New York Life & Health Insurance License exam flashcards

All 249 questions

From the free lessons, each with its answer and why. The full course adds questions from every lesson.

When New York issues an insurance agent's license to a corporation, who may be named as sub-licensees to act under it?

Only the corporation's officers and directors

Under section 2103(c), a license issued to a corporation authorizes only its officers and directors, named in the license as sub-licensees, to act individually as agents under it.

Source: N.Y. Ins. Law § 2103(c) ·Insurance regulation · From New York producer licensing: process, definitions, and license types (Ins. Law 2101-2109, 2136)

What is the minimum age for an individual applicant, or a proposed sub-licensee, to be issued a New York insurance agent's license?

18, measured at the time the license is issued

Section 2103(d) requires every individual applicant and every proposed sub-licensee to be eighteen years of age or over at the time the license is issued.

Source: N.Y. Ins. Law § 2103(d) ·Insurance regulation · From New York producer licensing: process, definitions, and license types (Ins. Law 2101-2109, 2136)

A New York insurance broker licensed under the non-life branch of Insurance Law § 2104 may act with respect to which lines of authority?

Any and every line of authority except life insurance and variable life and variable annuity products

Section 2104(b)(1)(B) gives a broker licensed under that branch authority over any and every line of authority except life insurance and variable life and variable annuity products.

Source: N.Y. Ins. Law § 2104(b)(1)(B) ·Insurance regulation · From New York producer licensing: process, definitions, and license types (Ins. Law 2101-2109, 2136)

A licensed New York agent is called to active duty in the armed forces. Under Insurance Law § 2109, to whom may a temporary license be issued so the agent's business continues?

A person the absent agent designates

Section 2109(a)(2) allows a temporary license to any person designated by a licensed agent or broker who is absent because of service in any branch of the U.S. armed forces.

Source: N.Y. Ins. Law § 2109(a)(2) ·Insurance regulation · From New York producer licensing: process, definitions, and license types (Ins. Law 2101-2109, 2136)

Under Insurance Law § 2104, the Superintendent may issue a broker's license to an applicant deemed to be what?

Trustworthy and competent to act as a broker in a way that safeguards the interests of the insured

Section 2104(a)(1) authorizes a broker's license for an applicant deemed trustworthy and competent to act as a broker in such manner as to safeguard the interests of the insured, and otherwise qualified.

Source: N.Y. Ins. Law § 2104(a)(1) ·Insurance regulation · From New York producer licensing: process, definitions, and license types (Ins. Law 2101-2109, 2136)

In New York licensing terminology, which term is the umbrella category that includes insurance agents, title insurance agents and insurance brokers?

Insurance producer

Insurance producer is the umbrella term for those licensed to sell, solicit or negotiate insurance: insurance agents, title insurance agents and insurance brokers, along with intermediaries such as excess line brokers and reinsurance intermediaries.

Insurance regulation · From New York producer licensing: process, definitions, and license types (Ins. Law 2101-2109, 2136)

Under Insurance Law § 2104(b)(3), which item must appear on a New York broker's license?

The licensee's lines of authority and the expiration date

Section 2104(b)(3) requires the license to contain the licensee's name, address, personal identification number, date of issuance, lines of authority, expiration date and any other information the Superintendent deems necessary.

Source: N.Y. Ins. Law § 2104(b)(3) ·Insurance regulation · From New York producer licensing: process, definitions, and license types (Ins. Law 2101-2109, 2136)

When a licensed New York accident and health insurance agent becomes totally disabled and cannot carry on the business, to whom may a temporary license be issued under Insurance Law § 2109?

The agent's next of kin

Section 2109(a)(3) authorizes a temporary license to the next of kin of a person who has become totally disabled and is prevented from pursuing the duties of the occupation, and who at the start of the disability was a licensed accident and health agent under section 2103(a), a licensed agent under section 2103(b), a licensed title insurance agent or a licensed broker.

Source: N.Y. Ins. Law § 2109(a)(3) ·Insurance regulation · From New York producer licensing: process, definitions, and license types (Ins. Law 2101-2109, 2136)

In insurance, what does the term "risk" mean?

Uncertainty about whether a loss will occur

Risk is uncertainty concerning loss. Where a loss is certain there is no risk, only a cost, so insurance deals with the uncertainty of whether a loss will happen.

General insurance · From Risk, exposure, hazard, peril, and loss, and the methods of handling risk

Which term describes the state of being open to possible loss, measured in units such as vehicles, payroll or property value?

Exposure

Exposure is the state of being subject to loss, and insurers express it in exposure units, such as the number of vehicles, the size of a payroll or the value of a building, to predict and price losses.

General insurance · From Risk, exposure, hazard, peril, and loss, and the methods of handling risk

What is a peril?

The cause of a loss

A peril is the immediate cause of loss, such as fire, windstorm, theft, collision, illness or death. Policies typically describe their coverage in terms of the perils they insure against.

General insurance · From Risk, exposure, hazard, peril, and loss, and the methods of handling risk

Which statement best defines a hazard?

A condition that increases the chance of a loss or the severity of a loss

A hazard is not the cause of a loss. It is a condition, physical, moral or morale, that makes a peril more likely to occur or makes the resulting loss larger.

General insurance · From Risk, exposure, hazard, peril, and loss, and the methods of handling risk

When a fire damages a building, the cost to repair the building itself is best described as

a direct loss

A direct loss is the immediate physical damage to property caused by a peril. Repairing the fire-damaged building is the direct loss; costs flowing from it are indirect.

General insurance · From Risk, exposure, hazard, peril, and loss, and the methods of handling risk

Which method of handling risk eliminates a risk by not engaging in the activity that creates it?

Avoidance

Avoidance means refusing to take on the activity or property that creates the exposure. It is the only method that removes the risk entirely.

General insurance · From Risk, exposure, hazard, peril, and loss, and the methods of handling risk

Buying an insurance policy is the most common example of which method of handling risk?

Transfer

Insurance transfers the financial consequences of covered losses from the insured to the insurer in exchange for a premium.

General insurance · From Risk, exposure, hazard, peril, and loss, and the methods of handling risk

A large corporation sets aside its own funds to pay employee injury claims instead of buying insurance. This self-insurance plan is a form of

retention

Self-insurance is planned retention. The organization accepts the risk and funds expected losses itself, often because its large number of exposure units makes losses predictable.

General insurance · From Risk, exposure, hazard, peril, and loss, and the methods of handling risk

Court decisions and laws that tend to increase the size of liability awards are sometimes described as which kind of hazard?

Legal hazard

Some texts identify legal hazard as a fourth hazard: features of the legal environment, such as generous court awards, that increase the frequency or severity of claims.

General insurance · From Risk, exposure, hazard, peril, and loss, and the methods of handling risk

In insurance terms, which best describes a loss?

An unintended, unexpected reduction in value

A loss is an unintended, unforeseen decrease in value resulting from a peril. Deliberate destruction and expected depreciation are not losses in the insurance sense.

General insurance · From Risk, exposure, hazard, peril, and loss, and the methods of handling risk

In life insurance, what is underwriting?

The process an insurer uses to decide whether it can accept an application and, if so, on what basis, so the proper premium is charged

Underwriting is the process by which a life insurer determines whether it can accept an application for life insurance and, if so, on what basis, so that the proper premium is charged. The underwriter reviews the application and decides whether the applicant is acceptable and at what premium rate.

Source: N.Y. Dep't of Fin. Servs., Life Insurance Information for Consumers ·Life insurance basics · From Underwriting: insurable interest, medical information, and risk classification

Between persons closely related by blood or by law, such as a parent and child, insurable interest is based on what?

A substantial interest engendered by love and affection

The statute defines insurable interest, for persons closely related by blood or by law, as a substantial interest engendered by love and affection. No economic stake needs to be shown.

Source: N.Y. Ins. Law § 3205(a)(1)(A) ·Life insurance basics · From Underwriting: insurable interest, medical information, and risk classification

A person of lawful age buys a policy on his own life. Whom may he name as beneficiary?

Any person, firm, association or corporation he chooses

Any person of lawful age may, on his own initiative, procure insurance on his own life for the benefit of any person, firm, association or corporation. You always have an insurable interest in your own life.

Source: N.Y. Ins. Law § 3205(b)(1) ·Life insurance basics · From Underwriting: insurable interest, medical information, and risk classification

How is a substandard life insurance applicant usually handled?

The applicant may be accepted, but an additional premium is charged for the greater probability of a shorter life span

A substandard risk is an applicant who does not meet the requirements set for the standard risk. An additional premium is charged on substandard risks to provide for the probability that the person will have a shorter life span than a standard risk.

Source: N.Y. Dep't of Fin. Servs., Life Insurance Information for Consumers ·Life insurance basics · From Underwriting: insurable interest, medical information, and risk classification

What is the Medical Information Bureau (MIB)?

A database shared by member insurers that holds coded information about impairments disclosed in earlier applications

The Medical Information Bureau is a nonprofit, member-insurer database of coded impairment information reported from previous applications. Underwriters use an MIB report as an alert to look further; it is not itself a basis for declining an applicant.

Life insurance basics · From Underwriting: insurable interest, medical information, and risk classification

What does adverse selection mean in life insurance?

The tendency of people who are worse-than-average risks to seek insurance, or more insurance, than others

Adverse selection is the tendency of poorer risks to seek or keep insurance at a higher rate than average risks. Underwriting exists largely to guard against it so that premiums match the risk accepted.

Life insurance basics · From Underwriting: insurable interest, medical information, and risk classification

Without the child's written consent, a person with an insurable interest may insure the life of a minor below what age, within limits set by statute?

14 years and 6 months

A person with an insurable interest in a minor under the age of 14 years and 6 months, or a person on whom the minor depends for support, may insure the minor without the minor's written consent, in amounts not exceeding the limits specified in the statute.

Source: N.Y. Ins. Law § 3205(c)(2) ·Life insurance basics · From Underwriting: insurable interest, medical information, and risk classification

During underwriting, the insurer requests a report from the applicant's own doctor describing diagnoses and treatment. What is this report called?

An attending physician's statement (APS)

An attending physician's statement is a report from the applicant's own physician summarizing the medical history, diagnoses and treatment. Underwriters order it when the application or exam raises questions, or for larger amounts.

Life insurance basics · From Underwriting: insurable interest, medical information, and risk classification

An applicant who fits the physical, occupational and other standards on which normal premium rates are based is classified as what?

A standard risk

A standard risk is a person applying for life insurance who fits the physical, occupational and other standards on which the normal premium rates are based.

Source: N.Y. Dep't of Fin. Servs., Life Insurance Information for Consumers ·Life insurance basics · From Underwriting: insurable interest, medical information, and risk classification

Under the Fair Credit Reporting Act, what must an applicant be told when an insurer orders an inspection report, which the Act calls an investigative consumer report?

That such a report may be made, and that the applicant has rights to ask its scope and dispute errors

For an inspection report, which the Fair Credit Reporting Act calls an investigative consumer report, the applicant must be told in writing, no later than three days after the report is first requested, that such a report may be made. That disclosure must also tell the applicant of the right to ask for the nature and scope of the investigation, and must come with the Act's summary of consumer rights, which include seeing the agency's file and disputing inaccurate information. If coverage is declined or rated because of any consumer report, the applicant must also be told which agency supplied it.

Life insurance basics · From Underwriting: insurable interest, medical information, and risk classification

A policy is procured on someone's life in violation of the insurable interest rules, and the beneficiary collects the death benefit. Who may sue to recover those benefits from the beneficiary?

The insured's executor or administrator

If the beneficiary, assignee or other payee under a contract made in violation of the insurable interest rule receives benefits on the death, disablement or injury of the insured, the insured or his executor or administrator may maintain an action to recover them.

Source: N.Y. Ins. Law § 3205(b)(4) ·Life insurance basics · From Underwriting: insurable interest, medical information, and risk classification

A life insurance premium rate is built on which three factors?

Mortality, interest and expense

The premium for a life policy rests on two underlying concepts, mortality and interest, plus a third variable, expense: the amount the company adds to cover operating costs such as selling, investing premiums and paying claims.

Source: N.Y. Dep't of Fin. Servs., Life Insurance Information for Consumers ·Life insurance basics · From Underwriting: insurable interest, medical information, and risk classification

In a typical life insurance application, what does Part 2 collect?

The applicant's medical history and health information

A life application is commonly divided into Part 1, general information such as identity, owner, beneficiary, amount and occupation, and Part 2, the medical history. The producer's report is a separate section completed by the agent.

Life insurance basics · From Underwriting: insurable interest, medical information, and risk classification

When an adult insures the life of an unrelated adult with an individual policy, how must the insured agree to it?

By applying for the policy or consenting to it in writing

Except for the listed exceptions, no contract of insurance on a person may be made unless, at or before the making of the contract, the insured, being of lawful age or competent to contract, applies for or consents in writing.

Source: N.Y. Ins. Law § 3205(c) ·Life insurance basics · From Underwriting: insurable interest, medical information, and risk classification

What does a life insurer use mortality tables for?

To estimate how much money it will need each year to pay death claims, based on expected deaths at each age

Mortality tables give the insurer a basic estimate of how much money it will need to pay death claims each year, and let it determine average life expectancy for each age group. Mortality is one of the three premium factors.

Source: N.Y. Dep't of Fin. Servs., Life Insurance Information for Consumers ·Life insurance basics · From Underwriting: insurable interest, medical information, and risk classification

Which statement best describes term life insurance?

It provides protection for a specified period and pays only if the insured dies during that period.

Term insurance is temporary protection for a specified period, such as one year, a set number of years, or to a stated age. The insurer pays the face amount only if the insured dies within that period; if the insured outlives it, no benefit is payable.

Source: N.Y. Dep't of Fin. Servs., Life Insurance Information for Consumers ·Life insurance policies · From Term life insurance types

Which type of term insurance has a death benefit that declines over the term while the premium stays the same?

Decreasing term

Decreasing term coverage falls over the term, usually monthly or yearly, while the premium remains level. That pattern matches a debt that is being paid down.

Source: N.Y. Dep't of Fin. Servs., Life Insurance Information for Consumers ·Life insurance policies · From Term life insurance types

How does the premium for annually renewable term (ART) usually behave?

It increases each year at renewal, based on the insured's attained age.

ART provides one year of coverage at a time, renewable each year. Each renewal is priced at the insured's attained age, so the premium rises every year.

Life insurance policies · From Term life insurance types

Increasing term coverage is most often sold in which form?

As a rider, such as a cost of living rider, attached to a base policy

Increasing term, whose death benefit grows by a fixed amount or percentage, is most often added as a rider, such as a cost of living rider or a return of premium rider, rather than sold on its own.

Life insurance policies · From Term life insurance types

What generally happens when the owner of a term life policy stops paying premiums?

The policy lapses without any cash value.

Term insurance has no cash value component. If the premium is not paid, the policy generally lapses with nothing to return, unlike a permanent policy that has cash value.

Source: N.Y. Dep't of Fin. Servs., Life Insurance Information for Consumers ·Life insurance policies · From Term life insurance types

When the owner of an annually renewable term policy renews it for another year, what must the insured provide?

No new evidence of insurability

Annually renewable term is one year of coverage that the owner may renew each year without new evidence of insurability. The trade-off is that each renewal is priced at the insured's attained age.

Life insurance policies · From Term life insurance types

A term policy described as "term to age 65" provides coverage until when?

Until the insured reaches age 65

Term coverage can run for a set number of years or to a specified age. Term to age 65 covers the insured until age 65, after which the coverage expires.

Source: N.Y. Dep't of Fin. Servs., Life Insurance Information for Consumers ·Life insurance policies · From Term life insurance types

A term policy is described as "convertible." What does that feature allow the owner to do?

Exchange the term policy for a permanent policy without proving insurability

Term plans may be convertible to a permanent plan of insurance. Conversion lets the owner exchange the term coverage for a permanent policy without new evidence of insurability.

Source: N.Y. Dep't of Fin. Servs., Life Insurance Information for Consumers ·Life insurance policies · From Term life insurance types

What is the shortest coverage period for which term life insurance is commonly written?

One year

Term protection can be as short as one year, or run for a set number of years such as 5, 10 or 20, or to a specified age. One-year term, renewable annually, is the shortest common form.

Source: N.Y. Dep't of Fin. Servs., Life Insurance Information for Consumers ·Life insurance policies · From Term life insurance types

What are the two broad categories into which life insurance plans fall?

Term and permanent

For the most part, life insurance plans are either term or permanent, or a combination of the two. Term is temporary protection; permanent insurance lasts for life and builds cash value.

Source: N.Y. Dep't of Fin. Servs., Life Insurance Information for Consumers ·Life insurance policies · From Term life insurance types

In increasing term coverage, how is the death benefit typically increased?

By a fixed amount or a percentage during the term

Increasing term raises the death benefit during the term by a fixed amount or a percentage, often to offset inflation.

Life insurance policies · From Term life insurance types

What defines a level term policy?

The death benefit stays the same from the start of the term until the policy expires.

Level term provides the same death benefit throughout the term until the policy expires, typically with a premium locked in for the guarantee period.

Source: N.Y. Dep't of Fin. Servs., Life Insurance Information for Consumers ·Life insurance policies · From Term life insurance types

Under the entire contract provision of an individual life insurance policy, what makes up the entire contract between the parties?

The policy, together with the application if a copy is attached when the policy is issued

Section 3203(a)(4) requires the policy to state that the policy, together with the application if a copy is attached when issued, constitutes the entire contract. Section 3204(a)(1) adds that nothing is incorporated by reference unless a copy is endorsed on or attached to the policy.

Source: N.Y. Ins. Law § 3203(a)(4) ·Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

How are statements made by the applicant in a life insurance application treated?

As representations, not warranties

Section 3204(c) provides that all statements made by or by the authority of the applicant for the issuance, reinstatement or renewal of a policy are deemed representations and not warranties.

Source: N.Y. Ins. Law § 3204(c) ·Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

Which policy provision contains the insurer's basic promise to pay the face amount to the beneficiary upon proof of the insured's death?

The insuring clause

The insuring clause is the insurer's fundamental promise to pay the death benefit to the beneficiary upon due proof of the insured's death, subject to the policy terms. It sets the scope of coverage.

Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

In a life insurance contract, what is the applicant's consideration?

The completed application and payment of the initial premium

The applicant's consideration is the completed application together with the initial premium. The insurer's consideration is its promise to pay. Later premiums are conditions for keeping the policy in force, not the consideration for the contract.

Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

For an individual life policy delivered in New York and not sold by mail order, what free look period must the policy allow?

Not less than ten days nor more than thirty days from the date the policy was delivered

Section 3203(a)(11) requires a provision allowing the owner to surrender the policy with a written request for cancellation during a period of not less than ten days nor more than thirty days from the date the policy was delivered, for a refund of premium.

Source: N.Y. Ins. Law § 3203(a)(11) ·Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

A life insurance policy is sold by mail order. What free look period must it give the owner?

Thirty days

Section 3203(a)(11) provides that a policy sold by mail order must contain a provision permitting the policy owner a thirty-day period to surrender the policy for a refund.

Source: N.Y. Ins. Law § 3203(a)(11) ·Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

Who may modify a life insurance policy or waive one of its requirements?

A person specified by the insurer in the policy, in a signed writing

Section 3204(a)(3) states that the policy cannot be modified, nor any rights or requirements waived, except in a writing signed by a person specified by the insurer in the policy.

Source: N.Y. Ins. Law § 3204(a)(3) ·Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

What does the insurer give as its consideration in a life insurance contract?

Its promise to pay the benefits described in the policy

The insurer's consideration is its promise to pay the policy benefits. The applicant's consideration is the completed application and the initial premium.

Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

When an owner returns a traditional life policy during the free look period with a written request for cancellation, what must the insurer refund?

Any premium paid for the policy, including policy fees and other charges

Section 3203(a)(11)(i) requires a refund of any premium paid for the policy, including any policy fees or other charges, when the policy is surrendered with a written request for cancellation during the free look period.

Source: N.Y. Ins. Law § 3203(a)(11) ·Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

Where does the insuring clause usually appear in a life insurance policy?

On the policy's face page

The insuring clause is usually on the face page of the policy, where it identifies the parties and the amount and states the insurer's promise to pay.

Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

Where must a life policy's free look provision appear?

In the policy or in a notice attached to it

Section 3203(a)(11) requires that a provision granting the free look right appear in the policy or in a notice attached to it.

Source: N.Y. Ins. Law § 3203(a)(11) ·Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

A life policy was reinstated after a lapse. The insured later sends the insurer a written request for a copy of the reinstatement application. Within how many days of receipt must the insurer deliver or mail the copy?

Fifteen days

Section 3204(e) requires the insurer, within fifteen days after receiving a written request at its home office or any branch office, to deliver or mail a copy of a reinstatement, renewal or change application, or option notice, to the insured, beneficiary or assignee who asked.

Source: N.Y. Ins. Law § 3204(e) ·Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

For a traditional whole life policy that is not in default, when must the policy entitle the owner to take a policy loan up to the loan value?

Once three full years' premiums have been paid

Section 3203(a)(8)(A) requires a policy not in default, where three full years' premiums have been paid, to entitle the policyholder to a loan up to the loan value, with the sole security being an assignment or pledge of the policy.

Source: N.Y. Ins. Law § 3203(a)(8) ·Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

Which party to a life insurance policy holds the right to surrender it for its cash value while the insured is alive?

The policyowner

The policyowner controls the contract while the insured is alive, including the right to surrender it for cash value. Beneficiaries do not hold that right. A revocable beneficiary has no control during the insured's life, and an irrevocable beneficiary can at most withhold consent to a surrender but cannot surrender the policy.

Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

Which choices may the policyowner make under a life insurance policy?

Nonforfeiture, dividend, and settlement options

Electing nonforfeiture, dividend and settlement options is among the policyowner's rights. Underwriting class, credited rates and mortality tables are set by the insurer under the policy terms and the law.

Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

To exercise the free look right, what must the policyowner do within the free look period?

Surrender the policy to the insurer together with a written request for cancellation

Section 3203(a)(11) gives the refund upon surrender of the policy, together with a written request for cancellation, to the insurer during the free look period.

Source: N.Y. Ins. Law § 3203(a)(11) ·Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

Which policy provision states the amount of the premium and how often it is due?

The consideration clause

The consideration clause states the premium amount and frequency, tying the insurer's promise to the payment of premiums.

Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

While the insured is alive, what rights does a revocable beneficiary have to control the policy?

None; the beneficiary only receives the proceeds at the insured's death

Control of the policy belongs to the owner. A revocable beneficiary has no rights to control the contract and only receives the proceeds when the insured dies.

Life insurance policy provisions, options, and riders · From Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

The basic financial risk that a life annuity is designed to protect against is the risk of:

Outliving one's money

An annuity protects against living too long. A life contingent payout turns a sum of money into income the annuitant cannot outlive, which is why the annuity is described as the mirror image of life insurance, which protects against dying too soon.

Source: N.Y. Dep't of Fin. Servs., Annuity Products in New York ·Annuities · From The annuity principle

Which statement best contrasts life insurance with an annuity?

Life insurance creates an estate, while an annuity liquidates one

Life insurance creates an immediate estate at death for survivors. An annuity systematically liquidates an estate, paying out principal and interest over a period, often the annuitant's lifetime.

Annuities · From The annuity principle

In an annuity contract, the person whose life the income payments are based on is the:

Annuitant

The annuitant is the life on which payments depend. The owner is often, but not always, the same person.

Source: N.Y. Dep't of Fin. Servs., Annuity Products in New York ·Annuities · From The annuity principle

In an annuity pool, funds left behind by annuitants who die earlier than expected and used to help pay those who live longer are called:

Survivorship benefits

Survivorship benefits, also called mortality credits, are the funds released by early deaths in the pool that support continued payments to survivors.

Annuities · From The annuity principle

The period during which an owner pays money into an annuity and the value grows before income begins is the:

Accumulation phase

During the accumulation phase, premiums are paid in and earn interest or investment returns on a tax-deferred basis. The annuity (payout) phase follows when the owner annuitizes.

Annuities · From The annuity principle

When the owner of a deferred annuity "annuitizes" the contract, the owner:

Converts the accumulated value into a stream of income payments

To annuitize is to convert the accumulation account into an income stream; it marks the move from the accumulation phase to the payout phase.

Source: N.Y. Dep't of Fin. Servs., Annuity Products in New York ·Annuities · From The annuity principle

A deferred annuity is one in which periodic income payments:

Are not scheduled to begin for at least 12 months

In a deferred annuity, periodic income payments are not scheduled to commence for at least 12 months; they are deferred to a maturity date or an earlier date the owner selects.

Source: N.Y. Dep't of Fin. Servs., Annuity Products in New York ·Annuities · From The annuity principle

Annuities are often called the "mirror image" of life insurance because they:

Use mortality tables to protect against the opposite risk, living too long instead of dying too soon

Both products rest on mortality tables and pooling, but they protect against opposite risks: life insurance against premature death, annuities against longevity.

Annuities · From The annuity principle

According to the New York Department of Financial Services, the goal of most annuities is to:

Provide a steady stream of income during retirement

The goal of most annuities is to provide a steady stream of income during retirement for a specified period or for the remainder of one or more lives.

Source: N.Y. Dep't of Fin. Servs., Annuity Products in New York ·Annuities · From The annuity principle

Under a joint and survivor annuity, periodic payments continue until:

Both annuitants have died

A joint and survivor annuity has two annuitants, usually spouses, and payments continue until the death of both. The survivor's payment may continue at 100% or be reduced, for example to 50%, 66.67% or 75%.

Source: N.Y. Dep't of Fin. Servs., Annuity Products in New York ·Annuities · From The annuity principle

Under a deferred annuity, periodic income payments begin on:

The maturity date stated in the contract or, if earlier, a date selected by the owner

In a deferred annuity, periodic payments are deferred until a maturity date stated in the contract or, if earlier, a date selected by the owner.

Source: N.Y. Dep't of Fin. Servs., Annuity Products in New York ·Annuities · From The annuity principle

The phase of an annuity in which the accumulated value is paid out to the annuitant as income is also called the:

Liquidation phase

The payout phase, also called the annuity or liquidation phase, is when the owner has annuitized and the value is paid out as income.

Annuities · From The annuity principle

In an annuity contract, the party who purchases the contract and holds the rights to control it is the:

Owner

The owner, or contract holder, purchases the annuity, pays the premium and controls the contract. The owner is often, but not necessarily, also the annuitant.

Source: N.Y. Dep't of Fin. Servs., Annuity Products in New York ·Annuities · From The annuity principle

Under the New York Department of Financial Services description, a purchaser may fund an annuity with:

A lump-sum payment or a series of payments

An annuity is a contract in which the purchaser agrees to make a lump sum payment or a series of payments in return for regular disbursements.

Source: N.Y. Dep't of Fin. Servs., Annuity Products in New York ·Annuities · From The annuity principle

For an individual who buys a life insurance policy for personal reasons, the premiums are generally:

Not deductible, because they are a personal expense

Premiums an individual pays for personal life insurance are a personal expense and are not deductible. The trade-off is that the death benefit is generally received income-tax-free.

Federal tax considerations for life insurance and annuities · From Tax treatment of life insurance premiums, proceeds, and MECs

A life insurance contract entered into on or after June 21, 1988 becomes a modified endowment contract if it fails which test?

The 7-pay test

Under 26 U.S.C. § 7702A(a), a modified endowment contract is a contract meeting section 7702 that was entered into on or after June 21, 1988 and fails the 7-pay test of subsection (b).

Source: 26 U.S.C. § 7702A(a) ·Federal tax considerations for life insurance and annuities · From Tax treatment of life insurance premiums, proceeds, and MECs

Interest credited to the cash value of a permanent life insurance policy that meets the federal definition of life insurance is:

Tax-deferred, not taxed as it accrues

The inside buildup of a policy that qualifies as life insurance under federal law is not taxed as it accrues. Gain can become taxable later, for example on a surrender, or on a withdrawal or loan from a policy that has become a modified endowment contract, but it is not taxed year by year.

Federal tax considerations for life insurance and annuities · From Tax treatment of life insurance premiums, proceeds, and MECs

Which distribution from a modified endowment contract is exempt from the 10% additional tax?

A distribution attributable to the taxpayer becoming disabled

26 U.S.C. § 72(v)(2) lists three exceptions to the MEC additional tax: distributions on or after age 59½, distributions attributable to disability, and substantially equal periodic payments for life or life expectancy.

Source: 26 U.S.C. § 72(v)(2)(B) ·Federal tax considerations for life insurance and annuities · From Tax treatment of life insurance premiums, proceeds, and MECs

The 10% additional tax on taxable distributions from a modified endowment contract does not apply once the taxpayer reaches what age?

59½

Under 26 U.S.C. § 72(v)(2)(A), the 10% additional tax does not apply to distributions made on or after the date the taxpayer attains age 59½.

Source: 26 U.S.C. § 72(v)(2)(A) ·Federal tax considerations for life insurance and annuities · From Tax treatment of life insurance premiums, proceeds, and MECs

Under employer-paid group term life insurance, the cost of how much coverage can be provided to an employee without creating taxable income?

$50,000

The cost of the first $50,000 of employer-paid group term life coverage is not taxable to the employee; the cost of coverage above $50,000 is taxable income.

Federal tax considerations for life insurance and annuities · From Tax treatment of life insurance premiums, proceeds, and MECs

A life insurance policy owner's cost basis in the contract is generally:

Total premiums paid, minus dividends and other amounts already received tax-free

Cost basis is the owner's investment in the contract: total premiums paid, reduced by dividends and other amounts already received tax-free.

Federal tax considerations for life insurance and annuities · From Tax treatment of life insurance premiums, proceeds, and MECs

Withdrawals and loans from a modified endowment contract are taxed on what basis?

Last in, first out, with gain coming out first

Living distributions from a MEC, including policy loans, are taxed last in, first out: gain comes out first as ordinary income before any tax-free return of basis.

Federal tax considerations for life insurance and annuities · From Tax treatment of life insurance premiums, proceeds, and MECs

The modified endowment contract rules apply to life insurance contracts entered into on or after which date?

June 21, 1988

26 U.S.C. § 7702A(a)(1)(A) applies the MEC definition to contracts entered into on or after June 21, 1988.

Source: 26 U.S.C. § 7702A(a)(1)(A) ·Federal tax considerations for life insurance and annuities · From Tax treatment of life insurance premiums, proceeds, and MECs

A Section 1035 exchange allows a policy owner to:

Exchange a life insurance policy for another life policy or an annuity without recognizing gain

A Section 1035 exchange lets an owner exchange one life insurance policy for another life policy, or for an annuity, without recognizing gain.

Federal tax considerations for life insurance and annuities · From Tax treatment of life insurance premiums, proceeds, and MECs

The gain on the surrender of a life insurance policy for its cash value is taxed as:

Ordinary income

When a policy is surrendered, the amount received above the cost basis is taxable as ordinary income.

Federal tax considerations for life insurance and annuities · From Tax treatment of life insurance premiums, proceeds, and MECs

Dividends paid on a participating life insurance policy are generally treated as:

A return of excess premium, not taxable until total dividends exceed premiums paid

Policy dividends are treated as a return of excess premium and are not taxable until total dividends received exceed total premiums paid. They reduce cost basis.

Federal tax considerations for life insurance and annuities · From Tax treatment of life insurance premiums, proceeds, and MECs

To qualify as life insurance under the federal tax definition, a contract must pass either the cash value accumulation test or:

The guideline premium and cash value corridor test

A contract qualifies as life insurance under federal law by passing either the cash value accumulation test or the guideline premium and cash value corridor test. Only then is its inside buildup tax-deferred.

Federal tax considerations for life insurance and annuities · From Tax treatment of life insurance premiums, proceeds, and MECs

What makes an employer retirement plan a 'qualified' plan?

It meets the requirements of Internal Revenue Code section 401(a)

A plan is qualified when it, and the trust that holds its assets, meet the requirements of IRC section 401(a). Meeting those requirements is what unlocks the plan's tax advantages.

Source: 26 U.S.C. § 401(a) ·Qualified plans · From Qualified and nonqualified retirement plans

When may an employer generally deduct its contributions to a qualified retirement plan?

In the year the contributions are made to the plan

A key tax advantage of a qualified plan is that the employer deducts its contributions currently, when they are made, even though the employee is not taxed until distribution.

Qualified plans · From Qualified and nonqualified retirement plans

Why would an employer choose a nonqualified plan instead of a qualified plan?

To provide extra benefits only to selected executives or key employees

Because a nonqualified plan does not have to meet section 401(a), it may discriminate. That lets an employer reward only the executives or key employees it chooses.

Qualified plans · From Qualified and nonqualified retirement plans

Under section 401(a), a qualified plan's contributions or benefits may not discriminate in favor of which group?

Highly compensated employees

Section 401(a)(4) bars contributions or benefits that discriminate in favor of highly compensated employees, a term section 401 defines by reference to section 414(q).

Source: 26 U.S.C. § 401(a)(4) ·Qualified plans · From Qualified and nonqualified retirement plans

A qualified plan's trust will not qualify unless the plan meets the minimum standards of which requirement under section 401(a)(7)?

Vesting, as set out in section 411

Section 401(a)(7) says a trust is not a qualified trust unless the plan satisfies the minimum vesting standards of section 411.

Source: 26 U.S.C. § 401(a)(7) ·Qualified plans · From Qualified and nonqualified retirement plans

A married, vested participant in a defined benefit plan reaches retirement. Unless an election is made under the statute, in what form must the plan pay the accrued benefit?

A qualified joint and survivor annuity

Section 401(a)(11) requires a defined benefit plan to pay a vested participant who survives to the annuity starting date in the form of a qualified joint and survivor annuity, unless waived as section 417 allows.

Source: 26 U.S.C. § 401(a)(11) ·Qualified plans · From Qualified and nonqualified retirement plans

Under section 401, the minimum-required qualified joint and survivor annuity pays the surviving spouse at least what share of the annuity paid during the couple's joint lives?

50 percent

Section 401(a)(13)(D)(ii) defines the minimum-required qualified joint and survivor annuity as one under which the survivor annuity is 50 percent of the amount payable during the joint lives of the participant and spouse.

Source: 26 U.S.C. § 401(a)(13)(D)(ii) ·Qualified plans · From Qualified and nonqualified retirement plans

Section 401(a)(9) requires a qualified plan to provide that a participant's entire interest will be distributed beginning no later than what point?

The required beginning date

Under section 401(a)(9), a trust is not qualified unless the plan provides that each employee's entire interest will be distributed, or begin to be distributed, no later than the required beginning date.

Source: 26 U.S.C. § 401(a)(9) ·Qualified plans · From Qualified and nonqualified retirement plans

Section 401(a)(30) limits the elective deferrals an individual may make under a qualified plan to what amount?

The annual limitation in effect under section 402(g)

Section 401(a)(30) requires the plan to limit an individual's elective deferrals, across all the employer's plans, to the limitation in effect under section 402(g)(1)(A) for the year.

Source: 26 U.S.C. § 401(a)(30) ·Qualified plans · From Qualified and nonqualified retirement plans

How are cash distributions of pre-tax contributions and earnings from a qualified retirement plan taxed?

As ordinary income

Because pre-tax contributions and earnings in a qualified plan have never been taxed, they are taxed as ordinary income when distributed.

Qualified plans · From Qualified and nonqualified retirement plans

The trust that holds a qualified plan's assets is treated how for federal income tax purposes?

It is exempt from tax

Section 401 cross-references section 501(a), which exempts from tax a trust qualified under section 401. That exemption is what lets earnings accumulate tax-deferred.

Source: 26 U.S.C. § 401 ·Qualified plans · From Qualified and nonqualified retirement plans

A 401(k) plan is classified as which type of qualified plan?

A defined contribution plan

A 401(k) is a qualified cash or deferred arrangement under which the employee's benefit is the value of an individual account, which makes it a defined contribution plan.

Qualified plans · From Qualified and nonqualified retirement plans

A self-employed sole proprietor wants a qualified, tax-favored retirement plan for herself. Which plan was historically designed for this purpose?

A Keogh (HR-10) plan

Keogh, or HR-10, plans are qualified plans for self-employed individuals and their employees, following tax-favored rules similar to other qualified plans.

Qualified plans · From Qualified and nonqualified retirement plans

Under section 408, a distribution from a SIMPLE retirement account during the period when the higher early-withdrawal tax for SIMPLE accounts applies can be rolled over tax-free only into what?

Another SIMPLE retirement account

Section 408(d)(3)(G) provides that a SIMPLE account distribution to which section 72(t)(6) applies may be treated as a rollover only if paid into another SIMPLE retirement account.

Source: 26 U.S.C. § 408(d)(3)(G) ·Qualified plans · From Qualified and nonqualified retirement plans

Which statement best describes a life settlement?

The owner sells an existing policy to a third party for more than its cash surrender value but less than its death benefit

A life settlement is a sale of an in-force policy to a third-party buyer, the provider, for a lump sum that exceeds the cash surrender value but is less than the death benefit.

Life settlements · From Life settlements

After a life settlement is completed, who normally pays the premiums and receives the death benefit?

The life settlement provider pays the premiums and receives the death benefit

The provider becomes the new owner and beneficiary of the settled policy, so it keeps paying the premiums and collects the death benefit at the insured's death.

Life settlements · From Life settlements

Whom does a life settlement broker represent?

Only the policy owner, to whom the broker owes a fiduciary duty

The life settlement broker represents only the owner and owes the owner a fiduciary duty, including acting on the owner's instructions and in the owner's best interest.

Source: N.Y. Ins. Law § 7813(l) ·Life settlements · From Life settlements

Which activity is a life settlement intermediary prohibited from doing?

Representing or negotiating on behalf of the owner

An intermediary relays offers and counteroffers but may not represent, solicit, negotiate or act on behalf of an owner, provider or broker, and may not act as a provider or broker.

Source: N.Y. Ins. Law § 7814(e) ·Life settlements · From Life settlements

What must a person hold before acting as a life settlement intermediary in the state?

A registration issued by the superintendent

No person may act as a life settlement intermediary without a registration issued and in force under the life settlements act.

Source: N.Y. Ins. Law § 7804(a) ·Life settlements · From Life settlements

How long does the owner have to rescind a life settlement contract?

Until fifteen days after the owner receives the settlement proceeds

The owner may rescind from the time the contract is executed until fifteen days after receiving the life settlement proceeds, and the disclosure document must say so.

Source: N.Y. Ins. Law § 7811(a)(5) ·Life settlements · From Life settlements

When must the provider send the settlement proceeds to the owner?

Within three business days after the provider receives the insurer's acknowledgement that ownership and beneficiary have been transferred

Proceeds must be sent within three business days after the provider receives the insurer's or group administrator's acknowledgement that ownership has been transferred and the beneficiary designated.

Source: N.Y. Ins. Law § 7811(a)(6) ·Life settlements · From Life settlements

After a settlement, how often may the provider contact an insured whose life expectancy is more than one year to check on health status?

Once every three months

Health-status contacts are limited to once every three months for an insured with a life expectancy of more than one year.

Source: N.Y. Ins. Law § 7813(k) ·Life settlements · From Life settlements

How must a life settlement provider pay the settlement proceeds?

In a lump sum, because installment payments are prohibited

No life settlement provider may enter into a contract in which proceeds are paid in installments.

Source: N.Y. Ins. Law § 7814(c) ·Life settlements · From Life settlements

To whom may a provider pay compensation for acting as a life settlement broker?

Only a person licensed as a life settlement broker

No one may provide compensation to a person acting as a life settlement broker, and no one may accept it, unless that person is a licensed life settlement broker.

Source: N.Y. Ins. Law § 7814(a)(7) ·Life settlements · From Life settlements

What has traditionally distinguished a viatical settlement from other life settlements?

The insured is terminally or chronically ill

Viatical settlement is the traditional name for a settlement where the insured is terminally or chronically ill, often with a short life expectancy.

Life settlements · From Life settlements

For purposes of the life settlement law, a person is terminally ill if death can reasonably be expected within what period?

Twenty-four months or less

A person is terminally ill if he or she has an illness or condition that can reasonably be expected to result in death in twenty-four months or less.

Source: N.Y. Ins. Law § 7813(j)(3)(A) ·Life settlements · From Life settlements

What is stranger-originated life insurance, or STOLI?

A policy purchased from the start with the intent of transferring it to investors with no insurable interest in the insured

STOLI is a scheme in which a policy is initiated for the benefit of investors who lack an insurable interest, with resale planned from the start. It is prohibited, unlike a legitimate life settlement.

Life settlements · From Life settlements

What must the owner's disclosure say about taxes?

Some or all of the proceeds may be taxable, and advice should be sought from a professional tax adviser

The disclosure must state that some or all of the proceeds may be taxable and that the owner should seek advice from a professional tax adviser.

Source: N.Y. Ins. Law § 7811(a)(2) ·Life settlements · From Life settlements

In a life settlement disclosure, what is the 'gross offer or bid'?

The total amount offered by the provider for the policy, inclusive of commissions and fees

Gross offer or bid means the total amount or value offered by the provider to purchase the policy, inclusive of commissions and fees.

Source: N.Y. Ins. Law § 7811(a)(8) ·Life settlements · From Life settlements

What is a financing entity in the life settlement business?

An accredited investor whose principal role is providing funds to buy policies, under a written agreement with a provider

A financing entity is an accredited investor whose principal activity in the transaction is providing funds to effect the settlement or purchase policies, and who has a written agreement with a provider to do so.

Source: N.Y. Ins. Law § 7802(e) ·Life settlements · From Life settlements

What does the insured's separate disclosure say about his or her personal information?

It may be disclosed as necessary to effect the contract, with consent, and the insured may be asked to renew permission every two years

The insured's notice must say that medical, financial and personal information may be disclosed as necessary to effect the contract, that consent will be requested, that it may go to buyers or funders, and that permission may need renewing every two years.

Source: N.Y. Ins. Law § 7811(b)(3) ·Life settlements · From Life settlements

What must a life settlement broker's disclosure give the owner about the bidding?

A full, complete and accurate description of all offers, counter-offers, acceptances and rejections

The broker's disclosure must include a full, complete and accurate description of all offers, counter-offers, acceptances and rejections relating to the proposed contract.

Source: N.Y. Ins. Law § 7811(c)(2) ·Life settlements · From Life settlements

Which life settlement participants may the superintendent examine or investigate?

Providers, brokers, intermediaries and applicants for those licenses or registrations

The superintendent may examine or investigate any life settlement provider, broker or intermediary, and any applicant for licensure or registration.

Source: N.Y. Ins. Law § 7808 ·Life settlements · From Life settlements

When must the owner's separate disclosure document be signed?

No later than the date the life settlement contract is signed by all parties

The separate disclosure document must be signed by the owner and the provider no later than the date the life settlement contract is signed by all parties.

Source: N.Y. Ins. Law § 7811(a) ·Life settlements · From Life settlements

What is a 'settled policy'?

A policy that has at any time been acquired by a life settlement provider under a life settlement contract

A settled policy is one that at any time has been acquired by a life settlement provider pursuant to a life settlement contract.

Source: N.Y. Ins. Law § 7802(t) ·Life settlements · From Life settlements

In accident and health insurance, which description best defines the peril of accident?

An unforeseen, unintended and unexpected event that causes bodily injury

An accident is an unforeseen, unintended and unexpected event that causes bodily injury. Health insurance recognises two perils: accident and sickness.

Accident and health insurance basics · From Accident and health basics: perils, types of losses and benefits, classes of coverage, and common exclusions

In a disability income policy, how is the peril of sickness traditionally defined?

Illness or disease that first manifests, or is first treated, after the policy takes effect

Sickness means illness or disease. Disability income policies, and other policies that may still limit pre-existing conditions, traditionally cover sickness that first manifests, or is first treated, after the policy is in force. Comprehensive major medical coverage under the Affordable Care Act cannot exclude pre-existing conditions.

Accident and health insurance basics · From Accident and health basics: perils, types of losses and benefits, classes of coverage, and common exclusions

A health maintenance organization (HMO) that provides care through its own network of doctors and hospitals, rather than paying the member cash, is paying benefits on what basis?

Service basis

On a service basis, the plan provides the medical care directly instead of paying money to the insured. HMOs are the standard example.

Accident and health insurance basics · From Accident and health basics: perils, types of losses and benefits, classes of coverage, and common exclusions

What is the principal sum in an accidental death and dismemberment (AD&D) policy?

The stated amount paid for accidental death

AD&D pays a stated principal sum for accidental death and a scheduled share of it for the loss of limbs or sight.

Accident and health insurance basics · From Accident and health basics: perils, types of losses and benefits, classes of coverage, and common exclusions

Long-term care insurance generally begins paying benefits when the insured:

cannot perform activities of daily living or has a cognitive impairment

Long-term care coverage pays for extended custodial, intermediate or skilled care when the insured cannot perform activities of daily living or has a cognitive impairment.

Accident and health insurance basics · From Accident and health basics: perils, types of losses and benefits, classes of coverage, and common exclusions

Under group health insurance, what does each covered employee receive?

A certificate of insurance under the employer's master contract

A group policy is a single master contract issued to an employer or association. Members do not get their own policies; they receive certificates of insurance.

Accident and health insurance basics · From Accident and health basics: perils, types of losses and benefits, classes of coverage, and common exclusions

Which government health program is needs-based and run jointly by the federal and state governments?

Medicaid

Medicaid is the needs-based health program run jointly by federal and state governments. Medicare is based on age 65 or certain disabilities.

Accident and health insurance basics · From Accident and health basics: perils, types of losses and benefits, classes of coverage, and common exclusions

Medicare primarily covers which group of people?

People aged 65 and over, and certain disabled people

Medicare is the federal health program for people aged 65 and over and for certain disabled people.

Accident and health insurance basics · From Accident and health basics: perils, types of losses and benefits, classes of coverage, and common exclusions

Which treatment is commonly excluded from health insurance coverage, subject to the insured's appeal rights?

Experimental or investigational treatment

Experimental or investigational treatment is a common exclusion, although insureds have appeal rights over such decisions.

Accident and health insurance basics · From Accident and health basics: perils, types of losses and benefits, classes of coverage, and common exclusions

How does disability income insurance typically pay its benefits?

As a periodic benefit, usually monthly, after an elimination period

Disability income insurance replaces part of earnings with a periodic benefit, usually monthly, after an elimination period.

Accident and health insurance basics · From Accident and health basics: perils, types of losses and benefits, classes of coverage, and common exclusions

Under the entire contract provision of an individual health policy, what makes up the entire contract of insurance?

The policy, including its endorsements and any attached papers

The entire contract provision says the policy, including the endorsements and the attached papers, if any, constitutes the entire contract of insurance.

Source: N.Y. Ins. Law § 3216(d)(1)(A) ·Individual health insurance policy general provisions · From Mandatory provisions I: entire contract, incontestability, grace period, reinstatement

An insured asks to change a provision of an individual health policy. Under the entire contract provision, what is required for the change to be valid?

Approval by an executive officer of the insurer, endorsed on or attached to the policy

No change is valid until approved by an executive officer of the insurer, and that approval must be endorsed on or attached to the policy.

Source: N.Y. Ins. Law § 3216(d)(1)(A) ·Individual health insurance policy general provisions · From Mandatory provisions I: entire contract, incontestability, grace period, reinstatement

Under the time limit on certain defenses provision, after what period can a non-fraudulent misstatement in the application no longer be used to void the policy?

Two years from the date of issue

After two years from the date of issue, no misstatement, except a fraudulent one, may be used to void the policy or deny a claim for a loss beginning after that period.

Source: N.Y. Ins. Law § 3216(d)(1)(B) ·Individual health insurance policy general provisions · From Mandatory provisions I: entire contract, incontestability, grace period, reinstatement

What is the minimum grace period for an individual health policy with monthly premiums?

10 days

The grace period minimums are 7 days for weekly, 10 days for monthly and 31 days for all other premium modes.

Individual health insurance policy general provisions · From Mandatory provisions I: entire contract, incontestability, grace period, reinstatement

What is the minimum grace period for an individual health policy with an annual premium?

31 days

Policies with premiums other than weekly or monthly, including annual premiums, have a minimum 31-day grace period.

Individual health insurance policy general provisions · From Mandatory provisions I: entire contract, incontestability, grace period, reinstatement

What is the minimum grace period for an individual health policy with weekly premiums?

7 days

Weekly-premium policies must allow a grace period of at least 7 days.

Individual health insurance policy general provisions · From Mandatory provisions I: entire contract, incontestability, grace period, reinstatement

A lapsed policy's insured submits a reinstatement application and premium, and the insurer issues a conditional receipt. The insurer never responds. When is the policy reinstated?

On the 45th day after the conditional receipt, unless the insurer has given written notice of disapproval

When a conditional receipt is issued, the policy is reinstated on approval or, absent prior written disapproval, on the 45th day after the receipt.

Individual health insurance policy general provisions · From Mandatory provisions I: entire contract, incontestability, grace period, reinstatement

When a policy is reinstated, the premiums paid may be applied to periods for which premium was not previously paid. What limit applies?

They may not be applied to any period more than 60 days before the reinstatement date

Premiums accepted for reinstatement may be applied to an unpaid period, but not to any period more than 60 days before the reinstatement date.

Individual health insurance policy general provisions · From Mandatory provisions I: entire contract, incontestability, grace period, reinstatement

An insurer wants to word a mandatory provision differently from the statute. When is that permitted?

When the regulator approves the wording and it is not less favorable in any respect to the insured or beneficiary

The mandatory provisions must appear in the statutory words, except that the insurer may substitute regulator-approved wording that is not less favorable in any respect to the insured or beneficiary.

Source: N.Y. Ins. Law § 3216(d) ·Individual health insurance policy general provisions · From Mandatory provisions I: entire contract, incontestability, grace period, reinstatement

Which mandatory provision prevents an insurer from using an honest, non-fraudulent application mistake to deny a claim for a disability beginning in year four?

Time limit on certain defenses

The time limit on certain defenses bars use of non-fraudulent misstatements after two years from issue to void the policy or deny a claim for a loss or disability beginning after that period.

Source: N.Y. Ins. Law § 3216(d)(1)(B) ·Individual health insurance policy general provisions · From Mandatory provisions I: entire contract, incontestability, grace period, reinstatement

Which pairing of a number and a mandatory provision is correct?

Reinstatement: sickness is covered only if it begins more than 10 days after reinstatement

A reinstated policy covers sickness beginning more than 10 days after reinstatement; the other pairings mix up the 10, 31, 45 and two-year figures.

Individual health insurance policy general provisions · From Mandatory provisions I: entire contract, incontestability, grace period, reinstatement

Which definition of total disability is the most favorable to the insured?

Own occupation

Under an own-occupation definition the insured is totally disabled when unable to perform the material and substantial duties of their own occupation, even if they could work in another field. That makes it the most favorable, and most expensive, definition.

Disability income and related insurance · From Disability classifications: total, partial, recurrent, and residual

Under an any-occupation definition, when is the insured considered totally disabled?

When unable to perform the duties of any gainful occupation for which they are reasonably suited by education, training or experience

The any-occupation definition requires that the insured be unable to work in any gainful occupation reasonably suited to their education, training or experience. It is the strictest and least expensive definition of total disability.

Disability income and related insurance · From Disability classifications: total, partial, recurrent, and residual

Under a recurrent disability provision, how is a recurrence of the same condition within the stated period after recovery treated?

As a continuation of the original disability, with no new elimination period

A recurrent disability provision treats a recurrence of the same or a related condition within a set period after recovery, typically six months, as a continuation of the original claim. The insured does not serve a second elimination period.

Disability income and related insurance · From Disability classifications: total, partial, recurrent, and residual

Which loss would typically qualify as a presumptive total disability?

Total and irrecoverable loss of sight in both eyes

Presumptive disability provisions treat certain catastrophic, permanent losses, such as total loss of sight in both eyes, hearing in both ears, speech, or the use of any two limbs, as total disability automatically.

Disability income and related insurance · From Disability classifications: total, partial, recurrent, and residual

A partial disability benefit is most commonly equal to what amount?

50% of the total disability benefit

Partial disability benefits are usually a flat percentage of the total benefit, most commonly 50%, paid for a limited time.

Disability income and related insurance · From Disability classifications: total, partial, recurrent, and residual

What is a split, or modified, definition of total disability?

Own occupation for an initial period, then any occupation for the rest of the benefit period

A split definition applies the own-occupation test for an initial period, commonly two to five years, and the any-occupation test after that.

Disability income and related insurance · From Disability classifications: total, partial, recurrent, and residual

For a later disability to be treated under a recurrent disability provision, what must generally be true of its cause?

It arises from the same or a related cause as the earlier disability

A recurrent disability provision applies when the later disability arises from the same or a related cause and occurs within the stated period after recovery.

Disability income and related insurance · From Disability classifications: total, partial, recurrent, and residual

Which definition of total disability is the strictest and least expensive?

Any occupation

Any occupation requires inability to work in any gainful occupation reasonably suited to the insured, which is the hardest test to meet and therefore the cheapest.

Disability income and related insurance · From Disability classifications: total, partial, recurrent, and residual

Which describes partial disability?

The insured can work but cannot perform one or more important duties of the occupation, or cannot work full time

Partial disability applies when the insured can still work but is unable to perform one or more important duties or cannot work full time.

Disability income and related insurance · From Disability classifications: total, partial, recurrent, and residual

The definition of disability used by Social Security disability benefits most closely resembles which policy definition?

Any occupation

Social Security disability uses an any-occupation approach, and in an even stricter form than most private policies.

Disability income and related insurance · From Disability classifications: total, partial, recurrent, and residual

To qualify as a presumptive disability, a loss such as loss of sight in both eyes must generally be:

Total and irrecoverable

Presumptive disability applies to the total and irrecoverable loss of sight in both eyes, hearing in both ears, speech, or the use of any two limbs.

Disability income and related insurance · From Disability classifications: total, partial, recurrent, and residual

Which disability classification triggers payment of the full monthly benefit?

Total disability

Total disability, as the policy defines it, triggers the full monthly benefit. Partial and residual benefits are reduced amounts.

Disability income and related insurance · From Disability classifications: total, partial, recurrent, and residual

What does medical expense insurance pay for?

The actual cost of care, such as hospital bills, surgeons' fees, doctors' visits, tests and drugs

Medical expense insurance reimburses the expenses of care: hospital, surgical, physician, testing and drug costs. That focus on expenses is what separates it from disability income insurance, which replaces lost income.

Medical plans · From Basic and major medical expense insurance

Which feature is characteristic of basic medical expense plans?

First-dollar coverage with relatively low internal limits on each benefit

Basic plans usually pay from the first dollar, with little or no deductible and no coinsurance, but each coverage stops at its own low internal limit. That low ceiling is their main weakness.

Medical plans · From Basic and major medical expense insurance

Under basic hospital expense coverage, how is the room and board benefit typically limited?

By a daily dollar limit for a maximum number of days

Basic hospital expense pays room and board up to a daily dollar amount, for no more than a stated number of days. Miscellaneous hospital expenses are limited separately.

Medical plans · From Basic and major medical expense insurance

In a major medical plan, what is the deductible?

The amount the insured pays each benefit period before the plan begins paying most covered charges

The deductible is the first layer of major medical cost sharing: the amount the insured pays alone each benefit period before the plan starts paying the covered charges it applies to. Some benefits, such as preventive care, can be paid before the deductible is met.

Medical plans · From Basic and major medical expense insurance

Under a typical 80/20 coinsurance arrangement in a major medical plan, who pays what?

After the deductible, the insurer pays 80 percent and the insured pays 20 percent of covered charges

Coinsurance is the percentage split of covered charges after the deductible. The common arrangement is 80 percent insurer and 20 percent insured.

Medical plans · From Basic and major medical expense insurance

Another name for the out-of-pocket maximum in a major medical plan is the:

Stop-loss limit

The out-of-pocket maximum is also called the stop-loss limit because it stops the insured's share of covered costs at a set amount.

Medical plans · From Basic and major medical expense insurance

What type of charges does major medical typically pay, rather than a fixed schedule amount?

Usual, customary and reasonable charges

Major medical typically pays usual, customary and reasonable (UCR) charges for covered services, instead of the fixed scheduled amounts used by basic plans.

Medical plans · From Basic and major medical expense insurance

How does supplemental major medical coordinate with a basic plan?

The basic plan pays first, a corridor deductible applies, and major medical then pays remaining covered costs subject to coinsurance

Supplemental major medical sits on top of a basic plan. The basic plan pays first, the insured meets a corridor deductible, and major medical covers the rest subject to coinsurance.

Medical plans · From Basic and major medical expense insurance

A corridor deductible is associated with which type of coverage?

Supplemental major medical

The corridor deductible is the amount the insured pays between the basic plan's benefits and the start of supplemental major medical benefits.

Medical plans · From Basic and major medical expense insurance

Which statement best describes comprehensive major medical?

It combines basic and major medical into a single plan with one deductible, one coinsurance arrangement and one out-of-pocket maximum

Comprehensive major medical merges basic and major medical coverage into one plan with a single set of cost-sharing terms. It is the dominant design today.

Medical plans · From Basic and major medical expense insurance

Under a relative value schedule in a basic surgical expense policy, how is the benefit for a procedure determined?

The procedure's assigned points are multiplied by the policy's dollar amount per point

A relative value system assigns each procedure a number of points; the policy's conversion factor, a set dollar amount per point, turns points into the maximum benefit.

Medical plans · From Basic and major medical expense insurance

Major medical expense insurance was designed primarily to protect against which exposure?

Catastrophic medical costs from serious or prolonged illness or injury

Major medical was built for catastrophic exposure: broad coverage with high limits, accepting deductibles and coinsurance in exchange.

Medical plans · From Basic and major medical expense insurance

Which basic coverage pays a surgeon's fee for an operation?

Basic surgical expense

Basic surgical expense pays surgeons' fees, usually from a surgical schedule that lists a maximum for each procedure.

Medical plans · From Basic and major medical expense insurance

Under the Affordable Care Act, how is the out-of-pocket maximum on a non-grandfathered major medical plan treated?

It is capped each year

For non-grandfathered plans, the ACA caps the out-of-pocket maximum on in-network essential health benefits each year and bars lifetime and annual dollar limits on essential health benefits.

Medical plans · From Basic and major medical expense insurance

Under the Affordable Care Act, what may a group health plan or health insurer do about lifetime dollar limits on benefits?

It may not set any lifetime dollar limit on essential health benefits

The ACA prohibits group health plans and insurers offering group or individual coverage from establishing lifetime limits on the dollar value of benefits for any participant or beneficiary. The prohibition protects essential health benefits, and no dollar threshold or approval process makes such a limit acceptable.

Source: 42 U.S.C. § 300gg-11(a)(1)(A) ·Federal Patient Protection and Affordable Care Act · From ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

What is the minimum medical loss ratio an insurer must meet in the large-group market under the ACA?

85%

The ACA requires insurers in the large-group market to spend at least 85% of premium on medical care and health-care quality improvement. The individual and small-group minimum is 80%.

Federal Patient Protection and Affordable Care Act · From ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

Beginning with which plan years did the ACA bar preexisting condition exclusions for adults in group and individual coverage?

Plan years beginning on or after January 1, 2014

The ban on preexisting condition exclusions for all enrollees took effect for plan years beginning on or after January 1, 2014. Children under 19 were protected earlier, from 2010. March 23, 2010 is the date the ACA was signed and the grandfathering cutoff date.

Federal Patient Protection and Affordable Care Act · From ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

A silver-level plan is designed to pay what share of the full actuarial value of covered benefits?

70%

The ACA defines the metal levels by actuarial value: bronze 60%, silver 70%, gold 80%, and platinum 90%. A silver plan is designed to pay 70% of the full actuarial value of benefits for a standard population.

Source: 42 U.S.C. § 18022(d)(1)(B) ·Federal Patient Protection and Affordable Care Act · From ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

A plan that offers dependent coverage of children must make that coverage available to an adult child until the child reaches what age?

26

A group health plan or insurer offering group or individual coverage that provides dependent coverage of children must continue to make it available for an adult child until the child turns 26. The plan need not cover that child's own children.

Source: 42 U.S.C. § 300gg-14(a) ·Federal Patient Protection and Affordable Care Act · From ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

Which metal level is designed to provide benefits actuarially equivalent to 90% of the full actuarial value of covered benefits?

Platinum

The platinum level is designed to provide benefits actuarially equivalent to 90% of the full actuarial value. Gold is 80%, silver 70%, bronze 60%.

Source: 42 U.S.C. § 18022(d)(1)(D) ·Federal Patient Protection and Affordable Care Act · From ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

How does the ACA's ban on lifetime dollar limits apply to grandfathered health plans?

It applies to grandfathered plans as well as new plans

The prohibition on lifetime dollar limits applies even to grandfathered plans. By contrast, grandfathered individual policies are exempt from the preexisting condition ban, and grandfathered plans need not cover the essential health benefits package.

Federal Patient Protection and Affordable Care Act · From ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

Under the ACA, the scope of the essential health benefits must equal the scope of benefits provided under what?

A typical employer plan

The Secretary must ensure that the scope of the essential health benefits is equal to the scope of benefits provided under a typical employer plan, informed by a Department of Labor survey of employer-sponsored coverage.

Source: 42 U.S.C. § 18022(b)(2)(A) ·Federal Patient Protection and Affordable Care Act · From ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

In which market may a health insurer offer a catastrophic plan?

The individual market only

If a health insurance issuer offers a catastrophic plan, it may only offer that plan in the individual market.

Source: 42 U.S.C. § 18022(e)(3) ·Federal Patient Protection and Affordable Care Act · From ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

When an insurer falls short of the ACA's medical loss ratio minimum, who receives the resulting rebate?

Policyholders, or the employer that bought the group coverage

An insurer that spends less than the required share of premium on care and quality improvement must rebate the difference to its policyholders. For group coverage the rebate goes to the employer or plan sponsor, which may pass the employees' share through to them.

Federal Patient Protection and Affordable Care Act · From ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

What is the ACA's minimum medical loss ratio for insurers in the individual market?

80%

Insurers in the individual and small-group markets must spend at least 80% of premium on medical care and health-care quality improvement. The large-group minimum is 85%.

Federal Patient Protection and Affordable Care Act · From ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

For a qualified health plan, what does the ACA say about prior authorization for emergency department services?

Coverage must be provided without any prior authorization requirement

A qualified health plan must cover emergency department services without imposing any prior authorization requirement, and may not limit out-of-network emergency coverage more restrictively than in-network coverage.

Source: 42 U.S.C. § 18022(b)(4)(E)(i) ·Federal Patient Protection and Affordable Care Act · From ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

Before plan years beginning January 1, 2014, what annual dollar limits did the ACA allow on essential health benefits?

Only a restricted annual limit, as defined by the Secretary

For plan years beginning before January 1, 2014, plans could impose only a restricted annual limit on the dollar value of essential health benefits, as defined by the Secretary to preserve access to needed services with minimal premium impact. From 2014 annual limits on essential health benefits were barred entirely.

Source: 42 U.S.C. § 300gg-11(a)(2) ·Federal Patient Protection and Affordable Care Act · From ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

Which preventive item must a non-grandfathered plan cover without cost-sharing?

Immunizations recommended by the CDC's Advisory Committee on Immunization Practices

Plans must cover, without cost-sharing, immunizations that have in effect a recommendation from the Advisory Committee on Immunization Practices of the CDC for the individual involved, along with USPSTF A- and B-rated services and HRSA-supported preventive care for children and women.

Source: 42 U.S.C. § 300gg-13(a)(2) ·Federal Patient Protection and Affordable Care Act · From ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

Which metal level is designed to pay the lowest share of covered costs, 60% of the full actuarial value?

Bronze

The bronze level is designed to provide benefits actuarially equivalent to 60% of the full actuarial value. A catastrophic plan is a separate, non-metal option that pays nothing until the annual cost-sharing limit is reached, except preventive care and three primary care visits.

Source: 42 U.S.C. § 18022(d)(1)(A) ·Federal Patient Protection and Affordable Care Act · From ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

To be grandfathered under the ACA, a health plan generally must have been in existence on what date and not materially changed since?

March 23, 2010

A grandfathered plan is one in existence on March 23, 2010, the date the ACA was signed, that has not been materially changed. October 1, 2013 was the start of the first exchange open enrollment, and January 1, 2014 is when most market reforms took effect.

Federal Patient Protection and Affordable Care Act · From ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

Over what period is an insurer's medical loss ratio generally measured to decide whether a rebate is owed?

A rolling three-year average

The medical loss ratio is calculated as a rolling three-year average, which smooths year-to-year swings in claims. It is measured across an insurer's block of business in a market, not policy by policy.

Federal Patient Protection and Affordable Care Act · From ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

Which level of care do most long-term care claimants need?

Custodial care

Custodial care is help with activities of daily living, which can be given by people without medical training. It is the care most long-term care claimants need.

Long-term care insurance · From Individual and group long-term care insurance

Under the federal definition of a chronically ill individual, what must be true of an insured with a severe cognitive impairment?

The insured requires substantial supervision to protect against threats to health and safety

A chronically ill individual includes one certified as requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment.

Source: 26 U.S.C. § 7702B(c)(2)(A)(iii) ·Long-term care insurance · From Individual and group long-term care insurance

In a long-term care policy, what is respite care?

Short-term care that gives a family caregiver a break

Respite care is short-term care that relieves an unpaid family caregiver for a time.

Long-term care insurance · From Individual and group long-term care insurance

To be treated as chronically ill under a tax-qualified long-term care policy, within what period must a licensed health care practitioner have certified that the insured meets the requirements?

Within the preceding 12 months

An individual is not a chronically ill individual unless, within the preceding 12-month period, a licensed health care practitioner has certified that the individual meets the requirements.

Source: 26 U.S.C. § 7702B(c)(2)(A) ·Long-term care insurance · From Individual and group long-term care insurance

Under federal tax law, how are amounts received under a qualified long-term care insurance contract generally treated?

As amounts received for personal injuries and sickness, treated as reimbursement for medical care

Amounts received under a qualified long-term care insurance contract, other than dividends or premium refunds, are treated as amounts received for personal injuries and sickness and as reimbursement for medical care expenses actually incurred.

Source: 26 U.S.C. § 7702B(a)(2) ·Long-term care insurance · From Individual and group long-term care insurance

Under a guaranteed renewable long-term care policy, what may the insurer do?

Raise premiums for an entire class of policyholders

On a guaranteed renewable policy the insurer cannot cancel the insured or raise one person's rate, but it can raise rates for a whole class.

Long-term care insurance · From Individual and group long-term care insurance

Which type of long-term care describes care at a community center during the day, with the insured returning home each evening?

Adult day care

Adult day care provides care in a community setting during the day, while the insured lives at home.

Long-term care insurance · From Individual and group long-term care insurance

What is the main purpose of long-term care insurance?

To pay for extended care caused by chronic illness, disability, or cognitive impairment, and to protect savings

Long-term care insurance pays for help with daily living needed over a long period because of chronic illness, disability, or cognitive impairment, filling the gap left by health insurance and Medicare and protecting savings.

Long-term care insurance · From Individual and group long-term care insurance

In a long-term care policy, what is the elimination period?

A waiting period, measured in days, that must pass before benefits begin

The elimination period is a waiting period, measured in days, before benefits begin. The policy states whether those days are calendar days or only days on which covered care is received. It works like a deductible measured in time.

Long-term care insurance · From Individual and group long-term care insurance

For federal tax purposes, a qualified long-term care insurance contract is treated as which kind of contract?

An accident and health insurance contract

A qualified long-term care insurance contract is treated as an accident and health insurance contract.

Source: 26 U.S.C. § 7702B(a)(1) ·Long-term care insurance · From Individual and group long-term care insurance

Which setting provides housing together with help with activities of daily living and supervision, with less medical care than a nursing home?

An assisted living facility

Assisted living facilities combine a residence with help with activities of daily living and supervision, with less medical care than a nursing home.

Long-term care insurance · From Individual and group long-term care insurance

A qualified long-term care contract's determination of whether an insured is chronically ill because of ADL loss must take into account at least how many of the six activities of daily living?

At least 5

A contract is not a qualified long-term care insurance contract unless its determination of chronic illness based on ADL loss takes into account at least 5 of the 6 activities of daily living.

Source: 26 U.S.C. § 7702B(c)(2)(B) ·Long-term care insurance · From Individual and group long-term care insurance

Federal COBRA continuation requirements apply to a group health plan only if the employers maintaining it normally employed at least how many employees on a typical business day during the preceding calendar year?

20

COBRA exempts a group health plan for a calendar year if all employers maintaining it normally employed fewer than 20 employees on a typical business day in the preceding calendar year. So the threshold is 20 or more employees.

Source: 29 U.S.C. § 1161(b) ·Group health and blanket insurance · From Group health insurance and COBRA

Outside of the disability extension, what is the most a group health plan may charge a qualified beneficiary for COBRA continuation coverage?

102% of the plan's cost

The qualified beneficiary may be charged up to 102% of the applicable premium: the full cost of the coverage plus 2% for administration. The 150% ceiling applies only during the disability extension months.

Group health and blanket insurance · From Group health insurance and COBRA

After a qualifying event, at least how long does a qualified beneficiary have to elect COBRA continuation coverage?

60 days

The election period is at least 60 days, measured from the later of the date coverage would be lost or the date the election notice is provided.

Group health and blanket insurance · From Group health insurance and COBRA

In a noncontributory group health plan, what percentage of eligible employees must be covered?

100%

In a noncontributory plan the employer pays the entire premium, so all eligible employees are covered: participation must be 100%. This prevents the employer from choosing whom to insure.

Group health and blanket insurance · From Group health insurance and COBRA

What document does each covered employee in a group health plan receive as evidence of coverage?

A certificate of insurance

The master policy is issued to the policyholder. Each insured employee receives a certificate of insurance summarizing the coverage, rather than an individual policy.

Group health and blanket insurance · From Group health insurance and COBRA

If a qualified beneficiary is determined by Social Security to be disabled within the first 60 days of COBRA coverage, the 18-month continuation period may be extended to a total of how many months?

29 months

The disability extension adds 11 months to the 18-month period, for a total of 29 months.

Group health and blanket insurance · From Group health insurance and COBRA

Once the plan administrator has been notified of a qualifying event, within how many days must the administrator notify the qualified beneficiaries of their COBRA rights?

14 days

The plan administrator must notify qualified beneficiaries within 14 days of the date the administrator is notified of the qualifying event (multiemployer plans may allow longer).

Source: 26 U.S.C. § 4980B(f)(6) ·Group health and blanket insurance · From Group health insurance and COBRA

Which group of people can be qualified beneficiaries under COBRA?

The covered employee and the spouse and dependent children who were covered under the plan on the day before the qualifying event

A qualified beneficiary is a spouse or dependent child who was a beneficiary under the plan on the day before the qualifying event, plus the covered employee for termination or reduced hours. A child born to or placed for adoption with the employee during continuation also qualifies.

Source: 26 U.S.C. § 4980B(g)(1)(A) ·Group health and blanket insurance · From Group health insurance and COBRA

An employee enrolls in the employer's group health plan during the initial eligibility period. How is the employee usually underwritten?

The employee is usually covered without individual evidence of insurability

Group insurance underwrites the group as a whole; a policy may insure employees with or without evidence of insurability, and timely enrollees are normally covered without it. For group health coverage, federal law does not let the plan base eligibility on health status, so a late enrollee generally waits for the next open enrollment period or a special enrollment event instead of proving insurability.

Source: N.Y. Ins. Law § 4235(c)(1)(A) ·Group health and blanket insurance · From Group health insurance and COBRA

During the disability extension months of COBRA continuation, what is the most the plan may charge for the coverage?

150% of the plan's cost

During the 11-month disability extension the plan may charge up to 150% of the applicable premium, compared with 102% during the standard period.

Group health and blanket insurance · From Group health insurance and COBRA

When an employee's employment ends, within how many days must the employer notify the group health plan administrator of the qualifying event?

30 days

For qualifying events such as termination, reduced hours, death or Medicare entitlement, the employer must notify the plan administrator within 30 days.

Group health and blanket insurance · From Group health insurance and COBRA

After electing COBRA, how long does a qualified beneficiary have to pay the first premium?

45 days

The first premium is due no later than 45 days after the date of election.

Group health and blanket insurance · From Group health insurance and COBRA

A group health policy that covers children must allow a dependent child to stay on the parent's medical coverage until what age, regardless of student status, marriage or financial dependence?

26

Group hospital, medical, surgical and prescription drug coverage that covers children must cover a married or unmarried child until age 26 without regard to financial dependence, residency, student status or employment.

Source: N.Y. Ins. Law § 4235(f)(1)(A)(i) ·Group health and blanket insurance · From Group health insurance and COBRA

What does experience rating mean for a group health policy?

The group's premium can be readjusted at renewal based on that group's own claims experience

Group policies may provide for readjustment of the premium rate based on the group's experience at the end of the first or any later policy year. This is experience rating.

Source: N.Y. Ins. Law § 4235(j)(1) ·Group health and blanket insurance · From Group health insurance and COBRA

Which statement best describes COBRA?

A federal law letting qualified beneficiaries elect to continue the employer's group health coverage, at their own expense, for a limited time

COBRA requires the sponsor of a covered group health plan to let each qualified beneficiary who would lose coverage because of a qualifying event elect continuation coverage under the plan. The beneficiary generally pays the premium.

Source: 29 U.S.C. § 1161(a) ·Group health and blanket insurance · From Group health insurance and COBRA

Who pays the cost of workers' compensation coverage?

The employer pays the entire cost

Workers' compensation is state-mandated but employer-funded. The employer pays 100% of the cost, and employees make no contribution toward it.

Government insurance plans · From Workers' compensation

What does it mean that workers' compensation is the employee's "exclusive remedy"?

The injured worker generally cannot also sue the employer for a covered work injury

Under the workers' compensation bargain, the worker receives guaranteed no-fault benefits and in exchange gives up the right to bring a negligence suit against the employer. Workers' compensation is the worker's exclusive remedy against the employer for a covered work injury.

Government insurance plans · From Workers' compensation

Which description best fits workers' compensation medical benefits for a covered work injury?

They usually have no deductible, no coinsurance and no dollar limit

Workers' compensation medical benefits pay hospital, surgical, physician and prescription costs for the work injury, usually with no deductible, no coinsurance and no dollar limit, and they begin immediately.

Government insurance plans · From Workers' compensation

Workers' compensation disability income benefits are commonly set at what level?

About two-thirds of the worker's average weekly wage, up to a state maximum

Disability income, or indemnity, benefits replace a percentage of the worker's average weekly wage, commonly two-thirds, subject to a maximum weekly benefit set by the state.

Government insurance plans · From Workers' compensation

A worker who cannot work at all for now, but is expected to recover and return to work, is classified as having what kind of disability?

Temporary total disability

Temporary total disability means the worker cannot work at all for the time being but is expected to recover. 'Temporary' describes duration and 'total' describes the inability to do any work.

Government insurance plans · From Workers' compensation

Which workers' compensation benefit pays to retrain an injured worker who cannot return to his former occupation?

Rehabilitation benefits

Rehabilitation benefits provide medical and vocational rehabilitation to return the injured worker to employment, including retraining for a different occupation.

Government insurance plans · From Workers' compensation

How are workers' compensation benefits received by an injured worker treated for income tax purposes?

They are not taxable income to the worker

Workers' compensation benefits received by the worker are not taxable income, even though the employer pays the entire premium.

Government insurance plans · From Workers' compensation

In most states, how do the limits of Part Two, employers' liability, compare with Part One, workers' compensation?

Part Two has stated dollar limits; Part One has no policy dollar limit

Part One pays the statutory benefits and has no policy dollar limit. In most states, Part Two, employers' liability, covers suits outside the statute and is written with stated dollar limits. New York is an exception: for employees subject to New York law, Part Two is unlimited.

Government insurance plans · From Workers' compensation

What is a monopolistic state fund?

A state-run fund that is the only permitted source of workers' compensation coverage

A monopolistic state fund is a state-run workers' compensation fund that is the only permitted source of coverage; private insurers cannot write the coverage there. North Dakota, Ohio, Washington and Wyoming use monopolistic funds.

Government insurance plans · From Workers' compensation

In a state with a competitive state fund, how may an employer obtain workers' compensation coverage?

From the state fund or from a private insurer, which compete for the business

A competitive state fund is a state-run fund that competes with private insurers. Employers may buy from either, or, if large and financially qualified, self-insure with state approval.

Government insurance plans · From Workers' compensation

Which employer is most likely to be permitted to self-insure its workers' compensation obligation?

A large, financially qualified employer approved by the state

Self-insurance is available to a large, financially qualified employer that the state approves; it then pays claims from its own funds instead of buying a policy.

Government insurance plans · From Workers' compensation

Workers' compensation premiums are primarily based on which factors?

The employer's payroll and the job classification of the work

Workers' compensation premium is computed on the employer's payroll and the classification of the work performed, then adjusted for the employer's own loss record through experience rating.

Government insurance plans · From Workers' compensation

When the employer or insurer does not dispute a claim, how are workers' compensation income benefits paid?

Periodically, like wages, directly to the worker, without waiting for a formal award

Where the right to compensation is not controverted, compensation is paid periodically and promptly in like manner as wages, as it accrues, and directly to the person entitled to it, without waiting for an award by the board.

Source: N.Y. Workers' Comp. Law § 25(1)(a) ·Government insurance plans · From Workers' compensation

If an employer's insurer disputes an injured worker's claim for workers' compensation, who decides it?

The state workers' compensation board or agency

Disputed workers' compensation claims are decided by the state's workers' compensation board, which has full power to determine all questions about payment of claims presented to it, after investigation and, on request, a hearing.

Source: N.Y. Workers' Comp. Law § 20(1) ·Government insurance plans · From Workers' compensation

What does a Medicare supplement (Medigap) policy primarily pay for?

Deductibles, coinsurance and copayments left after Original Medicare pays

Medigap is private insurance that fills the cost-sharing gaps in Original Medicare: the deductibles, coinsurance and copayments the beneficiary would otherwise owe.

Source: N.Y. Dep't of Fin. Servs., Medicare Insurance Coverage Information ·Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

To be eligible to buy a Medigap policy, a Medicare beneficiary must be enrolled in which parts of Medicare?

Both Part A and Part B

Medigap supplements Original Medicare, so the applicant must be enrolled in both Part A (hospital) and Part B (medical).

Source: N.Y. Dep't of Fin. Servs., Medicare Insurance Coverage Information ·Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

Which Medigap plans were eliminated as of June 1, 2010, because they had contained prescription drug benefits?

Plans H, I and J

Plans H, I and J carried drug benefits before the Medicare Modernization Act created Part D, and were eliminated in the 2010 modernization. Plan E was also dropped as duplicative.

Source: N.Y. Dep't of Fin. Servs., Medicare Insurance Coverage Information ·Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

Which description matches Medigap Plan N?

It does not pay the Part B deductible and has copays of up to $20 per office visit and up to $50 per emergency room visit

Plan N trades a lower premium for more cost-sharing: it does not cover the Part B deductible and carries up to $20 office and $50 emergency room copays, the ER copay waived on admission.

Source: N.Y. Dep't of Fin. Servs., Medicare Insurance Coverage Information ·Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

Which description matches Medigap Plan M?

It pays 50% of the Part A deductible and none of the Part B deductible

Plan M, added in 2010, has higher cost-sharing and a lower expected premium: 50% of the Part A deductible and no coverage of the Part B deductible.

Source: N.Y. Dep't of Fin. Servs., Medicare Insurance Coverage Information ·Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

What is Medicare Select?

A Medigap policy that requires use of network hospitals, and sometimes network doctors, except in an emergency

Medicare Select is a type of Medigap policy with a provider network requirement for full benefits, except in emergencies. It may cost less, and otherwise must meet all Medigap requirements.

Source: N.Y. Dep't of Fin. Servs., Medicare Insurance Coverage Information ·Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

Under federal law, when is a person's Medigap open enrollment period?

The six months beginning with the first month the person is both 65 or older and enrolled in Part B

The federal Medigap open enrollment period is six months long and begins with the first month the person is both at least 65 and enrolled in Part B. During it, insurers cannot refuse or rate up for health.

Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

What is the longest waiting period a Medigap policy may impose before covering a pre-existing condition?

6 months

A Medigap policy may impose up to a six-month waiting period for pre-existing conditions, and that wait must be reduced by prior creditable coverage.

Source: N.Y. Dep't of Fin. Servs., Medicare Insurance Coverage Information ·Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

Medigap policies are guaranteed renewable. What does that mean for the insured?

The insurer cannot cancel the policy because of the insured's health, only for reasons such as nonpayment of premium or a material misstatement

Guaranteed renewable means the insurer cannot refuse to renew because of health or claims. It may end coverage for nonpayment or a material misstatement on the application. Premiums can still rise for a whole class of insureds.

Source: N.Y. Dep't of Fin. Servs., Medicare Insurance Coverage Information ·Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

How long is the free-look period during which a Medigap buyer may return the policy for a full refund?

30 days

Medigap buyers receive a 30-day free-look period to review the policy and return it for a full premium refund.

Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

In the 2010 Medigap modernization, which benefit was added as a basic benefit in every plan?

Part A hospice care coinsurance or copayments

In 2010 the at-home recovery benefit was eliminated and a new hospice care benefit was added as a basic benefit in every Medigap plan. The preventive care benefit was also eliminated.

Source: N.Y. Dep't of Fin. Servs., Medicare Insurance Coverage Information ·Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

How does New York Insurance Law define "Medicare supplemental insurance"?

Any individual or group accident and health policy providing payment or reimbursement for health care services not provided by Medicare

Section 3218(a)(2) defines Medicare supplemental insurance as any individual or group accident and health policy that pays or reimburses health care services not provided by Medicare, subject to a narrow exception for certain multistate group contracts.

Source: N.Y. Ins. Law § 3218(a)(2) ·Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

What are Medicare Part B excess charges?

The amount a doctor who does not accept assignment may bill above the Medicare-approved amount

Excess charges are the difference between what a non-participating doctor bills (within legal limits) and the Medicare-approved amount. Some Medigap plans cover them.

Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

After Medicare's hospital benefits are used up, how many additional days of hospital coverage does the Medigap basic benefit provide?

365 days

Every Medigap plan covers Part A hospital coinsurance plus an additional 365 days of hospital care after Medicare benefits are exhausted.

Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

Under New York Insurance Law, what must the superintendent publish and distribute to help consumers choose Medigap coverage?

A consumer's shopping guide for Medicare supplemental insurance

Section 3218(b)(7) requires rules providing for publication and dissemination of a consumer's shopping guide for Medicare supplemental insurance.

Source: N.Y. Ins. Law § 3218(b)(7) ·Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

For policies sold on or after January 1, 2020, which plans must every Medigap insurer offer, according to New York's Department of Financial Services?

Plans A and B, plus either Plan D or Plan G

DFS reports that for policies sold on or after January 1, 2020, Medigap insurers must offer Plans A and B and either Plan D or Plan G. Not every company offers every plan.

Source: N.Y. Dep't of Fin. Servs., Medicare Insurance Coverage Information ·Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

Who sells Medicare supplement (Medigap) policies?

Private insurance companies

Medigap is health insurance sold by private insurance companies to cover some of the gaps in Original Medicare.

Source: N.Y. Dep't of Fin. Servs., Medicare Insurance Coverage Information ·Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

Starting January 1, 2020, which Medigap plans may not be sold to people newly eligible for Medicare, and why?

Plans C, F and high-deductible F, because they cover the Part B deductible

The federal MACRA change bars sale of Medigap plans covering the Part B deductible, which are C, F and high-deductible F, to people newly eligible on or after January 1, 2020.

Source: N.Y. Dep't of Fin. Servs., Medicare Insurance Coverage Information ·Private insurance for senior citizens and special needs individuals · From Medicare supplement policies

Under New York Insurance Law § 3218(c), an authorized insurer may issue or deliver a Medicare supplement policy in New York only if the policy:

Includes the minimum standards approved by the superintendent

Section 3218(c) bars authorized insurers from issuing or delivering any Medicare supplement policy in New York other than one that includes the minimum standards approved by the superintendent.

Source: N.Y. Ins. Law § 3218(c) ·Private insurance for senior citizens and special needs individuals · From Medicare supplement policies