Practical Insurance

Table of Contents

Chapter 1:  Ethics

  The Importance of Ethics

  The Big Picture

  Part-Time Agents

  Competency

  Education

  Writing the Policy

  Health Questions

  Proper Terminology

  CO-Mingling Funds

  When the Prospect sticks with “No”

  Why is it Important to be an Ethical Agent?               

  Religious Beliefs

  Equal Application

  Making Choices

  Replaced by Technology

  Ethics Beyond Philosophers

  Being Ethically Responsible

  Thinking of Others

  In Conclusion

 

 

1

2

2

4

5

7

8

9

10

11

12

13

14

16

17

17

18

20

21

Chapter 2:  Unfair Trade Practices Act

  Purpose

  Legislative History

  Insurance Activities Other than Sales

  Financial Activities Other than Insurance

  Nondiscrimination

  Limitation

  Definitions

  United States v. Southeastern Underwriters Association

  Developing Legislation

  Gramm-Leach-Bliley Act Key Points

  Is It Still Relevant?

  Section 5.  Favored Agent or Insurer, Coercion of Debtor

  Section 7. Defined and Undefined Practices

  Section 8. Cease-and-Desist and Penalty Orders

  Section 9. Judicial Review of Orders

  Section 11. Penalty for Violation of Cease-and-Desist Orders

  Section 12.  Regulations

  Defining Unfair Trade Practices

  Unfair Discrimination: Section 4. G.

  Countries Divided by Risk: A, B, C, and D

  Rebates

  NAIC Unfair Trade Practices Act defines rebates

  Prohibited Group Enrollments

 

22

22

25

26

27

27

27

28

30

31

33

47

48

49

50

50

50

50

51

55

60

61

61

  Failure to Maintain Marketing and Performance Records

  Failure to Maintain Complaint Handling Procedures

  Misrepresentation on Insurance Applications

  Unfair Financial Planning Practices

  Failure to File or Certify LTC Sales

  Failure to Provide Claims History

  Favored Agent or Insurer

 

61

62

62

62

63

64

64

 

Chapter 3:  Common Sense

  Integrating Insurance in Retirement Planning

  Dealing With Past & Present Mistakes

  Debt Affects Everything, Even Insurance

  Systematic Savings (Get Rich Slowly Scheme)

  Required Information Gathering

  Anti-Money Laundering Program & Suspicious Activity

                  Reporting Requirements for Insurers

  Goal Setting

  Career Choices and Earnings / Action Versus Fantasy

  Annuity’s Forced Savings Plan

  Committing Goals to Paper

  Messengers of Reality / Risk Tolerance

  Determining Quantity of Investment

  Risk Takers

  Individual Choices

  Net Worth Work Sheet

  Cash Flow Journal to Determine Life Insurance Requirements

  Which Assets are Financial?

  Liabilities

  Put and Take Accounts

  Consumer or Producer

                Living on Less than we Earn

                Dumping the Credit Card Habit

  Thinking Long-Term

  Thank God Common Sense is Free

 

 

65

66

67

69

70

71

 

81

82

83

84

85

86

86

87

91

92

93

94

95

96

97

98

99

100

Chapter 4:  The Basics

  Figuring in Inflation

  Extra Costs

  Lifestyle

          Housing

             Dining Out, Travel

             Hobbies    and Everything Else

  Income Selection

                Single Life or Joint-and-Survivor

  A Third of Our Adult Life

  Social Security Income

  Which Investment?

 

 

101

102

103

103

104

105

105

106

107

108

109

Chapter 5:  Insurance Risk

  Life’s A Gamble / Defining Risk

  Comfort Level

  Saving Enough for Retirement

  Insurance Risks, Perils & Hazards

  Insurable Exposures / Chance of Loss

  Morale & Moral Hazards

  Law of Large Numbers

  Types of Risk

  Investment Risk

 

 

111

112

114

115

115

116

116

117

118

Chapter 6:  Protection Through Insurance

  Of Course We Sell Peace of Mind

  Statistics / Insure the Big Things

  You Get What You Pay For

  Big Deductibles Are Usually Good

  Medical Insurance

  Medicaid Beneficiaries

  Continued Disagreement

 

 

120

121

122

123

123

126

126

Chapter 7:  Disability Insurance

  The Unrecognized Danger

  Preventing Excess Coverage

  Approaching the Disability Subject

Loss Affects the Pocketbook

  Protecting the Self Employed

  Protecting Business Partners from Each Other’s Disability

  Qualifying for Business Disability Buyout Insurance

  Specialized Knowledge / Under-Insured / Waiting Periods

  Durational Periods

  Extremely Important: “Disability” Policy Definition

  Group Disability Policies

  Physical Examination / Renewability / Policy Pricing

 

 

128

129

129

130

130

132

133

134

135

135

136

137

Chapter 8:  Long-Term Care Insurance

  Nursing Home Protection

  Abbreviations

  Long-Term Care Policy Defined

  Tax-Qualified Plans

  Medical Necessity & Cognitive Impairment

  Activities of Daily Living

  Benefit Triggers

  IRS Notice 97-31

  State versus Federal Law

  Covered Benefits for the Chronically Ill

  Partnership Long-Term Care Contracts

  Making Benefit Choices

  Daily Benefit Options

  Expense-Incurred and Indemnity Methods of Payments

  Determining Benefit Length

  Asset Protection in Partnership Policies

  Policy Structure

  Home Care Options

  Inflation Protection / Simple and Compound Protection

  Required Rejection Forms

  Elimination Periods in LTC Policies

  Policy Type

  Preexisting Periods in Policies

  Prior Hospitalization Requirements Medicare’s Skilled Care

  Nonforfeiture Values

  Waiver of Premium

  Unintentional Lapse of Policy

  Policy Renewal Features

  Contract Affordability

  Minimum Partnership Requirements

  Benefit Duplication

  Partnership Publication

  Adequate Policy Benefits

  Look-Back Period

  The Application / Market Needs

                Part A (In-Patient Care)

                Part B (Medical Care)

                Part D: Prescription Drug Benefits

  Medicaid is a Grant Program

  Policy Pricing

  Notice to Buyer

  Policy Schedule

  Definitions /  Home & Community-Based Care

  Bed Reservation  /  Waiver of Premium

  Alternative Plan of Care

  Policy Exclusions

  Age Misstatement on the Application

  Third-Party Notification

  When Premiums are Not Paid

 

 

139

140

140

142

144

144

146

147

148

148

150

152

153

155

155

155

156

156

157

158

158

159

159

160

160

161

161

162

162

162

163

163

163

166

167

168

169

169

170

173

174

174

175

176

177

178

179

179

179

Chapter 9:  Protecting Our Homes

  A Major Asset / Renter’s Insurance

  Homeowner’s Insurance / Two Sections

  Property Exposures

  Liability Exposures / Updating Coverage

  As A Recap / 80% Coverage Required

  Fire & Allied Coverages

  Three Forms of Homeowner’s Coverage

  Section I of Form #1 (HO-1)

  Section II of Form #1 / Form #2 (HO-2)

  Form #3 (HO-3)

  Policy Conditions

  Rates for Fire Insurance

  Insurable Conditions

  Form #4 (HO-4) Renter’s Insurance / Form #5 (HO-5)

  Form #6 (HO-6)

  Form #8 (HO-8)

  Exceptions in the Homeowner’s Policy

  Exceptions in Liability Coverage / Natural Disasters

  Moratorium on Insurance

  Volcanoes / Hurricanes and Tornadoes

  Personal Property / Inventories of Possessions

 

 

181

182

183

184

185

186

187

187

189

190

190

191

192

192

193

194

194

195

197

198

199

Chapter 10:  Automobile Insurance

  The Insurance Policy

  Underwriting Risk / Auto Insurance

  Six Policy Components

  Rising Premium Rates

  Insuring a New Vehicle

  Classic Cars

  Delivery Drivers / RV Insurance

  Motorcycle Insurance

  Mechanical Breakdown Insurance (MBI)

  Foreign Travel

  Pay-As-You-Go Insurance

  Safe Drivers Pay Less for Insurance

  A New Issue: Legalized Marijuana

  Distracted Driving

  Teenage Drivers

  Affordable Coverage

  Reading the Auto Policy

  Conditions in an Auto Policy

                The Family Automobile Policy (FAP)

  Auto Liability Insurance

  Personal-Injury Protection (PIP) / Collision

  Comprehensive Coverage

  Auto Insurance for School-Sanctioned Events

  Uninsured and Under-Insured Motorists Coverage

  Driving Uninsured: No Pay, No Play Laws

  Towing and Service; Rental Car Reimbursement

  Wage Loss and Substitute Services / Determining Auto Rates

 

202

203

204

205

206

207

208

209

210

211

212

212

214

217

219

222

228

229

231

232

235

236

236

237

237

238

239

  When an Auto Accident Occurs

  Deductibles

  Policy Components: 3 Standard Parts

  Broad Form Auto Insurance 

  Insuring Above All Other Liability Policies

  Single-Limit Policies / Split Limit Policies

  Umbrella Policies

  Judging Liability Insurance Amounts

  Property Damage / Medical Auto Insurance

  Personal-Injury Protection (PIP) in No-Fault States

  Wage Loss and Substitute Services

  Reviewing an Issued Policy for Correctness / Policy Layout

  Negligence Laws / Three Types of Negligence

  Loss-Adjustment Provisions / Notice of Loss

  Processing an Automobile Claim

  To Recap Negligence

 

241

243

244

245

246

247

248

248

249

250

250

251

252

253

254

255

Chapter 11:  Annuities

  Annuities:  Systematic Income

  Mortality Tables / Three Primary Types of Annuities

  Four People Potentially Involved

                The Insurer / The Contract Owner

                The Annuitant

                The Beneficiary

  Annuity Contract Titles / Annuity Development

  The Reinsurance Network

  Annuity Evolvement / Variable Annuities

  In the 70’s a Permanent Surrender Charge

  Bail-Out Annuities Marketed

  Indices & Two-Tiered Annuities

  The Application

  Options / Immediate Annuities

  Joint-and-Survivor Annuities / Immediate Variable Annuities

  Diversification / Deferred Annuities

  Flexibility

  Considering Goals and Objectives

  Annuity Advantages

  An Advantage: Safety of Principle and Contractual Guarantees

  An Advantage: Reserve Requirements for Annuities

  An Advantage: Financial Clout

  Advantages: Tax-Deferred Growth & Fixed Rate

                  Annuity Performance

  An Advantage: Professional Management

  An Advantage: Annuity Withdrawal Options

  An Advantage: Guaranteed Death Benefit in

                   Variable Annuities

  An Advantage: Avoiding the Probate Process

  An Advantage: Avoiding Those Darned In-Laws

  Annuities are Not Suitable for Every Investor

  Surrender Charges

 

257

258

259

259

260

261

261

262

263

263

263

263

264

265

266

267

268

269

270

270

271

272

273


274

275

276

 

276

277

278

279

  Fees

  Annuitization Options (Getting Your Money)

  Combining Annuities with Seven-Pay Life Insurance

  Using Annuities to Fund Legal Actions

  Employer Provided Retirement Options

  Rolling Over the Funds into Something Else

  Why Annuitize?

  Bailout Options

  Annuity Variations

                Single-Pay Deferred Annuity

                Accumulation Annuity

                Straight Life Annuity

                Refund Annuity

                Two-Tiered Annuity

                Joint-and-Survivor Annuity

                Pre-retirement Survivor Annuity

                Wrap-around Annuity

                CD-Like Annuity

  1035 Exchanges

  Split Annuities

  Reverse Annuity Mortgage (RAM)

  Private Annuities

  Qualified Annuities

  Tax-sheltered Annuities (TSA)

  Accumulation Periods

  Defining the Payout Period

  Interest Rates: Portfolio Average & Banding Method

  Assumed Interest Rate (AIR)

  TSA Expenses Explicit & Implicit

  Non-Qualified Annuities

  Annuity Suitability Training

  Finding the Right Products

  Safety of Investment / Funding Retirement

  Structured Settlements / Old Money; New Money

  Choosing an Annuity Type Based on Policy owner Risk

                Variable Annuities

                Funding Variable Annuities

                Variable Annuity Death Benefit

                Fixed-Rate Annuities

                Declared-Rate Fixed Annuities

                Indexed Fixed-Rate Annuities

                Two-Tiered Annuities

                Equity Indexed Annuities  (EIA)

                EIA Annual Expenses

                Contract Provisions Affect Consumers

                Guaranteed Rates and Returns

                Index Crediting

                Participation Rates

                Averaging

280

281

282

283

284

284

284

287

288

288

288

288

288

289

289

290

290

291

291

292

293

294

295

296

297

298

298

300

300

301

302

302

303

304

305

305

307

307

307

310

310

311

312

314

314

315

318

319

320

                Caps

                Spreads, Margins and Administrative Fees

                Returns

                Indexing Formulas

                Annual Reset Indexing Method

                High Water Mark Method

                Point-to-Point Indexing Method

                Multiple EIAs with Diversified Indexing Methods

                Terminology for EIA Products

  Annuity Surrender Values and Penalties

  Withdrawal Considerations / Payout Options

                Nonhuman Payees Under a Settlement Option

                Lifetime Income Payout Option

                Life-Annuity-Period-Certain Payout Option

                Joint-and-Last-Survivor Payout Option

                Required Distribution

                Taxation

                Qualified & Non-Qualified Annuity Annuitization

  Financially Sound Insurers

  State Guaranty Associations

  Establishing Suitability Standards

                Determining Suitability

                Sales Practices

                Product Replacement

                Deceptive Sales Practices Prohibited

                Full Disclosure

                Product knowledge / Identifying Suitability Issues

  It is Not a Liquidity Issue but Rather a Suitability Issue

  A Comprehensive Financial Plan

  Suitability Relating to Tax-Deferred Status

                Tax-Deferred Exception

  Annuity Gifts

  Other Tax Issues / Annuities are (Sometimes) Protected Assets

  Sometimes Annuities are a Bad Idea

  Considering Applicant Age

                Surrender Penalties

  Grasping Fundamental Aspects of the Product

                Basic Consumer Information Requirements

  General Contract Provisions

                Entire Contract

                Changes and Waivers

                Misstatements

                Required Reporting

                State Laws

                Claims by Creditors

  Additional Payments

  In Conclusion

 

320

320

321

322

323

323

324

325

325

329

331

333

333

333

334

335

335

335

336

337

337

338

340

340

340

340

341

342

343

347

348

348

349

350

350

351

352

353

354

354

354

354

355

355

355

356

357

Chapter 12:  Individual Retirement Accounts

  Personal Retirement / IRAs:  Individual Retirement Accounts

  Two Types of IRAs

  The Taxpayer Relief Act of 1997

  The IRS Restructuring and Reform Act of 1998

  Adding to A Roth

  Selecting the Best IRA Form

  Staying Within the Dollar Guidelines

  Roth IRA Withdrawals

  Roth IRA Advantages

 

 

358

359

361

361

362

363

363

363

364

Chapter 13:  Life Insurance

  Creating an Estate

  Trading a Guaranteed Loss for Protection

  Changing Social Times

  Two Basic Insurance Terms:  Premium & Peril

  Betting Against the Insurance Company

  A Good Financial Plan Involves Life Insurance

  What’s the Insurance For?

  Beneficiary Payout Options

  Estate Planning:  the Use of Procedures, Not Products

  Providing For Others through Planning

  Using Discipline to Achieve Security

  Making the Most of Our Earnings

  Turning Dreams into Goals

  Clarifying Client Objectives

  The Need for Broader Knowledge

  Basic Goals of Life Insurance / Life Insurance Trusts

  Trust Beneficiaries / Kinds of Life Insurance

  An Estate Planning Tool

  Term Insurance: No Money, Just Coverage

  Whole Life Insurance:  the Granddaddy

  Endowment Insurance Policies:  Forced Savings

  Universal Life: Separating Expenses

  Variable Life: Few Guarantees

  Survivorship Life:  Insuring 2 or More People

  Single Premium Whole Life

  Simplified Employee’s Pension Plan

  Buy-sell Agreements

  Company Ratings

 

 

366

367

367

368

368

369

370

371

371

372

373

373

373

374

374

375

376

377

377

378

379

279

380

381

382

383

383

384

Chapter 14: The Unusual

  Just About Anything can be Insured

  Types of Issued Policies

                Asteroid/Meteor Insurance

                Body Parts Insurance

                Chancel Liability Insurance / Replacement Insurance

                Flight Insurance and Travel Insurance

                Immaculate Conception Insurance

                Love Insurance

                Multiple Births Insurance

                Pet Insurance

                Ransom Insurance

                Space Alien Abduction Insurance

                Space Debris Insurance

                Supernatural or Ghost Insurance

                Sensory Insurance

                Talent Insurance

                Touring Caravan Insurance

                Wedding Insurance

                Unusual Insurance Claims

                Motor Insurance Quotes from Claim Forms

 

392

392

392

393

394

395

396

396

396

397

399

400

401

402

402

403

403

403

406

407

 

United Insurance Educators, Inc.

 

8213 - 352nd Street East

Eatonville, Washington 98328-8638

 

Telephone: (253) 846-1155

FAX only: (253) 846-7536

 

Email: mail@uiece.com