Insurance Key Concepts Flashcards
Annuitant
one to whom an annuity is payable, or a person upon the continuance of whose life further payment depends.
Amount of risk
difference between the face amount of the policy and the reserve or policy value at a given time. In other words, the dollar amount over what the policy owner has contributed of cash value toward payments of the policy owner’s claim. Because the cash value increases every year, the net amount at risk naturally decreases until it finally reaches zero when the cash value or reserve become the face value.
Apparent authority
the authority an agent appears to have, based on the principal’s (the insurer’s) actions, words, deeds, or because of circumstances the principal (the insurer) created.
Appointment
the authorization or certification of an agent to act for or represent an insurance company.
Approval receipt
a type of conditional receipt that provides that coverage is effective as of the date the application is approved.
Assignee
person (including corporation, partnership, or other organization) to whom a right or rights under a policy are transferred by means of assignment.
Assignment
signed transfer of benefits of a policy by an insured to another party. The company does not guarantee the validity of an assignment.
Attained age
– with reference to an insured, the current insurance age
Authority
the actions and deeds an agent is authorized to conduct on behalf of a insurance company, as specified in the agent’s contract.
Automatic premium loan provision
authorizes insurer to automatically pay any premium in default at the end of the grace period and charge the amount so paid against the life insurance policy as a policy loan.
Aviation exclusion
either attached by rider or include in standard policy language excepting from coverage certain deaths or disabilities due to aviation, such as “other than a fare-paying passenger”.
Beneficiary
person to whom the proceeds of a life or accident policy are payable when the insured dies. The various types of beneficiaries are primary beneficiaries (those first entitled to proceeds), secondary beneficiaries (those entitled to proceeds if no primary beneficiary is living when the insured dies), and tertiary beneficiaries (those entitled to proceeds if no primary or secondary beneficiaries are alive when the insured dies.
Annuity
a contract that provides a stipulated sum payable at certain regular intervals during the lifetime of one or more persons, or payable for a specified period only.
Mortality table
listing of the mortality experience of individuals by age; permits an actuary to calculate, on the average, how long a male or female of a given age group may be expected to live.
Mortality
the relative incidence of death within a given group
Morbidity rate
show the incident of disability due to sickness or accident within a given group
ART
annual renewable term – a form of renewal term insurance that provides coverage for one year and allows the policyowner to renew coverage each year without evidence of insurability – also called YRT – yearly renewable term.
Aleatory
– feature of insurance contracts in that there is an element of change for both parties and that the dollar given by the policyholder(premiums) and the insurer (benefits) may not be equal
Absolute assignment
policy assignment under which the assignee (person to whom the policy is assigned) receives full control over the policy and also full rights to its benefits. Generally, when a policy is assigned to secure a debt, the owner retains all rights in the policy in excess of the debt, even though the assignment is absolute in form.
Dividend
policyowner’s share in the divisible surplus of a company issuing insurance on the participating plan.
Dividend options
the different ways in which the insured under a participating life insurance policy may elect to receive surplus earnings: in cash, as a reduction of premium, as additional paid-up insurance, left on deposit at interest, or as additional term insurance.
Cash Value
The equity amount or “savings” accumulation in a whole of life policy.
Viatical Settlement
an agreement under which the owner of life insurance policy sells the policy to another person in exchange for a bargained- for payment, which is generally less than expected death benefit under the policy.
Accelerated Benefits
a life insurance rider that allows for early payment of some portion of the policy’s face amount should the insured suffer from a terminal illness or injury.
Settlement Options
optional modes of settlement provided by most insurance policies in lieu of lump-sum payment. Usual options are lump-sum cash, interest-only, fixed-period, fixed-amount, and life income.
Premium Factors
the three primary factors considered when computing the basic premium for insurance: mortality, expense, and interest.
Level Premium Funding
the insurance plan (used by all regular life insurance companies) under which, instead of an annually increasing premium that reflects the increasing change of death, an equivalent level premium is paid. Reserves that accumulate from more than adequate premiums paid in the early years supplement inadequate premiums in later years, 88, 91,
cash surrender value
amount available to the owner when a life insurance policy is surrender to the company. During the early policy years, the cash value is the reserve less a “surrender charge”; in later policy years, it usually equals or closely approximates the reserve value at time of surrender.
cash surrender option
a non forfeiture option that allows whole life insurance policy owners to receive a payout of their policy’s cash values.
cash refund annuity
provides that, upon the death of an annuitant before payments totaling the purchase price have been made, the excess of the amount paid by the purchaser over the total annuity payments received will be paid in one sum to designated beneficiaries.
broker
licensed insurance representative who does not represent a specific company, but places business among various companies. Legally the broker is usually regarded as a representative of the insured rather than the company.
benefit
may be either money or a right to the policy owner upon the happening of the conditions set out in the policy.
cash refund annuity
provides that, upon the death of an annuitant before payments totaling the purchase price have been made, the excess of the amount paid by the purchaser over the total annuity payments received will be paid in one sum to designated beneficiaries.
class designation
a beneficiary designation. Rather than specifying one or more beneficiaries by name, the policy owner designates a class or group of beneficiaries. For example: my children
collateral assignment
assignment of a policy to a creditor as security for a debt. The creditor is entitled to be reimbursed out of policy proceeds for the amount owned. The beneficiary is entitled to any excess of policy proceeds over the amount due the creditor in the event of the insured’s death.
commissioner
head of state insurance department; public officer charged with supervising the insurance business in a state and administrating insurance laws.
