CLA CRAM Course

Evaluate applications, select rating factors, policy terms and conditions

• - Stock
• - Mutual
• - Reciprocal
• - Non-Commercial Insurance (Blue Cross, Blue Shield)

ppeace of mind and securing credit

Retaining all or part of the risk

• - Direct Writers
• - Direct Mail
• - Exclusive Agent
• - Independant Agencies

• - Personal Interviews
• - MIB
• - DMV
• - Financial Reports
• - Physician Statement/Current Physical

works on behalf of a company for an insured

Works on behalf of an insured for a company

works for an employer, selling insurance (other then life) under an agent. NO SUCH THING AS LIFE SOLICITOR!

works with agents and is appointed with may companies

Third Party Administrator: no license, collects premiums, assist in settling claims

• - Life Combo
• - Life only Agent
• - both sell disability
• - Life & Disability Analyst

not authorized to transact business in CA except through Surplus Lines Broker

Lines broker and able to sell insurance in CA

Insurance organization outside the country

Insurance organization outside the State of CA

Insurance Organization inside the State of CA

no notice of appointment on file, but all fees and CE units are up to date

handles affairs and funds of others

• - 24 hrs each term which is every 2 years
• - LTC you will need 8 hrs CE every year for the first 4 years part of the 24 hr requirement
• - annuity you will need 8 hrs for first 4 years
• - code 4 hrs for first 4 years after first year 12 hrs

California Insurance Code

California Code of Regulations

• - Sales/Marketing
• - Underwriting
• - Claims
• - Actuarial

• - Reciprocal
• - Mutual
• - Stock
• - Risk Retention Groups
• - Lloyds

- Elected by the citizens to ADMINISTER, INTERPRET and ENFORCE the CODE

California Life and Health Insurance Guarantee Association: pays up to 80% of an insolvent insurers claims and no more than $250K in death benefits. Also, no more than $100K cash value

• - Prior Approval (California)
• - File & Use
• - Use & File
• - Open Cumpetition

Insurance Service Office - helps actuarial to standerize forms

Insured gives up the right to sue the 3rd party and the company does it for them

Mediator that helps settle disputed claims

A living benefit designed to protect against outliving ones resources by making periodic payments from an account

request form for insurance signed by agent & insured and becomes part of the policy, if accepted

a supplemental for/endorsement to change, add or modify a policy

Portion the insured pays before the company

• - Offer & Acceptance
• - Competent Parties
• - Legal Purpose
• - Consideration of a Contract (cash money)

• - Adhession
• - Aleatory
• - Unilateral
• - Conditional
• - Personal
• - Utmost Good Faith

Insured has no say in the contract wording, only accepts or rejects it "take-it or leave-it"

Values exchanged may not be equal (money)

Premium for a promise. Insurer is the only one that cannot cancel without just cause

Must meet all conditions before a claim is paid

Cannot transfer. Between company and insured

Honest Information on both parties; to their best belief and knowledge

Written instrument where one undertakes to indemnify another

• - General (part 1)
• - Medical (part 2)
• - Agent Report (part 3)
• - Title/Data/Face page
• - Conditions/Clauses
• - Rider/Application

Void of a contract

Professional liability coverage for those who give advice for a fee

Not permissible as an incentive to purchase another product

Termination of an entire group plan

continuation of coverage for a totally disabled person affected before the discontinuation of coverage

May or may not be the insured person, but the one with the rights to make changes etc.

Person or entity to which the benefits are paid

• - Frequency of a payment:
• - monthly
• - quarterly
• - semi-annually
• - annually

• - Preferred
• - Standard
• - Substandard

cause of loss

Statistcal chances of dying by using specific populations, diseases, ages, etc

• - Moral
• - Marale
• - Physical
• - Legal

The larger the pool of information gathered, the more reliable it becomes

Degree to which a person or property is at risk.Par/@on-Par – Participating (Mutual) or non-participating (Stock) in paying dividends to aninsured.

Accidental, creates a financial hardship

Tendency of those who need insurance to buy it.

Transfer or pool the risk.

Deliberately providing false information for gain/profit.

Hiding material information.

• - Expressed
• - Implied

Important facts to the contract.

Oral or written expression of information.

• - Expressed
• - Implied

• - Solicitation
• - Negotiation
• - Execution
• - Transaction

Must be in a prominent place in your office.

Available in 30 days upon request; all policy information must be accessiblein 30 days notice and on file for 2 years.

Must be printed on ALL material to the public; fines are foreach offense and are $200 1st, $500 2nd, $1000 ea offense after that.

Must be disclosed.

Every licensee must have one on file with the DOI to be activelylicensed.

Commissioner doesn’t create the code, only determines how toimplement it, etc.

1st attempt at restoring an insurance company that is close to insolvency.

List of Eligible Surplus Lines Insurers

Unbroken chain of events that results in damage or injury due tonegligence.

Broadening coverage without any extra charge during a policy period.

Reduction of the quantity, quality or value of something do to a coveredloss/ Consequential losses as a result of the covered loss.

Incurred losses + loss adjusted expenses and earned premium = Loss Ratio

Cancellation made by an insured prior to it’s expiration date and surcharged bythe Company.

Cancellation made prior to the expiration date and NOT surcharged by theCompany.

Cancellation of a policy back to its inception date with all premiums 100%refunded.

Cease coverage/ Company not continue beyond expirationdate/Cancels due to non-pay.

Money the company owes an insured for the unused portion of timealready paid for.

Just because I expect to own something in the future will notallow me to buy coverage for it now.

Percentage of premium dollar a company spends on claims and expenses.100%means no profit, broke even.

Giving up a right/ Agent acts in a misleading way so the insured is notrequired to perform.

Insurance company nearing bankruptcy or unable to pay expected losses.

• - Race
• - Color
• - National Oigin
• - Religion
• - Sexual Orientation
• - Mental Impairment that is not material
• - Ancestry

Carried over required x loss – deductible= Loss payment

Limit of insurance for all claims within a policy period, typically annual.

• - Punitive
• - Compensatory
• - Specific
• - General

• - Manual
• - Judgment
• - Merit Rating

Estimate of an amount the insurer may have to pay for future claims.

Transferring the policy from one person to another

• - General
• - Medical
• - Agent Report
• - Title/Data/Face
• - Conditions/Clauses
• - Rider/Application

• - Immediate
• - Deferred
• - Fixed
• - Variable

Purchased with a single lump sum and payments areset to begin in at least 1 year.

Purchased with a lump sum or payments over time,but insured makes no withdrawals for at least one year.

Unchanged rate of interest and payments to theannuitant.

Varying rate of return and payment are notguaranteed.

Payments made to annuitant immediately or after atleast one year.

Fixed payments/fixed interest rates; Varying ratesof interest and payments may be fixed or vary. Variable is beneficial to help keeppace with inflation.

Period of time in which an annuitantmakes payments; annuity period is also known as the annuitization period inwhich withdrawals are made.

General account investing is typicallysafe and conservative, while Variable products invest in a separate account andaccumulate at varying rates of return due to their placement in higher risk areas.

In a Qualified plan, contributions are taxdeductibleand taxes are deferred until withdrawn. In a Non-Qualified Plan,contributions are @OT tax deductible, but funds increased during theaccumulation period are not taxed until withdrawn, either.

Group is purchased by an employer andIndividual by one person.

More risk but also more potential return than a Fixedbut less than a Variable. EIA’s are in between a Fixed and a Variable Annuity.

Company agrees to pay a fixed rate of returnfor a specific time period. However, the value of the Annuity at the time ofwithdraw is adjusted by current interest rate if surrendered early. The clientshares in the risk of changing interest rates. (Bought at 7%, sold at 9% = penalty.But sale at 5% = bonus)

Developed by Congress to help non-profitscontribute to an Annuity. Funds put here are excluded from employee’s currenttaxable income rate but are taxed when withdrawn. Also known as a TDA, Tax-Deferred Annuity or TSA, Tax-Sheltered Annuity.

Pre-Tax Contributions of up to $5000per person if in a separate account for 2008. Taxable only when paid out

• - EDUCATION IRA
• - SEP IRA
• - SIMPLE IRA
• - ROTH IRA

Beneficiary is allowed to attend a program of highereducation. Contributions are not tax deductible, but withdrawals are nottaxable either.

(Simplified Employee Pension) Each employee has an accountand employer (self-employed) contributes no more than 25% of salary or$46,000 for 2008.

(Savings Incentive Match Plan for Employees) Must haveno more than 100 employees who earned $5000 or more in compensationduring the previous year. In 2008, employees can make a catch-upcontribution of $2500.

Contributions are not tax deductible, but withdrawals arenot taxable either. To contribute, singles must earn less than $110,000 andmarried couples $160,000 and withdrawals cannot be made for at least 5years. You CAN contribute to it past age 70 and do NOT have to withdrawby age 70.

• - Long-term care (LTC) insurance pays for services to helpindividuals who are unable to perform certain activities of dailyliving (ADL’s) without assistance, or require supervision due to acognitive impairment (reasoning skills) such as Alzheimer’sdisease.
• - LTC is available as individual insurance or through an employersponsoredor association plan.
• - It covers medical care, nursing care, hospice, adult day care andother assistance you might need if you have a chronic illness ordisability that leaves you unable to care for yourself for anextended period of time.
• - Not generally covered by other health insurance services.
• - Services may be conducted in a facility or in your home and aregenerally very expensive to receive.
• - Protects a person’s assets from liquidation!
• - One year in a nursing care facility is averaged at about $40,000!

• Premiums are not tax deductible, as they are paid with after taxdollars and considered a personal expense. Unless:
• 1) They are paid by employer for group term life and employer isnot beneficiary.
• 2) A Company pays the premiums as a bonus/incentive.
• 3) Paid by a Non-Profit Organization.
• 4) Paid as part of an Alimony settlement.
• 5) Purchased to cover a debt/creditor.

Life policy interest is not taxable and cash value given at death isnot taxed, but early surrenders are taxed. However, if company selectsan “accumulated at interest” dividend option, the insured is taxed onlyon the interest gained on the dividend payment.

Can take a loan (borrow) tax free!Fewer than 2% pay Federal Estate Taxes, due to the value of an estateneeding to be over $2 million currently. Must be paid within 9 monthsof death.

Employee Retirement Income Security Act of 1974. Protectsa persons retirement/pension with stringent laws that must befollowed.

• - 401(k)
• - 403(b)
• - Roth IRA
• - Keogh IRA

Contributions on a pre-tax basis and therefore taxedwhen withdrawn. Employers may contribute.

Employees of a 501©3 organization such as, Educational,Religious, Charitable, etc.; tax free until withdrawn. Invests onlyin annuities and mutual funds.

Not tax deductible but tax free when withdrawn.Can contribute up to a certain amount per year.

For Self Employed persons. Can be a profit sharingor money purchase plan.

- 457 Plan

State & local government employees or of tax exemptorganizations.

such asCorporate Pensions and Profit Sharing plans. The contribution isspecific and tax is deferred.

Money that is contributed by an employee belongs 100% tothe employee and when terminated, goes with them. The employercontribution is vested over time; typically 7 years.

Employee Stock Option Program

Workers pay about 6.2% of their salary into Social Security (FICA)and employers must match this amount. High wage earners do not paySocial Security on any income over the “taxable maximum”.

Old Age, Survivors and Disability Insurance

To receive benefit at retirement, a worker must have been employedand paid SS for 40 quarters (10 years). These are called “workcredits”. Payment may also be made to a surviving spouse ordependent children or dependent parents.Death Payment of $255…Wage is based on your lifetime earnings that have been FICA taxed aswell as current averages.

is the Medicaid Program for Californians and isadministered by the CA State Dept of Health. For low income families,disabled and seniors with no co-pay or deductible. Receives acute andlong-term care.

Blind, pregnant, children under 21 in Foster Care,disabled, refugees for 18 mo., low income under 21, those on SSI/SSP,65 and older, on kidney dialysis, in skilled care facilities, receivingTemp Assistance to Needy Families.

• is a Federal program for people 65 or older OR who arepermanently disabled or have End-Stage Renal Disease. It pays part ofthe costs associated with hospitalization, surgery, doctors’ bills, homehealth care, and skilled-nursing care.It is financed by a portion of our payroll taxes and there is adeductible. People age 65 or older and receiving Social Security areautomatically signed up.
• Part A = Hospital Care (Mandatory)
• Part B = Medical Insurance (Voluntary)
• Part C = Managed Care Facility (Voluntary)
• Part D = Prescription Drugs

Agent, Adjuster, Admitted, Alien, Annuity, Annuitized, Analyst, Adjustable,Accidental Death & Dismemberment, APS

Broker, Binder, Blanket Policy, Burial Expenses, Blackout

CLHIGA, Conservation, CE, CIC & CCR’s, Commissioner, Certificate, CIConversion, Claimant, Cash Value

Display of License, Domestic, Discrimination, Discontinuance, Disclosure,Disability

Expectant Interest, ERISA, E & O, Eligible, Endowment

Fraud, Free Insurance, Fiduciary, Free-Look, Funeral Expense, FixedPremium

Guaranteed Renewable, Grace Period, Group Life

Hazard, Health Care levels, Hospice, HMO, Home Care, HICAP

Insurable Interest, Insolvency, Inactive License, Incontestability, Illustration

Joint Life, Juvenile, Jumping Juvenile

Key Employee, Keogh Plan

License Number, LTC

Misrepresentation, MGA, Mutual Co., Medical, Misstatement, Mortality,Medi-Cal, Medicare, MIB

Non-Admitted, Names for Agencies, Notice of Appointment, Nursing Care

Outline of Coverage

Parts to a Policy, Prior Approval, Pre-Existing Condition, Par Policy, PayorRider

Qualifications to be an Insurance Company, Qualified Plans

Risk, Reinsurance, Rescission, Record Retention, Rates, Replacement,Retirement, Roth IRA

Solicitor, Stock Co., Self-Fund, Senior Issues, Survivorship Life, Second-to-Die, Suicide Clause

Term, TPA, Tertiary Beneficiary, Temporary Insurance, Taxation

Unearned Premiums, Unilateral, Utmost Good Faith, Underwriting, Universal Life

Variable

Waiver of Premium, Whole Life

EXclusions