Life & Health Terms
AGREEMENT
All parties to the contract agree to everything in the contract. (11-9)
ATTENDING PHYSICIANS STATEMENT (APS)
Also known as an APS. Information provided by health care practitioners/hospitals to insurance companies so that they can assess the insured's state of current or past health. (2-15) The applicant must sign a consent form to release the information to the insurer. Includes detailed information about the purpose of doctor's visits, results of tests administered, diagnosis and treatment of illness or injury, length and reason for any hospital stays and any test or surgery that has been recommended but has not yet been done.
AGENT'S APPOINTMENT
An agent is appointed to represent specific insurance companies. (10-14, 11-7)
ANNUAL RENEWABLE TERM
Temporary insurance with an annually increasing premium and a level death benefit. (3-3)
ASSUMED RATE OF INTEREST
This can have two meanings. The first is the rate of interest the insurance company uses to calculate the amount of money needed in its reserves to pay future obligations. The second meaning is the interest rate an agent uses on a computer illustration to show a person how a policy will theoretically perform. (2-17, 5-3)
CLAIM
When the insured submits paperwork to the insurance company to be reimbursed for a financial loss. (1-19, 12-5)
Time Limit on Certain Defenses
- The policy is incontestable after it has been in force for a period of time. - 2 Years
Medical Savings Accounts (MSAs)
-were created to help employees of small employers, as well as self- employed individuals, pay for their medical care expenses. -MSA's are tax-free accounts set up with financial institution such as banks and insurance companies. Qualified medical savings accounts are available for employers with no more than 50 employees.
ADVERSE SELECTION
An insurer selecting a higher than normal number of uninsurable or substandard risks for insurance coverage. (1-14)
ACTIVITIES OF DAILY LIVING
Basic functions allowing independent living (e.g. eating, dressing etc.). Used by Long-Term Care insurers to determine if benefits are payable. (9-12)
AVOIDANCE
Bypassing situations or circumstances that create risk. Also called "loss prevention." (1-4)
BLANKET LIFE INSURANCE
Coverage for particular locations or organizations where the members change frequently. Usually purchased by schools, athletic teams, summer camps etc. (4-22)
APPLICATION TO REDUCE PREMIUMS
Dividend option allowing the dividend to be used to offset premium payments. (4-13)
CAPITAL SUM
Dollar amount payable, as a lump sum, in the case of dismemberment. (4-22, 6-22)
CALIFORNIA LIFE AND HEALTH INSURANCE GUARANTEE ASSOCIATION
Life and disability insurance companies admitted in the State of California must participate in this organization. Within limitations, it protects the consumer if a member insurer becomes insolvent. (10-11)
BROKER
Represents the client in property and casualty insurance transactions. (1-20, 10-13)
BUY SELL AGREEMENTS
See "Business Continuation Insurance."
APPARENT AUTHORITY
The appearance of authority based on unauthorized actions on the part of the agent that have been reinforced by the insurer. (12-15)
AMOUNT AT RISK
The difference between the death benefit and the cash value of a life insurance policy. (3-6)
ATTAINED AGE
The insured's age at any particular point in time. For example, the current chronological age. (3-2)
BLACKOUT PERIOD
The period of time when no Social Security income is paid to the surviving worker's spouse. This period is reached when the youngest child of the worker reaches a limiting age and lasts until the surviving spouse is age 60. (2-2)
ANNUITANT
The person who owns and/or receives the payout from an annuity. (5-2)
Cost of living
allows the policy benefits to increase based on inflation, without evidence of insurability
consideration
both parties bring something of value insured-- application + premium insurer-- promise to pay
provision
think of provisions as simply "how we do things" they are components of a policy that outlines, benefits, conditions, rules or other important features **wont be tested but treat each provision like like a definition/ concept you need to know and understand
Misstatement of Age or Gender
(Will adjust) If the age and/or gender of the insured have been misstated in a policy, all benefits under the policy will be provided based upon the insured's correct age and/or gender according to the premium scale in effect at the time the policy was issued. An insurer can refund any overpaid premiums if the amount of premium paid was greater than should have been paid. The insurer can reduce the face when amount of premium paid was less than what should have been paid. For example, if the premium amount paid for the policy was 50% less than what should have been paid, then the death benefit will be reduced by 50%. There is no time limit for discovery, and this provision never cancels or voids a policy. The incontestability clause does not apply. Age and/or gender are not considered material to the policy issuance.
Loss: Human Loss
(i.e. personal losses faced by individuals or families) or Personnel loss (i.e. losses faced by businesses) associated with the death or disability of individuals.
POINT OF SERVICE PLANS (POS)
- Combines features of HMO and PPO - Pays providers with capitation or other risk sharing arrangement - Has a provider network; beneficiaries may use out-of-network provider for designated services - Has a gatekeeper to control and coordinate care
Reinstatement
- allows the insured to get their policy back if it was cancelled (lapsed) due to nonpayment for a period of up to 3 years - all back due premium must be paid - the insurer can make them undergo a medical exam/ ask medical questions
Policy Exclusions
- hazardous occupations or hobbies (excluded and/or results in a higher premium) - aviation (excludes personal pilots (big commercial airlines and passengers are covered) - war or military service (most life insurance will not cover, or they have one of these two rules: > status clause- excludes all death while on active duty > results clause-only excludes deaths from an act of war
What is an administrator in the insurance industry?
A certified person who collects premium and/or adjusts and settles life or health insurance claims.
ADMINISTRATOR
A certified person who collects premium and/or adjusts and settles life or health insurance claims. (10-15)
CLASS BENEFICIARY DESIGNATION
A clearly defined group of people who will receive the proceeds of a policy (for example, children of the insured). (4-17)
COBRA (Consolidated Omnibus Budget Reconciliation Act)
A federal act that allows for the continuation of group health plans by employees or dependents who lose their coverage through termination, reduced hours, death, divorce etc. The act applies to employers with 20 or more employees. (8-1)
ANNUITY
A financial contract that systematically liquidates an accumulated sum of money as an income stream. (1-9, 5-2) (concerned ill live too long, live past my money) (opposite of insurance-- worried to die too soon, before able to save money for family)
CEASE AND DESIST ORDER
A legal order that means "stop doing whatever you are doing." (12-4)
What is an agent in insurance?
A person who acts on behalf of another person or corporation, representing the insurer.
AGENT
A person who acts on behalf of another person or corporation. In insurance, an agent represents the insurer. (1-20, 1-22, 1-24, 2-21, 10-12, 10-13)
24-HOUR COVERAGE
A plan that combines Workers' Compensation and non-occupational health insurance to provide coverage for on and off the job injuries and illness.
Level premium
A policy premium that remains the same over the period of time premiums are paid.
CANCELLABLE
A policy that can be terminated by the insurer. (7-15)
What is an adjustable life insurance policy?
A policy where the death benefit can be adjusted up or down.
ABSOLUTE ASSIGNMENT
A process available in a life insurance policy that totally and irrevocably transfers all of the policyholder's rights and privileges of ownership to another party. (4-4) This type of assignment transfers the interest in the entire death benefit. For example, when a terminally ill person sells their life insurance policy to a Viatical Settlement Company or Life Settlement Provider, the transfer of ownership is achieved through an ABSOLUTE ASSIGNMENT. The Life Settlement Provider becomes the new owner of the policy and can name itself or another person as beneficiary.
CASE MANAGEMENT
A process using a manager to coordinate legal and economic issues including healthcare, home healthcare and long-term custodial care. (6-6)
BUYER'S GUIDE
A publication given to the client that provides an overview of an insurance product in plain English. (2-7, 9-6)
AGENCY
A relationship in which one person is authorized to represent or act for another person or corporation. (1-20)
What is an agency in insurance?
A relationship where one person is authorized to represent or act for another person or corporation.
ACCIDENTAL DEATH & DISMEMBERMENT INSURANCE
A type of life and health insurance which pays a lump-sum benefit in the event of either the accidental death or dismemberment of the insured. Dismemberment is defined as an accidental loss of sight, hearing, speech or any two limbs. (6-22, 7-7)
ADJUSTABLE LIFE
A type of life insurance policy in which the policy owner is able to adjust the death benefit up and/or down in order to meet changing needs and objectives. (3-12)
Term Policies: Riders Covering Additional Insureds
Allows the insured to cover additional people on their policy: Spouse: can be added and covered the same as the insured, expires at 65 Children: can be added for limited time, until 18 or 21 Family: Combo of spouse and children's rider Non-Family: allows for a change of the named insured on the policy, this is typically used in Key Person insurance when the key person retires or leaves the company
CASH REFUND ANNUITY
An annuity that guarantees the return of principal to the beneficiary if the annuitant dies before receiving the full payout. (5-5)
ANNUITY CERTAIN
An annuity that provides income for a specified (certain) period of time. (5-5)
ALEATORIC
An element of chance or uncertainty in the outcome of an insurance contract. (1-11)
ALIEN INSURER
An insurance company incorporated and governed by laws of a foreign nation. (10-6)
What is an admitted insurer?
An insurance company that has met the statutory requirements of a particular state and is allowed to transact insurance in that state.
ADMITTED INSURER
An insurance company that has met the statutory requirements of a particular state and is therefore allowed to transact insurance in that state. (10-4)
EXAMPLE: unpaid premium
An insured has a $500,000 life policy--the insured missed their $100 premium payment on the 1st of the month--and they died on the 5th. When the claim is filed, the beneficiary will receive $500,000-$100 (unpaid premium)= $499,900
ACCELERATED DEATH BENEFIT RIDER
An optional benefit found in a life insurance policy whereby a percentage of the death benefit is paid to a terminally ill insured that is covered by the policy; the balance is then paid to the beneficiary upon death. (3-18)
what is an exclusion?
Events/ situations/ perils NOT payable (not covered) under the policy, when something happens that's excluded, the insurer will not pay the claim.
APPLICATION
Form(s) containing information provided by the applicant or insured. The application becomes part of the entire contract. (2-13)
BASIC MEDICAL EXPENSE POLICY
Generally, refers to three types of coverage: Basic Hospital Expense including Miscellaneous Hospital Expenses, Surgical Expense and Miscellaneous Medical Expense. (7-1)
BINDING RECEIPT
Guarantees coverage after the initial premium is paid, even if the proposed insured is found to be uninsurable. (11-14)
COINSURANCE CLAUSE
In health insurance, a percentage that the insured must pay toward the cost of a claim after the deductible is satisfied. (6-13)
CASH VALUE
In permanent policies, an accounting measurement specifying the amount of money that the policyholder can receive before the death of the insured (through loans or surrender). (2-3, 2-18, 3-6)
BUSINESS CONTINUATION AGREEMENT
Life or disability insurance plans used to provide money to transfer the ownership of a business after a partner or the original owner have died or become disabled. (4-20)
What is adult day care?
Part-time institutional care for an elderly person who lives at home.
ADULT DAY CARE
Part-time institutional care for an elderly person who lives at home. (9-9, 9-13)
ANNUITY UNITS
Phrase used to describe Accumulation Units (see above) once the annuity payout begins. (5-6) When the annuitant requests that payments begin, usually at retirement, the value of the annuity is determined by multiplying the total number of accumulation units by the current value of the separate account. The accumulation units are now called ANNUITY UNITS and are valued monthly or annually, based on the value of the underlying securities for the life of the annuitant.
entire contract
Policy + Application together (+ Riders + Addendums)
CAPITATION
Process of determining how much money is paid to the medical providers/hospitals based on the number of people who could use medical services, not the actual number who do. The providers receive a fixed "per head" fee per month. They receive the same amount of money no matter how many patients they treat. (7-8)
BLUE CROSS AND BLUE SHIELD ASSOCIATION
Service provider offering a variety of plans (HMO, PPO etc.) and operating on a franchise basis. (6-10)
COLLATERAL ASSIGNMENT
Temporarily giving up some rights in the contract for a specific period of time or a specific purpose (e.g. as security for a loan). (4-7)
CANCELLATION
Terminating a policy. (4-8)
ACCUMULATION UNITS
The accounting measure that is used by insurance companies to determine the annuitant's ownership interest in a variable annuity. It is based on the value of the underlying securities in relation to the amount deposited. (5-5)
ADVERSE UNDERWRITING DECISION
The insurer treats the applicant as a higher than average risk resulting in rejection declination, substandard rating or cancellation during the contestability period. (2-16)
ANNUITY PERIOD
The period during which payments are made to the annuitant. (5-3)
ACCUMULATION PERIOD
The period of time after funds are deposited into an annuity in either a lump-sum or a series of payments, during which earnings interest are credited to the principal on a tax-deferred basis. (5-3)
BENEFICIARY
The person who receives the proceeds or benefits from the insurance policy. (1-22, 4-16)
In term policies, what happens to the premium throughout the term of the policy?
The premiums for Term policies are low and are calculated to be sufficient to cover only mortality costs and expenses for the period insured; the shorter the initial term period, the lower the initial premium. The company will increase the premium, reduce the death benefit or use the level premium concept. As a result, Term Life policies are described by "if" or "how" the death benefit changes during the term of the policy.
ASSIGNMENT
The transfer of rights under the insurance policy to another person or company. (4-3)
ACTUARY
These are the statisticians and mathematicians in an insurance company that calculate the probability of a loss, the expected severity and frequency of losses, and the cost of insuring the loss. (1-19)
AD&D (Accidental Death and Dismemberment) insurance
This is a rider that can be added to a life insurance policy, and will pay out if the insured dies from an accident within 90 days or experiences accidental dismemberment and loses a limb. (Principal Sum)- pays out the full-face amount of the policy for DEATH or TWO limbs (Capital SUM)- pays out half the amount for the loss of ONE limb
AUTOMATIC PREMIUM LOAN
This option is only available on policies that have a cash value. Allows the insurer to collect the premium from the cash value as loan if the payment is not made. This is meant to prevent unintentional lapse and will have to be paid back, like all loans it will reduce the death benefit if not paid back its automatic and cannot be held off for 6 months like regular policy loans.
ACCIDENTAL INJURY
To be covered under this definition the cause may be intentional, but the results must be unintentional and unforeseen. Also called the "results clause." (6-16) ACCIDENTAL INJURY is defined as an unexpected and unforeseen event that results in a bodily injury. Under this definition, the cause of the accident may be intentional, but the result of the accident must be unintentional. In other words, only the resulting injury suffered by the person is used as the determination of whether or not benefits will be paid. For example, if the insured were to intentionally jump down from a ladder and break a leg, the "accidental injury" definition would allow benefits to be paid because the resulting injury was not intended.
ACCIDENTAL MEANS
To be covered under this definition the cause of the accident must be unintentional, unforeseen, and unexpected.(6-16) -event not under the control of the insured that causes bodily injury - Policies that use this definition will pay benefits based on the "cause of injury" rather than the resulting injury itself. For example, if an insured is chopping wood and carelessly severs a thumb, the "accidental means" definition would deny coverage because the cause of injury was under the control of the insured. This is a very strict and potentially confusing definition of accident and most companies now use "accidental bodily injury" or the "results" provision instead in order to avoid legal hazards.
CERTIFICATE OF INSURANCE
Used in Group Insurance. A document that verifies the insured is covered by insurance. (1-13)
COLD LEAD ADVERTISING
Using advertising to contact persons the agent does not know. (9-17)
What is adverse selection in insurance?
When an insurer selects a higher than normal number of uninsurable or substandard risks for insurance coverage.
What is an adverse underwriting decision?
When the insurer treats the applicant as a higher than average risk, resulting in rejection, substandard rating, or cancellation during the contestability period.
free-look period
a 10 DAY period of time that starts at POLICY DELIVERY (not when appl. is signed or when the policy is issued) and allows the insured to review the policy and return it for a FULL REFUND ages 60+ allowed min 30 days
INCONTESTABILITY
a 2 year period of time the insurer is able to deny a claim if they discover an inaccuracy or lie in the Life Insurance Application after this period is over, the insurer cannot deny a claim for any reason- even a lie (only true for life policies not health policies)
Beneficiary designation: irrevocable
a beneficiary that CANNOT be changed unless they give written CONSENT to remove their name test hint: to maintain ALL ownership rights, do not assign anyone as a revocable beneficiary
Beneficiary Designation: Revocable
a beneficiary that can be changed to someone else at any time by the owner
unpaid premium
any claims paid during the grace period will be reduced by the amount of the missed bill (grace period no longer relevant since the premium was paid)
mode of premium payment
frequency- more frequent the mode, higher the premium ( more times paid= more money paid) yearly to monthly= higher overall premium monthly to yearly= lower overall premium
insuring clause/ insuring agreement
known as the 'promise to pay' and lists the parties to the contract this party (insurer) promises to pay this party (insured) if the covered peril were to occur
What is an Option?
options are the ways that the insured gets to choose how they receive the the benefits of the policy
Level Term
premiums and death benefits stay the same for the life of the policy Coverage periods can be as short as one year but are often 10, 15, 20 or up to 30 years. This policy is designed to deal with losses due to premature death and does not build any "living benefits" (cash values). A Guaranteed Level Premium Term policy has a fixed premium throughout the period of coverage and is the most common type of Level Term. In an Indeterminate Level Premium Term policy, the premium can fluctuate based on the insurer's mortality experience, expenses and investment return up to a maximum amount stated in the insurer's premium tables. The least common, and least expensive, option is a Non-Guaranteed Level Premium Term policy where renewability and conversion are subject to proof of insurability, premiums may fluctuate, and even death benefits may vary during the coverage period. The low premium cost of Level Term compared to permanent plans is valuable for families with a need for high coverage but with limited resources to pay for it and can allow additional money to be diverted to investments and savings.
Grace Period
the time between the billing date and the payment due date where the insured can be late and still be covered *all claims are covered during this time *depends on mode of premium *for life insurance grace period is 30/31
