florida life

Competent Parties

All parties must be of legal competence, meaning they must be of legal age, mentally capable of understanding the terms, and not influenced by drugs or alcohol.

straight whole life

Also called Continuous Premium Whole Life, is basic whole life policy, where the policy owner pays a fixed premium for the time the policy is issued until the insured's death or age 100.

whole life

Also called permanent life insurance, these are policies that remain in effect to age 100 as long as the premium is paid. provides lifetime protection and includes a savings element known as cash value. endow at the age 100, which means the cash value created by the payment of premiums is scheduled to equal the face amount of the policy at age 100. Premiums for whole life policies usually are higher than those for term insurance.

Adhesion

Also known as take it or leave it agreements, because they're prepared by only one party, the insurance company. Accepted or rejected by the other party, the applicant, with no negotiations or changes.

Lloyd's of London

An association formed to underwrite and issue insurance like coverage on certain items and areas that might otherwise be uninsurable

Offer and acceptance

An offer is made when the applicant submits an application for insurance to the insurance company. The offer is accepted after it has been approved by the insurance company's underwriter.

Insurance contract

Insurance policies are legal contracts. Contract laws defines a contract as a legally binding agreement between two or more parties, where a promise of benefits is exchanged for a consideration. In order for an insurance contract to be legally binding it must have 4 essential elements ( offer and acceptance, consideration, legal purpose, competent parties)

Valued or Indemnity

Life insurance is valued contract, which pays a stated amount, regardless of the actual loss incurred. health insurance is an indemnity contract. it only pays the amount equal to the loss. with health insurance you are not allowed to make a profit.

Substandard risk

People who are not acceptable at standard rates because of a physical condition, personal or family history of disease, occupation, or dangerous habits. These policies are also referred to as rated because they could be rated up resulting in a higher premium

Preferred Risk

People who meet certain requirements. The applicants are in superior physical condition, with healthy lifestyles and habits. Qualify for lower premiums than standard risk

Standard risk

People who, according to a company's underwriting standards, are entitled to insurance protection without extra rating or special restrictions. They are considered an average risk

Incontestable Clause

Prevents the insurance company from denying a claim because of incorrect information or a concealment of facts after the policy has been in force for two years.

Investigative consumer reports

Similar to consumer reports in that they also provide information on the consumers character, reputation, and habits. Primary difference is that the information is obtained through an investigation and interviews with associates, friends and neighbors

Reduced Paid-Up Option

Under this option the cash value is used to purchase a paid up whole life policy. The New whole life policy will have a smaller or reduced face amount from the original policy. But there will not be anymore premium payments due and it will continue to gain cash value.

Secondary Beneficiary

also called the contingent beneficiary or tertiary beneficiary has second claim in the even the primary beneficiary does before the insured. contingent beneficiaries do not receive anything if the primary beneficiary is still living at the time of the insureds death.

apparent (agents authority)

appearance or assumption of authority given based on the actions or words of the principal

express (agent authority)

authority granted to the agent by the principal, which is the insurance company, as written in the agency contract.

implied (agent authority)

authority not expressed or written into the agent contract, but which the agent is assumed to have in order to transact the business of insurance for the principal. comes from express authority, since not every single detail of an agents authority can be spelled out in the agents written contract

Automatic Premium Loan Provision

commonly added to contracts with cash value at no additional charge. special type of pain that prevents unintentional lapse of a policy due to the nonpayment of premiums. for example, if a policy owner misses a premium payment the payment is automatically paid using the policies cash value.

cash value

created by the accumulation of premiums is scheduled to equal the face amount of the policy when the insured reaches age 100. also referred as nonforfeiture values

1035 exchange

exchanges of life insurance policies and annuities may occur in a nontaxable exchange. when cash value life insurance policy is exchanged for another cash value life insurance policy or an annuity for an annuity there will be no income tax on these transactions.

decreasing term policies (basic type of term coverage)

feature a level premium and a death benefit that decreases each year. primarily used when the amount of protection needs to decrease over a period of time. most common use is to insure the payment of a mortgage. policy amount decreases as the outstanding mortgage loan balance decreases each year. death benefit will be zero dollars at the end of the policy term.

increasing term policies (basic type of term coverage)

feature level premiums and a death benefit that increases each year. the amount of increase is usually set at a specific amount or percentage.

level premiums

for whole life policies are based on the age of the individual when originally purchased. premiums remain the same throughout the entire life of the policy

Policy Loan Provision

found only in policies that contain cash value. policy owner is allowed to borrow an amount equal to the available cash value. if there are any outstanding loans at the time of the insureds death, the death benefit will be reduced by the amount of the outstanding loan.

underwriting process

general information, medical information, the agents report

Level Death Benefit

guaranteed and remains level for the entire lifetime of the policy

primary beneficiary

has first claim to the policy proceeds following the death of the insured. policy owner may name more than one primary beneficiary as well as how the proceeds are to be divided.

home service insurers

industrial insurance sold by home service or debit life insurance companies. Face amounts are small; usually $1,000 to $2,000 and premiums are paid weekly.

expense

insurance companies have operating expenses. these expenses are factored into premium rates. this a known as the loading charge.

interest only option

insurance company retains the policy proceeds and pays interest on the proceeds to the recipient beneficiary at regular intervals. insurer usually guarantees a certain rate of interest and will often pay interest in excess of the guaranteed rate.

conditional

insurance contracts are conditional because certain conditions must be met by all parties when a loss occurs, otherwise the contract would not be legally enforceable. if the policy owner is past due on his payments and the insured dies, the insurance company does not have to pay the death benefit because a condition was not met.

personal contract

insurance contracts are personal contracts between an individual and the insurance company, and cannot transfer ownership without the insurance company's written consent.

Collateral Assignment

involves a transfer of partial rights to another person; this is usually don't in order to secure a loan. a temporary assignment. once the debt or loan is repaid the rights are returned to the policy owner

Absolute Assignment

involves transferring all rights of ownership to another person or entity. is a permanent and total transfer of all the policy rights. new policy owner does not need to have an insurance interest in the insured.

Uniform Simultaneous Death Act

law will assume that the primary beneficiary died first in a common disaster. this is done to make sure the contingent beneficiary receives the death benefit proceeds

estoppel

legal process used to prevent a party from reclaiming a right or privilege that was already waived

level term insurance (basic type of term coverage)

most common type of temporary protection. "level" refers to death benefit that does not change throughout the life of the policy.

insurable interest

most important aspect for establishing a legal insurance contract. to purchase insurance the policy owner must face the possibility of losing money or something of value when a loss happens. this must exist between the policy owner and the person being insured at the time of application. only needs to exist at time of original application, but does not need to exist throughout the remainder of the policy

Medical Information Bureau

nonprofit trade organization which receives adverse medical information from insurance companies and maintains confidential medical information on individuals. it is a way insurance companies compare the information they have collected on potential applicants.

service providers

offer benefits to subscribers in return for the payment of a premium. most common service providers are health maintenance organizations better known as hmos and preferred provider organizations better known as ppos.

unilateral

one sided agreement. insurance company is legally bound to do anything. policy owner is under no legally binding promise to pay premiums. insurance company is legally bound to pay losses covered by the policy. if policy owner does not pay their premiums, insurance company does have right to terminate policy.

Single Premium Whole Life

onetime lump sum payment is made, which will provide a level death benefit to the insured at age 100. policy is completely paid up and will generate cash value immediately

stock insurance company

organized and incorporated under state law. owned by the stockholders, who get paid a share of the companies profit through dividends. nonparticipating or non par

mutual insurers

organized and incorporated under state laws. have no stockholders, instead the policyholders own the company. owners get paid a share of the company's profits through dividends. also referred to as participating or park companies because the policy owners do participate in being paid dividends

dividends

paid only on participating policies. eligible to receive this when a policy owner purchases the policy from a participating insurance company. when receiving dividends they have five options ( take cash dividends, apply dividends against premium payments, allow dividends to accumulate interest, buy paid up additions- which is a whole life policy-, purchase one year term insurance)

fixed amount option

pays a fixed specific amount in installments until the proceeds are exhausted.

grace period provision

period of time after the premium payment is due (usually 30 days). purpose is to protect the policyholder against an unintentional lapse of the policy. If insured dies during this period the benefit is payable, however any past due premiums will be deducted from the death benefit.

revocable

policy owner may change a beneficiary at any time and without the knowledge or consent of the beneficiary

irrevocable

policy owner may not change the beneficiary without written consent of the beneficiary. policy owner also cannot borrow against the policy's cash value.

consideration clause

policy owners promise to make premium payments

Suicide Provision

policy protects insurance companies against people using suicide for a quick payment of the death benefit. if insured commits suicide within 2 years, insurance company will not pay death benefit. they will only return the premiums that have been paid

Parol Evidence Rule

prevents parties from changing the meaning of a written contract by trying to introduce oral or written statements made before the formation of the contract

spendthrift trust clause

prevents the beneficiaries reckless spending of benefits by requiring that the benefits be paid in fixed installments

Purpose of Underwriting

process in which an insurance company determines whether or not a particular applicant is insurable and if so what premiums to charge. the main things an underwriter will use includes the applicants health, both current and past occupation lifestyle hobbies and habits

State Guarentee Association

protects policy owners in the event of any insurance company going out of business, becoming insolvent or the in ability to pay claims

annuities

provide a stream of income by making series of payments over a verbatim period of time

1970 Fair Credit Reporting Act

provides individuals privacy protection and fair and accurate credit reporting

life income option

provides the recipient with an income that he or she cannot outlive. installment payments are guaranteed for as long as the recipient lives. amount of each installment is based on the recipients life expectancy.

interest

since premiums are paid before claims are incurred; insurance companies invest the money in an effort to earn interest. this interest is a primary factor in lowering premium rates.

representation

statements believed to be true, to the best of one's knowledge, but they are not guaranteed to be true for insurance purposes. answers the applicant for insurance gives to the questions on the insurance application. untrue statements on the contract are considered misrepresentations and could void the contract

Cash Surrender Option

take the cash

term life

temporary life insurance provided for a specific period of time. also known as pure life insurance. temporary protection because it only provides coverage for a specific period of time. term policies change for the greatest amount of coverage for the lowest premiums. provides what is known as pure death protection. if insured dies during the policy term, the policy pays a death benefit to the beneficiary. if policy is canceled or expires prior to the insureds death, nothing is payable. with term policies, there is no cash value or any living benefits available.

waiver

the act of voluntarily giving up a legal right, claim or privilege

Extended Term Option

the cash value is used to purchase a term policy. the new term policy will have the same face value amount as the original whole life policy and will last for a set period of time based on the amount the cash value used. and there will not be any additional premium payments due

insuring clause

the insurance company's agreement and promise to pay the death benefit

morality

the rate of death. it tables help insurance companies predict life expectancy and the probability of death for a given group.

Misstatement of Age or Sex Provision

this provision allows the insurance company to adjust the policy at any time. in the event of a claim the insurance company is allowed to adjust the death benefit or the premium to the correct age or gender

exclusions

types of risks the policy will not cover. most common exclusions in life insurance policies are war, aviation- non commercial pilot, hazardous occupation or hobbies, commission of a felony, suicide

Lump-Sum Cash Option

upon the death of the insured the policy is designed to pay the proceeds in cash. not taxable as income

Waiver of Premium Rider

waives the premium for the policy if the insured becomes totally disabled. most insurance companies impose 6 month waiting period from time of disability. coverage remains in force until the insured is able to return to work. if insured is never able to return, the premiums will continue to be waived by insurance company. usually expires when insured reaches age 65

per stirpes

which means by the bloodline, distributes benefits of the beneficiary who died before the insured to the beneficiaries heirs.

per capita

which means by the head, evenly distributes benefits among the living named beneficiaries

beneficiary

who can be one? there are a few restrictions on who may be named a beneficiary of a life insurance policy. the decision rests solely with the policy owner. the person to which the policy proceeds will be paid upon the death of the insured. could be individuals, businesses, trusts, estates, or even charities.

Conditional Receipt

The applicant is covered by the insurance company as of the date of the application, providing that the insurance company approves them for insurance.

limited pay whole life

Designed so that the premiums for coverage will be completely paid up well before age 100. 20 year pay. coverage is completely paid for in 20 years. or life paid up at 65 whereby the coverage paid up by the insured at age 65

Legal purpose

Insurance contract must be legal and not against public policy. If an insurance contract has a insurable interest and the insured has provided written consent, it has legal purpose.

utmost good faith

Implies that there will be no fraud, misrepresentation or concealment between the parties as it pertains to insurance policies. both the insurance company and the policy owner must be able to rely on the other for relevant and accurate information. policy owner is expected to provide accurate information on the application for insurance. the insurance company must clearly and truthfully describe policy features and benefits and they must not conceal or mislead the insured

Consumer reports

Include written and oral information regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources

Independent Rating Services

Independent credit rating agencies rate or grade the financial strength and stability of insurance companies, ratings are based on claims, reserves and company profits

Consideration

Something a value that each party gives to the other. The consideration on the part of the insurance company is a promise to pay in the even of loss

Backdating

Sometimes it is possible to lower the premium rate by backdating an application for insurance -If the applicant chooses to do this, the policy may be backdated for no more than 6 months -The only reason that an application may be backdated is to lower premium

reinsurer

Specialized branch of the insurance industry that insures other insurance companies' risk. arrangement by which an insurance company transfers or sells a portion of the risk to a reinsurance company. the company assuming risk

warranties

Statements that are guaranteed to be true and are part of the legal contract

1945 McCarran and Ferguson Act

States that while federal government has the authority to regulate the insurance industry, it would not exercise that right if the insurance industry was run effectively and adequately by the state

Entire Contract Provision

Stipulates that the policy and a copy of the application, along with any riders or amendments, makeup the entire contract

ceding company

The insurance company transferring the risk

concealment

The legal term for the intentional withholding of information, which is crucial in making a decision. withholding of information by the applicant that results in an inaccurate underwriting decision and can void the policy

Demutualization

The process of a mutual company being converted into a stock company.

Mutualization

The process of a stock company being converted into a mutual company

Aleatory

There is not an equal exchange of value. Premiums paid by the insured are small in relation to the amount that will be paid by the insurance company, in the event of a loss.

policy riders

added to a policy and ride along on the basic life insurance policy. riders only have value when attached to a policy, they have no independent value. added to help people customize their insurance policies for their individual needs. are not free, their cost is added to the life insurance policy premium

cost of living rider

addresses inflation by automatically increasing the amount of insurance without evidence of insurability. face value of the policy may increase by the cost of living factor tied to an inflation index such as the consumer price index.

reinstatement provision

allows a lapsed policy to be put back in force. if the policy owner elects to reinstate the policy, they will have to provide evidence of insurability, pay back all premiums with interest and may be required to repay any outstanding loans

Guaranteed Insurability Rider

allows the insured to purchase additional coverage at specific future dates, without the evidence of insurability, the new premiums will be calculated only on the persons attained age.

free look provision

allows the policy owner a free look at the policy for a specific number of days. period starts when the policy owner receives the policy from insurance company in mail or is delivered by an insurance agent

convertible

allows the policy owner the right to convert the coverage to a permanent whole life insurance policy without evidence of insurability. premium for the new whole life permanent policy will be based only on the insureds current attained age

renewable

allows the policy owner the right to renew the coverage at the expiration date without evidence of insurability. premiums for the new term policy will be based only on the insureds current attained age

Fixed Period Option

also called period certain, proceeds will be paid out in equal installments over a specified period of years

death benefit proceed

also called settlement options, are methods used to pay the death benefit to a beneficiary upon the insureds death. policy owner may select a settlement option at the time of the policy application and may also change that option at any time during the life of the insured