la life and health

National Conference of Insurance Legislators (NCOIL)

comprised of state legislators from every state. The NCOIL works to help state legislators make informed decisions on insurance issues that affect their constituents. NCOIL works in tandem with the NAIC to help state legislators understand the importance of NAIC model regulations.

Hazard

condition that raises the chance of encountering a peril or increases the severity of a loss.

Ordinary life insurance generally includes life insurance issued in...

face amounts greater than $25,000 (in some cases, $1 million or more).

Underwriting Process

insurance company underwriters determine if the risk proposed for insurance should be accepted or rejected.

Insurable Risk

loss must be definable, loss must be measurable, accidental or outside the insured's control, part of a large group of similar (or homogeneous) risks, must not be catastrophic, not be one of the company's stated exclusions

Mutual Insurance Companies

owned by their policyowners; they have no stockholders. Similar to stock insurers, mutual insurance companies have minimum capital requirements and are governed by a board of directors. But a mutual company's board of directors is elected by the policyowners. Mutual companies issue participating policies, which pay policy dividends to their policyowners.

Financial Industry Regulatory Authority (FINRA)

private corporation that acts as a self-regulatory organization (SRO) overseeing the business of securities brokerage firms (including those selling variable insurance products) and exchange markets.

National Association of Insurance Commissioners (NAIC)

represents the insurance department of every state, the District of Columbia, and several U.S. territories. The NAIC meets regularly to review developing insurance issues and to promote uniformity by developing model insurance regulations. While the individual states are not required to adopt NAIC model regulations, most do adopt them in some form.

Participating Policies

which pay policy dividends to their policyowners.

variable annuity

A form of annuity for which the insurer makes no guarantee as to the annuity principal or the credited interest rate. Variable annuity premiums and contract values are invested in the insurer's separate accounts instead of its general account. The contract's values move up and down in response to the investment performance of the separate accounts and their associated stock, bond, and money-market portfolio subaccounts.

variable life insurance policy

A form of permanent life insurance in which premiums are placed in investment sub-accounts that the policyowner owns. The insurer guarantees a minimum death benefit, usually the face amount of the policy at issue. However, the cash values and the death benefit rise and fall on the basis of the sub-account's investment performance.

variable life insurance

A form of permanent whole life insurance in which premiums are placed in investment sub-accounts that the policyowner owns. The insurer guarantees a minimum death benefit, usually the face amount of the policy at issue. However, the cash values and the death benefit rise and fall on the basis of the sub-account's investment performance.

valued contract

A life or health insurance policy that pays a stipulated sum as set in the contract. All life insurance policies are valued contracts, as are accidental death & dismemberment health policies. A valued contract is the opposite of a reimbursement contact.

403(b) plan

A retirement plan reserved for non-profit organizations and their employees. Both employer and/or employee contribute funds into the plan. The funds are directed into individual accounts set up for each participating employee. The contributions are not taxable to the employee when they are made. Rather, they grow tax-deferred until they are distributed. Also called a tax-sheltered annuity plan (TSA).

waiver of cost of insurance

In UL policies, waives only the cost of insurance that is deducted monthly from the policy's cash value.

Demutalization

In recent decades a number of mutual insurance companies have transformed themselves into stock companies through a complex and lengthy process ;

From an insurance risk perspective, a person who smokes heavily and drinks alcohol to excess exhibits which of the following traits?

Moral hazards are individual traits or habits, like smoking and excessive drinking, that increase the chance of a loss.

Morale Hazards

Morale hazards are also individual tendencies, but they arise from a state of mind, attitude, or indifference to loss. Driving recklessly is an example of a morale hazard.

401(k) plan

One of the most popular types of qualified employer plans. 401(k)s are a form of defined contribution plan that allows both employer and employees to contribute to the plan. Employees can defer part of their wages into the plan. These deferrals are not included in the employee's gross income. As a result, they are not taxed.

From an insurance perspective, all the following statements regarding risk and loss are correct EXCEPT:

Only pure risks (representing the chance of loss but not gain) are insurable. Speculative risks, which involve the chance of gain as well as loss, are not insurable.

Physical Hazards

Physical hazards are individual physical characteristics that increase the chance of loss. They exist due to a person's physical condition as opposed to arising from his or her character. High cholesterol is an example of a physical hazard

Private Insurance Providers

Private insurers come in a variety of forms. While people are most familiar with commercial insurers, there are many other sources of insurance protection.

Whole Life Insurance

Provides permanent insurance coverage for a person's lifetime. Provides guarantees for premiums, cash value, and death benefits.

valuable consideration

Something given as part of an agreement between two parties that has some objective value and so makes the agreement a valid contract. For example, in the sale of a car, valuable consideration is the money paid to the person selling the car.

Waiting Period (Exclusion Period)

The time that must pass before a person is eligible to be covered for benefits under the terms of the health plan. Common to group health plans. Also known as exclusion period.

Commercial Insurance Companies

The two largest types of commercial insurance companies are stock insurance companies and mutual insurance companies. Both can market, sell, underwrite, and issue life, health, and property and/or casualty insurance.

Mutalization

Though much rarer, a stock company may convert to a mutual company through a process

From an insurance perspective, underwriting is best defined as

Through the underwriting process, insurance company underwriters determine if the risk proposed for insurance should be accepted or rejected. That is, it seeks to determine if the applicant represents an insurable risk.

7-pay test

To be considered a life insurance policy, the policy must meet the terms of this test. Applies specifically to the premiums paid into a contract during its first seven years. If this amount exceeds the net level premiums that would have been required to produce paid-up future benefits (i.e., a paid-up policy) after seven level annual payments are made, then the policy is a MEC.

Risk

"chance of loss."

Waiver of Premium

A provision in an insurance policy, sometimes provided by rider, under which the policy's premiums are waived if the insured becomes totally disabled for a stated period.

From an insurance perspective, the term exposure means

Also called loss exposure, exposure is the state of being subject to a possible loss. The extent of loss exposure facing an insurer has a direct bearing on the premium it charges.

Waiver of stipulated premium

In UL policies, waives a preset premium payment amount if the insured becomes disabled for at least six months.

Moral Hazards

Moral hazards are an individual's traits or habits that increase the chance of a loss. Alcoholism, smoking, and drug addiction are examples of moral hazards. A willingness to defraud insurers is considered a moral hazard for which insurers remain alert.

Waiver

When a party to a contract gives up a right that this party knows he or she holds.

Deductible

a state sum of money that the individual must pay before any major medical policy benefits are paid

Loss

an unplanned reduction in economic value.

Morbidity Tables

basis of health insurance premiums

Policy Dividens

cannot be guaranteed, are typically not taxable since they are viewed as a return of excess premiums.

Mortality Tables

determining life insurance premiums

Peril

event that insurance protects against

What level is insurance primarily regulated at?

state level

Industrial life insurance offers individual coverage in small face amounts in...

usually less than $10,000 (and frequently between $1,000 and $2,500).