Life Insurance Key terms

Law of large numbers

is a basic principle of insurance that the larger the number of individual risks combined into a group, the more certainty there is in predicting the degree or amount of loss that will be incurred in any given period.

Proof of Loss

is a mandatory health insurance provision stating that the insured must provide a complete claim form to the insured within days of the date of loss. If the insured wants to be payed they must prove the loss occurred.

Multi-Line Insurer

is an insurance company or independent agent that provides a one-stop shop business or indivduals seeing coverage for all their insurance needs. An Example, many large insurers of offer individual policies for auto home, long term care, life and health insurance needs.

Entire Contract

is an insurance policy provision stating that the applicant and policy contain all provisions and constitute the entire contract

Property Insurance

is an insurance policy that provides finical reimbursement to the own or renter if structure and its concerns, in the event of damage or theft. to put it simlyit insures you property and belongings they you own and rent.

Risk Retention

is being aware of the risks involved and taking precautions for financial protection. You decide that public transportation cannot get you everywhere you want to go when you want to go there. Now you must decide what limits to put on your financial responsibility by choosing your deductible. The auto policy's deductible is an illustration of risk retention. Through the deductible, the insured retains part of the risk, the part that you are responsible for.

Career Agency System

Agents are recruited, trained and supervised by either a managing employee or General Agent who is contracted with the insurance company.

Strong Assessment Mutual/Insurers

Assessment mutual companies are classified by the way in which they charge premiums.

gurentee

to be true

Principles of Agency Law

- The acts of the agents are the same as the company - Contracted completed by the agent is same as company doing it - Payment made to an agent is same as paying the company - Knowledge of the agent is the same as the company knowing it

Elements of Insurable Risk

1. Due to chance 2. Definite and measurable 3. Predictable 4. Not catastrophic 5. Loss exposure to be insured must be large 6. Insurance must not be mandatory

Hazard For insurance purpose

A condition or situation that creates or increases a chance of loss is called a hazard.

personal contract

An agreement between an insurance company and an individual that states that insurance policies cover the individual's insurable interest. and can be transferred without question once the validity has been checked

Lloyd's of London

An association of individuals and companies that underwrite insurance on their own accounts and provide specialized coverages.

A Reserve

Are founds held by a company to help fulfill future claims.A minimum reserve is usually set by the state department Of insurance.

Mutual Companies for the purpose of insurance

Are insurance companies characterized by havng no capital stock: it is owned by its own policy owners and usually issues participating insurance.

Implied Authority

Authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal.

Types of Insurance Companies

In Broad terms they can be separated into two categories private commercial and government with in these two categories there are several subcategories and types on insurance.

Industrial Insurer

Insurance is also sold through a special branch of the industry known as home service or "debit" insurers. These companies specialize in a particular type of insurance called industrial insurance, which is characterized by relatively small face amounts (usually $1,000 to $2,000) with premiums paid weekly.

nonparticipating

Insurance under which the insured is not entitled to share in the divisible surplus of the company.

Fair Credit Reporting Act (FCRA)

Is a federal law requiring an individual to be informed is he or she s being investigated by an inspection company. The law also outlines the sharing and impact of such informational requires individuals to be notified prior to being investigated.

Mutual Companies - Participating

Mutual insurance companies are also organized and incorporated under state laws, but they have no stockholders. Instead, the owners are the policyholders Anyone purchasing insurance from a mutual insurer is both a customer and an owner. He has the right to vote for members of the board of directors. By issuing participating policies that pay policy dividends, mutual insurers allow their policyowners to share in any company earnings. Referred to as participating companies because policyowners participate in dividends.

Types of Risk

Pure and Speculative

Risk Retention Group

RRG is a mutual insurance company formed to insure people in the same business, occupation, or profeshion. Examples pharmacist, dentist,engineers.

Utmost Good Faith

The fair and equal bargaining by both parties in forming the contract, where the applicant must make full disclosure of risk to the company, and the insurance company must be fair in underwriting the risk.

Government Insurers

The federal government provides life and health insurance through various sources. The federal government has offered a variety of military life insurance plans including United States Government Life Insurance, national Service Life Insurance, and Serviceman's Group Life Insurance. Because private insurance policies exclude catastrophic risks, the federal government has stepped in to provide them. At the state level, government are involved in providing unemployment insurance, workers compensation programs and secondary-injury funds, and state-run medical-expense insurance plans. Federal, state and local governments provide social insurance to a segment of the population who would otherwise be without disability income, retirement income, or medical care, such as Medicaid.

The Law of Agency

The law that governs the relationship between a principal and his or her agent. is an area of commercial law dealing with a set of contractual, quasi-contractual and non-contractual fiduciary relationships that involve a person, called the agent, that is authorized to act on behalf of another (called the principal) to create legal relations with a third party.

Agent Authority

The liabilities of the parties will depend, in part, on whether the agent had the authority to enter into the transaction on behalf of the principal. Before an agent can act in accordance with the valid agency relationship, there must be authority for the action taken. There are four type of authority, actual, apparent, inherent agency power, agency by estoppel and authority by ratification.

Principle of Indemnity

The principle that insurance policies should provide a benefit no greater than the loss suffered by an insured. Indemnity is making an insured whole by restoring them to the same condition as before a loss.

State Guarenty Association

Was established by each state to support insures and protect consumers in the case of insurer insolvency,garanty associations are founded by insurers through assessments.All athurised insurers are legal required to participate int he state guarenty association for any state they are authurized to do business in regardless of were there corporate office is.

Multi-liner

a company selling more than one type of insurance. Such as property and health insurance.

Aleatory

a future of a insurance contract with an element of chance for both involved paties, that the premiums and benefits may not be equal the premiums payed by the applicant is small in relation to the amount that will be payed by the insurance company in the event of a loss

captive insurer

insurer owned by a parent firm for the purpose of insuring the parent firm's loss exposures

Agents as Fiduciary

legal concept governing the activity of an agent. a person that holds a position of financial trust and confidence. they accept premiums on behalf of the insurer or offer advice that affects the person finachal security.

LEGAL POURPOSE

means an insurance contract must be legal and in opposition of public policy.If an insurance contract ha insurable interest and the insured has provided written consent it has legal purpose. without legal effective contract would be nil and void.

Risk Avoidance

occurs when individuals evade risk entirely. It is the act of not doing something that could possibly cause a loss or the inactivity of participation in an event that may potentially cause a loss situation. An example would be driving an automobile. If you never leave the house you completely avoid the possibility of getting into an auto accident.

conditional

provisional, contingent based on the promise of an event

Risk Reduction

takes place when the chances of loss are lessened. Changing one's lifestyle to minimize a known risk is an example of risk reduction. You decide you cannot stay in the house all day, every day, so avoiding the risk of an auto accident is not possible. You decide to reduce the risk by only using public transportation.

Express Authority

the authority of an agent, stated in the document or agreement creating the agency

Stock Companies For purpose of insurance

these are companies owned and controlled by a group of stock holders whose investments in the company

commercial

these insurers offer many ines of insurance. some sell primary life insurance and annuity, whale others sell accident and health insurance or property and casualty insurance.

representation

to be true and accurate to the best of the applicants belief

Risk Management

using strategies to reduce the amount of risk (the degree of likelihood that a person will become ill upon exposure to a toxin or pathogen).

Waiver

volentarily giving up on legal given right. if an insurer fails to enforce waives a provision of a contract cannot later deny a claim based on violation of that provision.

Reinsurer

A company that provides finical protection to insurance companies, Reinurers handle risks that are to large for insurance companys to handle on there own. Reinsurers make it possible for insurers to obtain more business that they wold otherwise be able to handle.

disability (income) insurance

A form of health insurance that provides periodic payments to replace income when the insured is unable to work as a result of illness, injury, or disease-not as a result of a work-related accident or condition

health insurance

A general way of describing insurance agents loss though sickness or accidental bodily injury. ALSO CALLED ACCIDENT AND HELTH,ACCIDENT AND SICKNESS, SICKNESS AND ACCIDENT OR DISSABILITY INSURANCE. it is inportant ti remember that health insurance is a general term and applies to many different types of insurance not just medical insurance that pays for hospital and doctors visits.

Estoppel

A legal impediment to denying a fact or restoring a right that has been previously waived.

Group Life

A life insurance policy that is offered to a group of people under a master policy( or one singular contract) and that does not require medical examinations if purchased during the initial eligibility period. It is usually issued to an employer for its employees or to members of an association.Those covered under a group life policy may or may not pay a portion of the premium and can usually shove there own beneficiary. However the insured typical dose NOT own the policy, the group( employer) owns and controls the policy.

competent party

A person who has the capacity to be engaged in a legal contract; being of sound mind and body.

Nonparticipating

A plan is insurance under witch the insured is not entitled to share in the divisible surplus pf the company.

Participating insurer

A plan of insurance is a plan under witch the policy owner receives shares witch are referred to as dividends, of the divisible surplus of the company.

Law of Large Numbers

A principle stating that the larger the number of similar exposure units considered, the more closely the losses reported will equal the underlying probability of loss. OR The Higher the exposer, the more likely the event can be predicted.

Parol Evidence Rule

A substantive rule of contracts under which a court will not receive into evidence the parties' prior negotiations, prior agreements, or contemporaneous oral agreements if that evidence contradicts or varies the terms of the parties' written contract.

Adverse Selection

defined as the tendency for poorer than average risk to seek out insurance.If an insurer cannot compensate poor risk with better than average risk, then its loss experienced will increase and it ablitiy to pay claims may be compromised . An example is a person ho takes 12 prescriptions is poor risk.

Notice of Claim

Is a policy provision that describes the policy owners obligation to provide notification of loss to the insurer within a reasonable period of time. Notice of claim only requires the insurance company be notified of a loss, it dose not require the proof of the los is provided.

Policy Summery

Is a summery of the terms od an insurance policy, including conditions, coverage limitations, and premiums. Policy summaries are often used with life insurance, longterm limitations and annuities.

Buyer's Guide

Is an informational consumer guid books that explain insurance policy and insurerance concepts: in many states, they are required to be given to applicants when certain types coverages are being considered. Buyers guides are often used with life insurance, long term care insurance, and annuities.

Offer and Acceptance

Is an offer that may be be made by the applicant by signing the application, paying the first premium, and if necessary , submitting to physical examination. policy insurance,as applied for, constitutes acceptance but the company.Or the offer may be made by the company when no premium payment is submitted with the application premium payment may be made by the company when no premium payment is submitted with the application. premium payment on the offered policy then constitutes accetance by the appliccantl

indemnity contract:

Is one that pays amount equal to the loss

NAIC

National Association of Insurance Commissioners (he overall purpose of the NAIC is to assist state regulators in the performance of their regulatory oversight function with regard to the insurance industry) They also take care of regulations and legislation however do not directly make laws. LAWS AEW MADE AT A STAE LEVEL.

Concealment

hiding

property and casualty insurance

One of the two main sectors of the insurance industry, encompassing numerous types of insurance, most of which cover the financial consequences of damage to one's own property or legal liability to others.

Hazard Types for insurance

Physical- poor health, over weight or blind. Moral- Dishonisty, Drugs,or alcohol abuse. Morale- carelessness, recless drivning, jumping off cliff, stealing, racing motorcycles, or a carefree or carless life style.

Deductable

The amount you are required to pay toward each claim you make before your insurance kicks in

Apparent Authority

The authority an agent is believed by third parties to have because of the behavior of the principal.

Adhesion

a prepared contract by one insurance company without negotiation between applicant and insurer. this contract is on a take it or leave it basis. only the insurance company can modify this type of contract

Risk Pooling

also known as loss sharing, spreads risk by sharing the possibility of loss over larger number of people, It transfers risk from and individual to a group.

Fraternal Benefit Societies

are nonprofit benevolent organizations that provide insurance to its members. Producers or agents who sell within their society, do not receive commissions, and stay under specific premium threshold often have less stringent licensing requirements.

Stock Companies

are private organizations, organized and incorporated under making a profit for its stock holders or shareholders. It is structured the same as any corparation. Stock holders may or may not be policy holders

Reciprocal Insurers

are unincorporated groups of individual members that provide insurance for other members through indemnity contracts. Each member acts as both insurer and insured and are managed by Attorney in Fact.

life insurance

is insurance against loss due to the death of a particular person( the insured party) upon who's death the insurance company agrees to pay a stated sum or income to the beneficiary. In its pursuit form, life insurance states"THAT WE WILL PAY THIS AMOUNT WHEN INSURED PARTYOR THIS SPECIFIC PERSON EXSPIRES"

casual (liability) insurance

is insurance witch broadly encompasses insurance not directly concerned with life insurance, health insurance, or property insurance. Casualty insurance includes vehicle insurance liability insurance, theft insurance, work mans comp insurance, and elevator insurance. Casualty insurance protects you for financially in the event that someone sues you,

Whole Life Insurance

is permanent level of insurance protection for a person Whole Life or entirety of the insureds life. Charicterized by level premiums, level benefits, and cash values.

Term Life Insurance

is protection for a set number of years, expiring without value if the insured survives stated period, witch may be one or more years. Term life is designed to provide temporary protection in case a person dies during or within a set time period.

Adverse selection

is selection "against the company." Tendency of less favorable insurance risks toseek or continue insurance to a greater extent than others. Also, tendency of policy owners to take advantage of favorable options in insurance contracts

Consideration

is something of value that each interested party gives to each other, the insured provides consideration with payment premium. the insurer provides consideration by promising to pay the insurancebenifit.

Reinsurance

is the acceptance by one or more insurers, called reinsurers, of a portion of the risk underwritten by another insurer who has contracted for the entire coverage.

Reinstatment

is the act of putting a vapes policy back in force by producing satisfactory evidence of insurability and paying any past due premiums required most states have reinstatement laws requiring and insure to allow for a policy to be reinstated upon request of the policy owner within a specific time period.

Risk Transfer

is the act of shifting the responsibility of risk to another in the form of an insurance contract. Through the insurance contract, the burden of carrying the risk and indemnifying the financial loss is transferred from the individual to the insurance company. Purchasing insurance does not eliminate risk entirely; however, it is one of the most effective ways of transferring risk.

Peril

is the immediate specific event causing loss and giving rise to risk. Speculative risk is a type of risk that involves the chance of both loss and gain; it is not insurable.

Risk

is the uncertainty regarding loss; the probability of loss occurring for an insured or prospect.

Pure risk

is type of risk that involves the chance of loss only; there is no opportunity for gain; insurable.

Unilateral

only one arty makes any kind of enforceable promise is always the insurer.

Consideration

part of contract setting fourth the amount of initial and renewal primiums and frequency f the future payments. Consideration is often said to include the initial premium and competed application for insurance. in other words the applicant saying please consider me for insurance here is my initial premium and my complete application how much and how often i the insured/applicant agree to pay in the future "Please Consider Me."

Valued Contract

pays a stated sum regardless of the actual loss occurred. life insurance are valued contracts

Medical Expense Insurance

pays benefits for nonsurgical doctors fees commonly rendered in a hospital sometimes pays for home and office calls also known as First dollar insurance.

Self Insures

self coverage no insurance company present.

Private insurance companies

sell health insurance policies to individuals. You will need to do some research to find a company with an excellent reputation and good rates. Keep in mind that most private insurance companies sell more than just health insurance. You might feel more comfortable with a company that specializes in health insurance.

Brokers

sells, solicits, or negotiates insurance for compensation.unlike agents they represent legally the insurer and can represent a number of companiesunder separate contractual agreements A Broker solicites and accepts applicants for insurance and then places the coverage with an insurer.

Insuring Agreement

summarizes the major promises of the insurer, it states the payment agreement, limits of coverage. it is basically the insurance company stating they will insure you under these specific terms for these specific conditions and amounts. Additional terms Insuring Clause Insurance Provisions