Life, Accident, Health & Disability Insurance
Implied Authority
Authorization to do something even though it is not in writing
Insolvency
Bankrupt/Assets do not equal paid-in-capital
Key Person Insurance
Covers decreased business earnings due to a death or disability of a key employee. (Ex. Senior sales manager, etc.)
Custodial Care
Describes the kind of care a person needs who cannot perform the activities of daily living
Common Disaster Clause
Determines the order of death when the insured and beneficiary die in the same accident.
Occupational Disability Income
Disability income policy that will pay benefits whether on the job or off the job
Per Stirpes
A beneficiary class designation that states, if one of the primary beneficiaries dies before the insured, their portion of hte death benefit is paid to the deceased beneficiary's children when the insured dies. "through the roots" maintains the order of beneficiaries
Non-Admitted Insurer
A company not licensed to do business in a particular state
Mutual company
A company that is owned by its policy owners
Life insurance
A form of insurance that pays off upon death of the person insured
Substandard Risk
A greater than average risk for the insurer
Preexisting Condition
A health condition or sickness that occurred prior to the issuing of a health policy
Fair Credit Reporting Act
A law that requires a reporting agency to take action if a consumer complains about inaccurate information
Broker
A licensed fire and casualty licensee who represents the client for a fee
Participating Life Insurance
A life insurance policy that allows policy holders to "participate" or share in the profits of the insurance company (mutual insurer). Policy which pays a dividend to its owner.
Nonparticipating Life Insurance
A life insurance policy that does not pay dividends to policyowners
Joint Life Insurance
A life policy covering two or more lives. It may be written as a first to die or second to die policy
Paid-Up Life Insurance
A life policy that no longer requires a premium payment, yet still provides protection
Beneficiary
A person whom the insurer will pay the death proceeds upon the death of the insured.
Binding Receipt
A receipt that verifies the agent received money from the applicant. Life insurance cannot be bound.
Loss
A reduction in quality, quantity, or value of something
Variable Life Insurance
A security based permanent life insurance policy. The policy owner gets to choose how the cash values are invested (separate account)
Health Insurance Counseling & Advocacy Program (HICAP)
A service provided by volunteers that advises the elderly about insurance needs for no fee
Deductible
A stated dollar amount that the insured must pay before policy benefits are paid
Accidental Death & Dismemberment
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. Pays a death benefit (principal sum) or benefit for losing a limb (capital sum) in the event of an accident.
Insurance policy
A written contact that outlines the obligations and responsibilities of the insured and the insurer
Return of Premium Rider (Disability Income)
Allows for a portion of the premium to be returned (refunded) to the insured if the policy owner (he/she) is permanently disabled. Refunds
Tax-Deferred
Allows the cash values to accumulate without tax penalties and postpones taxation to a later date. A term that is used when income is earned on an investment but taxes are postponed until benefit payments (qualified plan)
Life Paid-Up
Also known as a limited payment whole life policy. Premiums are paid for a specific number of years, but the policy still endows at 100. Type of policy with premiums that are fully paid up within a stated period of time, but endows at age 100.
Contingent Beneficiary
Also known as the secondary beneficiary, receives the policy proceeds if the primary is deceased
Contract
An agreement that outlines the rights and responsibilities of the insurer and the insured
Buy Sell Agreement
An agreement that the deceased partner's interest will be sold to the surviving partners at the stated price
Life Annuity Certain
An annuity that pays income to the annuitant for life or to a named beneficiary for a period certain if the annuitant has died
Life Annuity Certain
An annuity that pays income to the annuitant for life or to a named beneficiary for a period certain if the annuitant has died. Annuity guaranteeing a given number of income payments whether or not the annuitant is alive to receive them. It pays the annuitant for a guaranteed period of time or the life of the annuitant, whichever is greater.
Foreign Insurance Company
An insurance company that is incorporated outside the state where it is conducting business
Domestic Insurer
An insurance company that is organized in the state where it is conducting business
Valid Contract
An insurance contract has 4 requirements: - mutual assent - consideration - competent parties - legal purpose.
Adhesion
Any ambiguous language in the contract, the court would side with policy owner
Consideration
Anything of value (money or something of economic value) exchanged for a promise or for performance that is needed to make an instrument binding on the contracting parties. (Premium)
Hazard
Anything that increases the chance of loss
Agent
Appointed by an insurance company to sell its products and represents the insurer
ESOP
Employee Stock Ownership Plan - A defined contribution plan in which an employee obtains shares of stock in the company
Monopolistic
Employers only can buy worker's compensation insurance through a state ran fund
Rider
Endorsement to an insurance contract that modifies clauses and provision of the policy
Concealment
Failure to communicate information which a party to a contract knows and should communicate
Consolidated Omnibus Budget Reconciliation Act (COBRA)
Federal law that applies to employers offering group insurance who have 20 or more employees. Election of employee to continue health insurance benefits under certain events: job, loss or death of spouse
Insurance Interest
Financial interest in having the life of the insured continued
Surplus Lines Broker
Found in Property and Casualty insurance. Can place insurance with non-admitted insurers
Contestable period
Generally, the first two years in life insurance. During this period if the insurer finds any reason to dispute the information on the application, the insurer can rescind the policy or deny the claim
Lapse
Happens when the premium for the policy is not paid and grace period has expired
Long Term Care Insurance
Health insurance that provides funds for people who need home health care, extended health care or nursing home care
Usual, customary & reasonable
In health insurance, pays a dollar amount based on the geographical location
Endow
In life insurance, the cash value of the policy equals the face amount
Viatical
Insurance paid to terminally ill persons. Typically in lump sum. Absolute assignment is required.
Worker's Compensation Insurance
Insurance purchased by employers on their employees in case of work related injuries. Employers are responsible regardless of fault
Guaranteed Renewable Insurance Contract
Insured guaranteed to renew the policy at each renewal date. Insurer cannot change the terms but may change the premiums for an entire class
Multiple Employer Trust (MET)
Legal entities in which two or more financially unrelated companies join together to provide group insurance
Errors & Omissions Insurance
Liability insurance which provides coverage for an act, error, or omission that agent or company makes
Term Insurance
Life insurance protection for a designated number of years
Group Insurance
Life or health insurance provided for large numbers of people who have something in common, such as the same employer
Stop Loss Provision
Limits the insured's out of pocket expenses
Coninsurance
Major medical policy feature in which the insurer and the insured share in the cost of medical expenses
Health Maintenance Organization (HMO)
Managed care health insurance with an emphasis on preventive care
Commission
Money that is paid to an agent for selling an insurance company's policies
Last Survivor Policy (Second-to-Die)
Mostly used by husband and wife for estate planning. Written for million dollars or more. It will pay on the death of the second to die.
Pure Risk
No chance for a gain
Medical Information Bureau (MIB)
Non-profit organization supported by insurance companies. OR A non-profit organization funded by member life and health insurance companies. Prevents fraud or over insurance.
Nonforfeiture
Not losing cash values, when policy lapses for non-payment. Three options to choose from: cash surrender, reduced paid up, extended term.
Fixed period settlement option
Once a person has died, the death proceed is paid out as a level amount of money, which is principal and interest over a specified period of time.
Standard Risk
One that falls within the company's guidelines without requiring additional charges or special restrictions
Aleatory
Outcome depends upon an uncertain future event. A contract in which there will be unequal exchange of money.
Straight Life Settlement Option
Pays the payee a specified income for his/her lifetime. Upon the payee's death, nothing further is paid to anyone
Underwriter
People who assess risk and determine classification of the insured
Annuitant
Person who receives an income benefit from an annuity
Free Look Period
Policy owner has the right to return the policy for any reason during a specific number of days and receive a full refund of premium. (10 days; or 30 days for senior citizens (60 or older)).
Canelable
Policy that can be terminated
Family Protection Policy
Policy that provides protection for all family members. Term insurance for children and spouse. If a child converts to a permanent plan of life insurance, evidence of insurability is not required.
California Insurance Guarantee Association
Protects the insured if the insurance company becomes insolvent
Cost of Living Rider
Provides an increase in the amount of insurance coverage without the insured proving insurability. Tied to consumer price index
Medicare
Provides health insurance benefits to eligible people over 65 and some disabled people prior to age 65
Preferred Provider Organization (PPO)
Provides services at a pre-determined fee
Disability Income Insurance
Provides the insured with an income after being disabled due to an accident or illness
Admitted Insurer
Recognized by the Department of Insurance to transact insurance: approved or authorized
Moral Hazard
Results from individuals' values and character traits
Mortality table
Table that shows the average number of deaths (used to establish life insurance rates)
Renewable Term Insurance
Term insurance where the insured has the option of continuing the coverage for a period of time but with an increase in premiums based on age
Unearned premium
The amount of money the insured paid to the insurer that has not been used to provide coverage for the person
Rate
The classification the insured is assigned and or the dollar amount paid for a policy
Fixed Amount Settlement Option
The death benefit is paid to the beneficiary in a series of fixed amount installments until the proceeds plus interest are exhausted
Grace Period
The grace period for all life policies is 1 month. For Disability Insurance: Time period following the premium due date: Weekly premium 7 days Monthly premium 10 days Other policies 31 days
Short Rate Calculation
The insured no longer wants the insurance coverage, the company returns the unearned premium minus administration fees
Insurance Code
The laws of the state, written by legislature, that regulate insurance companies and agents
Cash Surrender Value (CSV)
The money in a permanent policy that the policy owner is entitled if he/she no longer wants the policy
Morbidity Table
The table that shows the average number of sickness or accidents at various ages
Uniform Simultaneous Death Act
There is no evidence as to which party died first
Modified Endowment Contract (MEC)
This concept applies to permanent life insurance. Prevents a life insurance policy from being used as or becoming an investment vehicle.
Irrevocable Beneficiary
This person cannot be removed as beneficiary unless this person gives his/her written consent
Insurance
Transfers risk of loss from the insured to the company
Eligibility/Enrollment Period
Used in life and health group benefits. Period of time a employee can enroll for benefits without proof of insurability
Conversion (Demutualization)
When a mutual insurance company changes to a stock insurance company