Insurance Exam Quick Summary (Numbered Points)

1. Irrevocable Beneficiary
   • An irrevocable beneficiary designation prevents the policyowner from making any policy changes without the beneficiary’s written consent.
2. Adverse Selection
   • Adverse selection is the tendency of higher-risk individuals to buy insurance more often than average-risk individuals.
3. Consideration (Life & Health Insurance)
   • Consideration consists of statements made in the application and the premium paid.
4. Insurable Interest
   • Insurable interest must exist only at the time of application, not at the time of claim.
   • If no beneficiary change occurs, the original beneficiary still receives proceeds.
5. Policy Forms Responsibility
   • The insurance carrier (insurer) assembles policy forms, riders, and endorsements.
   • The producer may deliver the policy but does not assemble it.
6. Dividends from Mutual Insurers
   • Dividends are not taxable because they are considered a return of excess premium, not income.
   • Mutual insurers may overcharge initially and refund surplus.
7. Mutual vs Stock Insurers
   • Mutual insurer = Participating
   • Stock insurer = Non-participating
8. Do Not Call Registry
   • Insurance sales calls are NOT exempt.
   • Political organizations, charities, and surveys are exempt.
9. Fair Credit Reporting Act (FCRA)
   • Obtaining consumer reports under false pretenses:
     • Up to $5,000 fine and 1 year imprisonment (producer)
     • Federal maximum fines may reach $10,000 (individual) and $50,000 (corporation)
10. Contract of Adhesion
    • Insurance contracts are prepared by the insurer with no negotiation.
    • Applicant must accept on a “take it or leave it” basis.
11. Rating Service Companies
    • Their primary purpose is to determine an insurer’s financial strength.
12. Law of Agency
    • The producer represents the principal (insurer).
    • Agents have actual, implied, and apparent authority.
    • The insurer is legally responsible for the agent’s actions.
13. Implied Authority
    • Unwritten authority assumed necessary to conduct business on behalf of the insurer.
14. Group Insurance Enrollment Period
    • The enrollment period is a limited time during which eligible members may sign up.
    • It cannot exceed four months.
15. COBRA Continuation
    • Coverage remains the same.
    • Premium may increase to 102% of the prior premium.
    • Election must be made within 60 days.
16. Preferred Provider Organization (PPO)
    • Out-of-network care is covered, but at a lower percentage.
    • If care is outside the network with no coverage, insured may pay 100%.
17. Suicide Clause (Life Insurance)
    • If suicide occurs within the stated period:
      • Insurer refunds premiums paid minus indebtedness
      • No interest is paid
18. Group Disability Income Insurance
    • Covers non-occupational illnesses and injuries.
    • Occupational injuries are covered by workers’ compensation.
19. Annuities
    • Only the policyowner can surrender an annuity during accumulation.
    • Refund annuity returns the remaining value if annuitant dies during payout.
    • Fixed Period Option:
      • Payments made for a set time
      • Beneficiary chooses the time period, not the amount
      • If beneficiary dies, remaining payments go to estate or contingent beneficiary
20. Indexed Annuities
    • Interest is tied to a market index (commonly S&P 500).
    • Subject to caps, floors, or participation rates.
21. Unearned Premium
    • Unearned premium belongs to the insured, not the insurer.
22. Alien Insurance Company
    • Chartered and organized in a country outside the United States.
23. New Jersey Licensing & Compliance
    • CE Requirement: 24 hours every 2 years, including 3 ethics hours
    • Temporary Certificate validity: 60 days
    • Branch office registration: 30 days before opening
    • Closing a branch office: Notify within 30 days
    • Producer must notify DOBI within 30 days of:
      • Address changes
      • Administrative actions
24. Policy Delivery
    • Individual policy or certificate must be delivered:
      • At effective date or
      • Within 30 days
25. Medicare Rules
    • Medicare qualifying events do NOT include being poverty-stricken.
    • Medicare Advantage (Part C) enrollment occurs when eligible for Medicare.
    • Medicare Supplement can be canceled for nonpayment.
    • If age 65+ and working for an employer with 20+ employees:
      • Employer plan is primary
      • Medicare is secondary
26. Alcoholism Coverage
    • Group health-care service contracts must cover treatment for alcoholism.
27. Disability Income Insurance
    • Designed to replace a portion of income during disability.
    • Does not replace full income or pay medical expenses.
28. Subrogation
    • Allows the insurer to recover money from a third party responsible for the loss after paying a claim.
    • Prevents double payment and helps control premiums.