Life, Accident & Sickness Agent (12-
GA-05) Certification Study Guide
Georgia Insurance A, Exams of
Community Health
Guaranteed Minimum Withdrawal Benefit (GMWB) - ANSWER//A Guaranteed
Minimum Withdrawal Benefit (GMWB) is a type of rider or contract attached to
some annuity insurance policies. It guarantees the policyholder a steady
stream of retirement income regardless of market volatility. A Guaranteed
Minimum Withdrawal Benefit, or GMWB, guarantees a policyholder's income
through all types of market activity. Maximum withdrawals are usually
between five and ten percent. These types of riders are designed to protect
policyholders during market downturns. Taxation of personal life insurance -
ANSWER//Tax implications are important to consider when buying life
insurance. The Internal Revenue Service (IRS) imposes different tax rules on
different plans, and sometimes the distinctions are arbitrary. Life insurance
premiums, under most circumstances, are not taxed—i.e. no sales tax is
added or charged. These premiums are also not tax-deductible. If an
employer pays life insurance premiums on an employee's behalf, any
payments for $50,000 or more in coverage is taxed as income. Interest
earned for prepaid insurance is taxed as interest income. Returns generated
from whole life insurance policies are not taxed until the policy is cashed out.
Employer-Paid Life Insurance When a person's employer provides life
insurance as part of an overall compensation plan, the IRS considers it
income, which means the employee is subject to taxes. However, these taxes
only apply when the employer pays for more than $50,000 in life insurance
coverage. Even in those cases, the premium cost for the first $50,000 in
coverage is exempt from taxation. Prepaid Life Insurance Some life insurance
plans allow the policyholder to pay a lump sum premium upfront. That money
gets applied to the plan's premiums throughout the plan's duration. The lump-
sum payment also grows in value because of interest. The growth of that
money is considered interest income by the IRS, which means it can be
subject to taxation when it is applied for a premium payment or when the
policyholder withdraws some or all of the money he has earned. Similar to
retirement accounts, such as 401(k) plans and IRAs, the accumulation of cash
value on a whole life insurance policy is tax-deferred. Even though this money
qualifies as income, the IRS does not require the policyholder to pay taxes on
it until he cashes out the policy. Life Insurance Premiums Not Tax-Deductible.
Section 1035 Exchange - ANSWER//A 1035 exchange is a provision in the
Internal Revenue Service (IRS) code allowing for a tax-free transfer of an
existing annuity contract, life insurance policy, long-term care product, or
endowment for another one of like kind. Section 1035 of the tax code allows
for tax-free exchanges of certain insurance products. Life insurance
policyholders can use a section 1035 exchange to trade an old policy in on a
new one with better features. The 2006 Pension Protection Act modified the
,law to allow exchanges into long-term care products. Business of Life
settlement - ANSWER//refers to the sale of an existing insurance policy to a
third party for a one-time cash payment. Payment is more than the surrender
value, but less than the actual death benefit. After the sale, the purchaser
becomes the policy's beneficiary and assumes payment of its premiums. Life
Settlement Broker - ANSWER//Life settlement brokers are state licensed
professionals who represent life insurance policyholders in the life settlement
process and negotiate on their behalf with life settlement providers. Financing
transaction (Entities) - ANSWER//Life settlement investors are known as
financing entities because they are providing the capital or financing for life
settlement transactions (the purchase of a life insurance policy). A financing
entity is an accredited investor whose principal activity in connection with the
transaction is providing funds to establish the life settlement contract or to
purchase one or more policies, and who has an agreement in writing with a
life settlement provider to finance the acquisition of a life settlement contract.
Owner - ANSWER//In a "life settlement" transaction, a life insurance policy
owner sells his or her policy to an investor in exchange for a lump sum
payment. The amount of the payment from the investor to the policy owner is
generally less than the death benefit on the policy, but more than its cash
surrender value. Broker License Requirements - ANSWER//- Be 18 years of
age - High school diploma or equivalent - 2 to 4 years of experience as a
practicing salesperson - Complete the required broker education - Take and
pass the broker licensing exam - Complete the broker license application and
pay the required fee Advertising (7809) - ANSWER//(b) Advertisements shall
be accurate, truthful and not misleading in fact or by implication. (c) No life
settlement provider, life settlement intermediary, life settlement broker, or any
person acting on behalf thereof shall: (1) directly or indirectly, market,
advertise, solicit or otherwise promote the purchase of a policy for the primary
purpose of, or with an emphasis on, settling the policy; or (2) use the words
"free", "no cost" or words of similar import in the marketing, advertising,
soliciting or otherwise promoting of the purchase of a policy. (d) The failure to
follow the provisions of this section shall be a defined violation under article
twenty-four of this chapter. Privacy (7810) - ANSWER//no life settlement
provider, life settlement broker, or life settlement intermediary, or any
authorized representative thereof, insurer, information bureau, rating agency
or company, or any other person with actual knowledge of an insured or
owner's identity, shall disclose the identity of the insured or owner, or any
information that there is a reasonable basis to believe could be used to
identify the insured or owner, or the insured's financial or medical information.
HIPAA (Health Insurance Portability and Accountability Act) 1996 -
ANSWER//Provides the ability to transfer and continue health insurance
coverage for millions of American workers and their families when they
change or lose their jobs; Reduces health care fraud and abuse; Mandates
industry-wide standards for health care information on electronic billing and
other processes; and Requires the protection and confidential handling of
protected health information Prohibited Practices (7814) - ANSWER//Under
the laws enforced by EEOC, it is illegal to discriminate against someone
(applicant or employee) because of that person's race, color, religion, sex
(including gender identity, sexual orientation, and pregnancy), national origin,
age (40 or older), disability or genetic information. Stranger-originated life
,insurance (7815) - ANSWER//an arrangement in which an investor holds a life
insurance policy without an insurable interest. Without an insurable interest,
the investor would ordinarily be prohibited from purchasing the original policy.
Stranger-Owned Life Insurance policies are owed by third-parties, usually
investors, with no insurable interest. SOLI policies are often offered in
exchange for loans that the insured can use during his or her lifetime. SOLI is
illegal as it gives the policyholder, who has no insurable interest or
relationship with the insured, an advantage in the insured's death. Insurable
interest provisions - ANSWER//A person or entity has an insurable interest in
an item, event or action when the damage or loss of the object would cause a
financial loss or other hardships. To have an insurable interest a person or
entity would take out an insurance policy protecting the person, item or event
in question. The insurance policy mitigates the risk of loss should something
beset the asset. Insurable interest is an essential requirement for issuing an
insurance policy that makes the entity or event legal, valid and protected
against intentionally harmful acts. People not subject to financial loss do not
have an insurable interest. Therefore a person or entity cannot Insurable
interest is the basis of all insurance policies. An insurable interest is an object
which, if damaged or destroyed, would result in financial hardship for the
policyholder. To exercise insurable interest, the policyholder would buy
insurance on the person or item in question. The policy must not create a
moral hazard, in which a policyholder would have a financial incentive to allow
or even cause a loss. Trust owned policies - ANSWER//Trust-owned life
insurance (TOLI) is a type of life insurance that resides within a trust. TOLI is
an estate planning tool mainly consumed by high-net-worth individuals, who
rely on it to ensure the responsible distribution of inheritance assets among
their heirs, reduce estate tax liability, and meet their charitable objectives.
Trust-owned life insurance (TOLI) is a type of life insurance housed inside a
trust. TOLI is favored by high-net-worth individuals who use this tool for estate
planning needs. The assets housed within the trust that are bequeathed to
beneficiaries can sidestep onerous tax obligations. TOLI policies demand
regular reviews to make sure they adequately meet the current needs of the
trust. If not, the products should be replaced with superior offerings.
Decreasing Term Insurance - ANSWER//Decreasing term insurance is
renewable term life insurance with coverage decreasing over the life of the
policy at a predetermined rate. Premiums are usually constant throughout the
contract, and reductions in coverage typically occur monthly or annually.
Terms range between 1 year and 30 years. Decreasing term insurance is a
more affordable option than whole life or universal life insurance. The death
benefit is designed to mirror the amortization schedule of a mortgage or other
high personal debt not easily covered by personal assets or income.
Decreasing term insurance allows a pure death benefit with no cash
accumulation. As such, this insurance option has modest premiums for
comparable benefit amounts to either a permanent or temporary life insurance.
Conditional Receipt - ANSWER//a document given to someone who applies
for an insurance contract and has provided the initial premium payment. This
receipt means that the person can only be insured if he or she meets the
standards of insurability and is given approval by the insurance company.
Elements of a Contract - ANSWER//offer and acceptance (Agreement)
consideration competency and capacity Legal Purpose Morbidity -
, ANSWER//Morbidity is a table used in calculating accident and health
premiums. COBRA (Consolidated Omnibus Budget Reconciliation Act) -
ANSWER//gives workers and their families who lose their health benefits the
right to choose to continue group health benefits provided by their group
health plan for limited periods of time under certain circumstances such as
voluntary or involuntary job loss, reduction in the hours worked, transition
between jobs, death, divorce, and other life events. Qualified individuals may
be required to pay the entire premium for coverage up to 102% of the cost to
the plan. generally requires that group health plans sponsored by employers
with 20 or more employees in the prior year offer employees and their families
the opportunity for a temporary extension of health coverage (called
continuation coverage) in certain instances where coverage under the plan
would otherwise end. Superintendents Powers - ANSWER//The
Superintendent shall have the power to prescribe and from time to time
withdraw or amend, in writing, regulations: governing the duties assigned to
the members of the staff of the department; effectuating any power, given to
him to prescribe forms or otherwise make regulations; and governing the
procedures to be followed in the practice of the department. Annuitant -
ANSWER//The person that buys an annuity; may or may not be an annuity's
policyowner. Dread Disease Policy - ANSWER//A dread disease policy, which
is also known as a critical illness policy, is a type of insurance policy that pays
out a tax-free lump sum in the event that you fall ill with one of the major
illnesses, diseases, or events that the policy covers. These conditions can
include things like: Cancer Heart-attacks By-passes Strokes Blindness
Deafness Alzheimer's Parkinson's Organ Failure or Transplant Severe Burns
Loss of Limbs Paralysis Accidental HIV Exposure Pregnancy-related
Complications ... and more!
Process 2103 (d-i) - ANSWER//1. The Superintendent may issue a license to
any person, firm or corporation who has complied with the requirements of the
Insurance Code, authorizing the licensee to act as agent of any authorized
insurer. Every individual applicant for a license under this section and every
proposed sub-licensee must be 18 years of age or older at the time of
issuance of such license. The person must submit to and pass a written
examination required by the Superintendent. Producer Definition (2101(k)) -
ANSWER//An insurance producer means an insurance agent, insurance
broker, reinsurance intermediary, excess lines broker, or any other person
required to be licensed under the insurance laws of this state to sell, solicit or
negotiate insurance. Who Should be Licensed (2101(k)(1)) - ANSWER//1.
The term "insurance producer" does not include: An officer, director or
employee of a licensed insurer, fraternal benefit society or health
maintenance organization or of a licensed insurance producer, provided that
the officer, director or employee does not receive any commission on policies
written or sold to insure risks residing, located or to be performed in this state
and: (a) the officer, director or employee's activities are executive,
administrative, managerial, clerical or a combination of these, and are only
indirectly related to the sale, solicitation or negotiation of insurance; (b) the
officer, director or employee's function relates to underwriting, loss control,
Inspection or the processing, adjusting, investigating or settling of a claim on a
contract of Insurance; or (c) the officer, director or employee is acting in the
GA-05) Certification Study Guide
Georgia Insurance A, Exams of
Community Health
Guaranteed Minimum Withdrawal Benefit (GMWB) - ANSWER//A Guaranteed
Minimum Withdrawal Benefit (GMWB) is a type of rider or contract attached to
some annuity insurance policies. It guarantees the policyholder a steady
stream of retirement income regardless of market volatility. A Guaranteed
Minimum Withdrawal Benefit, or GMWB, guarantees a policyholder's income
through all types of market activity. Maximum withdrawals are usually
between five and ten percent. These types of riders are designed to protect
policyholders during market downturns. Taxation of personal life insurance -
ANSWER//Tax implications are important to consider when buying life
insurance. The Internal Revenue Service (IRS) imposes different tax rules on
different plans, and sometimes the distinctions are arbitrary. Life insurance
premiums, under most circumstances, are not taxed—i.e. no sales tax is
added or charged. These premiums are also not tax-deductible. If an
employer pays life insurance premiums on an employee's behalf, any
payments for $50,000 or more in coverage is taxed as income. Interest
earned for prepaid insurance is taxed as interest income. Returns generated
from whole life insurance policies are not taxed until the policy is cashed out.
Employer-Paid Life Insurance When a person's employer provides life
insurance as part of an overall compensation plan, the IRS considers it
income, which means the employee is subject to taxes. However, these taxes
only apply when the employer pays for more than $50,000 in life insurance
coverage. Even in those cases, the premium cost for the first $50,000 in
coverage is exempt from taxation. Prepaid Life Insurance Some life insurance
plans allow the policyholder to pay a lump sum premium upfront. That money
gets applied to the plan's premiums throughout the plan's duration. The lump-
sum payment also grows in value because of interest. The growth of that
money is considered interest income by the IRS, which means it can be
subject to taxation when it is applied for a premium payment or when the
policyholder withdraws some or all of the money he has earned. Similar to
retirement accounts, such as 401(k) plans and IRAs, the accumulation of cash
value on a whole life insurance policy is tax-deferred. Even though this money
qualifies as income, the IRS does not require the policyholder to pay taxes on
it until he cashes out the policy. Life Insurance Premiums Not Tax-Deductible.
Section 1035 Exchange - ANSWER//A 1035 exchange is a provision in the
Internal Revenue Service (IRS) code allowing for a tax-free transfer of an
existing annuity contract, life insurance policy, long-term care product, or
endowment for another one of like kind. Section 1035 of the tax code allows
for tax-free exchanges of certain insurance products. Life insurance
policyholders can use a section 1035 exchange to trade an old policy in on a
new one with better features. The 2006 Pension Protection Act modified the
,law to allow exchanges into long-term care products. Business of Life
settlement - ANSWER//refers to the sale of an existing insurance policy to a
third party for a one-time cash payment. Payment is more than the surrender
value, but less than the actual death benefit. After the sale, the purchaser
becomes the policy's beneficiary and assumes payment of its premiums. Life
Settlement Broker - ANSWER//Life settlement brokers are state licensed
professionals who represent life insurance policyholders in the life settlement
process and negotiate on their behalf with life settlement providers. Financing
transaction (Entities) - ANSWER//Life settlement investors are known as
financing entities because they are providing the capital or financing for life
settlement transactions (the purchase of a life insurance policy). A financing
entity is an accredited investor whose principal activity in connection with the
transaction is providing funds to establish the life settlement contract or to
purchase one or more policies, and who has an agreement in writing with a
life settlement provider to finance the acquisition of a life settlement contract.
Owner - ANSWER//In a "life settlement" transaction, a life insurance policy
owner sells his or her policy to an investor in exchange for a lump sum
payment. The amount of the payment from the investor to the policy owner is
generally less than the death benefit on the policy, but more than its cash
surrender value. Broker License Requirements - ANSWER//- Be 18 years of
age - High school diploma or equivalent - 2 to 4 years of experience as a
practicing salesperson - Complete the required broker education - Take and
pass the broker licensing exam - Complete the broker license application and
pay the required fee Advertising (7809) - ANSWER//(b) Advertisements shall
be accurate, truthful and not misleading in fact or by implication. (c) No life
settlement provider, life settlement intermediary, life settlement broker, or any
person acting on behalf thereof shall: (1) directly or indirectly, market,
advertise, solicit or otherwise promote the purchase of a policy for the primary
purpose of, or with an emphasis on, settling the policy; or (2) use the words
"free", "no cost" or words of similar import in the marketing, advertising,
soliciting or otherwise promoting of the purchase of a policy. (d) The failure to
follow the provisions of this section shall be a defined violation under article
twenty-four of this chapter. Privacy (7810) - ANSWER//no life settlement
provider, life settlement broker, or life settlement intermediary, or any
authorized representative thereof, insurer, information bureau, rating agency
or company, or any other person with actual knowledge of an insured or
owner's identity, shall disclose the identity of the insured or owner, or any
information that there is a reasonable basis to believe could be used to
identify the insured or owner, or the insured's financial or medical information.
HIPAA (Health Insurance Portability and Accountability Act) 1996 -
ANSWER//Provides the ability to transfer and continue health insurance
coverage for millions of American workers and their families when they
change or lose their jobs; Reduces health care fraud and abuse; Mandates
industry-wide standards for health care information on electronic billing and
other processes; and Requires the protection and confidential handling of
protected health information Prohibited Practices (7814) - ANSWER//Under
the laws enforced by EEOC, it is illegal to discriminate against someone
(applicant or employee) because of that person's race, color, religion, sex
(including gender identity, sexual orientation, and pregnancy), national origin,
age (40 or older), disability or genetic information. Stranger-originated life
,insurance (7815) - ANSWER//an arrangement in which an investor holds a life
insurance policy without an insurable interest. Without an insurable interest,
the investor would ordinarily be prohibited from purchasing the original policy.
Stranger-Owned Life Insurance policies are owed by third-parties, usually
investors, with no insurable interest. SOLI policies are often offered in
exchange for loans that the insured can use during his or her lifetime. SOLI is
illegal as it gives the policyholder, who has no insurable interest or
relationship with the insured, an advantage in the insured's death. Insurable
interest provisions - ANSWER//A person or entity has an insurable interest in
an item, event or action when the damage or loss of the object would cause a
financial loss or other hardships. To have an insurable interest a person or
entity would take out an insurance policy protecting the person, item or event
in question. The insurance policy mitigates the risk of loss should something
beset the asset. Insurable interest is an essential requirement for issuing an
insurance policy that makes the entity or event legal, valid and protected
against intentionally harmful acts. People not subject to financial loss do not
have an insurable interest. Therefore a person or entity cannot Insurable
interest is the basis of all insurance policies. An insurable interest is an object
which, if damaged or destroyed, would result in financial hardship for the
policyholder. To exercise insurable interest, the policyholder would buy
insurance on the person or item in question. The policy must not create a
moral hazard, in which a policyholder would have a financial incentive to allow
or even cause a loss. Trust owned policies - ANSWER//Trust-owned life
insurance (TOLI) is a type of life insurance that resides within a trust. TOLI is
an estate planning tool mainly consumed by high-net-worth individuals, who
rely on it to ensure the responsible distribution of inheritance assets among
their heirs, reduce estate tax liability, and meet their charitable objectives.
Trust-owned life insurance (TOLI) is a type of life insurance housed inside a
trust. TOLI is favored by high-net-worth individuals who use this tool for estate
planning needs. The assets housed within the trust that are bequeathed to
beneficiaries can sidestep onerous tax obligations. TOLI policies demand
regular reviews to make sure they adequately meet the current needs of the
trust. If not, the products should be replaced with superior offerings.
Decreasing Term Insurance - ANSWER//Decreasing term insurance is
renewable term life insurance with coverage decreasing over the life of the
policy at a predetermined rate. Premiums are usually constant throughout the
contract, and reductions in coverage typically occur monthly or annually.
Terms range between 1 year and 30 years. Decreasing term insurance is a
more affordable option than whole life or universal life insurance. The death
benefit is designed to mirror the amortization schedule of a mortgage or other
high personal debt not easily covered by personal assets or income.
Decreasing term insurance allows a pure death benefit with no cash
accumulation. As such, this insurance option has modest premiums for
comparable benefit amounts to either a permanent or temporary life insurance.
Conditional Receipt - ANSWER//a document given to someone who applies
for an insurance contract and has provided the initial premium payment. This
receipt means that the person can only be insured if he or she meets the
standards of insurability and is given approval by the insurance company.
Elements of a Contract - ANSWER//offer and acceptance (Agreement)
consideration competency and capacity Legal Purpose Morbidity -
, ANSWER//Morbidity is a table used in calculating accident and health
premiums. COBRA (Consolidated Omnibus Budget Reconciliation Act) -
ANSWER//gives workers and their families who lose their health benefits the
right to choose to continue group health benefits provided by their group
health plan for limited periods of time under certain circumstances such as
voluntary or involuntary job loss, reduction in the hours worked, transition
between jobs, death, divorce, and other life events. Qualified individuals may
be required to pay the entire premium for coverage up to 102% of the cost to
the plan. generally requires that group health plans sponsored by employers
with 20 or more employees in the prior year offer employees and their families
the opportunity for a temporary extension of health coverage (called
continuation coverage) in certain instances where coverage under the plan
would otherwise end. Superintendents Powers - ANSWER//The
Superintendent shall have the power to prescribe and from time to time
withdraw or amend, in writing, regulations: governing the duties assigned to
the members of the staff of the department; effectuating any power, given to
him to prescribe forms or otherwise make regulations; and governing the
procedures to be followed in the practice of the department. Annuitant -
ANSWER//The person that buys an annuity; may or may not be an annuity's
policyowner. Dread Disease Policy - ANSWER//A dread disease policy, which
is also known as a critical illness policy, is a type of insurance policy that pays
out a tax-free lump sum in the event that you fall ill with one of the major
illnesses, diseases, or events that the policy covers. These conditions can
include things like: Cancer Heart-attacks By-passes Strokes Blindness
Deafness Alzheimer's Parkinson's Organ Failure or Transplant Severe Burns
Loss of Limbs Paralysis Accidental HIV Exposure Pregnancy-related
Complications ... and more!
Process 2103 (d-i) - ANSWER//1. The Superintendent may issue a license to
any person, firm or corporation who has complied with the requirements of the
Insurance Code, authorizing the licensee to act as agent of any authorized
insurer. Every individual applicant for a license under this section and every
proposed sub-licensee must be 18 years of age or older at the time of
issuance of such license. The person must submit to and pass a written
examination required by the Superintendent. Producer Definition (2101(k)) -
ANSWER//An insurance producer means an insurance agent, insurance
broker, reinsurance intermediary, excess lines broker, or any other person
required to be licensed under the insurance laws of this state to sell, solicit or
negotiate insurance. Who Should be Licensed (2101(k)(1)) - ANSWER//1.
The term "insurance producer" does not include: An officer, director or
employee of a licensed insurer, fraternal benefit society or health
maintenance organization or of a licensed insurance producer, provided that
the officer, director or employee does not receive any commission on policies
written or sold to insure risks residing, located or to be performed in this state
and: (a) the officer, director or employee's activities are executive,
administrative, managerial, clerical or a combination of these, and are only
indirectly related to the sale, solicitation or negotiation of insurance; (b) the
officer, director or employee's function relates to underwriting, loss control,
Inspection or the processing, adjusting, investigating or settling of a claim on a
contract of Insurance; or (c) the officer, director or employee is acting in the
