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