist)
• Prescription drugs through PARTICIPATING PHARMACIES

PPO (Preferred Provider Organization):
• Can use out-of-network providers
• Out-of-network = HIGHER out-of-pocket costs
• No gatekeeper required

POS (Point-of-Service):
• COMBINES features of HMO and indemnity plans
• Choose network or non-network AT TIME OF SERVICE
• Out-of-network = HIGHER costs

Must offer:
• FAMILY PLANNING services
• Routine physicals
• Emergency care

HMO wellness programs include: Routine physicals, smoke cessation, stress reduction
NOT included in wellness: Diagnostic testing services

Preadmission Testing: Diagnostic tests BEFORE hospitalization — reduces LENGTH OF STAY
Preadmission Certification: Insurer notified BEFORE non-emergency admission
• Failure to obtain = REDUCTION in benefits (not denial or cancellation)
• For emergencies: notify AFTER admission

Concurrent Review: Monitors LENGTH of hospital stay
Mandatory Second Surgical Opinion: Required for specified ELECTIVE surgeries
• Helps CONTAIN employer's premium cost
• Lower out-of-pocket with second opinion obtained

Field Underwriting: Producer's personal contact with applicant — may reveal hazardous activities

Underwriting factors: Age, sex, physical condition, occupation, current residence
NOT factors: National origin, former residence, income level (for group)

Rating Types:
• Experience Rating = large groups (based on group's claims history)
• Community Rating = same rate regardless of health status in geographic area

Individual health = MOST RESTRICTIVE underwriting

Members: INSURANCE COMPANIES (not doctors, hospitals, or underwriters)
Purpose: Share medical information between insurers to prevent fraud

Consumer/Investigative Reports:
• Contains credit, reputation, and habits information
• Applicant has right to receive COPY of report
• Physical exams at INSURER'S expense (not applicant's)

Difference between standard and substandard risk reflected in PREMIUM CHARGES

Substandard risk may result in:
• Policy issued with RATING (additional premium)
• Health condition EXCLUSION RIDER
• Modified coverage

Alcohol abuse: Indicates INCREASED exposure to risk

Has grown due to expansion of SELF-FUNDING of benefits
Third party handles claims and administration for self-insured employers

Privacy notice: PRODUCER supplies to applicant
Nonpublic information disclosure: Insurer must GIVE NOTICE, EXPLAIN, and ALLOW OPTING OUT

Contract is between: EMPLOYER and INSURER
Employees receive certificates of insurance, NOT the contract itself

Employers must treat pregnancy same as ANY OTHER MEDICAL DISABILITY
Sick leave for pregnancy = same as any other disability

Note: Post-termination extensions do NOT have to apply equally to pregnancy

When COBRA benefits expire, fully insured group policy can be converted to INDIVIDUAL HEALTH POLICY

Deductible: Amount insured pays BEFORE insurance pays
Coinsurance: PERCENTAGE shared after deductible
Copay: FIXED dollar amount per visit (covers admin costs)
Out-of-Pocket Maximum: Most insured pays in one year

Administered by: Centers for Medicare and Medicaid Services (CMS)
Enrollment handled by: Social Security Administration
Part of: OASDHI (Old Age, Survivors, Disability, and Health Insurance)

Eligibility: Age 65+ OR received Social Security Disability for 24+ months
Anyone eligible for Social Security retirement is automatically eligible for Medicare

Original Medicare (Part A + B):
• Administered by FEDERAL government
• Must purchase separate Part D prescription plan
• Generally needs Medigap to cover cost-sharing

Medicare Advantage (Part C):
• "All-in-one" PRIVATE alternative to Original Medicare
• Often HMOs or PPOs
• May include Part D prescription coverage
• Eliminates need for Medigap

Initial Enrollment Period (7 months):
• Begins 3 months BEFORE birth month
• Ends 3 months AFTER birth month

General Enrollment Period: January 1 - March 31
• For those who missed initial enrollment
• Coverage begins first day of month following enrollment
• Late enrollees pay PENALTY premium

Annual Open Enrollment: October 15 - December 7
• Change between Original Medicare and Advantage plans

Special Enrollment Period: When retiring from employer group coverage

NO premium for "fully insured" (40 credits/10 years work)
Funded by: Federal payroll and self-employment taxes

Part A COVERS:
• Inpatient hospital care (semi-private room, nursing, drugs, tests)
• Skilled nursing facility (requires prior 3-day hospital stay)
• Home health care
• Hospice care
• Inpatient psychiatric care (190 days LIFETIME maximum)

Part A does NOT cover:
• First 3 pints of blood
• Private duty nurse
• Private rooms
• Personal conveniences (TV, phone)

Benefit period: Begins at admission, ends 60 days after discharge

Hospital Coverage per Benefit Period:
• Days 1-60: Per-period deductible, NO coinsurance
• Days 61-90: Daily coinsurance amount
• Lifetime Reserve Days: 60 additional days (coinsurance = 2x days 61-90)

Skilled Nursing Facility (max 100 days):
• Days 1-20: NO cost-sharing
• Days 21-100: Daily coinsurance (flat dollar amount per day)
• After 100 days: NO coverage

Monthly premium deducted from Social Security check

Part B COVERS:
• Doctor's services and exams (anywhere in U.S.)
• Outpatient services, labs, x-rays, supplies
• Durable medical equipment
• Non-employee surgeons/anesthesiologists for inpatient surgery

Cost-sharing: Annual deductible + 20% coinsurance

Part B does NOT cover:
• Private duty nurse
• Custodial care
• Skilled nursing over 100 days
• Routine vision, hearing, dental
• Outpatient prescription drugs
• Cosmetic surgery
• Routine physical exams and foot care

Participating Provider: Accepts ASSIGNMENT — agrees to Medicare-approved fee
Non-Participating Provider: Does NOT accept assignment — may charge up to 15% MORE than Medicare-approved amount

Excess Charge: Difference between doctor's actual charge and Medicare-approved amount
• Covered by some Medigap plans

Must be enrolled in Parts A AND B to qualify
Continue paying Part B premium + plan premium
Government pays private insurers 95% of average cost per enrollee

Plan Types:
• HMO: Closed network, PCP required, out-of-network = emergency only
• PPO: Discounted network + some out-of-network coverage
• PFFS (Private Fee-for-Service): See any Medicare provider, plan sets payment terms

Cost: Small CO-PAY per visit or service (typical)
Part C participants may use HSAs for medical expenses

Covers OUTPATIENT medications
Offered by private companies
Same enrollment periods as Part B
Late enrollers pay penalty premium

"Donut Hole": Coverage gap between basic and catastrophic layers
Each plan covers medications in its FORMULARY

Purpose: Fills gaps in Original Medicare — pays deductibles and coinsurance
Sold by private insurers
NAIC established 10 standardized plans (A through L)

Medigap CANNOT:
• Duplicate Medicare benefits
• Add additional benefits (e.g., dental)
• Be more restrictive than Medicare terms

Only ONE Medigap policy allowed per person
Benefits change annually to mirror Medicare changes (30 days notice required)

Medicare SELECT: Medigap through closed-end HMO for lower premium

Part A Benefits:
• 100% hospital coinsurance days 61-90
• 100% lifetime reserve days coinsurance
• 365 ADDITIONAL lifetime reserve days
• 100% hospice coinsurance/copays
• Part A DEDUCTIBLE (core benefit)

Part B Benefits:
• 20% coinsurance after deductible (CORE BENEFIT)

Parts A and B: First 3 pints of blood

Plans B-L add: excess charges, skilled nursing cost-sharing, foreign travel

Open Enrollment Period: 6 months starting when enrolled in Part B
• GUARANTEED ISSUE — no underwriting
• NO minimum age requirement
• Policy issued REGARDLESS of health status

Contract Requirements:
• 30-day FREE-LOOK period
• Must be GUARANTEED RENEWABLE
• Max 6-month pre-existing condition exclusion/waiting period
• No new probationary period on replacement policies

Loss Ratios: 65% individual / 75% group

Duplication of Coverage: Selling multiple Medigap policies to one person = ILLEGAL
High-Pressure Tactics: Threats, excessive pressure, fear
Cold Lead Advertising: Fails to disclose agent may call
Twisting: Misrepresentation to induce sale

Commission Rules:
• First-year commission cannot exceed 200% of second-year
• Year 2 amount must continue for 5 years

Active employee age 65+ with COBRA group coverage:
• Employer group plan = PRIMARY
• Medicare = SECONDARY

Individual/Retiree insurance: SECONDARY to Medicare

Employee gets special enrollment period upon retirement

Covers at least 12 CONSECUTIVE MONTHS of care in non-hospital setting
Three types: Life insurance riders, hybrid contracts, stand-alone policies

Benefit Triggers (must have ONE):
• Loss of ability to perform 2+ ADLs without substantial assistance
• Cognitive impairment (memory, orientation, reasoning, judgment)

6 ADLs: Bathing, Dressing, Toileting, Transferring, Continence, Eating
NOT an ADL: Driving

Skilled Nursing Care:
• 24-hour daily nursing and rehabilitative care
• Physician-ordered, performed by skilled medical personnel

Intermediate Care:
• INTERMITTENT (not daily) nursing and rehabilitative care
• Physician-ordered, skilled personnel

Custodial Care:
• NON-MEDICAL assistance with ADLs
• Can be provided by medically UNSKILLED persons
• Must be physician-ordered
• Covered by LTCI, NOT Medicare or major medical

Nursing Home: Skilled care for significant loss of function
Assisted Living: Intermittent nursing + personal services (housekeeping, meals)
Home Health Care: Skilled care by visiting nurses/therapists at home
Home Care: Personal care by aides for ADLs (includes substantial assistance)
Adult Daycare: For seniors whose families work during day
Respite Care: Short-term relief for informal caregivers
Continuing Care Communities: Progressive levels without leaving community

COMFORT/PALLIATIVE care for life expectancy 6 months or less

Medicare Hospice Benefit Periods:
• Two 90-day periods
• Additional 60-day increments available

Hospice COVERS: Pain management, counseling, symptom relief, FAMILY COUNSELING
Hospice does NOT cover: REHABILITATION (curative treatment)

Elimination Period: Waiting period before benefits begin
Waiver of Premium: Suspends premiums while receiving benefits

Benefit Definition:
• Daily maximum for specified duration, OR
• "Pool of money" = total dollars available (not days)

Daily Benefit Amounts:
• Higher limit = higher premium
• Home care limits typically 50-80% of facility benefit

Payment Methods:
• Fixed daily INDEMNITY, OR
• REIMBURSEMENT (expense-incurred) for actual costs — MOST COMMON

Return of Premium Rider: Refunds premiums if policy lapses or insured dies without using benefits

Guarantee of Insurability Option:
• Buy MORE coverage at future intervals WITHOUT evidence of insurability
• Based on assumed inflation rate

Automatic Inflation Rider (AIR):
• Benefits periodically INCREASE WITHOUT proof of insurability
• Often 5% compounded annually

Non-Forfeiture Options (if policy lapses):
• Reduced paid-up policy
• Shortened benefit period
• Specified dollar amount

Requirements:
• At least 12 months of ongoing care
• Benefits based on loss of function or cognitive impairment
• Free-look period required
• Must be at least GUARANTEED RENEWABLE
• Max 6-month pre-existing condition exclusion
• Max 6-month look-back period

Prohibitions:
• Cannot require facility stay before home care
• Cannot pay significantly more for skilled vs other care
• Cannot require prior hospitalization
• Cannot supplement Medicare
• Cannot require terminal diagnosis
• Cannot use impairment riders for specific conditions

Allowable Exclusions:
• War
• Drug/alcohol abuse treatment
• Self-inflicted injury
• Attempted suicide
• Nervous/mental disorders
• Care outside U.S.
• Workers' Compensation covered losses

NOT Allowable Exclusions:
• Care for INCURABLE CONDITIONS
• ACUTE care (that's what LTCI doesn't cover by design, but can't be "excluded")

Functional Assessment: Reviews insured's ability to perform ADLs

Agent Responsibilities:
• Make fair and adequate policy comparisons
• Avoid selling excessive insurance
• Advise policy may not cover all costs
• PRODUCERS principally responsible for suitability

Required Disclosures: Outline of Coverage, Shopper's Guide, Personal Worksheet, Rating Practices

Third-Party Designation: Applicant may designate someone to receive lapse notices

Post-Claims Underwriting: Approving all applicants then underwriting at claim time = PROHIBITED unfair trade practice

Individual Premiums: NOT tax-deductible (after-tax)
Employer-Paid Qualified LTCI Premiums: EXCLUDED from employee's gross income

Benefits:
• Reimbursement benefits = NOT taxable
• Daily indemnity exceeding expenses = may be taxable (unless tax-qualified)

Qualified Plan Premiums: Deductible as medical expense exceeding 7.5% AGI

• Cannot pay expenses reimbursable by Medicare
• Benefit trigger: Loss of 2 ADLs OR severe cognitive impairment
• At least guaranteed renewable
• No cash surrender value
• Only provides LTC services
• 30-day free-look period
• Claims based on diagnosis of disability lasting at least 90 days
• Written plan of care required for claims

Accelerated Death Benefit Rider:
• Pays part of death benefit upon terminal illness diagnosis
• NOT included in NAIC definition of LTCI

Long-Term Care Rider:
• Uses face amount to pay monthly LTC benefit
• REDUCES death benefit
• Same benefit triggers as stand-alone LTCI

Hybrid (Linked) Plans:
• Combines life/annuity with traditional LTCI
• Guaranteed LTC benefits
• Potential LTC benefit exceeds underlying contract

Medicare: Federal program for 65+ and disabled — acute/chronic illness treatment
Medicaid: Means-tested public program for poverty-level individuals — federal/state funded, state administered
LTCI: Private alternative to Medicaid for LTC

Dual Eligible: Low-income 65+ can qualify for both Medicare AND Medicaid

Asset Transfer Penalty: If assets transferred to family to qualify for Medicaid, benefits delayed
• Look-back period: 5 YEARS

Federally supported, state-operated
Allow individuals to PROTECT ASSETS they would otherwise spend before qualifying for Medicaid

Requirements:
• Must be tax-qualified
• Must provide inflation protection
• Must meet consumer disclosure requirements

Preventative services (typically no deductible): Cleanings, x-rays, fluoride, oral exams
Restorative services: Fillings (NOT preventative)
Major services: Dentures, bridgework, crowns

Prepaid dental plans: CLOSED PANEL of dentists
PPO dental: DECREASED (reduced) fee schedules
Indemnity dental: Preventative care every 6 months

NOT covered:
• Treatment that began BEFORE eligibility date
• MOUTH CANCER (oral cancer)
• Cosmetic dentistry

Common limits: X-rays per year, cleanings per year, cosmetic procedures
NOT a common limit: Number of teeth treated annually

Adverse selection prevention: Waiting periods, probationary periods, evidence of insurability
Encourages adverse selection: Multiple/periodic open enrollment periods

Own Occupation: Cannot perform duties of YOUR specific job
• Pays full benefit even if working in another field

Any Occupation: Cannot perform ANY job reasonably suited by education/training/experience

Group LTD: Uses "own occupation" for first 2 YEARS, then switches to "any occupation"

Economic Death: Prolonged disability preventing earning a living — may be WORSE than physical death

Conditions that AUTOMATICALLY qualify for total disability benefit:
• Loss of BOTH hands or BOTH feet (2+ limbs required)
• Loss of sight in BOTH eyes (not just one)
• Loss of HEARING (both ears)
• Loss of SPEECH

Effect: WAIVES typical total disability requirements

Partial Disability: Unable to perform ONE or MORE job duties
• Traditional benefit = 50% of total disability benefit for max 6 months

Residual Disability: Unable to perform SOME duties; proportional benefit based on income loss
• Minimum 20% income loss required

Recurrent Disability: Relapse from SAME cause after returning to work
• Counts as original disability if within 6 months
• NO new elimination period, NO new benefit period

Time disabled person must WAIT before benefits are paid — a time-based DEDUCTIBLE

LONGER elimination period = LOWER premium

Coordinate with employer wage continuation (e.g., 2-month employer benefit → 60-day elimination period)

Occupational: Covers BOTH work-related AND non-work disabilities
Nonoccupational: Does NOT cover work-related injuries (WC covers those)

Example: Falls at work = NOT covered by nonoccupational policy

COLA (Cost-of-Living Adjustment): Increases benefits with CPI
• Increases at least once per year from WHEN BENEFITS BEGIN

Guaranteed Insurability (FIO): Buy additional coverage at future dates WITHOUT evidence of insurability

Social Security Rider: Coordinates with SSDI for lower premium

Earned Income for DI: Salary, bonus, commissions
• DIVIDENDS are NOT earned income

Age 65+: Must be ACTIVELY WORKING specified hours per week to continue coverage

Substandard Risk: Insurer may SHORTEN BENEFIT PERIOD (rather than charge extra premium)

Benefits: Should be SOMEWHAT LESS than previous earnings

Business Overhead Expense (BOE):
• Covers BUSINESS EXPENSES and PAYROLL when owner disabled
• Reimburses rent, utilities, employee salaries, etc.

Key Employee Coverage:
• Covers expense of finding/training REPLACEMENT for disabled key employee
• Benefits paid to BUSINESS = TAX-FREE

Disability Buy-Sell:
• Policies owned by BUSINESS ENTITY
• Proceeds = TAX-FREE
• Cross-purchase agreement = best for LIMITED number of partners

Individual DI (you pay): Benefits are TAX-FREE
Employer-paid group DI: Benefits are TAXABLE
Shared premium (75% employer, 25% employee): 75% of benefits TAXABLE

Employee pays additional rider separately: That rider's benefits = TAX-FREE

Corporation paying for group DI: Premiums are TAX-DEDUCTIBLE

Substandard risk options:
• Rating = ADDITIONAL PREMIUM charged
• Health condition EXCLUSION RIDER
• SHORTENED BENEFIT PERIOD

Covers BOTH lost wages AND medical expenses for occupational accidents

Why buy private disability if covered by WC?
WC benefits may be INADEQUATE to fully replace lost income

Fully Insured: 40 credits (10 years work) — qualifies for retirement, survivors, Medicare
Currently Insured: 6 credits in last 13 quarters — limited survivor benefits
Credits: Up to 4 per year

Employees/Employers: 7.65% each (6.2% SS + 1.45% Medicare)
Self-Employed: 15.3% total

Born 1960 or later = age 67. Can claim earlier with reduction or later with increase.

Serves at: Pleasure of the GOVERNOR
Duties: Enforce insurance code, conduct examinations/investigations, examine producers and insurers
Cease and Desist Order: Director can issue to PROHIBIT specific practices violating insurance law

Primary purpose of examining records: Determine compliance with state insurance laws

Age: 18+ years old
Term: 4 years
CE: 48 hours every 4 years (including 6 hours ETHICS)
Fingerprinting: REQUIRED for all producer/broker applicants
Records retention: 3 years at PRINCIPAL PLACE OF BUSINESS
Advertising records: 3 years

Report to Director within 30 days:
• Change of address (residential, business, or email)
• Administrative action in another jurisdiction
• BEFORE using assumed business name

Maximum: 180 days

CAN get temp license:
• Surviving spouse or personal representative of DECEASED producer
• Designated employee replacing deceased producer
• Representative of producer called to MILITARY duty

CANNOT get temp license:
• Employee of RETIRED producer
• Prospective producer waiting for exam
• Spouse of retiring producer

No written exam required if:
• Currently licensed and in good standing in home state
• Submitted proper application and fees

Becoming AZ resident: Must apply for resident license within 90 DAYS
CE reciprocity: If home state accepts AZ CE, AZ accepts home state CE

Grounds include:
• Materially incorrect/misleading license application
• Violating insurance laws or Director's orders
• Fraud or material misrepresentation
• Misappropriating premiums or converting funds
• Felony conviction or crime of moral turpitude
• Unfair trade practices
• Fraudulent, coercive, or dishonest practices
• License denied/suspended/revoked in another state
• Failing to comply with child support order
• Using notes improperly during licensing exam

Surrender license: Cannot reapply for 1 YEAR

Producer is authorized to: Solicit, receive, and forward applications to insurer

Producer is NOT authorized to:
• Accept or reject applications
• Settle claim disputes
• Determine premium ratings

Domestic: Incorporated in THIS state (Arizona)
Foreign: Incorporated in ANOTHER U.S. state
Alien: Incorporated OUTSIDE the U.S. (another country)

Authorized (Admitted): Has Certificate of Authority to transact business
Unauthorized (Non-admitted): No Certificate of Authority

Certificate of Authority: Required for insurer to transact business in AZ
• Failure to obtain does NOT impair validity of contracts

Captive Insurer: Writes exposures of its OWNERS only
Reciprocal Insurer: Members insure EACH OTHER, managed by ATTORNEY-IN-FACT
Fraternal Insurer: Lodge system providing social and insurance benefits to members

Misrepresentation: False statements about policy terms, benefits, dividends, financial condition
• Failing to disclose title and true nature of policy
• False advertising = misrepresentation

Rebating: Offering inducements NOT specified in policy
• Includes: premium rebates, special favors, stocks/bonds, splitting commission with buyer
• Both OFFER and ACCEPTANCE are illegal

Twisting: Replacing policy based on MISREPRESENTATION

Defamation: False/malicious statements about financial condition of insurer or person in insurance business

Coercion: Use of force or INTIMIDATION to sell insurance
• Unreasonably restrains business of insurance

Boycott: REFUSAL to do business

Unfair Discrimination: Different rates for same risk class
• Cannot discriminate based on: marital status, race, national origin, gender identity, sexual orientation, creed, ancestry

Unfair claims practices include:
• Misrepresenting policy provisions after a loss
• Failing to acknowledge/act promptly on claims
• Failing to adopt reasonable investigation standards
• Failing to affirm/deny coverage in reasonable time
• Refusing settlement because other insurance available
• Compelling insured to sue by offering substantially less
• Altering application without consent

NOT unfair claims practices:
• Refusing to pay FALSE or FRAUDULENT claims
• Offering to settle by ARBITRATION

Claims payment: Insurers must pay within 30 days or pay INTEREST

Unfair trade/claims practices:
• Up to $1,000 per violation, max $10,000 total
• INTENTIONAL: Up to $5,000 per violation, max $50,000 in 6 months

Insurance fraud: Class 6 FELONY, up to $5,000 per violation
False statement on application: Class 2 MISDEMEANOR

Federal penalties (Fraud and False Statements):
• Fine up to $50,000
• Prison up to 15 YEARS
• License revocation
• NOT community service

Person convicted of FELONY involving DISHONESTY may only engage in insurance business after receiving:
Written consent from STATE INSURANCE REGULATORY AGENCY

Interstate commerce includes U.S. TERRITORIES (Puerto Rico, etc.)

Grace period: 30 days (annual premium)
Free-look period: 10 days
Incontestable clause: 2 years (unless fraud)
Cash surrender delay: Insurer may delay up to 6 MONTHS
Reinstatement: Up to 3 YEARS upon meeting requirements
Policy loan max interest: 8% fixed rate
Conversion period (group to individual): 31 days

Annuity incontestable: 2 years

Illustrations: Must be signed by PRODUCER
• If premiums from nonguaranteed values, must disclose may need to resume payments

Dividends: Policy must state dividends are NOT guaranteed

Newborn coverage: Automatic from MOMENT OF BIRTH for at least 31 days
Adopted child maternity: Covered if adopted within 1 YEAR of birth
Handicapped children: Covered until SELF-SUPPORTIVE
• Continuation may require proof of incapacity AND dependency at age limit

Small employer: 2-50 employees
Discontinuation notice: 180 days advance notice

Claim form not received in 15 days: Submit WRITTEN proof of loss
Legal action wait: 60 days after proof of loss

Court-ordered child coverage: Must allow enrollment at ANY TIME

Purpose: Protect policyowners from misrepresentations and loss of benefits

Replacement notice: Must be provided no later than APPLICATION DATE
Medicare Supplement replacement: Signed by PRODUCER AND APPLICANT
LTC replacement: Signed by APPLICANT, retained by replacing insurer

Best practice: Wait until NEW policy issued and delivered before surrendering existing policy
Loan trigger: Borrowing 25%+ of existing cash value = replacement requiring notification

Notice of information practices:
• Given to applicant no later than APPLICATION DATE
• Given to policyholders at least ONCE PER YEAR (annually)

After adverse underwriting decision: Insurer must provide info within 30 BUSINESS DAYS

HIV/AIDS testing:
• Requires WRITTEN informed consent
• Consent form must disclose WHO receives test results
• Cannot report "AIDS virus antibodies" — only "abnormal blood test"
• Applicant must be told testing helps determine INSURABILITY

Must discuss: Financial status, financial objectives, age, annual income
NOT required: Level of education, client's primary physician

Initial training: 8 hours before soliciting LTC
Ongoing: 4 hours every 2 years

LTC benefits in AZ: Based on ability to perform ADLs
Producer responsibility: Determine appropriateness of Medicare Supplement

Life Settlement Broker: Licensed to NEGOTIATE life settlement contracts
Must be licensed BEFORE: Conducting any transactions
Proceeds: May be subject to claims of CREDITORS

Arizona Life and Disability Insurance Guaranty Fund:
Protects insureds when insurer becomes INSOLVENT

PROHIBITED: Producer telling client policy is covered by Guaranty Association

Must disclose: Name of ACTUAL INSURER (not just trade name)
Group endorsements: Must disclose any insurer CONTROL over the group
Testimonials: Must be genuine and represent current opinion
Policy title: Must appear on FACE AND BACK of policy

Fair Credit Reporting Act (FCRA):
• Consumer must be advised if denied based on unfavorable report
• Adverse info removed cannot be reinstated without notifying consumer in 5 days
• Late payments/judgments: 7 years; Bankruptcies: 10 years

Gramm-Leach-Bliley: Allows consolidation of banks, securities, insurance

Telemarketing Sales Rule:
• Calls only 8:00 AM - 9:00 PM
• Violation fine: $1,000 per call
• Do-not-call registry enforced

CAN-SPAM Act: Counters unsolicited commercial email

GINA: Bars use of genetic information in health insurance

Mental Health Parity Act: Established 2008

Exchanges: Help individuals and small businesses purchase coverage
• Began providing coverage: 2014
• Must offer INTERNET-BASED PORTAL
• Administered by CCIIO (Center for Consumer Information and Insurance Oversight)

Metal tiers: Bronze 60%, Silver 70%, Gold 80%, Platinum 90%

Pre-existing conditions: Cannot deny or limit (except GRANDFATHERED plans)
Lifetime limits: PROHIBITED
Annual limits: NONE after January 1, 2014

Dependent coverage: Up to age 26
Rescission notice: 30 days required
Rescission allowed: If intentionally false statements offered

Small business definition (2016+): Up to 100 employees
Special enrollment trigger: Loss of minimum essential coverage

NOT covered: Intentional SELF-INFLICTED injuries at worksite

AHCCCS: Arizona Health Care Cost Containment System (Arizona's Medicaid)
ALTCS: Arizona Long Term Care System — covers nursing home/custodial care
• No prior hospitalization required
• Must meet impairment, income, and asset requirements