1. Function of Underwriting
    Evaluate applications, select rating factors, policy terms and conditions
  2. Private Insurers 3 Types:
    • - Stock
    • - Mutual
    • - Reciprocal
    • - Non-Commercial Insurance (Blue Cross, Blue Shield)
  3. Benefits of Insurance
    ppeace of mind and securing credit
  4. Self-Funding
    Retaining all or part of the risk
  5. Marketing Distributions 4 areas
    • - Direct Writers
    • - Direct Mail
    • - Exclusive Agent
    • - Independant Agencies
  6. Investigative Agencies 5 areas
    • - Personal Interviews
    • - MIB
    • - DMV
    • - Financial Reports
    • - Physician Statement/Current Physical
  7. Agent
    works on behalf of a company for an insured
  8. Broker
    Works on behalf of an insured for a company
  9. Solicitor
    works for an employer, selling insurance (other then life) under an agent. NO SUCH THING AS LIFE SOLICITOR!
  10. MGA
    works with agents and is appointed with may companies
  11. TPA
    Third Party Administrator: no license, collects premiums, assist in settling claims
  12. License Types
    • - Life Combo
    • - Life only Agent
    • - both sell disability
    • - Life & Disability Analyst
  13. Non-Admitted
    not authorized to transact business in CA except through Surplus Lines Broker
  14. Admitted
    Lines broker and able to sell insurance in CA
  15. Alien
    Insurance organization outside the country
  16. Foreign
    Insurance organization outside the State of CA
  17. Domestic
    Insurance Organization inside the State of CA
  18. Inactive license
    no notice of appointment on file, but all fees and CE units are up to date
  19. Fiduciary
    handles affairs and funds of others
  20. CE unit reuirements
    • - 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
  21. CIC
    California Insurance Code
  22. CCR
    California Code of Regulations
  23. Departements in an Insurance Company
    • - Sales/Marketing
    • - Underwriting
    • - Claims
    • - Actuarial
  24. Types of insurance Companies 5 types
    • - Reciprocal
    • - Mutual
    • - Stock
    • - Risk Retention Groups
    • - Lloyds
  25. Commissioner
    - Elected by the citizens to ADMINISTER, INTERPRET and ENFORCE the CODE
  26. CLHIGA
    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
  27. Rating Laws 4 Types
    • - Prior Approval (California)
    • - File & Use
    • - Use & File
    • - Open Cumpetition
  28. ISO
    Insurance Service Office - helps actuarial to standerize forms
  29. Subrogation
    Insured gives up the right to sue the 3rd party and the company does it for them
  30. Arbitration
    Mediator that helps settle disputed claims
  31. Annuity
    A living benefit designed to protect against outliving ones resources by making periodic payments from an account
  32. Application
    request form for insurance signed by agent & insured and becomes part of the policy, if accepted
  33. Rider
    a supplemental for/endorsement to change, add or modify a policy
  34. Deductibles
    Portion the insured pays before the company
  35. Elements of a Contract 4 elements
    • - Offer & Acceptance
    • - Competent Parties
    • - Legal Purpose
    • - Consideration of a Contract (cash money)
  36. Types of Contracts
    • - Adhession
    • - Aleatory
    • - Unilateral
    • - Conditional
    • - Personal
    • - Utmost Good Faith
  37. Adhesion
    Insured has no say in the contract wording, only accepts or rejects it "take-it or leave-it"
  38. Aleatory
    Values exchanged may not be equal (money)
  39. Unilateral
    Premium for a promise. Insurer is the only one that cannot cancel without just cause
  40. Conditional
    Must meet all conditions before a claim is paid
  41. Personal
    Cannot transfer. Between company and insured
  42. Utmost Good Faith
    Honest Information on both parties; to their best belief and knowledge
  43. Insurance Policy
    Written instrument where one undertakes to indemnify another
  44. Parts of a Life Applcation/Policy
    • - General (part 1)
    • - Medical (part 2)
    • - Agent Report (part 3)
    • - Title/Data/Face page
    • - Conditions/Clauses
    • - Rider/Application
  45. Rescission
    Void of a contract
  46. E & O
    Professional liability coverage for those who give advice for a fee
  47. Free Insurance
    Not permissible as an incentive to purchase another product
  48. Discontinuance
    Termination of an entire group plan
  49. Extension of Benefits
    continuation of coverage for a totally disabled person affected before the discontinuation of coverage
  50. Policy Owner
    May or may not be the insured person, but the one with the rights to make changes etc.
  51. Beneficiary
    Person or entity to which the benefits are paid
  52. Premium Mode
    • - Frequency of a payment:
    • - monthly
    • - quarterly
    • - semi-annually
    • - annually
  53. Risk 3 types
    • - Preferred
    • - Standard
    • - Substandard
  54. Peril
    cause of loss
  55. Mortality
    Statistcal chances of dying by using specific populations, diseases, ages, etc
  56. Hazard 4 types
    • - Moral
    • - Marale
    • - Physical
    • - Legal
  57. Law of Large Numbers
    The larger the pool of information gathered, the more reliable it becomes
  58. Loss Exposure
    Degree to which a person or property is at risk.Par/@on-Par – Participating (Mutual) or non-participating (Stock) in paying dividends to aninsured.
  59. Ideally Insurable Risk 2 areas
    Accidental, creates a financial hardship
  60. Adverse Selection
    Tendency of those who need insurance to buy it.
  61. Spread of Risk
    Transfer or pool the risk.
  62. Fraud
    Deliberately providing false information for gain/profit.
  63. Concealment
    Hiding material information.
  64. Warranty 2 Types
    • - Expressed
    • - Implied
  65. Materiality
    Important facts to the contract.
  66. Representation
    Oral or written expression of information.
  67. Authority 2 Types
    • - Expressed
    • - Implied
  68. Transacting Insurance 4 areas
    • - Solicitation
    • - Negotiation
    • - Execution
    • - Transaction
  69. Display of License
    Must be in a prominent place in your office.
  70. Record Keeping
    Available in 30 days upon request; all policy information must be accessiblein 30 days notice and on file for 2 years.
  71. Printing License # and Fines
    Must be printed on ALL material to the public; fines are foreach offense and are $200 1st, $500 2nd, $1000 ea offense after that.
  72. Broker Fees
    Must be disclosed.
  73. Notice of Appointment
    Every licensee must have one on file with the DOI to be activelylicensed.
  74. Code Administration
    Commissioner doesn’t create the code, only determines how toimplement it, etc.
  75. Conservation
    1st attempt at restoring an insurance company that is close to insolvency.
  76. LESLI list
    List of Eligible Surplus Lines Insurers
  77. Proximate Cause
    Unbroken chain of events that results in damage or injury due tonegligence.
  78. Liberalization Clause
    Broadening coverage without any extra charge during a policy period.
  79. Direct/Indirect Loss
    Reduction of the quantity, quality or value of something do to a coveredloss/ Consequential losses as a result of the covered loss.
  80. Combined Ratio
    Incurred losses + loss adjusted expenses and earned premium = Loss Ratio
  81. Short rate
    Cancellation made by an insured prior to it’s expiration date and surcharged bythe Company.
  82. Pro Rata
    Cancellation made prior to the expiration date and NOT surcharged by theCompany.
  83. Flat Rate
    Cancellation of a policy back to its inception date with all premiums 100%refunded.
  84. Cancel/Non-renew/Lapse
    Cease coverage/ Company not continue beyond expirationdate/Cancels due to non-pay.
  85. Unearned Premium
    Money the company owes an insured for the unused portion of timealready paid for.
  86. Contingent/Expectant Interest
    Just because I expect to own something in the future will notallow me to buy coverage for it now.
  87. Loss Ratio
    Percentage of premium dollar a company spends on claims and expenses.100%means no profit, broke even.
  88. Waiver & Estoppel
    Giving up a right/ Agent acts in a misleading way so the insured is notrequired to perform.
  89. Insolvency
    Insurance company nearing bankruptcy or unable to pay expected losses.
  90. Non-Discrimination 7 areas
    • - Race
    • - Color
    • - National Oigin
    • - Religion
    • - Sexual Orientation
    • - Mental Impairment that is not material
    • - Ancestry
  91. Co-Insurance
    Carried over required x loss – deductible= Loss payment
  92. Aggregate
    Limit of insurance for all claims within a policy period, typically annual.
  93. Damages that may be awarded 4 Types
    • - Punitive
    • - Compensatory
    • - Specific
    • - General
  94. Types of Rating Methods 3 Types
    • - Manual
    • - Judgment
    • - Merit Rating
  95. Loss Reserve
    Estimate of an amount the insurer may have to pay for future claims.
  96. Assignment
    Transferring the policy from one person to another
  97. "Give Me A Full Cash Reward" G M A F C R
    • - General
    • - Medical
    • - Agent Report
    • - Title/Data/Face
    • - Conditions/Clauses
    • - Rider/Application
  98. Annuity Options 4 types
    • - Immediate
    • - Deferred
    • - Fixed
    • - Variable
  99. Immediate
    Purchased with a single lump sum and payments areset to begin in at least 1 year.
  100. Deferred
    Purchased with a lump sum or payments over time,but insured makes no withdrawals for at least one year.
  101. Fixed
    Unchanged rate of interest and payments to theannuitant.
  102. Variable
    Varying rate of return and payment are notguaranteed.
  103. Immediate & Deferred
    Payments made to annuitant immediately or after atleast one year.
  104. Fixed & Variable Annuities
    Fixed payments/fixed interest rates; Varying ratesof interest and payments may be fixed or vary. Variable is beneficial to help keeppace with inflation.
  105. Accumulation Period & Annuity Period
    Period of time in which an annuitantmakes payments; annuity period is also known as the annuitization period inwhich withdrawals are made.
  106. General Account vs Separate Account
    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.
  107. Qualified vs Non-Qualified
    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.
  108. Group vs Individual Annuities
    Group is purchased by an employer andIndividual by one person.
  109. Equity Indexed Annuity
    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.
  110. Market Value Adjusted Annuities
    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)
  111. Tax-Sheltered Annuities (403b)
    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.
  112. Individual Retirement Annuities (IRA)
    Pre-Tax Contributions of up to $5000per person if in a separate account for 2008. Taxable only when paid out
  113. IRA 4 Types
    • - 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.
  115. SEP IRA
    (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.
  117. ROTH IRA
    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.
  118. Long-term care (LTC) insurance
    • - 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.
  120. Cash Value Accumulation:
    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.
  121. ERISA
    Employee Retirement Income Security Act of 1974. Protectsa persons retirement/pension with stringent laws that must befollowed.
  122. Qualified Plans: (registered with IRS and tax favors)
    • - 401(k)
    • - 403(b)
    • - Roth IRA
    • - Keogh IRA
  123. 401(k)
    Contributions on a pre-tax basis and therefore taxedwhen withdrawn. Employers may contribute.
  124. 403(b)
    Employees of a 501©3 organization such as, Educational,Religious, Charitable, etc.; tax free until withdrawn. Invests onlyin annuities and mutual funds.
  125. ROTH IRA
    Not tax deductible but tax free when withdrawn.Can contribute up to a certain amount per year.
  126. Keogh IRA
    For Self Employed persons. Can be a profit sharingor money purchase plan.
  127. Non-Qualified Plan: (not registered and no tax favor for employer)
    - 457 Plan
  128. 457 Plan
    State & local government employees or of tax exemptorganizations.
  129. Defined Benefit/Defined Contribution Plans
    such asCorporate Pensions and Profit Sharing plans. The contribution isspecific and tax is deferred.
  130. Vesting
    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.
  131. ESOP
    Employee Stock Option Program
  132. Taxes taken from Social Security (FICA)
    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”.
  133. OASDI
    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.
  134. Medi-Cal
    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.
  135. Medi-Cal Eligible persons
    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.
  136. Medicare
    • 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
  137. A
    Agent, Adjuster, Admitted, Alien, Annuity, Annuitized, Analyst, Adjustable,Accidental Death & Dismemberment, APS
  138. B
    Broker, Binder, Blanket Policy, Burial Expenses, Blackout
  139. C
    CLHIGA, Conservation, CE, CIC & CCR’s, Commissioner, Certificate, CIConversion, Claimant, Cash Value
  140. D
    Display of License, Domestic, Discrimination, Discontinuance, Disclosure,Disability
  141. E
    Expectant Interest, ERISA, E & O, Eligible, Endowment
  142. F
    Fraud, Free Insurance, Fiduciary, Free-Look, Funeral Expense, FixedPremium
  143. G
    Guaranteed Renewable, Grace Period, Group Life
  144. H
    Hazard, Health Care levels, Hospice, HMO, Home Care, HICAP
  145. I
    Insurable Interest, Insolvency, Inactive License, Incontestability, Illustration
  146. J
    Joint Life, Juvenile, Jumping Juvenile
  147. K
    Key Employee, Keogh Plan
  148. L
    License Number, LTC
  149. M
    Misrepresentation, MGA, Mutual Co., Medical, Misstatement, Mortality,Medi-Cal, Medicare, MIB
  150. N
    Non-Admitted, Names for Agencies, Notice of Appointment, Nursing Care
  151. O
    Outline of Coverage
  152. P
    Parts to a Policy, Prior Approval, Pre-Existing Condition, Par Policy, PayorRider
  153. Q
    Qualifications to be an Insurance Company, Qualified Plans
  154. R
    Risk, Reinsurance, Rescission, Record Retention, Rates, Replacement,Retirement, Roth IRA
  155. S
    Solicitor, Stock Co., Self-Fund, Senior Issues, Survivorship Life, Second-to-Die, Suicide Clause
  156. T
    Term, TPA, Tertiary Beneficiary, Temporary Insurance, Taxation
  157. U
    Unearned Premiums, Unilateral, Utmost Good Faith, Underwriting, Universal Life
  158. V
  159. W
    Waiver of Premium, Whole Life
  160. X
Card Set