Basic Principles of Insurance Vocab & Notes Chap 1 Flashcards
Funds held by the company to help fulfill future claims.
Reserve
What are usually set by the state Department of Insurance?
Minimum reserves
An insurance company or independent agent that provides a one-stop shop for businesses or individuals seeking coverage for all their insurance needs.
Multi-line insurer
Insurance companies owned and controlled by a group of stockholders whose investment in the company provides the safety margin necessary in issuance of guaranteed, fixed premium, nonparticipating policies.
Stock Companies
Insurance under which the insured is not entitled to share in the divisible surplus of the company.
Nonparticipating plan
Insurance companies characterized by having no capital stock; it is owned by its policy owners and usually issues participating insurance.
Mutual Companies
A plan under which the policy owner receives shares (commonly called dividends) of the divisible surplus of the company.
Participating Plan
A company that provides financial protection to insurance companies. Handling risks that are too large for insurance companies to handle on their own and make it possible for insurers to obtain more business than they would otherwise be able to.
Reinsurer
Nonprofit benevolent organizations that provide insurance to its members. Producers or agents who only sell within their society, do not receive commission, and stay under a specific premium threshold often have less stringent licensing requirements.
Fraternal Benefit Societies
A federal law requiring an individual to be informed if she is being investigated by an inspection company. The law also outlines the sharing and impact of such information and requires individuals to be notified prior to being investigated.
Fair Credit Reporting Act
An informational consumer guide books that explain insurance policies and insurance concepts; in many states, they are required to be given to applicants when certain types of coverages are being considered. Often used with life insurance, long-term care insurance, and annuities.
Buyer’s Guide
A summary of the terms of an insurance policy, including the conditions, coverage limitations, and premiums. Often used with life insurance, long-term care insurance, and annuities.
Policy Summary
An association of all of the state insurance commissioners active in insurance regulatory problems and in forming and recommending model legislation and requirements. They do not directly MAKE laws, as laws are made at the state level. They do work on suggesting standards for states to adopt with the goal of a standardizing the insurance industry throughout the United States of America.
National Association of Insurance Commissioners (NAIC)
Established by each state to support insurers and protect consumers in the case of insurer insolvency, they are funded by insurers through assessments. All authorized insurers are legally required to participate in the ___________________ for any state they are authorized to do business in regardless of where their corporate office is.
State Guaranty Association
Insurance against loss due to the death of a particular person (the insured) upon whose death the insurance company agrees to pay a stated sum or income to the beneficiary. In its purist form, it states, “we will pay this amount when this person dies.”
Life Insurance
A protection for a set number of years; expiring without value if the insured survives the stated period, which may be one or more years. It is designed to provide temporary protection in case a person dies during a set period of time.
Term Life Insurance
A permanent level insurance protection for a person’s “whole of life,” from policy issue to the death of the insured. Characterized by level premiums, level benefits, and cash values.
Whole Life
A single contract covers an entire group of people. Most often, the group is an employer-employee group. Those covered under this policy may or may not pay a portion of the premium and can usually choose their beneficiary. However, the insured typically does NOT own the policy, the group (employer) owns and controls the policy.
Group Life
The part of an insurance contract setting forth the amount of initial and renewal premiums and frequency of future payments. This is often said to include the initial premium and completed application for insurance. In other words, the applicant is saying, “please CONSIDER me for insurance, here is my initial premium, my completed application, and how much\how often I agree to pay in the future. Please CONSIDER me.”
Consideration
This is the portion of the insurance policy in which the insurer promises to make payment to or on behalf of the insured. It states the scope and limits of coverage. It is usually contained in a coverage form from which a policy is constructed. In other words, it is the insurance company saying, “We ensure to INSURE you under these conditions for this amount.”
The Insuring Agreement (Insuring Clause, Insurance Provision)
