NC Life and Health Insurance Key Terms

Countersignature

May be required if selling a policy outside of the state

straight (pure) life annuity

-Paid as long as annuitant alive, then ends when annuitant dies -Max dollars of annuity benefit per dollars annuity premium because no survivor benefit, no guaranteed number of payments

Three factors in determining insurance premiums (MIE)

1. Mortality (life)- the chance of dying or Morbidity (health)- the chance of getting sick 2. Interest- Investment return on premiums collected 3. Expenses- The insurer's cost of doing business

The four required elements of a contract are:

1. Offer and Acceptance- Agreement 2. Consideration- Values exchanged 3. Competent parties 4. Legal purpose

Three things to remember about credit life

1. decreasing term 2. freedom to choose 3. lender gets the money

Association plans

1. have at least 500 members 2. have been in existence for at least 5 years 3. Have regular meetings where members can vote on issues 4. collect dues (except for credit union associates)

Personal Uses of Life Insurance

1. immediate estate creation- provide money to maintain the family's mode of living 2. Cash Accumulation- provide a reserve fund for emergencies or retirement 3. Liquidity- Access to life insurance benefits is almost immediate 4. Estate conservation- If there is a taxable estate, readily available cash can be used to pay estate taxes

How do insurance policies indemnify?

1. valued contract- know in advance what will be paid, pays a fixed amount (life insurance, disability income) 2. Reimbursement contract- Pays actual expenses (medical expense)

Notice of claim provision requires the insured to noify the insurance company of the claim within how many days?

20 days

Convertible Term Insurance

A Term Life policy that can be converted any time to a permanent type of coverage without proof of insurability. Conversion premiums are based on current age and coverage cannot be increased. Most Term is convertible, but not all. Most Group insurance (which is usually Annual Renewable Term) is convertible by law during its 31 day grace period.

Spendthrift Clause

A clause that prevents the debtors of a beneficiary from collecting the benefits before he/she receives them.

Family Maintenance Policy

A combination of whole life insurance and level term insurance to provide permanent coverage (lump sum payment to beneficiary when the insured dies) and a monthly family maintenance portion for a set period of time following the insured's death.

Recurrent Disability Provision

A disability income policy provision that specifies the period of time during which the reoccurrence of a disability is considered a continuation of a prior disability.

Keogh Plan

A federally-approved, tax-deferred savings program for self-employed people, allowing them to set money aside for their retirement.

family deductible

A fixed, periodic amount that must be met by the combination of payments for covered services to each individual of an insured/dependent group before benefits from a payer begin.

Buy-Sell Agreement*

A legal contract that determines what will be done with a business in the event that an owner dies or becomes disabled.

Time Limit on Certain Defenses provision

A mandatory health insurance contract provision that limits the time an insurer can void a contract or deny a claim for material misrepresentations on the application. The time limit on certain defenses provision in a health insurance policy is very similar to the incontestability clause in life insurance. Most states limit it to two years.

Consideration Clause

A part of the insurance contract that states that both parties must give something of value for the transfer of risk, and specifies the conditions of the exchange.

Elimination Period (Waiting Period)

A period of days (time) that must pass after the onset of an illness or occurrence of an accident before benefits will be payable.

Roth IRA

A personal savings plan; contributions are not tax-deductible; earnings are tax-free

Scheduled Dental Plan

A plan where each CDT code has a specified dollar amount assigned to it

Right to Examine (Free Look)

A required provision in a life insurance policy stating that the policyowner is permitted 10 days from the date the policy is delivered to examine the policy and return it for a refund of all premiums paid. In health insurance, this provision is optional but is usually included.

Qualified Plan

A retirement plan that meets the IRS guidelines for receiving favorable tax treatment.

qualified retirement plan

A retirement savings plan approved by the Internal Revenue Service that provides individuals with a tax benefit

Actuary

A specially trained mathematician who calculates insurance premiums

Proof of Loss

A statement of facts about a loss for which the insured is making a claim.

explanation of benefits form (EOB)

A summary prepared by an insurance company, and sent to a policyholder, that documents how the insurance policy covered the charges associated with a particular claim

Renewable Term Insurance

A type of term insurance that can be renewed for an agreed-on period or up to a specified age (usually 65 or 70), regardless of the insured's health

Limited Pay Whole Life

A variation of whole life insurance that charges a level annual premium and provides a level, guaranteed death benefit to the insured's age 100 and will endow for the face amount if the insured lives to age 100. Limited-pay life is designed so that the premiums for coverage will be completely paid-up well before age 100.

Indexed life insurance

A whole life plan of insurance that provides for the face amount of the policy and, correspondingly, the premium rate, to automatically increase every year based on an increase in the Consumer Price Index (CPI) or another index as defined in the policy.

Ownership transfer

Absolute assignment, all rights are transfered. Collateral assignment, may be used to cover loans, but the owner can always cancel the assignment after the loan is paid off.

Health insurance policies deal with two types of perils:

Accidental injury and sickness

Change of address (residence, business and email)

Agent must notify the Department of Insurance of these changes within 10 days of the change and 30 for a name change or else they face a $50 fine.

**Additional sources of information that the underwriter may use**

Agent's report- personal observations of the proposed insured by the agent attending physician's statement (APS)- Medical records of past treatment Investigative Consumer Report- Interviews with neighbors of the proposed insured Medical information bureau (MIB) report- answers to questions (not decisions) on prior applications for insurance Medical exam, including lab tests- test for cholesterol, drug use, HIV, etc.

Intermediary

Agents are not a part of contract. They represent the interest of only the insurer. They bring together the PRINCIPALS (the insurer and the applicant/owner)

Rebating

Agents cannot pay or discount premiums or give the client fancy gifts or dinners as an inducement to buy

Health Maintenance Organization (HMO)

Alternative means of health care in which people or their employers are charged a set amount and the HMO provides health care and covers hospital costs.

Industrial or Debit insurance

An agent has a list of customers and a route to follow every week to collect premiums. These policies are of $1000 face amount or less and the premiums are only a dollar or two a week. Physical exams are not practical for these.

Commingling

An agent who mixes client funds with his own is guilty of this action. May result in revoked or suspended license and could wait up to 2 years to re-apply for the license.

Deferred Annuity

An annuity that starts sometime in the future.

Accidental Death and Dismemberment

An insurance policy provision that protects the insured if he or she suffers loss of sight or loss of limb(s) or death by accident

Accidental Death and Dismemberment medical insurance

An insurance policy provision that protects the insured if he or she suffers loss of sight or loss of limb(s) or death by accident principal sum- death benefit capital sum- dismemberment benefit

Endowment policy

An insurance product that pays out a lump sum after a specified term or if the insured person dies before the end of the term. Endowment policies are often used as a way of saving over the long term.

Notice of Insurance Information Practices

Applicant for insurance must receive this notice no later than at policy delivery, but it is usually given when collection of information begins.

Reinstatement Provision

Applies to the timeframe that an insurer hasn't paid premium but wants the policy back. - You have 3-5 years to reinstate - proof of insurability and back premiums plus interest would have to be paid - If you havent heard back in 45 days, then the policy has been reinstated - policy premium is based on original age

Physical Hazard

Arises from the inherent characteristic of the exposure unit. Ex: underweight, diabetes, coronary artery disease.

Moral hazards

Arises from the lifestyle of the insured person. Ex: someone who drinks or smokes 12 packs a day

Adhesion*

Because the insurance contract is written by the insurer, without any consultation with the applicant, an insurance policy is a contract on adhesion. The applicant must accept the policy on a TAKE IT OR LEAVE IT basis, and once accepted the policy owner is "stuck" with the contract. Can only be overturned if there are misunderstanding or ambiguities.

Representation

Best of knowledge or belief. Use representations over warranties.

Well known service plans

Blue Cross- Hospital Blue Shield- Service Providers

The difference between occupational and nonoccupational disability

Both pay for injuries off the job, but nonoccupational applies at home along, while occupational applies both at home and at work

Cross Purchase Plan*

Business continuation funding plan whereby each partner agrees to buy Life policies on each other, but not themselves.

Cancellable Policies

Cancellable policies allow the insurer to cancel the policy at any time (some states require notice of at least 30 days), provided the insurer returns all unearned premiums. generally not done with health insurance

Aleatory contract

Cannot change the person insured. Denotes that insurance is unequal because of chance, some people need claims right away, others take years to have a claim.

Vision Care Insurance

Cover eye examinations, prescription lenses, frames, and contact lenses. but not for medical conditions

Grace Period Provision

Coverage remains in effect for 31 days past premium due date; benefits paid during grace period would be deducted from sum.

Per Cause Deductible

Deductible paid for each cause in which medical care is sought.

Illegal Agent practices

Defamation, boycotting, coercion, and intimidation. or Twisting- the act of misrepresenting an existing policy to get someone to drop it for a new policy

Pure Risk

Defined as the chance of loss or no loss, but no gain. Only Pure risk is insurable

Adverse selection

Denotes the notion that people will go years without insurance until they are certain of an imminent claim

Endodontics

Dental specialty that diagnoses and treats diseases of the pulp

Ownership Provision

Describes the policyowner's rights to transfer ownership to another.

Requirements for Social Security Disability

Fully insured as defined by Social Security (40 credits of coverage) Unable to perform any job that exists in the economy Expected to be that way for at least 12 months or dead within 12 months -elimination period of 5 months

Diagnostic/Preventive Services

Generally are not subject to coinsurance or deductibles

Unilateral insurance contracts

Happens after a person buys a policy and pays premiums and expects to have a claim paid but it isnt. The policy owner can discontinue the policy and the insurer cannot take legal action. Only one side can make the enforceable promise.

Two approaches in determining life insurance needs*

Human life value- Potential Future Income Needs Approach- Immediate needs at death and income replacement (cash needs at the time of death). Considers immediate cash needs and lost income in addition to social security benefits based on the primary insurance amount

Change of Occupation provision

If Insured changes to: more hazardous job - benefits reduced; less hazardous job - premiums reduce.

Executor of the Estate

If a family member, employee, of Executor of the Estate of the deceased or disabled agent wishes to tie up loose ends and deliver policies, they may obtain a temporary license to accomplish these goals.

Initial Deductible

If a policy has a $500 deductible, the insured must pay the first $500 of covered medical expenses

Fraud

If the concealment or mispresentation of a case is intended to injure another person

Surplus lines Broker

If the customer needs a policy from a company that is not licensed in North Carolina, they can obtain it through this

statement of good health

If the premium was not paid with the application, the agent must obtain a statement of good health to make sure the health of the proposed insured has not changed. Cannot deliver the policy until the underwriter reviews the new information if the health status has changed.

Key Person Disability Insurance

Indemnifies the business for the loss of services of a key employee due to disability

Social Security*

Is not funded by the Federal Government, just administered.

Peril

Is the cause of loss. In life insurance death is the peril insured against. In health insurance accident or sickness are the perils.

Insurance with Other Insurers

It calls for prorating benefits on any other reason than "expenses incurred"

Benefit Period

Length of time during which benefits are paid

Credit Life policy

Life insurance issued on the life of a borrower to cover the repayment of the loan should the borrower die or become disabled while repaying the loan.

Travel-accident policies

Limited to indemnities for accidents while traveling, usually by common carrier.

Ratios for insurance premiums

Loss %= claims/premiums Expense %= expenses/premiums Combination= Loss % + Expense % Even= 100%, Gain < 100%, Loss > 100%

Reciprocal*

Managed by the Attorney in Fact, exchanges are designed to allow the members of the reciprocal to insure each other. Membership fluctuates from year to year, and members are assessed when claims are made.

triple protection policy

Might start at a total death benefit of $60k then remains at $20k whole life only

Two types of insurable interest

Monetary- There is definite economic loss Non-monetary- There is a loss of love, affection or companionship

Gross Premium

Mortality minus interest plus expenses (M-I+E= Gross)

Back-dated

Most insurers base ages of applicants on the nearest birthday. So, the policy may be back dated up to 6 months to the earlier age.

*North Carolina Requirements to sell Variable Life Insurance*

Must have BOTH a North Carolina Agent license and a Securities license. Agent must pass exams administered by FINRA (Financial Industry Regulatory Authority)

Which of the following documents must be provided to the policyowner or applicant during policy replacement?

Notice Regarding Replacement must be forwarded to the replaced company within 5 days

Waiver and estoppel

Once a contract provision is waived, the insurer is estopped from re-asserting it later

Multiple Protection Policies

Pays a benefit of double or triple the face amount if death occurs during a specified period.

Business Overhead Expense

Pays the business if the small business owner gets disabled - Its purpose is to pay overhead expenses to keep the business in business - premiums are tax deductible with benefits being taxable -does not pay salary or lost wages

Controlled Business

Pertains to taking out life insurance or annuity contracts covering the agent or family members; total percentage of annual premiums must be less than 50% of an agent's total sales or he is in violation of the law

Interest Sensitive Whole Life

Premiums vary to reflect the insurer's changing assumptions with regard to death investment and expense factors. remember the three elements to insurance rates: morality, interest and expenses

North Carolina Life and Health Insurance Guaranty Association*

Protects consumers in case an insurer gets into financial difficulties. All authorized insurers are required to be members and pay proportional dues into the association

hospital indemnity policy

Provides a specific amount on a daily, weekly, or monthly basis while the insured is confined to a hospital

nonforfeiture benefits

Provides benefits if the insured lapses the policy; most common benefits are: 1) a return of premium - policyholder receives cash, which is a percentage of the total premiums paid (excluding interest) after the policy lapses or death occurs 2) shortened benefit period

Dread Disease Policy

Provides coverage for specific disease(s), such as cancer or leukemia.

Prosthodontics

Replacement of natural teeth with artificial teeth or dentures

Captive Agent

Represents only one company and if he leaves, all of his commissions and renewals are usually retained by the insurer.

ARRTS

Risk avoidance- if you have a fear of drowning, avoid any water. Risk Retention- practicing self insurance through saving money in case of an emergency. Risk Reduction- means efforts to reduce the extent of damage but not the chance of loss (regular check ups at the doctor) The most effective way to manage risk is to SHARE it or TRANSFER it to a large group by buying insurance

Modified Premium Whole Life policy

Same as Whole Life but premium low for 1st 3-5 yrs., THEN has one-time premium increase.

Apparent Authority

Sometimes the company inadvertently puts an agent in a position of authority. Even though the company didn't intend it, the company is still liable for the actions of the agent.

Implied Agent Authority

Taking in premiums from an out of town policyowner and sending it is within the implied authority of the agent

Level Term Insurance

Term insurance where the premium and face value of policy remains the same from the date the policy is issued until the date the policy expires.

The Authorization to Release Information

The Department of Insurance must be able to access private information for examination purposes, research, or any other legal purpose and it is valid for 30 months (2.5 years)

Conformity with State Statutes

The existing policy is automatically adjusted to comply with changes in state law.

Insuring Clause

The heart of the contract, describes the parties to the contract and the extent to which benefits are compensated

Separate Accounts

The insurer is regulated by the Securities and Exchange Commission (SEC). The insurer must establish separate accounts to fund the benefits of variable products.

Noncancellable

The owner can keep it as long as he wants, and rates can never be increased. The policy may only be cancelled for specific reasons described in the contract. Only policies with benefits that are not affected by inflation such as daily hospital indemnity and disability income would be issued "non-can". this is the most favorable to the insured, and the most expensive

probationary period

The period of time between the effective date of a health insurance policy and the date coverage for all or certain conditions begins. (if occurs in the first 30 days it is not covered)

Completed application

The primary source of underwriting information. 2 parts: general information, medical information. No insurance contract until both parts of the application are complete

Juvenile Life Insurance

This is a type of whole life insurance designed for young insureds (under age 21) in which the face amount increases significantly upon reaching a specified age in adulthood.

Franchise Life Insurance

This is used where participants are employees of a common employer (i.e., the employer may operate several companies) or are members of a common association or society. The employer/association/society is a sponsor of the plan and may or may not contribute to the premium payments. Unlike the employer's group plan, each individual will be issued an individual policy which will remain in force as long as premiums are paid and the employee/member maintains their relationship with the sponsor. These are used by small groups who individually do not meet the state's minimum numbers required by law.

blanket insurance

Type of insurance policy that covers more than one item of property at a single location or one or more items of property at multiple locations

To indemnify

To restore to the condition enjoyed before the loss, no more and no less.

Graded Premium Whole Life

Variation of a traditional whole life contract providing for lower than normal premium rates during the first few policy years, with premiums increasing gradually each year. After the preliminary period, premiums level off and remain constant.

Installment refund annuity

What type of annuity guarantees to pay an income to the annuitant each year as long as he lives, and upon death, the annuity will refund the remaining payments to a beneficiary?

Conservation proposal

When a company is given a notice regarding replacement, the replaced company will most likely present a counter-proposal to convince the client to keep the existing policy.

Fiduciary (trust on confidence)

When an agent is expected to act with utmost good faith for the benefit for all contract parties. If an agent makes an honest mistake, errors and omissions insurance would be available to pay the damages incurred. However, dishonest mistakes are not covered by E&C.

Individual permanent plan*

When an employee quits or retires, in the rare instant that the employer pays for the insurance, guaranteed conversion within 31 days to the individual permanent plan is required to be offered. IF the employee dies within the 31 day conversion period, benefits are paid in full

Reinsurance agreements

When insurance companies share their risks with each other. These agreements enable an insurance company, the CEDING company to transfer risk to the REINSURER.

Family Income Policies

Whole Life + Decreasing Term • This policy pays the beneficiary a monthly income for the balance of the family income coverage period. • The insurer must die prior to the time the selected family income coverage period ends. Starts when policy is issued.

Indeterminate Premium Whole Life

Whole life policies that provide a lower initial premium which can fluctuate up to a maximum premium as stated in the policy.

Morality table

a "normal" person pays a STANDARD rate, a higher mortality person pays a higher SUBSTANDARD rate, a person with a lower mortality pays a lower PREFERRED rate

Natural Group*

a group of two or more persons, (not family members) formed for some reason besides buying insurance

whole life policy

a life insurance policy in which premium payments continue to death or until age 100, whichever occurs first. Disadvantages: low rated interest, does nothing for inflation

Pre-existing condition

a medical condition diagnosed or treated before you join a new insurance plan

Adjustable Life Insurance

a policy that offers the insured the option to adjust the policy's face amount, premium, and length of protection without ever having to complete a new application or have another policy issued

Joint Life Insurance

a policy written on the lives of two or more people and is payable at the time of death of the first person to die

orthodontics

alignment or straightening of the teeth

Immediate Annuity

an annuity in which the annuitant begins receiving monthly benefits immediately

Unpaid Premium Provision

any unpaid premium will be subtracted from any outstanding claim

Presumptive Disability

applies if someone loses the use the use of two limbs, permanent sight in both eyes, hearing or speech. We would presume that anyone that severely disabled could not do anything, so if the person can return to work despite permanent disability, benefits are paid anyway as totally disabled. Once approved, no further proof is required to continue benefits.

Change of Beneficiary Provision

applies to death benefit policies. policyowner has the right to change beneficiaries only if he or she has been designated revocable

When can health insurance policies fraud be contested?

at any time in the future. accidental death provisions in life insurance polices are technically health benefits, so if an insured lies and then later dies in an accident, the basic benefits would be paid but the accidental death benefits would not be.

Express Agent Authority

authority given the agent through oral or written contracts.

waiver of cost of insurance

benefit which waives the monthly deduction for cose of insurance if the insured becomes disabled. however, in juvenile life, premiums are waived if the payer dies or becomes disabled

Fraternal*

benefits societies are similar to mutual companies. Only MEMBERS are eligible to buy insurance policies from fraternals. Agents of fraternals are limited to selling life, health, and annuity policies, but NOT liability insurance. FRATERNAL IS NOT EQUAL TO LIABILITY

Accidental means (not subject to the probationary period)

both the injury and the resulting cause of the injury must be unintentional. Fortunately, this definition is not allowed in North Carolina. more restrictive than accidental results

periodontics

branch of dentistry dealing with diseases of the bone and gum tissues supporting the teeth

Broker

buyer

Accidental results (not subject to the probationary period)

if an injury was unexpected and unforeseen, it is cover, unless someone deliberately caused the injury to himself less restrictive than accidental means

When a policyowner decides to stop paying on a cash value life insurance policy, he does not forfeit all the cash value. The policyowner may choose from these options:

cash surrender (full or partial), reduced paid up insurance (same type), extended term (same amount)

Underwriter

checks out the medical history of the proposed insured and other factors to eliminate adverse selection against the insurance company. The insurer will issue the policy, the policy premium, and any policy restrictions. Adverse underwriting decision: (90,21,30 rule) Anything worse than applied for. If the applicant wants an explanation within 90 days, the insurer must furnish an explanation within 21 days. A dispute must begin within 30 days

Time of Payment of Claims

claims are to be paid immediately upon written proof of loss

Comprehensive medical expense plan

combines basic with major medical works. Essentially, after the basic benefit is used up, the insured pays a corridor deductible

double protection policy

consists of a whole life policy with the same amount of level term to age 65. the benefit starts out at a total death benefit of say, $60k then at age 65 the term drops off and the permanent benefits remains at $30k whole life only

Social Security Rider or Social Insurance Supplement

provides a benefit only if one is not receiving benefits from social security or workers compensation

noncontributory plan

denotes an employer paying 100% of the premiums. With this plan, all eligible employees must sign up when first eligible or they will have to furnish evidence of insurability if they want to sign up later.

insurable interest

denotes that a person must have a valid reason to insure either themselves or another beneficiary and speculative risks are not insurable

Health insurance deals with

disability income, medical expense, dental expense, long term care (custodial care)

Direct response insurance companies

do not use agents to present their products, but sell directly to the public

individual deductible

each insured is personally responsible for a specified deductible amount each year

Insurance Information and Privacy Protection Act

establishes standards for the collection, use, preservation, and disclosure of information gathered during insurance transactions, privacy

War Clause

excludes payment if the insured dies as a direct result of war, only refunds unearned premiums

Contributory Plan

happens when the employee pays even one penny of the premiums. Since the substandard risk employees will all want to enroll, the insurer usually requires at least 75% participation before the policy will be issued

nonscheduled dental plans

has deductibles and co-insurance like a regular medical expense plan

Term Life Insurance Policy

if the employee dies during the term of the policy, the employee's beneficiaries receive a payment called the death benefit. Has no cash value and has to die to get the money. Temporary plan.

Own Occupation Disability

inability to perform any or all of the duties of his own occupation

*The Interest-adjusted net cost index*

includes interest to provide a more accurate comparison of similar polices. (REMEMBER, LOWER IS BETTER!) [helps consumers compare similar policies]

Limited Benefit Plans

insurance products with reduced benefits intended to supplement comprehensive health insurance plans, not to be an alternative to them, not typically required to provide the same level of coverage, so they cover fewer types of medical expenses than a comprehensive policy, have higher co-insurance percentages, co-payments and deductibles than comprehensive plans

Long-Term Disability Insurance

insurance that pays a percentage of a disabled employee's salary after an initial period and potentially for the rest of the employee's life 2 years or more

Short-Term Disability Insurance

insurance that pays a percentage of a disabled employee's salary as benefits to the employee for 2 years or less

Health insurance is a three party system

insured, provider, and insurer

Assessment*

insurers charge additional premiums at the end of a specified time period. (few in number)

Replacement (50% or more of insurance is changed)

involves persuading a policy owner to discontinue or change an existing policy in order to buy another. Any change in an existing policy, such as a loan, suspension of premium, reduction in face amount, or cancellation is considered replacement, and the existing company must be notified in writing that its policy may be replaced.

prescription drug coverage

is often provided for outpatient prescriptions, with a co-payment for each prescription

Personal Contract

life insurance is for one person and one person only.

Key person life insurance

life insurance that protects a firm against losses due to the death of a key employee

Life with Period Certain Annuity

makes payments for life, as long as we live, but also guarantees a minimum number of payments

Wavier of Premium

means no premium is required while receiving benefits

Target Premium (Universal Life)

minimizes the chance of lapse

Net Single Premium

mortality minus interest (M-I=Net)

Legally competent

must be presumed to be competent in the specific state. Cannot be underage, legally incompetent, or intoxicated at the time of contract. However, a minor at age 15 can buy life insurance for themselves.

guaranteed renewable policy

one in which the insurer guarantees to renew the policy at each anniversary date

Temporary license

only issued for new debit agents or if a licensed agent dies, becomes disabled or sells his book of business -is good for 180 days

Conditional Contract

payment of a claim on an insurance policy depends upon certain acts by the owner and the insurer. For example, the insurer must give proper notice of non renewal, and the policy owner must furnish proper proof of a loss to get a claim paid.

payment of claims

payments go to the insured, unless specifically assigned, and if the insured has died, to his legal representative

Major Medical Expense Insurance

pays most of the costs exceeding those covered by the hospital, surgical, and physician expense policies

policies may be limited in three ways

perils- accident only, cancer, heart attack Amounts- $100/ day Duration- 6 months or less

Incontestability

prevents an insurer from enjoying the premiums from an applicant who misrepresented a statement on an application. *Life insurance contracts are incontestable after two full years, even for suicide. The insured can "lie like a rug" and if the insurer cannot catch it within the two years, a claim must be paid*

Family Protection Policy

provides coverage on every family member; typically whole life on breadwinner and convertible term on rest of family; spouse can convert to perm. up to age 65, children when they turn 21

Single Premium Whole Life

provides for faster cash accumulation and immediate surrender value, but still provides benefits to age 100.

Short Term Survivorship

provision provides for a delay of up to 90 days before paying the proceeds.

interest on claim proceeds

provision stating that the insurer must pay interest from the date of death to the date of payment proceeds, if proceeds are paid more than 30 days after death

Independent Agent

represents at least one, but multiple companies, and if he wishes to move a client to another company he doesn't lose the commissions and renewals.

Industrial Insurance

small policies often $1,000 or less

exposure unit

someone subject to loss

HMO Providers

staff model- salaried staff and close panel (members only) Group Practice Model- contractors and open panel (members and nonmembers) Independent Practice Association- Doctors in private practice with a few HMO patients

Suicide Clause

states that if the insured commits suicide within two years after the policy is issued, the face amount of insurance will not be paid; there is only a refund of the premiums paid

illegal occupation provision

states that liability will be denied if the insured is injured while committing an illegal act or is engaged in an illegal occupation

Misrepresentation

telling a lie or a partial truth. If the misrepresentation would have affected the issuing of the policy, it is a MATERIAL REPRESENTATION and it would result in the policy becoming VOID, meaning it never happened.

Short-Term Medical

temporary coverage for a short time, usually 30 days to 6 months

Decreasing Term Insurance

term insurance in which the annual premium remains constant but the face amount of the policy declines each year

Master Contract

the contract given to the policyowner of a group contact and verifies that coverage is provided through a certificate of coverage

Increasing Term Insurance

the death benefit increases over the life of the policy, and the premium remains level

Issues with replacement

the insured may not qualify for the new insurance, the premium will be much higher since the insured is older, it will take time for cash values to accumulate again, there may be tax consequences if the cash surrender results in a gain, there may be early termination penalties on the old policy

legal actions

the insured must wait at least 60 days after furnishing proof of loss to initiate legal action. Legal action may not be initiated after 3 years from the date of proof of loss, since the statute of limitations has expired

claim forms provision

the insurer is required to send the insured a claim form within 15 days after notice is received

physical examination and autopsy

the insurer may conduct physical exams as often as reasonably necessary to process a claim. An autopsy may be performed at the insurer's expense, unless prohibited by law

intoxicants and narcotics

the insurer will not pay for a loss due to the insured being intoxicated or using non-prescribed controlled substances

Reserve Fund

the legal requirement for insurance companies to maintain adequate saving funds to make it easier to meet in difficult years

optionally renewable policy

the policy is reviewed, and renewal is at the option of the insurer

Entire Contract Provision

the policy owner is entitled to the entire contract so that he knows any riders or waivers

conditionally renewable policy

the policyholder can renew the policy until a specified age; however, the insurer has the right to decline renewal under conditions specified in the contract

Viatical Settlement

the sale of a life insurance policy by a terminally ill insured to another party, typically to investors or investor groups, who hope to profit by the insured's early death requires a vatical settlement broker license to sell

relation of earning to insurance

this disability insurance provision states that the insurer will not pay more than monthly earnings at the time of loss or average earnings over the last two years, whichever is greater.

nonrenewable

this is used for short-term nonrenewable medical expense policies of six months duration or less.

Conditional Receipt

this receipt says that if the insured was insurable at standard rates or better at the time of application, and the premium has been paid, the insurer will pay the death benefits. The conditional receipt provides for coverage to begin even before the policy is issued. However, if the premium was not paid, there can be no coverage until after the policy has been delivered and the premium is paid to the insurer.

Unfair trade practices

to avoid these violations, the agent must disclose to the customer exactly what is guaranteed in a policy, and must emphasize that anything beyond that, such as dividends or excess interest is not guaranteed. Agent may not provide false financial statements, or any information that might mislead the consumer.

Any occupation based on education training or experience disability

unable to do any job for which one is suited by education, training or experience

Concealment

when the applicant withholds material information from the insurer would also result in a void contract (meaning it never happened)

Variable Life Insurance

whole life insurance that invests the cash value of the policy in stocks or other high-yielding securities