Insurance Key Concepts

Question 1

Annuitant

Answer 1

one to whom an annuity is payable, or a person upon the continuance of whose life further payment depends.

Question 2

Amount of risk

Answer 2

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.

Question 3

Apparent authority

Answer 3

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.

Question 4

Appointment

Answer 4

the authorization or certification of an agent to act for or represent an insurance company.

Question 5

Approval receipt

Answer 5

a type of conditional receipt that provides that coverage is effective as of the date the application is approved.

Question 6

Assignee

Answer 6

person (including corporation, partnership, or other organization) to whom a right or rights under a policy are transferred by means of assignment.

Question 7

Assignment

Answer 7

signed transfer of benefits of a policy by an insured to another party. The company does not guarantee the validity of an assignment.

Question 8

Attained age

Answer 8

– with reference to an insured, the current insurance age

Question 9

Authority

Answer 9

the actions and deeds an agent is authorized to conduct on behalf of a insurance company, as specified in the agent’s contract.

Question 10

Automatic premium loan provision

Answer 10

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.

Question 11

Aviation exclusion

Answer 11

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”.

Question 12

Beneficiary

Answer 12

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.

Question 13

Annuity

Answer 13

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.

Question 14

Mortality table

Answer 14

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.

Question 15

Mortality

Answer 15

the relative incidence of death within a given group

Question 16

Morbidity rate

Answer 16

show the incident of disability due to sickness or accident within a given group

Question 17

ART

Answer 17

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.

Question 18

Aleatory

Answer 18

– 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

Question 19

Absolute assignment

Answer 19

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.

Question 20

Dividend

Answer 20

policyowner’s share in the divisible surplus of a company issuing insurance on the participating plan.

Question 21

Dividend options

Answer 21

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.

Question 22

Cash Value

Answer 22

The equity amount or “savings” accumulation in a whole of life policy.

Question 23

Viatical Settlement

Answer 23

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.

Question 24

Accelerated Benefits

Answer 24

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.

Question 25

Settlement Options

Answer 25

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.

Question 26

Premium Factors

Answer 26

the three primary factors considered when computing the basic premium for insurance: mortality, expense, and interest.

Question 27

Level Premium Funding

Answer 27

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,

Question 28

cash surrender value

Answer 28

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.

Question 29

cash surrender option

Answer 29

a non forfeiture option that allows whole life insurance policy owners to receive a payout of their policy’s cash values.

Question 30

cash refund annuity

Answer 30

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.

Question 31

broker

Answer 31

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.

Question 32

benefit

Answer 32

may be either money or a right to the policy owner upon the happening of the conditions set out in the policy.

Question 33

cash refund annuity

Answer 33

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.

Question 34

class designation

Answer 34

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

Question 35

collateral assignment

Answer 35

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.

Question 36

commissioner

Answer 36

head of state insurance department; public officer charged with supervising the insurance business in a state and administrating insurance laws.