General Basics Flashcards
Fixed Annuities
Contract offering a guaranteed rate of interest and a guaranteed return of principal for the term of the contract
Credit Life
Policy to pay off or reduce the balance of a loan or debt in the event of the insured’s death
Group Life
Life Insurance provided for members of a group. Normally a group of employees, any group not formed to buy a group policy. Lower cost because of reduction of admin expenses per life. Tax advantages
Insurable Interest
Life Insurance policy on someone else’s life
Permanent Life
Life Insurance policy including both a death and cash value component
Temporary Life
Death protection for a period or term
Universal Life
Flexible-premium, adjustable benefit life insurance policy that accumulates account value. Allows insured to change the amount of insurance as needs change
Variable Annuities
Issued by Insurance Company giving investor the flexibility to select from a variety of investment fund options. Earnings tax deferred. Agent must be registered with the Financial Industry Regulatory Authority in CA
Variable Life
Form of whole life insurance providing death benefits and/or cash values based on a taxdeferred investment protfolio
Insurance
Contract to indemnify another against loss
Loss
Reduction in the value of an asset
CIC
CA Insurance Code developed by the Legislature
CCR
California Code of Regulations - Overseen by CA Insurance Commissioner
Risk
Possibility (uncertainty) that a loss might occur
The uncertainty about loss that exists whenever more than one outcome is possible
Pure Risk
Chance of loss, no possibility of gain
Speculative risk
creating a risk offering the opportunity for gain and loss (e.g. gambling)
Peril
cause of loss
Hazard
something that increases the risk
Moral hazard
Morale Hazard
Physical Hazard
Moral - Attitudes and habits of an individual (dishonest)
Morale - indifference or apathy (careless)
Physical Hazard - tangible characteristics of a risk increasing the chance of loss (overweight, risky vocation)
Mortality Table
How many people in each age group will die this year
Developed by the National Association of Insurance Commissioners
Loss Exposure
A condition that could result in a loss
3 methods of gathering Risk Exposure information
1) Application
2) Physical Exam or Inspections
3) Consumer Credit Report
Predicting Insurable Risks
Large comparison of homogeneous units Monetary value of the loss Uncertainty of loss Creates an economic hardship Exclusions - catastrophic perils (e.g. earthquake, hurricane, flood, war, nuclear risks
Insurable Event
unknown event which may damage a person
Insurable Interest
someone or thing that would benefit if that person or thing continues to live (personal life, spouse, business, employee)
Principle of Indemnity
Restores the insured person in whole or in part, to the condition prior to the loss
Underwriting
examining and accepting or rejecting insurance risks
Agent Underwriter
front-line or field agent gathering information needed to access risk
Home Office Underwriter
Person in the office accessing the information gathered and determining acceptability of the risk
Adverse Selection
Protecting the insurance company from clients taking advantage of the potential of excessive claims.
e.g. 1) Taking a job to qualify for insurance they otherwise would not qualify for, 2) Suicide coverage, 3) Exclusion of catastrophic events
Contract Law
Agreement between insurer and the insured legally enforceable obligation to make all benefit payments for which premiums have been paid
Indemnify
Making an insured whole again after a loss
Restoring to condition before loss
Rescission
Insurer voids an insurance contract due to an intentionally fraudulent omission by the insured of a material fact.
Annuity
Agreement by insurer to spread out payments over time. Used to liquidate an estate over time
Annuitant
The party receiving the benefits of an annuity
Single premium immediate annuity
Lump sum purchase with payouts starting next month
Single premium deferred annuity
Single investment with payments beginning until an agreed on age
Fixed Annuity
Fixed rate of return
Variable Annuity
Monthly payouts during the payout period will change with the market
