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
