NY LIFE, ACCIDENT, AND HEALTH INSURANCE AGENT (BROKER) EXAM SERIES 17-55

NY LIFE, ACCIDENT, AND HEALTH INSURANCE AGENT (BROKER) EXAM SERIES 17-55 Process 2103 (d-i) - answer1. The Superintendent may issue a license to any person, firm or corporation who has complied with the requirements of the Insurance Code, authorizing the licensee to act as agent of any authorized insurer. Every individual applicant for a license under this section and every proposed sub-licensee must be 18 years of age or older at the time of issuance of such license. The person must submit to and pass a written examination required by the Superintendent. Producer Definition (2101(k)) - answerAn insurance producer means an insurance agent, insurance broker, reinsurance intermediary, excess lines broker, or any other person required to be licensed under the insurance laws of this state to sell, solicit or negotiate insurance. Who Should be Licensed (2101(k)(1)) - answer1. The term "insurance producer" does not include: An officer, director or employee of a licensed insurer, fraternal benefit society or health maintenance organization or of a licensed insurance producer, provided that the officer, director or employee does not receive any commission on policies written or sold to insure risks residing, located or to be performed in this state and: (a) the officer, director or employee's activities are executive, administrative, managerial, clerical or a combination of these, and are only indirectly related to the sale, solicitation or negotiation of insurance; (b) the officer, director or employee's function relates to underwriting, loss control, Inspection or the processing, adjusting, investigating or settling of a claim on a contract of Insurance; or (c) the officer, director or employee is acting in the capacity of a special agent or agency supervisor assisting licensed insurance producers where the person's activities are limited to providing technical advice and assistance to licensed insurance producers and do not include the sale, solicitation or negotiation of insurance. Home State (2101(l)) - answerHome state means the District of Columbia or any state or territory of the United States in which an insurance producer maintains his, her or its principal place of residence or principal place of business and is licensed to act as an insurance producer. Negotiate (2101(m)) - answerNegotiate or negotiation means the act of conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms or conditions of the contract, provided that the person engaged in that act either sells insurance or obtains insurance from licensed insurers, fraternal benefit societies or health maintenance organizations for purchasers. Sell (2101(n)) - answerSell or sale means to exchange a contract of insurance by any means, for money or its equivalent, on behalf of a licensed insurer, fraternal benefit society or health maintenance organization. Solicit (2101(o)) - - answerSolicit or solicitation means attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular licensed insurer, fraternal benefit society or health maintenance organization. Agent 2101(a) - answerIn this section, insurance agent means any authorized or acknowledged agent of an insurer, fraternal benefit society or health maintenance organization issued a certificate of authority pursuant to the public health law, and any sub-agent or other representative of such an agent, who acts as such in the solicitation of, negotiation for, or sale of, an insurance, health maintenance organization or annuity contract, other than as a licensed insurance broker. Agent 2101(k) - answerinsurance producer means an insurance agent, insurance broker, reinsurance intermediary, excess lines broker, or any other person required to be licensed under the insurance laws of this state to sell, solicit or negotiate insurance. The applicant must be at least 18 years of age at the time of license issuance. An examination is required for each applicant, except where noted for applicants with a change in residency moving to New York (see code 2103 below). Brokers 2101(c) - answera licensed insurance representative who does not represent a specific insurance company, but places business among various companies. Legally, the broker is usually regarded as a representative of the insured rather than the insuring company. Brokers 2101(h) - answerany licensed attorney at law of this state. Consultants (2107) - answerThe Superintendent may issue an insurance consultant's license to any person, firm, association or corporation who or which has complied with the requirements of this chapter with respect to either: life insurance, meaning all of those kinds of insurance authorized. Any such license issued to a firm or association shall authorize only the members of such firm or association named in such license as sub-licensees to act individually as consultants there under, and any such license issued to a corporation shall authorize only the officers and directors thereof named in such license as sub-licensees to act individually as consultants there under. Adjuster 2101(g) - answerThe Superintendent may, in his discretion require an applicant for a license under this section to present evidence, in such form as he prescribes, that such applicant has been employed, for a period which he deems reasonable, by an insurer, an independent adjuster or a public adjuster, in the performance of duties which in his opinion would provide the applicant with a satisfactory preliminary training for the duties and responsibilities which would evolve upon him as a licensee under this section. The term independent adjuster means any person, firm, association or corporation who for money, commission or any other thing of value, acts in this state on behalf of an insurer in the work of investigating and adjusting claims arising under insurance contracts issued by such insurer and who performs such duties required by such insurer as are incidental to such claims and also includes any person who for compensation or anything of value investigates and adjusts claims on behalf of any independent adjuster. Adjuster 2108 - answerAdjusters will be licensed as either independent adjusters, or as public adjusters. The Superintendent may prescribe the types of independent adjusters' licenses according to the kind or kinds of insurance claims which the licensee is to be authorized to investigate and adjust. No adjuster may act on behalf of an insurer unless licensed as an independent adjuster, and no adjuster may act on behalf of an insured unless licensed as a public adjuster. A public adjuster works on behalf of the insured for a fee. Nonresident 2101(d) - answerIn this section, non-resident insurance agent means an individual who is a non-resident of this state and who is licensed or authorized to act as an insurance agent in the state in which he resides, or in which he or the firm or association of which he is a member or employee, or the corporation, of which he is an officer, director, or employee maintains an office as an insurance agent. Nonresident 2101(e) - answerIn this section, "non-resident insurance broker", means an individual who is a non-resident of this state and who is licensed or authorized to act as an insurance broker in the state in which he resides, or in which he, or the firm or association of which he is a member or employee, or the corporation, of which he is an officer, director or employee maintains an office as an insurance broker. Nonresident 2103(g)(5) - answerIn the discretion of the Superintendent, no written insurance examination will be required of any individual seeking to be named as a licensee or sub-licensee who is a non-resident insurance agent. Nonresident 2103(g)(11) - answerNo written insurance examination will be required of any individual who applies for an insurance agent license in this state who was previously licensed for the same line or lines of authority in another state, provided, however, that the applicant's home state grants non-resident licenses to residents of this state on the same basis. Such individual shall also not be required to complete any prelicensing education. This exemption is only available if the person is currently licensed in that state or if the application is received within 90 days of the date of cancellation of the applicant's previous license and if the prior state issues a certification that, at the time of cancellation, the applicant was in good standing in that state or the state's producer database records, maintained by the National Association of Insurance Commissioners, its affiliates or subsidiaries indicate that the producer is or was licensed in good standing for the line of authority requested. An individual or entity licensed in another state that moves to this state must make an application within 90 days of establishing legal residence to become a resident licensee. No prelicensing education or examination will be required of that person to obtain any line of authority previously held in the prior state except where the Superintendent determines otherwise by regulation. Nonresident 2136 - Reciprocity - answerThe Superintendent shall waive any requirements for a nonresident license applicant otherwise applicable under this chapter if: (a) the applicant has a current and valid license in his or her home state and is in good standing in his or her home state; (b) the applicant has submitted a completed application in the form prescribed by the Superintendent or submitted the application for licensure submitted to his or her home state; (c) the applicant has paid the fees required by this chapter; and (d) the applicant's home state awards nonresident insurance producer licenses to residents of this state on the same basis as provided in this subsection. Business Entities 2101(p) - answerA business entity means a corporation, association, partnership, limited liability company, limited liability partnership or other legal entity. Business Entities 2103(e) - answerBefore any original insurance agent's license is issued to a business entity, there must be on file in the office of the Superintendent an application by the prospective licensee in such form or forms and supplements, and containing information the Superintendent prescribes and for each business entity, the sub-licensee or sub-licensees named in the application must be designated responsible for the business entity's compliance with the insurance laws, rules and regulations of this state. Temporary License (2109; Regs. 9, 18, 29, Part 20.1) - answerA temporary license may be issued in the case of death, service in armed forces or disability. The Superintendent may issue a temporary insurance agent's or insurance broker's license, or both, without requiring the applicant to pass a written insurance examination or to satisfy certain requirements except as to age in the following cases: (1) In the event of the death of a person who at the time of his death was a licensed accident and health insurance agent; (a) to the executor or administrator of the estate of such deceased agent or broker; (b) to a surviving next of kin of such deceased agent or broker, where no administrator of his estate has been appointed and no executor has qualified under his duly probated will; (c) to the surviving member or members of a firm or association, which at the time of the death of a member was such a licensed insurance agent or licensed insurance broker; or (d) to an officer or director of a corporation upon the death of the only officer or director who was qualified as a sub-licensee or to the executor or administrator of the estate of such deceased officer or director; (2) to any person who may be designated by a person licensed pursuant to this chapter as an insurance agent, or an insurance broker, or both, and who is absent because of service in any branch of the armed forces of the United States. (3) to the next of kin of a person who has become totally disabled and prevented from pursuing any of the duties of his or her occupation, and who at the commencement of his or her disability the license or licenses may be issued for a term not exceeding 90 days from the death of such additional term or terms of 90 days each, not exceeding in the aggregate 15 months. The Superintendent may issue renewal licenses for an additional term or terms of 90 days each exceeding the aggregate period of 15 months when in his judgment it will best serve the interests of any person serving in the armed forces of the United States. No person holding a temporary license is permitted to solicit new business under the temporary license. Renewal (2103(j); Reg. 5, Part 21.2) - answerAll individual insurance agent licenses must be renewed every two years. Individual licenses are issued with an expiration date determined by the date of birth: The license of an agent born in an even numbered year will expire on the agent's birthday in an even numbered year. The license of an agent born in an odd numbered year will expire on the agent's birthday in an odd numbered year Adjuster licenses are not determined on a birth date renewal. Adjuster licenses expire on December 31st of even-numbered years. Resident Licensees - answerAll licensed agents, brokers, consultants and public adjusters must complete continuing education (CE) requirements as a condition of renewing these licenses. Licensees must complete 15 credits of approved continuing education during each biennial licensing period. After your license has been renewed the first time, continuing education (CE) will always be required upon subsequent renewal or relicensing applications. Credits must be accumulated during the renewal period, which begins with the effective date of the license and ends with the expiration date. CE must be completed before processing the renewal or relicensing application. Assumed Names (2102(f)) - answerLicensees must notify the Superintendent upon changing his, her or its legal name. Except for an individual licensee's own legal name, no licensee may use any name, in conducting a business regulated by this article that has not been previously approved by the Superintendent. Change of Address (All Addresses, including Email) - (2134; Reg. 5, Part 21.4; Reg. 6, Part 22.3; Reg. 7, Part 23.4) - answerLicensees must inform the Superintendent by a means acceptable to the Superintendent of a change of business or residence address within 30 days of the change. This also includes e-mail addresses. Reporting of Actions (2110(i) - answerLicensees must report to the Superintendent any administrative action taken against the licensee in another jurisdiction or by another governmental agency in this state within 30 days of the final disposition of the matter. This report must include a copy of the order, consent to order or other relevant legal documents. Cease and Desist Order (2405) - answerWhenever the Superintendent has reason to believe that a person has committed or is committing a defined violation or has been engaged in or is engaging in any method of competition, or any act or practice, which could become a determined violation and that a proceeding thereon would be in the interest of the public, he shall serve upon that person a statement of the charges and notice of a hearing to be held at a time not less than 10 days after the date of service of the notice and at the place fixed in the notice. The person will be given an opportunity at the hearing to be heard personally or by counsel. Anyone violating a cease and desist order may be subjected to a fine of up to $5,000 for each violation. Hearings - Notice and Process (2405, Financial Services 305) - answerA statement of the charges and notice of a hearing to be held at a time not less than 10 days after the date of service of the notice and at the place fixed in the notice. Suspension, Revocation, and Nonrenewal (2110) - answerThe Superintendent may refuse to renew, revoke, or may suspend, for a period the Superintendent determines, the license of any insurance producer, insurance consultant or adjuster, if, after notice and hearing, the Superintendent determines that the licensee or any sub-licensee has: 1. violated any insurance laws, regulation, subpoena or order of the Superintendent of Insurance or of another state's Insurance Commissioner, or has violated any law in the course of his dealings in such capacity; 2. provided materially incorrect, materially misleading, materially incomplete or materially untrue information in the license application; 3. obtained or attempted to obtain a license through misrepresentation or fraud; 4. has used fraudulent, coercive or dishonest practices, demonstrated incompetence, demonstrated untrustworthiness, or demonstrated financial irresponsibility in the conduct of business in this state or elsewhere; 5. improperly withheld, misappropriated or converted any monies or properties received in the course of business in this state or elsewhere; 6. intentionally misrepresented the terms of an actual or proposed insurance contract or application for insurance; 7. has been convicted of a felony; 8. admitted or been found to have committed any insurance unfair trade practice or fraud; 9. had an insurance producer license, or its equivalent, denied, suspended or revoked in any other state, province, district or territory; 10. forged another's name to an application for insurance or to any document related to an insurance transaction; 11. improperly used notes or any other reference material to complete an examination for an insurance license; 12. knowingly accepted insurance business from an individual who is not licensed; 13. failed to comply with an administrative or court order imposing a child support obligation; or 14. failing to pay state income tax or comply with any administrative or court order directing payment of state income tax. Before revoking or suspending the license of any insurance producer or other licensee pursuant to the provisions of this article, the Superintendent will give notice to the licensee and to every sublicensee and will hold, or cause to be held, a hearing not less than 10 days after giving notice. If an insurance producer's license or other licensee's license pursuant to the provisions of this article is revoked or suspended by the Superintendent, the Superintendent will give notice to the licensee. No individual, corporation, firm or association whose license as an insurance producer or other licensee has been revoked, and no firm or association of which such individual is a member, will be entitled to obtain any license under the provisions of this chapter for a period of one year after such revocation, or, if such revocation be judicially reviewed, for one year after the final determination affirming the action of the Superintendent in revoking such license. Before revoking the license of any non-resident insurance producer the Superintendent will give 10 days' notice in writing to the licensee of the action proposed to be taken. The Superintendent retains the authority to enforce the provisions of and impose any penalty or remedy. All licensees must report to the Superintendent any administrative action taken against the licensee in another jurisdiction or by another governmental agency in this state within 30 days of the final disposition of the matter. Within 30 days of the initial pretrial hearing date, a licensee must report to the Superintendent any criminal prosecution of the licensee taken in any jurisdiction. Penalties (2127): - answerThe Superintendent, in lieu of revoking or suspending the license of a licensee, may in any one proceeding by order, require the licensee to pay a penalty in a sum not exceeding $500 for each offense, and a penalty in a sum not exceeding $2,500 in the aggregate for all offenses. Upon the failure of such a licensee to pay such penalty ordered within 20 days after the mailing of such order, postage prepaid, registered, and addressed to the last known place of business of such licensee, unless such order is stayed by an order of a court of competent jurisdiction, the Superintendent may revoke the license of such licensee or suspend the same for such period as he determines. Superintendent's General Duties and Powers (2404, Financial Services 201, 202, 301) - answerThe Superintendent is empowered to: Examine and investigate into the affairs of any person in order to determine whether the person has violated or is violating the insurance and regulations of this state. Responses to requests for information by the Superintendent should be made not less than 15 business days. The Superintendent is authorized, after notice and hearing, to levy a civil penalty against such person in an amount not to exceed $500 per day for each day beyond the date specified by the Superintendent for response, but in no event will such penalty exceed $10,000. In the event the Superintendent levies five separate civil penalties against any one person within five years for failure to comply with this section, the Superintendent is authorized, after notice and hearing, to levy an additional civil penalty against not to exceed $50,000. The Superintendent is also authorized to levy additional civil penalties not to exceed $50,000, after notice and hearing, against such person for every five subsequent violations of this section within a five year period. Any licensee may surrender his or her license in lieu of payment of any civil penalty imposed by the Superintendent. Certificate of Authority (1102) - answerThe certificate of authority is an insurer's license to transact insurance in this state as an authorized insurer. Solvency (307) - answerIt is required that each insurer file annual financial statements for review by the Superintendent to determine the continued solvency of the insurer. Unfair Claim Settlement Practices (2601; Reg. 64, Part 216.3-216.6) - answerUnfair settlement practices include: Knowingly misrepresenting to a claimant pertinent facts or policy provisions related to the coverages at issue. Failing to acknowledge within reasonable time, communications with respect to claims arising out of its policies. Failing to adopt and implement reasonable standards of prompt investigation of claims arising out of an insurer's policies. Claims must be promptly investigated to determine liability. Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims submitted in which liability has become reasonable clear. Compelling policyholders to institute suit to recover amounts due under its policies by offering less than the amounts ultimately recovered in suit brought by them Appointment of Agent - answerThe appointment must be made 15 days from the date an agency contract is executed, or the first application is submitted Termination of Agent Appointment (2112(d); Regs. 9, 18, 29, Part 20.2) - answerEvery insurer, fraternal benefit society or health maintenance organization or insurance producer or the authorized representative of the insurer, fraternal benefit society, health maintenance organization or insurance producer doing business in this state must, upon termination of a certificate of appointment, file with the Superintendent within 30 days a statement, in such form as the Superintendent may prescribe, the facts relative to such termination for cause. Misrepresentation (2123; Reg. 64, Part 216.3) - answerIt is a violation for an agent to make false or misleading statements or unfair coverage comparisons. False Advertising (2603) - answerIt is a violation to make false or misleading statements regarding the advertising of insurance products. A producing agent may not issue any illustration or statement used to advertise his/her business unless the agent is authorized to transact those lines of authority. Defamation of Insurer (2604) - answerIt is any false or malicious communication, written or oral, that injures another's reputation, fame or character. Individuals and companies both can be defamed. Unethical agents practice defamation by spreading rumors or falsehoods about the character of a competing agent or the financial condition of another insurance company. Both of these actions are considered illegal. Unfair Discrimination (, 2612) - answerNeither agents nor insurance companies are permitted to discriminate against perspective insureds. This means that a person cannot be given a different rate for coverage than another person in identical circumstances. They may not discriminate against a person solely because of an applicants' race, religion, occupation, where they live or their financial status. Rebating (2324, 4224) - answerRebating occurs if the buyer of an insurance policy receives any part of the agent's commission or anything of significant value as an inducement to purchase a policy. State regulations are very strict in this respect and are designed to prohibit discrimination in favor of, or against, policyowners. In this state, the practice of rebating is illegal and the following are defined as illegal inducements: Offering, paying or allowing any rebate or other inducement not specified in the policy or any special favor or advantage concerning the dividends or other benefits that will accrue, in order to place, negotiate or renew the policy. Offering, selling or purchasing anything of value not specified in the policy. Offering, paying or allowing any rebate of any premium on any insurance policy or annuity contract. Controlled Business (2103(i)) - answerThe Superintendent may refuse to issue, suspend, or revoke a license if an applicant receives more than 10% of the aggregate net commissions during a 12- month period from insurance sold to a licensee's spouse or other family members or business associates or their immediate family. Sharing Commissions (2121, 2128) - answerThe sharing of commissions with an unlicensed person or entity is prohibited. Fiduciary Responsibility - answerWhen someone has a fiduciary duty to someone else, the person with the duty must act in a way that will benefit someone else, usually financially. The person who has a fiduciary duty is called the fiduciary, and the person to whom the duty is owed is called the principal or the beneficiary. License display - answeran insurance agent or broker must prominently display the license or licenses of the supervising person or persons responsible for that office. While the Insurance Law and regulations promulgated thereunder do not require other insurance agents or brokers in an office to display their licenses, the Department is of the view that it is a good practice for each licensee to do so. Commissions and compensation - answerA sales commission is a sum of money paid to an employee upon completion of a task, usually selling a certain amount of goods or services. Employers sometimes use sales commissions as incentives to increase worker productivity. A commission may be paid in addition to a salary or instead of a salary. Termination responsibilities of producer - answer Aiding Unauthorized Insurer (2117) - answerActing for or aiding unlicensed or unauthorized insurers or health maintenance organizations. (a) No person, firm, association or corporation shall in this state act as agent for any insurer or health maintenance organization which is not licensed or authorized to do an insurance or health maintenance organization business in this state, in the doing of any insurance or health maintenance organization business in this state or in soliciting, negotiating or effectuating any insurance, health maintenance organization or annuity contract or shall in this state act as insurance broker in soliciting, negotiating or in any way effectuating any insurance, health maintenance organization or annuity contract of, or in placing risks with, any such insurer or health maintenance organization, or shall in this state in any way or manner aid any such insurer or health maintenance organization in effecting any insurance, health maintenance organization or annuity contract. Producer Compensation Transparency - answer"Producer Compensation Transparency," requires all New York-licensed producers to offer unrequested information about their compensation to their clients. If a client asks for more information, the producer must make a second highly detailed disclosure. Cyber Security Requirements for Financial Services Companies (Reg 23 ) - answerIs designed to promote the protection of customer information as well as the information technology systems of regulated entities. This regulation requires each company to assess its specific risk profile and design a program that addresses its risks in a robust fashion. Senior management must take this issue seriously and be responsible for the organization's cybersecurity program and file an annual certification confirming compliance with these regulations. A regulated entity's cybersecurity program must ensure the safety and soundness of the institution and protect its customers. Fair Credit Reporting Act (FCRA) - answerfederal law that regulates the collection of consumers' credit information and access to their credit reports. It was passed in 1970 to address the fairness, accuracy, and privacy of the personal information contained in the files of the credit reporting agencies. Workers Compensation - answerEligibility - All work injuries that occur during the course of work are covered under New York workers' compensation law. New York, like most states, also covers occupational diseases, which are illnesses that arise during the course of employment. Typical occupational diseases include asbestosis and hearing loss. Industrial (work-related) injuries can include bone fractures, sprains, burns, cuts, amputations, and other injuries that cause immediate harm. If your injury requires more than simple first aid, and it occurred in the course of your employment, you likely have a workers' compensation claim. Activities that happen outside the scope of your employment, such as commuting to and from work, are not covered. In other words, injuries or diseases arises from these activities do not give rise to a workers' compensation claim. Benefits - If you have an allowed workers' compensation claim, you will begin receiving workers' compensation benefits immediately. Your employer's workers compensation insurance carrier will pay medical bills for treatment related to your industrial injury. If you are unable to work due to your work-related injury or occupational disease for more than seven days, your employer's workers' compensation insurance carrier will begin payment of cash benefits to compensate for your lost wages. These temporary disability benefits equal two-thirds of your average weekly wage, multiplied by the percentage of your disability. Cash benefits are subject to a weekly maximum established by the state each year. As of July 1, 2017, the maximum benefit is $870.61 per week. These payments are usually paid every other week. The insurance carrier will continue to make these payments to you until your workers' compensation claim is closed or you are able to return to work, whichever occurs first. If your doctor finds that your injury has caused a permanent impairment, you may also be entitled to a permanent disability award. When a work injury results in death, the worker's family members can receive weekly death benefits and reimbursement for funeral expenses. Death Benefit (face amount/face value/coverage) - answerThe amount paid to beneficiaries when a policyholder dies. Beneficiary - answerThe person(s) who receive the death benefit. They are selected by the policyholder. Premium - answerThe regular payment made toward the insurance policy. These are typically monthly. Cash value - answerA tax-deferred savings account that are included in permanent life insurance policies. The cash value is basically an investment account inside of your straight life insurance policy. This account will grow according to a guaranteed rate over the course of the policy length. The rate of return will typically be large enough that when you turn 100 the cash value account will equal the value of the death benefit. At any point, you can use the cash value account for a variety of reasons, including: Universal life insurance - answerhas a cash value, just like a whole life insurance policy. Your premiums go toward both the cash value and the death benefit. But there's a twist: the policyholders of universal life policies can change the premium and death benefit amounts without getting a new policy. Basically, although you have a minimum premium to keep the policy in force, you can use the cash value to pay the premium. That means if you have enough money in the cash value, you can use that to skip premium payments entirely, letting the accrued interest do the work. the cash value of a universal life insurance policy has an interest rate that's sensitive to current market interest rates. If the interest rate being credited to your policy decreases to the minimum rate, your premium would have to increase to offset the reduced cash value. You can also adjust the death benefit within limits outlined in your policy. Increasing it may subject you to further underwriting, while there may be fees to decrease it. If your financial situation changes, the ability to change the death benefit amount within your policy is appealing. While this can be done with term life insurance policies, this feature is one of the main selling points of a universal policy. Variable Life Insurance - answersimilar to whole life insurance in that they both have a cash value, but the functions of the cash values are quite different. With a whole life insurance policy, the cash value component is a savings account. That's why, although the growth might be small compared to other investment options, there is a guaranteed minimum rate. It also includes dividend payments from the life insurance company. A variable life insurance cash value, though, is more akin to investing. The money paid into it goes into a series of mutual fund-like sub-accounts where you can get some decent growth, but you can also lose money depending on the market. The cash value is more or less placed in the stock market. While this makes variable life insurance policies a better investment option than whole life insurance policies - the potential for higher, tax-deferred growth makes it a "super-IRA" - you can only invest in the sub-accounts available through your policy. That means you don't get to choose from the wide variety of mutual funds that are available on the open market. As an investment vehicle, variable life insurance policies provide tax-free money to beneficiaries during the time that the policyholder is alive. Once that person dies, however, that money is retained by the insurance company. Like other types of life insurance, a variable policy can help cover funeral and end-of-life expenses. Variable universal life insurance - answerIf you think variable universal life insurance is just some aspects of universal and variable life insurance policies mashed together...well, you're mostly right. A variable universal life insurance policy takes the best (or worst, depending on how you look at it) of the other two policies: you can adjust the premium and death benefit amount while investing the cash value in the policy's cash value. But variable universal life insurance also comes with many of the same elements as the other two. Again, this policy is more complicated than most people need, and it isn't your best investment or insurance option. Simplified issue life insurance - answerTypically when you apply for life insurance, you go through a paramedical exam as part of the underwriting process so the insurer can find out how risky you are to insure. Ultimately, it helps them set your premium rate. With simplified issue life insurance, though, you can skip the medical exam. That's the "simplified" part of this policy type. Known as a "no exam policy," a simplified issue policy gets you life insurance without the health exam. You're not out of the woods completely, though. You don't need to go through the medical exam, but you do need to fill out a health questionnaire, answering questions like if you smoke, have been diagnosed with serious illnesses, and so on. People in poor health may have to take the exam if they have too many health issues, and they could flat-out be denied by insurers. For those healthier people in a hurry, though, it might be a good option to skip scheduling the paramedical exam, which adds some time to the underwriting process. But with this benefit comes a major financial drawback. With a term life insurance policy, your premium rates are directly tied to your chances of outliving your policy. If you're young and/or healthy, you'll pay lower rates than someone who is older and/or in poor health. That's why the medical exam is important. Since there is no medical exam with simplified issue life insurance, the policies tend to be more expensive than term policies. Guaranteed issue life insurance - answerGuaranteed issue life insurance takes the concept of simplified issue life insurance - forgoing the health exam - and takes it a step further in that you don't have to answer any questions about your health, either. As long as you can pay the premium, the insurer will cover you, needing only your age, sex, and state of residence. That makes it appealing for older people, whose declining health makes it prohibitively expensive to get coverage with another insurance types. Guaranteed issue life insurance is useful for elderly applicants, but others can likely get more life insurance coverage at a lower cost with a different policy type. Just like with simplified issue life insurance, the lack of insight into your health conditions that a medical exam and interview would provide means that you're going to be paying more for coverage. Final expense insurance - answerFinal expense insurance is a unique type of policy. It covers the cost of anything associated with your death, whether its medical costs, a funeral, or cremation - whatever your literal final expenses are. It's usually only issued to people of a certain age and the policy is valid up to a certain age. Like other permanent life insurance policies, there's a cash value that can grow over time. Final expense insurance is a simplified issue policy in most cases, but if you don't pass the health questionnaire you'll be placed in a guaranteed issue policy instead. Final expense insurance is usually attractive to older people who don't have other life insurance coverage (maybe they outgrew their term life policy) and don't have enough savings to pay for their own funeral, which can cost upwards of $8,000.Coverage is usually for small amounts, from $5,000 to $25,000, to cover those expenses. It's good if you don't have another way to pay for your funeral and don't want to burden your family with the costs. However, it has the same drawbacks as guaranteed issue life insurance: higher life insurance premiums for relatively low coverage amount. If you or your family are able to pay for a funeral through other means, that's your best bet. Term Life Insurance - answerTerm life insurance lasts for a set number of years before it expires. If you die before the term is up, a set amount of money, known as the death benefit, is paid to your designated beneficiary. Term life is considered the simplest, most accessible insurance policy. When you make your payments (known as your premium), you're simply paying for the death benefit that goes to your beneficiaries in the event of your death. The death benefit can be paid out as a lump sum, a monthly payment, or an annuity. Most people elect to receive their death benefit as a lump sum. Term life insurance policies are more affordable than other types of life insurance policies, usually costing between $30-40 a month for a 30-year, $500,000 policy for healthy people in their 20s and 30s. They expire at the end of the term, which can last up to 30 years. Level Term Life Insurance - answerA term life policy guaranteed to have the premium remain the same for the duration of the contract. This is what most people refer to as term life. Purchased for a set number of years (5, 10, 30 years, for example), the premium and the death benefit remains the same (level) until the end of the term. Many of these policies can be converted to a permanent policy at the end of the term, or can be canceled at any time. Annual renewable term life insurance - answerAnnual renewable life insurance works just like term life policies that have 10-, 20-, and 30-year terms. If you die while the term is active, your beneficiaries get a death benefit from the carrier. However, the term in an annual renewable term policy only lasts one year, after which it's renewed for another year, for a set number of years. Traditional term life insurance policies typically have a guaranteed level premium, meaning that your premium rates at the time of purchase are the same throughout the term of the policy. (Guaranteed level premium policies average out the cost over the life of the policy.) Your premiums will only go up if you let your policy lapse and try to purchase the same policy again. Convertible term - answerA convertible life insurance policy is simply a term life insurance policy that can convert to a permanent life insurance policy. Here's how it works: Let's say a 35-year-old man buys a 30-year convertible term life insurance policy. At age 45, he decides to convert that policy to a permanent life insurance policy. He will pay a substantially larger premium as a result but have coverage for the rest of his life. Most convertible policies have a time limit to convert, usually 10 years. Often, when the conversion option is close to expiring, life insurance companies let policyholders know that time is running out to execute this option. level-premium term insurance - answerLevel-Premium Insurance is a type of life insurance in which premiums stay the same price throughout the term, while the amount of coverage offered increases. Premium payments often start at a higher level than policies with similar coverage but are ultimately worth more than competitors as policyholders experience increased coverage over time at no additional expense. Terms are usually 10, 15, 20 and 30 years, based on what the policyholder requires. Whole Life Insurance - answerconsidered a permanent life insurance policy because if does not expire. It has a death benefit but also a cash value, which is a tax-deferred savings account that is included in the policy. The cash value accrues interest at a predetermined fixed rate. Each month, a certain portion of your premium will go into the cash value of the policy, which offers a guaranteed rate of return (The exact amount that goes into savings is determined by your individual policy). The policy's cash value grows over time. Due to the fees and the extra feature, a whole life insurance policy can cost five to 15 times as much as a term life policy (for the same death benefit amount). Whole life lasts for as long as you pay the premiums. However, the cash value component can make whole life more complex than term life because you have to consider surrender fees, taxes, and interest as well as other stipulations. May be worth it if you need the cash value to cover things like endowments or estate plans, which might benefit from the greater options that a whole life policy provides. Continuous premium (straight life) - answerStraight life insurance is a type of permanent life insurance that provides a guaranteed death benefit and has fixed premiums. Also known as whole or ordinary life insurance, the policy has a term length that lasts your entire life. This is different from term life insurance which expires after a set number of years. As a form of permanent life insurance, straight life insurance comes with a cash value account that will grow over the life of the plan. The cash value component of a life insurance policy is separate from the death benefit. Each month, part of the premium that you pay for a straight life policy will be added to the cash value account. The rest of the premium goes towards the company's costs for providing insurance limited-payment life insurance - answerLimited pay life insurance is for an individual who owns a whole life insurance policy but chooses to pay for the total cost of their premiums for a limited number of years. With the limited pay life insurance option, you pay premiums in the first 10, 15, or 20 years of ownership, but the benefits last a lifetime. Single premium Life - answera type of life insurance that charges the policyholder a single up-front premium payment to fully fund the policy. It was once a popular tax shelter. Single-premium life insurance requires a large sum of money from the policyholder that puts this type of insurance out of reach of many applicants. The great advantage to single-premium life insurance is that the single payment fully funds the policy, immediately guaranteeing a sizable death benefit to the beneficiaries. Two popular single-premium policies are single-premium whole life and single-premium variable life. The two differ in how each policy accumulates a cash value. The first offers a risk-free fixed interest rate. The second invests the cash value in actively managed portfolios and comes with the risks and potential rewards of active investing. Flexible Premium or Adjusted Life Insurance - answerAdjustable life insurance is a term and whole life hybrid insurance plan that allows policyholders the option to adjust policy features. These policies allow policyholders the ability to adjust the period of protection, face amount, premiums, and length of the premium payment period. These policies also incorporate an interest-bearing savings component or cash value account. Adjustable life insurance policies are attractive to those who want the protection and cash value benefits of permanent life insurance yet need or want some level of flexibility with policy features. Using the ability to modify premium payments and face amounts, policyholders may customize their coverage as their lives change. For example, a policyholder may want to increase the face amount upon getting married and having children. An unemployed person may want to reduce premiums to accommodate a restricted budget. As with other permanent life insurance, adjustable life insurance has a savings component that earns cash value interest. Today, most adjustable life insurance cash value accounts have a guaranteed rate of interest. Universal Life Insurance - answerpermanent life insurance with an investment savings element and low premiums like term life insurance. Most universal life insurance policies contain a flexible premium option. However, some require a single premium (single lump-sum premium) or fixed premiums (scheduled fixed premiums). Policyholders have the flexibility to adjust their premiums and death benefits. Universal life insurance premiums consist of two components: a cost of insurance (COI) amount, and a saving component, known as the cash value. The cost of universal life insurance is the minimum amount of a premium payment required to keep the policy active. can accumulate cash value, which earns interest based on the current market or minimum interest rate. Policyholders may borrow against the accumulated cash value without tax implications. Joint-Life (First to die) - answercombines life insurance for you and your spouse into one joint policy. Both individuals are listed as insured parties on the policy. When the first person dies, the policy's death benefits will be paid out to the survivor. The policy also terminates at that point, leaving the surviving spouse with no life insurance coverage. Survivorship (Second-to-Die) Life Insurance - answerSecond-to-die insurance is a type of life insurance on two people (usually married) that provides benefits to the beneficiaries only after the last surviving person on the policy dies. This differs from regular life insurance in that the surviving partner doesn't receive any benefits after the spouse dies. Thus, second-to-die insurance is used for estate planning. Life insurance on minors (3207(b)) - answerA minor above the age of fourteen years and six months shall be deemed competent to enter into a contract for, be the owner of, and exercise all rights relating to, a policy of life insurance upon the life of the minor or upon the life of any person in whom the minor has an insurable interest, but the beneficiary of such policy may be only the minor or the parent, spouse, brother, sister, child or grandparent of the minor. Fixed (equity) indexed life - answerEquity-indexed universal life insurance is a type of permanent life insurance policy that ties its accumulation to a stock market index. Unlike variable universal life insurance, which allows policyholders to invest a portion of the cash value into a range of funds and stocks with various risk profiles, equity-indexed universal life insurance offers policyholders the opportunity to place the cash value in an equity index account, which pays interest according to a market index without actually investing the money in the market. An equity-indexed life policy receives gains on, but no losses its cash value if the market goes down. This type of policy tends to have lower premiums than other forms of whole life insurance. Equity-indexed universal life insurance is more complex than other forms of life insurance and offers no guarantees as to market returns. Group life insurance policies - answerA type of life insurance in which a single contract covers an entire group of people. Typically, the policy owner is an employer or an entity such as a labor organization, and the policy covers the employees or members of the group. Group life insurance is often provided as part of a complete employee benefit package. In most cases, the cost of group coverage is far less than what the employees or members would pay for a similar amount of individual protection. Characteristics of Group Plans - answerdiffers from individual insurance in several respects. A distinctive characteristic is the coverage of many persons under one contact. A master contract is formed between the insurer and the group policy owner for the benefit of the individual members. In most plans, the group policy owner is the employer. Employees receive a certificate of insurance that shows they are insured. A second characteristic is that group insurance usually costs less that comparable insurance purchased individually. Employers usually pay part or all of the cost, which reduces or eliminates premium payments by the employees. In addition, administrative and marketing expenses are reduced as a result of mass distribution methods. Another characteristic is that individual evidence of insurability is usually not required. Group selection of risks is used, not individual selection. The insurer is concerned with the insurability of the group as a whole rather with the insurability of the single member within the group. Term insurance is the most common form of group life insurance. Group term life is typically provided in the form of yearly renewable term insurance. When group term insurance is provided through your employer, the employer usually pays for most (and in some cases all) of the premiums. The amount of your coverage is typically equal to one or two times your annual salary. Group term coverage remains in force until your employment is terminated or until the specific term of coverage ends. You may have the option of converting your group coverage to an individual policy if you leave your employer. However, most people choose not to do this because these conversion premiums tend to be much higher than premiums for comparable policies available to individuals. Typically, only those who are otherwise uninsurable take advantage of this conversion option. Types of Group plan sponsors - answera designated party—usually a company or employer—that sets up a healthcare or retirement plan, such as a 401(k), for the benefit of the organization's employees. The responsibilities of the plan sponsor include determining membership parameters, investment choices, and in some cases, providing contribution payments in the form of cash and/or stock. Some companies offer retirement savings plans, pension plans, or health plans to their employees as part of their employee benefits program. These companies are referred to as plan sponsors. Employers are typically plan sponsors, but unions and professional bodies could also be plan sponsors. Credit life insurance - answertype of life insurance policy designed to pay off a borrower's outstanding debts if the borrower dies. The face value of a credit life insurance policy decreases proportionately with the outstanding loan amount as the loan is paid off over time, until both reach zero value. typically sold by banks at a mortgage closing; it could also be offered when you take out a car loan or a line of credit. The pitch is to protect your heirs if you die, since the policy will pay off the loan. If your spouse or someone else is a co-signer on your mortgage, credit life insurance would protect them from making loan payments after your death. This could be appealing if you are the primary breadwinner in your family, and the loan co-signer would be unable to make payments in the event of your death. But in most cases, any heirs who are not co-signers on your loans are not obligated to pay off your loans when you die; debts are not generally inherited. The exceptions are the few states that recognize community property, but even then only a spouse could be liable for your debts, not your children. When banks loan money, part of their accepted risk is that the borrower could die before the loan is repaid. As such, credit life insurance really protects the lender, not your heirs. In fact, the payout on a credit life insurance policy goes straight to the lender, not to your heirs. Credit life insurance is a specialized type of life insurance policy intended to pay off specific outstanding debts in the case the borrower dies before the debt is fully repaid. Such a policy may be required by certain lenders for specific purposes. Credit life policies feature a term that corresponds with the loan maturity and decreasing death benefits that correspond with the reduced debt outstanding over time. Credit life policies, due to their specific nature, often have less stringent underwriting requirements. Qualified Retirement Plans - answerA qualified retirement plan meets the requirements of Internal Revenue Code Section 401(a) of the Internal Revenue Service (IRS) and is therefore eligible to receive certain tax benefits, unlike a non-qualified plan. An employer establishes such a retirement plan on behalf of and for the benefit of the company's employees. It is one tool that can help employers attract and retain good employees. defined contribution plan - answerretirement plan that's typically tax-deferred, like a 401(k) or a 403(b), in which employees contribute a fixed amount or a percentage of their paychecks to an account that is intended to fund their retirements. The sponsor company will, at times match a portion of employee contributions as an added benefit. These plans place restrictions that control when and how each employee can withdraw from these accounts without penalties. Defined contribution (DC) retirement plans allow employees to invest pre-tax dollars in the capital markets where they can grow tax-deferred until retirement withdrawals. 401(k) and 403(b) are two popular defined-contribution plans commonly used by companies and organizations to encourage their employees to save for retirement. DC plans can be contrasted with defined benefit (DB) pensions, whereby retirement income is guaranteed by an employer. With a DC plan, there are no guarantees, and participation is both voluntary and self-directed. Defined Benefit Plan - answeremployer-sponsored retirement plan where employee benefits are computed using a formula that considers several factors, such as length of employment and salary history. The company administers portfolio management and investment risk of the plan. There are also restrictions on when and by what method an employee can withdraw funds without penalties. Benefits paid are typically guaranteed for life and rise slightly to account for the increased cost of living. A defined-benefit plan is an employer-based program that pays benefits based on factors such as length of employment and salary history. Pensions are defined-benefit plans. In contrast to defined-contribution plans, the employer, not the employee, is responsible for all of the planning and investment risk of a defined-benefit plan. Benefits can be distributed as fixed-monthly payments like an annuity or in one lump-sum payment. The surviving spouse is often entitled to the benefits if the employee passes away. 401k - Tax Sheltered Annuities - answerA 401(k) plan is a tax-advantaged, defined-contribution retirement account offered by many employers to their employees. It is named after a section of the U.S. Internal Revenue Code. Workers can make contributions to their 401(k) accounts through automatic payroll withholding, and their employers can match some or all of those contributions. The investment earnings in a traditional 401(k) plan are not taxed until the employee withdraws that money, typically after retirement. In a Roth 401(k) plan, withdrawals can be tax-free. A 401(k) plan is a company-sponsored retirement account that employees can contribute to. Employers may also make matching contributions. There are two basic types of 401(k)s—traditional and Roth—which differ primarily in how they're taxed. In a traditional 401(k), employee contributions reduce their income taxes for the year they are made, but their withdrawals are taxed. With a Roth, employees make contributions with post-tax income, but can make withdrawals tax-free. Self-employed Plans (Keogh plans) - answerType of retirement plan designed for self-employed individuals and their employees. It can be set up by small businesses that are structured as LLCs, sole-proprietorships, or partnerships. A Keogh is similar to a 401(k) for very small businesses, but the annual contribution limits are higher than 401(k) limits. Simplified Employee Pension (SEP) - answerretirement plan designed for self-employed persons, partnerships, sole proprietors, independent contractors, and owner-employees of an unincorporated trade or business; however, it may be set up by any type of business. A SEP is an easy method for a small employer to establish a retirement plan for employees without the complex administration and expense found in qualified retirement plans. In fact, an employer may establish a SEP only if that employer has no qualified retirement plan in effect. Under a SEP, the employer may make a contribution of up to the lesser of 15% or $30,000 of compensation to IRAs established in each employee's name. Hence, such an arrangement is known as a SEP-IRA. When made, these contributions are owned in their entirety by the employee, and they may be withdrawn and/or transferred by the employee at any time. Contributions to a SEP by the employer are discretionary, but must be deposited into each eligible employee's IRA when made. Because these accounts are IRAs, the amounts therein are subject to all IRA rules regarding transfer, withdrawal and taxation. Savings Incentive Match Plan for Employees (SIMPLE) - answerEstablished by the Small Business Protection Act of 1996, a SIMPLE may be set up by employers who have no other retirement plan and who have 100 or fewer employees with at least $5,000 in compensation for the previous year. They may be structured as an IRA or as a 401(k) plan. Employees may defer any percentage of compensation up to $6,500 per year to the SIMPLE, and the employer is required to make a matching contribution of up to 3% of the employee's pay based on that election. The employer may reduce the maximum matching percentage in any two years out of five. Alternatively, the employer may establish a uniform 2% of salary contribution per year for all eligible employees regardless of whether they contribute to the SIMPLE or not. 457 Plan - answerNon-qualified, deferred compensation plan established by state and local governments for tax-exempt government agencies and tax exempt employees. While governmental 457 plans have special catch-up provisions for those age 50 or older, they enjoy an even greater contribution amount in the three years before retirement. The catch-up provisions three years prior to retirement will amount to double the normal amount for allowable maximum contributions. Until withdrawn, 457 plan contributions and all earnings remain untaxed. The 457 plan assets of tax-exempt employers are subject to the claims of the employer's creditors, but those of plans sponsored by governmental entities are not. Plan distributions may occur at retirement; on separation from employment; as the result of an unforeseeable emergency; and at death. Distributions may be taken as a lump sum, in annual installments, or as an annuity. In 2002 and later years, proceeds from a governmental 457 plan may be transferred to an IRA or a new employer's 401(k), 403(b) or 457 plan that accepts transfers from an old employer's plan. On withdrawal from an IRA or from the new plan, the distribution will be subject to immediate taxation at ordinary income tax rates. ownership provision - answerprovision that states that a policy may be owned by a different person than the one insured. assignment provision - answerTransfer by the holder of a life insurance policy (the assignor) of the benefits or proceeds of the policy to a lender (the assignee), as a collateral for a loan. In the event of the death of the assignor, the assignee is paid first and the balance (if any) is paid to the policy's beneficiary. Other types of insurance policies may not be used for this purpose. Entire Contract Provision - answerThis is a provision in an insurance contract stating that the entire agreement between the insured and the insurer is contained in the contract, including the application if it is attached, declarations, insuring agreements, exclusions, conditions and endorsements. Right to Examine ("Free Look") Provision - answerThe free look period for a life insurance contract is a trail period, typically 10 days. This period is for policy owners, and is mandated by most states in the United States. The free look period allows a policy owner to review their contract after it is delivered, without having to make an unchangeable financial commitment. If an owner wants to return the policy after reviewing the contract, he/she may do so for a full refund of all money given to the insurance company. Payment of Premium provision - answera condition precedent to the payment of a Covered Loss that the Named Insured has remitted to us all Premium in accordance with the terms of this Policy. Grace period - answerA uniform mandatory provision that gives the insured a period of time, based on the payment mode, to pay the required premium. During the grace period, the policy is still in force. For example: Policyholders can pay the premium 31 days after the initial due date. Reinstatement - answerReinstatement is the restoration of a person or thing to a former position. Regarding insurance, reinstatement allows a previously terminated policy to resume effective coverage. In the case of nonpayment, the insurer may require evidence of eligibility, such as an updated medical examination for life insurance, and full payment of outstanding premiums. Reinstatement of a life insurance policy occurs after the end of a grace period and when the contract is no longer in fo