Life, Accident, and Health - Kaplan Financial Education LIFE, ACCIDENT, AND HEALTH CLASS NOTES, 3RD...
248
Class Notes 3 rd Edition Texas Life, Accident, and Health
Transcript of Life, Accident, and Health - Kaplan Financial Education LIFE, ACCIDENT, AND HEALTH CLASS NOTES, 3RD...
Class Notes
3rd Edition
Texas
Life, Accident, and Health
TX_LAH_CN_3E.indb 1 1/27/2014 12:28:12 PM
At press time, this edition contains the most complete and accurate information currently available. Owing to the nature of license examinations, however, information may have been added recently to the actual test that does not appear in this edition. Please contact the publisher to verify that you have the most current edition.
This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought.
TEXAS LIFE, ACCIDENT, AND HEALTH CLASS NOTES, 3RD EDITION ©2014 Kaplan, Inc. All rights reserved.
The text of this publication, or any part thereof, may not be reproduced in any manner whatsoever without written permission from the publisher.
If you find imperfections or incorrect information in this product, please visit www.kfeducation.com and submit an errata report.
Published in January 2014 by Kaplan Financial Education. Printed in the United States of America.
ISBN: 978-1-4754-2422-5 / 1-4754-2422-1
PPN: 3200-4957
TX_LAH_CN_3E.indb 2 1/27/2014 12:28:12 PM
iii
L E S S O N O N E Introduction to Insurance 1
L E S S O N T W O Insurance Regulation 5
L E S S O N T H R E E Agency and Contracts 21
L E S S O N F O U R Underwriting Basics 27
L E S S O N F I V E Selling Life Insurance 35
L E S S O N S I X Policy Issuance and Delivery 39
L E S S O N S E V E N Types of Life Insurance Policies 43
L E S S O N E I G H T Life Insurance Policy Provisions 57
L E S S O N N I N E Life Insurance Riders 67
L E S S O N T E N Life Insurance Policy Options 73
L E S S O N E L E V E N Annuities 81
L E S S O N T W E L V E Group Life Insurance 87
L E S S O N T H I R T E E N Social Security and Tax Considerations 91
L E S S O N F O U R T E E N Retirement Plans 99
L E S S O N F I F T E E N Health Policy Provisions Individual Health Policies 105
L E S S O N S I X T E E N Health Insurance Basics 117
L E S S O N S E V E N T E E N Disability Income Policies 123
L E S S O N E I G H T E E N Medical Expense Insurance 133
L E S S O N N I N E T E E N Special Types of Medical Expenses Policies 141
L E S S O N T W E N T Y Group Health Insurance 147
L E S S O N T W E N T Y - O N E Social Health Insurance 153
L E S S O N T W E N T Y - T W O Long-Term Care 161
L E S S O N T W E N T Y - T H R E E Health Insurance Taxation 169
Lesson Reviews and Answers 173
Glossary 225
Contents
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Lesson OneIntroduction to Insurance
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2Le
sson
One
In
trod
uctio
n to
Insu
ranc
e
Less
onO
neLe
sson
One
Intr
oduc
tion
to In
sura
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Insu
ranc
e•S
ocia
l dev
ice
for s
prea
ding
the
chan
ce o
f fin
anci
al lo
ss a
mon
g a
larg
e nu
mbe
r of
peop
le•T
rans
fers
the
risk
of lo
ss fr
om in
sure
d to
in
sure
r thr
ough
a le
gal c
ontra
ct–I
nsur
ed p
ays
prem
ium
; ins
urer
pro
mis
es to
pay
th
ein
sure
dac
cord
ing
toth
ete
rms
ofth
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
the
insu
red
acco
rdin
g to
the
term
s of
the
cont
ract
Insu
rabl
e In
tere
st•B
asic
rule
gov
erni
ng in
sura
nce
stat
es th
at
befo
re a
n in
divi
dual
can
ben
efit
from
in
sura
nce,
that
indi
vidu
al m
ust h
ave
a le
gitim
ate
inte
rest
in th
e pr
eser
vatio
n of
the
life
or p
rope
rty in
volv
ed–P
erso
n is
pre
sum
ed to
hav
e an
insu
rabl
e in
tere
st in
© 2
014
Kap
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vers
ity S
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ssio
nal a
nd C
ontin
uing
Edu
catio
n3
•His
/Her
ow
n lif
e•T
he li
fe o
f a c
lose
blo
od re
lativ
e or
a s
pous
e
Insu
rabl
e In
tere
st•I
nsur
able
inte
rest
can
als
o be
bas
ed u
pon
a fin
anci
al lo
ss th
at c
ould
take
pla
ce–E
xam
ple:
Par
tner
s in
bus
ines
s•I
nsur
able
inte
rest
mus
t be
pres
ent a
t the
tim
e of
the
appl
icat
ion
for l
ife in
sura
nce
but
not a
t the
tim
e of
dea
th
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
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3Le
sson
One
In
trod
uctio
n to
Insu
ranc
e
Type
s of
Insu
rers
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Stoc
k In
sure
rs•O
wne
d by
thei
r sto
ckho
lder
s, w
ho re
ceiv
e di
vide
nds
as s
tock
val
ue o
r per
iodi
c di
vide
nd
tpa
ymen
ts•I
ncor
pora
ted
as a
for-
prof
it co
mpa
ny•W
hen
orga
nizi
ng, w
ill is
sue
shar
es o
f sto
ck to
ra
ise
fund
s•I
ssue
s no
npar
ticip
atin
g po
licie
s (n
onpa
r)•P
ays
taxa
ble
divi
dend
sto
shar
ehol
ders
ifa
© 2
014
Kap
lan
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vers
ity S
choo
l of P
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ssio
nal a
nd C
ontin
uing
Edu
catio
n6
•Pay
s ta
xabl
e di
vide
nds
to s
hare
hold
ers
if a
prof
it is
mad
e•M
ay is
sue
par p
olic
ies
to c
ompe
te w
ith m
utua
ls
Mut
ual I
nsur
ers
•O
wne
d by
thei
r pol
icyh
olde
rs, w
ho m
ay re
ceiv
e di
vide
nds
•M
utua
lsar
ein
corp
orat
edan
dm
anag
edby
abo
ard
of•
Mut
uals
are
inco
rpor
ated
and
man
aged
by
a bo
ard
of
dire
ctor
s w
ho d
o no
t nee
d an
insu
ranc
e lic
ense
–Iss
ue P
ar—
parti
cipa
ting
polic
ies
–Pol
icyh
olde
rs p
artic
ipat
e in
pro
fits
or s
urpl
us—
divi
dend
s–P
artic
ipat
ing
divi
dend
s ar
e a
parti
al re
turn
of
© 2
014
Kap
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Uni
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ity S
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nd C
ontin
uing
Edu
catio
n7
prem
ium
s an
d ar
e no
t tax
able
. The
div
iden
ds
are
not g
uara
ntee
d an
d ar
e co
nsid
ered
an
over
paym
ent o
f pre
miu
ms.
Dom
icile
•Whe
n de
term
inin
g th
e do
mic
ile o
f an
insu
rer,
com
pare
the
insu
rer’s
bas
e or
ho
me
offic
e w
ith th
e po
licyh
olde
r’s lo
catio
n –
Dom
estic
: In
the
sam
e st
ate
–Fo
reig
n: In
ano
ther
sta
te–
Alie
n: In
ano
ther
cou
ntry
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
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TX_LAH_CN_3E.indb 4 1/27/2014 12:28:13 PM
Lesson TwoInsurance Regulation
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6Le
sson
Tw
o In
sura
nce
Reg
ulat
ion
Less
onTw
oLe
sson
Tw
oIn
sura
nce
Reg
ulat
ion
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Reg
ulat
ion
of th
e In
sura
nce
Bus
ines
s•T
hree
maj
or c
hann
els
of re
gula
tion
of th
e in
sura
nce
indu
stry
are
–Fed
eral
regu
latio
n–S
tate
regu
latio
n–S
elf r
egul
atio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
Fede
ral R
egul
atio
n•F
eder
al ju
risdi
ctio
n ap
plie
s to
indi
vidu
als
or
com
pani
es w
hose
act
iviti
es a
ffect
inte
rsta
te
com
mer
ce, w
hich
incl
udes
mos
t ins
uran
ce
activ
ity, b
ut o
nly
to th
e ex
tent
that
suc
h bu
sine
ss is
not
regu
late
d by
sta
te la
w•T
here
are
sev
eral
impo
rtant
sou
rces
of
fede
ralr
egul
atio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
fede
ral r
egul
atio
n
Fair
Cre
dit R
epor
ting
Act
•Set
s up
pro
cedu
res
for c
onsu
mer
repo
rting
ag
enci
es to
follo
w in
thei
r dea
lings
with
bu
sine
sses
to e
nsur
e th
at re
cord
s ar
e co
nfid
entia
l, ac
cura
te, r
elev
ant,
and
prop
erly
use
d•A
ll in
sure
rs a
nd th
eir a
gent
s m
ust c
ompl
y w
ithth
isac
treg
ardi
ngin
form
atio
nob
tain
ed
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
with
this
act
rega
rdin
g in
form
atio
n ob
tain
ed
from
a th
ird p
arty
con
cern
ing
the
appl
ican
t
TX_LAH_CN_3E.indb 6 1/27/2014 12:28:13 PM
7Le
sson
Tw
o In
sura
nce
Reg
ulat
ion
Fair
Cre
dit R
epor
ting
Act
•Act
sta
tes
that
–A “N
otic
e to
the
App
lican
t” m
ust b
e is
sued
to a
ll ap
plic
ants
that
a re
port(
s) w
ill b
e or
dere
d co
ncer
ning
thei
r pas
t cre
dit h
isto
ry a
nd a
ny
othe
r per
tinen
t inf
orm
atio
n•A
gent
mus
t lea
ve th
is n
otic
e w
ith th
e ap
plic
ant a
long
w
ith th
e re
ceip
tC
tii
il
ddi
t
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
–Con
sum
er re
porti
ng a
genc
ies
incl
ude
cred
it re
porti
ng a
genc
ies,
the
Med
ical
Info
rmat
ion
Bur
eau,
and
so
forth
Patr
iot A
ct•E
xpan
ded
the
Sec
reta
ry o
f the
Tre
asur
y’s
auth
ority
to re
gula
te fi
nanc
ial t
rans
actio
ns,
parti
cula
rly th
ose
invo
lvin
g fo
reig
n in
divi
dual
s an
d en
titie
s•E
xpan
ded
the
defin
ition
of t
erro
rism
to
incl
ude
dom
estic
terr
oris
m, t
hus
enla
rgin
g th
enu
mbe
rofa
ctiv
ities
tow
hich
the
US
A
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
the
num
ber o
f act
iviti
es to
whi
ch th
e U
SA
PATR
IOT
Act
’s e
xpan
ded
law
enf
orce
men
t po
wer
s ca
n be
app
lied
Stat
e R
egul
atio
n•S
tate
regu
latio
n co
nsis
ts o
f–S
tatu
tes—
body
of l
aw p
asse
d by
the
Texa
s le
gisl
atur
e –
the
Texa
s In
sura
nce
Cod
e–R
ules
and
regu
latio
ns—
deve
lope
d by
the
Texa
s D
epar
tmen
t of I
nsur
ance
. The
per
son
in
char
ge o
f the
TD
I is
calle
d th
e co
mm
issi
oner
.
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
Com
mis
sion
er’s
Qua
lific
atio
ns•T
he C
omm
issi
oner
is a
ppoi
nted
by
the
gove
rnor
with
the
appr
oval
of t
he s
tate
S
enat
e–S
erve
s a
two-
year
term
of o
ffice
•Min
imum
of 1
0 ye
ars
of e
xper
ienc
e, o
f w
hich
five
yea
rs m
ust b
e in
the
insu
ranc
e or
insu
ranc
ere
gula
tory
busi
ness
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
or in
sura
nce
regu
lato
ry b
usin
ess
–May
be
an a
ttorn
ey o
r CPA
with
at l
east
five
ye
ars
of in
sura
nce
expe
rienc
e
TX_LAH_CN_3E.indb 7 1/27/2014 12:28:14 PM
8Le
sson
Tw
o In
sura
nce
Reg
ulat
ion
Hea
d of
the
Insu
ranc
e D
epar
tmen
t
•The
Com
mis
sion
er•C
omm
issi
oner
’s p
ower
s an
d du
ties
incl
ude
p–
Enf
orce
the
insu
ranc
e la
ws
of T
exas
–
Con
duct
inve
stig
atio
ns a
nd e
xam
inat
ions
–M
ake
reas
onab
le ru
les
and
regu
latio
ns–
Hire
app
ropr
iate
peo
ple
and
dele
gate
aut
horit
y ac
cord
ingl
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
Hea
d of
the
Insu
ranc
e D
epar
tmen
t
•Com
mis
sion
er’s
pow
ers
and
dutie
s in
clud
e–E
xam
ine
insu
rers
and
age
nts
•Inc
lude
s th
eir b
ooks
and
reco
rds
•Ins
urer
s m
ust b
e ex
amin
ed a
t lea
st o
nce
ever
y fiv
e ye
ars
or m
ore
ofte
n if
nece
ssar
y•A
gent
s ar
e ex
amin
ed m
ainl
y if
a co
mpl
aint
is re
ceiv
ed
by th
e TD
I
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
Hea
d of
the
Insu
ranc
e D
epar
tmen
t•C
omm
issi
oner
’s p
ower
s an
d du
ties
incl
ude
–Sub
poen
a w
itnes
ses
and
adm
inis
ter o
aths
–Iss
ue o
rder
s an
d no
tices
–Iss
ue in
sura
nce
licen
ses
and
certi
ficat
es o
f au
thor
ity–I
mpo
se p
enal
ties—
incl
udin
g fin
es,
susp
ensi
ons,
and
revo
catio
nsA
ppro
vein
sura
nce
polic
yfo
rms
sold
with
inth
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
–App
rove
insu
ranc
e po
licy
form
s so
ld w
ithin
the
stat
e–A
ppro
ve ra
tes
and
rate
incr
ease
s fo
r reg
ulat
ed
lines
of i
nsur
ance
Hea
d of
the
Insu
ranc
e D
epar
tmen
t
•Com
mis
sion
er d
oes
not w
rite
law
s;
legi
slat
ure
writ
es la
ws
•Com
mis
sion
er d
oes
not p
rose
cute
.–
Evi
denc
e of
a c
rime
is s
ent t
o th
e A
ttorn
ey G
ener
al.
•Com
mis
sion
er c
an h
ave
no fi
nanc
ial
inte
rest
with
any
insu
rer
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
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9Le
sson
Tw
o In
sura
nce
Reg
ulat
ion
Com
pany
Reg
ulat
ion
•Cer
tific
ate
of a
utho
rity
–Aut
horiz
ed/a
dmitt
ed in
sure
rs a
re is
sued
a
certi
ficat
e of
aut
horit
y•A
lega
l cer
tific
ate
issu
ed b
y th
e Te
xas
Dep
artm
ent o
f In
sura
nce
(TD
I)•G
rant
s in
sura
nce
com
pany
lega
l rig
ht to
writ
e in
sura
nce
cont
ract
s in
Tex
as
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
Com
pany
Reg
ulat
ion
•Ins
urer
sol
venc
y–P
rote
ctio
n of
the
cons
umer
aga
inst
insu
rer
inso
lven
cy is
one
of t
he p
rinci
pal c
once
rns
of
insu
ranc
e in
dust
ry–M
any
stat
es h
ave
adop
ted
regu
latio
ns fo
r the
es
tabl
ishm
ent o
f gua
rant
y as
soci
atio
ns
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
Com
pany
Reg
ulat
ion
•Gua
rant
y as
soci
atio
ns–O
rgan
ized
to h
elp
prot
ect c
laim
ants
, po
licyh
olde
rs, a
nnui
tant
s, a
nd c
redi
tors
in th
e ev
ent a
n in
sure
r doe
s be
com
e in
solv
ent
–The
gua
rant
y as
soci
atio
n in
clud
es•A
ll in
sure
rs a
utho
rized
to tr
ansa
ct b
usin
ess
with
in th
e st
ate
Ai
’th
iti
tt
tbi
ith
tt
i
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
–A
n in
sure
r’s a
utho
rizat
ion
to tr
ansa
ct b
usin
ess
in th
e st
ate
is
cont
inge
nt u
pon
mem
bers
hip
in th
e as
soci
atio
n
Com
pany
Reg
ulat
ion
•The
y es
tabl
ish
acco
unts
to c
olle
ct fu
nds
for t
he
adm
inis
tratio
n an
d as
sess
men
t of t
he a
ssoc
iatio
n•S
uper
vise
dby
Com
mis
sion
eran
dbo
ard
ofdi
rect
ors
•Sup
ervi
sed
by C
omm
issi
oner
and
boa
rd o
f dire
ctor
s–
Who
se d
utie
s ar
e sp
ecifi
ed b
y la
w
•Mem
ber i
nsur
ers
are
asse
ssed
on
the
perc
enta
ge o
f pr
emiu
ms
each
insu
rer h
as in
divi
dual
ly e
arne
d in
the
stat
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
TX_LAH_CN_3E.indb 9 1/27/2014 12:28:14 PM
10
Less
on T
wo
Insu
ranc
e R
egul
atio
n
Life
, Acc
iden
t, H
ealth
, and
Hos
pita
l Ser
vice
In
sura
nce
Gua
rant
y A
ssoc
iatio
n (L
AH
HSI
GA
)•M
anda
tory
par
ticip
atio
n•F
unde
d by
dire
ct a
sses
smen
ts•A
gent
s pr
ohib
ited
from
usi
ng th
e ex
iste
nce
of th
e G
uara
nty
Ass
ocia
tion
as a
sal
es a
id•N
o gu
aran
tees
for v
aria
ble
cont
ract
s•B
oard
of D
irect
ors
sele
cted
by
Com
mis
sion
er–C
ompr
ised
of n
ine
mem
bers
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
p•F
ive
are
insu
ranc
e in
dust
ry re
pres
enta
tives
•Fou
r rep
rese
nt th
e ge
nera
l pub
lic
Com
pany
Fin
anci
al S
tren
gth
•Rat
ing
serv
ices
/org
aniz
atio
ns–R
atin
g se
rvic
es/o
rgan
izat
ions
are
com
pani
es
that
rate
the
finan
cial
stre
ngth
ofin
sura
nce
that
rate
the
finan
cial
stre
ngth
of i
nsur
ance
ca
rrie
rs b
ased
on
an a
naly
sis
of c
ompa
ny c
laim
ex
perie
nce,
inve
stm
ent p
erfo
rman
ce,
man
agem
ent,
and
othe
r fac
tors
–The
se ra
tings
are
one
of t
he w
idel
y us
ed
indi
cato
rs o
f fin
anci
al h
ealth
in th
e in
sura
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
indu
stry
–The
TD
I doe
s no
t cal
cula
te a
nd p
ublis
h fin
anci
al s
treng
th ra
tings
Com
pany
Fin
anci
al S
tren
gth
•Rat
ing
serv
ices
/org
aniz
atio
ns–A
M B
est (
Bes
t’s R
atin
g)—
an e
xam
ple
com
pany
who
pub
lishe
s th
e fo
llow
ing
com
pany
ra
tings
:A
++, A
+ S
uper
ior
A, A
–E
xcel
lent
B++
, B+
Very
goo
d
D
Bel
ow m
inim
um
stan
dard
sE
Und
er s
tate
su
perv
isio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
B, B
–G
ood
C++
, C+
Fair
C, C
–M
argi
nal
supe
rvis
ion
FIn
liqu
idat
ion
Com
pany
Fin
anci
al S
tren
gth
•Rat
ing
serv
ices
/org
aniz
atio
ns–O
ther
exa
mpl
es o
f rat
ing
orga
niza
tions
incl
ude
•Sta
ndar
d &
Poo
r’s In
sura
nce
Rat
ing
Ser
vice
s•M
oody
’s In
vest
ors
Ser
vice
•W
eiss
Rat
ings
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
TX_LAH_CN_3E.indb 10 1/27/2014 12:28:15 PM
11
Less
on T
wo
Insu
ranc
e R
egul
atio
n
Age
nt R
egul
atio
n•D
efin
ition
of a
gent
–Any
one
who
sol
icits
insu
ranc
e or
aid
s in
pl
acin
g ris
ks, d
eliv
erin
g po
licie
s, o
r col
lect
ing
prem
ium
s on
beh
alf o
f an
insu
ranc
e co
mpa
ny•A
gent
s re
pres
ent t
heir
com
pani
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
Lice
nsin
g R
equi
rem
ents
•Pro
cess
to b
e lic
ense
d–B
e at
leas
t 18
year
s of
age
–Not
hav
e co
mm
itted
any
act
that
wou
ld b
e re
ason
for d
enia
l, su
spen
sion
, or r
evoc
atio
n of
an
insu
ranc
e lic
ense
–P
ay a
ppro
pria
te fe
es a
nd s
ucce
ssfu
lly p
ass
appl
icab
le e
xam
(s) –
Cha
rtere
d Li
fe
Und
erw
riter
s ar
e ex
empt
from
the
exam
. An
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
pat
torn
ey o
r CPA
who
sel
ls in
sura
nce
mus
t tak
e th
e ex
am–P
rovi
de fi
nger
prin
ts
Type
s of
Lic
ense
s•R
esid
ent a
gent
(ind
ivid
ual)
–Allo
ws
resi
dent
indi
vidu
als—
agen
t—to
sol
icit
and
sell
insu
ranc
e•N
onre
side
nt a
gent
(ind
ivid
ual)
–Allo
ws
nonr
esid
ent i
ndiv
idua
ls to
sol
icit
and
sell
insu
ranc
e•N
onre
side
nts
don’
thav
eto
take
the
Texa
ste
stif
they
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
Non
resi
dent
s do
nt h
ave
to ta
ke th
e Te
xas
test
if th
ey
have
the
sam
e ty
pe o
f lic
ense
in th
eir h
ome
stat
e.
They
mus
t, ho
wev
er, a
pply
for a
non
resi
dent
lice
nse.
Type
s of
Lic
ense
s•T
empo
rary
lice
nses
for i
nsur
ance
age
nt
appl
ican
ts–A
llow
s pe
rson
to o
pera
te a
s ag
ent w
hile
in th
e pr
oces
s of
get
ting
fully
lice
nsed
–9
0-da
y du
ratio
n an
d no
n-re
new
able
–Onl
y on
e in
a s
ix-m
onth
per
iod
–No
exam
requ
ired
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n24
No
exam
requ
ired
–Mus
t hav
e an
age
nt o
r com
pany
spo
nsor
TX_LAH_CN_3E.indb 11 1/27/2014 12:28:15 PM
12
Less
on T
wo
Insu
ranc
e R
egul
atio
n
Type
s of
Lic
ense
s•C
ouns
elor
–Allo
ws
pers
on to
“cou
nsel
” clie
nts
rega
rdin
g th
eir i
nsur
ance
nee
ds. D
oes
not a
llow
a p
erso
n to
sel
l ins
uran
ce w
ith th
is li
cens
e. T
hey
can
char
ge a
fee
for t
heir
advi
ce.
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n25
Type
s of
Lic
ense
s•B
usin
ess
and
finan
cial
ent
ities
•Mus
t als
o be
pro
perly
lice
nsed
in o
rder
to s
ell
ii
tht
tin
sura
nce
in th
e st
ate
•Typ
es o
f bus
ines
ses
and
finan
cial
ent
ities
incl
ude
–C
orpo
ratio
ns–
Lim
ited
liabi
lity
com
pani
es–
Par
tner
ship
s–
Ban
ks
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n26
Type
s of
Lic
ense
s•P
roce
ss in
clud
es•S
ubm
ittin
g ap
prop
riate
pap
erw
ork
and
payi
ng
id
fre
quire
d fe
es•H
avin
g at
leas
t one
offi
cer o
r par
tner
indi
vidu
ally
lic
ense
d w
ho is
resp
onsi
ble
for t
he e
ntity
’s in
sura
nce
oper
atio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n27
Sepa
rate
and
Dis
tinct
•Ban
king
and
Fin
anci
al In
stitu
tions
who
of
fer a
nnui
ties
as w
ell a
s FD
IC p
rodu
cts
mus
t mai
ntai
n a
sepa
rate
and
dis
tinct
offi
ce
area
to d
iscu
ss in
sura
nce
prod
ucts
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n28
TX_LAH_CN_3E.indb 12 1/27/2014 12:28:15 PM
13
Less
on T
wo
Insu
ranc
e R
egul
atio
n
Opt
Out
•Whe
n a
finan
cial
acc
ount
is fi
rst o
pene
d,
the
owne
r mus
t be
give
n th
e op
portu
nity
to
“Opt
Out
” of h
avin
g th
eir p
erso
nal
info
rmat
ion
shar
ed, d
istri
bute
d to
par
tner
co
mpa
nies
, or s
old
in th
e m
arke
tpla
ce
–If n
ot ta
ken
adva
ntag
e of
at t
he ti
me
the
acco
unt i
s o p
ened
, the
acc
ount
ow
ner m
ust b
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n29
p,
give
n th
e op
portu
nity
eac
h an
d ev
ery
year
unt
il ex
erci
sed
Exem
ptio
ns fr
om L
icen
sing
•C
erta
in p
erso
ns a
re e
xem
pt fr
om li
cens
ing
requ
irem
ents
•Thi
s ex
empt
ion
gene
rally
app
lies
to
pers
ons
who
are
not
act
ivel
y so
liciti
ng o
r se
lling
insu
ranc
e or
do
not r
ecei
ve
com
mis
sion
-bas
ed c
ompe
nsat
ion
An
atto
rney
orC
PAis
note
xem
ptif
they
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n30
•An
atto
rney
or C
PA is
not
exe
mpt
if th
ey
sell
insu
ranc
e
Mai
ntai
ning
a L
icen
se•U
nles
s re
voke
d or
sus
pend
ed, a
n ag
ent’s
lic
ense
rem
ains
in e
ffect
as
long
as
–Req
uire
d re
new
al fe
e ha
s be
en p
aid
–Con
tinui
ng e
duca
tion
(CE
) req
uire
men
ts h
ave
been
met
•For
non
resi
dent
age
nts,
mee
ting
CE
requ
irem
ents
for
thei
r res
iden
t sta
te ty
pica
lly s
uffic
es C
E re
quire
men
ts
fT
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n31
of T
exas
•An
agen
t lic
ense
d co
ntin
uous
ly in
Tex
as fo
r 20
year
s is
exe
mpt
from
CE
Con
tinui
ng E
duca
tion
•30
hou
rs p
er tw
o-ye
ar li
cens
e te
rm, i
nclu
ding
two
hour
s of
eth
ics/
cons
umer
pro
tect
ion
Atl
east
half
ofth
eho
urs
mus
tbe
earn
edin
a–
At l
east
hal
f of t
he h
ours
mus
t be
earn
ed in
a
clas
sroo
m o
r equ
ival
ent s
ettin
g •
Ther
e ar
e on
ly tw
o ac
cept
able
topi
c gr
oups
–
Gen
eral
insu
ranc
e–
Eth
ics/
cons
umer
pro
tect
ion
Ali
tk
fth
t
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n32
–A
ny li
cens
ee m
ay ta
ke c
ours
es fr
om th
ese
two
grou
ps•C
ours
es a
re n
ot d
ivid
ed b
y lic
ense
type
TX_LAH_CN_3E.indb 13 1/27/2014 12:28:16 PM
14
Less
on T
wo
Insu
ranc
e R
egul
atio
n
Age
nt L
icen
se R
enew
al•A
n ag
ent m
ay re
new
a li
cens
e th
at h
as n
ot
expi
red
or b
een
susp
ende
d or
revo
ked
by
filin
g a
rene
wal
app
licat
ion
and
nonr
efun
dabl
e fe
e w
ith th
e D
epar
tmen
t be
fore
the
licen
se e
xpire
s–I
f a li
cens
e ha
s be
en e
xpire
d fo
r 90
days
or
less
, the
app
lican
t may
rene
w b
y pa
ying
a
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n33
,pp
yy
py
glic
ense
rene
wal
pen
alty
of o
ne-h
alf o
f the
m
axim
um re
new
al fe
e al
low
ed b
y la
w, i
n ad
ditio
n to
the
regu
lar r
enew
al fe
e
Age
nt L
icen
se R
enew
al–I
f a li
cens
e ha
s be
en e
xpire
d fo
r mor
e th
an 9
0 da
ys (b
ut le
ss th
an o
ne y
ear)
, the
lice
nse
cann
otbe
rene
wed
cann
ot b
e re
new
ed•T
he a
pplic
ant m
ay o
btai
n a
new
lice
nse
(with
out t
he
requ
ired
licen
se e
xam
inat
ion)
but
mus
t pay
the
licen
se fe
e an
d a
pena
lty o
f 50%
of t
he fe
e–I
f a li
cens
e ha
s be
en e
xpire
d fo
r one
yea
r or
mor
e , th
e ap
plic
ant m
ust m
eet a
ll re
quire
men
ts
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n34
,pp
qfo
r a n
ew li
cens
e, in
clud
ing
qual
ifica
tion
by
exam
inat
ion
Mai
ntai
ning
a L
icen
se•C
hang
e of
add
ress
–Lic
ense
d ag
ent m
ust n
otify
Com
mis
sion
er o
f a
chan
ge in
add
ress
with
in 3
0 da
ys•A
ssum
ed n
ame
–An
insu
ranc
e ag
ent d
oing
bus
ines
s un
der a
ny
othe
r nam
e th
an th
e ag
ent’s
lega
l nam
e is
re
quire
d to
not
ify th
e C
omm
issi
oner
bef
ore
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n35
qy
usin
g th
e as
sum
ed n
ame
Com
mis
sion
s•A
n in
sure
r or l
icen
sed
agen
t may
not
pay
(o
r sha
re) c
omm
issi
ons
to a
per
son
for
selli
ng o
r neg
otia
ting
insu
ranc
e if
that
pe
rson
is n
ot li
cens
ed•O
ne a
gent
—on
e lic
ense
–C
anno
t hol
d m
ultip
le li
cens
es o
f sam
e ty
pe
sim
ulta
neou
sly
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n36
sim
ulta
neou
sly
TX_LAH_CN_3E.indb 14 1/27/2014 12:28:16 PM
15
Less
on T
wo
Insu
ranc
e R
egul
atio
n
Age
nt A
ppoi
ntm
ent
•To
repr
esen
t an
insu
ranc
e co
mpa
ny, t
he
agen
t mus
t be
appo
inte
d by
that
com
pany
•If t
he a
gent
repr
esen
ts m
ore
than
one
co
mpa
ny, t
he C
omm
issi
oner
mus
t be
notif
ied
of e
ach
appo
intm
ent
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n37
Term
inat
ion
of A
ppoi
ntm
ent
•Sub
ject
to a
gent
’s c
ontra
ct ri
ghts
, the
insu
rer
may
term
inat
e its
app
oint
ed a
gent
s at
any
tim
e•T
DI m
ust b
e no
tifie
d by
the
com
pany
with
the
reas
on w
hy th
e ap
poin
tmen
t is
bein
g te
rmin
ated
•Ter
min
atio
n of
a c
ompa
ny a
ppoi
ntm
ent d
oes
not t
erm
inat
e th
e ag
ent’s
sta
te in
sura
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n38
licen
se•P
olic
ies
sold
by
the
agen
t are
stil
l val
id b
ecau
se
com
pani
es is
sue
polic
ies
not a
gent
s
Fidu
ciar
y R
espo
nsib
ilitie
s•D
ue to
resp
onsi
bilit
ies
and
dutie
s of
age
nts,
th
ey a
re h
eld
in a
fidu
ciar
y ca
paci
ty (h
old
a iti
ffi
ilt
td
fid)
posi
tion
of fi
nanc
ial t
rust
and
con
fiden
ce)
•Pro
per h
andl
ing
of p
rem
ium
mon
ies
is s
ubje
ct
to s
tate
spe
cific
law
s, ru
les,
and
regu
latio
ns•A
ny m
isap
prop
riatio
n of
thes
e fu
nds
is s
ubje
ct
to s
tate
spe
cific
pen
altie
s an
d fin
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n39
•Any
com
min
glin
g (m
ixin
g pr
emiu
ms
with
age
nts
pers
onal
or b
usin
ess
mon
ey) i
s st
rictly
pr
ohib
ited
Felo
ny C
onvi
ctio
ns•A
ny in
sura
nce
agen
t who
is c
onvi
cted
of a
fe
lony
mus
t rep
ort t
he c
onvi
ctio
n to
the
Com
mis
sion
er w
ithin
30
days
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n40
TX_LAH_CN_3E.indb 15 1/27/2014 12:28:16 PM
16
Less
on T
wo
Insu
ranc
e R
egul
atio
n
Act
ing
With
out a
Lic
ense
•A p
erso
n w
ithou
t an
insu
ranc
e ag
ent’s
lic
ense
may
not
sol
icit
or s
ell i
nsur
ance
•Vio
latio
ns a
re s
ubje
ct to
sta
te s
peci
fic
pena
lties
and
fine
s–I
n Te
xas
•Cla
ss B
mis
dem
eano
r•U
pto
$500
fine
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n41
Up
to $
500
fine
•Can
not h
old
insu
ranc
e lic
ense
for f
ive
year
s
Dis
cipl
inar
y A
ctio
ns:
Pena
lties
and
Fin
es•C
omm
issi
oner
may
pla
ce o
n pr
obat
ion,
su
spen
d, re
voke
, or r
efus
e/de
ny to
issu
e or
re
new
a a
gent
’s li
cens
e or
may
levy
a c
ivil
pena
lty (f
ine)
for m
any
reas
ons,
incl
udin
g–P
rovi
ding
inco
rrec
t, m
isle
adin
g, o
r mat
eria
lly
untru
e in
form
atio
n in
the
licen
se a
pplic
atio
n –V
iola
ting
insu
ranc
ela
ws,
regu
latio
ns,
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n42
Viol
atin
g in
sura
nce
law
s, re
gula
tions
, su
bpoe
nas,
or o
rder
s
Dis
cipl
inar
y A
ctio
ns:
Pena
lties
and
Fin
es•R
easo
ns, i
nclu
ding
–Im
prop
erly
with
hold
ing,
mis
appr
opria
ting,
or
conv
ertin
g m
oney
or p
rope
rty re
ceiv
ed in
the
cour
se o
f doi
ng in
sura
nce
busi
ness
–Hav
ing
been
con
vict
ed o
f a fe
lony
–Usi
ng fr
audu
lent
, coe
rciv
e, o
r dis
hone
st
prac
tices
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n43
–Dem
onst
ratin
g in
com
pete
nce,
un
trust
wor
thin
ess,
or f
inan
cial
irre
spon
sibi
lity
in
the
cond
uct o
f bus
ines
s
Dis
cipl
inar
y A
ctio
ns:
Pena
lties
and
Fin
es•C
ease
and
des
ist o
rder
–Can
be
issu
ed b
y C
omm
issi
oner
in s
ituat
ions
w
here
viol
atio
nsha
veoc
curr
edor
itis
felt
aw
here
vio
latio
ns h
ave
occu
rred
or i
t is
felt
a lic
ense
e’s
cond
uct p
rese
nts
an im
med
iate
da
nger
to th
e pu
blic
–The
ord
er p
rohi
bits
the
indi
vidu
al o
r ent
ity fr
om
cont
inui
ng th
at p
ract
ice
–Fai
lure
to c
ompl
y ca
n re
sult
in s
ubst
antia
l fin
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n44
py
or lo
ss o
f lic
ense
–P
rohi
bits
the
indi
vidu
al o
r ent
ity fr
om c
ontin
uing
th
at p
ract
ice/
activ
ity
TX_LAH_CN_3E.indb 16 1/27/2014 12:28:17 PM
17
Less
on T
wo
Insu
ranc
e R
egul
atio
n
Dis
cipl
inar
y A
ctio
ns:
Pena
lties
and
Fin
es•T
he T
DI m
ay s
uspe
nd o
r rev
oke
the
licen
se. A
n ad
min
istra
tive
pena
lty (f
ine)
m
ay a
lso
be im
pose
d. T
he a
gent
can
–req
uest
a h
earin
g w
ithin
20
days
of n
otic
e. T
DI
has
to g
ive
at le
ast 1
0 da
ys a
dvan
ce n
otic
e of
th
e he
arin
g da
te.
•Ifa
licen
seis
revo
ked
ora
licen
se
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n45
If a
licen
se is
revo
ked
or a
lice
nse
appl
icat
ion
is d
enie
d, th
e pe
rson
mus
t wai
t 5
year
s to
reap
ply
for a
lice
nse
Reg
ulat
ed P
ract
ices
•C
ontr
olle
d bu
sine
ss–B
usin
ess
writ
ten
on a
n ag
ent’s
ow
n pe
rson
, im
med
iate
fam
ily m
embe
rs, o
r suc
h pe
rson
s as
th
e ag
ents
rela
tives
or b
usin
ess
asso
ciat
es–T
exas
allo
ws
an a
gent
to s
ell u
p to
75%
of t
heir
polic
ies
as c
ontro
lled
but n
ot 1
00%
–An
agen
t hol
ding
a te
mpo
rary
lice
nse
cann
ot
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n46
be p
aid
a co
mm
issi
on fo
r the
sal
e of
con
trolle
d bu
sine
ss o
r a re
plac
emen
t sal
e
Reg
ulat
ed P
ract
ices
•U
nfai
r tra
de p
ract
ices
–Con
sist
of u
nfai
r mar
ketin
g pr
actic
es a
nd u
nfai
r cl
aim
pra
ctic
es–V
iola
tion
can
carr
y a
crim
inal
pen
alty
•Cla
ss A
mis
dem
eano
r•U
p to
$50
0 fin
e, s
ix m
onth
s in
jail,
or b
oth
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n47
Reg
ulat
ed P
ract
ices
•U
nfai
r mar
ketin
g pr
actic
es–M
isre
pres
enta
tion—
a lie
•Lea
ding
som
eone
to b
elie
ve c
erta
in b
enef
its,
cond
ition
s, o
r adv
anta
ges
exis
t in
a po
licy
whe
n th
ey
do n
ot
•Res
ults
from
the
omis
sion
or i
ncor
rect
sta
tem
ent o
f a
mat
eria
l fac
t–F
alse
orde
cept
ive
adve
rtisi
ng
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n48
–Fal
se o
r dec
eptiv
e ad
verti
sing
TX_LAH_CN_3E.indb 17 1/27/2014 12:28:17 PM
18
Less
on T
wo
Insu
ranc
e R
egul
atio
n
Reg
ulat
ed P
ract
ices
•U
nfai
r mar
ketin
g pr
actic
es–T
wis
ting
•Usi
ng m
isre
pres
enta
tion
to c
ause
a p
erso
n to
dro
p ex
istin
g in
sura
nce
cove
rage
whe
n it
is n
ot in
the
best
in
tere
sts
of th
at p
erso
n. A
repl
acem
ent s
ale
mus
t be
nefit
the
cust
omer
not
just
the
agen
t.–D
efam
atio
n•M
akin
gor
alor
writ
ten
stat
emen
tsth
atar
efa
lse
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n49
•Mak
ing
oral
or w
ritte
n st
atem
ents
that
are
fals
e,
mal
icio
us, o
r der
ogat
ory
to th
e fin
anci
al c
ondi
tion
of
any
insu
rer
Reg
ulat
ed P
ract
ices
•U
nfai
r mar
ketin
g pr
actic
es–D
ispa
rage
men
t •M
isre
pres
entin
g ho
w a
com
pany
han
dles
cla
ims
or
othe
r bus
ines
s ac
tiviti
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n50
Reg
ulat
ed P
ract
ices
•U
nfai
r mar
ketin
g pr
actic
es–F
alse
fina
ncia
l sta
tem
ents
•Del
iber
atel
y m
ake
a fa
lse
finan
cial
sta
tem
ent
rega
rdin
g th
e so
lven
cy o
f an
insu
rer w
ith th
e in
tent
to
dece
ive
othe
rs
–Reb
atin
g •G
ivin
g so
met
hing
of v
alue
to a
pro
spec
tive
insu
ranc
e ap
plic
antt
oin
duce
the
purc
hase
ofa
polic
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n51
appl
ican
t to
indu
ce th
e pu
rcha
se o
f a p
olic
y
Reg
ulat
ed P
ract
ices
•U
nfai
r mar
ketin
g pr
actic
es–B
oyco
tt, c
oerc
ion,
and
intim
idat
ion
•The
insu
ranc
e pu
rcha
se m
ust b
e m
ade
volu
ntar
ily–U
nfai
r dis
crim
inat
ion
•Ille
gal t
o pe
rmit
disc
rimin
atio
n be
twee
n in
divi
dual
s of
sa
me
clas
s or
insu
ranc
e ris
k in
term
s of
rate
s,
prem
ium
s, fe
es, a
nd p
olic
y be
nefit
s be
caus
e of
thei
r ra
cecr
eed
orna
tiona
lorig
in
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n52
race
, cre
ed, o
r nat
iona
l orig
in
TX_LAH_CN_3E.indb 18 1/27/2014 12:28:17 PM
19
Less
on T
wo
Insu
ranc
e R
egul
atio
n
Reg
ulat
ed P
ract
ices
•A
dver
tisin
g or
illu
stra
tions
–No
adve
rtise
men
t may
fals
ely
lead
a p
erso
n to
b
lihi
lii
dd
bbe
lieve
this
pol
icy
is e
ndor
sed
by a
ny
gove
rnm
ent a
genc
y –A
test
imon
ial,
reco
mm
enda
tion,
or
endo
rsem
ent m
ade
by a
per
son
or e
ntity
who
is
not a
spo
kesp
erso
n sh
all r
epre
sent
the
curr
ent
opin
ion
ofth
ea
thor
and
shal
lref
lect
the
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n53
opin
ion
of th
e au
thor
and
sha
ll re
flect
the
auth
or's
per
sona
l opi
nion
s of
or e
xper
ienc
es
with
the
insu
rer o
r its
pro
duct
s
Reg
ulat
ed P
ract
ices
•A
dver
tisin
g or
illu
stra
tions
–If t
he c
urre
nt o
r illu
stra
ted
rate
of i
nter
est i
s hi
hth
tht
di
tt
thi
gher
than
the
guar
ante
ed in
tere
st ra
te, a
n ad
verti
sem
ent m
ay n
ot d
ispl
ay th
e gr
eate
r rat
e of
in
tere
st w
ith s
uch
prom
inen
ce a
s to
rend
er th
e gu
aran
teed
inte
rest
rate
obs
cure
. –I
f a p
erso
n is
com
pens
ated
, dire
ctly
or i
ndire
ctly
, fo
rmak
ing
ate
stim
onia
len
dors
emen
tor
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n54
for m
akin
g a
test
imon
ial,
endo
rsem
ent,
or
appr
aisa
l, th
is s
hall
be d
iscl
osed
in th
e ad
verti
sem
ent b
y la
ngua
ge s
ubst
antia
lly a
s fo
llow
s: “P
aid
End
orse
men
t.”
Reg
ulat
ed P
ract
ices
•A
dver
tisin
g or
illu
stra
tions
–Unl
awfu
l Ind
ucem
ent—
No
insu
rer m
ay o
ffer a
h
fii
lpu
rcha
ser o
f ins
uran
ce a
ny s
peci
al tr
eatm
ent
not a
llow
ed b
y la
w, in
clud
ing
spec
ial t
reat
men
t in
the
paym
ent o
f div
iden
ds.
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n55
Reg
ulat
ed P
ract
ices
•A
dver
tisin
g or
illu
stra
tions
–Dut
y of
age
nt—
Bef
ore
usin
g an
adv
ertis
emen
t d
fid
ib
i(
)f
hii
as d
efin
ed in
sub
sect
ion
(a) o
f thi
s se
ctio
n, a
n ag
ent m
ust f
ile th
e ad
verti
sem
ent w
ith th
e ho
me
offic
e of
the
insu
rer a
ffect
ed b
y th
e ad
verti
sem
ent f
or w
ritte
n ap
prov
al. A
n ag
ent i
s no
t req
uire
d to
file
adv
ertis
emen
ts re
ceiv
ed
from
the
insu
rer
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n56
from
the
insu
rer.
TX_LAH_CN_3E.indb 19 1/27/2014 12:28:18 PM
20
Less
on T
wo
Insu
ranc
e R
egul
atio
n
Reg
ulat
ed P
ract
ices
•
Adv
ertis
ing
or il
lust
ratio
ns–
Dut
y of
insu
rers
—E
very
insu
rer m
arke
ting
polic
ies
inth
isst
ate
shal
lest
ablis
han
dm
aint
ain
asy
stem
in th
is s
tate
sha
ll es
tabl
ish
and
mai
ntai
n a
syst
em
of c
ontro
l ove
r the
con
tent
, for
m, a
nd m
etho
d of
di
ssem
inat
ion
of a
ll ad
verti
sem
ents
con
cern
ing
its
polic
ies.
A s
yste
m o
f con
trol s
hall
incl
ude,
but
is n
ot
limite
d to
, req
uirin
g th
e ag
ents
, or a
ny o
ther
ent
ities
w
ho p
repa
re a
dver
tisem
ents
whi
ch n
ame
the
insu
rer o
r adv
ertis
e its
pol
icy,
to s
ubm
it th
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n57
prop
osed
adv
ertis
emen
t to
the
insu
rer's
hom
e of
fice
for w
ritte
n ap
prov
al o
f the
hom
e of
fice
prio
r to
use.
STO
LI (S
tran
ger O
wne
r Life
Insu
ranc
e) a
nd IO
LI
(Inve
stor
Ow
ner L
ife In
sura
nce)
•Life
insu
ranc
e bo
ught
by
a st
rang
er (i
nves
tor)
th
at h
as n
o in
sura
ble
inte
rest
in th
e lif
e of
the
insu
red
insu
red
•The
ow
ner (
stra
nger
or i
nves
tor)
pay
s th
e in
sure
d a
mon
thly
ben
efit
for a
sta
ted
perio
d of
tim
e or
ag
rees
to p
ay th
e in
sure
d’s
bene
ficia
ry a
par
tial
paym
ent o
f the
dea
th b
enef
it if
the
insu
red
dies
Rec
omm
ende
dth
atag
ents
and
ins
reds
chec
k
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n58
•Rec
omm
ende
d th
at a
gent
s an
d in
sure
dsch
eck
with
the
TDI b
efor
e be
com
ing
invo
lved
Reg
ulat
ed P
ract
ices
•U
nfai
r cla
im p
ract
ices
–Inc
lude
, but
not
lim
ited
to
•Mis
repr
esen
ting
to c
laim
ants
mat
eria
l fac
ts o
r pol
icy
prov
isio
ns•N
ot a
ttem
ptin
g in
goo
d fa
ith to
brin
g ab
out p
rom
pt,
fair,
and
equ
itabl
e se
ttlem
ent w
hen
liabi
lity
has
beco
me
reas
onab
ly c
lear
•Fai
ling
to s
ettle
cla
ims
prom
ptly,
whe
re li
abili
ty h
as
bbl
ld
tift
h
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n59
beco
me
reas
onab
ly c
lear
, und
er o
ne p
ortio
n of
the
insu
ranc
e po
licy
in o
rder
to in
fluen
ce s
ettle
men
ts
unde
r oth
er p
ortio
ns o
f the
insu
ranc
e po
licy
cove
rage
Reg
ulat
ed P
ract
ices
•U
nfai
r cla
im p
ract
ices
–Inc
lude
, but
not
lim
ited
to•F
ailin
g w
ithin
a re
ason
able
tim
e to
affi
rm o
r den
y co
vera
ge o
f a c
laim
or t
o su
bmit
a re
serv
atio
n of
rig
hts
to a
pol
icyh
olde
r•A
ttem
ptin
g to
enf
orce
a fu
ll an
d fin
al re
leas
e of
a
clai
m w
hen
only
a p
artia
l pay
men
t has
bee
n m
ade
• Ref
usin
gto
pay
acl
aim
with
outc
ondu
ctin
ga
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n60
Ref
usin
g to
pay
a c
laim
with
out c
ondu
ctin
g a
reas
onab
le in
vest
igat
ion
with
resp
ect t
o th
e cl
aim
TX_LAH_CN_3E.indb 20 1/27/2014 12:28:18 PM
Lesson ThreeAgency and Contracts
TX_LAH_CN_3E.indb 21 1/27/2014 12:28:18 PM
22
Less
on T
hree
A
genc
y an
d C
ontr
acts
Less
onTh
ree
Less
on T
hree
Age
ncy
and
Con
trac
ts
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Age
ncy
Law
Prin
cipl
es•A
genc
y–R
elat
ions
hip
in w
hich
one
per
son
is a
utho
rized
to
repr
esen
t and
act
on
beha
lf of
ano
ther
pe
rson
or c
orpo
ratio
n •A
cor
pora
tion
is a
lega
l per
son
but c
anno
t act
for
itsel
f, so
it m
ust a
ct th
roug
h ag
ents
or e
mpl
oyee
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
Age
ncy
Law
Prin
cipl
es•A
gent
–Per
son
auth
oriz
ed to
act
on
beha
lf of
ano
ther
pe
rson
, who
is c
alle
d th
e pr
inci
pal
–In
the
insu
ranc
e in
dust
ry, t
he a
gent
is th
e sa
les
repr
esen
tativ
e fo
r the
insu
ranc
e co
mpa
ny
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
Age
ncy
Law
Prin
cipl
es•P
rinci
pal/i
nsur
er
–In
insu
ranc
e in
dust
ry, t
he p
rinci
pal i
s th
e in
sura
nce
com
pany
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
TX_LAH_CN_3E.indb 22 1/27/2014 12:28:18 PM
23
Less
on T
hree
A
genc
y an
d C
ontr
acts
The
Age
nt/P
rinci
pal R
elat
ions
hip
•Age
nt: s
omeo
ne w
ho a
cts
on b
ehal
f of
anot
her c
alle
d th
e pr
inci
pal—
party
to w
hom
ac
tion
is ta
ken
•Age
nt a
utho
rity
–An
agen
t is
prov
ided
aut
horit
y th
roug
h th
e ag
ency
con
tract
–C
ontra
ctgr
ants
anag
entt
heau
thor
ityto
acta
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
–Con
tract
gra
nts
an a
gent
the
auth
ority
to a
ct a
s a
lega
l rep
rese
ntat
ive
for t
he c
ompa
ny
Dut
ies
and
Res
pons
ibili
ties
of th
e A
gent
•Age
nt h
as a
fidu
ciar
y re
spon
sibi
lity
to th
e in
sure
d, th
e in
sure
r, th
e ap
plic
ant f
or
insu
ranc
e, c
urre
nt c
lient
s, a
nd s
o fo
rth
(fidu
ciar
y is
a p
erso
n in
a p
ositi
on o
f fin
anci
al tr
ust a
nd c
onfid
ence
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
Age
nts’
Dut
ies
to th
e In
sure
d•A
ct in
insu
red’
s be
st in
tere
sts
and
com
ply
with
al
l law
s•T
o ev
alua
te th
e cl
ient
’s in
sura
nce
need
s an
d m
ake
prop
er re
com
men
datio
ns w
ith re
gard
to
cove
rage
•I
f an
agen
t fai
ls to
reco
mm
end
a ne
eded
co
vera
ge o
r lea
ves
a co
vera
ge g
ap th
at re
sults
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
in a
loss
that
is n
ot c
over
ed, t
he in
sure
d m
ay
have
a v
alid
cla
im a
gain
st th
e ag
ent
Age
nts’
Dut
ies
to th
e In
sure
r•A
ct in
acc
orda
nce
to a
genc
y co
ntra
ct, t
hus
for
bene
fit o
f the
insu
rer
•Mus
t acc
ount
for a
ll pr
emiu
ms
agen
t is
auth
oriz
ed to
col
lect
, and
mus
t not
em
bezz
le o
r co
mm
ingl
e th
ose
fund
s•A
n ag
ent i
s gu
ilty
of c
omm
ingl
ing
whe
n pr
emiu
m m
oney
acc
epte
d by
the
agen
t fro
m a
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
insu
red
or a
pplic
ant i
s de
posi
ted
in th
e ag
ents
pe
rson
al o
r bus
ines
s ac
coun
t
TX_LAH_CN_3E.indb 23 1/27/2014 12:28:19 PM
24
Less
on T
hree
A
genc
y an
d C
ontr
acts
Age
nts’
Dut
ies
toth
e In
sure
r•I
f an
agen
t inc
orre
ctly
impl
ies
or te
lls a
n in
sure
d th
ere
is c
over
age
unde
r a p
olic
y w
hen
no c
over
age
actu
ally
exi
sts
unde
r th
at p
olic
y, th
e in
sure
r cou
ld b
e he
ld li
able
fo
r the
loss
(est
oppe
l) •T
he in
sure
r mig
ht h
ave
to p
ay th
e lo
ss b
ut
wou
ldth
enha
vea
valid
clai
mag
ains
tthe
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
wou
ld th
en h
ave
a va
lid c
laim
aga
inst
the
agen
t and
cou
ld s
ue to
reco
ver t
he a
mou
nt
paid
to th
e in
sure
d
Elem
ents
of a
Leg
al C
ontr
act (
LAC
C)
•Leg
al o
bjec
tive
–Con
tract
mus
t be
for a
lega
l pur
pose
and
not
co
ntra
ry to
pub
lic p
olic
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
Elem
ents
of a
Leg
al C
ontr
act (
LAC
C)
•Agr
eem
ent (
offe
r and
acc
epta
nce)
–Res
ults
from
an
offe
r by
one
party
and
an
acce
ptan
ce b
y an
othe
r–O
ffer c
an c
ome
from
the
appl
ican
t or i
nsur
er•I
n ei
ther
cas
e, m
ust b
e de
finite
and
cle
ar in
its
term
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
Elem
ents
of a
Leg
al C
ontr
act (
LAC
C)
•Agr
eem
ent (
offe
r and
acc
epta
nce)
–Acc
epta
nce
mus
t be
unco
nditi
onal
and
un
qual
ified
•For
exa
mpl
e:
–A
fter r
evie
win
g an
app
licat
ion,
the
insu
rer i
ssue
s a
polic
y w
ith
a hi
gher
rate
cov
erag
e th
an a
pplie
d fo
r—th
e in
sure
r has
mad
e a
coun
tero
ffer
–Th
e ap
plic
ants
mus
t now
dec
ide
if th
ey w
ant t
o ac
cept
; if t
hey
dth
it
t
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
do, t
here
is a
con
tract
TX_LAH_CN_3E.indb 24 1/27/2014 12:28:19 PM
25
Less
on T
hree
A
genc
y an
d C
ontr
acts
Elem
ents
of a
Leg
al C
ontr
act (
LAC
C)
•Com
pete
nt p
artie
s –B
oth
parti
es m
ust h
ave
the
lega
l cap
acity
to
mak
e a
cont
ract
–Per
sons
age
18,
san
e, a
nd s
ober
are
co
nsid
ered
com
pete
nt. A
n ex
cept
ion
in T
exas
is
a pe
rson
can
app
ly fo
r life
insu
ranc
e at
age
14.
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
Elem
ents
of a
Leg
al C
ontr
act (
LAC
C)
•Con
side
ratio
n –E
ach
party
to th
e co
ntra
ct m
ust g
ive
the
othe
r so
met
hing
of v
alue
–For
insu
rer,
cons
ists
of p
rom
ises
con
tain
ed in
po
licy
cont
ract
–For
insu
red,
con
sist
s of
sta
tem
ents
mad
e in
ap
plic
atio
n an
d pa
ymen
t of p
rem
ium
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
Dis
tinct
Cha
ract
eris
tics
of In
sura
nce
Con
trac
ts•U
nila
tera
l con
trac
t—ex
chan
ge o
f an
act
for a
pro
mis
e. L
egal
ly e
nfor
ceab
le o
n on
ly
one
party
to th
e co
ntra
ct.
–Onl
y th
e in
sure
r has
pro
mis
e to
kee
p
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
Dis
tinct
Cha
ract
eris
tics
of In
sura
nce
Con
trac
ts•C
ontr
act o
f adh
esio
n –T
he c
ontra
ct m
ust b
e ac
cept
ed b
y th
e ow
ner
exac
tly a
s w
ritte
n by
the
com
pany
—in
sure
d ca
n “t
ake
it or
leav
e it”
–Bec
ause
onl
y in
sure
rs d
raw
up
cont
ract
s,
cour
ts g
ener
ally
hav
e he
ld th
at a
ny a
mbi
guity
(w
hene
ver a
term
in th
e po
licy
coul
d be
i
di
diff
)ih
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
inte
rpre
ted
in tw
o di
ffere
nt w
ays)
in th
e co
ntra
ct
shou
ld b
e in
terp
rete
d in
favo
r of t
he in
sure
d
TX_LAH_CN_3E.indb 25 1/27/2014 12:28:19 PM
26
Less
on T
hree
A
genc
y an
d C
ontr
acts
Lega
l Iss
ues
Affe
ctin
g In
sura
nce
Con
trac
ts•R
epre
sent
atio
ns–A
sta
tem
ent b
elie
ved
to b
e tru
e to
the
best
of
one’
s kn
owle
dge
–Ans
wer
to q
uest
ions
by
insu
reds
/app
lican
ts a
re
repr
esen
tatio
ns–U
nles
s fra
udul
ent o
r a m
ater
ial
mis
repr
esen
tatio
n, th
e po
licy
cann
ot b
e vo
ided
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
•A m
isre
pres
enta
tion
is m
ater
ial i
f the
insu
ranc
e co
mpa
ny, h
avin
g kn
own
the
true
fact
s, w
ould
hav
e re
fuse
d to
issu
e th
e po
licy
as a
pplie
d
Lega
l Iss
ues
Affe
ctin
g In
sura
nce
Con
trac
ts•W
arra
ntie
s–S
tate
men
ts c
onsi
dere
d to
be
guar
ante
ed to
be
true
–Bre
ach
of w
arra
nty
prov
ides
gro
unds
for
void
ing
the
cont
ract
–Ans
wer
s to
que
stio
ns o
n th
e ap
plic
atio
n ar
e no
t w
arra
ntie
s, th
ey a
re re
pres
enta
tions
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
TX_LAH_CN_3E.indb 26 1/27/2014 12:28:19 PM
Lesson FourUnderwriting Basics
TX_LAH_CN_3E.indb 27 1/27/2014 12:28:19 PM
28
Less
on F
our
Und
erw
ritin
g Ba
sics
Less
onFo
urLe
sson
Fou
rU
nder
writ
ing
Bas
ics
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Afte
r the
Pro
spec
t Agr
ees
to B
uy•A
fter p
rosp
ect h
as a
gree
d to
pur
chas
e th
e in
sura
nce
cont
ract
, thr
ee fu
nctio
ns m
ust
take
pla
ce
–Und
erw
ritin
g pr
oces
s w
ill b
egin
—ev
alua
tion
of
the
risk
–App
licat
ion
will
be
eith
er a
ppro
ved
or n
ot
a ppr
oved
, re
sulti
ng in
the
polic
y ei
ther
bei
ng
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
ppg
py
gis
sued
or d
eclin
ed
–If i
ssue
d, a
gent
will
del
iver
the
polic
y to
the
polic
y ow
ner
Rel
ated
Def
initi
ons
•App
lican
t—in
divi
dual
who
fills
out
the
appl
icat
ion
and
appl
ies
for t
he in
sura
nce
•Pol
icy
owne
r—in
divi
dual
who
acc
epts
the
po
licy
whe
n de
liver
ed a
nd h
as th
e sp
ecia
l po
licy
owne
r’s ri
ghts
•Thi
rd-p
arty
ow
ners
hip—
refe
rs to
a s
ituat
ion
whe
re th
e po
licy
is o
wne
d by
som
eone
oth
er
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
than
the
insu
red
•Ins
ured
—in
divi
dual
who
se li
fe is
cov
ered
by
the
polic
y
Rel
ated
Def
initi
ons
•Ben
efic
iary
—in
divi
dual
(s) o
r bus
ines
s(es
) w
hom
the
polic
y ow
ner h
as n
amed
to
rece
ive
the
bene
fits
of th
e po
licy
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
TX_LAH_CN_3E.indb 28 1/27/2014 12:28:19 PM
29
Less
on F
our
Und
erw
ritin
g Ba
sics
The
Und
erw
ritin
g Pr
oces
s•T
he u
nder
writ
er’s
job
–To
use
all t
he in
form
atio
n ga
ther
ed fr
om m
any
sour
ces
to d
eter
min
e w
heth
er to
acc
ept a
pa
rticu
lar a
pplic
ant
–If a
pplic
ant i
s ac
cept
ed, t
o m
ake
sure
pol
icy
is
prop
erly
rate
d –K
ey p
urpo
se is
to p
rote
ct in
sura
nce
com
pany
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
agai
nst a
dver
se s
elec
tion,
whi
ch e
xist
s w
hen
the
grou
p of
risk
s in
sure
d is
mor
e lik
ely
than
th
e av
erag
e gr
oup
to e
xper
ienc
e lo
ss
Sour
ces
of U
nder
writ
ing
Info
rmat
ion
•App
licat
ion
•Med
ical
exa
ms
and
hist
oryy
•Ins
pect
ion
repo
rts•I
nves
tigat
ive
Con
sum
er R
epor
ts•A
ttend
ing
Phy
sici
an’s
Sta
tem
ent
• The
Med
ical
Info
rmat
ion
Bur
eau
(MIB
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
The
Med
ical
Info
rmat
ion
Bur
eau
(MIB
)•T
he a
gent
The
App
licat
ion
•Vita
l doc
umen
t and
acc
urac
y of
info
rmat
ion
is c
ritic
al d
ue to
–App
licat
ion
is u
sual
ly m
ade
part
of th
e le
gal
cont
ract
–I
t is
the
unde
rwrit
er’s
prim
ary
sour
ce fo
r in
form
atio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
The
App
licat
ion
•Age
nt’s
repo
rt/S
tate
men
t (P
art I
II)
–Pro
vide
s ce
rtain
info
rmat
ion
agen
t is
awar
e of
re
gard
ing
the
prop
osed
insu
red
–Inv
olve
s co
nfid
entia
l com
mun
icat
ion
and
clar
ifica
tion
betw
een
the
agen
t and
the
unde
rwrit
er, i
nclu
ding
age
nt’s
obs
erva
tions
and
re
latio
nshi
p to
the
insu
red
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
–Thi
s se
ctio
n is
nei
ther
see
n no
r sig
ned
by th
e ap
plic
ant
TX_LAH_CN_3E.indb 29 1/27/2014 12:28:20 PM
30
Less
on F
our
Und
erw
ritin
g Ba
sics
The
App
licat
ion
•P
rope
r sig
natu
res
of a
ll pa
rties
to th
e co
ntra
ct–R
equi
red
sign
atur
es
Mi
if
•Min
imum
of t
wo
–A
pplic
ant (
if al
so th
e in
sure
d)–
Age
nt
•Thr
ee if
pro
pose
d in
sure
d is
diff
eren
t tha
n th
e ap
plic
ant o
r pol
icy
owne
r–
App
lican
t and
/or o
wne
r
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
–P
ropo
sed
insu
red
–A
gent
The
App
licat
ion
•Pro
per s
igna
ture
s–A
pplic
ant’s
sig
natu
re c
ertif
ies
that
the
stat
emen
ts m
ade
on th
e ap
plic
atio
n ar
e be
lieve
d to
be
true
to th
e be
st o
f the
app
lican
t’s
know
ledg
e (r
epre
sent
atio
n st
atem
ents
)–S
igna
ture
aut
horiz
es th
e in
sure
r to
colle
ct
unde
rwrit
ing
info
rmat
ion,
suc
h as
med
ical
di
df
h
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
repo
rts, c
redi
t rep
orts
, and
so
forth
–Ben
efic
iary
doe
s no
t sig
n
The
App
licat
ion
•Cha
nges
in th
e ap
plic
atio
n–A
ny c
hang
es m
ade
in th
e ap
plic
atio
n af
ter i
t is
com
plet
ed m
ust b
e in
itial
ed b
y th
e ap
plic
ant
•Ini
tialin
g by
app
lican
t pro
vide
s in
sure
r ne
cess
ary
verif
icat
ion
that
app
lican
t is
awar
e of
any
cha
nge
on th
e ap
plic
atio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
The
App
licat
ion
•Inc
ompl
ete
appl
icat
ions
–Will
be
retu
rned
to a
gent
for c
ompl
etio
n–R
esul
ts in
a d
elay
in th
e un
derw
ritin
g pr
oces
s•A
pplic
ant w
ill h
ave
to w
ait t
o ha
ve th
e in
sura
nce
prot
ectio
n is
sued
–I
f app
lican
t doe
s no
t ans
wer
som
e qu
estio
ns o
n th
e ap
plic
atio
n an
d th
e in
sure
r iss
ues
the
polic
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
with
out o
btai
ning
thes
e an
swer
s, th
e in
sure
r w
aive
s its
righ
t to
know
and
use
this
in
form
atio
n. T
his
is c
alle
d a
wai
ver.
TX_LAH_CN_3E.indb 30 1/27/2014 12:28:20 PM
31
Less
on F
our
Und
erw
ritin
g Ba
sics
The
App
licat
ion
•Bac
kdat
ing
of a
pplic
atio
ns–T
he p
ract
ice
of m
akin
g a
polic
y ef
fect
ive
at a
da
te e
arlie
r tha
n th
e pr
esen
t–I
s us
ed to
sav
e ag
e (a
nd p
rem
ium
) for
the
appl
ican
t and
is a
llow
able
with
cer
tain
type
s of
lif
e po
licie
s•M
axim
um in
Tex
as is
six
mon
ths
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
Atte
ndin
g Ph
ysic
ian’
s St
atem
ent (
APS
)
•Afte
r rev
iew
of a
pplic
atio
n, u
nder
writ
er m
ay
requ
est a
n A
PS
from
the
prop
osed
in
sure
d’s
doct
or
•Des
igne
d to
obt
ain
mor
e sp
ecifi
c in
form
atio
n ab
out a
par
ticul
ar m
edic
al
prob
lem
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
Inve
stig
ativ
e C
onsu
mer
(Ins
pect
ion)
R
epor
ts•P
rovi
de in
form
atio
n on
a c
onsu
mer
, in
clud
ing
–Cha
ract
er•G
ener
al re
puta
tion,
per
sona
l hab
its, m
ode
of li
ving
, an
d so
forth
–Cre
dit h
isto
ry (c
an th
e ap
plic
ant a
fford
the
insu
ranc
e an
d is
ther
e a
poss
ible
mor
al h
azar
d)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
–Crim
inal
his
tory
Inve
stig
ativ
e C
onsu
mer
(Ins
pect
ion)
R
epor
ts•C
onsu
mer
mus
t be
clea
rly a
nd a
ccur
atel
y to
ld a
bout
the
repo
rt in
writ
ing
•Con
sum
er R
epor
t Not
ifica
tion
ofte
n pa
rt of
th
e ap
plic
atio
n–I
f so,
age
nt m
ust c
lear
ly p
oint
this
out
to th
e ap
plic
ant a
nd g
ive
the
appl
ican
t a c
opy
of th
is
notif
icat
ion
atth
etim
eof
appl
icat
ion
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
notif
icat
ion
at th
e tim
e of
app
licat
ion
TX_LAH_CN_3E.indb 31 1/27/2014 12:28:20 PM
32
Less
on F
our
Und
erw
ritin
g Ba
sics
Med
ical
Info
rmat
ion
Bur
eau
(MIB
)•N
onpr
ofit
trade
ass
ocia
tion
that
mai
ntai
ns
med
ical
info
rmat
ion
on a
pplic
ants
for l
ife a
nd
hlth
ihe
alth
insu
ranc
e•M
IB re
port
help
s un
derw
riter
ver
ify a
nsw
ers
to
med
ical
que
stio
ns o
n th
e ap
plic
atio
n•M
IB re
port
cann
ot b
e us
ed a
s th
e so
le b
asis
for
decl
inin
g an
app
licat
ion
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
•Med
ical
info
rmat
ion
mai
ntai
ned
by th
e M
IB
com
es fr
om in
sura
nce
com
pani
es, n
ot d
irect
ly
from
doc
tors
or h
ospi
tals
Med
ical
Exa
min
atio
ns a
nd T
estin
g (L
ab
Test
s)•P
rovi
de a
dditi
onal
info
rmat
ion
for t
he
unde
rwrit
ing
proc
ess
•Con
duct
ed b
y pa
ram
edic
s or
phy
sici
ans
at
the
insu
rer’s
exp
ense
•Typ
ical
ly m
ore
com
mon
with
the
unde
rwrit
ing
of li
fe in
sura
nce
than
with
he
alth
insu
ranc
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
heal
th in
sura
nce
Med
ical
Exa
min
atio
ns a
nd T
estin
g (L
ab
Test
s)•I
nclu
des
test
ing
for A
IDS
and
AID
S-r
elat
ed
cond
ition
s–
Que
stio
nsre
latin
gto
AID
Sor
AID
S-r
elat
edQ
uest
ions
rela
ting
to A
IDS
or A
IDS
rela
ted
cond
ition
s m
ust b
e ad
min
iste
red
in a
non
-di
scrim
inat
ory
man
ner
–A
pplic
ants
mus
t giv
e w
ritte
n ap
prov
al fo
r thi
s te
stin
g–
Mos
t leg
isla
tion
conc
erni
ng th
is is
sue
is d
esig
ned
to e
nsur
e th
at in
sure
rs d
o no
t dis
crim
inat
e w
hen
mak
ing
deci
sion
sag
ains
tper
sons
who
have
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
mak
ing
deci
sion
s ag
ains
t per
sons
who
hav
e ce
rtain
cha
ract
eris
tics
(i.e.
, sex
ual o
rient
atio
n,
mar
ital s
tatu
s, g
eogr
aphi
c ar
ea o
f res
iden
ce, a
nd
so fo
rth)
Hea
lth In
sura
nce
Port
abili
ty a
nd
Acc
ount
abili
ty A
ct (H
IPA
A) D
iscl
osur
es•I
mpo
ses
spec
ific
requ
irem
ents
on
heal
th
care
pro
vide
rs w
ith re
spec
t to
the
disc
losu
re o
f ins
ured
s’ h
ealth
and
med
ical
in
form
atio
n•H
ealth
car
e pr
ovid
ers
mus
t pre
serv
e pa
tient
con
fiden
tialit
y an
d pr
otec
t thi
s in
form
atio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
info
rmat
ion
TX_LAH_CN_3E.indb 32 1/27/2014 12:28:20 PM
33
Less
on F
our
Und
erw
ritin
g Ba
sics
Cla
ssifi
catio
n of
Ris
ks•S
tand
ard
risk
–App
lican
t mee
ts th
e in
sure
r’s n
orm
al
unde
rwrit
ing
guid
elin
es–R
isk
prof
ile o
f an
aver
age
risk
–Ins
urer
cha
rges
its
stan
dard
pre
miu
m
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
Cla
ssifi
catio
n of
Ris
ks•P
refe
rred
risk
–App
lican
t exc
eeds
the
insu
rer’s
nor
mal
un
derw
ritin
g gu
idel
ines
–Ris
k pr
ofile
that
has
the
low
est c
hanc
e of
loss
fo
r the
insu
rer
–Ins
urer
cha
rges
pre
miu
m lo
wer
than
its
norm
al
stan
dard
pre
miu
m
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
Cla
ssifi
catio
n of
Ris
ks•S
ubst
anda
rd ri
sk–A
pplic
ant d
oes
not m
easu
re u
p to
insu
rer’s
un
derw
ritin
gst
anda
rds
unde
rwrit
ing
stan
dard
s–R
isk
prof
ile b
elow
that
of a
n av
erag
e ris
k–I
nsur
er m
ay s
till i
ssue
pol
icy,
but
will
typi
cally
ei
ther
cha
rge
an in
crea
sed
prem
ium
(rat
e up
) or
issu
e po
licy
cove
rage
exc
lusi
ons
(wai
ver o
r re
stric
tive
rider
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
)•D
eclin
ed (n
ot a
cla
ssifi
catio
n)–R
isk
prof
ile is
so
high
that
insu
rer m
akes
the
deci
sion
to d
eclin
e/re
ject
the
appl
icat
ion
Prem
ium
Mod
e•
The
prem
ium
is th
e co
nsid
erat
ion
give
n by
the
insu
red
for t
he c
over
age
prov
ided
by
the
insu
rer
The
frequ
ency
ofpa
ymen
tis
refe
rred
toas
the
•Th
e fre
quen
cy o
f pay
men
t is
refe
rred
to a
s th
e pr
emiu
m m
ode
and
incl
udes
–A
nnua
l—ty
pica
lly th
e le
ast e
xpen
sive
mod
e fo
r the
po
licy
owne
r–
Sem
i-ann
ual
Qua
rterly
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n24
–Q
uarte
rly–
Mon
thly
—ty
pica
lly th
e m
ost e
xpen
sive
mod
e fo
r th
e po
licy
owne
r
TX_LAH_CN_3E.indb 33 1/27/2014 12:28:21 PM
34
Less
on F
our
Und
erw
ritin
g Ba
sics
The
App
licat
ion
Proc
ess
App
licat
ion
rece
ived
at h
ome
offic
e
Und
erw
ritin
g pr
oces
s be
gins
Pre
miu
m (i
f any
was
pa
id w
ith th
e ap
plic
atio
n)
If pr
efer
red
orst
anda
rd ri
skIf
the
appl
icat
ion
is
dec
lined
Pol
icy
is is
sued
and
sen
t to
age
nt fo
r del
iver
y to
If su
bsta
ndar
d ris
k
Com
pany
cou
nter
offe
rs,
and
send
s a
“rate
d” p
olic
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n25
will
be fu
lly re
fund
ed
Agen
t del
iver
s an
d ex
plai
ns c
over
age
and
any
ratin
gs. I
f ow
ner a
ccep
ts p
olic
y,
has
10 d
ays
to d
ecid
e to
kee
p po
licy
as
issu
ed o
r ret
urn
it fo
r a fu
ll re
fund
the
polic
y ow
ner
to a
gent
for d
eliv
ery
TX_LAH_CN_3E.indb 34 1/27/2014 12:28:21 PM
Lesson FiveSelling Life Insurance
TX_LAH_CN_3E.indb 35 1/27/2014 12:28:21 PM
36
Less
on F
ive
Selli
ng L
ife In
sura
nce
Less
onFi
veLe
sson
Fiv
eSe
lling
Life
Insu
ranc
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Impo
rtan
ce o
f Life
Insu
ranc
e•L
ife in
sura
nce
prod
ucts
pro
vide
fina
ncia
l se
curit
y•C
osts
ass
ocia
ted
with
dea
th in
clud
e–M
edic
al b
ills
from
a fi
nal i
llnes
s or
acc
iden
t–F
uner
al e
xpen
ses
–Rem
aini
ng d
ebt (
i.e.,
loan
s, c
redi
t car
ds, a
nd
sofo
rth)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
so fo
rth)
Impo
rtan
ce o
f Life
Insu
ranc
e•F
amily
and
oth
ers
who
wer
e fin
anci
ally
de
pend
ent u
pon
the
dece
ased
stil
l hav
e fin
anci
al n
eeds
, inc
ludi
ng–M
ortg
age
or re
nt p
aym
ents
–Im
med
iate
inco
me
need
s (i.
e., g
roce
ries,
ut
ilitie
s, c
loth
ing,
and
so
forth
)–L
onge
rter
mne
eds
(i.e.
,chi
ldre
n’s
educ
atio
n,
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
Long
er te
rm n
eeds
(i.e
., ch
ildre
ns
educ
atio
n,
retir
emen
t inc
ome
for s
pous
e, a
nd s
o fo
rth)
Pers
onal
Use
s of
Life
Insu
ranc
e•C
ash
accu
mul
atio
n–W
hole
life
insu
ranc
e po
licie
s ac
cum
ulat
e a
cash
val
ue fo
r the
insu
red
that
can
be
used
as
colla
tera
l for
pol
icy
loan
s in
the
even
t of a
n em
erge
ncy
or in
late
r yea
rs to
sup
plem
ent
retir
emen
t inc
ome
–The
cas
h va
lue
of a
life
insu
ranc
e po
licy
is
ff
dli
ib
fib
ii
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
ofte
n re
ferr
ed to
as
a liv
ing
bene
fit b
ecau
se it
is
avai
labl
e to
the
polic
y ow
ner w
hile
the
insu
red
is s
till a
live
TX_LAH_CN_3E.indb 36 1/27/2014 12:28:21 PM
37
Less
on F
ive
Selli
ng L
ife In
sura
nce
Bus
ines
s U
ses
of L
ife In
sura
nce
•Key
per
son
life
insu
ranc
e–
Pro
tect
s th
e bu
sine
ss fr
om th
e fin
anci
al lo
ss
ti
dh
kl
disu
stai
ned
whe
n a
key
empl
oyee
die
s–
Bus
ines
s is
the
owne
r, pr
emiu
m p
ayor
, and
be
nefic
iary
of t
he p
olic
y–
Face
am
ount
of p
olic
y ge
nera
lly re
late
s to
the
amou
nt o
f los
t inc
ome
to th
e bu
sine
ss p
lus
the
cost
sof
hirin
gan
dtra
inin
ga
repl
acem
entf
orth
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
cost
s of
hiri
ng a
nd tr
aini
ng a
repl
acem
ent f
or th
e de
ceas
ed k
ey p
erso
n –
Pre
miu
ms
not d
educ
tible
as
a bu
sine
ss e
xpen
se–
Dea
th b
enef
it no
t tax
able
whe
n re
ceiv
ed
Bus
ines
s U
ses
of L
ife In
sura
nce
•Buy
-sel
l agr
eem
ents
/fund
ing
–Typ
ical
ly u
sed
by p
artn
ersh
ips
Gll
bl
ht
dith
ii
•Gen
eral
ly, b
y la
w, w
hen
a pa
rtner
die
s, th
e su
rviv
ing
partn
er(s
) mus
t dis
solv
e th
e bu
sine
ss•P
robl
ems
crea
ted
by d
eath
of a
par
tner
can
be
reso
lved
to a
larg
e de
gree
by
mea
ns o
f a p
rope
rly
draw
n bu
y-se
ll ag
reem
ent,
whi
ch is
typi
cally
fund
ed
by li
fe in
sura
nce
•Sur
vivi
ngpa
rtner
sar
ebo
und
byag
reem
entt
obu
you
t
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
Sur
vivi
ng p
artn
ers
are
boun
d by
agr
eem
ent t
o bu
y ou
t th
e de
ceas
ed p
artn
ers
inte
rest
; the
dec
ease
d pa
rtner
’s h
eirs
are
bou
nd b
y ag
reem
ent t
o se
ll th
e de
ceas
ed p
artn
er’s
inte
rest
Bus
ines
s U
ses
of L
ife In
sura
nce
•Typ
es o
f buy
-sel
l agr
eem
ents
–Cro
ss-p
urch
ase
plan
•Typ
ical
ly u
sed
whe
n tw
o to
thre
e pa
rtner
s in
volv
ed•E
ach
partn
er b
uys
a po
licy
on th
e ot
her p
artn
er(s
)–E
ntity
-pur
chas
e pl
an•T
ypic
ally
use
d w
hen
thre
e or
mor
e pa
rtner
s in
volv
ed•P
artn
ersh
ip (t
he e
ntity
) pur
chas
es p
olic
ies
on th
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
partn
ers
and
agre
es to
pur
chas
e th
e in
tere
st o
f the
de
ceas
ed p
artn
er
Bus
ines
s U
ses
of L
ife In
sura
nce
•Buy
-sel
l agr
eem
ents
/fund
ing
–Pre
miu
ms
not d
educ
tible
as
a bu
sine
ss
expe
nse
–Dea
th b
enef
it no
t tax
able
whe
n re
ceiv
ed
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
TX_LAH_CN_3E.indb 37 1/27/2014 12:28:22 PM
38
Less
on F
ive
Selli
ng L
ife In
sura
nce
Age
nt’s
Res
pons
ibili
ties
•Sol
icita
tion
and
sale
s pr
esen
tatio
ns•T
o en
sure
pro
per h
andl
ing
on th
e pa
rt of
p
pg
pth
e ag
ent,
the
follo
win
g ar
e re
quire
d in
m
ost s
tate
s–A
dver
tisin
g•M
ust a
lway
s us
e ad
verti
sing
mat
eria
ls th
at a
re tr
uthf
ul
and
not m
isle
adin
g
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
g–P
olic
y su
mm
ary
illus
tratio
ns•U
se o
nly
illus
tratio
ns th
at m
eet a
ll st
ate
requ
irem
ents
Adv
ertis
ing
Rul
es•I
f an
agen
t cre
ates
an
adve
rtise
men
t and
id
entif
ies
the
insu
rer,
it m
ust b
e ap
prov
ed b
y th
e i
it
fit
insu
rer p
rior t
o fir
st u
se
–Ins
urer
is re
spon
sibl
e fo
r ALL
adv
ertis
emen
ts
that
use
its
nam
e•A
cop
y of
all
adve
rtise
men
ts m
ust b
e ke
pt o
n fil
e fo
r at l
east
thre
e ye
ars
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
•In
orde
r for
two
agen
ts to
join
tly a
dver
tise,
they
bo
th m
ust h
old
the
sam
e ty
pe o
f lic
ense
TX_LAH_CN_3E.indb 38 1/27/2014 12:28:22 PM
Lesson SixPolicy Issuance and Delivery
TX_LAH_CN_3E.indb 39 1/27/2014 12:28:22 PM
40
Less
on S
ix
Polic
y Is
suan
ce a
nd D
eliv
ery
Less
onSi
xLe
sson
Six
Polic
y Is
suan
ce a
nd D
eliv
ery
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Col
lect
ion
of P
rem
ium
•Age
nt is
enc
oura
ged
to c
olle
ct th
e in
itial
pr
emiu
m w
ith th
e ap
plic
atio
nP
dt
ffti
id
t–P
roce
dure
mos
t effe
ctiv
e in
rega
rds
to o
wne
r ac
cept
ing
polic
y w
hen
issu
ed–W
hen
initi
al p
rem
ium
is p
aid
with
app
licat
ion,
ag
ent p
rovi
des
appl
ican
t with
the
appl
icab
le
rece
ipt
–Ifa
pplic
antw
aits
topa
yth
epr
emiu
m
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
If ap
plic
ant w
aits
to p
ay th
e pr
emiu
m,
som
ethi
ng m
ay h
appe
n pr
ior t
o po
licy
bein
g is
sued
that
cou
ld m
ake
the
appl
ican
t un
insu
rabl
e
Con
ditio
nal R
ecei
pt•I
ssue
d w
hen
initi
al p
rem
ium
is s
ubm
itted
w
ith th
e ap
plic
atio
n•R
ecei
pt is
con
ditio
nal b
ecau
se a
gent
ca
nnot
gua
rant
ee p
olic
y w
ill b
e is
sued
•Exp
lain
s po
licy
will
be
issu
ed s
ubje
ct to
ap
prov
al b
y th
e in
sura
nce
com
pany
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
•Exp
lain
s ap
plic
ant m
ust m
eet a
ll th
e re
quire
men
ts d
etai
led
in th
e co
nditi
onal
re
ceip
t (i.e
., m
edic
al e
xam
if re
quire
d)
Con
ditio
nal R
ecei
pt•E
ffect
ive
date
of i
nsur
ance
–If t
he u
nder
writ
er is
sues
the
polic
y as
a
stan
dard
risk
(or p
refe
rred
), th
e ef
fect
ive
date
of
the
insu
ranc
e is
the
late
r of
•The
dat
e on
whi
ch th
e ap
plic
atio
n w
as c
ompl
eted
, si
gned
, and
pre
miu
m p
aid
OR
Th
eda
teth
eph
ysic
alex
amw
asco
mpl
eted
(ifan
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
•The
dat
e th
e ph
ysic
al e
xam
was
com
plet
ed (i
f an
exam
was
requ
ired)
TX_LAH_CN_3E.indb 40 1/27/2014 12:28:22 PM
41
Less
on S
ix
Polic
y Is
suan
ce a
nd D
eliv
ery
Con
ditio
nal R
ecei
pt•E
ffect
ive
date
of i
nsur
ance
–If t
he u
nder
writ
er is
sues
as
a su
bsta
ndar
d ris
k,
noin
sura
nce
wou
ldbe
info
rce
until
the
no in
sura
nce
wou
ld b
e in
forc
e un
til th
e ap
plic
ant m
akes
dec
isio
n w
heth
er to
acc
ept o
r no
t •I
f app
lican
t acc
epts
sub
stan
dard
pol
icy,
pol
icy
is
effe
ctiv
e w
hen
appl
ican
t sig
ns th
e pr
oper
form
to
acce
pt th
e su
bsta
ndar
d po
licy
and
pays
the
requ
ired
addi
tiona
lpre
miu
m
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
addi
tiona
l pre
miu
m
•If a
pplic
ant d
oes
not a
ccep
t the
sub
stan
dard
pol
icy,
in
itial
pre
miu
m p
aid
is re
turn
ed a
nd n
o co
vera
ge w
as
ever
in fo
rce
Tria
l App
licat
ion
•App
lies
whe
n th
e in
itial
pre
miu
m is
not
su
bmitt
ed w
ith th
e ap
plic
atio
n•N
o re
ceip
t is
give
n to
the
appl
ican
t at t
he
time
of a
pplic
atio
n•C
over
age
can
go in
to e
ffect
onl
y af
ter t
he
follo
win
g ha
ve ta
ken
plac
eP
lii
id
bth
i
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
–Pol
icy
is is
sued
by
the
insu
ranc
e co
mpa
ny–P
olic
y is
del
iver
ed b
y th
e ag
ent
Tria
l App
licat
ion
•Cov
erag
e ca
n go
into
effe
ct o
nly
afte
r–A
pplic
ant h
as p
aid
all r
equi
red
prem
ium
s du
e–A
pplic
ant h
as c
ompl
eted
all
requ
ired
form
s—S
tate
men
t of G
ood
Hea
lth—
to v
erify
the
appl
ican
t has
rem
aine
d in
goo
d he
alth
sin
ce
appl
icat
ion
was
take
n•I
f app
lican
t has
not
, age
nt c
anno
t lea
ve th
e po
licy;
if
tilld
id
bli
td
iti
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
cove
rage
stil
l des
ired
by a
pplic
ant,
unde
rwrit
ing
proc
ess
wou
ld h
ave
to b
egin
all
over
aga
in
Del
iver
ing
and
Serv
icin
g th
e Po
licy
•Del
iver
y–E
xpla
in th
e ef
fect
ive
date
of c
over
age
•Ide
ntify
whe
n co
vera
ge is
effe
ctiv
e•A
lso
esta
blis
hes
date
by
whi
ch fu
ture
pre
miu
ms
mus
t be
pai
d as
wel
l–I
f not
alre
ady
deliv
ered
at t
ime
of s
olic
itatio
n,
deliv
er a
Life
Insu
ranc
e B
uyer
’s G
uide
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
TX_LAH_CN_3E.indb 41 1/27/2014 12:28:23 PM
42
Less
on S
ix
Polic
y Is
suan
ce a
nd D
eliv
ery
Rep
lace
men
t•S
peci
al c
are
mus
t be
take
n w
hen
repl
acem
ent o
f an
exis
ting
polic
y is
in
volv
ed to
mak
e su
re in
sure
d is
not
mis
led
into
mak
ing
a de
cisi
on th
at is
not
to th
e in
sure
d’s
adva
ntag
e or
bes
t int
eres
ts
•Tw
istin
g oc
curs
in a
repl
acem
ent
trans
actio
nth
atbe
nefit
sth
eag
ento
vert
he
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
trans
actio
n th
at b
enef
its th
e ag
ent o
ver t
he
need
s of
clie
nt
TX_LAH_CN_3E.indb 42 1/27/2014 12:28:23 PM
Lesson SevenTypes of Life Insurance Policies
TX_LAH_CN_3E.indb 43 1/27/2014 12:28:23 PM
44
Less
on S
even
Ty
pes
of L
ife In
sura
nce
Polic
ies
Less
on S
even
Type
s of
Life
In
sura
nce
Polic
ies
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Intr
oduc
tion
•All
life
insu
ranc
e pr
ovid
es a
dea
th b
enef
it •T
he d
eath
ben
efit
can
be th
e sa
me,
mor
e,
lh
hf
ii
llor
less
than
the
face
am
ount
orig
inal
ly
purc
hase
d in
the
insu
ring
agre
emen
t•S
ome
life
insu
ranc
e po
licie
s al
so p
rovi
de
livin
g be
nefit
s, s
uch
as
–Loa
n va
lues
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
–Ret
irem
ent i
ncom
e–C
ash
with
draw
als
Intr
oduc
tion
•Life
insu
ranc
e ca
n be
stru
ctur
ed to
pro
vide
–A
dea
th b
enef
it on
ly, u
sing
term
insu
ranc
e–A
dea
th b
enef
it pl
us c
ash
accu
mul
atio
n, u
sing
on
e of
man
y ty
pes
of p
erm
anen
t/who
le li
fe
insu
ranc
e–A
dea
th b
enef
it pl
us p
rem
ium
flex
ibili
ty, u
sing
un
iver
sal l
ife in
sura
nce
–A
deat
hbe
nefit
plus
inve
stm
entf
lexi
bilit
yus
ing
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
A de
ath
bene
fit p
lus
inve
stm
ent f
lexi
bilit
y, u
sing
va
riabl
e lif
e in
sura
nce
–A d
eath
ben
efit
plus
pre
miu
m a
nd in
vest
men
t fle
xibi
lity,
usi
ng v
aria
ble
univ
ersa
l life
insu
ranc
e
Term
Insu
ranc
e•P
rovi
des
a de
ath
bene
fit o
nly—
pure
pr
otec
tion
•Des
igne
d to
pro
vide
life
insu
ranc
e pr
otec
tion
for a
tem
pora
ry li
mite
d tim
e pe
riod
–Dea
th b
enef
it (fa
ce a
mou
nt) p
ayab
le o
nly
if th
e in
sure
d di
es d
urin
g tim
e sp
ecifi
ed in
the
polic
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
TX_LAH_CN_3E.indb 44 1/27/2014 12:28:23 PM
45
Less
on S
even
Ty
pes
of L
ife In
sura
nce
Polic
ies
Term
Insu
ranc
e•N
o ca
sh v
alue
–Can
be
com
pare
d to
rent
ing
vers
us b
uyin
g a
hom
e—no
equ
ity is
bei
ng b
uilt
•Ofte
n us
ed to
pro
vide
insu
red
with
the
max
imum
am
ount
of c
over
age
for t
he
low
est i
nitia
l pre
miu
m—
parti
cula
rly tr
ue
with
youn
geri
nsur
eds
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
with
you
nger
insu
reds
Type
s of
Ter
m In
sura
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Leve
l Ter
m•D
esig
ned
to p
rovi
de li
fe in
sura
nce
prot
ectio
n fo
r a li
mite
d tim
e pe
riod
–Typ
ical
leve
l ter
m p
olic
ies
avai
labl
e in
clud
e 1,
5,
10,
15,
20,
and
30
year
•Dea
th b
enef
it re
mai
ns le
vel d
urin
g th
e po
licy
term
•Pre
miu
mre
mai
nsle
veld
urin
gth
epo
licy
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
•Pre
miu
m re
mai
ns le
vel d
urin
g th
e po
licy
term
Dec
reas
ing
Term
•Des
igne
d to
pro
vide
life
insu
ranc
e pr
otec
tion
for a
lim
ited
time
perio
d–T
ypic
al d
ecre
asin
g te
rm p
olic
ies
avai
labl
e in
clud
e 15
, 20,
25,
and
30
year
•The
pre
miu
m re
mai
ns le
vel d
urin
g th
e
polic
y te
rm•T
hede
ath
bene
fitde
crea
ses
durin
gth
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
•The
dea
th b
enef
it de
crea
ses
durin
g th
e po
licy
term
TX_LAH_CN_3E.indb 45 1/27/2014 12:28:24 PM
46
Less
on S
even
Ty
pes
of L
ife In
sura
nce
Polic
ies
Dec
reas
ing
Term
•Com
mon
ly u
sed
in d
ebt s
ituat
ions
, with
pe
rhap
s m
ost c
omm
on b
eing
a m
ortg
age
•Can
be
writ
ten
as e
ither
a s
epar
ate
polic
y or
as
a rid
er fo
r a w
hole
life
con
tract
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
How
Dec
reas
ing
Term
Insu
ranc
e W
orks
•If i
nsur
ed d
ies
whi
le p
olic
y in
effe
ct, d
eath
be
nefit
det
erm
ined
by
rem
aini
ng te
rm
$250
,000
D
eath
Ben
efit
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
25
3
5
4
5
5
5$0
Dea
th B
enef
it
Leve
l Pre
miu
m a
ll ye
ars
Incr
easi
ng T
erm
•Usu
ally
writ
ten
as a
ride
r (i.e
., co
st o
f liv
ing
rider
), ra
rely
as
a se
para
te c
ontra
ct•T
otal
dea
th b
enef
it in
crea
ses
durin
g th
e po
licy
term
(ann
ually
or p
erio
dica
lly)
–Usu
ally
incr
ease
in p
rem
ium
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
Com
mon
Ter
m F
eatu
res
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
TX_LAH_CN_3E.indb 46 1/27/2014 12:28:24 PM
47
Less
on S
even
Ty
pes
of L
ife In
sura
nce
Polic
ies
Ren
ewab
le F
eatu
re
•A re
new
able
term
pol
icy
is o
ne th
at m
ay b
e re
new
ed a
t the
end
of t
he s
peci
fied
perio
d w
ithou
t evi
denc
e of
insu
rabi
lity
•At t
he re
new
al, t
he p
rem
ium
rate
s ar
e ba
sed
on th
e ag
e th
e in
sure
d ha
s re
ache
d at
the
time
of re
new
al, w
hich
is re
ferr
ed to
as
the
insu
red’
sat
tain
edag
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
as th
e in
sure
ds
atta
ined
age
How
10-
Year
Lev
el R
enew
able
Ter
m
Insu
ranc
e W
orks
•D
eath
ben
efit
rem
ains
the
sam
e th
roug
hout
10
year
s If
rene
wed
at e
nd o
f 10t
h ye
ar, p
rem
ium
will
incr
ease
ba
sed
onin
sure
d’s
“atta
ined
age”
base
d on
insu
red
s at
tain
ed a
ge
$50,
000
10-Y
ear L
evel
Pre
miu
m—
Leve
l Ter
m (R
enew
able
to A
ge 6
5)
$50,
000
Year
s 31
-40
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
$50,
000
Dea
th B
enef
it
25
3
5
4
5
5
5
6
5
Year
s 1-
10Ye
ars
11-2
0
Year
s 21
-30
$0 D
eath
B
enef
it
Con
vert
ible
Fea
ture
•A
con
verti
ble
term
pol
icy
allo
ws
the
polic
y ow
ner t
o co
nver
t the
term
pol
icy
(tem
pora
ry p
rote
ctio
n) to
a p
erm
anen
t po
licy
(per
man
ent p
rote
ctio
n) w
ithou
t ev
iden
ce o
f ins
urab
ility
–Bas
ed u
pon
insu
ranc
e co
mpa
ny’s
pol
icie
s an
d re
quire
men
ts, c
an c
onve
rt th
e te
rm p
olic
y in
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
q,
py
who
le o
r in
part
Who
le L
ife In
sura
nce
•Des
igne
d to
pro
vide
pro
tect
ion
for t
he
who
le li
fe o
f the
insu
red
•Som
etim
es a
lso
refe
rred
to a
s pe
rman
ent
insu
ranc
e or
ord
inar
y lif
e in
sura
nce
•The
pre
miu
ms
for m
ost p
erm
anen
t pol
icie
s ar
e de
sign
ed to
rem
ain
leve
l dur
ing
the
entir
etim
eth
epo
licy
isin
forc
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
entir
e tim
e th
e po
licy
is in
forc
e
TX_L&H_CN_Slides.indd 47 3/12/2014 12:51:19 PM
48
Less
on S
even
Ty
pes
of L
ife In
sura
nce
Polic
ies
Who
le L
ife In
sura
nce
•The
face
am
ount
of t
he p
olic
y re
mai
ns th
e sa
me
thro
ugho
ut th
e lif
e of
the
polic
y •C
ash
valu
es a
ccum
ulat
e w
ithin
the
polic
y•M
ost p
erm
anen
t pol
icie
s de
sign
ed to
en
dow
(gua
rant
eed
cash
val
ue e
qual
s th
e fa
ce a
mou
nt o
f the
pol
icy)
at a
ge 1
00, a
t w
hich
time
that
amou
ntis
paid
toth
eow
ner
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
whi
ch ti
me
that
am
ount
is p
aid
to th
e ow
ner
as a
livi
ng b
enef
it
Type
s of
Who
le L
ife P
olic
ies
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Con
tinuo
us P
rem
ium
Who
le L
ife•A
lso
refe
rred
to a
s st
raig
ht li
fe in
sura
nce
•Pre
miu
ms
rem
ain
leve
l and
are
pay
able
to
py
age
100,
at w
hich
tim
e th
e co
ntra
ct e
ndow
s•T
he b
ase
face
am
ount
of t
he p
olic
y re
mai
ns th
e sa
me
thro
ugho
ut th
e lif
e of
the
polic
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
•Acc
umul
ates
cas
h va
lue
$100
,000
Insi
de
Bui
ld-U
p (C
ash
Valu
e)
Term
+
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
In “
who
le li
fe,”
the
cash
val
ue is
alw
ays
part
of
deat
h be
nefit
Now
. . .
. . .
. . .
. . .
. . .
. . .
. . .
. . .
. . .
. . .
. . .
. . .
. . .
. . .
. . t
o Ag
e 10
0
TX_LAH_CN_3E.indb 48 1/27/2014 12:28:25 PM
49
Less
on S
even
Ty
pes
of L
ife In
sura
nce
Polic
ies
Lim
ited
Paym
ent W
hole
Life
•A
llow
s th
e po
licy
owne
r to
pay
for t
he e
ntire
pol
icy
in
a sh
orte
r tim
e pe
riod
–P
olic
yow
nerp
ays
ale
velp
rem
ium
butf
ora
–P
olic
y ow
ner p
ays
a le
vel p
rem
ium
, but
for a
sh
orte
r tim
e–
Pol
icy
still
end
ows
at a
ge 1
00•
As
com
pare
d to
con
tinuo
us p
rem
ium
who
le li
fe,
annu
al p
rem
ium
pay
men
ts a
re h
ighe
r, re
sulti
ng in
–
Hig
her e
mph
asis
on
the
savi
ngs
aspe
ct o
f the
po
licy
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
polic
y–
Cas
h va
lue
of p
olic
y bu
ilds
quic
ker
•C
omm
on e
xam
ples
incl
ude
–10
-pay
life
, 20-
pay
life,
and
life
pai
d-up
at a
ge 6
5
Sing
le P
rem
ium
Who
le L
ife•F
unde
d w
ith o
ne p
rem
ium
•Pol
icy
owne
r cou
ld p
ay le
ss in
pre
miu
m th
an a
li
iii
dd
id
polic
y re
quiri
ng p
rem
ium
s ov
er e
xten
ded
perio
d–U
nles
s in
sure
d di
es in
ear
lier y
ears
of p
olic
y•P
rovi
des
imm
edia
te a
cces
s to
cas
h va
lue
•Sin
gle
prem
ium
who
le li
fe p
olic
ies
fall
into
the
cate
gory
of m
odifi
ed e
ndow
men
t con
tract
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
gy
–Tax
impl
icat
ions
will
be d
iscu
ssed
late
r in
the
sect
ion
on ta
xatio
n
Adj
usta
ble
Life
Insu
ranc
e•
A po
licy
com
bini
ng w
hole
life
and
term
insu
ranc
e in
on
e pr
oduc
t•
Cre
ated
toad
dfle
xibi
lity
tow
hole
life
•C
reat
ed to
add
flex
ibili
ty to
who
le li
fe•
Offe
rs th
e po
licy
owne
r the
opt
ion
to a
djus
t the
po
licy’
s fa
ce a
mou
nt, p
rem
ium
, and
leng
th o
f pr
otec
tion
at s
peci
fied
times
(i.e
., po
licy
anni
vers
ary
or p
rem
ium
due
dat
e)–
Pre
miu
ms
can
be in
crea
sed
or d
ecre
ased
Pol
icy
cash
valu
esw
illbe
effe
cted
acco
rdin
gly
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
•Pol
icy
cash
val
ues
will
be
effe
cted
acc
ordi
ngly
–Fa
ce a
mou
nt c
an b
e in
crea
sed
(with
pro
of o
f in
sura
bilit
y) o
r dec
reas
ed
Inde
term
inat
e Pr
emiu
m•A
type
of w
hole
life
pol
icy
desi
gned
to o
ffer l
ower
pr
emiu
ms
in th
e ea
rly y
ears
Afh
hi
b•A
fter t
wo
or th
ree
year
s, th
e pr
emiu
ms
may
be
adju
sted
to re
flect
the
insu
rer’s
exp
erie
nce
with
re
gard
to a
ctua
l–M
orta
lity
–Inv
estm
ents
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n24
–Exp
ense
s•F
utur
e ad
just
men
ts m
ay b
e m
ade
annu
ally
at t
he
polic
y an
nive
rsar
y
TX_LAH_CN_3E.indb 49 1/27/2014 12:28:25 PM
50
Less
on S
even
Ty
pes
of L
ife In
sura
nce
Polic
ies
Inte
rest
Sen
sitiv
e W
hole
Life
•Als
o kn
own
as c
urre
nt a
ssum
ptio
n w
hole
lif
e•I
nsur
ance
com
pany
(the
insu
rer)
rese
rves
th
e rig
ht to
incr
ease
or d
ecre
ase
the
prem
ium
with
in a
cer
tain
rang
e (a
s sp
ecifi
ed in
the
polic
y)P
rem
ium
adju
stm
ents
typi
cally
mad
eon
an
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n25
–Pre
miu
m a
djus
tmen
ts ty
pica
lly m
ade
on a
n an
nual
bas
is
Equi
ty In
dexe
d Li
fe•I
nter
est c
redi
ted
to c
ash
valu
e is
bas
ed o
n pe
rform
ance
of a
n in
dex
(S&
P 50
0) n
ot
unde
r the
con
trol o
f ins
urer
–A
nnua
l per
form
ance
of i
ndex
est
ablis
hes
the
next
yea
r’s in
tere
st ra
te p
aid
on th
e ca
sh
accu
mul
atio
n bu
t with
cap
s an
d fo
rmul
as–
Min
imum
inte
rest
rate
(2%
–3%
) avo
ids
effe
ct
fti
id
f
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n26
of n
egat
ive
inde
x pe
rform
ance
Uni
vers
al L
ife•
Als
o ca
lled
flexi
ble
prem
ium
adj
usta
ble
life
insu
ranc
e•
Com
bina
tion
of te
rm in
sura
nce
and
a po
licy
fund
va
lue
valu
e –
Pol
icy
char
ges
term
mor
talit
y ra
tes,
whi
ch in
crea
se
prop
ortio
nate
ly w
ith in
sure
d’s
age
•Cha
rges
for t
he a
mou
nt a
t ris
k—di
ffere
nce
betw
een
the
face
am
ount
and
the
cash
val
ue o
f th
epo
licy
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n27
the
polic
y•D
educ
ted
on a
regu
lar b
asis
with
oth
er p
olic
y ex
pens
es fr
om p
olic
y pr
emiu
m/c
ash
valu
e
Uni
vers
al L
ife•C
ombi
natio
n of
term
insu
ranc
e an
d a
polic
y fu
nd v
alue
–P
olic
y fu
nd b
uild
s ca
sh v
alue
bas
ed u
pon
a st
ated
inte
rest
rate
•“C
urre
nt in
tere
st” r
ate
is th
e ra
te c
urre
ntly
bei
ng
cred
ited
(insu
rer s
ets)
•“G
uara
ntee
d in
tere
st” r
ate
is th
e m
inim
um ra
te t
hat
will
becr
edite
d(c
ontra
ctre
quire
s)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n28
will
be
cred
ited
(con
tract
requ
ires)
•Cas
h va
lue
held
in th
e in
sure
r’s g
ener
al a
ccou
nt
TX_LAH_CN_3E.indb 50 1/27/2014 12:28:26 PM
51
Less
on S
even
Ty
pes
of L
ife In
sura
nce
Polic
ies
Uni
vers
al L
ife•P
rovi
des
mor
e fle
xibi
lity
than
trad
ition
al w
hole
lif
e in
sura
nce
–Fl
exib
lepr
emiu
m—
polic
yow
nerm
ayin
crea
seFl
exib
le p
rem
ium
polic
y ow
ner m
ay in
crea
se,
decr
ease
, or s
kip
prem
ium
s (a
s lo
ng a
s th
ere
is a
t le
ast e
noug
h ca
sh v
alue
to ta
ke th
e po
licy
to th
e ne
xt re
new
al)
–Fl
exib
le d
eath
ben
efit—
polic
y ow
ner m
ay
incr
ease
(pro
of o
f ins
urab
ility
requ
ired)
or d
ecre
ase
the
deat
h be
nefit
(with
or w
ithou
t cha
nge
in
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n29
prem
ium
)–
Allo
ws
for p
artia
l with
draw
als
of c
ash
valu
e ve
rsus
ha
ving
to s
urre
nder
pol
icy
(per
man
ent $
for $
re
duct
ion
of d
eath
ben
efit)
Ann
ually
requ
ired
polic
y st
atem
ent
prov
ides
mon
thly
acc
ount
ing
of
Uni
vers
al L
ife is
“U
nbun
dled
”
Flex
ible
Pr
emiu
ms
(Not
re
quire
d to
be
paid
)
Cur
rent
In
tere
st R
ate
(Min
imum
in
tere
st ra
te
guar
ante
ed)
Cas
h Va
lue
Cas
h Va
lue
Prem
ium
s Pa
id •
Cur
rent
Inte
rest
Add
ed •
Expe
nses
Ded
ucte
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n30
Mon
thly
Ded
uctio
ns fr
om C
ash
Valu
eC
ost o
f Ins
uran
ce +
Rid
ers
+ Ex
pens
es +
Fee
s
p)
g)
Varia
ble
Life
•
Des
igne
d to
com
bine
the
prot
ectio
n an
d sa
ving
s fe
atur
es o
f who
le li
fe in
sura
nce
with
the
grow
th
pote
ntia
lofs
ecur
ities
pote
ntia
l of s
ecur
ities
–D
esig
ned
to p
rovi
de a
mea
ns o
f pos
sibl
y ke
epin
g be
tter p
ace
with
infla
tion
in re
gard
s to
cas
h va
lue
and
deat
h be
nefit
•P
rem
ium
s ar
e fix
ed—
ofte
n re
ferr
ed to
as
the
“sch
edul
ed p
rem
ium
”P
arto
fpre
miu
mgo
esin
toth
ein
sure
r’sge
nera
l
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n31
–P
art o
f pre
miu
m g
oes
into
the
insu
rer’s
gen
eral
ac
coun
t, w
ith th
e m
ajor
ity o
f the
pre
miu
m g
oing
in
to th
e se
para
te a
ccou
nt
Varia
ble
Life
•
Cha
rges
and
exp
ense
s/fe
es–
Bef
ore
allo
catio
n to
the
sepa
rate
acc
ount
, sta
te
prem
ium
tax
adm
inis
trativ
efe
ean
dsa
les
load
are
prem
ium
tax,
adm
inis
trativ
e fe
e, a
nd s
ales
load
are
de
duct
ed fr
om th
e pr
emiu
m•M
axim
um s
ales
load
of 9
% fo
r the
sho
rter o
f life
ex
pect
ancy
or 2
0 ye
ars
–M
orta
lity
risk
fee,
exp
ense
risk
fee,
and
inve
stm
ent
man
ager
fee
dedu
cted
from
sep
arat
e ac
coun
t on
a
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n32
regu
lar b
asis
•
Pol
icy
owne
r cho
oses
the
inve
stm
ent o
ptio
ns in
the
sepa
rate
acc
ount
and
bea
rs th
e in
vest
men
t ris
k
TX_LAH_CN_3E.indb 51 1/27/2014 12:28:26 PM
52
Less
on S
even
Ty
pes
of L
ife In
sura
nce
Polic
ies
Varia
ble
Life
•
Per
form
ance
of t
he s
epar
ate
acco
unt d
eter
min
es th
e –
Tota
l dea
th b
enef
itf
ff
•Will
var
y fro
m th
e fa
ce a
mou
nt o
f cov
erag
e th
e po
licy
orig
inal
ly b
egan
with
–To
tal c
ash
valu
e—th
ere
is n
o gu
aran
teed
cas
h va
lue
•P
olic
y do
es h
ave
a gu
aran
teed
min
imum
dea
th
bene
fitdu
eto
the
prem
ium
that
goes
toth
ein
sure
r’s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n33
bene
fitdu
e to
the
prem
ium
that
goe
s to
the
insu
rers
ge
nera
l acc
ount
–R
equi
res
timel
y pr
emiu
m p
aym
ents
Varia
ble
Life
•
Varia
ble
life
is d
efin
ed a
s a
secu
rity
–M
ust b
e re
gist
ered
as
a se
curit
yf
–D
eliv
ery
of th
e pr
ospe
ctus
requ
ired
at o
r prio
r to
the
solic
itatio
n–
Sui
tabi
lity
requ
irem
ents
app
ly•
To s
ell v
aria
ble
life,
pro
duce
r/age
nt m
ust h
ave
a lif
e in
sura
nce
licen
se a
nd b
e se
curit
ies
regi
ster
ed –
Ser
ies
6or
7an
dus
ually
Ser
ies
63(o
r65
or66
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n34
Ser
ies
6 or
7 a
nd u
sual
ly S
erie
s 63
(or 6
5 or
66)
•Va
riabl
e lif
e po
lices
are
regu
late
d by
bot
h th
e in
sura
nce
and
secu
ritie
s re
gula
tors
Varia
ble
Uni
vers
al L
ife
•Ble
nds
feat
ures
of u
nive
rsal
life
and
va
riabl
e lif
e•D
esig
ned
to c
ombi
ne th
e pr
otec
tion
and
savi
ngs
feat
ures
of w
hole
life
insu
ranc
e w
ith th
e gr
owth
pot
entia
l of s
ecur
ities
–Des
igne
d to
pro
vide
a m
eans
of p
ossi
bly
keep
ing
bette
rpac
ew
ithin
flatio
nin
rega
rds
to
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n35
keep
ing
bette
r pac
e w
ith in
flatio
n in
rega
rds
to
cash
val
ue a
nd d
eath
ben
efit
Varia
ble
Uni
vers
al L
ife
•Pro
vide
s po
licy
owne
r with
flex
ibilit
y –
Flex
ible
pre
miu
m—
polic
y ow
ner m
ay in
crea
se,
dki
i(
lth
it
decr
ease
, or s
kip
prem
ium
s (a
s lo
ng a
s th
ere
is a
t le
ast e
noug
h ca
sh v
alue
to ta
ke th
e po
licy
to th
e ne
xt re
new
al)
•All
of th
e pr
emiu
m g
oes
into
the
sepa
rate
acc
ount
–Fl
exib
le d
eath
ben
efit—
polic
y ow
ner m
ay in
crea
se
(pro
of o
f ins
urab
ility
requ
ired)
or d
ecre
ase
the
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n36
(pro
of o
f ins
urab
ility
requ
ired)
or d
ecre
ase
the
deat
h be
nefit
–A
llow
s fo
r par
tial w
ithdr
awal
s of
cas
h va
lue
vers
us
havi
ng to
sur
rend
er p
olic
y (r
educ
es d
eath
ben
efit)
TX_LAH_CN_3E.indb 52 1/27/2014 12:28:26 PM
53
Less
on S
even
Ty
pes
of L
ife In
sura
nce
Polic
ies
Varia
ble
Uni
vers
al L
ife
•Cha
rges
and
exp
ense
s/fe
es–B
efor
e al
loca
tion
to th
e se
para
te a
ccou
nt, s
tate
i
di
ii
fd
ll
dpr
emiu
m ta
x, a
dmin
istra
tive
fee,
and
sal
es lo
ad
are
dedu
cted
from
the
prem
ium
•Max
imum
sal
es lo
ad o
f 9%
for t
he s
horte
r of
life
expe
ctan
cy o
r 20
year
s–M
orta
lity
risk
fee,
exp
ense
risk
fee,
and
in
vest
men
tman
ager
fee
dedu
cted
from
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n37
inve
stm
ent m
anag
er fe
e de
duct
ed fr
om
sepa
rate
acc
ount
on
a re
gula
r bas
is
•Pol
icy
owne
r cho
oses
inve
stm
ent o
ptio
ns in
the
sepa
rate
acc
ount
and
bea
rs th
e in
vest
men
t ris
k
Varia
ble
Uni
vers
al L
ife
•Per
form
ance
of t
he s
epar
ate
acco
unt d
eter
min
es
the T
ldh
bfi
hi
d–T
otal
dea
th b
enef
it—th
ere
is n
o gu
aran
teed
de
ath
bene
fit•M
ay v
ary
from
the
face
am
ount
of c
over
age
the
polic
y or
igin
ally
beg
an w
ith–T
otal
cas
h va
lue—
ther
e is
no
guar
ante
ed c
ash
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n38
valu
e
Varia
ble
Uni
vers
al L
ife
•Va
riabl
e un
iver
sal l
ife d
efin
ed a
s a
secu
rity
–M
ust b
e re
gist
ered
as
a se
curit
yD
eliv
ery
ofth
epr
ospe
ctus
requ
ired
ator
prio
rto
–D
eliv
ery
of th
e pr
ospe
ctus
requ
ired
at o
r prio
r to
the
solic
itatio
n–
Sui
tabi
lity
requ
irem
ents
app
ly•
To s
ell v
aria
ble
univ
ersa
l life
, age
nt/p
rodu
cer m
ust
have
a li
fe in
sura
nce
licen
se a
nd b
e se
curit
ies
regi
ster
ed—
Ser
ies
6 or
7 a
nd u
sual
ly S
erie
s 63
(or
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n39
gy
(65
or 6
6)•
Varia
ble
univ
ersa
l life
pol
ices
regu
late
d by
bot
h in
sura
nce
and
secu
ritie
s re
gula
tors
Fam
ily P
lan
(or P
acka
ge)
•Des
igne
d to
insu
re a
ll fa
mily
mem
bers
un
der o
ne p
olic
y•U
sual
ly c
onsi
sts
of–P
erm
anen
t ins
uran
ce o
n th
e fa
mily
br
eadw
inne
r –T
erm
insu
ranc
e (u
sual
ly le
vel)
on th
e ot
her
fam
ily m
embe
rs (s
pous
e an
d ch
ildre
n)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n40
•Spo
use
–re
new
able
to a
ge 6
5•C
hild
ren
–re
new
able
to a
ge 2
1 or
25
•Add
ition
al c
hild
ren
typi
cally
aut
omat
ical
ly c
over
ed
star
ting
15 d
ays
from
birt
h at
no
addi
tiona
l pre
miu
m
TX_LAH_CN_3E.indb 53 1/27/2014 12:28:27 PM
54
Less
on S
even
Ty
pes
of L
ife In
sura
nce
Polic
ies
Join
t Life
Pol
icie
s•O
ne p
olic
y th
at in
sure
s th
e liv
es o
f tw
o or
m
ore
peop
le•C
omm
on ty
pes
of jo
int l
ife p
olic
ies
incl
ude
–Firs
t-to-
die
join
t life
–Sec
ond-
to-d
ie jo
int l
ife
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n41
Join
t Life
Pol
icie
s•F
irst-t
o-di
e jo
int l
ife–C
ontra
ct e
nds
at th
e fir
st d
eath
(fac
e am
ount
pa
id)
–No
cont
inui
ng in
sura
nce
prot
ectio
n fo
r oth
ers
cove
red
by th
e po
licy
–Com
mon
ly u
sed
to fu
nd b
uy-s
ell a
gree
men
ts
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n42
Join
t Life
Pol
icie
s•S
econ
d-to
-die
join
t life
(or l
ast-t
o-di
e)
–Als
o ca
lled
surv
ivor
life
, sur
vivo
rshi
p lif
e, o
r las
t su
rviv
or li
fe
–Cov
ers
two
lives
or m
ore
–Ben
efit
is p
aid
on th
e de
ath
of th
e se
cond
in
sure
d or
last
sur
vivo
r–C
omm
only
use
d fo
r est
ate
plan
ning
pur
pose
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n43
yp
gp
p
Juve
nile
Insu
ranc
e•W
ritte
n on
the
lives
of c
hild
ren
–Orig
inal
ly a
ged
one
day
up to
16
year
s of
age
•Adu
lt (i.
e., p
aren
t or g
uard
ian)
app
lies
for,
owns
, and
usu
ally
pay
s pr
emiu
m o
n po
licy
•At a
cer
tain
age
(i.e
., 25
), ow
ners
hip
is
ofte
n tra
nsfe
rred
to c
hild
who
is n
ow o
f l
l
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n44
lega
l age
–Pre
miu
ms
may
con
tinue
for l
ife o
r are
pai
d up
af
ter 2
0 ye
ars
TX_LAH_CN_3E.indb 54 1/27/2014 12:28:27 PM
55
Less
on S
even
Ty
pes
of L
ife In
sura
nce
Polic
ies
Cre
dit L
ife In
sura
nce
•Will
pay
deat
h be
nefit
s w
heth
er d
eath
occ
urs
acci
dent
ally
or b
y na
tura
l cau
ses,
unl
ike
cred
it he
alth
insu
ranc
eth
atpa
yson
lyw
hen
deat
his
heal
th in
sura
nce
that
pay
s on
ly w
hen
deat
h is
ac
cide
ntal
•May
be
indi
vidu
al o
r gro
up•N
ames
the
cred
itor a
s th
e be
nefic
iary
of t
he
polic
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n45
•May
not
exc
eed
the
inde
bted
ness
at t
he ti
me
of
deat
h•U
sual
ly is
dec
reas
ing
term
life
insu
ranc
e
TX_LAH_CN_3E.indb 55 1/27/2014 12:28:28 PM
TX_LAH_CN_3E.indb 56 1/27/2014 12:28:28 PM
Lesson EightLife Insurance Policy Provisions
TX_LAH_CN_3E.indb 57 1/27/2014 12:28:28 PM
58
Less
on E
ight
Li
fe In
sura
nce
Polic
y Pr
ovis
ions
Less
on E
ight
Life
Insu
ranc
e Po
licy
Prov
isio
ns
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Stan
dard
Pro
visi
ons
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Entir
e C
ontr
act C
laus
e•L
ife in
sura
nce
polic
y is
a c
ontra
ct b
etw
een
the
owne
r and
the
insu
ranc
e co
mpa
ny
Eh
hbl
ii
di
hh
•Eac
h pa
rty h
as o
blig
atio
ns a
nd ri
ghts
that
are
sp
elle
d ou
t in
the
cont
ract
•To
mak
e su
re n
o m
isun
ders
tand
ings
occ
ur, p
olic
y st
ates
that
the
polic
y its
elf a
nd th
e ap
plic
atio
n,
whe
n at
tach
ed to
the
polic
y, m
ake
up th
e en
tire
cont
ract
bet
een
the
parti
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
cont
ract
bet
wee
n th
e pa
rties
–Inc
lude
s an
y rid
ers
Entir
e C
ontr
act C
laus
e•O
nly
the
insu
rer c
an m
ake
chan
ges
to a
po
licy
(con
tract
)–P
olic
y ow
ner c
an re
ques
t a c
hang
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
TX_LAH_CN_3E.indb 58 1/27/2014 12:28:28 PM
59
Less
on E
ight
Li
fe In
sura
nce
Polic
y Pr
ovis
ions
Insu
ring
Cla
use:
Leg
al P
urpo
se•C
onta
ins
the
basi
c pr
omis
e of
the
life
insu
ranc
e co
mpa
ny to
pay
ben
efits
on
the
insu
red’
s de
ath
•Set
s fo
rth b
asic
agr
eem
ent b
etw
een
the
com
pany
and
the
owne
r•C
laus
e ge
nera
lly n
ot ti
tled
as s
uch,
but
us
ually
foun
don
the
first
page
ofth
epo
licy
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
usua
lly fo
und
on th
e fir
st p
age
of th
e po
licy
•Inc
lude
s th
e am
ount
of t
he p
olic
y—ca
lled
face
am
ount
Insu
ring
Cla
use:
Leg
al P
urpo
se•I
dent
ifies
the
parti
es to
the
cont
ract
and
ot
her p
ertin
ent i
nfor
mat
ion,
incl
udin
g–O
wne
r, in
sure
r, in
sure
d, b
enef
icia
ry, d
eath
be
nefit
, pre
miu
m, a
nd e
ffect
ive
date
•Typ
ical
ly u
nder
sign
ed b
y an
offi
cer o
f the
in
sure
r
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
Rig
ht to
Exa
min
e or
Free
-Loo
k Pr
ovis
ion
•Giv
es p
olic
y ow
ner t
he ri
ght t
o re
turn
the
polic
y fo
r a fu
ll pr
emiu
m (s
omet
imes
re
ferr
ed to
as
the
buye
r’s re
mor
se
prov
isio
n)•B
egin
s w
ith th
e da
te o
f del
iver
y. A
gent
get
s a
sign
ed d
eliv
ery
rece
ipt.
10da
yfre
elo
okpe
riod
inTe
xas
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
•10-
day
free-
look
per
iod
in T
exas
•Ins
uran
ce is
in e
ffect
dur
ing
the
10 d
ays
Con
side
ratio
n C
laus
e •
Con
side
ratio
n is
the
valu
e gi
ven
in e
xcha
nge
for a
co
ntra
ctua
l pro
mis
eP
li'
idti
ith
tf
–Pol
icy
owne
r's c
onsi
dera
tion
is th
e pa
ymen
t of
prem
ium
–Ins
urer
’s c
onsi
dera
tion
is th
e pr
omis
e to
pay
the
polic
y’s
bene
fit (t
he a
ctua
l fac
e am
ount
is fo
und
in th
e in
surin
g ag
reem
ent)
•C
onsi
dera
tion
clau
sesp
ecifi
esth
eam
ount
and
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
•C
onsi
dera
tion
clau
se s
peci
fies
the
amou
nt a
nd
frequ
ency
of p
rem
ium
pay
men
ts th
at p
olic
y ow
ner
mus
t pay
in o
rder
to k
eep
the
insu
ranc
e in
forc
e
TX_LAH_CN_3E.indb 59 1/27/2014 12:28:29 PM
60
Less
on E
ight
Li
fe In
sura
nce
Polic
y Pr
ovis
ions
Ow
ners
hip
Rig
hts/
Ow
ner’s
Rig
hts
•P
olic
y ow
ner (
not t
he in
sure
d) h
as c
erta
in ri
ghts
–
Nam
e th
e be
nefic
iary
(rec
eive
s th
e po
licy’
s pr
ocee
ds
inth
eev
ento
fthe
deat
hof
the
insu
red)
in th
e ev
ent o
f the
dea
th o
f the
insu
red)
–C
hang
e th
e be
nefic
iary
–D
ecid
e ho
w th
e po
licy
proc
eeds
will
be p
aid
out
–A
ssig
n th
e po
licy
•Tra
nsfe
r rig
hts
in th
e po
licy
to a
noth
er p
arty
Ato
talt
rans
fero
fow
ners
hip
toan
othe
rpar
tyis
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
–A
tota
l tra
nsfe
r of o
wne
rshi
p to
ano
ther
par
ty is
ca
lled
an a
bsol
ute
assi
gnm
ent
–A
ssig
ning
the
polic
y as
col
late
ral f
or a
loan
is a
co
llate
ral a
ssig
nmen
t
Ow
ners
hip
Rig
hts/
Ow
ner’s
Rig
hts
•P
olic
y ow
ner h
as c
erta
in ri
ghts
rega
rdin
g th
e po
licy
–D
ecid
e pr
emiu
m p
aym
ent s
ched
ule
•Can
also
deci
deto
chan
geth
epa
ymen
tsch
edul
e•C
an a
lso
deci
de to
cha
nge
the
paym
ent s
ched
ule
–D
ecid
e ho
w to
use
div
iden
ds p
aid
by th
e co
mpa
ny–
If po
licy
is te
rm, d
ecid
es w
heth
er to
rene
w o
r con
vert
to w
hole
life
–If
polic
y is
who
le li
fe, d
ecid
es u
se o
f the
pol
icy’
s ca
sh
valu
e A
nyon
em
aybe
prem
ium
paye
rwith
owne
r’s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
–An
yone
may
be
prem
ium
pay
er w
ith o
wne
rs
perm
issi
on(o
wne
r rem
ains
resp
onsi
ble)
Paym
ent o
f Pre
miu
m•S
peci
fies
whe
n, w
here
, and
how
pre
miu
ms
are
to
be p
aid
Ull
ib
idi
d•U
sual
ly p
rem
ium
s ar
e to
be
paid
in a
dvan
ce
•V
ario
us m
odes
of p
ayin
g th
e pr
emiu
m a
re
iden
tifie
d–M
onth
ly
•Usu
ally
mos
t exp
ensi
ve m
etho
d of
pay
men
t
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
yp
py
–Qua
rterly
–Sem
iann
ually
Gra
ce P
erio
d•I
f pol
icy
owne
r doe
s no
t pay
pre
miu
m b
y du
e da
te, t
his
prov
isio
n al
low
s 31
day
s du
ring
whi
ch p
rem
ium
s m
ay b
e pa
id
with
out p
enal
ty to
kee
p po
licy
in fo
rce
•If i
nsur
ed d
ies
durin
g th
e gr
ace
perio
d an
d pr
emiu
m h
as n
ot b
een
paid
, the
pol
icy
bene
fitis
paya
ble
butt
hepr
emiu
mam
ount
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
bene
fit is
pay
able
, but
the
prem
ium
am
ount
du
e w
ill b
e de
duct
ed fr
om th
e be
nefit
s pa
id
to th
e be
nefic
iary
TX_LAH_CN_3E.indb 60 1/27/2014 12:28:29 PM
61
Less
on E
ight
Li
fe In
sura
nce
Polic
y Pr
ovis
ions
Aut
omat
ic P
rem
ium
Loa
n Pr
ovis
ion
•
Whe
n in
clud
ed, a
llow
s th
e in
sure
r to
auto
mat
ical
ly
use
the
cash
val
ue to
pay
pre
miu
ms
if no
t pai
d by
the
polic
yow
nerb
yen
dof
grac
epe
riod
polic
y ow
ner b
y en
d of
gra
ce p
erio
d–
Pol
icy
mus
t hav
e su
ffici
ent c
ash
valu
e to
pay
the
prem
ium
due
–Tr
eate
d as
any
oth
er lo
an o
n th
e po
licy
wou
ld b
e,
incl
udin
g ch
arge
of i
nter
est
–K
eeps
polic
yin
forc
ew
hen
itw
ould
othe
rwis
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
Kee
ps p
olic
y in
forc
e w
hen
it w
ould
oth
erw
ise
have
laps
ed d
ue to
non
paym
ent o
f pre
miu
ms
–If
futu
re in
tere
st is
not
pai
d, it
will
be
adde
d to
the
amou
nt o
f the
loan
Rei
nsta
tem
ent
•A
llow
s po
licy
owne
r to
rein
stat
e a
laps
ed p
olic
y, if
ci
rcum
stan
ces
invo
lved
are
with
in c
erta
in li
mita
tions
an
dal
lreq
uire
men
tsar
em
etan
d al
l req
uire
men
ts a
re m
et•
Lim
itatio
ns–
Ther
e is
a li
mite
d tim
e pe
riod
in w
hich
pol
icie
s m
ay
be re
inst
ated
afte
r lap
sing
•Typ
ical
per
iod
is th
ree
year
s, b
ut c
ould
be
long
er
inso
me
case
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
in s
ome
case
s–
A ne
w c
onte
stab
le p
erio
d us
ually
goe
s in
to e
ffect
, bu
t usu
ally
no
new
sui
cide
exc
lusi
on
Rei
nsta
tem
ent
•Req
uire
men
ts–P
aym
ent o
f all
back
pre
miu
ms
•Div
iden
ds n
ot re
paid
–Int
eres
t on
past
-due
pre
miu
ms
may
be
asse
ssed
–Any
out
stan
ding
loan
s on
laps
ed p
olic
y m
ay b
e re
quire
d to
be
paid
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
–Pro
of o
f ins
urab
ility
•Val
ue—
reca
ptur
es te
rms
of o
rigin
al p
olic
y
Polic
y Lo
an P
rovi
sion
s•
Onl
y fo
und
in p
olic
ies
that
incl
ude
cash
val
ues
(who
le li
fe p
olic
ies)
Bef
ore
avai
labl
eto
polic
yow
ner
polic
yty
pica
lly•
Bef
ore
avai
labl
e to
pol
icy
owne
r, po
licy
typi
cally
ne
eds
to b
e in
forc
e fo
r a s
peci
fied
perio
d (u
sual
ly
thre
e ye
ars)
•Lo
an a
mou
nt a
vaila
ble
base
d up
on c
ash
valu
e an
d ty
pe o
f pol
icy
–C
onsi
dere
dad
vanc
eof
cash
valu
e(r
educ
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
Con
side
red
adva
nce
of c
ash
valu
e(r
educ
es
proc
eeds
to b
enef
icia
ry if
loan
out
stan
ding
)•
Insu
rer c
harg
es in
tere
st a
s sp
ecifi
ed in
the
polic
y
TX_LAH_CN_3E.indb 61 1/27/2014 12:28:29 PM
62
Less
on E
ight
Li
fe In
sura
nce
Polic
y Pr
ovis
ions
Polic
y Lo
an P
rovi
sion
s•
If lo
an a
mou
nt a
nd in
tere
st a
re n
ot p
aid,
thes
e am
ount
s ar
e co
nsid
ered
inde
bted
ness
aga
inst
the
polic
yan
dw
illre
sult
ina
redu
ced
deat
hbe
nefit
polic
y an
d w
ill re
sult
in a
redu
ced
deat
h be
nefit
•
Cou
ld v
oid
polic
y if
tota
l am
ount
of l
oan
and
accr
ued
inte
rest
equ
als
or e
xcee
ds th
e ca
sh v
alue
of
the
polic
y an
d is
not
cor
rect
ed in
tim
e•
Insu
rer m
ay d
efer
a lo
an re
ques
t for
up
to s
ix
mon
ths
from
the
date
ofth
elo
anap
plic
atio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
mon
ths
from
the
date
of t
he lo
an a
pplic
atio
n –U
nles
s re
ason
for l
oan
is to
pay
pre
miu
ms
due
Inco
ntes
tabi
lity
•Sta
tes
that
afte
r a p
olic
y ha
s be
en in
forc
e a
certa
in le
ngth
of t
ime,
the
insu
rer c
an n
o lo
nger
con
test
or v
oid
it, e
xcep
t for
no
npay
men
t of p
rem
ium
s–L
imits
the
perio
d in
whi
ch th
e in
sure
r may
co
ntes
t the
insu
ranc
e co
ntra
ct fo
r m
isre
pres
enta
tion
or fr
aud
on th
e pa
rt of
the
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
appl
ican
t–T
wo
year
s in
Tex
as
Suic
ide
Cla
use
•Des
igne
d to
pre
vent
peo
ple
who
are
co
ntem
plat
ing
suic
ide
from
obt
aini
ng
insu
ranc
ein
sura
nce
•Sta
tes
that
if in
sure
d co
mm
its s
uici
de
with
in a
spe
cifie
d pe
riod,
pol
icy
will
be
void
ed–I
f sui
cide
occ
urs
with
in th
e sp
ecifi
ed p
erio
d,
ins
rer
sal
lre
fnd
spr
emi
ms
paid
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
insu
rer u
sual
ly re
fund
s pr
emiu
ms
paid
–Max
imum
in T
exas
is tw
o ye
ars
Suic
ide
Cla
use
•Onc
e sp
ecifi
ed p
erio
d ha
s el
apse
d, in
sure
r w
ill p
ay c
laim
eve
n if
insu
red
com
mits
su
icid
e•A
pplie
s w
heth
er th
e in
sure
d is
san
e or
in
sane
at t
ime
suic
ide
com
mitt
ed
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
TX_LAH_CN_3E.indb 62 1/27/2014 12:28:30 PM
63
Less
on E
ight
Li
fe In
sura
nce
Polic
y Pr
ovis
ions
Mis
stat
emen
t of A
ge o
r Sex
•If i
nsur
ed’s
age
or s
ex is
mis
stat
ed o
n th
e ap
plic
atio
n, in
sure
r has
the
right
to a
djus
t th
e po
licy’
s be
nefit
s to
refle
ct th
e am
ount
of
insu
ranc
e th
at th
e pr
emiu
ms
paid
wou
ld
have
pur
chas
ed o
n th
e ba
sis
of th
e co
rrec
t ag
e or
sex
of t
he in
sure
d•N
otim
elim
itfo
rmak
ing
adju
stm
ent
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
•No
time
limit
for m
akin
g ad
just
men
t
Mis
stat
emen
t of A
ge o
r Sex
•If m
isst
atem
ent d
isco
vere
d at
tim
e of
in
sure
d’s
deat
h, in
sure
r will
adj
ust b
enef
it ac
cord
ingl
y–I
f ins
ured
pay
ing
low
er p
rem
ium
than
sho
uld
have
, fac
e am
ount
will
be
redu
ced
–If i
nsur
ed p
ayin
g hi
gher
pre
miu
m th
an s
houl
d ha
ve, e
xces
s pr
emiu
ms
will
be
refu
nded
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
p
Med
ical
Exa
min
atio
ns a
nd A
utop
sy
•Giv
es in
sure
r the
righ
t and
opp
ortu
nity
, at
its o
wn
expe
nse,
to c
ondu
ct a
med
ical
ex
amin
atio
n of
insu
red
as o
ften
as
reas
onab
ly re
quire
d w
hen
a cl
aim
is
pend
ing
or, i
n th
e ca
se o
f dea
th, t
o ha
ve a
n au
tops
y pe
rform
ed if
it is
not
forb
idde
n by
la
w
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
law
Ben
efic
iarie
s•B
enef
icia
ry is
the
pers
on o
r ent
ity to
who
m
paym
ent o
f the
life
insu
ranc
e pr
ocee
ds w
ill
be m
ade
upon
the
deat
h of
the
insu
red
•Pro
visi
on a
llow
s th
e po
licy
owne
r to
dire
ct
the
bene
fit p
aym
ent t
o pa
rty o
f the
ir ch
oice
1.P
rimar
y be
nefic
iary
•Per
son
oren
tity
desi
gnat
edto
rece
ive
the
deat
h
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n24
•Per
son
or e
ntity
des
igna
ted
to re
ceiv
e th
e de
ath
bene
fit u
pon
insu
red’
s de
ath
TX_LAH_CN_3E.indb 63 1/27/2014 12:28:30 PM
64
Less
on E
ight
Li
fe In
sura
nce
Polic
y Pr
ovis
ions
Ben
efic
iarie
s2.
Con
tinge
nt b
enef
icia
ry•P
erso
n or
ent
ity w
ho w
ill re
ceiv
e po
licy
proc
eeds
if p
rimar
y be
nefic
iary
pre
dece
ases
th
e in
sure
d3.
Terti
ary
bene
ficia
ry•T
hird
par
ty in
line
to re
ceiv
e po
licy
proc
eeds
if
prim
ary
and
cont
inge
nt b
enef
icia
ries
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n25
py
gpr
edec
ease
the
insu
red
Ben
efic
iarie
s•A
var
iety
of d
iffer
ent p
artie
s or
inte
rest
s m
ay b
e de
sign
ated
as
bene
ficia
ries,
in
clud
ing
–Ind
ivid
uals
•I
ndiv
idua
l ent
ities
may
be
desi
gnat
ed–T
rust
s•P
roce
eds
are
left
to th
e tru
st, w
hich
in tu
rn m
anag
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n26
,g
thos
e pr
ocee
ds a
ccor
ding
to th
e tru
st a
gree
men
t
Ben
efic
iarie
s•A
var
iety
of d
iffer
ent p
artie
s or
inte
rest
s (c
ontin
ued)
–Est
ates
•If p
olic
y ow
ner d
oes
not n
ame
a be
nefic
iary
or a
ll de
sign
ated
ben
efic
iarie
s pr
edec
ease
insu
red,
pr
ocee
ds g
o to
insu
red’
s es
tate
•Not
adv
anta
geou
s du
e to
tax
impl
icat
ions
invo
lved
, pr
ocee
dspa
ssin
gth
roug
hpr
obat
ean
dtim
ein
volv
ed
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n27
proc
eeds
pas
sing
thro
ugh
prob
ate,
and
tim
e in
volv
ed
Ben
efic
iarie
s•A
var
iety
of d
iffer
ent p
artie
s or
inte
rest
s (c
ontin
ued)
–Min
ors
•Can
pre
sent
pro
blem
s du
e to
–
A m
inor
wou
ld n
ot b
e co
mpe
tent
lega
lly to
rece
ive
paym
ent o
f an
d pr
ovid
e re
ceip
t for
the
polic
y pr
ocee
ds if
the
insu
red
dies
be
fore
the
min
or c
ame
of a
ge–
If in
sure
r pai
d th
e po
licy
proc
eeds
with
out a
pro
per r
ecei
pt
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n28
from
the
bene
ficia
ry, i
t mig
ht b
e lia
ble
to p
ay th
e pr
ocee
ds
agai
n w
hen
the
bene
ficia
ry re
ache
d ag
e of
maj
ority
TX_LAH_CN_3E.indb 64 1/27/2014 12:28:30 PM
65
Less
on E
ight
Li
fe In
sura
nce
Polic
y Pr
ovis
ions
Ben
efic
iarie
s•A
var
iety
of d
iffer
ent p
artie
s or
inte
rest
s (c
ontin
ued)
–Min
ors
•To
avoi
d po
tent
ial p
robl
ems,
insu
rer m
ay d
o on
e of
se
vera
l thi
ngs
–M
ay h
old
on to
the
proc
eeds
, pay
ing
inte
rest
on
them
unt
il th
e be
nefic
iary
reac
hes
lega
l age
–M
ay in
sist
that
a tr
uste
e or
gua
rdia
n be
app
oint
ed fo
r the
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n29
yg
ppm
inor
who
is le
gally
ent
itled
to re
ceiv
e an
d m
anag
e th
e po
licy
proc
eeds
Rev
ocab
le V
ersu
s Irr
evoc
able
Ben
efic
iary
Des
igna
tions
•Rev
ocab
le–P
olic
y ow
ner c
an c
hang
e th
e be
nefic
iary
at a
ny
time
fora
nyre
ason
time
for a
ny re
ason
•Irr
evoc
able
–Pol
icy
owne
r can
not c
hang
e th
e be
nefic
iary
w
ithou
t the
ben
efic
iary
’s w
ritte
n co
nsen
t •C
hang
e of
ben
efic
iary
–Pol
icy
owne
rhas
right
toch
ange
revo
cabl
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n30
Pol
icy
owne
r has
righ
t to
chan
ge re
voca
ble
bene
ficia
ries
as lo
ng a
s th
e in
sure
d is
aliv
e–C
hang
e of
ben
efic
iary
is e
ffect
ive
on d
ate
that
re
ques
t is
sign
ed b
y th
e po
licy
owne
r
Com
mon
Dis
aste
r Pro
visi
on•
In th
e ev
ent o
f a c
omm
on a
ccid
ent t
hat t
akes
the
lives
of b
oth
the
insu
red
and
the
prim
ary
bene
ficia
ry,
this
prov
isio
nal
low
spo
licy
owne
rto
mak
ece
rtain
this
pro
visi
on a
llow
s po
licy
owne
r to
mak
e ce
rtain
th
at th
e rig
hts
of th
e co
ntin
gent
ben
efic
iary
are
pr
otec
ted
–If
the
prim
ary
bene
ficia
ry li
ves
a sh
ort t
ime
long
er
than
the
insu
red,
but
in d
oing
so
rece
ives
the
proc
eeds
of t
he p
olic
y (o
r prim
ary
bene
ficia
ry’s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n31
esta
te re
ceiv
es b
enef
its)
–Te
xas
requ
ires
bene
ficia
ry to
sur
vive
insu
red
by a
t le
ast 1
20 h
ours
Excl
usio
ns a
nd
Lim
itatio
ns/R
estr
ictio
ns•F
or m
any
year
s, li
fe in
sura
nce
polic
ies
wer
e w
ritte
n w
ith a
num
ber o
f exc
lusi
ons,
w
hich
spe
lled
out t
he c
ircum
stan
ces
unde
r w
hich
the
polic
y pr
ocee
ds w
ould
not
be
paid
; how
ever
, tod
ay m
ost l
ife in
sura
nce
polic
ies
no lo
nger
con
tain
thes
e ex
clus
ions
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n32
TX_LAH_CN_3E.indb 65 1/27/2014 12:28:31 PM
66
Less
on E
ight
Li
fe In
sura
nce
Polic
y Pr
ovis
ions
Excl
usio
ns a
nd
Lim
itatio
ns/R
estr
ictio
ns•C
omm
on e
xclu
sion
s th
at m
ay b
e us
ed
toda
y in
clud
e –A
viat
ion
excl
usio
n•R
estri
cts
paym
ent o
f ben
efits
in c
ase
of d
eath
from
av
iatio
n ac
tiviti
es, e
xcep
t whe
n th
e in
sure
d w
as a
fa
re-p
ayin
g pa
ssen
ger
•Ins
urer
may
pro
vide
cov
erag
e th
roug
h ch
arge
of a
hi
gher
prem
ium
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n33
high
er p
rem
ium
Excl
usio
ns a
nd
Lim
itatio
ns/R
estr
ictio
ns•C
omm
on e
xclu
sion
s (c
ontin
ued)
–War
or m
ilita
ry s
ervi
ce•S
tatu
s cl
ause
exc
lude
s pa
ymen
t of d
eath
ben
efit
whi
le in
sure
d is
ser
ving
in th
e m
ilita
ry•R
esul
ts c
laus
e ex
clud
es p
aym
ent o
f dea
th b
enef
it if
insu
red
is k
illed
as
a re
sult
of w
ar•M
any
insu
rers
toda
y do
not
use
this
exc
lusi
on o
r cl
ause
buti
nste
adlim
itth
eam
ount
ofin
sura
nce
or
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n34
clau
se, b
ut in
stea
d lim
it th
e am
ount
of i
nsur
ance
or
char
ge a
hig
her p
rem
ium
to c
over
the
high
er ri
sk
invo
lved
TX_LAH_CN_3E.indb 66 1/27/2014 12:28:31 PM
Lesson NineLife Insurance Riders
TX_LAH_CN_3E.indb 67 1/27/2014 12:28:31 PM
68
Less
on N
ine
Life
Insu
ranc
e R
ider
s
Less
onN
ine
Less
on N
ine
Life
Insu
ranc
e R
ider
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Rid
ers
•Spe
cial
pol
icy
prov
isio
ns th
at p
rovi
de
bene
fits
not f
ound
in th
e or
igin
al c
ontra
ct o
r th
at m
ake
adju
stm
ents
to it
•A
dditi
onal
pre
miu
m c
harg
ed fo
r add
ition
al
bene
fits
•Can
be
used
to ta
ke b
enef
its a
way
from
th
epo
licy
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
the
polic
y•A
re a
ttach
ed to
the
polic
y, th
us b
ecom
ing
part
of th
e co
ntra
ct
Type
s of
Rid
ers
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Wai
ver o
f Pre
miu
m R
ider
•O
ne o
f mos
t com
mon
ride
rs fo
r life
in
sura
nce
polic
ies
•Add
ition
al p
rem
ium
cha
rged
•App
lies
whe
n po
licy
owne
r and
insu
red
are
sam
e pe
rson
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
TX_LAH_CN_3E.indb 68 1/27/2014 12:28:31 PM
69
Less
on N
ine
Life
Insu
ranc
e R
ider
s
Wai
ver o
f Pre
miu
m R
ider
•
If in
sure
d be
com
es d
isab
led,
pre
miu
ms
are
paid
by
the
insu
ranc
e co
mpa
ny
–Th
ere
isa
wai
ting
perio
d(ty
pica
llyth
ree
tosi
x–
Ther
e is
a w
aitin
g pe
riod
(typi
cally
thre
e to
six
m
onth
s) d
urin
g w
hich
insu
red
pays
pre
miu
ms
–If
disa
bilit
y co
ntin
ues
beyo
nd w
aitin
g pe
riod
•Ins
uran
ce c
ompa
ny p
ays
prem
ium
s fo
r the
dur
atio
n of
the
disa
bilit
y•I
nsur
ance
com
pany
als
o w
ill re
imbu
rse
the
insu
red
iid
di
thiti
id
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
any
prem
ium
s pa
id d
urin
g th
e w
aitin
g pe
riod
(ret
roac
tive)
–If
insu
red
reco
vers
from
dis
abilit
y, in
sure
d w
ill ag
ain
resu
me
futu
re p
rem
ium
pay
men
ts
Wai
ver o
f Pre
miu
m R
ider
•R
ider
typi
cally
end
s at
a s
peci
fied
age
(i.e.
, age
60
or 6
5)If
dii
lh
llif
lili
hl
•If a
trad
ition
al w
hole
life
pol
icy,
pol
icy
cash
val
ue
cont
inue
s to
gro
w ju
st a
s if
insu
red
was
pay
ing
the
prem
ium
s•I
f a p
artic
ipat
ing
polic
y, d
ivid
ends
are
als
o pa
id
on a
ccum
ulat
ed p
rem
ium
s w
aive
d by
insu
rer
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
•Som
e po
licie
s pr
ovid
e a
wee
kly
or m
onth
ly
disa
bilit
y in
com
e. T
he a
mou
nt p
aid
is n
orm
ally
a
perc
enta
ge o
f the
face
am
ount
of t
he p
olic
y.
Payo
r Rid
er•U
sed
with
juve
nile
insu
ranc
e po
licie
s•S
tate
s th
at if
the
payo
r (pe
rson
pay
ing
the
i)
fh
lidi
bpr
emiu
ms)
of t
he p
olic
y di
es o
r bec
omes
di
sabl
ed b
efor
e th
e ch
ild h
as re
ache
d a
spec
ified
ag
e (i.
e. a
ge 2
1 or
25)
the
insu
rer w
ill w
aive
all
furth
er p
rem
ium
s un
til c
hild
reac
hes
that
age
•Mak
es it
pos
sibl
e to
gua
rant
ee th
at a
juve
nile
po
licill
acco
mpl
ish
hati
tso
ner
ants
itto
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
polic
y w
ill a
ccom
plis
h w
hat i
ts o
wne
r wan
ts it
to•B
oth
adul
t pre
miu
m p
ayor
and
chi
ld m
ust p
rove
in
sura
bilit
y
Gua
rant
eed
Insu
rabi
lity
Rid
er•A
llow
s th
e po
licy
owne
r to
purc
hase
ad
ditio
nal p
erm
anen
t ins
uran
ce a
t sp
ecifi
ed ti
mes
with
out h
avin
g to
pro
ve
insu
rabi
lity
•Spe
cifie
d tim
es c
ould
incl
ude
–Spe
cifie
d ag
es
•Thr
eeye
arin
terv
als
com
mon
star
ting
atag
e25
and
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
•Thr
ee-y
ear i
nter
vals
com
mon
, sta
rting
at a
ge 2
5 an
d en
ding
at a
ge 4
0–S
peci
fied
occu
rren
ces
•Mar
riage
, birt
h, o
r ado
ptio
n of
a c
hild
TX_LAH_CN_3E.indb 69 1/27/2014 12:28:32 PM
70
Less
on N
ine
Life
Insu
ranc
e R
ider
s
Gua
rant
eed
Insu
rabi
lity
Rid
er•A
mou
nt o
f ins
uran
ce th
at c
an b
e pu
rcha
sed
on
optio
n da
tes
usua
lly li
mite
d, b
ased
upo
n th
e t
dt
fth
bli
amou
nt a
nd ty
pe o
f the
bas
e po
licy
•Pre
miu
ms
for a
dditi
onal
cov
erag
e ba
sed
on
insu
red’
s at
tain
ed a
ge a
t the
tim
e ad
ditio
nal
cove
rage
is a
dded
•Rid
er g
ener
ally
exp
ires
whe
n in
sure
d at
tain
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
age
40, a
t whi
ch ti
me
addi
tiona
l pre
miu
m fo
r
this
ride
r cea
ses
bein
g ch
arge
d
Acc
iden
tal D
eath
Ben
efit
Rid
er•P
ays
the
bene
ficia
ry a
n in
crea
sed
deat
h be
nefit
if
insu
red
dies
as
the
resu
lt of
an
acci
dent
Ih
“id
i”
id(“
dbl
”–I
ncre
ases
the
“inde
mni
ty” p
aid
(“do
uble
” or
“trip
le”)
•For
ben
efic
iary
to re
ceiv
e th
is a
dditi
onal
ben
efit,
in
sure
d m
ust d
ie o
f acc
iden
tal c
ause
s w
ithin
a
spec
ified
per
iod
of ti
me,
usu
ally
90
days
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
•Acc
iden
t mus
t occ
ur b
efor
e in
sure
d re
ache
s a
spec
ified
age
, usu
ally
60,
65,
or 7
0
Acc
iden
tal D
eath
Ben
efit
Rid
er•R
ider
’s ra
te le
ss e
xpen
sive
than
regu
lar
mor
talit
y ra
te d
ue to
insu
red’
s lik
elih
ood
of
dyin
gof
anac
cide
ntbe
ing
less
likel
yth
andy
ing
of a
n ac
cide
nt b
eing
less
like
ly th
an
dyin
g of
oth
er c
ause
s•S
ome
excl
usio
ns d
o ap
ply
to th
is ri
der,
incl
udin
g–
Dea
th a
s a
resu
lt of
sel
f-inf
licte
d in
jury
(i.e
., su
icid
e )
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
)–
Dea
th w
hile
com
mitt
ing
a cr
ime
–D
eath
as
a re
sult
of w
ar (o
r acc
iden
t whi
le in
m
ilita
ry s
ervi
ce)
Acc
iden
tal D
eath
and
Dis
mem
berm
ent
Rid
er (A
D&
D)
•Pay
s a
bene
fit if
insu
red
dies
or l
oses
a
qual
ifyin
g bo
dy p
art d
ue to
an
acci
dent
•Prin
cipa
l sum
–A
mou
nt p
aid
if in
sure
d di
es d
ue to
an
acci
dent
; al
so m
axim
um th
at w
ill b
e pa
id fo
r all
loss
es–I
f dea
th o
ccur
s w
ithin
90
days
of t
he a
ccid
ent,
insu
rerp
ays
100%
ofpr
inci
pals
um
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
insu
rer p
ays
100%
of p
rinci
pal s
um
TX_LAH_CN_3E.indb 70 1/27/2014 12:28:32 PM
71
Less
on N
ine
Life
Insu
ranc
e R
ider
s
Acc
iden
tal D
eath
and
Dis
mem
berm
ent
Rid
er (A
D&
D)
•Cap
ital s
um–A
mou
nt p
aid
whe
n in
sure
d su
ffers
a q
ualif
ying
di
smem
berm
ent d
ue to
an
acci
dent
–Qua
lifyi
ng d
ism
embe
rmen
ts in
clud
e •L
oss
of li
mb
(sev
eran
ce) a
t or a
bove
wris
t or a
nkle
•Los
s of
sig
ht in
bot
h ey
es–C
an v
ary
by p
olic
y, b
ut c
apita
l sum
am
ount
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
yy
py
pof
ten
one
half
of p
rinci
pal s
um a
mou
nt
Ret
urn
of P
rem
ium
Rid
er•
Con
sist
s of
an
incr
easi
ng a
mou
nt o
f ter
m in
sura
nce
that
alw
ays
equa
ls th
e to
tal o
f pre
miu
ms
paid
at a
ny
poin
tdur
ing
the
effe
ctiv
eye
ars
poin
t dur
ing
the
effe
ctiv
e ye
ars
–In
real
ity, d
oes
not r
etur
n pr
emiu
m b
ut p
ays
an
addi
tiona
l am
ount
at d
eath
that
equ
als
the
prem
ium
s pa
id u
p to
that
tim
e as
long
as
deat
h fa
lls w
ithin
the
time
spec
ified
in th
e rid
er–
Pol
icy
owne
r is
buyi
ng te
rm in
sura
nce
and
char
ged
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
for i
t acc
ordi
ngly
–If
polic
y ca
rrie
d to
end
of t
erm
, an
amou
nt e
qual
to
all p
rem
ium
s pa
id is
retu
rned
to p
olic
y ow
ner
Add
ition
al In
sure
ds R
ider
•Atta
ched
to p
rovi
de c
over
age
for o
ther
pe
ople
in w
hom
the
insu
red
has
an
insu
rabl
e in
tere
st•U
sual
ly in
volv
es a
term
insu
ranc
e rid
er o
n th
e ot
her p
erso
n(s)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
Add
ition
al In
sure
ds R
ider
•Com
mon
exa
mpl
es in
clud
e–S
pous
e or
oth
er in
sure
d te
rm ri
der
•Ter
m in
sura
nce
rider
that
cov
ers
the
spou
se•T
erm
insu
ranc
e rid
er th
at c
over
s a
busi
ness
par
tner
(i.
e., f
or fu
ndin
g of
a b
uy-s
ell a
gree
men
t)–C
hild
ren’
s te
rm ri
der
•Ter
m in
sura
nce
rider
that
cov
ers
the
child
or c
hild
ren
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
–Fam
ily te
rm ri
der
•Ter
m in
sura
nce
rider
that
cov
ers
both
spo
use
and
child
ren
TX_LAH_CN_3E.indb 71 1/27/2014 12:28:32 PM
72
Less
on N
ine
Life
Insu
ranc
e R
ider
s
Acc
eler
ated
Dea
th B
enef
its R
ider
•If i
nsur
ed is
dia
gnos
ed w
ith a
term
inal
illn
ess
(i.e.
, dea
th e
xpec
ted
to o
ccur
with
in 2
4 th
)th
iill
t(
mon
ths)
, the
insu
rer w
ill p
ay a
per
cent
age
(as
desi
gnat
ed in
the
rider
) of t
he d
eath
ben
efit
whi
le th
e in
sure
d is
stil
l aliv
e•D
esig
ned
to h
elp
relie
ve s
ome
of th
e fin
anci
al
dure
ss in
sure
d m
ay b
e ex
perie
ncin
g
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
•Fun
ds c
an b
e us
ed in
any
man
ner i
nsur
ed
deem
s ne
cess
ary
and
are
rece
ived
tax
free
Acc
eler
ated
Dea
th B
enef
its R
ider
•Int
eres
t may
be
char
ged
on th
e am
ount
pai
d in
ad
vanc
e •D
eath
ben
efits
pay
able
und
er th
e po
licy
are
redu
ced
by a
ny a
mou
nts
paid
as
acce
lera
ted
bene
fits,
plu
s an
y un
paid
inte
rest
•S
ome
new
er p
olic
ies
auto
mat
ical
ly in
clud
e th
is
prov
isio
n, o
lder
pol
icie
s m
ay a
dd a
s a
rider
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
•Pro
visi
on g
iven
with
out a
n in
crea
se in
pre
miu
m
Acc
eler
ated
Liv
ing
Ben
efits
Rid
er•A
llow
s th
e in
sure
d, w
hile
aliv
e, to
acc
ess
the
valu
e of
the
deat
h be
nefit
if th
ey w
ill b
e fi
dt
ih
fth
id
fco
nfin
ed to
a n
ursi
ng h
ome
for t
he re
mai
nder
of
the
thei
r life
–May
be
limite
d to
60%
–90%
of t
he a
vaila
ble
face
am
ount
, and
to c
erta
in d
aily
spe
ndin
g lim
itatio
ns (s
uch
as $
100
per d
ay)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
•May
be
adde
d or
incl
uded
as
a se
para
te lo
ng-
term
car
e rid
er–U
sual
ly a
t no
addi
tiona
l cos
t
TX_LAH_CN_3E.indb 72 1/27/2014 12:28:33 PM
Lesson TenLife Insurance Policy Options
TX_LAH_CN_3E.indb 73 1/27/2014 12:28:33 PM
74
Less
on T
en
Life
Insu
ranc
e Po
licy
Opt
ions
Less
onTe
nLe
sson
Ten
Life
Insu
ranc
e Po
licy
Opt
ions
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Settl
emen
t Opt
ions
•Th
e ow
ner h
as th
e rig
ht to
sel
ect a
set
tlem
ent o
ptio
n w
hile
the
insu
red
is a
live,
but
the
final
dec
isio
n is
of
ten
done
atth
etim
eof
deat
hso
that
the
ofte
n do
ne a
t the
tim
e of
dea
th s
o th
at th
e be
nefic
iary
’s fi
nanc
ial s
ituat
ion
at th
e tim
e ca
n be
ta
ken
into
con
side
ratio
n–
Unl
ess
the
polic
y ow
ner s
peci
fies
an ir
revo
cabl
e se
ttlem
ent o
ptio
n, th
e be
nefic
iary
may
sel
ect a
ny o
f th
e sa
me
optio
ns a
vaila
ble
to th
e po
licy
owne
r
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
whe
n th
e pr
ocee
ds b
ecom
e pa
yabl
e, e
ven
if th
at
optio
n di
ffers
from
that
orig
inal
ly s
elec
ted
by th
e po
licy
owne
r
Settl
emen
t Opt
ions
Ava
ilabl
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Lum
p-Su
m P
aym
ent o
r Cas
h•B
enef
icia
ry re
ceiv
es th
e de
ath
bene
fit a
s a
sing
le, l
ump-
sum
pay
men
t•B
enef
it re
ceiv
ed fr
ee o
f inc
ome
tax-
only
ta
x-fre
e op
tion
•Pro
babl
y m
ost c
omm
only
cho
sen
optio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
TX_LAH_CN_3E.indb 74 1/27/2014 12:28:33 PM
75
Less
on T
en
Life
Insu
ranc
e Po
licy
Opt
ions
Inte
rest
or I
nter
est-O
nly
Opt
ion
•Ben
efic
iary
leav
es th
e be
nefit
on
depo
sit
with
the
insu
rer
•The
insu
rer i
nves
ts th
ese
proc
eeds
and
pa
ys th
e ea
rned
inte
rest
as
inco
me
to th
e be
nefic
iary
–Int
eres
t rec
eive
d is
taxa
ble
inco
me
to th
e be
nefic
iary
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
bene
ficia
ry•U
sed
prim
arily
in e
stat
e pl
anni
ng
Fixe
d-Pe
riod
Opt
ion
•Ben
efit
rece
ived
con
sist
s of
a re
gula
r inc
ome
for
a sp
ecifi
ed p
erio
d• P
aym
ents
com
pris
edof
both
prin
cipa
land
Pay
men
ts c
ompr
ised
of b
oth
prin
cipa
l and
in
tere
st–P
rinci
pal a
mou
nt g
radu
ally
dec
reas
es to
zer
o•A
ctua
l am
ount
of r
egul
ar p
aym
ent n
ot k
now
n•F
acto
rs th
at d
eter
min
e th
e am
ount
that
will
be
rece
ived
are
–The
prin
cipa
lam
ount
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
The
prin
cipa
l am
ount
–The
inte
rest
ear
ned
on th
e pr
inci
pal (
taxa
ble)
–The
leng
th o
f tim
e th
e pa
ymen
ts a
re to
be
mad
e
Fixe
d-A
mou
nt O
ptio
n•B
enef
it re
ceiv
ed c
onsi
sts
of a
spe
cifie
d re
gula
r am
ount
, but
not
a s
peci
fied
time
perio
dP
aym
ents
com
pris
edof
both
prin
cipa
land
•Pay
men
ts c
ompr
ised
of b
oth
prin
cipa
l and
in
tere
st–P
aym
ents
con
tinue
unt
il co
mbi
natio
n of
pr
inci
pal a
nd in
tere
st a
re e
xhau
sted
•Fac
tors
that
det
erm
ine
how
long
the
paym
ents
w
illbe
rece
ived
are
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
will
be
rece
ived
are
–T
he s
peci
fied
amou
nt o
f eac
h pa
ymen
t–T
he p
rinci
pal a
mou
nt
–The
inte
rest
ear
ned
on th
e pr
inci
pal
Life
Inco
me
Opt
ion
•P
rovi
des
for p
aym
ent o
f ins
tallm
ents
for t
he e
ntire
lif
etim
e of
the
paye
eIn
sure
r’sof
ferd
iffer
ento
ptio
nsin
whi
chth
ese
•In
sure
rs o
ffer d
iffer
ent o
ptio
ns in
whi
ch th
ese
inst
allm
ents
can
be
paid
•C
omm
on o
ptio
ns in
clud
e–
Stra
ight
life
/pur
e lif
e/lif
e-on
ly•P
ayee
rece
ives
a s
peci
fied
mon
thly
inco
me
for
life
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
life
•Upo
n de
ath
of p
ayee
, pay
men
ts c
ease
(unp
aid
deat
h be
nefit
prin
cipa
l rem
ains
with
insu
rer)
TX_LAH_CN_3E.indb 75 1/27/2014 12:28:34 PM
76
Less
on T
en
Life
Insu
ranc
e Po
licy
Opt
ions
Life
Inco
me
Opt
ion
•Com
mon
opt
ions
incl
ude
–Life
inco
me
with
per
iod
certa
in•P
ayee
rece
ives
a s
peci
fied
mon
thly
inco
me
for l
ife
•If p
ayee
die
s be
fore
the
end
of th
e ye
ars
spec
ified
in
the
certa
in p
erio
d (i.
e. 5
, 10,
15,
or 2
0), a
sec
ond
paye
e re
ceiv
es th
e pa
ymen
ts fo
r the
rem
aind
er o
f the
ce
rtain
per
iod
spec
ified
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
Life
Inco
me
Opt
ion
•Com
mon
opt
ions
incl
ude
–Life
inco
me
with
refu
nd•P
ayee
rece
ives
a s
peci
fied
mon
thly
inco
me
for l
ife•I
f pay
ee d
ies
befo
re h
avin
g re
ceiv
ed a
n am
ount
equ
al
to th
e fu
ll pr
ocee
ds o
f the
pol
icy,
pro
ceed
s w
ill g
o to
a
seco
nd p
ayee
•Bot
h ca
sh re
fund
(lum
p-su
m) a
nd in
stal
lmen
t ref
und
optio
nsav
aila
ble
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
optio
ns a
vaila
ble
Life
Inco
me
Opt
ion
•Com
mon
opt
ions
incl
ude
–Joi
nt a
nd s
urvi
vor l
ife in
com
e•T
wo
or m
ore
paye
es a
re re
cipi
ents
of t
he li
fetim
e in
com
e•U
pon
deat
h of
firs
t pay
ee, p
aym
ents
go
to s
econ
d pa
yee,
and
so
forth
•Am
ount
of p
aym
ent t
o ad
ditio
nal p
ayee
s co
uld
eith
er
redu
ceor
stay
the
sam
eba
sed
upon
the
optio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
redu
ce o
r sta
y th
e sa
me,
bas
ed u
pon
the
optio
n ch
osen
whe
n se
tting
up
this
set
tlem
ent o
ptio
n
Non
forf
eitu
re O
ptio
ns:
Gua
rant
eed
Valu
es•T
exas
ope
rate
s un
der a
law
kno
wn
as th
e st
anda
rd n
onfo
rfeitu
re la
w, w
hich
sta
tes
that
h
ll
titb
dan
y ca
sh v
alue
acc
umul
atio
n m
ust b
e m
ade
avai
labl
e to
the
polic
y ow
ner i
f the
pol
icy
owne
r sto
ps p
ayin
g th
e pr
emiu
ms
for a
ny
reas
on•T
he p
olic
y ow
ner h
as 6
0 da
ys to
not
ify th
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
com
pany
of t
he o
ptio
n th
ey c
hoos
e. If
no
notic
e is
rece
ived
, the
com
pany
will
use
the
optio
n w
ritte
n in
the
cont
ract
.
TX_LAH_CN_3E.indb 76 1/27/2014 12:28:34 PM
77
Less
on T
en
Life
Insu
ranc
e Po
licy
Opt
ions
Non
forf
eitu
re O
ptio
ns:
Gua
rant
eed
Valu
es•A
mou
nt o
f cas
h va
lue
and
its ra
te o
f ac
cum
ulat
ion
vary
by
com
pany
and
type
of
polic
y•T
he fo
llow
ing
are
com
mon
non
forfe
iture
op
tions
in c
ash
valu
e po
licie
s th
at a
re
avai
labl
e:C
ash
surr
ende
rval
ue
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
–Cas
h su
rren
der v
alue
–Ext
ende
d te
rm in
sura
nce
–Red
uced
pai
d-up
insu
ranc
e
Cas
h Su
rren
der V
alue
•Is
the
amou
nt a
pol
icy
owne
r is
entit
led
to w
hen
the
polic
y ha
s be
en s
urre
nder
ed b
efor
e m
atur
ityP
olic
yow
nert
akes
the
accu
mul
ated
cash
valu
e•P
olic
y ow
ner t
akes
the
accu
mul
ated
cas
h va
lue
as a
sin
gle
lum
p-su
m p
aym
ent
•Cov
erag
e en
ds w
hen
the
polic
y is
sur
rend
ered
•Sur
rend
er v
alue
up
to th
e am
ount
of p
rem
ium
s pa
id re
ceiv
ed ta
x-fre
e, a
ny a
mou
nt a
bove
that
is
taxa
ble
toth
epo
licy
owne
r
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
taxa
ble
to th
e po
licy
owne
r•I
nsur
er m
ay d
elay
pay
men
t of t
he c
ash
surr
ende
r va
lue
for u
p to
six
mon
ths
Red
uced
Pai
d-U
p In
sura
nce
Opt
ion
•Acc
umul
ated
cas
h va
lue
used
to p
urch
ase
a si
ngle
pre
miu
m p
aid-
up w
hole
life
in
sura
nce
polic
y –F
ace
amou
nt o
f the
new
pol
icy
is le
ss th
an th
e or
igin
al a
nd re
mai
ns th
e sa
me
for t
he d
urat
ion
of th
e co
ntra
ct (p
rovi
des
prot
ectio
n up
to a
ge
100)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
–Ins
ured
’s a
ttain
ed a
ge u
sed
to c
ompu
te fa
ce
amou
nt o
f new
pai
d-up
pol
icy
Red
uced
Pai
d-U
p In
sura
nce
Opt
ion
•Acc
umul
ated
cas
h va
lue
(con
tinue
d)–N
ew p
olic
y bu
ilds
cash
val
ue, e
ndow
s at
age
10
0–S
ince
it is
a p
aid
up p
olic
y, n
o fu
rther
pre
miu
ms
need
ed–N
ew re
duce
d pa
id-u
p po
licy
will
not
incl
ude
any
rider
s or
sup
plem
enta
ry b
enef
its
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
TX_LAH_CN_3E.indb 77 1/27/2014 12:28:35 PM
78
Less
on T
en
Life
Insu
ranc
e Po
licy
Opt
ions
Exte
nded
Ter
m In
sura
nce
•Acc
umul
ated
cas
h va
lue
used
as
a si
ngle
pr
emiu
m to
pur
chas
e a
paid
-up
term
in
sura
nce
polic
y–F
ace
amou
nt o
f ter
m p
olic
y eq
ual t
o th
e fa
ce
amou
nt o
f the
orig
inal
who
le li
fe p
olic
y–L
engt
h of
term
dep
ends
on
the
net c
ash
valu
e th
at is
app
lied
as a
sin
gle
prem
ium
at i
nsur
ed’s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
ppg
pat
tain
ed a
ge–T
he e
xten
ded
term
insu
ranc
e w
ill n
ot in
clud
e an
y rid
ers
or s
uppl
emen
tary
ben
efits
Div
iden
ds•P
artic
ipat
ing
polic
ies,
usu
ally
issu
ed b
y m
utua
l ins
uran
ce c
ompa
nies
, may
pay
di
vide
nds
to th
eir p
olic
y ow
ners
•Div
iden
ds a
re n
ot g
uara
ntee
d an
d ar
e on
ly
paya
ble
whe
n de
clar
ed b
y th
e bo
ard
of
dire
ctor
s of
the
insu
ranc
e co
mpa
ny
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
Div
iden
ds•T
hrou
gh d
ecla
ring
a di
vide
nd, t
he in
sure
r al
low
s po
licy
owne
rs to
par
ticip
ate
in th
e fa
vora
ble
clai
ms
expe
rienc
e of
the
insu
ranc
e co
mpa
ny
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
Div
iden
d O
ptio
ns
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
TX_LAH_CN_3E.indb 78 1/27/2014 12:28:35 PM
79
Less
on T
en
Life
Insu
ranc
e Po
licy
Opt
ions
Cas
h D
ivid
end
Opt
ion
•Pol
icy
owne
r rec
eive
s a
chec
k fro
m th
e in
sure
r for
the
divi
dend
am
ount
—ta
x fre
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
Acc
umul
atio
n at
Inte
rest
Div
iden
d O
ptio
n
•Pol
icy
owne
r let
s di
vide
nds
accu
mul
ate
at
inte
rest
with
the
com
pany
–Com
pany
inve
sts
polic
y ow
ner’s
mon
ey fr
om
the
divi
dend
s an
d ad
ds th
e in
tere
st e
arni
ngs
to
the
initi
al a
mou
nt a
s ea
rnin
gs a
ccru
e –I
f ins
ured
die
s w
ith a
cre
dit t
o th
e po
licy
for
accu
mul
ated
div
iden
ds a
nd in
tere
st, t
his
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
amou
nt is
pai
d to
the
bene
ficia
ry in
add
ition
to
the
deat
h be
nefit
Acc
umul
atio
n at
Inte
rest
Div
iden
d O
ptio
n
•Lea
ving
div
iden
ds to
acc
umul
ate
at in
tere
st
has
noth
ing
to d
o w
ith th
e ca
sh v
alue
ac
cum
ulat
ion
of a
per
man
ent p
olic
y•A
ccum
ulat
ed d
ivid
ends
may
be
with
draw
n at
any
tim
e by
the
polic
y ow
ner
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
Paid
-Up
Add
ition
s D
ivid
end
Opt
ion
•P
olic
y ow
ner u
ses
the
divi
dend
s to
pur
chas
e ad
ditio
nal,
fully
pai
d-up
who
le li
fe in
sura
nce
At
fid
dditi
ib
dth
•A
mou
nt o
f pai
d-up
add
ition
is b
ased
on
the
insu
red’
s ag
e at
the
time
the
paid
-up
addi
tions
are
pu
rcha
sed
and
the
actu
al a
mou
nt o
f the
div
iden
d•
Paid
-up
addi
tions
are
sin
gle
prem
ium
who
le li
fe
polic
ies
purc
hase
d w
ith d
ivid
ends
One
purc
hase
dea
chye
ar(if
divi
dend
decl
ared
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n24
–One
pur
chas
ed e
ach
year
(if d
ivid
end
decl
ared
)–E
ach
paid
-up
addi
tion
also
dev
elop
s ca
sh v
alue
TX_LAH_CN_3E.indb 79 1/27/2014 12:28:35 PM
80
Less
on T
en
Life
Insu
ranc
e Po
licy
Opt
ions
Paid
-Up
Add
ition
s D
ivid
end
Opt
ion
•No
new
pol
icie
s is
sued
, bas
e po
licy
sim
ply
amen
ded
to re
flect
the
addi
tiona
l pai
d-up
va
lues
–If i
nsur
ed d
ies,
the
base
pol
icy
face
am
ount
an
d th
e pa
id-u
p ad
ditio
ns m
ake
up th
e to
tal
deat
h be
nefit
–If i
nsur
ed s
urre
nder
s po
licy,
the
cash
val
ues
of
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n25
py
the
base
pol
icy
and
the
paid
-up
addi
tions
are
pa
id (c
anno
t sur
rend
er b
ase
polic
y an
d ke
ep
paid
-up
addi
tions
)
Red
uce
Prem
ium
Div
iden
d O
ptio
n
•Pol
icy
owne
r use
s th
e di
vide
nd to
pay
all
or
part
of th
e ne
xt p
rem
ium
due
on
the
polic
y•I
f thi
s op
tion
chos
en, p
rem
ium
not
ice
typi
cally
will
sho
w th
e gr
oss
prem
ium
am
ount
min
us th
e di
vide
nd a
nd th
e po
licy
owne
r pay
s th
e ne
t am
ount
due
, if a
ny
Ann
ualp
rem
ium
paym
entm
ode
usua
lly
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n26
•Ann
ual p
rem
ium
pay
men
t mod
e us
ually
re
quire
d w
hen
this
div
iden
d op
tion
chos
en
Paid
-Up
Insu
ranc
e D
ivid
end
Opt
ion
•Div
iden
ds u
sed
to p
ay u
p a
polic
y ea
rlier
th
an o
ther
wis
e ex
pect
ed•F
or e
xam
ple:
–B
y us
ing
the
divi
dend
s in
this
man
ner o
ver t
he
life
of th
e po
licy,
a 2
0-ye
ar p
ay p
olic
y m
ay b
e pa
id u
p af
ter 1
6 or
17
year
s in
stea
d of
the
full
20 y
ears
Ifus
edin
this
man
nero
na
tradi
tiona
lwho
lelif
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n27
–If u
sed
in th
is m
anne
r on
a tra
ditio
nal w
hole
life
co
ntra
ct, p
olic
y ow
ner w
ould
not
hav
e to
pay
on
the
polic
y to
age
100
•Pol
icy
owne
r mus
t req
uest
this
opt
ion
One
-Yea
r Ter
m D
ivid
end
Opt
ion
•Div
iden
ds u
sed
to p
urch
ase
addi
tiona
l on
e-ye
ar te
rm in
sura
nce
–Am
ount
of t
erm
insu
ranc
e us
ually
lim
ited
to th
e cu
rren
t cas
h va
lue
of th
e po
licy
–Cos
t of t
erm
insu
ranc
e ba
sed
on th
e at
tain
ed
age
of th
e in
sure
d–I
f thi
s di
vide
nd o
ptio
n ha
s be
en in
effe
ct s
ince
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n28
pth
e or
igin
al p
olic
y w
ent i
n fo
rce,
insu
rer u
sual
ly
will
not
requ
ire a
dditi
onal
pro
of o
f ins
urab
ility
TX_LAH_CN_3E.indb 80 1/27/2014 12:28:36 PM
Lesson ElevenAnnuities
TX_LAH_CN_3E.indb 81 1/27/2014 12:28:36 PM
82
Less
on E
leve
n A
nnui
ties
Less
onEl
even
Less
on E
leve
nA
nnui
ties
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Purp
ose
of A
nnui
ties
•To
liqui
date
a s
um o
f mon
ey o
r an
esta
te,
over
tim
e, th
roug
h a
serie
s of
per
iodi
c pa
ymen
ts w
hich
the
annu
itant
can
not
outli
ve–P
rote
cts
the
annu
itant
by
trans
ferr
ing
the
risk
of
livin
g to
o lo
ng fr
om th
e an
nuita
nt to
the
insu
rer
–Rem
embe
r:“L
ifein
sura
nce
crea
tes
an
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
Rem
embe
r: L
ife in
sura
nce
crea
tes
an
imm
edia
te e
stat
e up
on d
eath
”•L
ife in
sura
nce
prot
ects
aga
inst
dyi
ng to
o so
on
Purp
ose
of A
nnui
ties
•The
re is
no
insu
rabi
lity
requ
irem
ent t
o pu
rcha
seH
ii
thl
it
–Hav
ing
mon
ey is
the
only
requ
irem
ent
•Ann
uitie
s ar
e no
t life
insu
ranc
e, b
ut th
ey
are
a lif
e in
sura
nce
prod
uct
–Ann
uitie
s in
clud
e a
deat
h be
nefit
pro
visi
on if
th
e ow
ner d
ies
befo
re a
nnui
tizat
ion
Pth
tt
lt
bfi
i(
tl
h
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
•Pay
s th
e co
ntra
ct v
alue
to a
ben
efic
iary
(act
ual c
ash
valu
e, o
r pur
chas
e pr
ice
if gr
eate
r)•T
he p
olic
y ow
ner m
ay c
hang
e th
e be
nefic
iary
at a
ny
time,
unl
ess
it w
as m
ade
irrev
ocab
le
Perio
ds (P
hase
s) o
f an
Ann
uity
•A
nnui
ties
have
two
dist
inct
per
iods
or p
hase
s–A
ccum
ulat
ion
perio
d ($
$ in
)P
il
ihd
li
dih
lii
i•P
artia
l with
draw
als
are
perm
itted
with
lim
itatio
ns•W
ithdr
awal
s m
ay b
e su
bjec
t to
a su
rren
der c
harg
e by
th
e in
sura
nce
com
pany
dur
ing
the
first
7 to
10
year
s.–A
nnui
ty (A
nnui
tizat
ion)
per
iod
($$
out)
–Ann
uitiz
atio
n oc
curs
at a
pre
dete
rmin
ed a
ge o
r up
onre
ques
toft
hepo
licyo
wne
r
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
upon
requ
est o
f the
pol
icyo
wne
r–O
nce
the
cont
ract
ent
ers
the
annu
ity p
erio
d, n
o ne
w m
oney
can
be
adde
d to
the
cont
ract
TX_LAH_CN_3E.indb 82 1/27/2014 12:28:36 PM
83
Less
on E
leve
n A
nnui
ties
Ann
uity
Fun
ding
•Sin
gle-
prem
ium
imm
edia
te a
nnui
ties
(SP
IA) a
nd s
ingl
e-pr
emiu
m d
efer
red
annu
ities
(SP
DA
) are
pur
chas
ed w
ith a
on
e-tim
e lu
mp
sum
pre
miu
m p
aym
ent
•Fle
xibl
e-pr
emiu
m d
efer
red
annu
ities
(F
PD
A) a
re p
urch
ased
with
an
initi
al lu
mp
sum
and
addi
tiona
lmon
eym
aybe
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
sum
and
add
ition
al m
oney
may
be
cont
ribut
ed o
ver t
ime
Imm
edia
te a
nd D
efer
red
Ann
uitie
s•B
ased
on
whe
n (o
r if)
annu
ity p
aym
ents
ar
e to
beg
in, a
nnui
ties
are
refe
rred
to a
s ei
ther
eith
er–I
mm
edia
te a
nnui
ty•P
aym
ents
beg
in w
ithin
12
mon
ths
of th
e co
ntra
ct
purc
hase
dat
e (o
ne m
odal
per
iod)
•Pay
men
ts fo
llow
sta
ndar
d m
odes
(mon
thly,
qua
rterly
, se
mia
nnua
l, an
nual
), w
ith m
onth
ly p
aym
ents
the
mos
t co
mm
on
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
com
mon
–Def
erre
d an
nuity
•Pay
men
t not
inte
nded
to s
tart
until
a fu
ture
dat
e,
usua
lly m
any
year
s in
to th
e fu
ture
The
Ann
uity
Per
iod
•W
hen
the
cont
ract
is “a
nnui
tized
,” it
ente
rs th
e an
nuity
per
iod.
Inco
me
paym
ent b
egin
s.
–Th
ean
nuity
’sva
lue
will
bedi
strib
uted
durin
gth
eTh
e an
nuity
s va
lue
will
be
dist
ribut
ed d
urin
g th
e fu
ll lif
etim
e of
the
annu
itant
, pos
sibl
y ev
en lo
nger
–Th
e pe
rson
(s) r
ecei
ving
the
inco
me
is c
alle
d th
e an
nuita
nt•
Varie
ty o
f dis
tribu
tion
optio
ns a
vaila
ble
–Li
fe in
com
eLi
fi
ithi
dt
i
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
–Li
fe in
com
e w
ith p
erio
d ce
rtain
–R
efun
d (lu
mp
sum
or i
nsta
llmen
t)–
Join
t and
sur
vivo
r
Fixe
d A
nnui
ties
•Gen
eral
acc
ount
lia
bilit
y–P
rem
ium
s pa
id a
re h
eld
in th
e in
sure
r’s g
ener
al
acco
unt
–Ins
urer
see
ks c
onse
rvat
ive
inve
stm
ents
that
m
atch
its
con
tract
ual g
uara
ntee
s an
d lia
bilit
ies
to th
e po
licyo
wne
r•I
nves
ting
in h
ighl
y ra
ted
long
-term
gov
ernm
ent a
nd
tb
di
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
corp
orat
e bo
nds
is c
omm
on
TX_LAH_CN_3E.indb 83 1/27/2014 12:28:36 PM
84
Less
on E
leve
n A
nnui
ties
Fixe
d A
nnui
ties
•Int
eres
t rat
e gu
aran
teed
–Fix
ed a
nnui
ties
prov
ide
a gu
aran
teed
rate
of
retu
rn•M
inim
um in
tere
st ra
te(3
%–5
%) i
s gu
aran
teed
in th
e co
ntra
ct–
Insu
rer b
ears
all
inte
rest
-rat
e ris
k–
Ow
ner b
ears
infla
tion
risk
•Con
tract
may
perm
itth
ein
sure
rto
cred
ita
high
er
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
Con
tract
may
per
mit
the
insu
rer t
o cr
edit
a hi
gher
in
tere
st ra
te a
t its
opt
ion
Fixe
d A
nnui
ties
•Fix
ed p
aym
ent g
uara
ntee
d fo
r life
–Fix
ed a
nnui
ties
prov
ide
a gu
aran
teed
and
ce
rtain
ben
efit
paya
ble
to th
e an
nuita
nt fo
r the
ir lif
etim
e–A
mou
nt o
f ben
efit
paym
ent i
s de
term
ined
by
the
valu
e of
the
cont
ract
at a
nnui
tizat
ion,
the
life
expe
ctan
cy o
f the
ann
uita
nt, a
nd th
e di
ibi
il
db
hli
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
dist
ribut
ion
optio
n se
lect
ed b
y th
e po
licy
owne
r
Varia
ble
Ann
uitie
s•S
epar
ate
acco
unt l
iabi
lity
–Net
pre
miu
ms
paid
are
hel
d in
the
insu
rer’s
se
para
te a
ccou
nt•T
he in
sure
r ow
ns a
var
iety
of s
ecur
ities
in
“sub
acco
unts
” in
var
ying
risk
cat
egor
ies
and
re
sem
blin
g m
utua
l fun
ds–T
he v
alue
of t
he c
ontra
ct a
nd b
enef
it pa
ymen
ts
depe
ndon
the
perfo
rman
ceof
the
sepa
rate
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
depe
nd o
n th
e pe
rform
ance
of t
he s
epar
ate
acco
unt
•Con
tract
ow
ner b
ears
all
inve
stm
ent r
isk
Varia
ble
Ann
uitie
s•V
aria
ble
annu
ities
are
def
ined
and
re
gula
ted
as s
ecur
ities
–Pro
duct
s m
ust b
e re
gist
ered
as
a se
curit
y w
ith
the
Sec
uriti
es a
nd E
xcha
nge
Com
mis
sion
(S
EC
)–C
lient
s m
ust r
ecei
ve a
pro
spec
tus
not l
ater
than
th
e fir
st a
ppoi
ntm
ent
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
–Age
nts
and
prod
ucts
are
sub
ject
to b
oth
fede
ral
secu
ritie
s re
gula
tions
and
sta
te in
sura
nce
regu
latio
ns
TX_LAH_CN_3E.indb 84 1/27/2014 12:28:37 PM
85
Less
on E
leve
n A
nnui
ties
Varia
ble
Ann
uitie
s–P
erso
ns s
ellin
g va
riabl
e an
nuity
con
tract
s m
ust
be d
ual-l
icen
sed
Lif
it
tl
hFI
NR
AS
i6
•Life
insu
ranc
e ag
ents
mus
t als
o ha
ve F
INR
A Se
ries
6 or
7 a
nd S
erie
s 63
or 6
6 re
gist
ratio
ns
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
TX_LAH_CN_3E.indb 85 1/27/2014 12:28:37 PM
TX_LAH_CN_3E.indb 86 1/27/2014 12:28:37 PM
Lesson TwelveGroup Life Insurance
TX_LAH_CN_3E.indb 87 1/27/2014 12:28:37 PM
88
Less
on T
wel
ve
Gro
up L
ife In
sura
nce
Less
onTw
elve
Less
on T
wel
ve
Gro
up L
ife In
sura
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Gro
up L
ife In
sura
nce
•Cov
erag
e ge
nera
lly a
vaila
ble
with
out
indi
vidu
al m
edic
al e
xam
inat
ions
•Mas
ter p
olic
y is
sued
to a
n em
ploy
er, l
abor
un
ion,
ass
ocia
tion
of g
over
nmen
t em
ploy
ees,
cre
dito
rs, o
r non
prof
it or
gani
zatio
nC
ertif
icat
esof
insu
ranc
eis
sued
toth
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
•Cer
tific
ates
of i
nsur
ance
issu
ed to
the
insu
red
indi
vidu
al
•Usu
ally
term
insu
ranc
e
Con
trib
utor
y Ve
rsus
Non
cont
ribut
ory
•Non
cont
ribut
ory
plan
–Pre
miu
m is
pai
d en
tirel
y by
the
spon
sor
–All
(100
%) e
ligib
le e
mpl
oyee
s or
mem
bers
m
ust b
e co
vere
d•C
ontri
buto
ry p
lan
–Pre
miu
m p
aid
by b
oth
spon
sor a
nd in
sure
dA
tlea
st75
%of
alle
ligib
leem
ploy
ees
or
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
–At l
east
75%
of a
ll el
igib
le e
mpl
oyee
s or
m
embe
rs m
ust b
e co
vere
d
Stan
dard
Pro
visi
ons
•Gro
up p
olic
ies
–Con
vers
ion
(31
days
)•R
ight
to c
onve
rt to
an
indi
vidu
al p
olic
y w
hen
insu
red’
s co
vera
ge is
term
inat
ed b
ecau
se o
f ter
min
atio
n of
em
ploy
men
t or e
limin
atio
n of
a c
lass
of i
nsur
eds
•Rig
ht to
con
vert
to a
n in
divi
dual
pol
icy
beca
use
mas
ter p
olic
y ha
s be
en te
rmin
ated
•No
med
ical
que
stio
ns
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
TX_LAH_CN_3E.indb 88 1/27/2014 12:28:37 PM
89
Less
on T
wel
ve
Gro
up L
ife In
sura
nce
Stan
dard
Pro
visi
ons
•In
addi
tion
to th
e rig
hts
of c
onve
rsio
n lis
ted,
an
insu
red
who
die
s af
ter c
over
age
has
term
inat
ed, b
ut b
efor
e th
e en
d of
the
31-
day
conv
ersi
on p
erio
d, w
ill re
ceiv
e th
e gr
oup
polic
y be
nefit
(con
side
red
sam
e as
gr
ace
perio
d)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
Cer
tific
ates
of I
nsur
ance
•In
grou
p in
sura
nce
–Cer
tific
ate
show
s th
e im
porta
nt, p
ertin
ent
info
rmat
ion,
incl
udin
g•A
mou
nt o
f the
life
insu
ranc
e pr
otec
tion
•Nam
e of
the
bene
ficia
ry•C
over
age
effe
ctiv
e da
te•A
dditi
onal
det
ails
suc
h as
ben
efit
desc
riptio
ns, n
otic
e f
li
ii
htd
dt
if
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
of c
laim
, con
vers
ion
right
s, d
epen
dent
cov
erag
e if
appl
icab
le, c
ontra
ct/c
ertif
icat
e nu
mbe
r, an
d so
forth
TX_LAH_CN_3E.indb 89 1/27/2014 12:28:38 PM
TX_LAH_CN_3E.indb 90 1/27/2014 12:28:38 PM
Lesson ThirteenSocial Security and Tax Considerations
TX_LAH_CN_3E.indb 91 1/27/2014 12:28:38 PM
92
Less
on T
hirt
een
Soci
al S
ecur
ity a
nd T
ax C
onsi
dera
tions
Less
on T
hirt
een
Soci
al S
ecur
ity a
nd T
axC
onsi
dera
tions
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Soci
al S
ecur
ity•S
ocia
l Sec
urity
Act
–Orig
inal
ly p
asse
d in
193
5—to
ok e
ffect
in 1
937
–Cov
erag
e ex
tend
ed o
ver t
he y
ears
so
that
to
day
near
ly a
ll pr
ivat
e se
ctor
em
ploy
ees
and
self-
empl
oyed
per
sons
are
cov
ered
–Cov
ers
a w
ide
asso
rtmen
t of s
ocia
l ins
uran
ce
and
publ
ic a
ssis
tanc
e (w
elfa
re) p
rogr
ams
•Wha
twe
refe
rto
asS
ocia
lSec
urity
ism
ore
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
•Wha
t we
refe
r to
as S
ocia
l Sec
urity
is m
ore
prop
erly
cal
led
Old
Age
Sur
vivo
rs a
nd
Dis
abili
ty In
sura
nce
(OA
SD
I)
Type
s of
Ben
efits
•OA
SD
I pro
vide
s th
e fo
llow
ing
gene
ral
cate
gorie
s of
ben
efits
Mon
thly
retir
emen
tben
efits
forr
etire
dw
orke
rs–M
onth
ly re
tirem
ent b
enef
its fo
r ret
ired
wor
kers
at
leas
t age
62
and
fully
insu
red
–Mon
thly
ben
efits
for s
pous
es o
f ret
ired
wor
kers
–Mon
thly
sur
vivo
r ben
efits
for s
pous
e an
d ce
rtain
oth
er s
urvi
vors
of d
ecea
sed
wor
kers
(e
.g.,
min
or c
hild
ren)
Mon
thly
disa
bilit
ybe
nefit
sfo
rdis
able
dw
orke
rs
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
–Mon
thly
dis
abili
ty b
enef
its fo
r dis
able
d w
orke
rs
and
thei
r dep
ende
nts
–A lu
mp-
sum
dea
th b
enef
it of
$25
5 pa
yabl
e at
a
wor
ker’s
dea
th
Dis
abili
ty B
enef
its•T
o qu
alify
, a p
erso
n m
ust b
e fu
lly o
r cu
rren
tly in
sure
d an
d un
der n
orm
al
retir
emen
t age
•Soc
ial S
ecur
ity d
efin
es to
tal d
isab
ility
–The
inab
ility
to e
ngag
e in
any
sub
stan
tial
gain
ful a
ctiv
ity b
ecau
se o
f phy
sica
l or m
enta
l di
sabi
lity
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
disa
bilit
y–T
he d
isab
ility
mus
t be
expe
cted
to la
st fo
r at
leas
t 12
mon
ths
TX_LAH_CN_3E.indb 92 1/27/2014 12:28:38 PM
93
Less
on T
hirt
een
Soci
al S
ecur
ity a
nd T
ax C
onsi
dera
tions
Dis
abili
ty B
enef
its•O
nce
a pe
rson
bec
omes
dis
able
d an
d is
elig
ible
fo
r ben
efits
, the
re is
a fi
ve-m
onth
wai
ting
perio
dB
fib
ih
fid
fh
ih
fll
–Ben
efits
beg
in o
n th
e fir
st d
ay o
f the
six
th fu
ll m
onth
–Ben
efits
are
not
pai
d re
troac
tivel
y fo
r the
firs
t fiv
e m
onth
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
Tax
Con
side
ratio
ns
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Indi
vidu
al L
ife In
sura
nce
•Life
insu
ranc
e po
licie
s ha
ve tr
aditi
onal
ly
been
giv
en fa
vora
ble
tax
treat
men
t•T
wo
maj
or ta
x ad
vant
ages
–Ann
ual e
arni
ngs
on th
e ca
sh v
alue
s ge
nera
lly
accu
mul
ate
on a
tax
defe
rred
bas
is u
ntil
they
ar
e di
strib
uted
–Pro
ceed
spa
yabl
eat
the
insu
red’
sde
ath
are
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
Pro
ceed
s pa
yabl
e at
the
insu
red
s de
ath
are
inco
me
tax
free
to th
e be
nefic
iary
whe
n pa
id a
s a
lum
p su
m (o
ther
dis
tribu
tion
optio
ns c
reat
e so
me
tax
liabi
litie
s)
Polic
y Pr
ocee
ds•
If th
e de
ath
bene
fit is
pai
d ou
t in
way
s ot
her t
han
a lu
mp
sum
, reg
ardl
ess
of w
hich
oth
er o
ptio
n is
cho
sen,
a
porti
onof
each
indi
vidu
alpa
ymen
tis
taxa
ble
toth
ea
porti
on o
f eac
h in
divi
dual
pay
men
t is
taxa
ble
to th
e be
nefic
iary
as
inco
me
–Th
e po
rtion
of e
ach
paym
ent t
hat i
s pr
inci
pal—
deriv
ed fr
om th
e lu
mp-
sum
dea
th b
enef
it—is
re
ceiv
ed in
com
e ta
x fre
e–
The
porti
on o
f eac
h pa
ymen
t tha
t is
not c
onsi
dere
d t
fth
ii
l(i
tt
dff
fth
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
part
of th
e pr
inci
pal (
inte
rest
ear
ned
off o
f the
pr
ocee
ds le
ft w
ith th
e co
mpa
ny) i
s th
e on
ly p
art o
f th
is in
com
e el
emen
t tha
tis
subj
ect t
o in
com
e ta
x
TX_LAH_CN_3E.indb 93 1/27/2014 12:28:38 PM
94
Less
on T
hirt
een
Soci
al S
ecur
ity a
nd T
ax C
onsi
dera
tions
Acc
eler
ated
Dea
th B
enef
its
•A
ccel
erat
ed d
eath
ben
efits
are
rece
ived
inco
me
tax
free
as lo
ng a
s th
ey a
re “q
ualif
ied”
Qlif
id
thi
dh
btif
id
b–Q
ualif
ied
mea
ns th
e in
sure
d ha
s be
en c
ertif
ied
by
a ph
ysic
ian
as h
avin
g an
illn
ess
or p
hysi
cal
cond
ition
that
can
reas
onab
ly b
e ex
pect
ed to
re
sult
in d
eath
with
in 2
4 m
onth
s of
the
date
of t
he
certi
ficat
ion
•O
ther
stip
ulat
ions
may
beap
plie
dbu
tthe
end
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
Oth
er s
tipul
atio
ns m
ay b
e ap
plie
d, b
ut th
e en
d re
sult
is th
at th
ose
who
requ
ire a
cces
s to
thes
e be
nefit
s m
ay re
ceiv
e th
e m
oney
with
out h
avin
g to
pa
y in
com
e ta
xes
on it
Cas
h Va
lue
Acc
umul
atio
n•O
ne o
f the
mos
t sig
nific
ant a
dvan
tage
s of
lif
e in
sura
nce
prod
ucts
is th
eir a
bilit
y to
ac
cum
ulat
e ca
sh o
n a
tax-
defe
rred
bas
is–C
ash
valu
es a
re n
ot ta
xed
until
with
draw
n–T
he o
nly
part
taxa
ble
is th
at w
hich
is
cons
ider
ed in
exc
ess
of c
ost b
asis
(pre
miu
ms
paid
less
par
tial s
urre
nder
s/w
ithdr
awal
s)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
pp
)
Div
iden
ds a
nd S
urre
nder
Val
ues
•Div
iden
ds p
aid
to p
artic
ipat
ing
polic
y ow
ners
are
gen
eral
ly n
ot ta
xabl
e as
in
com
e–C
onsi
dere
d a
retu
rn o
f pre
miu
m•A
ny in
tere
st e
arne
d on
div
iden
ds is
taxa
ble
–Acc
umul
atio
n at
inte
rest
div
iden
d op
tion
wou
ld
incu
rinc
ome
tax
liabi
lity
fort
hein
tere
stea
rned
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
incu
r inc
ome
tax
liabi
lity
for t
he in
tere
st e
arne
d on
the
accu
mul
ated
div
iden
ds
Div
iden
ds a
nd S
urre
nder
Val
ues
Whe
n pr
ocee
ds a
re re
ceiv
ed fr
om a
su
rren
dere
d or
mat
ured
life
insu
ranc
e po
licy,
the
part
of th
e pr
ocee
ds, i
f any
,tha
t ex
ceed
s th
e co
st o
f the
pol
icy
is s
ubje
ct to
or
dina
ry fe
dera
l inc
ome
tax
in th
e ye
ar
rece
ived
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
TX_LAH_CN_3E.indb 94 1/27/2014 12:28:39 PM
95
Less
on T
hirt
een
Soci
al S
ecur
ity a
nd T
ax C
onsi
dera
tions
Mod
ified
End
owm
ent C
ontr
act (
MEC
)•
If yo
u ov
erfu
nd a
life
insu
ranc
e co
ntra
ct it
may
be
com
e a
Mod
ified
End
owm
ent C
ontra
ct (M
EC
)Th
ete
stph
rase
is:“
itfa
ilsth
e7
pay
test
”•
The
test
phr
ase
is:
it fa
ils th
e 7-
pay
test
–
This
mea
ns th
at m
ore
mon
ey w
as a
ccum
ulat
ed in
th
e co
ntra
ct d
urin
g th
e fir
st 7
yea
rs th
an it
wou
ld
take
to fu
lly fu
nd th
e po
licy
at a
ge 9
5 or
late
r •
Als
o, a
sev
ere
redu
ctio
n in
the
face
am
ount
of a
n ex
istin
gpo
licy
mak
esth
atpo
licy
aM
EC
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
exis
ting
polic
y m
akes
that
pol
icy
a M
EC
•O
nce
a co
ntra
ct h
as b
een
clas
sifie
d an
ME
C, i
t is
alw
ays
an M
EC
Mod
ified
End
owm
ent C
ontr
act (
MEC
)•P
enal
ties
asse
ssed
aga
inst
ME
Cs
prim
arily
af
fect
mon
ey ta
ken
out o
f the
pol
icy
Mdi
tib
td
fM
EC
iid
d–M
oney
dis
tribu
ted
from
an
ME
C is
con
side
red
to c
ome
first
from
ear
ning
s—ex
cess
of c
ash
valu
e ov
er c
ost b
asis
—an
d is
taxe
d as
ord
inar
y in
com
e–I
f pol
icy
owne
r you
nger
than
age
59½
and
is
not d
isab
led,
thes
e ta
xabl
e di
strib
utio
ns a
re
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
,co
nsid
ered
to b
e pr
emat
ure
and
subj
ect t
o a
10%
pen
alty
tax
in a
dditi
on to
the
regu
lar
inco
me
tax
Gro
up L
ife In
sura
nce
•Dea
th b
enef
its fr
om a
gro
up li
fe p
olic
y ar
e no
t sub
ject
to fe
dera
l inc
ome
tax
whe
n re
ceiv
ed b
y th
e be
nefic
iary
as
a lu
mp-
sum
pa
ymen
t
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
Gro
up L
ife In
sura
nce
•Ded
uctib
ility
of p
rem
ium
s pa
id–E
mpl
oyee
Ntd
dtib
lt
thl
•Not
ded
uctib
le to
the
empl
oyee
•Not
con
side
red
inco
me
to th
e em
ploy
ee u
nles
s–
Cov
erag
e fo
r em
ploy
ee e
xcee
ds $
50,0
00–
Cos
t of c
over
age
in e
xces
s of
$50
,000
taxe
d to
em
ploy
ee a
s “im
pute
d in
com
e”–S
pons
or/e
mpl
oyer
•Are
ded
uctib
le to
the
empl
oyer
as
a bu
sine
ss
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
py
expe
nse
TX_LAH_CN_3E.indb 95 1/27/2014 12:28:39 PM
96
Less
on T
hirt
een
Soci
al S
ecur
ity a
nd T
ax C
onsi
dera
tions
Ann
uity
Pay
men
ts•I
ncom
e pa
ymen
ts m
ade
from
an
annu
ity a
re
cons
ider
ed p
artly
a re
turn
of c
ost,
refe
rred
to a
s co
stba
sis
and
partl
ya
retu
rnof
earn
ings
cost
bas
is, a
nd p
artly
a re
turn
of e
arni
ngs
•Fo
r a p
erio
d of
tim
e, p
art o
f the
ann
uity
pay
men
t w
ill n
ot b
e ta
xed
(ret
urn
of c
ost)
and
part
will
be
taxe
d (p
aym
ent o
f ear
ning
s)
–The
cos
t bas
is p
art i
s th
e pr
emiu
m p
aid
in
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
–The
ear
ning
s pa
rt is
der
ived
from
the
earn
ings
of
the
annu
ity (i
.e.,
inte
rest
ear
ned
on th
e pr
emiu
ms
paid
) and
is ta
xabl
e
Ann
uity
Pay
men
ts•O
nce
it ha
s be
en d
eter
min
ed th
at th
e co
st
basi
s ha
s be
en fu
lly re
cove
red,
all
of th
e an
nuity
pay
men
t now
bec
omes
taxa
ble
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
Taxa
tion
Dur
ing
Acc
umul
atio
n•P
artia
l with
draw
als
are
cons
ider
ed
earn
ings
firs
t and
are
taxa
ble
as o
rdin
ary
inco
me
(LIF
O—
last
in, f
irst o
ut)
–Onl
y af
ter a
ll th
e ea
rnin
gs h
ave
been
taxe
d ar
e w
ithdr
awal
s co
nsid
ered
a re
turn
of p
rinci
pal
–If w
ithdr
awal
is b
efor
e ag
e 59
½, 1
0% p
enal
ty
tax
coul
d al
so a
pply
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
ppy
•App
lies
only
to g
ain,
not
cos
t bas
is•N
o pe
nalty
app
lies
whe
n du
e to
dea
th, c
erta
in
disa
bilit
ies,
or i
f con
tract
is a
nnui
tized
Sect
ion
1035
(Pol
icy
Exch
ange
s)
•Li
fe In
sura
nce
and
annu
ity p
olic
ies
are
cons
ider
ed
prop
erty
so
that
gai
n or
loss
on
an e
xcha
nge
of
such
polic
ies
ordi
naril
yw
ould
bere
cogn
ized
fort
axsu
ch p
olic
ies
ordi
naril
y w
ould
be
reco
gniz
ed fo
r tax
pu
rpos
es•
Und
er S
ectio
n 10
35 o
f the
Inte
rnal
Rev
enue
Cod
e,
no g
ain
or lo
ss is
reco
gniz
ed o
n th
e ex
chan
ge o
f th
e fo
llow
ing
–Alif
ein
sura
nce
cont
ract
fora
noth
erlif
ein
sura
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
A lif
e in
sura
nce
cont
ract
for a
noth
er li
fe in
sura
nce
cont
ract
–A li
fe in
sura
nce
cont
ract
for a
n an
nuity
con
tract
TX_LAH_CN_3E.indb 96 1/27/2014 12:28:39 PM
97
Less
on T
hirt
een
Soci
al S
ecur
ity a
nd T
ax C
onsi
dera
tions
Sect
ion
1035
(Pol
icy
Exch
ange
s)
•No
gain
or l
oss
–An
annu
ity c
ontra
ct fo
r ano
ther
ann
uity
con
tract
–An
annu
ity c
ontra
ct e
xcha
nged
for a
life
in
sura
nce
cont
ract
is n
ot a
llow
able
und
er
Sec
tion
1035
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
Que
stio
nIn
whi
ch o
f the
follo
win
g tra
nsfe
rs o
f cas
h va
lue
wou
ld y
ou a
ntic
ipat
e a
taxa
ble
even
t oc
curr
ing?
A.F
rom
a w
hole
life
pol
icy
to a
uni
vers
al li
fe
polic
yB
.Fro
m a
fixe
d an
nuity
to a
var
iabl
e an
nuity
C.F
rom
aun
iver
sall
ifepo
licy
toa
varia
ble
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
C.F
rom
a u
nive
rsal
life
pol
icy
to a
var
iabl
e an
nuity
D.F
rom
a fi
xed
annu
ity to
a u
nive
rsal
life
po
licy
Ans
wer
In w
hich
of t
he fo
llow
ing
trans
fers
of c
ash
valu
e w
ould
you
ant
icip
ate
a ta
xabl
e ev
ent
occu
rrin
g?A
.Fro
m a
who
le li
fe p
olic
y to
a u
nive
rsal
life
po
licy
B.F
rom
a fi
xed
annu
ity to
a v
aria
ble
annu
ityC
.Fro
ma
univ
ersa
llife
polic
yto
ava
riabl
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
C.F
rom
a u
nive
rsal
life
pol
icy
to a
var
iabl
e an
nuity
D.F
rom
a fi
xed
annu
ity to
a u
nive
rsal
life
po
licy
Qua
lifie
d R
etire
men
t Pla
n D
istr
ibut
ions
•As
a ru
le, f
unds
from
a q
ualif
ied
retir
emen
t pla
n m
ay b
e di
strib
uted
at a
ny a
ge w
hen
empl
oym
ent
iste
rmin
ated
the
plan
iste
rmin
ated
orth
eis
term
inat
ed, t
he p
lan
is te
rmin
ated
, or t
he
empl
oyee
retir
es•I
f the
dis
tribu
tion
is c
onsi
dere
d to
be
prem
atur
e (i.
e., m
ade
befo
re a
ge 5
9½),
a 10
% p
enal
ty ta
x is
ge
nera
lly a
pplie
d to
the
dist
ribut
ion
in a
dditi
on to
th
ere
gula
rinc
ome
tax
due
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n24
the
regu
lar i
ncom
e ta
x du
e–
Exc
eptio
n to
this
pen
alty
bei
ng c
erta
in a
llow
able
har
dshi
p w
ithdr
awal
s•D
eath
, dis
abili
ty, o
r sys
tem
atic
pay
men
ts o
ver t
ime
TX_LAH_CN_3E.indb 97 1/27/2014 12:28:40 PM
TX_LAH_CN_3E.indb 98 1/27/2014 12:28:40 PM
Lesson FourteenRetirement Plans
TX_LAH_CN_3E.indb 99 1/27/2014 12:28:40 PM
10
0Le
sson
Fou
rtee
n R
etire
men
t Pl
ans
Less
onFo
urte
enLe
sson
Fou
rtee
nR
etire
men
t Pla
ns
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Ret
irem
ent P
lans
•Leg
al s
truct
ures
to a
llow
em
ploy
ers
and
empl
oyee
s to
sav
e m
oney
for r
etire
men
t on
a fa
vora
ble
tax
basi
s•T
he p
lans
can
als
o be
cre
ated
indi
vidu
ally
•Wid
e va
riety
of f
inan
cial
pro
duct
s, in
clud
ing
annu
ities
, may
be
used
to fu
nd re
tirem
ent
plan
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
plan
s
Def
ined
Ben
efit
Plan
•Pla
n sp
ecifi
es a
mou
nt o
f ben
efit
to b
e re
ceiv
ed a
t ret
irem
ent
–Typ
ical
ly, a
spe
cifie
d pe
rcen
tage
of p
re-
retir
emen
t inc
ome
base
d on
age
and
long
evity
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
Def
ined
Con
trib
utio
n Pl
an•F
ocus
es o
n th
e co
ntrib
utio
ns m
ade
to th
e pl
an, n
ot th
e be
nefit
s th
e pl
an w
ill p
ay o
ut–E
mpl
oyee
and
/or e
mpl
oyer
def
ines
the
amou
nt
of c
ontri
butio
n th
at w
ill b
e m
ade
•Ben
efit
not p
rede
term
ined
and
unk
now
n–W
ill d
epen
d on
how
muc
h is
con
tribu
ted,
the
perfo
rman
ceof
the
inve
stm
ents
and
leng
thof
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
perfo
rman
ce o
f the
inve
stm
ents
, and
leng
th o
f tim
e co
ntrib
utio
ns m
ade
TX_LAH_CN_3E.indb 100 1/27/2014 12:28:40 PM
10
1Le
sson
Fou
rtee
n R
etire
men
t Pl
ans
Qua
lifie
dan
dN
onqu
alifi
edQ
ualif
ied
and
Non
qual
ified
R
etire
men
t Pla
ns
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Non
qual
ified
Ret
irem
ent P
lans
•Do
not m
eet r
equi
rem
ents
set
by
fede
ral
law
in o
rder
to b
e ca
lled
qual
ified
•Con
tribu
tions
are
not
tax
dedu
ctib
le b
ut
inte
rest
and
ear
ning
are
allo
wed
to g
row
ta
x de
ferr
ed•A
nnui
ties
are
nonq
ualif
ied
plan
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
Qua
lifie
d R
etire
men
t Pla
ns
•Are
elig
ible
for f
avor
able
tax
treat
men
t of
cont
ribut
ions
and
ear
ning
s–C
ontri
butio
ns a
re ta
x de
duct
ible
•Ear
ning
s gr
ow ta
x de
ferr
ed
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
Qua
lifie
d R
etire
men
t Pla
ns
•C
ontri
butio
ns to
qua
lifie
d pl
ans
grow
tax
defe
rred
un
til w
ithdr
awn
S
ill
thi
thl
htb
–Sin
ce a
ll th
e m
oney
in th
e pl
an h
as n
ot b
een
taxe
d, w
ithdr
awal
s w
ill b
e ta
xabl
e an
d po
ssib
ly
subj
ect t
o a
10%
tax
pena
lty if
take
n to
o ea
rly
(bef
ore
age
59½
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
TX_LAH_CN_3E.indb 101 1/27/2014 12:28:41 PM
10
2Le
sson
Fou
rtee
n R
etire
men
t Pl
ans
Qua
lifie
d R
etire
men
t Pla
ns
•Em
ploy
er s
pons
ored
pla
ns–K
eogh
–so
le p
ropr
ieto
r ind
ivid
ual
401K
ti–4
01K
–co
rpor
atio
ns–P
rofit
sha
ring
–co
rpor
atio
ns–S
ectio
n 45
7 –
loca
l and
sta
te g
over
nmen
t*–T
ax s
helte
red
annu
ity –
scho
ol a
nd n
on-p
rofit
em
ploy
ees
•Ind
ivid
ualp
lans
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
•Ind
ivid
ual p
lans
–Tra
ditio
nal I
RA
–Rot
h IR
A* N
ot c
alle
d a
qual
ified
pla
n bu
t con
tribu
tions
are
mad
e w
ith p
re-ta
x do
llars
Rol
love
rs a
nd T
rans
fers
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Rol
love
r•O
ccur
s w
hen
mon
ey in
a q
ualif
ied
retir
emen
t pla
n is
tran
sfer
red
to a
diff
eren
t qu
alifi
ed re
tirem
ent p
lan
thro
ugh
the
reci
pien
t (fu
nds
in th
e re
cipi
ent’s
con
trol)
•Rol
love
rs b
etw
een
IRA
s m
ay b
e m
ade
only
on
ce w
ithin
a 1
2-m
onth
per
iod
No
limit
onam
ount
ofa
rollo
ver
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
–No
limit
on a
mou
nt o
f a ro
llove
r
Rol
love
r•F
rom
dat
e fu
nds
are
with
draw
n fro
m o
ld
plan
, the
ow
ner h
as 6
0 da
ys to
mak
e th
e de
posi
t to
the
new
pla
n–A
ny fu
nds
not r
olle
d ov
er w
ithin
that
60-
day
perio
d be
com
e ta
xabl
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
TX_LAH_CN_3E.indb 102 1/27/2014 12:28:41 PM
10
3Le
sson
Fou
rtee
n R
etire
men
t Pl
ans
Tran
sfer
s•O
ccur
s w
hen
mon
ey in
a q
ualif
ied
retir
emen
t pla
n is
tran
sfer
red
dire
ctly
to a
di
ffere
nt q
ualif
ied
retir
emen
t pla
n–T
rans
fer t
akes
pla
ce d
irect
ly b
etw
een
cust
odia
ns o
f the
app
licab
le a
ccou
nts
–Fun
ds n
ever
in th
e re
cipi
ent’s
con
trol
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
The
Empl
oyee
Ret
irem
ent
Inco
me
Secu
rity
Act
(ER
ISA
)•E
nact
ed to
pro
tect
the
inte
rest
s of
par
ticip
ants
in
empl
oyee
ben
efit
plan
s as
wel
l as
the
inte
rest
s of
the
parti
cipa
nts’
bene
ficia
ries
of th
e pa
rtici
pant
s’ b
enef
icia
ries
–Dea
ls w
ith q
ualif
ied
pens
ion
plan
s, p
lus
som
e se
ctio
ns, a
pply
to g
roup
insu
ranc
e pl
ans
•Doe
s no
t req
uire
em
ploy
ers
to s
pons
or
retir
emen
t pla
ns b
ut re
gula
tes
thos
e th
at h
ave
plan
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
plan
s•C
hurc
h re
tirem
ent p
lans
are
exe
mpt
from
ER
ISA
TX_LAH_CN_3E.indb 103 1/27/2014 12:28:41 PM
TX_LAH_CN_3E.indb 104 1/27/2014 12:28:41 PM
Lesson FifteenHealth Policy Provisions Individual Health Policies
TX_LAH_CN_3E.indb 105 1/27/2014 12:28:41 PM
10
6Le
sson
Fift
een
Hea
lth P
olic
y Pr
ovis
ions
Indi
vidu
al H
ealth
Pol
icie
s
Less
on F
iftee
nH
ealth
Pol
icy
Prov
isio
nsIn
divi
dual
Hea
lth P
olic
ies
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Entir
e C
ontr
act
•Th
is p
rovi
sion
def
ines
an
entir
e co
ntra
ct (a
nd n
othi
ng
else
) as
–Th
ein
sura
nce
polic
y–
The
insu
ranc
e po
licy
–E
ndor
sem
ents
, if a
ny
–A
ttach
men
ts, i
f any
(i.e
., th
e ap
plic
atio
n)•
Cha
nges
may
be
mad
e if
appr
oved
by
an e
xecu
tive
offic
er o
f the
insu
ranc
e co
mpa
ny–
Insu
red
will
be
awar
e of
any
suc
h ch
ange
s b
hill
bd
dtt
hd
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
beca
use
chan
ges
will
be
endo
rsed
on
or a
ttach
ed
to th
e po
licy
•A
n ag
ent o
r pro
duce
r may
not
cha
nge
a po
licy
or
wai
ve a
ny o
f its
pro
visi
ons
Tim
e Li
mit
on C
erta
in D
efen
ses,
In
cont
esta
bilit
y•N
o m
ater
ial m
isst
atem
ents
in th
e ap
plic
atio
n (e
xcep
t for
frau
d) c
an b
e us
ed
to v
oid
the
polic
y or
den
y a
clai
m a
fter t
wo
year
s ha
ve p
asse
d–U
nles
s an
insu
red’
s st
atem
ents
are
frau
dule
nt,
afte
r tw
o ye
ars
from
the
date
the
polic
y is
is
sued
, the
pol
icy
beco
mes
inco
ntes
tabl
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
–Fra
ud c
an v
oid
the
heal
th in
sura
nce
cont
ract
w
hene
ver i
t is
foun
d an
d ca
n be
pro
ven
by th
e he
alth
insu
rer
Tim
e Li
mit
on C
erta
in D
efen
ses,
In
cont
esta
bilit
y•A
fter t
wo
year
s, th
e po
licy
cann
ot b
e vo
ided
, a c
laim
may
not
be
deni
ed, a
nd
bene
fits
may
not
be
redu
ced
on th
e gr
ound
s th
at a
n ill
ness
or a
con
ditio
n w
as
pree
xist
ing
•Ins
urer
may
add
an
impa
irmen
t rid
erIn
sure
rcan
excl
ude
cove
rage
forc
erta
in
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
–Ins
urer
can
exc
lude
cov
erag
e fo
r cer
tain
co
nditi
ons,
but
it m
ust b
e do
ne w
hen
the
polic
y is
initi
ally
issu
ed
TX_LAH_CN_3E.indb 106 1/27/2014 12:28:42 PM
10
7Le
sson
Fift
een
Hea
lth P
olic
y Pr
ovis
ions
Indi
vidu
al H
ealth
Pol
icie
s
Gra
ce P
erio
d•I
nsur
ers
mus
t allo
w th
e in
sure
d a
perio
d of
gr
ace
for p
rem
ium
pay
men
t•R
equi
red
grac
e pe
riod
depe
nds
on h
ow
ofte
n th
e in
sure
d pa
ys th
e po
licy
prem
ium
s–W
eekl
y pr
emiu
m—
7 da
ys–M
onth
ly p
rem
ium
—10
day
sQ
arte
rlse
mia
nnal
lan
nal
l31
das
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
–Qua
rterly
, sem
i-ann
ually
, ann
ually
—31
day
s
Rei
nsta
tem
ent
•O
utlin
es th
e pr
oced
ures
invo
lved
rega
rdin
g re
inst
atem
ent o
f cov
erag
e fo
llow
ing
the
laps
e of
a
polic
ypo
licy
•In
sure
r may
requ
est a
rein
stat
emen
t app
licat
ion
and
requ
ire th
e in
sure
d to
pro
ve in
sura
bilit
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
Rei
nsta
tem
ent
•If a
ny p
rem
ium
is p
aid
with
the
rein
stat
emen
t ap
plic
atio
nA
cond
ition
alre
ceip
tis
give
nto
the
insu
red
–A c
ondi
tiona
l rec
eipt
is g
iven
to th
e in
sure
d–I
f the
app
licat
ion
is n
ot re
ject
ed w
ithin
45
days
, co
vera
ge is
aut
omat
ical
ly re
inst
ated
•Cov
erag
e af
ter r
eins
tate
men
t beg
ins
–Im
med
iate
ly fo
r acc
iden
ts (d
ay p
olic
y is
re
inst
ated
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
rein
stat
ed)
–Sic
knes
s is
sub
ject
to a
10-
day
prob
atio
nary
pe
riod
Not
ice
of C
laim
•For
loss
-of-t
ime
(dis
abili
ty) b
enef
it po
licie
s pa
yabl
e fo
r at l
east
two
year
s, th
e in
sure
r ca
n re
quire
that
the
insu
red
prov
ide,
eve
ry
six
mon
ths,
writ
ten
notic
e th
at th
e cl
aim
is
cont
inui
ng–T
his
prov
isio
n do
es n
ot a
pply
whe
n th
e in
sure
d su
ffers
a le
gal i
ncap
acity
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
gp
y–C
an a
lso
requ
ire m
edic
al e
xam
inat
ion
at
com
pany
exp
ense
to d
eter
min
e co
ntin
uing
di
sabi
lity
TX_LAH_CN_3E.indb 107 1/27/2014 12:28:42 PM
10
8Le
sson
Fift
een
Hea
lth P
olic
y Pr
ovis
ions
Indi
vidu
al H
ealth
Pol
icie
s
Cla
im F
orm
s•U
pon
rece
ivin
g a
notic
e of
cla
im, t
he
insu
rer m
ust f
urni
sh th
e in
sure
d w
ith fo
rms
to p
rovi
de p
roof
of l
oss
with
in 1
5 da
ys
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
Proo
f of L
oss
•Ins
ured
mus
t sub
mit
writ
ten
proo
f (sw
orn
stat
emen
t) of
loss
to a
n in
sure
r with
in 9
0 da
ys a
fter t
he d
ate
of th
e lo
ss o
r as
soon
as
reas
onab
ly p
ossi
ble
•For
cla
ims
that
invo
lve
perio
dic
paym
ents
be
caus
e of
a c
ontin
uing
loss
, pro
of m
ust
befu
rnis
hed
with
in90
days
afte
rthe
end
of
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
be fu
rnis
hed
with
in 9
0 da
ys a
fter t
he e
nd o
f th
e pe
riod
for w
hich
the
com
pany
is li
able
Tim
e of
Pay
men
t of C
laim
s•I
nsur
er m
ust m
ake
paym
ent i
mm
edia
tely
af
ter r
ecei
ving
writ
ten
proo
f of l
oss
•For
loss
es in
volv
ing
perio
dic
bene
fits
(dis
abili
ty, l
ong
term
car
e), p
aym
ents
mus
t be
mad
e no
less
freq
uent
ly th
an m
onth
ly
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
Phys
ical
Exa
min
atio
n an
d A
utop
sy•
Whi
le in
sure
d is
aliv
e an
d re
ceiv
ing
bene
fits,
insu
rer
may
requ
ire th
at in
sure
d su
bmit
to p
hysi
cal
exam
inat
ion
atco
mpa
nyex
pens
eex
amin
atio
n at
com
pany
exp
ense
•If
insu
red
has
died
, app
aren
tly a
ccid
enta
lly, i
nsur
er m
ay
have
an
auto
psy
perfo
rmed
at i
ts e
xpen
se to
det
erm
ine
exac
t cau
se o
f dea
th–
How
ever
, any
app
licab
le s
tate
law
s th
at m
ight
pr
even
t suc
h an
aut
opsy
take
pre
cede
nce
over
the
cont
ract
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
cont
ract
•In
sure
r is
requ
ired
to p
ay fo
r exa
min
atio
ns o
r aut
opsi
es
and
may
requ
ire o
nly
reas
onab
le e
xam
inat
ions
TX_LAH_CN_3E.indb 108 1/27/2014 12:28:42 PM
10
9Le
sson
Fift
een
Hea
lth P
olic
y Pr
ovis
ions
Indi
vidu
al H
ealth
Pol
icie
s
Lega
l Act
ions
•Thi
s pr
ovis
ion
proh
ibits
the
insu
red
from
su
ing
the
insu
rer f
or a
t lea
st 6
0 da
ys a
fter
filin
g a
writ
ten
proo
f of l
oss
–Pro
vide
s in
sure
r with
tim
e to
inve
stig
ate
the
clai
m a
nd m
ake
certa
in it
is v
alid
•Max
imum
tim
e fo
r fili
ng a
sui
t in
Texa
s is
th
ree
year
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
thre
e ye
ars
Cha
nge
of B
enef
icia
ry•P
olic
y ow
ner h
as th
e rig
ht to
nam
e a
bene
ficia
ry e
ither
–Rev
ocab
le—
mea
ns th
e po
licy
owne
r can
als
o ch
ange
the
bene
ficia
ry a
t any
tim
e in
the
futu
re–I
rrev
ocab
le—
mea
ns th
e be
nefic
iary
des
igna
tion
may
not
be
chan
ged
with
out c
onse
nt o
f the
ex
istin
g be
nefic
iary
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
Mis
stat
emen
t of A
ge•I
f the
mis
stat
emen
t res
ulte
d in
an
over
paym
ent o
f pre
miu
ms,
exc
ess
prem
ium
s w
ill b
e re
fund
ed (s
ubje
ct to
co
ntra
ct li
mita
tions
)•I
f the
mis
stat
emen
t res
ulte
d in
an
unde
rpay
men
t of p
rem
ium
s, th
e be
nefit
s w
illbe
redu
ced
toco
inci
dew
ithth
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
will
be
redu
ced
to c
oinc
ide
with
the
prem
ium
col
lect
ed
Unp
aid
Prem
ium
•Upo
n pa
ymen
t of a
cla
im, a
ny p
rem
ium
du
e an
d un
paid
may
be
dedu
cted
from
the
bene
fits
–Usu
ally
util
ized
by
insu
rer w
hen
an in
sure
d ex
perie
nces
a lo
ss d
urin
g th
e gr
ace
perio
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
TX_LAH_CN_3E.indb 109 1/27/2014 12:28:43 PM
11
0Le
sson
Fift
een
Hea
lth P
olic
y Pr
ovis
ions
Indi
vidu
al H
ealth
Pol
icie
s
Oth
erH
ealth
Insu
ranc
eO
ther
Hea
lth In
sura
nce
Prov
isio
ns
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Faci
lity
of P
aym
ent
•Allo
ws
insu
rer t
o pa
y an
y re
lativ
e $1
,000
•Pa y
s on
ly if
the
insu
red
or b
enef
icia
ry is
y
yy
not l
ivin
g
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
Free
Loo
k•A
llow
s in
divi
dual
s to
look
ove
r the
pol
icy
for 1
0 da
ys (3
0 da
ys fo
r Med
icar
e su
pple
men
t and
l
tli
i)
long
-term
car
e po
licie
s)•I
f the
ow
ner d
ecid
es to
retu
rn th
e po
licy,
they
m
ust r
ecei
ve a
full
refu
nd o
f the
pre
paid
pr
emiu
m•I
nsur
ance
is in
effe
ct d
urin
g th
is fr
ee lo
ok p
erio
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
•Fre
e lo
ok p
erio
d be
gins
from
the
date
of p
olic
y de
liver
y
Insu
ring
Cla
use
•Usu
ally
the
initi
al p
olic
y cl
ause
(firs
t pag
e of
the
polic
y)•R
epre
sent
s in
sure
rs p
rom
ise
to p
ay u
nder
th
e co
nditi
ons
stip
ulat
ed in
the
polic
y •C
onta
ins
the
defin
ition
s of
“sic
knes
s” a
nd
“acc
iden
t”
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
TX_LAH_CN_3E.indb 110 1/27/2014 12:28:43 PM
11
1Le
sson
Fift
een
Hea
lth P
olic
y Pr
ovis
ions
Indi
vidu
al H
ealth
Pol
icie
s
Con
side
ratio
n C
laus
e•I
n le
gal t
erm
s, c
onsi
dera
tion
is a
n ex
chan
ge o
f som
ethi
ng o
f val
ue o
n w
hich
a
cont
ract
is b
ased
–W
hen
both
par
ties
exch
ange
con
side
ratio
n, th
e co
ntra
ct is
val
idat
ed•S
tate
s th
at th
e fu
ll m
inim
um p
rem
ium
re
quire
dan
dth
est
atem
ents
mad
eon
the
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
requ
ired
and
the
stat
emen
ts m
ade
on th
e ap
plic
atio
n m
ake
up th
e po
licy
owne
r’s
cons
ider
atio
n fo
r the
con
tract
Polic
y C
ontin
uatio
n/R
enew
al
Prov
isio
ns•T
hese
pro
visi
ons
limit
the
circ
umst
ance
s un
der w
hich
the
insu
rer m
ay c
hang
e pr
emiu
ms
or d
isco
ntin
ue c
over
age
for
reas
ons
othe
r tha
n no
n-pa
ymen
t of
prem
ium
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
Opt
iona
lly a
nd C
ondi
tiona
lly
Ren
ewab
le P
olic
ies
•Bot
h po
licy
owne
r and
insu
rer
–Whe
n th
e in
sure
r has
the
optio
n to
refu
se to
re
new
, the
pol
icy
may
be
one
of tw
o ty
pes
•Opt
iona
lly re
new
able
•Con
ditio
nally
rene
wab
le
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
Opt
iona
lly R
enew
able
•A
lso
refe
rred
to a
s re
new
able
at t
he o
ptio
n of
the
insu
rer
Insu
rerr
eser
ves
the
right
tono
tren
ewth
epo
licy
•In
sure
r res
erve
s th
e rig
ht to
not
rene
w th
e po
licy
–M
ay e
xerc
ise
that
righ
t onl
y on
the
polic
y an
nive
rsar
y or
pre
miu
m d
ue d
ate
•Ins
urer
pre
vent
ed fr
om c
ance
ling
the
cont
ract
at
any
othe
r tim
e—m
ust w
ait u
ntil
a pr
emiu
m is
due
•In
addi
tion
prem
ium
san
dbe
nefit
spr
ovid
edm
ay
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n24
•In
add
ition
, pre
miu
ms
and
bene
fits
prov
ided
may
al
so b
e al
tere
d or
mod
ified
by
the
insu
rer,
but o
nly
at
the
polic
y an
nive
rsar
y or
pre
miu
m d
ue d
ate
TX_LAH_CN_3E.indb 111 1/27/2014 12:28:43 PM
11
2Le
sson
Fift
een
Hea
lth P
olic
y Pr
ovis
ions
Indi
vidu
al H
ealth
Pol
icie
s
Con
ditio
nally
Ren
ewab
le•T
he in
sure
r may
ele
ct n
ot to
rene
w th
e po
licy,
but
onl
y un
der c
ondi
tions
spe
cifie
d in
the
polic
y, a
nd o
nly
by c
lass
of i
nsur
eds
–Ins
urer
may
cho
ose
not t
o re
new
the
cont
ract
fo
r circ
umst
ance
s su
ch a
s th
e in
sure
d re
achi
ng
age
65, b
ut n
ot d
ue to
a c
over
ed in
divi
dual
’s
dete
riora
ting
heal
th
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n25
–May
als
o ch
oose
not
to re
new
due
to c
hang
e of
oc
cupa
tion
Can
cela
ble
Polic
ies
•With
a c
ance
labl
e po
licy,
insu
rer m
ay c
ance
l co
vera
ge fo
r an
indi
vidu
al a
t any
tim
e, p
rovi
ded
it re
turn
san
yun
earn
edpr
emiu
ms
toth
ein
sure
dre
turn
s an
y un
earn
ed p
rem
ium
s to
the
insu
red
and
prov
ides
pro
per w
ritte
n no
tice
–Mus
t not
ify in
sure
d in
writ
ing
by m
ailin
g no
tice
and
unea
rned
pre
miu
m to
insu
red’
s la
st k
now
n ad
dres
sIn
Teas
canc
ella
tion
isef
fect
ie
notl
ess
than
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n26
•In
Texa
s, c
ance
llatio
n is
effe
ctiv
e no
t les
s th
an
five
days
from
the
date
of t
he n
otic
e
Gua
rant
eed
Ren
ewab
le P
olic
ies
•Ins
urer
relin
quis
hes
its ri
ghts
to c
ance
l at a
ny
time
and
to re
fuse
rene
wal
at a
pre
miu
m d
ue
dt
date
•Ren
ewab
le a
t the
insu
red’
s op
tion
•Ren
ewal
is g
uara
ntee
d as
long
as
the
insu
red
pays
the
prem
ium
–Non
paym
ent o
f pre
miu
m is
the
only
reas
on a
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n27
py
py
insu
rer m
ay c
ance
l or r
efus
e to
rene
w a
gu
aran
teed
rene
wab
le p
olic
y
Gua
rant
eed
Ren
ewab
le P
olic
ies
•Pre
miu
ms
may
onl
y be
incr
ease
d on
the
basi
s of
an
entir
e cl
assi
ficat
ion
of in
sure
ds–P
rem
ium
s m
ay n
ot b
e in
crea
sed
on a
n in
divi
dual
bas
is•T
he g
uara
ntee
to re
new
end
s at
a s
peci
fied
age
(i.e.
, age
65)
exc
ept f
or s
enio
r pr
oduc
ts
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n28
prod
ucts
TX_LAH_CN_3E.indb 112 1/27/2014 12:28:44 PM
11
3Le
sson
Fift
een
Hea
lth P
olic
y Pr
ovis
ions
Indi
vidu
al H
ealth
Pol
icie
s
Non
canc
elab
le P
olic
ies
•Ins
urer
may
not
can
cel o
r ref
use
to re
new
–Onl
y re
ason
the
insu
rer m
ay c
ance
l is
for
nonp
aym
ent o
f pre
miu
m•I
nsur
er m
ay n
ever
incr
ease
the
prem
ium
s–I
nitia
l pre
miu
m is
the
prem
ium
the
insu
red
will
pa
y th
roug
hout
life
of p
olic
y•I
nsur
erre
tain
sth
erig
htto
canc
elor
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n29
•Ins
urer
reta
ins
the
right
to c
ance
l or
nonr
enew
at a
stip
ulat
ed a
ge (i
.e.,
60, 6
5,
or 7
0)
Term
Pol
icie
s•C
over
age
exte
nds
only
for a
spe
cifie
d le
ngth
of
tim
e•C
anno
t be
rene
wed
•Whe
n it
expi
res,
the
insu
red
mus
t app
ly a
nd
qual
ify fo
r ano
ther
pol
icy
•Ind
ivid
ual t
erm
—co
vers
onl
y in
divi
dual
s lis
ted
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n30
liste
d•B
lank
et te
rm—
auto
mat
ical
ly c
over
s en
tire
grou
p
Non
occu
patio
nal C
over
age
•Non
occu
patio
nal p
olic
ies
do n
ot p
rovi
de fu
ll co
vera
ge–O
nly
prov
ide
off-t
he-jo
b co
vera
ge—
do n
ot
cove
r occ
upat
iona
l haz
ards
•In
cont
rast
, occ
upat
iona
l pol
icie
s ar
e ba
sica
lly fu
ll co
vera
ge–P
rovi
de24
-hou
rcov
erag
ew
ithoc
cupa
tiona
l
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n31
–Pro
vide
24-
hour
cov
erag
e, w
ith o
ccup
atio
nal
loss
es c
over
ed a
s w
ell a
s an
y ot
her t
ype
of lo
ss
Cas
e M
anag
emen
t Pro
visi
ons
•To
cont
rol t
he c
osts
ass
ocia
ted
with
med
ical
ca
re, m
any
insu
rers
hav
e m
etho
ds to
redu
ce
thi
li
ith
id
tif
hlth
cost
s w
hile
giv
ing
the
insu
red
optio
ns fo
r hea
lth
care
•With
risi
ng h
ealth
cos
ts, m
any
polic
ies
are
prov
idin
g fo
r som
e ty
pe a
dmin
istra
tive
over
sigh
t in
an
atte
mpt
to c
onta
in c
osts
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n32
–The
se p
rovi
sion
s ar
e va
rious
ly c
alle
d ca
se
man
agem
ent,
man
aged
car
e, c
laim
s co
ntro
l, co
st c
onta
inm
ent,
or s
imila
r ter
ms
TX_LAH_CN_3E.indb 113 1/27/2014 12:28:44 PM
11
4Le
sson
Fift
een
Hea
lth P
olic
y Pr
ovis
ions
Indi
vidu
al H
ealth
Pol
icie
s
Cos
t Con
tain
men
t in
Man
aged
Car
e
•One
of t
he p
rimar
y go
als
of m
anag
ed c
are
is to
del
iver
cos
t-effe
ctiv
e he
alth
car
e to
su
bscr
iber
s, a
nd th
is c
an b
e ac
com
plis
hed
thro
ugh
the
follo
win
g m
etho
ds–P
reve
ntiv
e ca
re•I
f det
ecte
d in
thei
r ear
ly s
tage
s, m
any
illne
sses
can
be
trea
ted
for m
inim
al c
ost w
hen
com
pare
d to
the
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n33
cost
of i
llnes
ses
caug
ht in
late
r sta
ges
•Man
aged
car
e or
gani
zatio
ns ty
pica
lly p
rovi
de
gene
rous
acc
ess
to h
ealth
car
e pr
ovid
ers
for e
arly
de
tect
ion
and
treat
men
t of i
llnes
ses
Cos
t Con
tain
men
t in
Man
aged
Car
e
•Acc
ompl
ishe
d th
roug
h th
e fo
llow
ing
met
hods
(con
tinue
d)–O
utpa
tient
ben
efit
•Sub
stan
tial c
ost s
avin
gs c
an b
e re
aliz
ed b
y av
oidi
ng
hosp
ital a
dmis
sion
s•M
anag
ed c
are
orga
niza
tions
stro
ngly
enc
oura
ge
outp
atie
nt p
roce
dure
s w
hene
ver i
t doe
s no
t je
opar
dize
the
qual
ityof
care
rece
ived
byth
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n34
jeop
ardi
ze th
e qu
ality
of c
are
rece
ived
by
the
subs
crib
er
Util
izat
ion
Man
agem
ent/R
evie
w•C
ost c
ontro
l mec
hani
sm b
eing
use
d by
in
sure
rs a
nd e
mpl
oyer
s•C
onsi
sts
of a
n ev
alua
tion
of th
e ap
prop
riate
ness
, nec
essi
ty, a
nd q
ualit
y of
he
alth
car
e an
d m
ay in
clud
e pr
ospe
ctiv
e re
view
and
/or c
oncu
rren
t rev
iew
, whi
ch a
re
tech
niqu
esof
case
man
agem
ent
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n35
tech
niqu
es o
f cas
e m
anag
emen
t
Util
izat
ion
Man
agem
ent/R
evie
w•C
ase
man
agem
ent t
echn
ique
s–P
rosp
ectiv
e (p
eer)
revi
ew•P
rior t
o ac
tual
car
e•A
lso
know
n as
pre
adm
issi
on c
ertif
icat
ion
or
prec
ertif
icat
ion
auth
oriz
atio
n•I
nsur
er re
view
s al
l pro
pose
d no
n-em
erge
ncy
hosp
ital
adm
issi
ons
and
requ
ires
appr
oval
bef
ore
insu
red
can
bead
mitt
ed
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n36
be a
dmitt
ed–
Allo
ws
insu
rer t
o ev
alua
te a
ppro
pria
tene
ss o
f the
pro
cedu
re
and
the
leng
th o
f hos
pita
l sta
y
TX_LAH_CN_3E.indb 114 1/27/2014 12:28:44 PM
11
5Le
sson
Fift
een
Hea
lth P
olic
y Pr
ovis
ions
Indi
vidu
al H
ealth
Pol
icie
s
Util
izat
ion
Man
agem
ent/R
evie
w•C
ase
man
agem
ent t
echn
ique
s–P
rosp
ectiv
e (p
eer)
revi
ew•I
nsur
er m
ay re
quire
a s
econ
d op
inio
n be
fore
ap
prov
ing
a su
rger
y–
Pur
pose
is to
mak
e su
re th
at s
urge
ry is
the
mos
t ap
prop
riate
trea
tmen
t–
The
seco
nd s
urgi
cal o
pini
on is
a p
rovi
sion
that
can
be
incl
uded
in p
olic
ies
that
offe
r sur
gica
l exp
ense
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n37
pg
pbe
nefit
s»T
his
cove
rage
allo
ws
insu
red
to c
onsu
lt a
doct
or
othe
r tha
n th
e at
tend
ing
phys
icia
n, to
det
erm
ine
alte
rnat
ive
met
hods
of t
reat
men
t
Util
izat
ion
Man
agem
ent/R
evie
w•C
ase
man
agem
ent t
echn
ique
s–C
oncu
rren
t rev
iew
•Ins
urer
mon
itors
insu
red’
s ho
spita
l sta
y, w
hile
the
stay
is
in p
rogr
ess,
to–
Ant
icip
ate
any
chan
ges
in m
edic
al c
ondi
tion
that
mig
ht re
quire
ad
ditio
nal c
are
–M
ake
sure
eve
ryth
ing
is p
roce
edin
g ac
cord
ing
to s
ched
ule
–Th
at th
e in
sure
d w
ill b
e re
leas
ed fr
om h
ospi
tal a
s pl
anne
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n38
Util
izat
ion
Man
agem
ent/R
evie
wA
mbu
lato
ry (o
utpa
tient
) car
e–I
s th
e al
tern
ativ
e to
the
cost
ly in
patie
nt
diag
nost
ic te
stin
g an
d tre
atm
ent
–Am
bula
tory
car
e is
kno
wn
to o
pera
te in
ho
spita
ls a
nd d
octo
rs o
ffice
s, b
ut it
can
als
o be
pr
ovid
ed b
y sp
ecia
l am
bula
tory
car
e he
alth
ce
nter
s, g
roup
med
ical
ser
vice
s, h
ospi
tal
lii
ldi
l
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n39
emer
genc
y ro
oms,
mul
tispe
cial
ty g
roup
med
ical
pr
actic
es, a
nd h
ealth
car
e co
rpor
atio
ns
TX_LAH_CN_3E.indb 115 1/27/2014 12:28:45 PM
TX_LAH_CN_3E.indb 116 1/27/2014 12:28:45 PM
Lesson SixteenHealth Insurance Basics
TX_LAH_CN_3E.indb 117 1/27/2014 12:28:45 PM
11
8Le
sson
Six
teen
H
ealth
Insu
ranc
e Ba
sics
Less
onSi
xtee
nLe
sson
Six
teen
Hea
lth In
sura
nce
Bas
ics
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Hea
lth M
aint
enan
ce O
rgan
izat
ion
(HM
O)
•Pur
pose
of H
MO
s is
to m
anag
e he
alth
car
e an
d its
cos
ts th
roug
h a
prog
ram
of p
repa
id
care
that
em
phas
izes
pre
vent
ion
and
early
tre
atm
ent
•Thi
s pr
epay
men
t ent
itles
hea
lth c
are
cons
umer
to a
wid
e ra
nge
of s
ervi
ces
and
isre
ferr
edto
asa
serv
ice-
incu
rred
basi
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
is re
ferr
ed to
as
a se
rvic
e-in
curr
ed b
asis
Texa
s H
MO
Cer
tific
ate
of A
utho
rity
•HM
Os
are
not i
nsur
ance
com
pani
es;
ther
efor
e, th
ey c
anno
t use
wor
ds in
thei
r na
me
that
wou
ld im
ply
such
(ins
uran
ce,
mut
ual,
casu
alty
, or s
uret
y)•I
n or
der t
o co
nduc
t bus
ines
s in
Tex
as, a
n H
MO
mus
t hav
e a
certi
ficat
e of
aut
horit
y is
sued
byth
eTD
I
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
issu
ed b
y th
e TD
I•M
embe
rs o
f an
HM
O a
re c
alle
d su
bscr
iber
s or
enr
olle
es, n
ot in
sure
ds
Hea
lth M
aint
enan
ce O
rgan
izat
ion
(HM
O)
•Typ
ical
stru
ctur
es: g
roup
mod
el–H
MO
con
tract
s w
ith o
ne la
rge
inde
pend
ent
med
ical
gro
up th
at s
peci
aliz
es in
a v
arie
ty o
f m
edic
al s
ervi
ces
to p
rovi
de th
ose
serv
ices
to
HM
O s
ubsc
riber
s–H
MO
pay
s th
e m
edic
al g
roup
ent
ity, n
ot th
e in
divi
dual
ser
vice
pro
vide
rs
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
•Med
ical
gro
up it
self
choo
ses
how
to p
ay it
s in
divi
dual
ph
ysic
ians
, who
rem
ain
inde
pend
ent o
f the
HM
O
rath
er th
an b
ecom
e sa
larie
d em
ploy
ees
TX_LAH_CN_3E.indb 118 1/27/2014 12:28:45 PM
11
9Le
sson
Six
teen
H
ealth
Insu
ranc
e Ba
sics
Hea
lth M
aint
enan
ce O
rgan
izat
ion
(HM
O)
•Typ
ical
stru
ctur
es: s
taff
mod
el–C
ontra
ctin
g ph
ysic
ians
are
pai
d em
ploy
ees
wor
king
on
the
staf
f of t
he H
MO
–Gen
eral
ly o
pera
te in
a c
linic
set
ting
at th
e H
MO
’s p
hysi
cal f
acili
ties
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
Hea
lth M
aint
enan
ce O
rgan
izat
ion
(HM
O)
•Typ
ical
stru
ctur
es: n
etw
ork
mod
el–O
pera
tes
muc
h lik
e th
e gr
oup
mod
el, e
xcep
tH
MO
tt
ithtl
ttd
likl
•HM
O c
ontra
cts
with
at l
east
two,
and
mor
e lik
ely
seve
ral,
med
ical
gro
ups
rath
er th
an ju
st o
ne•H
MO
may
als
o m
ake
sim
ilar c
ontra
ctua
l ar
rang
emen
ts w
ith in
depe
nden
t doc
tors
to p
rovi
de
serv
ices
in th
eir i
ndiv
idua
l offi
ces
–Pur
pose
of a
net
wor
k is
to in
crea
se
ibili
tt
idi
f
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
acce
ssib
ility
to p
rovi
ders
as
a co
nven
ienc
e fo
r H
MO
sub
scrib
ers
Hea
lth M
aint
enan
ce O
rgan
izat
ion
(HM
O)
•Typ
ical
stru
ctur
es: i
ndiv
idua
l pra
ctic
e as
soci
atio
n m
odel
(IPA
)–G
ives
HM
O m
embe
rs th
e m
axim
um fr
eedo
m o
f ch
oice
of p
hysi
cian
s an
d lo
catio
ns–A
llow
s H
MO
to c
ontra
ct s
epar
atel
y w
ith a
ny
com
bina
tion
of in
divi
dual
phy
sici
ans,
med
ical
gr
oups
, or p
hysi
cian
s’ a
ssoc
iatio
ns
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
–Pay
men
t usu
ally
on
a fe
e-fo
r-se
rvic
e ba
sis,
fe
es n
egot
iate
d in
adv
ance
Que
stio
n•S
tar H
MO
con
tract
s w
ith 1
4 m
edic
al g
roup
s to
in
crea
se a
cces
sibi
lity
to p
rovi
ders
as
a i
fb
ibE
hft
hco
nven
ienc
e fo
r sub
scrib
ers.
Eac
h of
the
med
ical
gro
ups
is p
aid
on a
cap
itatio
n ba
sis
to
prov
ide
serv
ices
to S
tar’s
sub
scrib
ers.
The
S
tar H
MO
ope
rate
s as
A.a
sta
ff m
odel
HM
O
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
B.a
net
wor
k m
odel
HM
OC
.a g
roup
mod
el H
MO
D.a
n in
divi
dual
pra
ctic
e as
soci
atio
n m
odel
HM
O
TX_LAH_CN_3E.indb 119 1/27/2014 12:28:45 PM
12
0Le
sson
Six
teen
H
ealth
Insu
ranc
e Ba
sics
Ans
wer
•Sta
r HM
O c
ontra
cts
with
14
med
ical
gro
ups
to
incr
ease
acc
essi
bilit
y to
pro
vide
rs a
s a
if
bib
Eh
fth
conv
enie
nce
for s
ubsc
riber
s. E
ach
of th
e m
edic
al g
roup
s is
pai
d on
a c
apita
tion
basi
s to
pr
ovid
e se
rvic
es to
Sta
r’s s
ubsc
riber
s. T
he
Sta
r HM
O o
pera
tes
asA
.a s
taff
mod
el H
MO
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
B.a
net
wor
k m
odel
HM
OC
.a g
roup
mod
el H
MO
D.a
n in
divi
dual
pra
ctic
e as
soci
atio
n m
odel
HM
O
Hea
lth M
aint
enan
ce O
rgan
izat
ion
(HM
O)
•Im
porta
nt fe
atur
es o
f HM
Os
–No
term
inat
ion
of a
n en
rolle
e or
sub
scrib
er d
ue
to a
ny h
ealth
con
ditio
n–S
ubsc
riber
’s in
form
atio
n is
con
fiden
tial
•Sam
e le
gal p
rivile
ge a
s do
ctor
/pat
ient
eve
n th
ough
H
MO
is n
ot a
doc
tor
–The
mem
ber m
ust u
se a
prim
ary
care
phy
sici
an
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
(PC
P) a
ppro
ved
by th
e H
MO
and
mus
t be
refe
rred
to a
spe
cial
ist b
y th
eir P
CP
exce
pt in
th
e ca
se o
f an
emer
genc
y
Hea
lth M
aint
enan
ce O
rgan
izat
ion
(HM
O)
•Ter
m o
pen
enro
llmen
t–A
per
iod
each
yea
r whe
n an
HM
O m
ust
adve
rtise
ava
ilabi
lity
to th
e ge
nera
l pub
lic o
n an
in
divi
dual
bas
is•M
ay b
e re
quire
d by
sta
te la
w, p
erm
ittin
g al
l who
app
ly
to jo
in
•Usu
ally
last
s 31
day
sH
MO
gene
rally
may
notr
ejec
tany
appl
ican
tfor
heal
th
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
•HM
O g
ener
ally
may
not
reje
ct a
ny a
pplic
ant f
or h
ealth
re
ason
s, s
ome
exce
ptio
ns a
re p
eopl
e w
ho a
re
hosp
italiz
ed d
urin
g th
e en
rollm
ent p
erio
d or
who
hav
e ch
roni
c ill
ness
es o
r per
man
ent i
njur
ies
Hea
lth M
aint
enan
ce O
rgan
izat
ion
(HM
O)
•Ope
n-en
ded
HM
O–A
lso
know
n as
a “l
eaky
” HM
O o
r a p
oint
-of-
serv
ice
HM
O–H
ybrid
arr
ange
men
t whe
reby
par
ticip
ants
may
us
e no
n-H
MO
pro
vide
rs a
t any
tim
e an
d re
ceiv
e in
dem
nity
ben
efits
sub
ject
to h
ighe
r ou
t-of-p
ocke
t cos
ts to
the
parti
cipa
nt
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
TX_LAH_CN_3E.indb 120 1/27/2014 12:28:46 PM
12
1Le
sson
Six
teen
H
ealth
Insu
ranc
e Ba
sics
Pref
erre
d Pr
ovid
er O
rgan
izat
ion
(PPO
)
•Arr
ange
men
t und
er w
hich
a s
elec
ted
grou
p of
in
depe
nden
t hos
pita
ls a
nd m
edic
al p
ract
ition
ers
ina
certa
inar
eaag
ree
topr
ovid
ea
rang
eof
in a
cer
tain
are
a ag
ree
to p
rovi
de a
rang
e of
se
rvic
es a
t a p
rear
rang
ed c
ost
•Org
aniz
er o
f the
PP
O m
ight
be
any
one
of a
nu
mbe
r of g
roup
s, in
clud
ing
–Tra
ditio
nal i
nsur
ance
com
pani
es, B
lue
Cro
ss/B
le
Shi
eld
loca
lgro
psof
hosp
itals
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
Cro
ss/B
lue
Shi
eld,
loca
l gro
ups
of h
ospi
tals
, lo
cal g
roup
s of
phy
sici
ans,
an
exis
ting
HM
O,
larg
e em
ploy
ers,
and
trad
e un
ions
Pref
erre
d Pr
ovid
er O
rgan
izat
ion
(PPO
)
•Org
aniz
ers
and
prov
ider
s ag
ree
on m
edic
al
serv
ice
char
ges
that
are
gen
eral
ly lo
wer
than
th
ose
the
prov
ider
sw
ould
char
gepa
tient
sno
tth
ose
the
prov
ider
s w
ould
cha
rge
patie
nts
not
asso
ciat
ed w
ith th
e P
PO
•Pro
vide
rs a
re p
aid
on a
fee-
for-
serv
ice
basi
s•P
eopl
e w
ho re
ceiv
e se
rvic
es c
hoos
e a
pref
erre
d pr
ovid
er fr
om a
list
the
PP
O d
istri
bute
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
–Use
rs u
sual
ly h
ave
mor
e ch
oice
s am
ong
prov
ider
s un
der a
PP
O th
an u
nder
an
HM
O
arra
ngem
ent
Flex
ible
Spe
ndin
g A
ccou
nt (F
SA)
•Caf
eter
ia p
lan
that
is fu
nded
with
em
ploy
ee
mon
ey b
y m
eans
of a
sal
ary
redu
ctio
nC
fi
li
lb
fi–C
afet
eria
pla
n is
an
empl
oyee
ben
efit
arra
ngem
ent i
n w
hich
em
ploy
ees
can
sele
ct
from
a ra
nge
of b
enef
its•P
reta
x do
llars
take
n ou
t of e
mpl
oyee
’s
com
pens
atio
n an
d us
ed to
cov
er c
erta
in q
ualif
ied
med
ical
epe
nses
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
med
ical
exp
ense
s–Q
ualif
ied
med
ical
exp
ense
s do
es n
ot in
clud
e in
sura
nce
prem
ium
s
Flex
ible
Spe
ndin
g A
ccou
nt (F
SA)
•Res
ults
in a
low
er c
ost p
lan
from
the
empl
oyer
’s p
ersp
ectiv
e, w
ith a
n em
ploy
er’s
ll
liit
dt
di
it
tit
expe
nses
usu
ally
lim
ited
to a
dmin
istra
tive
cost
s•T
ypic
ally
use
d by
mod
erat
e-si
zed
to la
rge
empl
oyer
s•K
now
n as
“SP
EN
D IT
OR
LO
SE
IT” a
ccou
nt–F
unds
con
tribu
ted
durin
g ye
ar a
re fo
rfeite
d if
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
gy
not u
sed
by d
eadl
ine
TX_LAH_CN_3E.indb 121 1/27/2014 12:28:46 PM
12
2Le
sson
Six
teen
H
ealth
Insu
ranc
e Ba
sics
Hea
lth S
avin
gs A
ccou
nt (H
SA)
•Est
ablis
hed
by th
e M
edic
are
Pre
scrip
tion
Dru
g an
d M
oder
niza
tion
Act
of 2
003
•Is
a ta
x-fa
vore
d ve
hicl
e fo
r acc
umul
atin
g fu
nds
to c
over
med
ical
exp
ense
s•I
ndiv
idua
ls u
nder
age
65
are
elig
ible
to
esta
blis
h an
d co
ntrib
ute
to H
SA
s if
they
ha
vea
qual
ified
high
dedu
ctib
lehe
alth
plan
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
have
a q
ualif
ied
high
-ded
uctib
le h
ealth
pla
n
Hea
lth R
eim
burs
emen
t A
ccou
nt/A
rran
gem
ent (
HR
A)
•A fo
rm o
f con
sum
er-d
irect
ed o
r con
sum
er-
driv
en h
ealth
pla
n•A
type
of h
ealth
insu
ranc
e pl
an th
at
reim
burs
es e
mpl
oyee
s fo
r qua
lifie
d m
edic
al
expe
nses
that
are
not
pai
d by
an
insu
ranc
e po
licy
thro
ugh
an a
ccou
nt th
at is
fund
ed b
y th
eem
ploy
er
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
the
empl
oyer
–Rei
mbu
rsem
ent i
n ac
cord
ance
with
a p
re-
esta
blis
hed
empl
oyer
agr
eem
ent
Hea
lth R
eim
burs
emen
t A
ccou
nt/A
rran
gem
ent (
HR
A)
•Em
ploy
er c
reat
es a
tax-
favo
red
savi
ngs
acco
unt f
or e
ach
empl
oyee
, pro
vide
s th
e fu
nds,
and
mak
es a
ll th
e ap
plic
able
de
cisi
ons,
incl
udin
g–A
mou
nt o
f con
tribu
tion
–Typ
ical
qua
lifie
d ex
pens
es in
clud
e in
sura
nce
co-p
ays
and
dedu
ctib
les,
med
ical
exam
s,vi
sion
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
copa
ys a
nd d
educ
tible
s, m
edic
al e
xam
s, v
isio
n ex
pens
es, d
enta
l car
e, p
resc
riptio
n dr
ugs,
m
edic
ally
nec
essa
ry n
on-p
resc
riptio
n dr
ugs,
an
d ce
rtain
hea
lth in
sura
nce
prem
ium
s
Smal
l Em
ploy
er M
edic
al P
lans
(HB
205
5)
•Sm
all e
mpl
oyer
def
ined
: 2–5
0 em
ploy
ees
•Gua
rant
eed
issu
e if
75%
par
ticip
atio
np
p•B
enef
its m
ust b
e of
fere
d to
all
elig
ible
em
ploy
ees
and
depe
nden
ts•P
reex
istin
g co
nditi
ons
can
be e
xclu
ded
for
up to
12
mon
ths
with
cre
dit g
iven
for t
ime
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
satis
fied
unde
r ano
ther
pla
n•N
ewbo
rns
mus
t be
cove
red
imm
edia
tely
TX_LAH_CN_3E.indb 122 1/27/2014 12:28:47 PM
Lesson SeventeenDisability Income Policies
TX_LAH_CN_3E.indb 123 1/27/2014 12:28:47 PM
12
4Le
sson
Sev
ente
en
Dis
abili
ty In
com
e Po
licie
s
Less
onSe
vent
een
Less
on S
even
teen
Dis
abili
ty In
com
e Po
licie
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Dis
abili
ty In
com
e In
sura
nce
•Dis
abili
ty in
com
e po
lices
are
des
igne
d to
re
plac
e a
porti
on o
f the
insu
red’
s lo
st
wag
es w
hen
the
insu
red
is u
nabl
e to
wor
k du
e to
an
acci
dent
or i
llnes
s•A
lso
refe
rred
to a
s lo
ss o
f tim
e co
vera
ge•D
esig
ned
to p
rote
ct a
n in
divi
dual
’s m
ost
impo
rtant
asse
tth
eab
ility
toea
rnan
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
impo
rtant
ass
et—
the
abili
ty to
ear
n an
in
com
e
Prob
atio
nary
Per
iod
•A
limite
d pe
riod,
as
stat
ed in
the
polic
y, th
at b
egin
s w
hen
the
polic
y go
es in
to e
ffect
Pi
df3
0d
bt
bt
–P
erio
d of
30
days
com
mon
but
may
var
y by
type
of
pol
icy
(i.e.
, 15
or e
ven
60 d
ays
for l
ong-
term
po
licie
s)•
Dur
ing
this
per
iod,
dis
abili
ties
resu
lting
from
si
ckne
sses
are
not
cov
ered
–M
ajor
purp
ose
isto
relie
veth
ein
sure
rfro
mpa
ying
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
–M
ajor
pur
pose
is to
relie
ve th
e in
sure
r fro
m p
ayin
g be
nefit
s fo
r pre
-exi
stin
g co
nditi
ons
•D
isab
ilitie
s re
sulti
ng fr
om a
ccid
ents
are
not
sub
ject
to
the
prob
atio
nary
per
iod
Elim
inat
ion
Perio
d•
Per
iod
for w
hich
an
insu
red
pers
on m
ust b
e di
sabl
ed
befo
re b
enef
its b
egin
May
beth
ough
tofa
sa
time
dedu
ctib
lera
ther
than
–M
ay b
e th
ough
t of a
s a
time
dedu
ctib
le ra
ther
than
a
dolla
r ded
uctib
le–
Ben
efits
not
pay
able
dur
ing
the
elim
inat
ion
perio
d an
d be
gin
only
afte
r thi
s pe
riod
of ti
me
is s
atis
fied
•D
eter
min
ed b
y th
e in
sure
d (c
hose
n fro
m o
ptio
ns
avai
labl
efro
mth
ein
sure
r)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
avai
labl
e fro
m th
e in
sure
r)–
Vario
us o
ptio
ns a
vaila
ble
(i.e.
, 30,
60,
90,
180
day
s or
long
er)
TX_LAH_CN_3E.indb 124 1/27/2014 12:28:47 PM
12
5Le
sson
Sev
ente
en
Dis
abili
ty In
com
e Po
licie
s
Elim
inat
ion
Perio
d•T
he lo
nger
the
elim
inat
ion
perio
d, th
e lo
wer
th
e in
sura
nce
prem
ium
•Not
retro
activ
e•A
pplie
s fo
r eac
h ne
w d
isab
ility
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
Ben
efit
Perio
d•T
he m
axim
um le
ngth
of t
ime
the
insu
red
is
elig
ible
to re
ceiv
e a
bene
fit•A
fter e
limin
atio
n pe
riod
satis
fied,
ben
efit
perio
d be
gins
–Ins
ured
elig
ible
to b
e pa
id b
enef
its fo
r thi
s sp
ecifi
c pe
riod,
pro
vide
d th
e in
sure
d re
mai
ns
tota
llydi
sabl
ed
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
tota
lly d
isab
led
Ben
efit
Perio
d•L
engt
h of
ben
efit
perio
d se
lect
ed b
y th
e po
licy
owne
r (fro
m o
ptio
ns a
vaila
ble
from
insu
rer)
Sd
bf
ifid
–Sta
ted
as a
num
ber o
f yea
rs o
r to
a sp
ecifi
ed
age
•Typ
ical
per
iods
ava
ilabl
e in
clud
e 1
year
, 2
year
s, 5
yea
rs, 1
0 ye
ars,
and
to a
ge 6
5•T
he lo
nger
the
bene
fit p
erio
d, th
e hi
gher
the
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
polic
y’s
prem
ium
•App
lies
for e
ach
new
dis
abili
ty
Def
inin
g To
tal D
isab
ility
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
TX_LAH_CN_3E.indb 125 1/27/2014 12:28:47 PM
12
6Le
sson
Sev
ente
en
Dis
abili
ty In
com
e Po
licie
s
Tota
l Dis
abili
ty•M
eani
ng o
f tot
al d
isab
ility
ver
y im
porta
nt,
and
is a
lway
s de
fined
in th
e po
licy
•Diff
eren
t com
pani
es m
ay u
se d
iffer
ent
defin
ition
s, b
ut w
ill b
e ba
sed
on w
ork
activ
ity•W
ork
activ
ity lo
oked
at b
y in
sure
rs in
term
s of
two
dim
ensi
ons
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
of tw
o di
men
sion
s–O
wn
occu
patio
n–A
ny o
ccup
atio
n
Ow
n O
ccup
atio
n•C
once
rns
the
occu
patio
n in
whi
ch th
e pa
rticu
lar
indi
vidu
al is
nor
mal
ly e
ngag
ed•T
otal
dis
abili
ty is
def
ined
as
an in
sure
d’s
inab
ility
to p
erfo
rm a
ny o
r all
of th
e pr
imar
y or
m
ater
ial d
utie
s of
the
insu
red’
s ow
n oc
cupa
tion
–Ref
ers
to th
e in
sure
d’s
own
occu
patio
n at
the
time
disa
bilit
y be
gins
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
•Thi
s de
finiti
on is
the
mos
t gen
erou
s to
the
insu
red
and
is th
e m
ost e
xpen
sive
Any
Occ
upat
ion
•Def
ines
tota
l dis
abili
ty a
s th
e in
sure
d’s
inab
ility
to p
erfo
rm th
e du
ties
of a
ny
occu
patio
n fo
r whi
ch th
e in
sure
d is
re
ason
ably
qua
lifie
d by
edu
catio
n, tr
aini
ng,
or e
xper
ienc
e•T
his
defin
ition
is le
ss g
ener
ous
to th
e in
sure
dbu
tis
less
expe
nsiv
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
insu
red,
but
is le
ss e
xpen
sive
Occ
upat
iona
l Ver
sus
Non
occu
patio
nal
•Sho
rt-te
rm p
olic
ies
ofte
n co
ver o
nly
nono
ccup
atio
nal d
isab
ility
•Mos
t lon
g-te
rm p
lans
cov
er b
oth
occu
patio
nal
and
nono
ccup
atio
nal s
ickn
ess
and
acci
dent
s•W
hen
occu
patio
nal b
enef
its a
re p
rovi
ded
(i.e.
as
in th
roug
h a
long
term
dis
abili
ty g
roup
po
licy)
, the
y ar
e of
ten
redu
ced
by b
enef
its
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
py)
,y
yre
ceiv
ed fr
om w
orke
rs’ c
ompe
nsat
ion
and
Soc
ial S
ecur
ity
TX_LAH_CN_3E.indb 126 1/27/2014 12:28:48 PM
12
7Le
sson
Sev
ente
en
Dis
abili
ty In
com
e Po
licie
s
Res
idua
l Dis
abili
ty•M
any
rece
nt p
olic
ies
have
repl
aced
the
parti
al d
isab
ility
pro
visi
on w
ith a
resi
dual
di
sabi
lity
prov
isio
n•T
his
bene
fit is
usu
ally
a p
erce
ntag
e of
the
tota
l dis
abili
ty b
enef
it fo
r per
iods
of p
artia
l di
sabi
lity
as d
efin
ed in
the
polic
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
Res
idua
l Dis
abili
ty•
Ear
ning
s co
me
into
pla
y in
the
resi
dual
ben
efit
prov
isio
nE
arni
ngs
durin
gpa
rtial
disa
bilit
ym
ustb
eat
leas
ta–
Ear
ning
s du
ring
parti
al d
isab
ility
mus
t be
at le
ast a
st
ated
per
cent
age
less
than
ear
ning
s be
fore
di
sabi
lity
(i.e.
, 20%
less
)–
The
perc
enta
ge o
f red
uctio
n in
ear
ning
s is
m
ultip
lied
by th
e no
rmal
tota
l dis
abili
ty b
enef
it to
de
term
ine
the
resi
dual
ben
efit
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
–P
ays
redu
ced
bene
fits
afte
r ret
urn
to w
ork
•Tra
nsiti
onal
pay
whi
le re
gain
ing
full
earn
ing
pow
er (i
f una
ble
to w
ork
full
time)
Rec
urre
nt D
isab
ility
•U
nder
recu
rrent
dis
abilit
y be
nefit
, if t
he in
sure
d re
turn
s to
wor
k af
ter a
qua
lifyi
ng d
isab
ility
and
the
disa
bilit
yre
curs
with
inth
esp
ecifi
edtim
epe
riod
the
disa
bilit
y re
curs
with
in th
e sp
ecifi
ed ti
me
perio
d, th
e in
sure
d is
elig
ible
to re
star
t ben
efits
imm
edia
tely
–Rec
urrin
g di
sabi
lity
is n
ot c
onsi
dere
d a
new
di
sabi
lity
–Pre
vent
s in
sure
d fro
m n
eedi
ng to
sat
isfy
a n
ew
elim
inat
ion
perio
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
elim
inat
ion
perio
d–E
ncou
rage
s in
sure
d to
retu
rn to
wor
k as
soo
n as
is
real
istic
Rec
urre
nt D
isab
ility
•Rec
urre
nt p
erio
d sp
ecifi
ed in
the
polic
y (i.
e., t
hree
to s
ix m
onth
s)•W
hen
recu
rren
t dis
abili
ty b
enef
its a
re
appl
icab
le, o
nly
the
bala
nce
of th
e be
nefit
pe
riod
appl
ying
to th
e or
igin
al d
isab
ility
ap
plie
s to
the
recu
rren
t dis
abili
ty
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
TX_LAH_CN_3E.indb 127 1/27/2014 12:28:48 PM
12
8Le
sson
Sev
ente
en
Dis
abili
ty In
com
e Po
licie
s
Que
stio
n•B
rand
on in
jure
s hi
s ba
ck w
orki
ng a
t a
war
ehou
se.
Six
mon
ths
late
r, he
is w
ell
enou
gh to
go
back
to w
ork
liftin
g bo
xes.
Tw
o w
eeks
into
wor
king
, how
ever
, he
stra
ins
his
back
aga
in a
nd h
as to
go
back
on
bed
rest
. Thi
s is
an
exam
ple
of
A.a
redu
ndan
t dis
abili
ty
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
yB.
a re
sidu
al d
isab
ility
C.
a re
curr
ent d
isab
ility
D.
a re
duce
d di
sabi
lity
Ans
wer
•Bra
ndon
inju
res
his
back
wor
king
at a
w
areh
ouse
. S
ix m
onth
s la
ter,
he is
wel
l en
ough
to g
o ba
ck to
wor
k lif
ting
boxe
s.
Two
wee
ks in
to w
orki
ng, h
owev
er, h
e st
rain
s hi
s ba
ck a
gain
and
has
to g
o ba
ck
on b
ed re
st. T
his
is a
n ex
ampl
e of
A.
a re
dund
ant d
isab
ility
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
yB.
a re
sidu
al d
isab
ility
C.
a re
curr
ent d
isab
ility
D.
a re
duce
d di
sabi
lity
Bus
ines
sU
ses
Bus
ines
s U
ses
for D
isab
ility
Inco
me
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Bus
ines
s O
verh
ead
Expe
nse
(BO
E)
•Des
igne
d fo
r the
sm
all b
usin
ess
owne
r and
pe
ople
in p
rivat
e pr
actic
e•P
urpo
se is
to c
over
cer
tain
ove
rhea
d ex
pens
es th
at c
ontin
ue w
hen
the
busi
ness
ow
ner i
s di
sabl
ed–I
ndem
nifie
s th
e bu
sine
ss (n
ot th
e ow
ner)
for
such
busi
ness
expe
nses
as
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
such
bus
ines
s ex
pens
es a
s•R
ent,
taxe
s, in
sura
nce
prem
ium
s, u
tility
bill
s,
empl
oyee
s’ c
ompe
nsat
ion,
and
so
forth
•Not
the
owne
r’s s
alar
y
TX_LAH_CN_3E.indb 128 1/27/2014 12:28:49 PM
12
9Le
sson
Sev
ente
en
Dis
abili
ty In
com
e Po
licie
s
Bus
ines
s O
verh
ead
Expe
nse
(BO
E)
•Pre
miu
ms
tax
dedu
ctib
le to
the
busi
ness
, be
nefit
s re
ceiv
ed ta
xabl
e to
the
busi
ness
–How
ever
, tax
able
ben
efits
are
then
use
d to
pay
ta
x-de
duct
ible
bus
ines
s ex
pens
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
Key
Per
son
Dis
abili
ty In
sura
nce
•Key
per
son’
s ec
onom
ic v
alue
to th
e bu
sine
ss is
det
erm
ined
in te
rms
of th
e po
tent
ial l
oss
of b
usin
ess
inco
me
that
co
uld
occu
r as
wel
l as
the
expe
nse
of
hirin
g an
d tra
inin
g a
repl
acem
ent f
or th
e ke
y pe
rson
–T
his
valu
eth
enbe
com
esth
edi
sabi
lity
bene
fit
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
This
val
ue th
en b
ecom
es th
e di
sabi
lity
bene
fit
that
will
be
paid
to th
e bu
sine
ss
Key
Per
son
Dis
abili
ty In
sura
nce
•Ben
efit
amou
nt m
ay b
e pa
id in
a lu
mp
sum
or
in m
onth
ly in
stal
lmen
ts•P
olic
y ge
nera
lly h
as e
limin
atio
n pe
riod
of
30 to
90
days
and
ben
efit
perio
d of
one
or
two
year
s•B
usin
ess
is o
wne
r and
pre
miu
m p
ayor
of
polic
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
polic
y•P
rem
ium
pai
d no
t tax
ded
uctib
le; b
enef
its
rece
ived
by
the
busi
ness
tax
free
Dis
abili
ty B
uy-S
ell I
nsur
ance
•A d
isab
ility
buy
-sel
l or b
uyou
t pol
icy
prov
ides
fu
nds
need
ed to
buy
out
a d
isab
led
busi
ness
t
jt
lifi
idf
dpa
rtner
, jus
t as
life
insu
ranc
e pr
ovid
es fu
nds
in th
e ev
ent o
f a p
artn
er’s
dea
th•I
s th
e fu
ndin
g ve
hicl
e fo
r the
buy
-sel
l ag
reem
ent,
in th
is c
ase
in th
e ev
ent o
f di
sabi
lity
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n24
•The
buy
-sel
l agr
eem
ent s
peci
fies
the
valu
e or
a
met
hod
of d
eter
min
ing
the
valu
e of
the
owne
r’s b
usin
ess
inte
rest
TX_LAH_CN_3E.indb 129 1/27/2014 12:28:49 PM
13
0Le
sson
Sev
ente
en
Dis
abili
ty In
com
e Po
licie
s
Dis
abili
ty B
uy-S
ell I
nsur
ance
•Usu
ally
has
a lo
nger
elim
inat
ion
perio
d,
such
as
one
or tw
o ye
ars
•Ben
efits
may
be
paid
in a
lum
p su
m
(typi
cally
mos
t com
mon
) or i
n m
onth
ly
inst
allm
ents
–Will
be
spec
ified
in th
e bu
y-se
ll ag
reem
ent
Pi
tdd
tibl
bfit
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n25
•Pre
miu
ms
not d
educ
tible
; ben
efits
are
ta
xabl
e as
cap
ital g
ains
if th
ey e
xcee
d th
e co
st b
asis
of th
e di
sabl
ed o
wne
r
Gro
up D
isab
ility
Insu
ranc
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Gro
up D
isab
ility
Insu
ranc
e•A
s co
mpa
red
to in
divi
dual
dis
abili
ty in
com
e po
licie
s, g
roup
dis
abili
ty in
com
e po
licie
s ar
e –G
ener
ally
less
cos
tly
–Mor
e lib
eral
in re
gard
s to
und
erw
ritin
g re
quire
men
ts•D
ue to
the
fact
that
the
grou
p is
bei
ng u
nder
writ
ten
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n27
gp
gve
rsus
the
indi
vidu
al th
emse
lves
Shor
t-Ter
m D
isab
ility
(STD
)•T
ypic
ally
des
igne
d to
pro
vide
cov
erag
e fo
r no
n-oc
cupa
tiona
l illn
esse
s an
d in
jurie
s•P
rovi
des
a sh
ort t
erm
ben
efit
for
empl
oyee
s w
ho c
anno
t wor
k du
e to
a
disa
bilit
y –T
ypic
ally
6 to
24
mon
ths
Eli
iti
id
ift
di
dt
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n28
•Elim
inat
ion
perio
d is
ofte
n de
sign
ed to
co
ordi
nate
with
the
empl
oyer
’s s
ick
leav
e po
licy
TX_LAH_CN_3E.indb 130 1/27/2014 12:28:49 PM
13
1Le
sson
Sev
ente
en
Dis
abili
ty In
com
e Po
licie
s
Long
-Ter
m D
isab
ility
(LTD
)•T
ypic
ally
des
igne
d to
pro
vide
cov
erag
e fo
r bo
th o
ccup
atio
nal a
nd n
on-o
ccup
atio
nal
illd
ij
iill
ness
es a
nd in
jurie
s–D
isab
ilitie
s la
stin
g lo
nger
than
two
year
s•P
rovi
des
a lo
ng-te
rm b
enef
it fo
r em
ploy
ees
who
can
not w
ork
due
to a
dis
abili
ty–O
ften
upto
age
65
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n29
Ofte
n up
to a
ge 6
5
TX_LAH_CN_3E.indb 131 1/27/2014 12:28:49 PM
TX_LAH_CN_3E.indb 132 1/27/2014 12:28:49 PM
Lesson EighteenMedical Expense Insurance
TX_LAH_CN_3E.indb 133 1/27/2014 12:28:50 PM
13
4Le
sson
Eig
htee
n M
edic
al E
xpen
se In
sura
nce
Less
onEi
ghte
enLe
sson
Eig
htee
nM
edic
al E
xpen
se In
sura
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Med
ical
Exp
ense
Insu
ranc
e•M
edic
al e
xpen
se in
sura
nce
prov
ides
be
nefit
for m
edic
al c
are
•Con
tract
s m
ay p
rovi
de fo
r pay
men
t of
med
ical
exp
ense
s in
curr
ed o
n a
–Rei
mbu
rsem
ent b
asis
•By
payi
ng b
enef
its to
the
polic
y ow
ner
–Ser
vice
bas
isB
ypa
ying
thos
ew
hopr
ovid
eth
ese
rvic
esdi
rect
ly
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
•By
payi
ng th
ose
who
pro
vide
the
serv
ices
dire
ctly
–Ind
emni
ty b
asis
•By
payi
ng a
set
am
ount
rega
rdle
ss o
f the
am
ount
ch
arge
d fo
r med
ical
exp
ense
s
Med
ical
Exp
ense
Insu
ranc
e•M
edic
al e
xpen
se o
r hos
pita
lizat
ion
insu
ranc
e m
ay b
e w
ritte
n on
–An
indi
vidu
al b
asis
–A g
roup
bas
is•B
enef
its p
rovi
ded
cove
r the
indi
vidu
al a
nd
elig
ible
dep
ende
nts
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
Med
ical
Exp
ense
Insu
ranc
e•A
lthou
gh th
ere
are
man
y ty
pes
of b
enef
its
avai
labl
e, m
edic
al e
xpen
se in
sura
nce
can
gene
rally
be
cate
goriz
ed a
s–B
asic
med
ical
exp
ense
insu
ranc
e–C
ompr
ehen
sive
maj
or m
edic
al in
sura
nce
–Sup
plem
enta
l maj
or m
edic
al in
sura
nce
Spe
cial
polic
ies
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
–Spe
cial
pol
icie
s
TX_LAH_CN_3E.indb 134 1/27/2014 12:28:50 PM
13
5Le
sson
Eig
htee
n M
edic
al E
xpen
se In
sura
nce
Bas
ic H
ospi
tal,
Surg
ical
, an
d M
edic
al E
xpen
se P
olic
ies
•Bas
ic c
over
ages
pro
vide
d by
an
indi
vidu
al
med
ical
exp
ense
pol
icy
incl
ude
–Bas
ic h
ospi
tal e
xpen
se–B
asic
sur
gica
l exp
ense
–Bas
ic m
edic
al e
xpen
se•T
hese
bas
ic c
over
ages
may
be
sold
to
geth
eror
sepa
rate
ly
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
toge
ther
or s
epar
atel
y•C
over
ages
are
a s
tate
d do
llar a
mou
nt a
nd
have
no
dedu
ctib
le
Bas
ic H
ospi
tal E
xpen
se B
enef
its•P
rovi
des
a st
ated
dol
lar a
mou
nt p
er d
ay fo
r ro
om a
nd b
oard
•Inc
lude
s a
flat a
mou
nt fo
r all
othe
r hos
pita
l ch
arge
s (n
ursi
ng, d
rugs
, and
so
forth
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
Bas
ic S
urgi
cal E
xpen
se B
enef
its•P
ays
surg
eons
’ fee
s an
d re
late
d co
sts
incu
rred
whe
n in
sure
d ha
s an
ope
ratio
n•R
elat
ed c
osts
mig
ht in
clud
e fe
es fo
r –A
n as
sist
ant s
urge
on–A
n an
esth
esio
logi
st–P
ost o
pera
tive
care
Eth
ti
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
–Eve
n th
e op
erat
ing
room
•Whe
n no
t cov
ered
as
a m
isce
llane
ous
med
ical
item
Bas
ic S
urgi
cal E
xpen
se B
enef
its•N
onsc
hedu
led
plan
–P
ays
on th
e ba
sis
of w
hat i
s co
nsid
ered
usu
al,
cust
omar
yan
dre
ason
able
(UC
R)i
na
certa
incu
stom
ary,
and
reas
onab
le (U
CR
) in
a ce
rtain
ge
ogra
phic
are
a•D
efin
ition
of U
CR
bas
ed o
n am
ount
phy
sici
ans
in
area
usu
ally
cha
rge
for s
ame
or s
imila
r pro
cedu
res
–A
llow
pol
icie
s to
sta
y ap
ace
of in
flatio
n an
d to
avo
id
polic
y re
stru
ctur
ing
ever
y tim
e m
edic
al c
osts
incr
ease
–In
sure
rstil
lres
erve
srig
htto
agre
eor
disa
gree
that
a
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
Insu
rer s
till r
eser
ves
right
to a
gree
or d
isag
ree
that
a
parti
cula
r cha
rge
is u
sual
, cus
tom
ary,
and
reas
onab
le–
Insu
red
may
be
resp
onsi
ble
for a
ny a
mou
nt a
bove
the
UC
R
TX_LAH_CN_3E.indb 135 1/27/2014 12:28:50 PM
13
6Le
sson
Eig
htee
n M
edic
al E
xpen
se In
sura
nce
Bas
ic R
egul
ar M
edic
al E
xpen
se B
enef
its
•Som
etim
es re
ferr
ed to
as
phys
icia
ns’
nons
urgi
cal e
xpen
seC
f•C
over
age
is fo
r non
surg
ical
ser
vice
s a
phys
icia
n pr
ovid
es–C
over
s of
fice
visi
ts a
nd h
ospi
tal v
isits
–Usu
ally
pay
s a
flat f
ee p
er p
hysi
cian
vis
it–M
ay h
ave
limita
tions
rega
rdin
g m
axim
um
bf
ii
di
dll
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
num
ber o
f vis
its p
er d
ay, m
axim
um d
olla
r am
ount
per
vis
it, a
nd m
axim
um n
umbe
r of d
ays
cove
rage
app
lies
Maj
or M
edic
al In
sura
nce
•Cov
ers
muc
h br
oade
r ran
ge o
f med
ical
ex
pens
es w
ith g
ener
ally
hig
her i
ndiv
idua
l be
nefit
s an
d po
licy
max
imum
s–P
rovi
ding
mor
e co
mpl
ete
cove
rage
with
few
er
gaps
•The
se m
ore
exte
nsiv
e he
alth
pol
icie
s di
vide
dro
ughl
yin
totw
ogr
oups
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
divi
ded
roug
hly
into
two
grou
ps–C
ompr
ehen
sive
maj
or m
edic
al e
xpen
se–S
uppl
emen
tal m
ajor
med
ical
exp
ense
Com
preh
ensi
ve M
ajor
Med
ical
Ben
efits
•Mor
e tra
ditio
nal b
asic
cov
erag
es a
nd
esse
ntia
lly a
ny o
ther
type
of m
edic
al
expe
nse
are
com
bine
d in
to a
sin
gle
com
preh
ensi
ve p
olic
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
Com
preh
ensi
ve M
ajor
Med
ical
Ben
efits
•D
educ
tible
s—de
sign
ed to
low
er p
rem
ium
s–
A de
duct
ible
is th
e am
ount
of e
xpen
se o
r los
s to
be
paid
by
the
insu
red
befo
re th
e he
alth
insu
ranc
e po
licy
pad
byt
esu
edbe
oe
te
eat
sua
cepo
cyst
arts
pay
ing
bene
fits
(hig
her d
educ
tible
s, d
ecre
ase
prem
ium
)–
Gen
eral
ly a
n im
porta
nt fe
atur
e of
maj
or m
edic
al
polic
ies
–M
ost m
ajor
med
ical
ben
efits
beg
in to
be
paid
afte
r the
de
duct
ible
is s
atis
fied
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
TX_LAH_CN_3E.indb 136 1/27/2014 12:28:50 PM
13
7Le
sson
Eig
htee
n M
edic
al E
xpen
se In
sura
nce
Com
preh
ensi
ve M
ajor
Med
ical
Ben
efits
•Coi
nsur
ance
–Coi
nsur
ance
mea
ns in
sure
r and
insu
red
shar
e b
thd
dtib
lt
any
expe
nses
abo
ve th
e de
duct
ible
am
ount
•Coi
nsur
ance
fact
or a
pplie
d af
ter i
nsur
ed h
as s
atis
fied
thei
r ded
uctib
le re
quire
men
t–A
noth
er im
porta
nt fe
atur
e of
maj
or m
edic
al
cove
rage
–Ins
urer
alw
ays
carr
ies
the
bulk
of t
he e
xpen
se
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
yp
•80/
20 c
omm
on, b
ut o
ther
pro
porti
ons
coul
d ap
ply
(i.e.
, 75/
25)
–In
sure
r pay
s 80
% o
f cov
ered
exp
ense
s/in
sure
d pa
ys 2
0% o
f co
vere
d ex
pens
es
Com
preh
ensi
ve M
ajor
Med
ical
Ben
efits
•Sto
p-lo
ss li
mit
–Des
igne
d to
cap
loss
es to
the
insu
red
and
il
dd
ij
dil
lii
incl
uded
in m
ajor
med
ical
pol
icie
s–D
olla
r am
ount
bey
ond
whi
ch th
e in
sure
d no
lo
nger
par
ticip
ates
in p
aym
ent o
f the
exp
ense
s (c
oins
uran
ce s
tops
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
Com
preh
ensi
ve M
ajor
Med
ical
Ben
efits
•Max
imum
out
of p
ocke
t exp
ense
=
Ded
uctib
le +
insu
red'
s po
rtion
of t
he s
top
loss
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
Com
preh
ensi
ve M
ajor
Med
ical
B
enef
its E
xam
ple
An
insu
red’
s m
ajor
med
ical
pol
icy
has
a $5
00 d
educ
tible
, 80
/20
coin
sura
nce,
and
a $
5,00
0 st
op-lo
ss a
fter t
he
dedu
ctib
le is
met
. If t
he in
sure
d’s
cove
red
med
ical
de
duct
be
set
te
sued
sco
eed
edca
expe
nses
for t
he y
ear t
otal
$20
,000
, how
muc
h w
ill th
e in
sure
d pa
y?
Tota
l cov
ered
exp
ense
s
$ 2
0,00
0Le
ss d
educ
tible
(
500
)R
emai
ning
exp
ense
s19
,500
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
Insu
red’
s co
insu
ranc
e(
1,0
00)
(.20
×$5
,000
)In
sure
d pa
ys$
1,5
00
TX_LAH_CN_3E.indb 137 1/27/2014 12:28:51 PM
13
8Le
sson
Eig
htee
n M
edic
al E
xpen
se In
sura
nce
Que
stio
nA
med
ical
exp
ense
pol
icy
has
a $2
50 a
nnua
l de
duct
ible
, an
80/2
0 co
insu
ranc
e fa
ctor
, and
$5
,000
sto
p-lo
ss. I
f the
insu
red’
s fir
st c
laim
fo
r the
yea
r is
$1,0
00, h
ow m
uch
will
the
insu
red
pay?
A
.$25
0B
.$75
0
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
C.$
400
D.$
800
Ans
wer
A m
edic
al e
xpen
se p
olic
y ha
s a
$250
ann
ual
dedu
ctib
le, a
n 80
/20
coin
sura
nce
fact
or, a
nd
$5,0
00 s
top-
loss
. If t
he in
sure
d’s
first
cla
im
for t
he y
ear i
s $1
,000
, how
muc
h w
ill th
e in
sure
d pa
y?
A.$
250
B.$
750
Ded
uctib
le =
$25
0
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
C.$
400
D.$
800
$750
×.2
0 =
$150
Alw
ays
subt
ract
the
DE
DU
CTI
BLE
first
! W
ho p
ays
the
first
dol
lar?
Insu
reds
do!
Maj
or M
edic
al D
educ
tible
s•
Com
preh
ensi
ve m
ajor
med
ical
pla
n de
duct
ible
s us
ually
follo
w o
ne o
f thr
ee m
odel
sFl
atde
duct
ible
(mos
tcom
mon
)–
Flat
ded
uctib
le (m
ost c
omm
on)
•Beg
ins
with
the
first
dol
lar o
f cov
ered
exp
ense
s in
a
year
–C
orrid
or d
educ
tible
•Sta
rts w
ith 1
00%
bas
ic c
over
age
and
follo
wed
by
100%
cat
astro
phic
(sup
plem
enta
l) co
vera
ge
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
–In
tegr
ated
ded
uctib
le (n
ot c
omm
on)
•Cre
dits
coi
nsur
ance
pay
men
ts to
war
d th
e an
nual
de
duct
ible
Flat
D
educ
tible
Cor
ridor
Ded
uctib
leIn
tegr
ated
Ded
uctib
le
100%
In
sure
r10
0%
Insu
rer
100%
In
sure
r
100%
Insu
red
Insu
rer
I
nsur
edIn
sure
r
Ins
ured
80%
20%
80%
20%
Insu
rer
I
nsur
edIn
sure
r
Ins
ured
80%
20
%80
%
20%
Stop
Los
sLi
mit
Stop
Los
sLi
mit
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
80%
20
%80
%
20%
100%
Insu
red
100%
In
sure
r
TX_LAH_CN_3E.indb 138 1/27/2014 12:28:51 PM
13
9Le
sson
Eig
htee
n M
edic
al E
xpen
se In
sura
nce
Supp
lem
enta
l Maj
or M
edic
al B
enef
its
•Cov
erag
e be
gins
with
a tr
aditi
onal
bas
ic
polic
y, w
hich
pay
s fir
st, a
nd th
e m
ajor
m
edic
alco
vera
geis
adde
dto
pick
upm
edic
al c
over
age
is a
dded
to p
ick
up
expe
nses
not
cov
ered
by
the
basi
c po
licy
–Sup
plem
ents
a b
asic
pol
icy
(that
incl
udes
ho
spita
l, su
rgic
al, a
nd m
edic
al c
over
age)
with
an
add
ition
al p
olic
y co
verin
g a
broa
der r
ange
of
med
ical
ex p
ense
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
p–B
asic
pla
n ge
nera
lly w
ill p
ay c
over
ed m
edic
al
expe
nses
with
no
dedu
ctib
le, u
p to
the
polic
y lim
it
TX_LAH_CN_3E.indb 139 1/27/2014 12:28:51 PM
TX_LAH_CN_3E.indb 140 1/27/2014 12:28:51 PM
Lesson NineteenSpecial Types of Medical Expenses Policies
TX_LAH_CN_3E.indb 141 1/27/2014 12:28:51 PM
14
2Le
sson
Nin
etee
n Sp
ecia
l Typ
es o
f M
edic
al E
xpen
ses
Polic
ies
Less
on N
inet
een
Spec
ial T
ypes
of
Med
ical
Exp
ense
s Po
licie
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Den
tal C
are
Insu
ranc
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Trad
ition
al D
enta
l Cov
erag
es•
Bei
ng o
ffere
d m
ore
frequ
ently
as
part
of g
roup
hea
lth
plan
s–
Occ
asio
nally
dent
alin
sura
nce
ispa
rtof
ahe
alth
–O
ccas
iona
lly, d
enta
l ins
uran
ce is
par
t of a
hea
lth
bene
fits
pack
age
with
a s
ingl
e (in
tegr
ated
) ded
uctib
le•D
educ
tible
app
lies
to b
oth
med
ical
and
den
tal
cove
rage
s–
Mor
e of
ten,
den
tal c
over
age
and
clai
ms
are
hand
led
sepa
rate
ly w
ith a
sep
arat
e de
duct
ible
Thb
bti
id
id
tl
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
•Th
ere
may
be
a pr
obat
iona
ry p
erio
d in
gro
up d
enta
l in
sura
nce
–H
elp
hold
dow
n co
vera
ge fo
r pre
exis
ting
cond
ition
s
Dia
gnos
tic a
nd P
reve
ntat
ive
•Fo
r som
e pl
ans,
ben
efits
may
be
on a
fixe
d pr
epai
d ba
sis
rath
er th
an a
fee-
for-
serv
ice
plan
in w
hich
the
plan
parti
cipa
ntis
reim
burs
edpl
an p
artic
ipan
t is
reim
burs
ed•
Suc
h pl
ans
may
pro
vide
100
% c
over
age
for
–R
outin
e vi
sits
to th
e de
ntis
t–
Pro
tect
ive
fluor
ide
treat
men
ts–
Dia
gnos
tic x
-ray
s–
Den
tal e
xam
s an
d di
agno
sis
Ll
thti
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
–Lo
cal a
nest
hetic
s–
Teet
h cl
eani
ngs
(usu
ally
onc
e ev
ery
six
mon
ths)
–P
reve
ntiv
e ca
re
TX_LAH_CN_3E.indb 142 1/27/2014 12:28:52 PM
14
3Le
sson
Nin
etee
n Sp
ecia
l Typ
es o
f M
edic
al E
xpen
ses
Polic
ies
Type
s of
Cov
ered
Ser
vice
s•B
asic
–Tee
th c
lean
ing
and
min
or re
stor
ativ
e ca
re s
uch
as fi
lling
s or
cap
s•M
ajor
–Rep
airs
suc
h as
cro
wns
and
brid
ges
•Orth
odon
tiaS
bjtt
itii
dll
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
–Sub
ject
to o
ne y
ear w
aitin
g pe
riod
as w
ell a
s an
nual
and
life
time
max
imum
lim
its
Min
imiz
ing
Adv
erse
Sel
ectio
n•T
o of
fset
add
ition
al (a
nd o
ften
cost
ly) f
acto
rs,
a ne
w p
rogr
am o
f den
tal i
nsur
ance
will
ofte
n in
clud
epr
ovis
ions
tom
inim
ize
adve
rse
incl
ude
prov
isio
ns to
min
imiz
e ad
vers
e se
lect
ion
•Exa
mpl
es o
f adv
erse
sel
ectio
n pr
ovis
ions
–A
redu
ced
max
imum
ann
ual b
enef
it•E
ncou
rage
s an
insu
red
to c
hoos
e le
ss c
ostly
cou
rses
of
treat
men
t whe
neve
r pos
sibl
e–
Alo
wer
coin
sura
nce
perc
enta
gefo
ropt
iona
l
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
–A
low
er c
oins
uran
ce p
erce
ntag
e fo
r opt
iona
l ex
pens
es–
A gr
adua
ted
coin
sura
nce
fact
or th
at b
egin
s at
60%
an
d in
crea
ses
each
pla
n ye
ar
Lim
ited
Polic
ies
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Lim
ited
Polic
ies
•Fol
low
ing
is a
ser
ies
of p
olic
ies,
eac
h of
w
hich
cov
ers
only
a li
mite
d, s
peci
fied
risk
•Col
lect
ivel
y, th
ey a
re c
alle
d lim
ited
polic
ies
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
TX_LAH_CN_3E.indb 143 1/27/2014 12:28:52 PM
14
4Le
sson
Nin
etee
n Sp
ecia
l Typ
es o
f M
edic
al E
xpen
ses
Polic
ies
Dre
ad D
isea
se•C
over
s sp
ecifi
c di
seas
es a
s na
med
in th
e po
licy
•Exa
mpl
es–H
eart
–Can
cer
•Gen
eral
ly, th
ese
polic
ies
cove
r illn
esse
s th
at d
o no
t occ
ur fr
eque
ntly
but
incu
r sig
nific
ant c
osts
w
hen
the y
do
occu
r
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
y•T
hese
pol
icie
s ar
e of
ten
fairl
y in
expe
nsiv
e in
co
mpa
rison
to fu
ll he
alth
cov
erag
e du
e to
the
low
fre
quen
cy o
f the
dis
ease
Trav
el A
ccid
ent I
nsur
ance
•Cov
ers
loss
from
trav
el a
ccid
ents
in a
co
mm
on c
arrie
r•M
ay b
e of
fere
d as
a b
enef
it of
eith
er a
n in
divi
dual
or a
gro
up a
ccid
enta
l dea
th a
nd
dism
embe
rmen
t pol
icy
•One
-tim
e co
vera
ge p
roba
bly
the
best
kn
own
type
oftra
vela
ccid
enti
nsur
ance
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
know
n ty
pe o
f tra
vel a
ccid
ent i
nsur
ance
Hos
pita
l Inc
ome
(Inde
mni
ty) I
nsur
ance
•P
ays
a sp
ecifi
c am
ount
of i
nsur
ance
for e
ach
day
an in
divi
dual
is h
ospi
taliz
edP
ditl
ti
dtt
hit
l•
Pay
s di
rect
ly to
insu
red,
not
to h
ospi
tal
•N
ot in
tend
ed to
cov
er e
xpen
ses
for h
ospi
taliz
atio
n bu
t to
prov
ide
a flo
w o
f inc
ome
that
beg
ins
whe
n th
e in
sure
d is
con
fined
to th
e ho
spita
l and
end
s on
fin
al d
ay o
f hos
pita
lizat
ion
Som
etim
esus
edto
mee
tded
uctib
lean
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
–Som
etim
es u
sed
to m
eet d
educ
tible
and
co
insu
ranc
e re
quire
men
ts o
f a m
edic
al e
xpen
se
polic
y
Hos
pita
l Inc
ome
(Inde
mni
ty) I
nsur
ance
•Lim
itatio
ns m
ay a
pply
–May
incl
ude
an e
limin
atio
n pe
riod,
in w
hich
ca
se c
over
age
does
not
beg
in o
n th
e fir
st d
ay
of c
onfin
emen
t–B
enef
its p
aid
for p
reex
istin
g co
nditi
ons
•Usu
ally,
the
amou
nt o
f ins
uran
ce a
vaila
ble
is
indi
cate
d as
a m
onth
l y a
mou
nt fo
r a s
peci
fied
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
yp
num
ber o
f mon
ths
TX_LAH_CN_3E.indb 144 1/27/2014 12:28:53 PM
14
5Le
sson
Nin
etee
n Sp
ecia
l Typ
es o
f M
edic
al E
xpen
ses
Polic
ies
Visi
on C
are
Insu
ranc
e•I
nsur
ers
may
offe
r vis
ion
care
pol
icie
s to
cl
ose
the
gap
from
pol
icie
s th
at c
over
di
seas
e an
d in
jury
to e
yes,
but
no
cove
rage
for e
ye e
xam
s an
d co
rrec
tions
•Vis
ion
care
cov
ers
–Eye
exa
min
atio
nsC
osto
flen
ses
and
fram
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
–Cos
t of l
ense
s an
d fra
mes
–Cos
t of c
onta
ct le
nses
–O
ther
cor
rect
ive
item
s
Visi
on C
are
Insu
ranc
e•L
imita
tions
and
exc
lusi
ons
–Rep
lace
men
t fra
mes
or l
ense
s re
quire
d be
caus
e of
loss
or b
reak
age
–Sun
glas
ses
and
safe
ty g
lass
es–M
edic
al a
nd s
urgi
cal c
osts
of t
he ty
pe c
over
ed
by b
asic
and
maj
or m
edic
al p
olic
ies
(cat
arac
t su
rger
y)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
–LA
SIK
sur
gery
is c
onsi
dere
d el
ectiv
e an
d is
not
co
vere
d
Cre
dit I
nsur
ance
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Cre
dit H
ealth
Insu
ranc
e•C
over
s a
debt
or, w
ith th
e cr
edito
r rec
eivi
ng
the
bene
fits
to p
ay o
ff th
e de
bt if
the
debt
or
is d
isab
led
or d
ies
acci
dent
ally
•May
be
writ
ten
as a
n in
divi
dual
cre
dit
heal
th in
sura
nce
polic
y–
App
lican
t app
lies
for t
he p
olic
y an
d re
ceiv
ed it
on
the
basi
sof
indi
vidu
alse
lect
ion
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
the
basi
s of
indi
vidu
al s
elec
tion
–P
olic
y ow
ner i
s th
e de
btor
, and
the
polic
y ow
ner
nam
es th
e cr
edito
r as
the
reci
pien
t of t
he p
olic
y’s
bene
fits
TX_LAH_CN_3E.indb 145 1/27/2014 12:28:53 PM
TX_LAH_CN_3E.indb 146 1/27/2014 12:28:53 PM
Lesson TwentyGroup Health Insurance
TX_LAH_CN_3E.indb 147 1/27/2014 12:28:53 PM
14
8Le
sson
Tw
enty
G
roup
Hea
lth In
sura
nce
Less
onTw
enty
Less
on T
wen
tyG
roup
Hea
lth In
sura
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Gro
up H
ealth
Insu
ranc
e•M
any
empl
oyer
s m
ake
heal
th in
sura
nce
avai
labl
e to
thei
r em
ploy
ees
Eith
erby
payi
ngth
epr
emiu
ms
fort
he–E
ither
by
payi
ng th
e pr
emiu
ms
for t
he
empl
oyee
s–S
harin
g in
pre
miu
m p
aym
ent
–Ded
uctin
g th
e pr
emiu
ms
from
em
ploy
ees’
pa
yche
cks
•Offe
ring
empl
oyee
svo
lunt
ary
limite
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
•Offe
ring
empl
oyee
s vo
lunt
ary
limite
d po
licie
s su
ch a
s ca
ncer
, hea
rt at
tack
, ho
spita
l ind
emni
ty, a
nd s
o on
is c
alle
d w
ork-
site
ben
efits
Polic
y Ty
pes
•Gro
up h
ealth
pla
ns m
ay in
clud
e an
y of
se
vera
l typ
es o
f ins
uran
ce, i
nclu
ding
–Dis
abili
ty in
com
e•P
ays
bene
fits
for l
ost e
arni
ngs
resu
lting
from
acc
iden
t or
sic
knes
s di
sabi
lity
–Acc
iden
tal d
eath
and
dis
mem
berm
ent
•Cov
ers
acci
dent
al lo
ss o
f life
and
acc
iden
tal l
oss
of
one
or m
ore
limbs
or e
yesi
ght
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
–Hos
pita
l exp
ense
•Pay
s fo
r hos
pita
l exp
ense
s w
heth
er tr
eatm
ent i
s on
an
inpa
tient
or o
n an
out
patie
nt b
asis
Polic
y Ty
pes
•Gro
up h
ealth
pla
ns (c
ontin
ued)
–Sur
gica
l exp
ense
•Cov
ers
only
reim
burs
emen
tfor
surg
ical
expe
nses
Cov
ers
only
reim
burs
emen
t for
sur
gica
l exp
ense
s•P
olic
ies
like
this
rare
toda
y, b
ut s
till d
o ex
ist
–Med
ical
exp
ense
•Pro
vide
cov
erag
e fo
r med
ical
exp
ense
s in
volv
ing
phys
icia
n or
nur
sing
ser
vice
s, b
ut n
o su
rgic
al
expe
nse
–Dis
abili
ty in
com
e co
vera
ge o
ften
offe
red
unde
r tb
till
ffd
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
a gr
oup
arra
ngem
ent b
ut is
usu
ally
offe
red
sepa
rate
ly fr
om h
ospi
tal,
med
ical
, and
sur
gica
l co
vera
ge
TX_LAH_CN_3E.indb 148 1/27/2014 12:28:53 PM
14
9Le
sson
Tw
enty
G
roup
Hea
lth In
sura
nce
Con
vers
ion
Priv
ilege
•Allo
ws
the
insu
red
to c
onve
rt th
eir g
roup
co
vera
ge to
indi
vidu
al c
over
age
with
out
evid
ence
of i
nsur
abili
ty•D
oes
not a
pply
to g
roup
med
ical
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
Con
vers
ion
Priv
ilege
•Th
is p
rivile
ge g
oes
into
effe
ct o
nly
whe
n in
sure
d is
no
long
er e
ligib
le fo
r gro
up c
over
age
beca
use
of th
e fo
llow
ing
circ
umst
ance
sfo
llow
ing
circ
umst
ance
s–
Insu
red’
s em
ploy
men
t is
term
inat
ed–
Insu
red
beco
mes
inel
igib
le fo
r cov
erag
e be
caus
e th
e cl
ass
he w
as in
sure
d un
der i
s no
long
er e
ligib
le
for c
over
age
–In
sure
d’s
depe
nden
t chi
ld re
ache
s th
e ag
e ifi
di
thli
thft
iti
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
spec
ified
in th
e po
licy
as th
e ag
e of
term
inat
ing
depe
nden
t cov
erag
e•
Insu
red
has
31 d
ays
from
tim
e of
inel
igib
ility
to
conv
ert t
o an
indi
vidu
al p
lan
Dep
ende
nt C
over
age
•Gro
up h
ealth
insu
ranc
e be
nefit
s m
ay b
e ex
tend
ed to
the
prim
ary
insu
red’
s de
pend
ents
, inc
ludi
ng–I
nsur
ed’s
spo
use
–Ins
ured
’s c
hild
ren
•Can
be
step
child
ren,
fost
er c
hild
ren,
or a
dopt
ed
child
ren
• Mus
tbe
youn
gert
han
asp
ecifi
edag
e(a
ge26
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
Mus
t be
youn
ger t
han
a sp
ecifi
ed a
ge (a
ge 2
6)•C
hild
may
be
a de
pend
ent b
eyon
d sp
ecifi
ed a
ge if
th
at c
hild
is p
erm
anen
tly m
enta
lly o
r phy
sica
lly
disa
bled
bef
ore
the
spec
ified
age
Dep
ende
nt C
over
age
•Gro
up L
ife o
r hea
lth in
sura
nce
bene
fits
(con
tinue
d)
–Ins
ured
’s d
epen
dent
par
ents
–Any
oth
er p
erso
n w
ho is
dep
ende
nt o
n th
e in
sure
d•R
equi
red
by la
w, s
ubje
ct to
dep
ende
ncy
conf
irmat
ion
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
TX_LAH_CN_3E.indb 149 1/27/2014 12:28:54 PM
15
0Le
sson
Tw
enty
G
roup
Hea
lth In
sura
nce
Coo
rdin
atio
n of
Ben
efits
Pro
visi
on
•Coo
rdin
atio
n of
ben
efits
rule
–Whe
n an
indi
vidu
al is
cov
ered
und
er a
n em
ploy
er’s
gro
up h
ealth
insu
ranc
e pl
an, t
he
cove
rage
pro
vide
d by
the
empl
oyer
is a
lway
s pr
imar
y–O
ther
cov
erag
e av
aila
ble
to th
e em
ploy
ee a
s a
depe
nden
t will
be
seco
ndar
y an
d pa
y on
ly
hd
bh
i
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
thos
e ex
pens
es n
ot c
over
ed b
y th
e pr
imar
y pl
an, w
ithin
its
polic
y lim
its
Coo
rdin
atio
n of
Ben
efits
Pro
visi
on
•Coo
rdin
atio
n of
ben
efits
rule
(con
tinue
d)–W
hen
depe
nden
t chi
ldre
n in
volv
ed•P
rimar
y co
vera
ge is
pro
vide
d by
the
pare
nt w
hose
bi
rthda
y fa
lls e
arlie
r in
the
year
•Oth
er p
aren
t’s c
over
age
pays
on
an e
xces
s ba
sis
•If p
aren
ts s
epar
ated
or d
ivor
ced,
the
plan
of t
he
pare
nt w
ith c
usto
dy is
prim
ary,
bar
ring
any
othe
r leg
al
arra
ngem
ents
(ie
cour
tsta
tes
othe
rwis
e)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
arra
ngem
ents
(i.e
., co
urt s
tate
s ot
herw
ise)
Texa
s-M
anda
ted
Ben
efits
in
Gro
up H
ealth
Insu
ranc
e•G
roup
pol
icie
s m
ust c
over
–N
ewbo
rns—
cong
enita
l pro
blem
s an
d ill
ness
up
31d
to 3
1 da
ys–G
rand
child
ren—
if lis
ted
as a
dep
ende
nt o
n th
eir t
ax re
turn
–Che
mic
al d
epen
denc
e •P
sych
olog
ical
and
phy
siol
ogic
al a
ddic
tion
–be
nefit
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
can
be le
ss th
an re
gula
r med
ical
•No
canc
ella
tion
of c
over
age
if di
agno
sed
with
H
IV/A
IDS
HIP
AA
: Por
tabi
lity
•Und
er H
IPA
A, a
per
son
chan
ging
jobs
is e
ligib
le
for t
he n
ew e
mpl
oyer
’s m
edic
al p
lan
with
out
losi
ngco
vera
gefo
rpre
exis
ting
cond
ition
slo
sing
cov
erag
e fo
r pre
-exi
stin
g co
nditi
ons
–Has
had
con
tinuo
us c
over
age
for a
t lea
st 1
8 m
onth
s–T
here
is n
o m
ore
than
a 6
3 da
y ga
p•A
n in
divi
dual
with
gro
up h
ealth
insu
ranc
e w
ho
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
leav
es to
bec
ome
self-
empl
oyed
can
not b
e de
nied
cov
erag
e–P
rem
ium
cha
rged
may
be
high
er
TX_LAH_CN_3E.indb 150 1/27/2014 12:28:54 PM
15
1Le
sson
Tw
enty
G
roup
Hea
lth In
sura
nce
HIP
AA
: Por
tabi
lity
•Gro
up p
lans
can
not i
mpo
se m
ore
than
a 1
2-m
onth
pre
exis
ting
cond
ition
s ex
clus
ion
for a
pe
rson
who
soug
htm
edic
alad
vice
diag
nosi
sor
pers
on w
ho s
ough
t med
ical
adv
ice,
dia
gnos
is, o
r tre
atm
ent w
ithin
the
prev
ious
six
mon
ths
–Thi
s ex
clus
ion
cann
ot b
e ap
plie
d in
the
case
of
new
born
s, a
dopt
ed c
hild
ren,
or p
regn
anci
es
exis
ting
on th
e ef
fect
ive
date
of c
over
age
Ins
rers
can
req
irece
rtific
ate
ofpr
iorc
redi
tabl
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
•Ins
urer
s ca
n re
quire
cer
tific
ate
of p
rior c
redi
tabl
e co
vera
ge
Con
tinua
tion
of B
enef
its
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Con
solid
ated
Om
nibu
s B
udge
t R
econ
cilia
tion
Act
of 1
985
(CO
BR
A)
•A fe
dera
l law
that
requ
ires
empl
oyer
s w
ith 2
0 or
m
ore
empl
oyee
s to
pro
vide
form
er e
mpl
oyee
s an
dth
eirf
amili
esa
cont
inua
tion
ofbe
nefit
sun
der
and
thei
r fam
ilies
a c
ontin
uatio
n of
ben
efits
und
er
the
empl
oyer
’s g
roup
hea
lth in
sura
nce
plan
–Sam
e gr
oup
cove
rage
that
the
empl
oyee
had
as
a c
over
ed e
mpl
oyee
•CO
BR
A sp
ecifi
es th
e ra
tes,
cov
erag
e, q
ualif
ying
ev
ents
,qua
lifyi
ngbe
nefic
iarie
s,no
tific
atio
nof
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
even
ts, q
ualif
ying
ben
efic
iarie
s, n
otifi
catio
n of
el
igib
ility
pro
cedu
res,
and
tim
e of
pay
men
t re
quire
men
ts fo
r the
con
tinua
tion
of in
sura
nce
Con
solid
ated
Om
nibu
s B
udge
t R
econ
cilia
tion
Act
of 1
985
(CO
BR
A)
•Dec
isio
n pe
riod
–A
qual
ified
ben
efic
iary
has
60
days
from
rece
ivin
g w
ritte
nno
tice
ofth
eirr
ight
toco
ntin
ueto
mak
ea
writ
ten
notic
e of
thei
r rig
ht to
con
tinue
to m
ake
a de
cisi
on a
bout
whe
ther
or n
ot to
con
tinue
cov
erag
e–
If co
ntin
ued
cove
rage
is n
ot e
lect
ed w
ithin
60
days
, op
tion
to d
o so
is fo
rfeite
d•C
ontin
uatio
n/du
ratio
n of
cov
erag
e–
Em
ploy
er is
not
requ
ired
to m
ake
cont
inua
tion
cove
rage
ava
ilabl
e in
defin
itely
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
–R
atio
nale
is to
pro
vide
tran
sitio
nal h
ealth
car
e co
vera
ge u
ntil
empl
oyee
or f
amily
mem
ber c
an
obta
in c
over
age
or e
mpl
oym
ent e
lsew
here
TX_LAH_CN_3E.indb 151 1/27/2014 12:28:55 PM
15
2Le
sson
Tw
enty
G
roup
Hea
lth In
sura
nce
Con
solid
ated
Om
nibu
s B
udge
t R
econ
cilia
tion
Act
of 1
985
(CO
BR
A)
•Con
tinua
tion/
dura
tion
(con
tinue
d)
–A q
ualif
ied
bene
ficia
ry m
ay c
ontin
ue to
pa
rtici
pate
inth
egr
oup
insu
ranc
epl
anby
parti
cipa
te in
the
grou
p in
sura
nce
plan
by
payi
ng 1
02%
of t
he a
ctua
l gro
up ra
te p
lan
to
the
spon
sor,
with
leng
th o
f per
iod
depe
ndin
g up
on c
ircum
stan
ces
invo
lved
•18
mon
ths
appl
ies
to th
ose
empl
oyee
s an
d in
sure
d de
pend
ents
who
lose
cov
erag
e du
e to
term
inat
ion
of
empl
oym
ent (
or re
duct
ion
in h
ours
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
py
()
•36
mon
ths
appl
ies
to d
epen
dent
s w
ho lo
se c
over
age
beca
use
of d
eath
, div
orce
, or l
egal
sep
arat
ion,
or n
o lo
nger
mee
ting
the
defin
ition
of a
dep
ende
nt (o
r em
ploy
ee’s
elig
ibili
ty fo
r Med
icar
e)
Whe
n C
OB
RA
Con
tinua
tion
Ends
•Onc
e th
e m
axim
um te
rm o
f CO
BR
A co
ntin
uatio
n ha
s be
en c
ompl
eted
, if t
he
polic
y do
es n
ot o
ffer a
con
vers
ion
priv
ilege
, th
e in
sure
d m
ust f
ind
new
cov
erag
e–I
f una
ble
to q
ualif
y fo
r or f
ind
repl
acem
ent
cove
rage
, ins
ured
can
app
ly fo
r the
Tex
as R
isk
Poo
l
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
TX_LAH_CN_3E.indb 152 1/27/2014 12:28:55 PM
Lesson Twenty-OneSocial Health Insurance
TX_LAH_CN_3E.indb 153 1/27/2014 12:28:55 PM
15
4Le
sson
Tw
enty
-One
So
cial
Hea
lth In
sura
nce
Less
onTw
enty
-One
Less
on T
wen
tyO
neSo
cial
Hea
lth In
sura
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Soci
al H
ealth
Insu
ranc
e•
Ref
ers
to h
ealth
cov
erag
es s
ubsi
dize
d an
d im
plem
ente
d th
roug
h go
vern
men
t adm
inis
tratio
n of
ta
xm
oney
and
soci
alpr
ogra
ms
tax
mon
ey a
nd s
ocia
l pro
gram
s•
Soc
ial h
ealth
insu
ranc
e in
clud
es–
Med
icar
e an
d as
soci
ated
priv
ate
cove
rage
s–
Med
icai
d–
Soc
ial S
ecur
ityW
k’
ti
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
–W
orke
rs’ c
ompe
nsat
ion
–Tr
iCar
e(fo
r mili
tary
, inc
ludi
ng re
tired
and
de
pend
ents
)
Med
icar
e El
igib
ility
•A
pers
on is
elig
ible
for M
edic
are
bene
fits
who
–Is
age
65
or o
ver a
nd h
as q
ualif
ied
for S
ocia
l S
ecur
it y o
r Rai
lroad
Ret
irem
ent m
onth
ly c
ash
yy
bene
fits
–Is
ent
itled
to b
enef
its u
nder
the
Soc
ial S
ecur
ity
prog
ram
for 2
4 m
onth
s as
a d
isab
led
wor
ker,
disa
bled
wid
ow(e
r), o
r as
a ch
ild a
ge 1
8 or
ove
r w
ho w
as d
isab
led
befo
re a
ge 2
2–
Isdi
agno
sed
asha
ving
perm
anen
tkid
ney
failu
re
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
Is d
iagn
osed
as
havi
ng p
erm
anen
t kid
ney
failu
re
and
requ
iring
dia
lysi
s or
a k
idne
y tra
nspl
ant
–W
as b
orn
befo
re 1
929
and
has
few
or n
o qu
arte
rs
of c
over
age
unde
r the
Soc
ial S
ecur
ity s
yste
m
Med
icar
e Pa
rt A
•Pro
vide
s co
vera
ge fo
r fou
r diff
eren
t kin
ds
of c
are
–Inp
atie
nt h
ospi
tal c
are
–Ski
lled
nurs
ing
faci
lity
care
–Hom
e he
alth
car
e–H
ospi
ce c
are
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
TX_LAH_CN_3E.indb 154 1/27/2014 12:28:55 PM
15
5Le
sson
Tw
enty
-One
So
cial
Hea
lth In
sura
nce
Inpa
tient
Hos
pita
l Car
e•
Med
icar
e pa
ymen
ts (f
or e
ach
bene
fit p
erio
d)–I
nsur
ed fi
rst m
ust s
atis
fy a
ded
uctib
le
it
requ
irem
ent
•Ded
uctib
le a
mou
nt c
hang
es a
nnua
lly (c
over
s fir
st 6
0 da
ys o
f eac
h ho
spita
l adm
issi
on)
•Med
icar
e th
en w
ill pa
y 10
0% o
f cov
ered
ex
pens
es fo
r the
firs
t 60
days
of h
ospi
taliz
atio
nIf
fid
fl
th60
dth
tit
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
–If c
onfin
ed fo
r lon
ger t
han
60 d
ays,
the
patie
nt
has
to p
ay a
cop
ay p
er d
ay–L
imite
d to
90
days
of c
over
age
per b
enef
it pe
riod
Skill
ed N
ursi
ng F
acili
ty C
are
•100
-day
ben
efit
(per
ben
efit
perio
d)•M
edic
are
defin
es th
e sk
illed
nur
sin g
faci
lity
gy
bene
fit q
uite
nar
row
ly–T
o qu
alify
, the
insu
red
mus
t spe
nd a
min
imum
of
thre
e da
ys in
a h
ospi
tal p
rior t
o ad
mis
sion
to
a sk
illed
nur
sing
faci
lity
–Car
em
ustb
eth
ety
peth
atca
nbe
perfo
rmed
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
Car
e m
ust b
e th
e ty
pe th
at c
an b
e pe
rform
ed
only
by
or u
nder
sup
ervi
sion
of l
icen
sed
nurs
ing
pers
onne
l, an
d on
ly a
s re
sult
of d
octo
r’s o
rder
s
Hom
e H
ealth
Car
e•W
hen
insu
red
can
be c
ared
for a
t hom
e•E
li gib
le e
xpen
ses
incl
ude
gp
–Int
erm
itten
t, pa
rt-tim
e nu
rsin
g ca
re–P
hysi
cal,
occu
patio
nal,
or s
peec
h th
erap
y–H
ome
heal
th a
ides
–Med
ical
soc
ial s
ervi
ces
Mdi
lli
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
–Med
ical
sup
plie
s–8
0% o
f cer
tain
dur
able
med
ical
equ
ipm
ent (
i.e.,
whe
elch
airs
or h
ospi
tal b
eds)
Hos
pice
Car
e•P
rovi
des
inpa
tient
and
out
patie
nt h
ospi
ce c
are
for t
erm
inal
ly il
l ins
ured
s (n
on-fa
mily
car
egiv
ers)
Pd
fi
lif
d•P
aym
ents
are
mad
e fo
r pai
n re
lief a
nd s
ympt
om
man
agem
ent
•Pay
men
t is
not m
ade
for c
urat
ive
or o
ther
type
s of
trea
tmen
t (e.
g., r
ehab
ilita
tion)
•Tw
o 90
-day
per
iods
, and
one
45-
day
perio
d pe
r
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
bene
fit p
erio
d–U
nlim
ited
dura
tion
if ph
ysic
ian
certi
fies
need
TX_LAH_CN_3E.indb 155 1/27/2014 12:28:56 PM
15
6Le
sson
Tw
enty
-One
So
cial
Hea
lth In
sura
nce
Med
icar
e Pa
rt B
•C
over
cha
rges
for p
hysi
cian
’s a
nd s
urge
on’s
ser
vice
s an
d ou
tpat
ient
hos
pita
l exp
ense
s (E
R, l
ab, d
iagn
ostic
te
sts)
test
s)–
Opt
iona
l cov
erag
e an
d re
quire
s a
mon
thly
pre
miu
m–
Ann
ual d
educ
tible
–G
ener
ally
an
80-2
0 pl
an o
f coi
nsur
ance
, but
has
no
stop
-loss
lim
it–
Thre
e-un
it “d
educ
tible
” for
out
patie
nt b
lood
d
ii
tti
(idd
itit
PtA
’d
dtib
l)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
adm
inis
tratio
n (in
add
ition
to P
art A
’s d
educ
tible
)–
No
cove
rage
for d
enta
l or c
onfin
emen
t in
a nu
rsin
g fa
cilit
y
Med
icar
eSu
pple
men
tM
edic
are
Supp
lem
ent
Insu
ranc
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Med
icar
e Su
pple
men
t Pol
icie
s•S
old
by p
rivat
e in
sura
nce
com
pani
es to
fill
gaps
in M
edic
are
Par
ts A
and
B–S
omet
imes
refe
rred
to a
s M
edig
ap p
olic
ies
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
Ope
n En
rollm
ent R
equi
rem
ents
•Al
l ins
uran
ce c
ompa
nies
sel
ling
Med
icar
e su
pple
men
t pol
icie
s m
ust g
uara
ntee
issu
e if
the
appl
ican
tis
65or
olde
rand
has
enro
lled
inPa
rtB
appl
ican
t is
65 o
r old
er a
nd h
as e
nrol
led
in P
art B
M
edic
are
with
in th
e la
st s
ix m
onth
s•
Bot
h M
edic
are
Par
ts A
and
B m
ust b
e ca
rried
to b
e el
igib
le fo
r Med
icar
e su
pple
men
t ins
uran
ce•
Pre
-exi
stin
g co
nditi
ons
can
be e
xclu
ded
for t
he fi
rst
six
mon
ths
ofco
vera
gebu
tonl
yif
they
wer
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
six
mon
ths
of c
over
age,
but
onl
y if
they
wer
e tre
ated
in th
e si
x m
onth
s im
med
iate
ly p
rece
ding
th
e ef
fect
ive
date
of t
he p
olic
y
TX_LAH_CN_3E.indb 156 1/27/2014 12:28:56 PM
15
7Le
sson
Tw
enty
-One
So
cial
Hea
lth In
sura
nce
Med
icar
e Su
pple
men
t Pol
icie
s•M
ust i
nclu
de a
min
imum
30-
day
free-
look
pr
ovis
ion
•Mus
t aut
omat
ical
ly a
djus
t ben
efits
to re
flect
st
atut
ory
chan
ges
in M
edic
are
•Mus
t be
guar
ante
ed re
new
able
•Mus
t be
base
d on
the
guid
e de
velo
ped
for
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
long
-term
car
e pr
oduc
ts b
y th
e N
atio
nal
Ass
ocia
tion
of In
sura
nce
Com
mis
sion
ers
Med
icar
e Pa
rt C
: Med
icar
e A
dvan
tage
•To
enr
oll i
n a
Med
icar
e A
dvan
tage
pla
n–
A pe
rson
mus
t be
enro
lled
in M
edic
are
Par
t A a
nd
Par
tBan
dpa
yth
em
onth
lyP
artB
prem
ium
Par
t B a
nd p
ay th
e m
onth
ly P
art B
pre
miu
m–
May
als
o pa
y an
add
ition
al p
rem
ium
to th
e M
edic
are
Adv
anta
ge p
rovi
der
•P
eopl
e en
rolle
d in
a M
edic
are
Adv
anta
ge p
lan
don’
t ne
ed a
Med
icar
e su
pple
men
t pol
icy
beca
use
Med
icar
eA
dvan
tage
plan
sus
ually
prov
ide
the
sam
e,
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
Med
icar
e A
dvan
tage
pla
ns u
sual
ly p
rovi
de th
e sa
me,
or
gre
ater
, lev
el o
f ben
efits
pro
vide
d by
mos
t M
edic
are
supp
lem
ents
Med
icar
e Pa
rt D
: M
edic
are
Pres
crip
tion
Dru
g Pl
ans
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Med
icar
e Pa
rt D
•Pro
vide
s m
any
outp
atie
nt d
rugs
at a
re
duce
d ou
t-of-p
ocke
t cos
t–M
ust e
nrol
l in
a pr
ivat
e P
art D
pla
n–C
alen
dar y
ear d
educ
tible
–Cov
ers
appr
oxim
atel
y 75
% o
f dru
g co
sts
up to
a
certa
in a
mou
nt–S
tops
payi
ng(c
alle
dth
edo
nuth
ole)
upto
a
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
Sto
ps p
ayin
g (c
alle
d th
e do
nut h
ole)
up
to a
ce
rtain
am
ount
–Mos
t dru
gs th
en c
over
ed a
t 95%
to D
ecem
ber
31
TX_LAH_CN_3E.indb 157 1/27/2014 12:28:56 PM
15
8Le
sson
Tw
enty
-One
So
cial
Hea
lth In
sura
nce
Med
icar
e an
d Em
ploy
er
Cov
erag
e:In
form
atio
nfo
rC
over
age:
Info
rmat
ion
for
Med
icar
e B
enef
icia
ries
Wor
king
Pas
t Age
65
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Med
icar
e an
d Em
ploy
er C
over
age
•B
ased
on
circ
umst
ance
s in
volv
ed, M
edic
are
may
be
seco
ndar
y pa
yer t
o an
y gr
oup
heal
th p
lan
prov
ided
or
may
bepr
imar
ypa
yer
or m
ay b
e pr
imar
y pa
yer
–If
Med
icar
e re
cipi
ent i
s st
ill a
ctua
lly w
orki
ng a
nd
cove
red
unde
r a g
roup
hea
lth p
lan,
that
pla
n is
pr
imar
y an
d M
edic
are
is s
econ
dary
cov
erag
e•G
roup
hea
lth p
lan
pays
firs
t on
hosp
ital a
nd
med
ical
bill
sIf
thl
dt
llf
id
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
•If t
he p
lan
does
not
pay
all
of e
xpen
ses
incu
rred
, M
edic
are
may
pay
sec
onda
ry b
enef
its fo
r M
edic
are
cove
red
serv
ices
to s
uppl
emen
t am
ount
pa
id b
y gr
oup
heal
th p
lan
Med
icar
e an
d Em
ploy
er C
over
age
•Bas
ed o
n ci
rcum
stan
ces
invo
lved
–I
f Med
icar
e re
cipi
ent c
hoos
es to
reje
ct g
roup
he
alth
cov
erag
e, M
edic
are
beco
mes
the
prim
ary
paye
r for
Med
icar
e-co
vere
d he
alth
se
rvic
es (e
xcep
tion:
wor
kers
’ com
pens
atio
n)–M
edic
are
reci
pien
ts w
ho a
re re
tired
but
stil
l co
vere
d by
an
empl
oyer
’s m
edic
al p
lan
have
M
dih
id
h
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
Med
icar
e as
the
prim
ary
paye
r and
the
empl
oyer
pla
n is
sec
onda
ry (a
cts
like
a M
edic
are
Sup
plem
ent)
Med
icai
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
TX_LAH_CN_3E.indb 158 1/27/2014 12:28:57 PM
15
9Le
sson
Tw
enty
-One
So
cial
Hea
lth In
sura
nce
Med
icai
d•M
edic
aid
is a
wel
fare
hea
lth c
are
prog
ram
fo
r ind
igen
t per
sons
(reg
ardl
ess
of a
ge)
•Est
ablis
hed
by th
e fe
dera
l gov
ernm
ent b
ut
is a
dmin
iste
red
by in
divi
dual
sta
tes
and
coun
ties
–Fed
eral
gov
ernm
ent p
ays
maj
ority
of h
ealth
ca
re
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
care
–Sta
te p
ays
all a
dmin
istra
tive
expe
nses
and
any
ot
herw
ise
unfu
nded
ben
efits
it c
hoos
es
Wor
kers
’ Com
pens
atio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Wor
kers
’ Com
pens
atio
n•T
exas
law
det
erm
ines
the
leve
l of
com
pens
atio
n an
d be
nefit
s aw
arde
d to
an
inju
red
empl
oyee
if c
over
ed b
y w
orke
rs’
com
pens
atio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
Wor
kers
’ Com
pens
atio
n•I
f an
empl
oyee
is in
jure
d, b
ecom
es s
ick
by
dise
ase,
or d
ies
in th
e co
urse
and
sco
pe o
f em
ploy
men
t, th
e fo
llow
ing
bene
fits
are
cove
red
by th
e w
orke
rs’ c
ompe
nsat
ion
law
–Med
ical
–Dis
abili
ty–S
urvi
vor
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n24
–Sur
vivo
r –B
uria
l
TX_LAH_CN_3E.indb 159 1/27/2014 12:28:57 PM
16
0Le
sson
Tw
enty
-One
So
cial
Hea
lth In
sura
nce
Wor
kers
’ Com
pens
atio
n•M
edic
al b
enef
its–I
njur
ed e
mpl
oyee
s ar
e en
title
d to
unl
imite
d ex
pens
es fo
r rea
sona
ble
and
nece
ssar
y m
edic
al c
are
rela
ted
to a
wor
k re
late
d in
jury
or
illne
ss
•No
time
limit
on h
ow lo
ng p
aym
ents
mus
t be
mad
e•N
o do
llar l
imit
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n25
Wor
kers
’ Com
pens
atio
n•
Oth
er b
enef
its in
clud
e–
Dis
abili
ty in
com
e aw
arde
d to
the
empl
oyee
to
reim
burs
eth
emfo
rlos
twag
esw
hile
unab
leto
wor
kre
imbu
rse
them
for l
ost w
ages
whi
le u
nabl
e to
wor
k as
the
resu
lt of
the
wor
k-re
late
d in
jury
or i
llnes
s–
Sur
vivo
r ben
efits
pay
able
to th
e fa
mily
of a
wor
ker
kille
d in
the
cour
se a
nd s
cope
of e
mpl
oym
ent,
or
as th
e re
sult
of a
wor
k-re
late
d ill
ness
–B
uria
lben
efit
ofup
to$6
,000
isal
sopa
yabl
eto
the
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n26
Bur
ial b
enef
it of
up
to $
6,00
0 is
als
o pa
yabl
e to
the
pers
on w
ho p
ays
the
fune
ral e
xpen
ses
Wor
kers
’ Com
pens
atio
n•P
rimar
y co
vera
ge–A
ll be
nefit
s pa
id u
nder
a w
orke
rs’
com
pens
atio
n cl
aim
are
prim
ary
to a
ny o
ther
be
nefit
s pa
yabl
e un
der a
n in
divi
dual
or g
roup
he
alth
or d
isab
ility
insu
ranc
e po
licy
–If t
he c
laim
is c
ause
d by
som
eone
els
e or
an
othe
r bus
ines
s, th
e w
orke
rs’ c
ompe
nsat
ion
ih
hf
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n27
insu
ranc
e co
mpa
ny c
an s
ue th
e ot
her p
arty
for
reim
burs
emen
t of t
he c
laim
. Thi
s is
cal
led
subr
ogat
ion.
TX_LAH_CN_3E.indb 160 1/27/2014 12:28:57 PM
Lesson Twenty-TwoLong-Term Care
TX_LAH_CN_3E.indb 161 1/27/2014 12:28:57 PM
16
2Le
sson
Tw
enty
-Tw
o Lo
ng-T
erm
Car
e
Less
onTw
enty
-Tw
oLe
sson
Tw
enty
Two
Long
-Ter
m C
are
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Long
-Ter
m C
are
(LTC
)•L
ong-
term
car
e pa
ys fo
r the
kin
d of
car
e ne
eded
by
indi
vidu
als
who
hav
e ch
roni
c ill
ness
es o
r dis
abili
ties
•It o
ften
cove
rs v
ario
us c
osts
–Nur
sing
hom
e ca
re–P
rovi
des
cove
rage
for h
ome-
base
d ca
re•V
isiti
ngnu
rses
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
•Vis
iting
nur
ses
•Cho
re s
ervi
ces
•Res
pite
car
e fo
r dai
ly c
areg
iver
s
NA
IC M
odel
for L
ong-
Term
Car
e•K
ey lo
ng-te
rm c
are
issu
es in
clud
e –A
ben
efit
perio
d of
at l
east
one
yea
r–S
trict
rest
rictio
ns o
n ca
ncel
latio
n, s
peci
fical
ly
proh
ibiti
ng c
ance
llatio
n be
caus
e of
the
insu
red’
s ag
ing
•Mus
t be
guar
ante
ed re
new
able
–Sta
ndar
ds fo
r cov
erin
g pr
eexi
stin
g co
nditi
ons
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
–Fre
e lo
ok p
erio
d (3
0 da
ys)
–Pro
hibi
tion
of e
xclu
sion
s fo
r Alz
heim
er’s
di
seas
e
Type
s of
Ben
efits
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
TX_LAH_CN_3E.indb 162 1/27/2014 12:28:58 PM
16
3Le
sson
Tw
enty
-Tw
o Lo
ng-T
erm
Car
e
Skill
ed N
ursi
ng C
are
•Nur
sing
and
reha
bilit
ativ
e ca
re th
at is
re
quire
d da
ily•C
an b
e pe
rform
ed o
nly
by s
kille
d m
edic
al
prac
titio
ners
on
a do
ctor
’s o
rder
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
Inte
rmed
iate
Car
e•N
ursi
ng a
nd re
habi
litat
ive
care
that
is
requ
ired
occa
sion
ally
•Can
be
perfo
rmed
onl
y by
ski
lled
med
ical
pr
actit
ione
rs o
n a
doct
or’s
ord
ers
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
Cus
todi
al o
r Res
iden
tial C
are
•Hel
p in
per
form
ing
activ
ities
of d
aily
livi
ng–T
ype
mos
t eld
erly
peo
ple
will
requ
ire a
t som
e tim
e in
thei
r lat
er y
ears
–It i
s al
so th
e ty
pe th
at is
not
cov
ered
by
Med
icar
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
Hom
e H
ealth
Car
e•S
ervi
ces
perfo
rmed
from
tim
e to
tim
e in
the
indi
vidu
al’s
hom
e–M
ay in
clud
e sk
illed
nur
sing
, var
ious
type
s of
th
erap
y, h
elp
with
AD
Ls, a
nd h
elp
with
ho
usew
ork
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
TX_LAH_CN_3E.indb 163 1/27/2014 12:28:58 PM
16
4Le
sson
Tw
enty
-Tw
o Lo
ng-T
erm
Car
e
Adu
lt D
ay C
are
•Pro
vide
s co
mpa
ny, s
uper
visi
on, a
nd s
ocia
l an
d re
crea
tiona
l sup
port
durin
g th
e da
y fo
r pe
ople
who
live
at h
ome
and
are
func
tiona
lly im
paire
d ad
ults
–Typ
ical
ly, a
dult
day
care
incl
udes
tran
spor
tatio
n to
and
from
a d
ay c
are
cent
er a
nd a
var
iety
of
heal
th, s
ocia
l, an
d re
late
d ac
tiviti
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
–Inc
lude
s m
eals
and
cer
tain
med
ical
ser
vice
s–U
sual
ly in
clud
ed is
spe
cial
ized
car
e fo
r pat
ient
s w
ith A
lzhe
imer
’s
Hos
pice
and
Res
pite
Car
e•H
ospi
ce c
are
is o
ften
offe
red
as a
n op
tiona
l be
nefit
–Prim
ary
focu
s is
pai
n co
ntro
l, co
mfo
rt, a
nd
coun
selin
g fo
r the
term
inal
ly il
l pat
ient
and
thei
r fa
mily
•Typ
ical
ly, th
e ex
pens
es in
curr
ed in
a h
ospi
ce w
ill b
e ro
om a
nd b
oard
and
med
icat
ion
for p
ain
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
Hos
pice
and
Res
pite
Car
e•R
espi
te c
are
–Cov
ers
the
cost
of r
epla
cing
the
prim
ary
care
give
r who
is lo
okin
g af
ter a
n el
derly
per
son
in th
e ho
me
•Onl
y fo
r sho
rt pe
riods
–Tw
o op
tions
•The
pat
ient
is a
dmitt
ed to
a n
ursi
ng h
ome
for n
eede
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
care
for a
sho
rt pe
riod
•Sub
stitu
te c
are
prov
ider
mov
es in
to th
e in
sure
d’s
hom
e fo
r tha
t sho
rt, te
mpo
rary
per
iod
Com
mon
Pro
visi
ons
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
TX_LAH_CN_3E.indb 164 1/27/2014 12:28:58 PM
16
5Le
sson
Tw
enty
-Tw
o Lo
ng-T
erm
Car
e
Gua
rant
eed
Ren
ewab
ility
•Th
e cu
rrent
gen
erat
ion
of lo
ng-te
rm c
are
polic
ies
are
guar
ante
ed re
new
able
Ctb
ld
tft
f–C
anno
t be
canc
eled
exc
ept f
or n
onpa
ymen
t of
prem
ium
•In
sure
r doe
s re
serv
e th
e rig
ht to
incr
ease
pr
emiu
ms
in a
ccor
danc
e w
ith th
e po
licy
prov
isio
ns–P
rem
ium
s w
ill be
cha
nged
on
the
polic
y an
nive
rsar
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
anni
vers
ary
–Inc
reas
ed p
rem
ium
will
be fo
r an
entir
e cl
ass
of
insu
red,
not
just
a s
ingl
e in
divi
dual
Que
stio
n•W
hich
of t
he fo
llow
ing
stat
emen
ts
desc
ribes
a g
uara
ntee
d re
new
able
pol
icy?
A.I
t can
be
canc
eled
at a
ny ti
me
by th
e in
sure
r.B
.It m
ay b
e re
new
ed o
nly
at th
e in
sure
r’s
disc
retio
n.C
.It h
as le
vel p
rem
ium
s an
d an
unc
ondi
tiona
l rig
ht to
rene
w.
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
gD
.The
righ
t to
rene
w is
gua
rant
eed,
but
pr
emiu
ms
may
be
incr
ease
d by
cla
sses
or
clas
sific
atio
ns.
Ans
wer
•Whi
ch o
f the
follo
win
g st
atem
ents
de
scrib
es a
gua
rant
eed
rene
wab
le p
olic
y?A
.It c
an b
e ca
ncel
ed a
t any
tim
e by
the
insu
rer.
B.I
t may
be
rene
wed
onl
y at
the
insu
rer’s
di
scre
tion.
C.I
t has
leve
l pre
miu
ms
and
an u
ncon
ditio
nal
right
to re
new.
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
gD
.The
righ
t to
rene
w is
gua
rant
eed,
but
pr
emiu
ms
may
be
incr
ease
d by
cla
sses
or
clas
sific
atio
ns.
Ben
efit
Am
ount
•Max
imum
dai
ly b
enef
it am
ount
for a
nur
sing
ho
me
stay
or c
over
ed h
ome
heal
th c
are
Hi
hd
ilb
fihi
hl
–Hig
her d
aily
ben
efits
mea
n hi
gher
ann
ual
prem
ium
s–R
eim
burs
emen
t for
cha
rges
up
to th
e st
ated
lim
it, b
ut n
ot m
ore
than
the
daily
lim
it•M
axim
um p
olic
y be
nefit
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
–Cal
cula
ted
by m
ultip
lyin
g th
e da
ily b
enef
it by
th
e nu
mbe
r of d
ays
in th
e be
nefit
per
iod
TX_LAH_CN_3E.indb 165 1/27/2014 12:28:59 PM
16
6Le
sson
Tw
enty
-Tw
o Lo
ng-T
erm
Car
e
Ben
efit
Perio
d•M
axim
um p
erio
d fo
r whi
ch b
enef
its w
ill b
e pa
id–U
sual
ly fr
om th
ree
to fi
ve y
ears
•Unl
imite
d be
nefit
per
iods
ava
ilabl
e•S
ome
polic
ies
may
con
tain
bot
h a
bene
fit
perio
d pe
r sta
y pl
us a
life
time
max
imum
b
fiti
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
bene
fit p
erio
d
Ben
efit
Trig
gers
•In
abili
ty to
per
form
at l
east
two
AD
Ls q
ualif
ies
for
long
-term
car
e pa
ymen
tsA
DL
il
d•
AD
Ls in
clud
e–
Mob
ility
, or t
rans
ferr
ing—
the
abili
ty to
wal
k (n
eed
assi
stiv
e de
vice
s su
ch a
s w
alke
rs o
r can
es)
–D
ress
ing
–P
erso
nal h
ygie
ne
Toile
ting
and
cont
inen
ce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
–To
iletin
g an
d co
ntin
ence
–E
atin
g—be
ing
able
to ta
ke in
food
–B
athi
ng
Ben
efit
Trig
gers
•Add
ition
ally,
and
unr
elat
ed to
the
AD
Ls, a
di
agno
sis
of c
ogni
tive
impa
irmen
t (in
abili
ty to
d
td
tht
f’
diun
ders
tand
the
natu
re o
f one
’s s
urro
undi
ngs
and
the
dang
ers
they
may
repr
esen
t) or
A
lzhe
imer
’s d
isea
se is
a b
enef
it tri
gger
in
long
-term
car
e po
licie
s•A
n in
divi
dual
cer
tifie
d to
be
chro
nica
lly il
l with
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
a co
nditi
on e
xpec
ted
to la
st a
t lea
st 9
0 da
ys
by a
lice
nsed
hea
lth c
are
prof
essi
onal
(MD
, N
P, R
N, M
SW
) als
o is
a b
enef
it tri
gger
Elim
inat
ion
Perio
d•P
erio
d at
the
begi
nnin
g of
a c
onfin
emen
t in
a lo
ng-te
rm c
are
faci
lity
durin
g w
hich
no
bene
fits
are
paya
ble
•Def
ined
as
a tim
e de
duct
ible
•Len
gth
of th
e el
imin
atio
n pe
riod
chos
en b
y th
e in
sure
d fro
m th
e op
tions
ava
ilabl
e fro
m
the
insu
rer
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
the
insu
rer
•The
long
er th
e w
aitin
g pe
riod,
the
low
er th
e pr
emiu
m, a
ll ot
her f
acts
bei
ng e
qual
TX_LAH_CN_3E.indb 166 1/27/2014 12:28:59 PM
16
7Le
sson
Tw
enty
-Tw
o Lo
ng-T
erm
Car
e
Pree
xist
ing
Con
ditio
ns•M
ost,
but n
ot a
ll, lo
ng-te
rm c
are
polic
ies
do
not c
over
con
ditio
ns th
at e
xist
ed d
urin
g th
e si
x m
onth
s be
fore
the
polic
y ef
fect
ive
date
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
Prot
ectio
n fr
om U
nint
entio
nal L
apse
•Ins
ured
may
des
igna
te a
third
par
ty, t
ypic
ally
a
fam
ily m
embe
r, to
rece
ive
adva
nce
notic
e of
la
pse
orca
ncel
latio
nla
pse
or c
ance
llatio
n•M
ust w
ait a
t lea
st 3
0 da
ys fo
llow
ing
prem
ium
due
da
te b
efor
e se
ndin
g no
tice
–Pol
icie
s m
ay n
ot la
pse
or b
e ca
ncel
led
with
in
65 d
ays
of th
e pr
emiu
m d
ue d
ate
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
•Pol
icy
mus
t be
rein
stat
ed w
ithin
five
mon
ths
of
laps
e if
due
to m
enta
l or p
hysi
cal d
efic
ienc
y
Shop
per’s
Gui
de•M
ust b
e pr
ovid
ed to
all
pros
pect
ive
appl
ican
ts
prio
r to
the
pres
enta
tion
of a
n ap
plic
atio
n or
ll
tf(f
tli
itti
)en
rollm
ent f
orm
(for
age
nt s
olic
itatio
n)•M
ust b
e pr
ovid
ed in
con
junc
tion
with
any
ap
plic
atio
n or
enr
ollm
ent f
orm
(for
dire
ct
resp
onse
sol
icita
tions
)•M
ust b
e ba
sed
on th
e gu
ide
deve
lope
d fo
r
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
gp
long
-term
car
e pr
oduc
ts b
y th
e N
atio
nal
Ass
ocia
tion
of In
sura
nce
Com
mis
sion
ers
TX_LAH_CN_3E.indb 167 1/27/2014 12:28:59 PM
TX_LAH_CN_3E.indb 168 1/27/2014 12:28:59 PM
Lesson Twenty-ThreeHealth Insurance Taxation
TX_LAH_CN_3E.indb 169 1/27/2014 12:28:59 PM
17
0Le
sson
Tw
enty
-Thr
ee
Hea
lth In
sura
nce
Taxa
tion
Less
onTw
enty
-Thr
eeLe
sson
Tw
enty
Thre
eH
ealth
Insu
ranc
e Ta
xatio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Indi
vidu
al P
olic
ies
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Indi
vidu
al P
olic
ies
•Pre
miu
ms
for i
ndiv
idua
lly o
wne
d ac
cide
nt, h
ealth
, di
sabi
lity,
or l
ong-
term
car
e po
licie
s ge
nera
lly a
re
notd
educ
tible
toth
ein
divi
dual
taxp
ayer
not d
educ
tible
to th
e in
divi
dual
taxp
ayer
•How
ever
, if t
he ta
xpay
er’s
med
ical
exp
ense
s ex
ceed
10%
of a
djus
ted
gros
s in
com
e du
ring
a ta
xabl
e ye
ar, a
ny m
edic
al e
xpen
ses,
incl
udin
g pr
emiu
ms
for a
ccid
ent a
nd h
ealth
insu
ranc
e (b
ut
notd
isab
ility
insu
ranc
e)in
curre
dab
ove
the
10%
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
not d
isab
ility
insu
ranc
e) in
curr
ed a
bove
the
10%
th
resh
old
can
be d
educ
ted
Indi
vidu
al P
olic
ies
•Ben
efits
pai
d by
indi
vidu
ally
ow
ned
acci
dent
, hea
lth, d
isab
ility
, or l
ong-
term
ca
re p
olic
ies
gene
rally
are
rece
ived
inco
me
tax
free
by th
e ta
xpay
er, p
rovi
ded
the
bene
fits
do n
ot e
xcee
d th
e ac
tual
exp
ense
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
TX_LAH_CN_3E.indb 170 1/27/2014 12:29:00 PM
17
1Le
sson
Tw
enty
-Thr
ee
Hea
lth In
sura
nce
Taxa
tion
Dis
abili
ty In
com
e In
sura
nce
•Pre
miu
ms
paid
by
the
insu
red
are
not t
ax
dedu
ctib
le•B
enef
its p
aid
in th
is ty
pe o
f situ
atio
n ar
e ta
x fre
e to
the
insu
red
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
Gro
up P
olic
ies
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Gro
up A
ccid
ent,
Hea
lth, a
nd D
enta
l C
over
age
•Pre
miu
ms
paid
by
a co
mpa
ny fo
r gro
up
acci
dent
, hea
lth, a
nd d
enta
l cov
erag
e fo
r its
em
ploy
ees
are
gene
rally
ded
uctib
le b
y th
e co
mpa
ny a
s a
busi
ness
exp
ense
•Pre
miu
ms
are
not t
axed
to th
e em
ploy
ees
•Ben
efits
rece
ived
by
the
empl
oyee
s ar
e in
com
eta
xfre
eto
the
exte
ntth
ebe
nefit
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
inco
me
tax
free
to th
e ex
tent
the
bene
fits
do n
ot e
xcee
d ac
tual
exp
ense
s
Gro
up D
isab
ility
Insu
ranc
e•P
rem
ium
s pa
id b
y a
com
pany
for g
roup
di
sabi
lity
insu
ranc
e fo
r its
em
ploy
ees
are
gene
rally
ded
uctib
le b
y th
e co
mpa
ny a
s a
busi
ness
exp
ense
•Pre
miu
ms
are
not t
axed
to th
e em
ploy
ees,
bu
t the
ben
efits
may
be
taxa
ble
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
TX_LAH_CN_3E.indb 171 1/27/2014 12:29:00 PM
17
2Le
sson
Tw
enty
-Thr
ee
Hea
lth In
sura
nce
Taxa
tion
Gro
up D
isab
ility
Insu
ranc
e•T
he p
erce
ntag
e of
the
bene
fits
taxa
ble
to
the
empl
oyee
equ
als
the
perc
ent o
f be
nefit
s pa
id b
y th
e em
ploy
er•E
xam
ple
–Em
ploy
er p
aid
75%
of t
he d
isab
ility
polic
y pr
emiu
ms—
then
75%
of a
ny b
enef
it re
ceiv
ed
byth
eem
ploy
eeis
taxe
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
by th
e em
ploy
ee is
taxe
d–I
f the
em
ploy
er p
aid
100%
of t
he p
rem
ium
, the
n 10
0% o
f any
ben
efit
rece
ived
by
the
empl
oyee
w
ould
be
taxe
d
Qua
lifie
d G
roup
Lo
ng-T
erm
Car
e In
sura
nce
•Em
ploy
ee is
not
taxe
d on
thes
e pr
emiu
ms,
an
d be
nefit
s ar
e ta
x ex
empt
•How
ever
, the
se ta
x ad
vant
ages
do
not
appl
y to
gro
up lo
ng-te
rm c
are
cove
rage
pr
ovid
ed th
roug
h a
Sec
tion
125
cafe
teria
pl
an, a
nd e
xpen
ses
for l
ong-
term
car
e se
rvic
esca
nnot
bere
imbu
rsed
unde
r
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
serv
ices
can
not b
e re
imbu
rsed
und
er
flexi
ble
spen
ding
arr
ange
men
ts
TX_LAH_CN_3E.indb 172 1/27/2014 12:29:01 PM
Class NotesLesson Reviews and Answers
TX_LAH_CN_3E.indb 173 1/27/2014 12:29:01 PM
TX_LAH_CN_3E.indb 174 1/27/2014 12:29:01 PM
175
1. The term used to describe the individual who is covered by the insurance isA. insurerB. insuredC. policyownerD. risk
2. Which of the following is a risk?A. A car may need to have new brakes
installed after several years of regular driving
B. An individual may need medical attention after slipping on the ice and falling
C. Both of the scenarios are examples of a riskD. Neither of the scenarios is an example of
a risk
3. J & L buy life insurance on each other because they are partners in business. J buys out L a year later. Can J collect as beneficiary if L dies later?A. Yes, if the policy is still in effectB. No, because J has no insurable interestC. Only if L’s spouse agrees to the paymentD. No. The company cancelled the policy
because L is no longer a business partner of J.
4. Which of the following is a type of insurance company owned by its shareholders?A. MutualB. StockC. Lloyd’sD. Reinsurer
5. What type policy can earn a dividend?A. ParticipatingB. SpecializedC. Profit sharingD. Non-participating
6. Which of the following risks is most likely to be insurable?A. George is concerned about the financial
impact his premature death would have on his family.
B. Talyn is concerned about the financial impact large betting losses at the horse track will have on his retirement savings.
C. John is concerned about the financial impact on his savings when his car eventually becomes worn enough to need to be replaced.
D. Jewel is concerned about the financial effect losing her hat would have on her weekly spending money.
7. Which of the following life insurance compa-nies has the best chance of making a profit?A. ABC Mutual with 100 insuredsB. XYZ Stock company with 250 customersC. J&L Preferred that has 800 customersD. Big Bad Insurance Company having
498,000 insureds
8. Who makes the promise in a life insurance policy?A. InsuredB. ApplicantC. BeneficiaryD. Insurance company
9. Ed would be allowed to purchase life insurance on all of the following EXCEPTA. spouseB. motherC. neighborD. son
10. Hoosier Insurance Company is owned by the policyholders. Hoosier Insurance is A. a stock insurerB. a mutual insurerC. a nonprofit insurerD. a fraternal insurer
L E S S O N O N E R E V I E W
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L E S S O N T W O R E V I E W
1. Business written on the producer’s own life or interests is known asA. controlled businessB. personal businessC. conflicted businessD. producer business
2. Most insurance regulation takes place at A. the international levelB. the national levelC. the state levelD. the local level
3. Insurance laws generally are written byA. the federal governmentB. the state legislatureC. the state Department of InsuranceD. the Commissioner
4. To become licensed as an insurance producer, an individual must be at least ageA. 16 yearsB. 18 yearsC. 21 yearsD. 25 years
5. The federal governmentA. is the primary authority for regulating the
business of insurance B. does not get involved in regulating the
business of insurance C. has the right to regulate the business of
insurance to the extent that such business is not regulated by state law
D. has no rights regarding the regulation of insurance
6. Applicants for insurance must be given ad-vance notice including all of the following types of information EXCEPTA. the persons who are collecting informationB. the kind of information to be collectedC. the sources of informationD. the persons with access to personal
information
7. The Commissioner of Insurance has all of the following powers EXCEPTA. conducting investigations and
examinationsB. making reasonable rules and regulationsC. promulgating insurance lawD. approving insurance policy forms sold
within the state
8. Associations organized to protect claimants, policyholders, annuitants, and creditors of financially impaired insurers are known asA. insurance associationsB. department associationsC. liability associationsD. guaranty associations
9. How many CE hours must be completed in a class or class equivalent?A. 10B. 15C. 20D. 25
10. Sheila has allowed her license to expire 60 days ago. What must she do before selling insur-ance?A. Renew her licenseB. Renew and pay the late feeC. Apply for a new licenseD. Apply for a new license and retake the
exam
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L E S S O N T H R E E R E V I E W
1. Insurance agents are appointed byA. the federal governmentB. the state Department of InsuranceC. the Insurance CommissionerD. insurance companies
2. Which element is NOT necessary for the for-mation of a valid contract?A. ConsiderationB. Competent parties C. Written documentD. Legal purpose
3. The applicant gives money and the insur-ance company issues a policy. What is this an example of?A. Competent partiesB. ConsiderationC. Legal purposeD. Agreement
4. When representing an insurer, a producer act-ing as an agent has a responsibility to act with the degree of care thatA. a licensed insurance producer would apply
under similar circumstancesB. a reasonable person would apply under
similar circumstancesC. a lawyer would apply under similar
circumstancesD. any person would apply under similar
circumstances
5. What is the dollar amount usually found on the first page of a policy called?A. Coverage limitB. Death benefitC. Face amountD. Premium account
6. Carol applies for a life insurance policy and pays the initial premium. Carol hasA. accepted an offer from the insurerB. made an offer to the insurerC. accepted a counteroffer from the insurerD. made a counteroffer to the insurer
7. The insurer looks at Carol’s application and de-cides to offer Carol a modified policy, including an exclusion Carol did not request. The insurer hasA. accepted an offer from CarolB. made an offer to CarolC. accepted a counteroffer from CarolD. made a counteroffer to Carol
8. Answers to questions on an application areA. representationsB. guaranteesC. warrantiesD. promises
9. A policy may be voided if the insurance com-pany discoversA. misrepresentationsB. concealmentC. material misrepresentationsD. incorrect information
10. J, an insurance agent, accepts a cash payment from an insured. J deposits the money in his business checking account that he uses to pay bills. What is this called?A. Fiduciary actionsB. ComminglingC. UnderwritingD. Embezzlement
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L E S S O N F O U R R E V I E W
1. John fills out an application for a life insurance policy to insure his own life, for which he plans to pay the premiums. John is playing all of the following roles EXCEPTA. applicantB. policyownerC. insuredD. beneficiary
2. All of the following are required to sign a life insurance application EXCEPT A. applicantB. beneficiaryC. insuredD. agent
3. John applies for a life insurance policy today. He tells you he had a birthday 4 months ago. What should you do?A. Back date the applicationB. Lie about his ageC. NothingD. Charge him a lower premium
4. If an applicant is rated or declined an insurance policy, the reasons for this decision usually will be explained to the applicant byA. the agentB. the underwriterC. the insurerD. the Insurance Commissioner
5. Robin is a 25-year-old man who drinks occa-sionally, does not smoke, and has minor health problems. He probably would be classified by an insurer asA. a standard riskB. a substandard riskC. a superstandard riskD. preferred risk
6. How often a premium will be paid is called theA. frequencyB. modeC. amountD. consideration
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L E S S O N F I V E R E V I E W
1. Which of the following costs are associated with death?A. Doctor or hospital bills from a final illness
or accidentB. Paying off debts such as credit card and
other loansC. TaxesD. All of the above
2. Who is the applicant and owner of a key per-son life insurance policy?A. EmployeeB. BeneficiaryC. Employee’s spouseD. Employer
3. Wilma’s husband died three years ago, leav-ing her with two grade school-aged children. Which income period is Wilma in?A. Family dependency periodB. Preretirement periodC. Retirement periodD. Grieving period
4. Which of the following is an advantage of life insurance as property?A. Life insurance is generally paid for in one
lump sumB. Life insurance requires no physical upkeepC. Life insurance requires careful managerial
care on the part of the policyholderD. Life insurance has little potential for a
positive return on investment
5. Life insurance proceeds are generally the only source of income for surviving dependents of a breadwinner.A. TrueB. False
6. All of the following are reasons to buy life insurance EXCEPTA. funeral billsB. mortgageC. medical billsD. retirement
7. A cross-purchase plan is typically used to fund a buy-sell agreement when the number of part-ners involved isA. more than 3B. 2 to 3C. 2 onlyD. 3 only
8. Who must approve advertisements that include the insurance companies’ name?A. CompanyB. AgentC. TDID. State
9. An entity purchase plan is typically used to fund a buy-sell agreement when the number of partners involved isA. more than 3B. 2 to 3C. 2 onlyD. 3 or more
10. When purchasing a key person life insurance policy on a key employee, the business isA. the policyownerB. the premium payerC. the beneficiaryD. all of the above
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L E S S O N S I X R E V I E W
1. Which kind of receipt is most commonly used in life insurance?A. Conditional receiptB. Binding receiptC. Inspection receiptD. Premium receipt
2. A policy issued from a trail application will be delivered by the agent so thatA. the agent has another opportunity to sell
policiesB. the agent can verify the insured’s good
health at the time of delivery and collect the premium
C. the insurer can save mailing costs of delivering the policies
D. underwriting information can be verified
3. If payment of a valid death claim is delayed, what is the usual reason?A. A dispute over the validity of the claimB. A dispute over the amount of the claimC. The insurer has not receive proper
notification of the deathD. The insurer has not received proper
notification of the policy
4. Lee applies for a policy, pays the initial pre-mium, and receives a conditional receipt on March 14. On March 15, he passes the medi-cal exam with flying colors. On March 16, an undiagnosed brain aneurysm bursts, killing Lee instantly. On March 17, the insurer receives the results of the medical exam, which in-cludes no information about the aneurysm. On March 19, the insurer receives the notice of claim. The insurer willA. pay the claimB. return the premiumC. pay the claim plus the amount of the first
premiumD. pay the claim minus a processes fee
5. Rich applies for a policy on Friday, Septem-ber 1. No premium is sent with the application. On September 14th, the underwriter decides not to issue a policy. On September 16th, before receiving a declination notice from the insurer, Rich dies in an automobile accident. The insurer willA. not pay a claimB. pay a claim if the beneficiary suesC. pay a claim regardlessD. pay the claim because a notice was not
sent
6. A policy may be issued in all of the following ways EXCEPTA. as applied forB. as a modified or amended policyC. as an exchange policy, covering someone
other than the original applicantD. with a waiver excluding death by a certain
cause
7. Which of the following statements is NOT true?A. Replacement is illegalB. Replacement is the purchase of one life
insurance policy to replace anotherC. Replacement laws are designed to protect
the interests of life insurance purchasersD. Replacement laws concern themselves
with the use of false and misleading statements used in the sale of insurance
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L E S S O N S E V E N R E V I E W
1. Term insurance providesA. cash valuesB. the ability to take a loan against the policyC. pure insurance protectionD. lifelong protection
2. Carl’s insurance policy is designed to cover the mortgage on his house if he should die before paying it off. The policy isA. convertible termB. renewable termC. increasing termD. decreasing term
3. The least common of the following types of insurance is A. convertible termB. renewable termC. increasing termD. decreasing term
4. Joan makes only one premium payment to acquire a paid-up policy that will probably be classified as a modified endowment contract. Joan hasA. a whole life policyB. a limited pay policyC. a single premium policyD. an economatic policy
5. Q has a life policy that lasts for 10 years. At the end of that time, he can extend it for another 10 years. What type of policy does Q have?A. TermB. Renewable termC. 10-pay lifeD. Short-term
6. Ken buys a policy with a flexible premium but guaranteed cash values. What type of policy has he purchased?A. Whole lifeB. TermC. Universal lifeD. Variable life
7. This type policy adds interest to the cash val-ues based upon the S&P 500 stock measure. It also has a guaranteed interest rate. What type of policy is this?A. UniversalB. VariableC. TermD. Indexed
8. Which of the following is an advantage of term insurance?A. The initial cost of the policy tends to be
lowB. The policy becomes more expensive over
timeC. It provides temporary protection for a
limited timeD. Even if the policy is renewable, it is
probably not renewable beyond a certain age such as 65
9. Gerald has a state insurance license but no other training or licenses. Gerald can sell any of the following EXCEPTA. an adjustable life insurance policyB. an economatic life insurance policyC. a whole life insurance policyD. a variable universal life insurance policy
10. What is the cash value at age 65 of a $100,000 life paid up at 65 whole life policy?A. Less than $100,000B. Equal to $100,000C. More than $100,000D. Equal to premiums paid
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L E S S O N E I G H T R E V I E W
1. Which clause contains the basic promise of the life insurance company to pay a specified sum of money to a beneficiary upon the death of the insured?A. Consideration clauseB. Insuring clauseC. Policy loan clauseD. Payment clause
2. Which clause identifies the fact that the poli-cyowner must pay something of value for the insurer’s promise to pay benefits?A. Consideration clauseB. Insuring clauseC. Entire contract clauseD. Payment clause
3. Which of the following is NOT usually a con-dition of policy reinstatement?A. The policyowner must pay all back
dividends due plus interest on the amountB. The policyowner must pay all back
premiums due plus interest on the amountC. The insured must show proof of
insurabilityD. Less than 3 years must have elapsed
4. Harry decides to borrow some money from a bank. What type of assignment will Harry probably use to secure the loan?A. Voluntary assignmentB. Collateral assignmentC. Complete assignmentD. Absolute assignment
5. Ginny is a revocable primary beneficiary on her mother’s life insurance policy. Which of the following statements is TRUE?A. Ginny can probably assign her rights in
the policy as collateral on a loan.B. Ginny will receive benefits only if another
beneficiary has died before her mother dies.
C. Ginny’s mother may not change the beneficiary without Ginny’s permission.
D. Ginny will receive benefits before any other beneficiary upon her mother’s death.
6. Steve is the beneficiary on his wife’s life insur-ance policy. When they divorce, his wife can-not remove him as beneficiary on the policy without his written permission becauseA. most states require the beneficiary’s written
consentB. Steve is a revocable beneficiaryC. Steve is an assigned beneficiaryD. Steve is an irrevocable beneficiary
7. When Tom dies, Rosemary receives the death benefit. If Rosemary had died before Tom, George would have received the benefit. Which of the following statements is TRUE?A. Rosemary is the primary beneficiary, and
George is the contingent beneficiaryB. Tom is the primary beneficiary, and
Rosemary is the contingent beneficiaryC. Rosemary is the contingent beneficiary,
and George is the primary beneficiaryD. George is the contingent beneficiary, and
Rosemary is the tertiary beneficiary
8. All of the following complete the entire con-tract EXCEPTA. policyB. applicationC. ridersD. premium
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9. Mary can change the beneficiary of a life insur-ance policy. What is she called?A. InsuredB. BeneficiaryC. OwnerD. Applicant
10. M applies for a life policy on March 1. The policy is received by M on March 16. When does the free look period end?A. March 31B. March 26C. April 16D. May 16
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L E S S O N N I N E R E V I E W
1. Garth has a $100,000 whole life insurance policy that has been in effect for 10 years. The policy includes a double indemnity rider. Garth jumps off a bridge and dies. How much will the policy pay?A. Nothing because all policies exclude death
resulting from suicideB. $100,000 because the base policy excludes
death resulting from suicide, but the multiple indemnity rider does not
C. $100,000 because the multiple indemnity rider excludes death resulting from suicide, but the base policy’s suicide exclusion has expired
D. $200,000 dollars because death was accidental
2. Tammy has a total of $10,000 loan and interest outstanding against her $100,000 policy. The policy has a double indemnity rider. Tammy is killed in an automobile accident. How much will the policy pay?A. Nothing until the outstanding loan is
repaidB. $180,000C. $190,000D. $200,000
3. Kumar has a life insurance policy with a rider that will pay him $1,000 per month if he is totally and permanently disabled. Which type of rider does he have?A. Waiver of premium riderB. Accidental death and disability riderC. Disability income riderD. Payor rider
4. Paul has a life insurance policy on his son for which he pays all the premiums. A rider to this policy states that if Paul becomes permanently and totally disabled, the premiums will be paid until his son reaches age 21, at which point his son will take over the premium payments. Which type of rider does he have?A. Waiver of premium riderB. Accidental death and disability riderC. Disability income riderD. Payor rider
5. Alberta is concerned that if she became totally and permanently disabled, she would not be able to pay her life insurance premiums and the policy will lapse. Which type of rider should she consider to protect against this possibility?A. Waiver of premium riderB. Accidental death and disability riderC. Disability income riderD. Payor rider
6. Which of the following riders is increasing term insurance that always equals the total premiums paid during the time the policy is in effect?A. Guaranteed insurabilityB. Return of premiumC. Accidental deathD. Waiver of premium
7. Double payment may be made because of which occurrence?A. Guaranteed insurabilityB. Return of premiumC. Accidental deathD. Waiver of premium
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8. Which of the following is waiver of all future premiums in the event of total and permanent disability?A. Guaranteed insurabilityB. Return of premiumC. Accidental deathD. Waiver of premium
9. A policy allows for payment of part of the face amount while the insured is still living. What rider has been included in this policy?A. Payor riderB. Guaranteed insurability riderC. Waiver of premium riderD. Accelerated death benefits rider
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L E S S O N T E N R E V I E W
1. Heath has chosen to receive the payout from his wife’s life insurance policy in such a way that he will have an income for the remain-der of his life, regardless of how long he lives. Heath has selectedA. the interest-only optionB. the fixed-period optionC. the fixed-amount optionD. the life-income option
2. Jim has selected to receive only the interest from his mother’s life insurance policy. When Jim dies, his children will receive the lump-sum benefit in addition to the benefit from his life insurance policy. Jim has selectedA. the interest-only optionB. the fixed-period optionC. the fixed-amount optionD. the life-income option
3. Tina has a whole life insurance policy on her life that has been in effect for 15 years. Tina and her husband review their insurance cover-age and decide that the policy, which was purchased before their marriage, is no longer necessary for their financial future. If Tina decides to stop paying the premiums, what will happen?A. The policy will lapse when the grace
period expires, and Tina will lose the cash values built up in the policy.
B. The policy has not built up cash values because it is a whole life policy.
C. The policy has not been in force long enough to have built up cash values, so when it lapses, Tina will receive nothing.
D. The policy will lapse, and Tina will be able to select a nonforfeiture option to receive value for the cash value built up in the policy.
4. Susan decides to stop paying premiums on her whole life policy. She tells the company to use the cash values and buy a single premium policy. What will be the face amount of the new policy?A. Equal to the originalB. Greater than the originalC. Less than the originalD. Depends on her answers to medical
questions
5. Which of the following statements about re-duced paid-up insurance option is NOT true?A. The new policy will build cash values for
the policyowner.B. No further premiums need to be paid on
the reduced policy; it is paid up.C. The new protection is for the same
amount as the original policy.D. A full share of expense loading is usually
not included in the premium on the reduced coverage because the costs of setting up the coverage are greatly reduced.
6. Which of the following is NOT a factor in determining the amount the beneficiary will receive each time a payment is made under the fixed period option?A. The age of the beneficiaryB. The principal amountC. The interest earned on the principalD. The length of time payments are to be
made
7. Which of the following is NOT a factor in determining the amount the beneficiary will receive each time a payment is made under the fixed amount option?A. The specified amount of each paymentB. The principal amountC. The interest earned on the principalD. The capital amount
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8. Which of the following statements about policy dividends is correct?A. They are guaranteed to be paidB. Are paid every yearC. Are not guaranteedD. Are always 10% of the face amount
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L E S S O N E L E V E N R E V I E W
1. Annuities exist toA. accumulate a sum of moneyB. distribute a lifetime incomeC. both accumulate a sum of money and
distribute a lifetime incomeD. neither accumulate a sum of money nor
distribute a lifetime income
2. Liz purchases an immediate annuity. The annu-ity contract must beA. a fixed annuityB. a variable annuityC. a deferred annuityD. a single premium annuity
3. Which type of annuity is most likely to provide death benefits?A. Fixed annuityB. Variable annuityC. Deferred annuityD. Immediate annuity
4. Which of the following types of annuities are regulated as securities?A. Fixed annuitiesB. Flexible annuitiesC. Variable annuitiesD. Structured annuities
5. Which of the following is a purpose of the an-nuity?A. The creation of a fund at the death of an
individualB. The replacement of earnings upon the
disability of an individualC. The distribution of a lifetime incomeD. The discounting of a principal sum back to
its present value
6. An annuity might be called the flip side of A. compoundingB. life insuranceC. retirement planningD. Social Security
7. An annuity that guarantees a minimum rate of return isA. an immediate annuityB. a deferred annuityC. a variable annuityD. a fixed annuity
8. Which type of annuity is most likely to be used to distribute lottery winnings?A. Flexible premium, temporary annuity with
period certainB. Single premium, temporary annuity with
amount certainC. Single premium life annuityD. Flexible premium, temporary annuity with
amount certain
9. Marcus purchases an annuity that offers a guar-anteed minimum interest rate and a guarantee against loss of principal if the contract is held to term. However, if the Nasdaq moves up-ward, Marcus’s annuity might end up accruing more than the guaranteed minimum interest rate. Marcus has purchasedA. an equity-indexed annuityB. a market value-adjusted annuityC. a market value-indexed annuityD. an equity-adjusted annuity
10. Eric purchases an annuity and plans on paying $100 a month for a number of years. What type of annuity has he purchased?A. Flexible premium immediateB. Variable annuityC. Fixed annuityD. Flexible premium deferred
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L E S S O N T W E L V E R E V I E W
1. An employer pays the entire cost of group life insurance for its employees. What is this plan called?A. ContributoryB. PrepaidC. NoncontributoryD. Conciliatory
2. Doris dies 15 days after her group coverage is terminated and before she has the chance to convert her policy to permanent coverage. Doris’ beneficiary will receiveA. the full benefit under the group policyB. the full death benefit under an individual
policyC. the death benefit minus unpaid premium
under the group policyD. the death benefit minus unpaid premium
under the individual policy
3. Which of the following individuals would NOT qualify as a dependent for group insur-ance coverage?A. The insured’s spouseB. The insured’s parents, who live on their
own and receive a small amount of financial support from the insured
C. The insured’s best friend, who lives with the insured and is listed as a dependent on the insured’s tax return
D. The insured’s disabled 22-year-old daughter
4. Which of the following statements about con-version from group life insurance is TRUE?A. Coverage must be converted to a term
policyB. Conversion must be applied for within 6
months of terminationC. Proof of insurability will be requiredD. Premiums for the new policy will be based
on the insured’s attained age
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L E S S O N T H I R T E E N R E V I E W
1. What is the amount of burial benefit paid by OASDI?A. 0B. $1,000C. $255D. $5,000
2. At what age is an individual eligible to receive Social Security retirement benefits?A. 65B. 67C. 55D. 62
3. Disability benefits under Social Security re-quire at least A. a 3-month waiting periodB. a 5-month waiting periodC. a 7-month waiting periodD. a 12-month waiting period
4. The penalties assessed against MECs primarily affectA. the cost basis of the policyB. money put into the policyC. money taken out of the policyD. the death benefits of the policy
5. As a general rule, for federal tax purposesA. neither life insurance nor annuity
premiums is tax deductibleB. life insurance premiums are tax deductible
but annuity premiums are notC. annuity premiums are tax deductible but
life insurance premiums are notD. both life insurance and annuity premiums
are tax deductible
6. Billy is receiving the proceeds of a life insur-ance policy as an income stream over a period of several years. What part of the money will be subject to tax?A. None of it; it is life insurance proceedsB. All of it; it is being paid out in an income
streamC. Only the part that represents income
earned on the original death benefitD. Only the part that represents the original
death benefit and not the income earned on the original death benefit
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L E S S O N F O U R T E E N R E V I E W
1. All of the following are examples of qualified retirement plans EXCEPTA. AnnuitiesB. 401KC. IRAD. TSA
2. A qualified retirement plan does NOT offer which of the following tax advantages?A. The business sponsoring the plan may
deduct contributions to it.B. Money received upon retirement is tax freeC. Contributions to qualified plans are not
currently taxable to plan participants.D. Contributions to qualified plans may
accumulate on a tax-deferred basis.
3. Who may contribute to an IRA?A. Anybody with earned incomeB. Only people who don’t participate in
company retirement plansC. Only people who earn less than certain
specified amountsD. Only people who are self-employed
4. Under which of the following circumstances are qualified plan distributions likely to receive a tax penalty?A. Distributions before age 59½B. Payments at age 70C. Distribution due to disabilityD. Payments beginning at age 65
5. A rollover from one IRA to another or from a qualified plan to an IRA must be accomplished within how many days if the owner is to avoid an income tax liability on the amount rolled over?A. 10B. 30C. 60D. 90
6. At what age is an individual no longer subject to early withdrawal penalties under an IRA?A. 55B. 55½C. 59D. 59½
7. With this retirement plan, the employee knows how much they can put in but they don’t know what their income will be at retirement. What is this plan called?A. Defined benefit planB. Variable planC. Defined contribution planD. Standard pension plan
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L E S S O N F I F T E E N R E V I E W
1. According to the entire contract provision, the entire contract includes all of the following EXCEPTA. the insurance policyB. the premium paymentC. any endorsementsD. any attachments
2. All insurance policies may be canceled at any time byA. the insurer onlyB. the insured onlyC. either the insurer or the insuredD. neither the insurer nor the insured
3. Normally, written proofs of loss must be fur-nished within how many days after the loss?A. 15B. 45C. 60D. 90
4. If there is no beneficiary listed on a policy, benefits will be paid toA. the stateB. the insured’s estateC. the insured’s nearest blood relativeD. the insured’s nearest relative by marriage
or blood
5. When does the incontestable period begin?A. 3 yearsB. 2 yearsC. 4 yearsD. 1 year
6. A revocable beneficiaryA. has the right to refuse assignment of the
policyB. may stop the policyowner from disposing
of the policyC. may be changed without the beneficiary’s
consentD. is assigned for life
7. How long is the free look period with a Medi-care supplement policy?A. 10 daysB. 21 daysC. 30 daysD. 45 days
8. CeeCee’s policy is guaranteed renewable. Which of the following may the insurer NOT do?A. Refuse to renew the policy if CeeCee fails
to pay the premiumB. Increase the premiums on all members of
CeeCee’s classC. Increase the premiums on CeeCee’s policy
onlyD. Refuse to renew the policy when CeeCee
reaches a specified age
9. George has a noncancelable policy. Which of the following may the insurer do?A. Cancel the policy if George fails to pay
premiumsB. Increase the premiums on all members of
George’s classC. Increase the premiums on George’s policy
onlyD. Cancel the policy if the insurer chooses to
longer to do business in George’s state
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L E S S O N S I X T E E N R E V I E W
1. Julia has a policy that will pay any expenses she incurs as the result of in-hospital medical treatment, as well as some of the expenses she incurs on an outpatient basis. Julia probably has A. a disability income policyB. a medical expense insurance policyC. a long-term care policyD. a hospital income insurance policy
2. George has a policy that will provide him an income if he is disabled from illness or injury and recuperating at home. George probably hasA. a disability income policyB. a medical expense insurance policyC. a long-term care policyD. a hospital income insurance policy
3. What do you call customers of an HMO?A. InsuredsB. ParticipantsC. PayorsD. Subscribers
4. What is the minimum number of employees required to qualify for a Small Employer medi-cal plan?A. 10B. 2C. 5D. 50
5. What do you call an HMO that pays a reduced amount for services provided to enrollees by medical providers outside the HMO network?A. Capitation providerB. Indemnity planC. Point of service HMOD. Network provider
6. Best Cleaners has a health plan that provides its employees with a high-deductible medical indemnity plan and an account funded by the business, which employees can use to pay for medical expenses throughout the year. The plan is probablyA. a cafeteria planB. a health savings accountC. a multiple employer trustD. a third-party administrator
7. The Hoosier HMO contracts with an indepen-dent medical group that specializes in a variety of medical services to provide those services to HMO subscribers. The Hoosier HMO is structuredA. a staff model HMOB. a network model HMOC. a group model HMOD. an individual practice association model
HMO
8. The Provider’s Choice HMO was started by a group of individual physicians who each oper-ate out of their own office. The physicians are paid on a fee-for-service basis with the fees ne-gotiated in advance. Provider’s Choice HMO operates asA. a staff model HMOB. a network model HMOC. a group model HMOD. an individual practice association model
HMO
9. Gwyneth’s HMO requires that she receive health care services from a specified, limited number of health care providers chosen by the HMO. Gwyneth’s HMO isA. open panelB. closed panelC. choice panelD. guarded panel
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10. All of the following are examples of managed care plans EXCEPTA. health maintenance organizationsB. preferred provider organizationsC. indemnity arrangementsD. point-of-service plans
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L E S S O N S E V E N T E E N R E V I E W
1. To receive benefits from a disability income policy for disability due to sickness, the insured must beA. totally disabledB. partially disabledC. either totally or partially disabledD. deceased
2. A period of time an insured qualifies for dis-ability but receives no benefits is calledA. the waiting periodB. a time of probationC. an elimination periodD. the trial period
3. The longer the benefit periodA. the higher the policy’s premiumB. the lower the policy’s premiumC. the higher the policy’s benefitsD. the lower the policy’s benefits
4. Occupational disability benefits are often reduced by benefits receivedA. from Social Security onlyB. from workers’ compensation onlyC. from either social Security or workers’
compensationD. before the end of the elimination period
only
5. Which of the following statements about par-tial disability is NOT true?A. The person is not able to perform every
duty of the prior occupation.B. The person is able to perform one or more
important duties of the occupation.C. Sickness disability is more likely to be
partial than accident disability.D. An insured might receive both total and
partial disability benefits as the result of a single accident.
6. Common exclusions under disability policies include all of the following EXCEPTA. disability caused by flying as a passenger on
a commercial aircraftB. disability resulting when an insured is
injured while committing a felonyC. disability caused by self-inflicted injuryD. disability caused by an act of war
7. The benefit that enables a disabled insured to learn to work in another occupation is known as A. the cost-of-living benefitB. the rehabilitation benefitC. the guaranteed insurability optionD. the lifetime benefit option
8. Which definition of total disability is more favorable to the insured?A. Own occupationB. Any occupationC. They are the same in benefits to the
insuredD. There is no way to determine from the
information provided
9. Most often, LTD policies provide benefitsA. for 2 yearsB. for 5 yearsC. to age 60D. to age 65
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L E S S O N E I G H T E E N R E V I E W
1. Lauren’s policy covers hospital expenses by paying a specified, predetermined amount per day, as shown in a schedule in the policy. Lau-ren’s policy pays on A. a reimbursement choiceB. an expenses-incurred basisC. an indemnity basisD. a capitation basis
2. The insureds maximum out of pocket equalsA. the deductible plus coinsuranceB. the deductible plus the stop loss amountC. the deductible plus the insureds
coinsurance percent times the stop lossD. the maximum benefit
3. The insureds major medical has a $500 deduct-ible, 80/20 coinsurance, and a $5,000 stop loss. The first claim for the year is $2,000. How much does the insured pay?A. $800B. $1,200C. $1,700D. $1,800
4. The fee charged for a similar service in the same geographical area is calledA. usual, customary, and reasonableB. standard feeC. average chargeD. PPO fee
5. Purchasing basic benefits on an individual basis usuallyA. provides a broader range of coverage than
a single major medical policyB. provides less-complete coverage with more
gaps than a major medical policyC. provides exactly the same coverage as a
major medical policyD. is prohibited by state law
6. The dollar limit beyond which the insured no longer participates in payment of expenses is A. the deductibleB. the coinsuranceC. the stop-loss limitD. the maximum benefit
7. The dollar limit beyond which the insurer no longer participates in payment of expenses is A. the deductibleB. the coinsuranceC. the stop-loss limitD. the maximum benefit
8. The expense that must be incurred before ma-jor medical benefits begin to be paid is A. the deductibleB. the coinsuranceC. the stop-loss limitD. the maximum benefit
9. The sharing of expenses between the insured and the insurer is an example ofA. deductibleB. coinsuranceC. stop-loss limitD. maximum benefit
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L E S S O N N I N E T E E N R E V I E W
1. The ability of an individual to wait until cov-ered by dental insurance before seeking treat-ment for dental issues is an example ofA. improper insuranceB. improper selectionC. adverse selectionD. adverse insurance
2. Comprehensive dental policiesA. limit benefits to specified maximums per
procedureB. work in much the same way as
comprehensive medical expense coverageC. never require deductiblesD. seldom require coinsurance
3. Dread disease policiesA. are purchased to cover a variety of
conditions that fall under the category of dread diseases
B. cover any disease defined by the ADA as a dread disease
C. cover specific diseases as named in the policy, such as heart disease or cancer
D. are a good replacement for general health insurance
4. Vision care insurance covers all of the follow-ing EXCEPTA. injury to the eyeB. eye examinationsC. costs of contact lensesD. cost of prescription lenses
5. Prescription drug policies generally excludeA. any narcotic substanceB. any drugs not covered by other programsC. experimental drugsD. drugs for ongoing medical conditions
6. The amount of coverage available under a credit insurance policy is generally limited toA. the total amount of indebtedness at any
given pointB. the total amount of the loan coveredC. the amount the policy is written for D. there is no limit
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L E S S O N T W E N T Y R E V I E W
1. The conversion privilege allows the insured to continue group coverage withoutA. paying individual premiumsB. filling out an applicationC. providing proof of termination of
employmentD. providing evidence of insurability
2. All of the following could be considered de-pendents except the insured’sA. adopted childrenB. parentsC. child age 27 and marriedD. 21-year-old child who is attending college
full time
3. Mary has been terminated by her employer. How long, if possible, can she continue being covered by the group medical insurance?A. 6 monthsB. 12 monthsC. 18 monthsD. 36 months
4. Under the coordination of benefits rule, the primary company paysA. if there is no other coverageB. as if there were no other coverageC. whatever the other coverage does not pay,
up to the policy limitsD. only if the other coverage refuses the claim
5. Under the coordination of benefits rule, the secondary company paysA. if there is no other coverageB. as if there were no other coverageC. whatever the other coverage does not pay,
up to the policy limitsD. only if the other coverage refuses the claim
6. When are newborns eligible for coverage?A. 15 daysB. 30 daysC. 31 daysD. At birth
7. John, covered as a dependent on his mother’s group health insurance, gets married. How long, if at all, can he remain covered by the insurance?A. 6 monthsB. 12 monthsC. 18 monthsD. 36 months
8. Which federal law is intended to accomplish pension equity but also protects group insur-ance plan participants? A. COBRAB. OBRAC. ERISAD. TEFRA
9. Jack quits his job to open his own business. Jack is eligible to remain on the group insur-ance. How long does he have to notify his employer that he wishes to remain covered?A. 60 days from noticeB. 30 days from noticeC. 90 daysD. 18 months
10. The option to convert your group insurance to an individual policy after you terminate your employment applies to all of your benefits EXCEPTA. disabilityB. accidental death and dismembermentC. life insuranceD. major medical
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L E S S O N T W E N T Y - O N E R E V I E W
1. Under Medicare Part B, individuals pay a deductible eachA. benefit periodB. weekC. monthD. year
2. After the deductible is satisfied, Part B pays what percentage of all approved charges?A. 10%B. 20%C. 80%D. 100%
3. Medicare Part A provides coverage for all of the following kinds of care EXCEPTA. private duty nursingB. skilled nursing facility careC. home health careD. hospice care
4. Linda buys a Medicare supplement policy and revives the policy on April 1. How long does she have to return the policy for a full refund?A. April 10B. April 21C. April 30D. May 15
5. What is the maximum age limit to receive Medicaid coverage?A. No maximumB. 65C. 70D. 80
6. Medicare supplement policies are also known asA. Medicare policiesB. Medigap policiesC. Medicaid policiesD. Medichoice policies
7. Which of the following individuals is NOT likely to be eligible for Medicaid?A. Pam, a single mom who relies on Aid to
Families with Dependent Children to help feed her family
B. Darrell, who has been unable to work since becoming blind 2 years ago
C. Carmen, who has not been able to work since losing both legs in an accident
D. Ginny, who is over 65 and working as a manager of a retail outlet
8. For each benefit period, Medicare will pay the full cost of up to how many days of hospital care?A. 30B. 60C. 90D. 365
9. To be compensable as interpreted in workers’ compensation law, an injury must meet all of the following criteria EXCEPTA. it must be accidentalB. it must arise out of the individual’s
employmentC. it must arise in the course of the
individual’s employmentD. it must be unforeseeable
10. In Texas, which of the following is NOT a workers’ compensation benefit?A. Physical rehabilitationB. New job trainingC. Lost income replacementD. Burial expenses
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L E S S O N T W E N T Y - T W O R E V I E W
1. Nursing home care is generally covered byA. MedicareB. Medicare supplementsC. long-term care policiesD. all of the above
2. The maximum period of time a long-term care policy will pay benefits is calledA. Payment periodB. Benefit periodC. Elimination periodD. Maximum period
3. Which of the following is NOT considered an activity of daily living?A. TransferringB. DressingC. BathingD. Working
4. The elimination period may be thought of asA. a dollar amount deductibleB. a time deductibleC. a dollar amount co-paymentD. a time co-payment
5. What name do you call the waiting period before a long-term care policy pays benefits?A. Probationary periodB. An exclusionary periodC. A deductibleD. An elimination period
6. Virtually all of the current long-term care poli-cies are guaranteed renewable. This means the insurer cannot cancel the policyA. but does reserve the right to increase
policy premiums on specified classes of policies
B. but does reserve the right to increase policy premiums on individual policies
C. or increase policy premiums on specified classes of policies
D. or increase policy premiums on individual policies
7. When waiver of premium appliesA. the premium is waived immediately upon
disabilityB. the premium payment is suspended
permanently once it is invokedC. the premium payment generally resumes
when care ceasesD. the premium payment is waived only if
disability is considered permanent and total
8. Typically, the expenses incurred in a hospice will beA. surgical and room and boardB. room and board and physical therapyC. surgical and physical therapyD. room and board and medication for pain
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L E S S O N T W E N T Y - T H R E E R E V I E W
1. Wanda’s company pays the entire premium for her group disability coverage. If Wanda became disabled, how much of her benefits from this coverage would be subject to tax?A. AllB. NoneC. HalfD. Three-fourths
2. If Wanda paid 50% of premiums, what percent-age of her benefits would be tax-free?A. 0%B. 50%C. 75%D. 100%
3. If Wanda paid 100% of her premiums, what percentage of her benefits would be taxed?A. 0%B. 50%C. 75%D. 100%
4. The Delectable Doughnut company may deduct its premiums for business overhead expense insuranceA. only if it is a corporationB. only if it is a partnership or a corporationC. whether it is a corporation, partnership, or
sole proprietorshipD. only if it is sole proprietorship
5. Individual disability insurance premiums areA. deductible to the insured, and the benefits
are received tax-freeB. not deductible to the insured, but the
benefits are received tax-freeC. deductible to the insured, but the benefits
are taxedD. not deductible to the insured, and the
benefits are taxed
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L E S S O N O N E A N S W E R S A N D R A T I O N A L E S
1. B. The term used to describe the individual who is covered by the insurance is insured.
2. B. A possibility that an individual may need medical attention after slipping on the ice and falling is a risk.
3. A. Insurable interest has to exist only at the time of purchase.
4. B. A stock insurance company is owned by its shareholders.
5. A. A policy that may earn dividends is called participating and is usually issued by mutual companies.
6. A. George is most likely insurable.
7. D. Insurance requires the spreading of risk among a large number of insureds.
8. D. The insurance company promises to pay.
9. C. There is no insurable interest in the life of the neighbor.
10. B. Hoosier Insurance is a mutual insurer.
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L E S S O N T W O A N S W E R S A N D R A T I O N A L E S
1. A. Business written on the producer’s own life or interests is known as controlled business.
2. C. Most insurance regulation takes place at the state level.
3. B. Insurance laws generally are written by the state legislature.
4. B. To become licensed as an insurance producer, an individual must be at least 18 years old.
5. C. The federal government has the right to regulate the business of insurance to the extent that such business is not regulated by state law.
6. A. Applicants for insurance do not have to be given advance notice of the persons who will be collecting information.
7. C. The Commissioner of Insurance does not have the power to promulgate insurance laws.
8. D. Associations organized to protect claimants, policyholders, annuitants, and creditors of financially impaired insurers are known as guaranty associations.
9. B. One half of the required hours must be completed in a class or equivalent.
10. B. A license cannot be renewed more than 90 days after expiration.
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L E S S O N T H R E E A N S W E R S A N D R A T I O N A L E S
1. D. Insurance agents are appointed by insurance companies.
2. C. A written document is not necessary for the formation of a valid contract.
3. B. Value given by the parties is called consideration.
4. B. When representing an insurer, a producer acting as an agent has a responsibility to act with the degree of care that a reasonable person would apply under similar circumstances.
5. C. The face amount, which is the amount of insurance originally purchased, is usually found on the first policy page.
6. B. Carol has made an offer to the insurer.
7. D. The insurer has made a counteroffer to Carol.
8. A. Statements that are believed to be true
9. C. An untruthful statement that would have prevented the company from issuing the policy if the truth had been known
10. B. Commingling is mixing premium with the agent’s personal or business assets.
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L E S S O N F O U R A N S W E R S A N D R A T I O N A L E S
1. D. In this instance, John is the applicant, the insured, and the policyowner. The beneficiary receives the policy’s benefits/proceeds upon John’s death.
2. B. The beneficiary is not a party to the application.
3. A. Backdating is allowed in Texas for up to 6 months.
4. A. If an applicant is rated or declined an insurance policy, the reasons for this decision will be explained to the applicant by the agent.
5. A. Robin probably would be classified as a standard risk.
6. B. The frequency of premium payment is called the mode.
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L E S S O N F I V E A N S W E R S A N D R A T I O N A L E S
1. D. All of these costs are associated with death.
2. D. The policy benefits the employer.
3. A. Wilma is in the family dependency period because she still has children to support.
4. B. Life insurance requires no physical upkeep. The policyowner must simply make sure they pay the necessary premium.
5. B. Surviving dependents are often entitled to benefits from retirement plans and government programs such as Social Security.
6. D. Life insurance policies are primarily used to protect against unexpected death.
7. B. A cross-purchase plan is typically used to fund a buy-sell agreement when the number of partners involved is 2 to 3.
8. A. The company has to approve all advertising that includes their name.
9. D. An entity purchase plan is typically used to fund a buy-sell agreement when the number of partners involved is 3 or more.
10. D. When a business purchases a key person life insurance policy on an employee who is key to the business’ operations, the business is the policyowner, pays the premium, and is the beneficiary of the proceeds.
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L E S S O N S I X A N S W E R S A N D R A T I O N A L E S
1. A. Conditional receipts are the type most commonly used in life insurance transactions.
2. B. The insurer may require personal delivery so the producer can verify the insured’s good health at the time of delivery and collect the first premium.
3. C. Most insurance companies pay death claims as soon as possible after they receive proper notification and proof of death. If there is a delay, the usual reason is that the company has not received proper notification.
4. A. Since Lee had fulfilled all of his obligations, and the medical exam showed nothing on the aneurysm (meaning the policy would have been issued as applied for had Lee still been living), the company will pay the claim.
5. A. Not pay a claim because no receipt was issued
6. C. A policy cannot be issued as an exchange policy covering someone other than the original applicant.
7. A. Replacement is legal.
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1. C. Term insurance provides pure insurance protection only.
2. D. This policy is decreasing term because it provides a decreasing death benefit as the balance of the mortgage declines.
3. C. Increasing term is not used as often as level term or decreasing term.
4. C. Joan’s policy requires only one premium to acquire a paid-up policy, so it is a single premium policy.
5. B. A renewable term policy can be renewed based upon the insureds attained age.
6. C. Universal life policies have flexible premiums that can be raised, lowered, or stopped by the owner.
7. D. Indexed whole policies earn interest similar to the stock market but are still guaranteed by the company.
8. A. The initial cost of a term insurance policy tends to be low.
9. D. Gerald cannot sell variable universal life insurance policies.
10. A. Paid up at age 65 means premium payments stop at age 65. The policy does not endow until age 100.
L E S S O N S E V E N A N S W E R S A N D R A T I O N A L E S
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1. B. The insuring clause contains this promise on the insurance company’s part.
2. A. The consideration clause identifies the fact that the policyowner must pay something of value for the insurer’s promise to pay benefits.
3. A. Requiring the policyowner to pay all back dividends due plus interest on the amount is not usually a condition of policy reinstatement.
4. B. Harry will probably use a collateral assignment to secure the loan from a bank.
5. D. Upon her mother’s death, Ginny will receive benefits before any other beneficiary.
6. D. When they divorce, his wife cannot remove him as beneficiary on the policy without his written permission because Steve is an irrevocable beneficiary.
7. A. Rosemary is the primary beneficiary, and George is the contingent beneficiary.
8. D. Premium is an element of consideration.
9. C. The owner has all of the policy rights.
10. B. The free look period is 10 days.
L E S S O N E I G H T A N S W E R S A N D R A T I O N A L E S
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L E S S O N N I N E A N S W E R S A N D R A T I O N A L E S
1. C. Being in force for 10 years, the base policy would be beyond the suicide contestable period, so the whole life policy would pay $100,000. The rider, however, excludes death from self-inflicted injury.
2. C. The policy will pay a death benefit of $200,000 minus the outstanding policy loan of $10,000, which is $190,000.
3. C. Kumar has a disability income rider on his policy.
4. D. This is a payor rider because it provides for a waiver of premiums on the son’s coverage if the payor (Paul) becomes disabled.
5. A. A waiver of premium rider will waive the premiums on Alberta’s policy if she becomes disabled.
6. B. A return of premium rider is increasing term insurance that always equals the total premiums paid during the time the policy is in effect.
7. C. Double payment may be made in the case of accidental death.
8. D. Waiver of premium is waiver of all future premiums in the event of total and permanent disability.
9. D. The accelerated death benefits rider allows for payment of part of the face amount while the insured is still living.
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1. D. This is an example of the life-income option because the proceeds will be paid over the beneficiary’s life, regardless of how long that might be.
2. A. Because Jim has elected to receive only the interest, this example represents the interest-only option.
3. D. Since this policy has been in effect for 15 years, there would be some cash value in the policy. If Tina decides to stop paying the premium, this cash value could be used for the nonforfeiture option of her choice.
4. C. Susan has chosen the reduced paid up cash value option. The new policy face amount will be less than the original.
5. C. The reduced paid-up amount is the amount of paid-up insurance that can be purchased using the existing cash value at a rate based upon the insured’s attained age.
6. A. The age of the beneficiary is not a factor in determining the amount the beneficiary will receive each time a payment is made under the fixed period option.
7. D. The capital amount is not a factor in determining the amount the beneficiary will receive each time a payment is made under the fixed amount option.
8. C. Dividends are not guaranteed.
L E S S O N T E N A N S W E R S A N D R A T I O N A L E S
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L E S S O N E L E V E N A N S W E R S A N D R A T I O N A L E S
1. C. Annuities are useful for both accumulating a sum of money and for distributing a lifetime income.
2. D. An immediate annuity is purchased with a single premium, and annuity payments begin one payout interval later.
3. C. A death benefit is paid if the annuitant dies before the annuity payments begin. This is more likely to occur with a deferred annuity.
4. C. Variable annuities are regulated as securities because the contract owner bears the investment risk.
5. C. One of the main purposes of an annuity is the distribution of a lifetime income.
6. B. An annuity might be called the flip side of life insurance. Life insurance protects you and your family if you die too soon. Annuities protect you if you live too long (and outlive your savings and earning potential) by providing a lifetime income.
7. D. A fixed annuity guarantees a minimum rate of return.
8. B. Lottery winnings are most likely distributed through a single premium, temporary annuity with amount certain.
9. A. Marcus has purchased an equity-indexed annuity.
10. D. Flexible premium (multiple payments that can change). Deferred (not going to receive any income, if any, until some time in the future).
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1. C. Since the employee pays no part of the cost, it is called noncontributory.
2. A. Doris’s beneficiary will receive the full benefit under the group policy.
3. B. The insured’s parents, who live on their own and receive a small amount of financial support from the insured, would not qualify as a dependent for group insurance coverage.
4. D. In converting from group life insurance, the premiums for the new policy will be based on the insured’s attained age.
L E S S O N T W E L V E A N S W E R S A N D R A T I O N A L E S
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1. C. The amount payable to a spouse is $255.
2. D. The earliest age to receive retirement benefits is 62.
3. B. Disability benefits under Social Security require at least a five-month waiting period.
4. C. The penalties assessed against MECs primarily affect money taken out of the policy.
5. A. As a general rule, for federal tax purposes, neither life insurance nor annuity premium is tax deductible.
6. C. Only the part that represents income earned on the original death benefit is subject to tax.
L E S S O N T H I R T E E N A N S W E R S A N D R A T I O N A L E S
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1. A. This is a defined benefit plan because it is designed to provide a specific benefit amount at retirement.
2. B. Money received in retirement is taxed.
3. A. Anybody with earned income may contribute to an IRA.
4. A. Tax penalties usually apply to premature distributions.
5. C. A rollover from one IRA to another or from a qualified plan to an IRA must be accomplished within 60 days to avoid an income tax liability on the amount rolled over.
6. D. At age 59½, an individual is no longer subject to early withdrawal penalties under an IRA.
7. C. Defined contribution plans offer no specified benefit at retirement.
L E S S O N F O U R T E E N A N S W E R S A N D R A T I O N A L E S
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1. B. The premium payment is not part of the entire contract.
2. B. The incontestable period begins 2 years after the effective date of the policy. However, fraud, if discovered, can be contested at any time.
3. D. Written proofs of loss must normally be furnished within 90 days after the date of loss.
4. B. If there is no beneficiary listed on a policy, benefits will be paid to the estate.
5. B. Insurers cannot refuse claim payment after two years.
6. C. A revocable beneficiary may be changed without the beneficiary’s consent.
7. C. Accident & Health policies have a 10 day free look period. However, it is expanded to 30 days for Medicare supplement and Long-term care policies.
8. C. The insurer may not increase the premiums on CeeCee’s policy only.
9. A. The insurer may cancel the policy if George fails to pay premiums.
L E S S O N F I F T E E N A N S W E R S A N D R A T I O N A L E S
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1. B. A medical expense insurance policy pays for inpatient treatment and some outpatient expenses.
2. A. A disability income policy provides income to an individual disabled by illness or injury.
3. D. Customers of HMOs are called members, subscribers, or enrollees. Not insureds.
4. B. Small Employer medical plans cover 2–50 employees.
5. C. An HMO that allows its subscribers to obtain service outside of the HMO network is called a point of service or “leaky” HMO. Similar to a PPO.
6. B. A health savings account can be funded by an employer and can be used to pay for medical expenses.
7. C. A group model HMO contracts with an independent medical group to provide services to its subscribers.
8. D. An individual practice association model HMO consists of individual physicians operating out of their own offices.
9. B. A closed-panel HMO specifies a limited number of health care providers from which its subscribers may receive services.
10. C. Indemnity arrangements are not managed care plans.
L E S S O N S I X T E E N A N S W E R S A N D R A T I O N A L E S
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L E S S O N S E V E N T E E N A N S W E R S A N D R A T I O N A L E S
1. A. To receive benefits from a disability income policy for disability due to sickness, the insured must be totally disabled.
2. C. Social insurance supplements provide disability income before workers’ compensation and Social Security begin payments and after workers’ compensation and Social Security end payments.
3. A. The longer the benefit period the higher the policy’s premium.
4. C. Occupational disability benefits are often reduced by benefits received from either Social Security or workers’ compensation.
5. C. Sickness disability is less likely to be partial than accident disability.
6. A. Disability caused by flying as a passenger on a commercial aircraft is not a common exclusion under disability policies.
7. B. The rehabilitation benefit facilitates vocational training to prepare an insured for a new occupation.
8. A. The own occupation definition of total disability is more favorable to the insured.
9. D. Most often, LTD policies provide benefits to age 65.
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1. C. Lauren’s policy pays on an indemnity basis, meaning it pays benefits based on a predetermined, fixed rate for the medical services provided, regardless of the actual expenses incurred.
2. C. Maximum out of pocket equals deductible plus insureds share of the stop loss.
3. A. Insured pays the deductible plus 20% (coinsurance) of the remaining $1500, which equals $800.
4. A. What similar providers charge for a similar service in the same geographical area is called the usual, reasonable, and customary fee.
5. B. Purchasing basic benefits on an individual basis usually provides less-complete coverage with more gaps than a major medical policy.
6. C. The stop-loss limit is the dollar limit beyond which the insured no longer participates in payment of expenses.
7. D. The maximum benefit is the dollar limit beyond which the insurer no longer participates in payment of expenses.
8. A. The deductible must be satisfied before major medical benefits begin to be paid.
9. B. The sharing of expenses between the insured and the insurer is an example of coinsurance.
L E S S O N E I G H T E E N A N S W E R S A N D R A T I O N A L E S
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1. C. The ability of an individual to wait until covered by dental insurance before seeking treatment for dental issues is an example of adverse selection.
2. B. Comprehensive dental policies work in much the same way as comprehensive medical expense coverage.
3. C. Dread disease policies cover specific diseases, such as heart disease or cancer, as named in the policy.
4. A. Vision care insurance generally does not cover injury to the eye.
5. C. Prescription drug policies generally exclude experimental drugs.
6. A. The amount of coverage available under a credit insurance policy is generally limited to the total amount of indebtedness at any given point.
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1. D. The conversion privilege allows the insured to continue group coverage without providing evidence of insurability.
2. C. The insured’s 25-year-old child who becomes physically disabled at age 24 cannot be considered a dependent.
3. C. Continuation due to termination is 18 months.
4. B. Under the coordination of benefits rule, the primary company pays as if there were no other coverage.
5. C. Under the coordination of benefits rule, the secondary company pays whatever the other coverage does not pay, up to the policy limits.
6. D. Newborns are required to be covered immediately for congenital problems at birth.
7. D. Continuation of coverage due to loss of dependent status is 36 months.
8. C. ERISA is intended to accomplish pension equity but also protects group insurance plan participlants.
9. A. You have 60 days after notice to elect to continue the group insurance benefit.
10. D. Major medical is not eligible for conversion to an individual policy.
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1. D. Medicare Part B has an annual deductible.
2. C. After the deductible is satisfied, Part B pays 80% of all approved charges.
3. A. Medicare Part A does not cover private duty nursing.
4. C. The free look period for senior products is 30 days.
5. A. Medicaid covers the poor regardless of age.
6. B. Medicare supplement policies are also known as Medigap policies because they fill in some of the “gaps” not covered by Medicare.
7. D. Ginny is not likely to be eligible for Medicaid.
8. B. Once the insured satisfies her deductible requirement, Medicare will pay the full cost of up to 60 days of hospital care for each benefit period.
9. D. The injury need not be unforeseeable.
10. B. Workers’ compensation in Texas is not required to pay for new job training.
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1. C. Nursing home care is generally covered by long-term care policies.
2. B. The maximum length of time the policy will pay is called a benefit period.
3. D. Working is not an activity of daily living.
4. B. The elimination period may be thought of as a time deductible.
5. D. A period of time after qualifying for benefits before the policy actually starts paying is called the elimination period.
6. A. Guaranteed renewable means the insurer cannot cancel the policy but does reserve the right to increase policy premiums on specified classes of policies.
7. C. When waiver of premium applies, the premium payment generally resumes when care ceases.
8. D. Typically, the expenses incurred in a hospice will be room and board and medication for pain.
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1. A. Since the employer paid 100% of the premium, 100% of the benefits would be taxable.
2. B. 50% of her benefits would be tax-free and 50% would be taxable.
3. A. 100% of her benefits would be tax-free, meaning 0% would be taxed.
4. C. The premiums for business overhead expense insurance are deductible, regardless of the type of business. Any benefits received are taxable.
5. B. Individual disability insurance premiums are not deductible to the insured, but the benefits are received tax-free.
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Glossary
Aabsolute assignment Policy assignment under
which the assignee (person to whom the policy is assigned) receives full control over the policy and also full rights to its benefits. Generally, when a policy is assigned to secure a debt, the owner retains all rights in the policy in excess of the debt, even though the assignment is absolute in form. (See assignment)
accelerated benefits rider A life insurance rider that allows for the early payment of some portion of the policy’s face amount should the insured suf-fer from a terminal illness or injury.
acceptance (See offer and acceptance)accident and health insurance Insurance under
which benefits are payable in case of disease, accidental injury or accidental death. Also called health insurance, personal health insurance and sickness and accident insurance.
accidental bodily injury provision Disability income or accident policy provision that requires that the injury be accidental in order for benefits to be payable.
accidental death and dismemberment (AD&D) Insurance providing payment if the insured’s death results from an accident or if the insured accidentally severs a limb above the wrist or ankle joints or totally and irreversibly loses his or her eyesight.
accidental death benefit rider A life insurance policy rider providing for payment of an addi-tional benefit when death occurs by accidental means.
accidental dismemberment Often defined as “the severance of limbs at or above the wrists or ankle joints, or the entire irrevocable loss of sight.” Loss of use in itself may or not be considered dismem-berment.
accidental means provision Unforeseen, unex-pected, unintended cause of an accident. Require-ment of an accident-based policy that the cause of the mishap must be accidental for any claim to be payable.
accumulation unit Premiums an annuitant pays into a variable annuity are credited as accumula-tion units. At the end of the accumulation period, accumulation units are converted to annuity units.
acquired immune deficiency syndrome (AIDS) A life-threatening condition brought on by the human immunodeficiency virus; insurers must adhere to strict underwriting and claims guide-lines in regard to AIDS risks and AIDS-related conditions.
acute illness A serious condition, such as pneumo-nia, from which the body can fully recover with proper medical attention.
adhesion A life insurance policy is a “contract of adhesion” because buyers must “adhere” to the terms of the contract already in existence. They have no opportunity to negotiate terms, rates, values, and so on.
adjustable life insurance Combines features of both term and whole life coverage with the length of coverage and amount of accumulated cash value as the adjustable factors. Premiums may be increased or decreased to fit the specific needs. Such adjustments are not retroactive and apply only to the future.
admitted insurer An insurance company that has met the legal and financial requirements for operation within a given state.
adult day care Type of care (usually custodial) designed for individuals who require assistance with various activities of daily living, while their primary caregivers are absent. Offered in care centers.
adverse selection Selection “against the com-pany.” Tendency of less favorable insurance risks to seek or continue insurance to a greater extent than others. Also, tendency of policyowners to take advantage of favorable options in insurance contracts.
agency Situation wherein one party (an agent) has the power to act for another (the principal) in dealing with third parties.
agent Anyone not a duly licensed broker, who solic-its insurance or aids in placing risks, delivering policies or collecting premiums on behalf of an insurance company.
agent’s report The section of an insurance applica-tion where the agent reports his or her personal observation about the applicant.
aleatory Feature of insurance contracts in that there is an element of chance for both parties and that the dollar given by the policyholder (premiums) and the insurer (benefits) may not be equal.
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226 Glossary
alien insurer Company incorporated or organized under the laws of any foreign nation, providence or territory.
ambulatory surgery Surgery performed on an outpa-tient basis.
amount at risk Difference between the face amount of the policy and the reserve or policy value at a given time. In other words, the dollar amount over what the policyowner has contributed of cash value toward payment of his or her own claim. Because the cash value increases every year, the net amount at risk naturally decreases until it finally reaches zero when the cash value or reserve become the face amount.
annually renewable term (ART) A form of renew-able term insurance that provides coverage for one year and allows the policyowner to renew his or her coverage each year, without evidence of insurability. Also called yearly renewable term (YRT).
annuitant One to whom an annuity is payable, or a person upon the continuance of whose life further payment depends.
annuity A contract that provides a stipulated sum pay-able at certain regular intervals during the lifetime of one or more persons, or payable for a specified period only.
annuity unit The number of annuity units denotes the share of the funds an annuitant will receive from a variable annuity account after the accumulation period ends and benefits begin. A formula is used to convert accumulation units to annuity units.
any occupation A definition of total disability that requires that for disability income benefits to be payable, the insured must be unable to perform any job for which he or she is “reasonably suited by reason of education, training or experience.”
application Form supplied by the insurance company, usually filled in by the agent and medical examiner (if applicable) on the basis of information received from the applicant. It is signed by the applicant and is part of the insurance policy if it is issued. It gives information to the home office underwriting department so it may consider whether an insurance policy will be issued and, if so, in what classification and at what premium rate.
appointment The authorization or certification of an agent to act for or represent an insurance company.
assignee Person (including corporation, partnership or other organization) to whom a right or rights under a policy are transferred by means of an assignment.
assignment Signed transfer of benefits of a policy by an insured to another party. The company does not guarantee the validity of an assignment.
assignment provision (health contracts) Com-mercial health policy provision that allows the poli-cyowner to assign benefit payments from the insurer directly to the health care provider.
assignor Person (including corporation, partnership or other organization or entity) who transfers a right or rights under an insurance policy to another by means of an assignment.
attained age With reference to an insured, the cur-rent insurance age.
authority The actions and deeds an agent is authorized to conduct on behalf of an insurance company, as specified in the agent’s contract.
authorized company Company duly authorized by the insurance department to operate in the state.
automatic premium loan provision Authorizes insurer to automatically pay any premium in default at the end of the grace period and charge the amount so paid against the life insurance policy as a policy loan.
aviation exclusion Either attached by rider or included in standard policy language excepting from coverage certain deaths or disabilities due to avia-tion, such as “other than a fare-paying passenger.”
Bbackdating The practice of making a policy effective
at an earlier date than the present. basic medical expense policy Health insurance
policy that provides “first dollar” benefits for speci-fied (and limited) health care, such as hospitaliza-tion, surgery or physician services. Characterized by limited benefit periods and relatively low coverage limits.
beneficiary Person to whom the proceeds of a life or accident policy are payable when the insured dies. The various types of beneficiaries are: primary ben-eficiaries (those first entitled to proceeds); second-ary beneficiaries (those entitled to proceeds if no primary beneficiary is living when the insured dies); and tertiary beneficiaries (those entitled to proceeds if no primary or secondary beneficiaries are alive when the insured dies).
benefit May be either money or a right to the policy-owner upon the happening of the conditions set out in the policy.
benefit period Maximum length of time that insur-ance benefits will be paid for any one accident, illness or hospital stay.
Best’s Insurance Report A guide, published by A.M. Best, Inc., that rates insurers’ financial integrity and managerial and operational strengths.
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227Glossary
blackout period Period following the death of a fam-ily breadwinner during which no Social Security benefits are available to the surviving spouse.
blanket policy Covers a number of individuals who are exposed to the same hazards, such as members of an athletic team, company officials who are passen-gers in the same company plane, and so on.
broker Licensed insurance representative who does not represent a specific company, but places busi-ness among various companies. Legally, the broker is usually regarded as a representative of the insured rather than the company.
business continuation plan Arrangements between the business owners that provide that the shares owned by any one of them who dies or becomes disabled shall be sold to and purchased by the other co-owners or by the business.
business overhead expense insurance A form of disability income coverage designed to pay necessary business overhead expenses, such as rent, should the insured business owner become disabled.
buyer’s guides Informational consumer guide books that explain insurance policies and insurance con-cepts; in many states, they are required to be given to applicants when certain types of coverages are being considered.
buy-sell agreement Agreement that a deceased busi-ness owner’s interest will be sold and purchased at a predetermined price or at a price according to a predetermined formula.
Ccafeteria plan Employee benefit arrangements in
which employees can select from a range of benefits. cancellable contract Health insurance contract that
may be terminated by the company or that is renew-able at its option.
capital sum Amount provided for accidental dismem-berment or loss of eyesight. Indemnities for loss of one member or sight of one eye are percentages of the capital sum.
case management The professional arrangement and coordination of health services through assessment, service plan development and monitoring.
cash or deferred arrangements A qualified employer retirement plan under which employees can defer amounts of their salaries into a retire-ment plan. These amounts are not included in the employee’s gross income and so are tax deferred. Also called 401(k) plans.
cash refund annuity Provides that, upon the death of an annuitant before payments totaling the purchase price have been made, the excess of the amount paid by the purchaser over the total annuity pay-ments received will be paid in one sum to desig-nated beneficiaries.
cash surrender option A nonforfeiture option that allows whole life insurance policyowners to receive a payout of their policy’s cash values.
cash surrender value Amount available to the owner when a life insurance policy is surrendered to the company. During the early policy years, the cash value is the reserve less a “surrender charge”; in later policy years, it usually equals or closely approxi-mates the reserve value at time of surrender.
cash value The equity amount or “savings” accumula-tion in a whole life policy.
class designation A beneficiary designation. Rather than specifying one or more beneficiaries by name, the policyowner designates a class or group of ben-eficiaries. For example, “my children.”
classification Occupational category of a risk. close corporation A corporation owned by a small
group of stockholders, each of whom usually has a voice in operating the business.
COBRA “Consolidated Omnibus Budget Reconciliation Act of 1985,” extending group health coverage to terminated employees and their families for up to 18 or 36 months.
coinsurance (percentage participation) Principle under which the company insures only part of the potential loss, the policyowners paying the other part. For instance, in a major medical policy, the company may agree to pay 75 percent of the insured expenses, with the insured to pay the other 25 percent.
collateral assignment Assignment of a policy to a creditor as security for a debt. The creditor is entitled to be reimbursed out of policy proceeds for the amount owed. The beneficiary is entitled to any excess of policy proceeds over the amount due the creditor in the event of the insured’s death.
commissioner Head of a state insurance department; public officer charged with supervising the insur-ance business in a state and administrating insur-ance laws. Called “superintendent” in some states, “director” in others.
common disaster provision Sometimes added to a policy and designed to provide an alternative ben-eficiary in the event that the insured as well as the original beneficiary dies as the result of a common accident.
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228 Glossary
competent parties To be enforceable, a contract must be entered into by competent parties. A com-petent party is one who is capable of understanding the contract being agreed to.
comprehensive major medical insurance Designed to give the protection offered by both a basic medical expense and major medical policy. It is characterized by a low deductible amount, coin-surance clause and high maximum benefits.
concealment Failure of the insured to disclose to the company a fact material to the acceptance of the risk at the time application is made.
conditionally renewable contract Health insurance policy providing that the insured may renew the contract from period to period, or continue it to a stated date or an advanced age, subject to the right of the insurer to decline renewal only under condi-tions defined in the contract.
conditional receipt Given to the policyowners when they pay a premium at time of application. Such receipts bind the insurance company if the risk is approved as applied for, subject to any other condi-tions stated on the receipt.
consideration Element of a binding contract; accep-tance by the company of payment of the premium and statements made by the prospective insured in the application.
consideration clause The part of an insurance con-tract setting forth the amount of initial and renewal premiums and frequency of future payments.
contestable period Period during which the com-pany may contest a claim on a policy because of misleading or incomplete information in the appli-cation.
contingent beneficiary Person(s) named to receive proceeds in case the original beneficiary is not alive. Also referred to as secondary or tertiary beneficiary.
continuing care Type of health or medical care designed to provide a benefit for elderly individuals who live in a retirement community; addresses full-time needs, both social and medical. Also known as residential care.
contract An agreement enforceable by law whereby one party binds itself to certain promises or deeds.
contract of agency A legal document containing the terms of the contract between the agent and company, signed by both parties. Also called agency agreement.
contributory plan Group insurance plan issued to an employer under which both the employer and employees contribute to the cost of the plan. Gener-ally, 75 percent of the eligible employees must be insured. (See noncontributory plan)
conversion privilege Allows the policyowner, before an original insurance policy expires, to elect to have a new policy issued that will continue the insurance coverage. Conversion may be effected at attained age (premiums based on the age attained at time of conversion) or at original age (premiums based on age at time of original issue).
convertible term Contract that may be converted to a permanent form of insurance without medical examination.
coordination of benefits (COB) provision Designed to prevent duplication of group insurance benefits. Limits benefits from multiple group health insurance policies in a particular case to 100 percent of the expenses covered and designates the order in which the multiple carriers are to pay benefits.
corridor deductible In superimposed major medical plans, a deductible amount between the benefits paid by the basic plan and the beginning of the major medical benefits.
credit accident and health insurance If the insured debtor becomes totally disabled due to an accident or sickness, the policy premiums are paid during the period of disability or the loan is paid off. May be individual or group policy.
credit life insurance Usually written as decreasing term on a relatively small decreasing balance install-ment loan that may reflect direct borrowing or a balance due for merchandise purchased. If borrower dies, benefits pay balance due. May be individual or group policy.
credit report A summary of an insurance applicant’s credit history, made by an independent organization that has investigated the applicant’s credit standing.
cross-purchase plan An agreement that provides that upon a business owner’s death, surviving own-ers will purchase the deceased’s interest, often with funds from life insurance policies owned by each principal on the lives of all other principals.
currently insured Under Social Security, a status of limited eligibility that provides only death benefits.
custodial care Level of health or medical care given to meet daily personal needs, such as dressing, bath-ing, getting out of bed, and so on. Though it does not require medical training, it must be adminis-tered under a physician’s order.
Ddeath rate Proportion of persons in each age group
who die within a year; usually expressed as so many deaths per thousand persons. (See expected mortality)
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229Glossary
decreasing term insurance Term life insurance on which the face value slowly decreases in scheduled steps from the date the policy comes into force to the date the policy expires, while the premium remains level. The intervals between decreases are usually monthly or annually.
deductible Amount of expense or loss to be paid by the insured before a health insurance policy starts paying benefits.
deferred annuity Provides for postponement of the commencement of an annuity until after a specified period or until the annuitant attains a specified age. May be purchased either on single-premium or flex-ible premium basis.
defined benefit plan A pension plan under which benefits are determined by a specific benefit formula.
defined contribution plan A tax-qualified retire-ment plan in which annual contributions are determined by a formula set forth in the plan. Benefits paid to a participant vary with the amount of contributions made on his or her behalf and the length of service under the plan.
dental insurance A relatively new form of health insurance coverage typically offered on a group basis, it covers the costs of normal dental mainte-nance as well as oral surgery and root canal therapy.
dependency period Period following the death of the breadwinner up until the youngest child reaches maturity.
disability Physical or mental impairment making a person incapable of performing one or more duties of his or her occupation.
disability buy-sell agreement An agreement between business co-owners that provides that shares owned by any one of them who becomes disabled shall be sold to and purchased by the other co-owners or by the business using funds from dis-ability income insurance.
disability income insurance A type of health insurance coverage, it provides for the payment of regular, periodic income should the insured become disabled from illness or injury.
disability income rider Typically a rider to a life insurance policy, it provides benefits in the form of income in the event the insured becomes totally disabled.
discrimination In insurance, the act of treating cer-tain groups of people unfairly in the sale and/or pric-ing of policies; treating any of a given class of risk differently from other like risks. Discrimination is expressly prohibited in most state insurance codes.
dividend Policyowner’s share in the divisible surplus of a company issuing insurance on the participating plan.
dividend options The different ways in which the insured under a participating life insurance policy may elect to receive surplus earnings: in cash; as a reduction of premium; as additional paid-up insur-ance; left on deposit at interest; or as additional term insurance.
domestic insurer Company within the state in which it is chartered and in which its home office is located.
dread disease policy (See limited risk policy)
Eelimination period Duration of time between the
beginning of an insured’s disability and the com-mencement of the period for which benefits are payable.
employee benefit plans Plans through which employers offer employees benefits such as cover-age for medical expenses, disability, retirement and death.
employee stock ownership plan (ESOP) A form of defined contribution profit-sharing plan, an ESOP invests primarily in the securities or stock of the employer.
endowment Contract providing for payment of the face amount at the end of a fixed period, at a speci-fied age of the insured, or at the insured’s death before the end of the stated period.
endowment period Period specified in an endow-ment policy during which, if the insured dies, the beneficiary receives a death benefit. If the insured is still living at the end of the endowment period, he or she receives the endowment as a living benefit.
enhanced whole life A whole life insurance policy issued by a mutual insurer, in which policy divi-dends are used to provide extra death benefits or to reduce future premiums.
enrollment period Period during which new employ-ees can sign up for coverage under a group insurance plan.
entire contract provision An insurance policy provi-sion stating that the application and policy contain all provisions and constitute the entire contract.
entity plan An agreement in which a business assumes the obligation of purchasing a deceased owner’s interest in the business, thereby proportionately increasing the interests of surviving owners.
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230 Glossary
equity indexed annuity A fixed deferred annuity that offers the traditional guaranteed minimum interest rate and an excess interest feature that is based on the performance of an external equities market index.
errors and omissions insurance Professional liability insurance that protects an insurance pro-ducer against claims arising from service he or she rendered or failed to render.
estate Most commonly, the quantity of wealth or prop-erty at an individual’s death.
estate tax Federal tax imposed on the value of prop-erty transferred by an individual at his or her death.
estoppel Legal impediment to denying the conse-quences of one’s actions or deeds if they lead to detrimental actions by another.
evidence of insurability Any statement or proof regarding a person’s physical condition, occupation, and so forth, affecting acceptance of the applicant for insurance.
examiner Physician authorized by the medical director of an insurance company to make medical exami-nations. Also, person assigned by a state insurance company to audit the affairs of an insurance com-pany.
excess interest Difference between the rate of inter-est the company guarantees to pay on proceeds left under settlement options and the interest actually paid on such funds by the company.
exclusion ratio A fraction used to determine the amount of annual annuity income exempt from federal income tax. The exclusion ratio is the total contribution or investment in the annuity divided by the expected ratio.
exclusion rider Health insurance policy rider that waives insurer’s liability for all future claims on a preexisting condition.
exclusions Specified hazards listed in a policy for which benefits will not be paid.
expected mortality Number of deaths that theoreti-cally should occur among a group of insured persons during a given period, according to the mortality table in use. Normally, a lower mortality rate is anticipated and generally experienced.
extended term insurance Nonforfeiture option providing for the cash surrender value of a policy to be used as a net single premium at the insured’s attained age to purchase term insurance for the face amount of the policy, less indebtedness, for as long a period as possible, but no longer than the term of the original policy.
Fface amount Commonly used to refer to the principal
sum involved in the contract. The actual amount payable may be decreased by loans or increased by additional benefits payable under specified condi-tions or stated in a rider.
facility-of-payment provision Clause permitted under a uniform health insurance policy provision allowing the company to pay up to $1,000 of ben-efits or proceeds to any relative appearing entitled to it if there is no beneficiary or if the insured or beneficiary is a minor or legally incompetent.
Fair Credit Reporting Act Federal law requiring an individual to be informed if he or she is being inves-tigated by an inspection company.
family plan policy All-family plan of protection, usu-ally with permanent insurance on the primary wage earner’s life and with spouse and children automati-cally covered for lesser amounts of protection, usu-ally term, all included for one premium.
FICA Contributions made by employees and employers to fund Social Security benefits (OASDI).
fiduciary Person in a position of special trust and confidence, (e.g., in handling or supervising affairs or funds of another).
final expense fund Basic use for life insurance; reserve to cover costs of last illness, burial, legal and administrative expenses, miscellaneous outstanding bills, and so on. Also called cleanup fund.
fixed-amount settlement option A life insurance settlement option whereby the beneficiary instructs that proceeds be paid in regular installments of a fixed dollar amount. The number of payment peri-ods is determined by the policy’s face amount, the amount of each payment and the interest earned.
fixed annuity A type of annuity that provides a guar-anteed fixed benefit amount, payable for the life of the annuitant.
fixed-period settlement option A life insurance settlement option in which the number of payments is fixed by the payee, with the amount of each pay-ment determined by the amount of proceeds.
flat deductible Amount of covered expenses payable by the insured before medical benefits are payable.
foreign insurer Company operating in a state in which it is not chartered and in which its home office is not located.
fraud An act of deceit; misrepresentation of a material fact made knowingly, with the intention of having another person rely on that fact and consequently suffer a financial hardship.
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231Glossary
free look Provision required in most states whereby policyholders have either 10 or 20 days to examine their new policies at no obligation.
fully insured A status of complete eligibility for the full range of Social Security benefits: death benefits, retirement benefits, disability benefits and Medicare benefits.
funding In a retirement plan, the setting aside of funds for the payment of benefits.
Ggovernment insurer An organization that, as an
extension of the federal or state government, pro-vides a program of social insurance.
grace period Period of time after the due date of a premium during which the policy remains in force without penalty.
graded premium whole life Variation of a tradi-tional whole life contract providing for lower than normal premium rates during the first few policy years, with premiums increasing gradually each year. After the preliminary period, premiums level off and remain constant.
group credit insurance A form of group insurance issued by insurance companies to creditors to cover the lives of debtors for the amounts of their loans.
group insurance Insurance that provides coverage for a group of persons, usually employees of a company, under one master contract.
guaranteed insurability (guaranteed issue) Arrangement, usually provided by rider, whereby additional insurance may be purchased at various times without evidence of insurability.
guaranteed renewable contract Health insurance contract that the insured has the right to continue in force by payment of premiums for a substantial period of time during which the insurer has no right to make unilaterally any change in any provision, other than a change in premium rate for classes of insureds.
guaranty association Established by each state to support insurers and protect consumers in the case of insurer insolvency, guaranty associations are funded by insurers through assessments.
Hhazard Any factor that gives rise to a peril.health insurance Insurance against loss through sick-
ness or accidental bodily injury. Also called acci-dent and health, accident and sickness, sickness and accident or disability insurance.
health maintenance organization (HMO) Health care management stressing preventive health care, early diagnosis and treatment on an outpatient basis. Persons generally enroll voluntarily by paying a fixed fee periodically.
home health care Skilled or unskilled care provided in an individual’s home, usually on a part-time basis.
hospital benefits Payable for charges incurred while the insured is confined to, or treated in, a hospital, as defined in a health insurance policy.
hospital expense insurance Health insurance benefits subject to a specified daily maximum for a specified period of time while the injured is confined to a hospital, plus a limited allowance up to a speci-fied amount for miscellaneous hospital expenses, such as operating room, anesthesia, laboratory fees, and so on. Also called hospitalization insurance. (See medical expense insurance)
hospital indemnity Form of health insurance provid-ing a stipulated daily, weekly or monthly indem-nity during hospital confinement; payable on an unallocated basis without regard to actual hospital expense.
Iimmediate annuity Provides for payment of annu-
ity benefit at one payment interval from date of purchase. Can only be purchased with a single payment.
incontestable clause Provides that, for certain rea-sons such as misstatements on the application, the company may void a life insurance policy after it has been in force during the insured’s lifetime, usually one or two years after issue.
increasing term insurance Term life insurance in which the death benefit increases periodically over the policy’s term. Usually purchased as a cost of living rider to a whole life policy. (See cost of living rider)
indemnity approach A method of paying health pol-icy benefits to insureds based on a predetermined, fixed rate set for the medical services provided, regardless of the actual expenses incurred.
indexed whole life A whole life insurance policy whose death benefit increases according to the rate of inflation. Such policies are usually tied to the Consumer Price Index (CPI).
individual insurance Policies providing protection to the policyowner, as distinct from group and blanket insurance. Also called personal insurance.
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232 Glossary
individual retirement account (IRA) A personal qualified retirement account through which eligible individuals accumulate tax-deferred income up to a certain amount each year, depending on the person’s tax bracket.
industrial insurance Life insurance policy providing modest benefits and a relatively short benefit period. Premiums are collected on a weekly or monthly basis by an agent calling at insured’s homes. (See home service insurer)
inspection report Report of an investigator providing facts required for a proper underwriting decision on applications for new insurance and reinstatements.
installment refund annuity An annuity income option that provides for the funds remaining at the annuitant’s death to be paid to the beneficiary in the form of continued annuity payments.
insurability All conditions pertaining to individuals that affect their health, susceptibility to injury, or life expectancy; an individual’s risk profile.
insurability receipt A type of conditional receipt that makes coverage effective on the date the applica-tion was signed or the date of the medical exam (whichever is later), provided the applicant proves to be insurable.
insurable interest Requirement of insurance con-tracts that loss must be sustained by the applicant upon the death or disability of another and loss must be sufficient to warrant compensation.
insurance Social device for minimizing risk of uncer-tainty regarding loss by spreading the risk over a large enough number of similar exposures to predict the individual chance of loss.
insurance code The laws that govern the business of insurance in a given state.
insurer Party that provides insurance coverage, typi-cally through a contract of insurance.
insuring clause Defines and describes the scope of the coverage provided and limits of indemnification.
integrated deductible In superimposed major medi-cal plans, a deductible amount between the benefits paid by the basic plan and those benefits paid by the major medical. All or part of the integrated deduct-ible may be absorbed by the basic plan.
interest-only option (interest option) Mode of settlement under which all or part of the proceeds of a policy are left with the company for a definite period at a guaranteed minimum interest rate. Interest may either be added to the proceeds or paid annually, semiannually, quarterly or monthly.
interest-sensitive whole life Whole life policy whose premiums vary depending upon the insurer’s underlying death, investment and expense assump-tions.
intermediate nursing care Level of health or medical care that is occasional or rehabilitative, ordered by a physician, and performed by skilled medical personnel.
irrevocable beneficiary Beneficiary whose interest cannot be revoked without his or her written con-sent, usually because the policyowner has made the beneficiary designation without retaining the right to revoke or change it.
Jjoint and last survivor policy A variation of the
joint life policy that covers two lives but pays the benefit upon the death of the second insured.
joint and survivor annuity Covers two or more lives and continues in force so long as any one of them survives.
joint life policy Covers two or more lives and provides for the payment of the proceeds at the death of the first among those insured, at which time the policy automatically terminates.
juvenile insurance Written on the lives of children who are within specified age limits and generally under parental control.
KKeogh plans Designed to fund retirement of self-
employed individuals; name derived from the author of the Keogh Act (HR-10), under which contributions to such plans are given favorable tax treatment.
key-person insurance Protection of a business against financial loss caused by the death or disable-ment of a vital number of the company, usually indi-viduals possessing special managerial or technical skill or expertise.
Llapse Termination of a policy upon the policyowner’s
failure to pay the premium within the grace period. law of large numbers Basic principle of insurance
that the larger the number of individual risks com-bined into a group, the more certainty there is in predicting the degree or amount of loss that will be incurred in any given period.
legal purpose In contract law, the requirement that the object of, or reason for, the contract must be legal.
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233Glossary
level term insurance Term coverage on which the face value remains unchanged from the date the policy comes into force to the date the policy expires.
license Certification issued by a state insurance department that an individual is qualified to solicit insurance applications for the period covered; usually issued for one year, renewable on applica-tion without need to repeat the original qualifying requirements.
licensed insurer (See admitted insurer)life annuity Payable during the continued life of the
annuitant. No provision is made for the guaranteed return of the unused portion of the premium.
life expectancy Average duration of the life remain-ing to a number of persons of a given age, according to a given mortality table. Not to be confused with “probable lifetime,” which refers to the difference between a person’s present age and the age at which death is most probable, (i.e., the age at which most deaths occur).
life income settlement option A settlement option providing for life insurance or annuity proceeds to be used to buy an annuity payable to the beneficiary for life-often with a specified number of payments certain or a refund if payments don’t equal or exceed premiums paid.
life insurance Insurance against loss due to the death of a particular person (the insured) upon whose death the insurance company agrees to pay a stated sum or income to the beneficiary.
limited pay life insurance A form of whole life insurance characterized by premium payments only being made for a specified or limited number of years.
limited policies Restrict benefits to specified acci-dents or diseases, such as travel policies, dread disease policies, ticket policies, and so forth.
limited risk policy Provides coverage for specific kinds of accidents or illnesses, such as injuries received as a result of travel accidents or medical expenses stemming from a specified disease. (See special risk policy)
loan value Determinable amount that can be bor-rowed from the issuing company by the policyowner using the value of the life insurance policy as col-lateral.
long-term care Refers to the broad range of medi-cal and personal services for individuals (often the elderly) who need assistance with daily activities for an extended period of time.
long-term care policy Health insurance policies that provide daily indemnity benefits for extended care confinement.
loss sharing (See risk pooling)lump sum Payment of entire proceeds of an insur-
ance policy in one sum. The method of settlement provided by most policies unless an alternate settle-ment is elected by the policyowner or beneficiary.
Mmajor medical expense policy Health insurance
policy that provides broad coverage and high benefits for hospitalization, surgery and physician services. Characterized by deductibles and coinsur-ance cost-sharing.
managed care A system of delivering health care and health care services, characterized by arrangements with selected providers, programs of ongoing quality control and utilization review and financial incen-tives for members to use providers and procedures covered by the plan.
mandatory second opinion To control costs, many health policies provide that, in order to be eligible for benefits, insureds must get a second opinion before receiving non-life-threatening surgery.
master contract Issued to the employer under a group plan; contains all the insuring clauses defining employee benefits. Individual employees participat-ing in the group plan receive individual certificates that outline highlights of the coverage. Also called master policy.
maturity value Proceeds payable on an endowment contract at the end of the specified endowment period, or payable on an ordinary life contract at the last age of the mortality table if the insured is still living at that age. Maturity value of a policy is the same as the face amount of the policy and is equal to the reserve value of the contract on this maturity date. Actual amount payable by the company may be increased by dividend additions or accumulated dividend deposits, or decreased by outstanding loans.
McCarran-Ferguson Act Also know as Public Law 15, the 1945 act exempting insurance from federal antitrust laws to the extent insurance is regulated by states.
Medicaid Provides medical care for the needy under joint federal-state participation (Kerr-Mills Act).
medical cost management The process of control-ling how policyholders utilize their policies. (See mandatory second opinion, precertification, ambu-latory surgery and case management)
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234 Glossary
medical examination Usually conducted by a licensed physician; the medical report is part of the application, becomes part of the policy contract, and is attached to the policy. A “nonmedical” is a short-form medical report filled out by the agent. Various company rules, such as amount of insur-ance applied for or already in force, or applicant’s age, sex, past physical history and data revealed by inspection report, and so on, determine whether the examination will be “medical” or “nonmedical.”
medical expense insurance Pays benefits for nonsur-gical doctors’ fees commonly rendered in a hospital; sometimes pays for home and office calls.
Medical Information Bureau (MIB) A service organization that collects medical data on life and health insurance applicants for member insurance companies.
medical report A document completed by a physi-cian or other approved examiner and submitted to an insurer to supply medical evidence of insurability (or lack of insurability) or in relation to a claim.
Medicare Federally sponsored health insurance and medical program for persons age 65 or older; admin-istered under provisions of the Social Security Act.
Medicare Part A Compulsory hospitalization insur-ance that provides specified inhospital and related benefits. All workers covered by Social Security finance its operation through a portion of their FICA tax.
Medicare Part B Voluntary program designed to provide supplementary medical insurance to cover physician services, medical services and supplies not covered under Medicare Part A.
Medicare Part C Medicare Part C is called Medicare Advantage. The program offers a variety of man-aged care plans, a private fee-for-service plan, and Medicare specialty plans. These specialty plans provide services that focus care on the management of a specific disease or condition.
Medicare Part D A program that offers a prescription drug benefit to help Medicare beneficiaries pay for the drugs they need. The drug benefit is optional and is available to anyone who is entitled to Medi-care Part A or enrolled in Part B. This benefit is available through private prescription drug plans (PDPs) or Medicare Advantage (PPO) plans.
Medicare supplement policy Health insurance that provides coverage to fill the gaps in Medicare coverage.
miscellaneous expenses Hospital charges, other than for room and board, (e.g., x-rays, drugs, labora-tory fees) in connection with health insurance.
misrepresentation Act of making, issuing, circulating or causing to be issued or circulated, an estimate, illustration, circular or statement of any kind that does not represent the correct policy terms, divi-dends or share of the surplus or the name or title for any policy or class of policies that does not in fact reflect its true nature.
misstatement of age or sex provision If the insured’s age or sex is misstated in an application for insurance, the benefit payable usually is adjusted to what the premiums paid should have purchased.
modified endowment contract (MEC) A life insur-ance policy under which the amount a policyowner pays in during the first years exceeds the sum of net level premiums that would have been payable to provide paid-up future benefits in seven years.
modified whole life Whole life insurance with premium payable during the first few years, usually five years, only slightly larger than the rate for term insurance. Afterwards, the premium is higher for the remainder of life than the premium for ordinary life at the original age of issue, but lower than the rate at the attained age at the time of charge.
moral hazard Effect of personal reputation, character, associates, personal living habits, financial responsi-bility and environment, as distinguished from physi-cal health, upon an individual’s general insurability.
morale hazard Hazard arising from indifference to loss because of the existence of insurance.
morbidity The relative incidence of disability due to sickness or accident within a given group.
mortality The relative incidence of death within a group.
mortality table Listing of the mortality experience of individuals by age; permits an actuary to calculate, on the average, how long a male or female of a given age group may be expected to live.
mortgage insurance A basic use of life insurance, so-called because many family heads leave insur-ance for specifically paying off any mortgage balance outstanding at their death. The insurance generally is made payable to a family beneficiary instead of to the mortgage holder.
mutual insurer An insurance company characterized by having no capital stock, it is owned by its policy-owners and usually issues participating insurance.
NNational Association of Insurance
Commissioners (NAIC) Association of state insurance commissioners active in insurance regula-tory problems and in forming and recommending model legislation and requirements.
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235Glossary
natural group A group formed for a reason other than to obtain insurance.
noncancellable and guaranteed renewable contract Health insurance contract that the insured has the right to continue in force by pay-ment of premiums set forth in the contract for a substantial period of time, during which the insurer has no right to make unilaterally any change in any contract provision.
noncontributory plan Employee benefit plan under which the employer bears the full cost of the employees’ benefits; must insure 100 percent of eligible employees.
nonforfeiture options Privileges allowed under terms of a life insurance contract after cash values have been created.
nonforfeiture values Those benefits in a life insur-ance policy that by law, the policyowner does not forfeit even if he or she discontinues premium pay-ments; usually cash value, loan value, paid-up insur-ance value and extended term insurance value.
nonparticipating Insurance under which the insured is not entitled to share in the divisible surplus of the company.
nonqualified plan A retirement plan that does not meet federal government requirements and is not eligible for favorable tax treatment.
notice of claims provision Policy provision that describes the policyowner’s obligation to provide notification of loss to the insurer within a reason-able period of time.
Ooffer and acceptance The offer may be made by the
applicant by signing the application, paying the first premium and, if necessary, submitting to a physical examination. Policy issuance, as applied for, con-stitutes acceptance by the company. Or, the offer may be made by the company when no premium payment is submitted with application. Premium payment on the offered policy then constitutes acceptance by the applicant.
Old-Age, Survivors, Disability and Hospital Insurance (OASDI) Retirement, death, disability income and hospital insurance benefits provided under the Social Security system.
open-panel HMO A network of physicians who work out of their own offices and participate in the HMO on a part-time basis.
optionally renewable contract Health insurance policy in which the insurer reserves the right to ter-minate the coverage at any anniversary or, in some cases, at any premium due date, but does not have the right to terminate coverage between such dates.
ordinary insurance Life insurance of commercial companies not issued on the weekly premium basis; amount of protection usually is $1,000 or more.
other insureds rider A term rider, covering a family member other than the insured, that is attached to the base policy covering the insured.
outline of coverage Informational material about a specific plan or policy of insurance that describes the policy’s features and benefits; in many states, an outline of coverage is required to be given to consumers when certain types of coverages are being considered.
overhead insurance Type of short-term disability insurance reimbursing the insured for specified, fixed, monthly expenses, normal and customary in operating the insured’s business.
overinsurance An excessive amount of insurance; an amount of insurance that would result in payment of more than the actual loss or more than incurred expenses.
own occupation A definition of total disability that requires that in order to receive disability income benefits the insured must be unable to work at his or her own occupation.
Ppaid-up additions Additional life insurance pur-
chased by policy dividends on a net single premium basis at the insured’s attained insurance age at the time additions are purchased.
paid-up policy No further premiums are to be paid and the company is held liable for the benefits pro-vided by the contract.
partial disability Illness or injury preventing insured from performing at least one or more, but not all, of their occupational duties.
participating Plan of insurance under which the policyowner receives shares (commonly called divi-dends) of the divisible surplus of the company.
partnership A business entity that allows two or more people to strengthen their effectiveness by working together as co-owners.
payor rider Available under certain juvenile life insurance policies, upon payment of an extra pre-mium. Provides for the waiver of future premiums if the person responsible for paying them dies or is disabled before the policy becomes fully paid or matures as a death claim, or as an endowment, or the child reaches a specific age.
period certain annuity An annuity income option that guarantees a definite minimum period of pay-ments.
policy In insurance, the written instrument in which a contract of insurance is set forth.
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236 Glossary
policy loan In life insurance, a loan made by the insur-ance company to the policyowner, with the policy’s cash value assigned as security. One of the standard nonforfeiture options.
policy provisions The term or conditions of an insur-ance policy as contained in the policy clauses.
precertification The insurer’s approval of an insured’s entering a hospital. Many health policies require precertification as part of an effort to control costs.
preexisting condition An illness or medical condi-tion that existed before a policy’s effective date; usually excluded from coverage, through the policy’s standard provisions or by waiver.
preferred provider organization (PPO) Associa-tion of health care providers, such as doctors and hospitals, that agree to provide health care to members of a particular group at fees negotiated in advance.
preferred risk A risk whose physical condition, occupation, mode of living and other characteristics indicate a prospect for longevity for unimpaired lives of the same age.
premium The periodic payment required to keep an insurance policy in force.
prescription drug coverage Usually offered as an optional benefit to group medical expense plans, this coverage covers some or all of the cost of pre-scription drugs.
presumptive disability benefit A disability income policy benefit that provides that if an insured expe-riences a specified disability, such as blindness, he or she is presumed to be totally disabled and entitled to the full amount payable under the policy, whether or not he or she is able to work.
primary beneficiary In life insurance, the beneficiary designated by the insured as the first to receive policy benefits.
primary insurance amount (PIA) Amount equal to a covered worker’s full Social Security retirement benefit at age 65 or disability benefit.
principal An insurance company that, having appointed someone as its agent, is bound to the contracts the agent completes in its behalf.
principal sum The amount under an AD&D policy that is payable as a death benefit if death is due to an accident.
private insurer An insurer that is not associated with federal or state government.
probationary period Specified number of days after an insurance policy’s issue date during which cover-age is not afforded for sickness. Standard practice for group coverages.
proceeds Net amount of money payable by the com-pany at the insured’s death or at policy maturity.
producer A general term applied to an agent, broker, personal producing general agent, solicitor or other person who sells insurance.
profit-sharing plan Any plan whereby a portion of a company’s profits is set aside for distribution to employees who qualify under the plan.
proof of loss A mandatory health insurance provision stating that the insured must provide a completed claim form to the insurer within 90 days of the date of loss.
pure risk Type of risk that involves the chance of loss only; there is no opportunity for gain; insurable.
Qqualified plan A retirement or employee compen-
sation plan established and maintained by an employer that meets specific guidelines spelled out by the IRS and consequently receives favorable tax treatment.
Rrate-up in age System of rating substandard risks that
assumes the insured to be older than he or she really is and charging a correspondingly higher premium.
rating The making of insurance also creates the pre-mium classification given an applicant for life or health insurance.
reasonable and customary charge Charge for health care service consistent with the going rate of charge in a given geographical area for identical or similar services.
rebating Returning part of the commission or giving anything else of value to the insured as an induce-ment to buy the policy. It is illegal and cause for license revocation in most states. In some states, it is an offense by both the agent and the person receiving the rebate.
recurrent disability provision A disability income policy provision that specifies the period of time during which the reoccurrence of a disability is con-sidered a continuation of a prior disability.
reduced paid-up insurance A nonforfeiture option contained in most life insurance policies providing for the insured to elect to have the cash surrender value of the policy used to purchase a paid-up policy for a reduced amount of insurance.
reimbursement approach Payment of health policy benefits to insured based on actual medical expenses incurred.
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237Glossary
reinstatement Putting a lapsed policy back in force by producing satisfactory evidence of insurability and paying any past-due premiums required.
renewable option An option that allows the policy-owner to renew a term policy before its termination date without having to provide evidence of insur-ability.
renewable term Some term policies prove that they may be renewed on the same plan for one or more years without medical examination, but with rates based on the insured’s advanced age.
replacement Act of replacing one life insurance policy with another; may be done legally under certain conditions. (See twisting)
representation Statements made by applicants on their applications for insurance that they repre-sent as being substantially true to the best of their knowledge and belief, but that are not warranted as exact in every detail. (See warranties)
reserve Fund held by the company to help fulfill future claims.
residual disability benefit A disability income pay-ment based on the proportion of income the insured has actually lost, taking into account the fact that he or she is able to earn some income.
respite care Type of health or medical care designed to provide a short rest period for a caregiver. Char-acterized by its temporary status.
revocable beneficiary Beneficiary whose rights in a policy are subject to the policyowner’s reserved right to revoke or change the beneficiary designation and the right to surrender or make a loan on the policy without the beneficiary’s consent.
rider Strictly speaking, a rider adds something to a policy. However, the term is used loosely to refer to any supplemental agreement attached to and made a part of the policy, whether the policy’s conditions are expanded and additional coverages added, or a coverage of conditions is waived.
risk Uncertainty regarding loss; the probability of loss occurring for an insured or prospect.
risk pooling A basic principle of insurance whereby a large number contribute to cover the losses of a few. (See loss sharing)
risk selection The method of a home office under-writer used to choose applicants that the insurance company will accept. The underwriter must deter-mine whether risks are standard, substandard or preferred and adjust the premium rates accordingly.
rollover IRA An individual retirement account established with funds transferred from another IRA or qualified retirement plan that the owner had terminated.
Sschedule List of specified amounts payable, usually for
surgical operations, dismemberment, fractures, etc. secondary beneficiary An alternative beneficiary
designated to receive payment, usually in the event the original beneficiary predeceases the insured.
Section 457 plans Deferred compensation plans for employees of state and local governments in which amounts deferred will not be included in gross income until they are actually received or made available.
self-insurance Program for providing insurance financed entirely through the means of the policy-owner, in place of purchasing coverage from com-mercial carriers.
self-insured plan A health insurance plan charac-terized by an employer (usually a large one), labor union, fraternal organization or other group retain-ing the risk of covering its employees’ medical expenses.
settlement options Optional modes of settlement provided by most life insurance policies in lieu of lump-sum payment. Usual options are: lump-sum cash; interest-only; fixed-period; fixed-amount; and life income.
single dismemberment Loss of one hand or one foot, or the sight of one eye.
single-premium whole life insurance Whole life insurance for which the entire premium is paid in one sum at the beginning of the contract period.
skilled nursing care Daily nursing care ordered by a doctor; often medically necessary. It can only be performed by or under the supervision of skilled medical professionals and is available 24 hours a day.
small employer An employer who employs not more than 50 employees, the majority of whom are employed in Florida.
Social Security Programs first created by Congress in 1935 and now composed of Old-Age, Survivors and Disability Insurance (OASDI), Medicare, Medicaid and various grants-in-aid, which provide economic security to nearly all employed people.
sole proprietorship The simplest form of business organization whereby one individual owns and con-trols the entire company.
special class Applicants who cannot qualify for standard insurance, but may secure policies with riders waiving payment for losses involving certain existing health impairments.
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238 Glossary
special risk policy Provides coverage for unusual hazards normally not covered under accident and health insurance, such as a concert pianist insuring his or her hands for a million dollars. (See limited risk policy)
specified disease insurance (See limited risk policy)
speculative risk A type of risk that involves the chance of both loss and gain; not insurable.
spendthrift provision Stipulates that, to the extent permitted by law, policy proceeds shall not be sub-ject to the claims of creditors of the beneficiary or policy-owner.
spousal IRA An individual retirement account that persons eligible to set up IRAs for themselves may set up jointly with a nonworking spouse.
standard risk Person who, according to a company’s underwriting standards, is entitled to insurance pro-tection without extra rating or special restrictions.
stock insurer An insurance company owned and con-trolled by a group of stockholders whose investment in the company provides the safety margin necessary in issuance of guaranteed, fixed premium, nonpar-ticipating policies.
stock redemption plan An agreement under which a close corporation purchases a deceased stockholder’s interest.
stop-loss provision Designed to stop the company’s loss at a given point, as an aggregate payable under a policy, a maximum payable for any one disability or the like; also applies to individuals, placing a limit on the maximum out-of-pocket expenses an insured must pay for health care, after which the health policy covers all expenses.
straight life income annuity (straight life annuity, life annuity) An annuity income option that pays a guaranteed income for the annuitant’s lifetime, after which time payments stop.
straight whole life insurance (See whole life insurance)
subscriber Policyowner of a health care plan under-written by a service insurer.
substandard risk Person who is considered an under-average or impaired insurance risk because of physical condition, family or personal history of disease, occupation, residence in unhealthy climate or dangerous habits. (See special class)
suicide provision Most life insurance policies provide that if the insured commits suicide within a speci-fied period, usually two years after the issue date, the company’s liability will be limited to a return of premiums paid.
supplemental accident coverage Often included as part of a group basic or major medical plan, this type of coverage is designed to cover expenses associated with accidents to the extent they are not provided under other coverages.
supplementary major medical policy A medi-cal expense health plan that covers expenses not included under a basic policy and expenses that exceed the limits of a basic policy.
surgical expense insurance Provides benefits to pay for the cost of surgical operations.
surgical schedule List of cash allowances payable for various types of surgery, with the respective maxi-mum amounts payable based upon severity of the operations; stipulated maximum usually covers all professional fees involved, (e.g., surgeon, anesthesi-ologist).
surrender value (See cash surrender value)
Ttax-sheltered annuity An annuity plan reserved for
nonprofit organizations and their employees. Funds contributed to the annuity are excluded from cur-rent taxable income and are only taxed later, when benefits begin to be paid. Also called tax-deferred annuity and 403(b) plan.
temporary insurance agreement (See binding receipt)
term insurance Protection during limited number of years; expiring without value if the insured survives the stated period, which may be one or more years, but usually is 5 to 20 years, because such periods generally cover the needs for temporary protection.
term of policy Period for which the policy runs. In life insurance, this is to the end of the term period for term insurance, to the maturity date for endow-ments and to the insured’s death (or age 100) for permanent insurance. In most other kinds of insur-ance, it is usually the period for which a premium has been paid in advance; however, it may be for a year or more, even though the premium is paid on a semiannual or other basis.
tertiary beneficiary In life insurance, a beneficiary designated as third in line to receive the proceeds or benefits if the primary and secondary beneficiaries do not survive the insured.
time limit on certain defenses A provision stating that an insurance policy is incontestable after it has been in force a certain period of time. It also limits the period during which an insurer can deny a claim on the basis of a preexisting condition.
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239Glossary
total disability Disability preventing insureds from performing any duty of their usual occupations or any occupation for remuneration; actual definition depends on policy wording.
transacting insurance The transaction of any of the following, in addition to other acts included under applicable provisions of the state code: solicitation or inducement; preliminary negotiations; effect-ing a contract of insurance; transacting matters subsequent to effecting a contract of insurance and arising out of it.
travel-accident policies Limited to indemnities for accidents while traveling, usually by common carrier.
trust Arrangement in which property is held by a per-son or corporation (trustee) for the benefit of others (beneficiaries). The grantor (person transferring the property to the trustee) gives legal title to the trustee, subject to terms set forth in a trust agree-ment. Beneficiaries have equitable title to the trust property.
twisting Practice of inducing a policyowner with one company to lapse, forfeit or surrender a life insur-ance policy for the purpose of taking out a policy in another company. Generally classified as a misde-meanor, subject to fine, revocation of license and sometimes imprisonment. (See misrepresentation)
Uunderwriter Company receiving premiums and
accepting responsibility for fulfilling the policy contract. Company employee who decides whether or not the company should assume a particular risk. The agent who sells the policy.
underwriting Process through which an insurer deter-mines whether, and on what basis, an insurance application will be accepted.
Unfair Trade Practices Act A model act written by the National Association of Insurance Commission-ers (NAIC) and adopted by most states empowering state insurance commissioners to investigate and issue cease and desist orders and penalties to insur-ers for engaging in unfair or deceptive practices, such as misrepresentation or coercion.
Uniform Simultaneous Death Act Model law that states when an insured and beneficiary die at the same time, it is presumed that the insured survived the beneficiary.
unilateral Distinguishing characteristic of an insurance contract in that it is only the insurance company that pledges anything.
uninsurable risk One not acceptable for insurance due to excessive risk.
universal life Flexible premium, two-part contract containing renewable term insurance and a cash value account that generally earns interest at a higher rate than a traditional policy. The inter-est rate varies. Premiums are deposited in the cash value account after the company deducts its fee and a monthly cost for the term coverage.
utilization review A technique used by health care providers to determine after the fact if health care was appropriate and effective.
Vvariable annuity Similar to a traditional, fixed annu-
ity in that retirement payments will be made peri-odically to the annuitants, usually over the remain-ing years of their lives. Under the variable annuity, there is no guarantee of the dollar amount of the payments; they fluctuate according to the value of an account invested primarily in common stocks.
variable life insurance Provides a guaranteed minimum death benefit. Actual benefits paid may be more, however, depending on the fluctuating market value of investments behind the contract at the insured’s death. The cash surrender value also generally fluctuates with the market value of the investment portfolio.
variable universal life insurance A life insurance policy combining characteristics of universal and variable life policies. A VUL policy contains unscheduled premium payments and death benefits and a cash value that varies according to the underlying funds whose investment portfolio is managed by the policyowner.
vision insurance Optional coverage available with group health insurance plans, vision insurance typi-cally pays for charges incurred during eye exams; eyeglasses and contact lenses are usually excluded.
void contract An agreement without legal effect; an invalid contract.
voidable contract A contract that can be made void at the option of one or more parties to the agree-ment.
Wwaiting period (See elimination period)waiver Agreement waiving the company’s liability for a
certain type or types of risk ordinarily covered in the policy; a voluntary giving up of a legal, given right.
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240 Glossary
waiver of premium Rider or provision included in most life insurance policies and some health insurance policies exempting the insured from paying premiums after he or she has been disabled for a specified period of time, usually six months in life policies and 90 days or six months in health policies.
war clause Relieves the insurer of liability, or reduces its liability, for specified loss caused by war.
warranties Statements made on an application for insurance that are warranted to be true; that is, they are exact in every detail as opposed to representations. Statements on applications for insurance are rarely warranties, unless fraud is involved. (See representation)
whole life insurance Permanent level insurance protection for the “whole of life,” from policy issue to the death of the insured. Characterized by level premiums, level benefits and cash values.
wholesale insurance (See franchise insurance)workers’ compensation Benefits paid workers for
injury, disability or disease contracted in the course of their employment. Benefits and conditions are set by law, although in most states the insurance to provide the benefits may be purchased from regular insurance companies. A few states have monopolis-tic state compensation funds.
Yyearly renewable term insurance (YRT)
(See annually renewable term)
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Notes
Notes
Notes
Notes
