LOMA 280

Estate Plan

A plan to settle one's Estate as per one's wishes. The Estate Plan considers the amount of assets and debts that one is likely to have when one dies and how best one can preserve those assets so that that can be passed to one's heirs.

physical examination provision

After the insured submits a claim, the insurer has the right to have the insured examined by a doctor of the insurer's choice, at the insurer's expense

Elimination period provision

An elimination period is the waiting period for which the insured has to be disabled to receive the benefits

Spouse and children insurance rider

Any child born into the family while the policy is in force will be covered automatically under the rider when the child reaches the age of 15days.

Bargaining contract

Both parties as equals set terms and conditions of the agreement.

Staff model

Closed panel. Physicians are actually employees of the HMO and generally out of offices in the HMO's facilities. The staff model HMO may own or contract with hospitals, laboratories, pharmacies, and other organizations to provide nonphysician medical services. Uses 'Salary' structures. Financial risks on the HMO, costly to start up but have greater control over physicians so can manage utilization of health care services better than other models.

An application for life insurance provides legally adequate consideration to the insurer when he or she submits the

Completed application for insurance, and the policy's initial premium only

Modified-coverage Whole Life Insurance Policy

Coverage is changed with increasing age. Advantage: If Insured thinks his coverage required might go down later in his/her life then this is an ideal choice. With time financial obligation of people goes down, like house loan paid off, children no more dependent etc.

First -to - die benefit

Coverage to a couple. If one of them dies then survivor couple gets the benefit and coverage terminates.

T/F? Most insurance companies do not require the beneficiary to have an insurable interest in the life of the policyowner-insured

False

The insurance companies are highly regulated in the US by both the federal and the state governmnets. The primary area(s) which is regulated by these is/are

Financial Solvency of the Insurer, Market Conduct of the Insurer

fraternal benefit society

Fraternal insurers (in US and Canada) generally issue policies as open contracts which state that the entire contract consists of the policy and any attached riders, the fraternal society's charter/constitution/bylaws,

Discounted fee-for-service arrangement

HMO pays physicians a certain percentage of their normal fees (like 90%). It is not as widely used as other fee structures

Immediate participation guarantee (IGP) provision

Here also the assets of the plan are placed in the General Investment Account of the insurer, but this contract does not guarantee against investment losses. Instead the contract allows the sponsor to participate in the gain and the loss of the insurer. However there is a limit to which the sponsor shares the loss of the insurer

Sole proprietorship

Here the 1st party is the owner and the 2nd party is an employee having the ability & the drive to take over the business after the owner's death. The 1st party will identify the 2nd party. The 2nd party, however, may not have sufficient assets to fund the purchase of the business. In that case, individual LIP is the common way to fund for him.

Stop-loss coverage arrangement

If a self-insured group experiences several catastrophic medical claims in one year, the employer may not have that much fund to cover all such claims. To deal with such situations many employers purchase Stop-Loss Insurance from an Principles of Insurance: Life, Health & Annuities Page 96 of 110 Dated: 26th Feb, 2003 insurance co. so that they can transfer their liability to the insurance co. when the claims exceed a certain dollar amount.

Preference beneficiary clause

If the policy owner does not name a beneficiary then insured keeps a list of stated order of preference and proceed will be paid according to that order.

Office of the Superintendent of Insurance

In Canada, each province has established an administrative agency to enforce the province's insurance laws and regulations

Uniform Life Insurance Act

In Canada, the common law provinces have all enacted insurance laws patterned, with minor variations

mortality tables

In general, the higher the mortality rate for a group of insureds, the higher the premium rate will be for the block of life insurance policies issued to that group

Defined contribution plan

In this plan the employer states the amount of contribution that will be paid for each plan participants. The contributions are invested into separate accounts for each participant. The participants get the entire accrued amount as a lump sum or as monthly annuity. There are advantages that the Defined Contribution Plans have over Defined Benefit Plans—firstly, the employer knows the amount that will be paid for the plan in advance, secondly, the employer does not have to depend on the actuary's estimation. Moreover ERSIA imposes more complicated laws for Benefit Plans

indeterminate premium life insurance policy

In this type 2 premium rates is provided by Insurance companies. 1. Minimum Premium Rate 2. Maximum Premium Rate The policy starts with the minimum rate for couple of years. In this time period , insurer evaluates the actual mortality, interest and expense bucket and comes up with a premium rate which lies between the previous 2 rates. This modification happens throughout the life of the policy. It enables insurer to be flexible in premium pricing since this way they can change the premium to counter all the expenses. Also known as non-guaranteed premium life insurance or variable premium life insurance policy.

join whole life insurance

Insures the lives of two individuals under the same policy and provides a death benefit upon the death of one of the insureds

Limited-payment whole life insurance policy

Joe Su will pay level premiums on his life insurance policy for twenty years, after which time the premium payments will cease, but his coverage will continue until his death. His policy provides a death benefit of $250,000

Assets =

Liability + Owner's equity

Unilateral contract

Only one party makes the legally enforceable promises

Individual practice association (IPA) model

Open Panel. Under this arrangement, HMO enters into a contract with an IPA, which is an association of physicians (independent practitioners) that agrees to provide services. Physicians provide services to their own patients as well as to the HMO subscribers. This model requires less start-up capital and can offer a broad range of specialists. IPA model is generally compensated by 'capitation' or 'discounted fee-for-service' arrangements. Some HMO requires subscribers to pay co-payment also. But in this case the financial risk rests with an IPA.

Closed contract provision

Policies pricing factors, including mortality charges, the interest rate, and expense charges, are each listed separately in the policy.

Universal Life Insurance

Policies pricing factors, including mortality charges, the interest rate, and expense charges, are each listed separately in the policy.

legal reserve system

Premium an individual pays for an insurance policy should be directly related to the amount of risk the insurance company assumes for that policy

Modified-Premium Whole Life Insurance Policy

Premium is low in beginning years and then it rises after that period one time to attain a level premium and that continues for the rest of the life. This is modified premiums

Which risk CANNOT be normally covered by purchasing insurance policies

Professional Risk

The National Association of Insurance Commissioners (NAIC)

Promotes uniformity of state regulation by developing model bills and regulations that each state is encouraged to Pass, non governmental

Substandard risk

Proposed insured who have significantly greater -than average likelihood of loss but are still found insurable.

Standard risk

Proposed insureds that have the likelihood of loss that is not significantly greater-than-average.

Under the Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP)

Retirement income benefits are provided in one lump sum instead of monthly payments

Retrospective Review

Same as preadmission but is done after the patient's release from hospital. This is a concurrent review step of the whole analysis. This might reveal erroneous charges and billing errors.

Business overhead expense coverage

Should the owner gets disabled, still he might incur expenses to operate his business

Terminal illness (TI) benefit

TI benefit is a benefit under which the insurer pays a portion of the policy's death benefit to the policy owner if the insured suffers from a terminal illness and has a physician-certified life expectancy of 12 months or less

Each state in the US regulates the policy forms that insurers may use within the state. The insurance department reviews the policy forms to ensure

That is contains all required policy provisions , is not unfair or deceptive in anyway to the customers, and is easy to read and understand

Electronic funds transfer method

The P/Owner authorizes his/her bank to pay the premiums automatically on premium due dates.

Commutative contract

The parties specify values in advance that they would exchange, moreover items and services are exchanged between parties are of relatively equal values.

Disability income insurance policies typically specify that income benefits will not be paid to a disabled insured if the insured's disability is

The result of the insured's active participation in a riot

Formal contract

The type of contract in which the requirements concerning the form of agreement are met E.g:- Lease deed agreement which an owner and tenant have to enter before the tenant can occupy the house.

Premium delay arrangement

This allows the group policyholder to postpone paying monthly group insurance premium for a stated period of time (usually 60 or 90 days) beyond the expiration of the policy's grace period.

Thrift and Savings Plan

This plan works in the same way as Profit Sharing Plans; the only difference is that the employer's contribution is obligatory.

annuity's accumulation period

Time period between the contract holder's purchase of a deferred annuity and the onset of the annuity's payout period

Minimum premium plan (MPP)

Under MPP, the group policyholder deposits into a special account funds an amount that is sufficient to pay a stated amount of claims. The insurer pays the claims until this fund is exhausted. Thereafter, the insurer is responsible for paying the claims from its own fund against a very nominal premium from the group policyholder. In MPP the premium taxes get considerably reduced.

Capitation arrangement

Under this arrangement the providers gets paid PMPM (per member per month) for a subscriber regardless of number of visits

transferring risk

When the financial responsibility for an associated risk is transferred from one party to another (generally in exchange of a fee), it is called transferring of risk. A most common example is purchasing an insurance coverage.

Concurrent Review

While patient is in hospital, UR staffs monitors the condition

deferred annuity contract generally includes a withdrawal provision, which gives the contract holder the right to

Withdraw all or part of the annuity's accumulated value during the accumulation period

Dread disease (DD) benefit

a benefit under which the insurer agrees to pay a portion of the policy's face amount to a policy owner if the insurer suffers from one of a number of specified diseases

interpleader

a procedure that releases the insurer from liability when the insurer cannot determine the correct beneficiary for a policy's proceeds, the insurer may pay such proceeds to a court and ask the court to decide the proper recipient

Presumptive Disability coverage

a stated condition that, if present, automatically causes the insured to be considered totally disabled; thus the insured will receive the full benefits even he resumes his original occupation

Salary Continuation Plan

a type of self-insured disability income plan typically provides 100% of the insured employee's salary, beginning on the first day of the employee's absence due to sickness or injury and continuing for some specified time

In order to obtain an agent's license,

an individual must be sponsored for licensing by a licensed insurance company.

Business Continuation Insurance Plan

an insurance plan designed to enable a business owner (or owners) to continue business operation if the owner or the Key Person dies

Contributory Plan

company is responsible for enrolling new group members in the planand for making all premium payments to the insurer, but company requires that the insured group members pay one third of the premium for their coverage through payroll deduction

corporations

continue beyond the death of any or all of its owners

Consolidation Omnibus Budget Reconciliation Act (COBRA)

continue group medical expense insurance coverage at own expense after termination for a maximum period of 18 months

collateral assignment

differs from absolute because a) the collateral assignee's rights are limited to those ownership rights that directly concern the monetary value of the policy b) the collateral assignee has a vested right to a policy's monetary values, but the rights are limited c) the collateral assignee's right to the policy values are temporary

Free-look (free-examination) provision

gives a policyowner a stated period of time after the policy is delivered during which the policy owner can cancel the policy and receive a full refund of the initial premium payment

Retrospective rating arrangemen

he insurer agrees to charge the group policyholder a lower monthly premium than it would normally charge based upon the group's prior claim experience. On the other hand, the Group Policy Holder agrees to pay an additional amount to the insurer if at the end the policy year; the group's claim experience becomes unfavorable

McCarran - Ferguson Act (Public Law 15)

insurance regulation is primarily the responsibility of the States as long as United States congress considers state regulation to be adequate

An adjustable life insurance policy

insured specifies the face amount and premium he can pay and a plan of insurance is chalked out to provide insurance

A deferred compensation plan

is a plan established by an employer to provide income benefits to an employee at a later date, such as the Principles of Insurance: Life, Health & Annuities Page 18 of 110 Dated: 26th Feb, 2003 employee's retirement, if the employee does not voluntarily terminate the employment before that date

reinsurance

is the insurance that one insurance company- known as the ceding company-sells to another insurance company-known as the reinsurer

Health maintenance organization (HMOs)

it Contracts with physicians and hospitals to make up a network of health care providers

Insurable risk

loss must occur by chance

Gross premium =

net premium + loading premium

Probationary Period

new employees must wait three months before he is eligible to enroll in companys insurance plan

Preadmission certification

part of UR process where the UR agent analyzes the situation and determines whether hospitalization or some other type of care is most appropriate, and what length any hospital stay should be

a whole life insurance policy that is priced according to the level premium system

pay the same premium amount each year that the policy is in force

Facility-of-payment clause

permits an insurer to make payment of all or part of the policy proceeds either to a relative of the insured or to anyone who has a valid claim to the proceeds

Surrender Provision

permits the policy owner to reduce the amount in the policy's cash value by withdrawing up to the amount of the cash value in cash.

insurance provision purpose

prevents an insurance company from excluding certain type of illness or injuries from coverage

Level term life insurance policy

provides a death benefit of $100,000 if her death occurs at any time during the five-year period during which the policy is in force, and Ms. Carter's annual premium remains the same throughout this five-year period

Defined benefit plan

retirement benefit. The benefit is usually given as monthly annuity. The services of an actuary are typically required to determine the amount of contribution required for the plan. Contributions made for all the plan participants are pooled into one investment account and are allocated to individual plan participants as they retire according to the plan's provision.

qualified profit sharing plan

retirement plan that qualifies for favorable tax treatment and is funded by Employer contribution payable from the employer's profits

Premium reduction dividend option

specifies that policy dividends will be applied toward the payment of renewal premiums

incontestable provision/incontetable clause

that after the policy has been force for a specified period, usually 2 or 3 years, the insurer can't use material misrepresentations in the application either to void the policy or to deny a claim unless the misrepresentations were fraudulent.

Employee Retirement Income Security Act (ERISA)

the federal law that was designed to ensure that certain minimum plan requirements are contained in employee welfare benefit plans. This law also contains detailed provisions that regulate employer- sponsored retirement plans

Non Contributory Plan

the insured group members are not required to contribute any part of the premium.

Under the settlement option known as the fixed-period option,

the insurer pays the policy proceeds in installments of equal amount to the payee for a specified period of time

law of large numbers

the more times we observe a particular event, the more likely it is that our observed results will approximate the "true"probability that the event will occur

liquidation

the process of selling off for cash a business' assets of the deceased, such as its building, inventory, etc, and using that cash to pay the business's debts. Any funds remaining are then distributed among the owners of the business.

Benefit Period

time for which the insurer pays the disability income benefits. Based on this the policy can either be classified into short term or long term.

Indemnity Plan

traditional

absolute assignment

where complete transfer of rights occurs