Accident and Health Insurance Basics (CH 7)

Question 1

Accident

Answer 1

A fortuitous event; unforeseen and unintended.

Question 2

Binding Receipt

Answer 2

A rarely used type of receipt in which coverage begins at the moment of delivery and cannot be reversed, regardless of what the underwriter may discover at a later date.

Question 3

Cancellation

Answer 3

The termination of a contract of insurance in force by the voluntary act of the insurance company or insured, effected in accordance with provisions in the contract or by mutual agreement.

Question 4

Capital Sum

Answer 4

The maximum amount payable in one sum in the event of accidental dismemberment. It is typically half of the face amount or principal sum.

Question 5

Conditional Receipt

Answer 5

A provision that, if premium settlement accompanies the application, coverage shall be in force from the date of application (whether the policy has been issued or not), provided the insurance company would have issued the coverage on the basis of facts as revealed by the application and other usual sources of underwriting information. A physical does not have to be completed for the company to make this judgment.

Question 6

Consideration Clause

Answer 6

A clause in a Life policy specifying the premium due for the insurance protection and the frequency of payment (also called mode).

Question 7

Contract

Answer 7

A legal agreement between two parties for consideration, such as an insurance policy.

Question 8

Death Benefit

Answer 8

The policy proceeds to be paid on the death of the insured.

Question 9

Execution Clause

Answer 9

A statement in a life insurance policy that specifies the proof needed for payment of the proceeds.

Question 10

Grace Period

Answer 10

A period of time after the premium due date during which a policy remains in force without penalty, even though the premium due has not been paid.

Question 11

Hazard

Answer 11

Any factor tending to make a policy owner a less desirable risk for the insuring company. May be physical or moral (health, occupation, dangerous sports, criminality, or immortality).

Question 12

Insuring Clause

Answer 12

The clause in a policy that specifies, in brief, the contract’s intent and benefits.

Question 13

Malingering

Answer 13

The practice of feigning an illness or inability to work in order to collect insurance benefits.

Question 14

Mandatory Standard Provisions

Answer 14

A set of statutory provisions required by most states to be included in every Health policy issued. Also called Uniform Policy provisions or Mandatory provisions. Created with the cooperation of the NAIC.

Question 15

Peril

Answer 15

The cause of loss to a policyowner.

Question 16

Pre-Existing Condition

Answer 16

A condition of health or physical condition that existed before the policy was issued.

Question 17

Principal Sum

Answer 17

The full face amount payable in one sum in event of accidental death and severe accidental dismemberment.

Question 18

Probationary Period

Answer 18

A period of time between the effective date of a Health policy and the date coverage begins for sickness.

Question 19

Proof of Loss

Answer 19

A formal statement by the insured to the insurance company regarding a loss. The purpose is to place before the company sufficient information concerning the loss to enable it to determine its liability under the policy.

Question 20

Reinstatement Clause

Answer 20

Provides the conditions under which a lapsed policy may be reinstated, if approved by the insurance company.

Question 21

Renewability Clause

Answer 21

Define condition(s) in which the insurance company may or may not cancel a Health policy.

Question 22

Time Limit on Certain Defenses

Answer 22

A Uniform Provision on Health Insurance policies specifying that, after a given number of years (usually two), no statements (except fraudulent misstatements) made in the application shall be used to deny a claim or void the policy and that no claim shall be denied or reduced on the grounds that a disease or physical condition not excluded at time of issue existed prior to effective date.

Question 23

In a guaranteed renewable disability income contract, the insurance company reserves the right to change premiums after the policy is issued if:

Answer 23

The premium change applies to all insureds and a specific class or classes

Question 24

If an individual filed a claim under 2 individual health insurance policies issued by the same insurer, the insurer might return

Answer 24

The premium amount for coverage, which would cause combined benefits to exceed a maximum benefit allowed.

Question 25

Associations can be formed by employee groups and professional organizations. In order to qualify for health coverage most insurers require the association

Answer 25

have a minimum of 100 members. Association cannot be formed solely for the purpose of obtaining health insurance.

Question 26

The Sonic Blast Speaker Company has 500 employees and has decided to self insure under the ERISA guidelines. Which of the following is the major reason for this action?

Answer 26

The company saves premium dollars and uses these savings to pay claims out of their own funds.