Arizona Life & Health Course Notes

PSI exam weight: 4%. License activity and line of authority first; then check application, renewal, commission, conduct, and reporting rules. Arizona resident major-line CE: 48 hours per 4-year term, including 6 ethics, unless exempt. Temporary producer license: Director discretion, specified continuity situations, maximum 180 days. Administrative action: report within 30 days after final disposition with relevant dispositive document. Claims: reasonable investigation; suspected fraud can trigger reporting before a criminal conviction.

• Do not confuse Licensing — license required and lines of authority: Life and Accident & Health or Sickness are separate Arizona lines of authority; do not treat 'disability' as a separate major line.

• License activity and line of authority first; then check application, renewal, commission, conduct, and reporting rules.

PSI exam weight: 3%. FCRA: adverse action based on a consumer report triggers notice; free-report request right is 60 days. Do Not Call safe harbor uses Registry data downloaded no more than 31 days before the call plus procedures/training/records. CAN-SPAM: truthful routing/subject, ad identification, postal address, opt-out; honor opt-out within 10 business days. 18 USC 1033: dishonest/breach-of-trust felony + insurance-business participation requires written regulatory consent. GINA protects health coverage/employment; not life, disability, or LTC in the same way.

• Do not confuse Fair Credit Reporting Act — adverse action: Ordering or reviewing a report is not itself adverse action; an unfavorable insurance decision based on the report triggers the notice.

• FCRA: adverse action based on a consumer report triggers notice; free-report request right is 60 days.

PSI exam weight: 7%. Pure risk = loss/no loss; speculative risk includes chance of gain. Peril causes loss; hazard increases frequency/severity. Transfer shifts financial consequences by contract; avoidance eliminates exposure. Insurance contracts: aleatory, adhesion, unilateral, conditional; valid contract needs offer/acceptance, consideration, competent parties, legal purpose. Authority: express = stated; implied = necessary/incidental; apparent = principal manifestations + reasonable third-party belief.

• Do not confuse Risk concepts — pure versus speculative risk: Pure Risk: Outcomes are limited to loss or no loss. Speculative Risk: Outcomes include potential gain.

• Pure risk = loss/no loss; speculative risk includes chance of gain.

PSI exam weight: 17%. Life insurable interest is tested at contract formation; creditor/business interests can qualify. Needs analysis: human-life-value = future economic contribution; needs approach = obligations/goals minus available resources. Premium basics: life pricing uses mortality, interest, and expenses; health/disability relies heavily on morbidity. Underwriting controls adverse selection using application, producer report, MIB/consumer reports, medical exams and APS where applicable. Conditional receipts and delivery/effective-date questions turn on the exact conditions, premium, insurability, and material health changes.

• Do not confuse Insurable interest — timing: Life insurance generally requires insurable interest at inception; property insurance requires insurable interest at the time of loss.

• Life insurable interest is tested at contract formation; creditor/business interests can qualify.

PSI exam weight: 9%. Term = temporary/no cash value; level/decreasing/increasing describe death-benefit pattern. Whole life = permanent + guaranteed cash value; ordinary, limited-pay, and single-premium differ mainly in premium schedule. Universal life = flexible premium + interest-sensitive account; VUL adds separate-account market risk; IUL uses index-linked crediting formula. Variable products use separate accounts and require securities authority. Joint life = first death; survivorship life = second death.

• Do not confuse Term life — level term: Level term = constant death benefit; decreasing term = declining death benefit; increasing term = rising death benefit.

• Term = temporary/no cash value; level/decreasing/increasing describe death-benefit pattern.

PSI exam weight: 15%. Owner controls contract rights; beneficiary rights depend on revocable vs. irrevocable status. Arizona life grace: 30 days (or one month not less than 30); incontestability: 2 years during insured's lifetime, except nonpayment. Misstatement of age adjusts benefits to what the premium would have purchased at the correct age. Nonforfeiture: cash surrender = cash/coverage ends; reduced paid-up = smaller permanent; extended term = term for limited duration. Fixed-period settlement fixes time; fixed-amount fixes payment. Policy loans create debt; outstanding debt reduces net proceeds. Guaranteed insurability = buy more without new health evidence; accelerated death benefit = living advance of death benefit.

• Do not confuse Ownership rights: A ‘permitted' change differs from a ‘prohibited' change. The contract defines what is allowed, and any deviation requires specific contractual procedures.

• Owner controls contract rights; beneficiary rights depend on revocable vs. irrevocable status.

PSI exam weight: 7%. Owner controls contract; annuitant is measuring life; beneficiary receives contract-defined death/refund value. Immediate = income soon; deferred = accumulation before future income. Fixed = insurer supports guarantees; variable = separate accounts/owner market risk; indexed = fixed product with index-linked formula. Life-only pays highest life-contingent income but stops at death; period-certain/refund/joint-survivor options trade income for guarantees. Arizona annuity recommendation: statutory best-interest standard with care, disclosure, conflict and documentation obligations.

• Do not confuse Annuity parties — owner: Owner vs. Annuitant: The owner controls the contract; the annuitant is a calculation component.

• Owner controls contract; annuitant is measuring life; beneficiary receives contract-defined death/refund value.

PSI exam weight: 8%. Time limit on defenses/preexisting conditions: two-year framework with fraud and specific-exclusion distinctions. Arizona grace by premium mode: 7 days weekly, 10 monthly, 31 all other. Notice of claim: generally 20 days/as soon as reasonably possible; proof of loss: 90-day framework. Reinstatement: application pending can auto-reinstate on day 45 absent disapproval; accident after reinstatement, sickness beginning more than 10 days later. Claim forms: insurer 15 days; legal actions: not before 60 days after proof and not after 3 years from proof due.

• Do not confuse Time limit on certain defenses: Two-year defense limit does not mean every policy exclusion disappears after two years.

• Time limit on defenses/preexisting conditions: two-year framework with fraud and specific-exclusion distinctions.

PSI exam weight: 6%. Own-occ vs any-occ definitions determine total-disability qualification; residual/partial benefits address reduced earning capacity. Presumptive disability uses listed catastrophic losses; recurrent disability rules treat related recurrences per contract. Elimination period = waiting time; benefit period = maximum payment duration. BOE pays eligible business overhead, not personal income; buy-sell and key-person disability address different business exposures. SSA uses a strict total-disability standard: no partial/short-term benefits; 12 months/death duration requirement.

• Do not confuse Total disability — own occupation: A. Broad disability definition (any work) vs. B. Own-occupation definition (job duties).

• Own-occ vs any-occ definitions determine total-disability qualification; residual/partial benefits address reduced earning capacity.

PSI exam weight: 11%. Deductible = amount before plan sharing; copay = fixed amount; coinsurance = percentage; OOP max caps covered in-network member cost sharing subject to plan/ACA rules. HMO emphasizes network/coordination; PPO allows more out-of-network choice at higher cost; POS blends coordination with some out-of-network access. Cost containment includes PCP coordination, preauthorization, utilization review, preventive care and ambulatory/outpatient care. Limited policies (hospital indemnity, critical illness, AD&D) are not substitutes for comprehensive major medical. ACA Marketplace plans protect preexisting conditions; MHPAEA limits more restrictive mental-health financial/treatment requirements.

• Do not confuse Deductible: A ‘co-pay' is a fixed amount paid *per service*, regardless of the deductible. The deductible is a total amount.

• Deductible = amount before plan sharing; copay = fixed amount; coinsurance = percentage; OOP max caps covered in-network member cost sharing subject to plan/ACA rules.

PSI exam weight: 3%. Master contract belongs to employer/group; members receive certificates. Contributory = employee pays part; noncontributory = employer pays all. Waiting/probationary periods govern eligibility; coordination of benefits sets primary/secondary order. COBRA job loss/reduced hours generally = up to 18 months; other events can differ. COBRA ordinary maximum premium is generally up to 102% of plan cost.

• Do not confuse Master contract and certificate: Master policyholder = group; certificate holder = covered member.

• Master contract belongs to employer/group; members receive certificates.

PSI exam weight: 5%. Medicare A = hospital; B = medical/outpatient; C = Medicare Advantage; D = prescription drugs. Medigap supplements Original Medicare, not Medicare Advantage; standardized letter plans have standardized benefits. LTC qualified-plan triggers commonly use 2 ADLs or severe cognitive impairment; elimination period is a time deductible. Arizona LTC training: 8-hour initial + 4 hours every 24 months. Arizona LTC right-to-return period: 30 days.

• Do not confuse Medicare Part A: Part A = hospital/facility-type benefits; Part B = medical/outpatient/provider services.

• Medicare A = hospital; B = medical/outpatient; C = Medicare Advantage; D = prescription drugs.

PSI exam weight: 5%. Life death proceeds generally income-tax-free; interest on retained proceeds is taxable. Cash surrender gain above basis is generally taxable; policy dividends are generally return of premium until basis is recovered. Nonqualified annuity withdrawal before annuitization generally uses LIFO; annuitized payments use exclusion-ratio treatment. Taxable annuity distributions before 59½ can face a 10% additional tax unless an exception applies. After-tax individual disability premiums generally produce tax-free benefits; employer/pre-tax premiums generally produce taxable benefits. HSA = individually owned/portable; HRA = employer-funded; health FSA = employer cafeteria-plan arrangement.

• Do not confuse Life insurance death proceeds: Death benefit itself generally tax-free; post-death interest is taxable.

• Life death proceeds generally income-tax-free; interest on retained proceeds is taxable.