Kaplan Life and Health Definitions (Flashcards Deck)
This is the deck of flashcards that comes with the Kaplan study guide for Life and Health insurance.
Discrimination
In insurance, the act of treating certain groups of people unfairly in the sale and pricing of policies. This does not apply to age, sex, occupation, and medical history.
Modified Endowment Contract (MEC)
A permanent or cash value life insurance policy which violates the 7-pay test when premiums exceed the amount allowed by the IRS in the first seven years of the policy.
Elimination Period
The period of time an insured must wait before receiving benefits from a disability income policy or a long-term care policy. This is a deductible of time as opposed to an amount of money.
Automatic Premium Loan Provision
Authorizes the insurer to automatically pay any premium in default at the end of the grace period. The premium owed plus interest charged is deducted from the policy’s cash value.
Reduced Paid-Up Insurance
A nonforfeiture option allowing the policyowner to exchange the policy’s cash surrender value for a paid-up permanent policy with a reduced death benefit.
Paid-Up Additions
Additional life insurance purchased by the policy dividends on a net single premium basis at the insured’s attained insurance age at the time additions are purchased.
Mortality Table
A table used by an actuary to calculate how long a male or female of a given age group may be expected to live (insured’s statistical likelihood of death).
Multiple Employer Trust (MET)
Several small groups of individuals that need life and health insurance but do not qualify for the group insurance band together under state trust laws to purchase insurance at a more favorable rate.
National Association of Insurance Commissioners (NAIC)
Association of state insurance commissioners active in insurance regulatory problems and in forming and recommending model legislation and requirements.
Morbidity
The relative incidence of disability due to sickness or accident within a given group.
Medicare Supplement Policy
Health insurance that provides coverage to fill the gaps in Medicare coverage.
Nonforfeiture Options
In life insurance, this protects the owner’s right to the cash value of a permanent policy in the event he surrenders or there is a lapse in coverage. There are three options:
- Cash surrender
- Extended term policy
- Reduced paid-up policy
Health Insurance
A broad description of insurance to offset the cost of accident or illness. May be in the form of reimbursement or indemnity (cash) policies.
Agent’s (Producer’s) Report
The section of an insurance application where the agent (producer) details personal observations about the applicant.
Adhesion
The contract must be accepted by the insured exactly as it is written by the insurer. The terms of the contract cannot be negotiated. The contract is offered on a take-it-or-leave-it basis.
Apparent Authority
The insured believes the agent has the authority to act based on actions, words or deeds of the agent. Even though the agent may not have been granted such authority by the insurer, they will be held liable for the actions of the agent.
Free Look
Provision required in most states whereby policyholders have either 10 or 30 days to examine their new policies at no obligation.
Waiver of Premium
Provided the owner is also insured, this rider exempts the owner/insured from paying premiums after she has been disabled for a specific period of time, usually 90 days in life policies.
Payor Rider
This rider waives future premiums if the owner dies or becomes disabled. Considered desirable for juvenile policies.
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.
Moral Hazard
Conditions resulting from a weakness of human character (when someone should know the difference between right and wrong), such as embezzlement and arson.
Morale Hazard
Hazard arising from indifference to loss because of the existence of insurance (e.g., individual leaving a car unlocked).
Pure Risk
The only insurable risk - it involves the chance of loss only, with no possibility of gain.
Sole Proprietorship
The simplest form of business organization owned and controlled by one individual.
Suicide Provision
Most life insurance policies provide that if the insured commits suicide within a specified period, usually two years after the issue date, the company’s liability will be limited to a return of premiums paid.
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.
Revocable Beneficiary
Beneficiary whose interest can be revoked by the policyowner without notice to the beneficiary or obtaining the beneficiary’s written consent.
Contingent Beneficiary
Person(s) named to receive proceeds in case the original beneficiary is not alive.
Cost-Of-Living (COL) Rider
A rider available with some policies that provides for an automatic increase in benefits (typically tied to the Consumer Price Index), offsetting the effects of inflation. This will result in an automatic increase in premium.
Accidental Death and Dismemberment (AD&D)
Insurance providing payment if the insured’s death results form an accident or if the insured accidentally severs a limb above the wrist or ankle joints or permanent blindness.
Settlement Options
On the death of the insured, the beneficiary may elect to receive payment in a number of ways. Usual options are lump-sum cash, interest-only, installment agreement, and life income.
Grace Period
Period of time after the due date of a premium during which the policy remains in force. If a claim occurs within this timeframe, the death benefit is paid less premium owed.
Reentry Option
An option in a renewable term life policy under which policyowners can receive a lower renewal premium if they prove insurability. The insurer may be able to decline coverage under this option.
Change of Occupation Provision
This provision is found in health insurance stating if the insured changes to a more hazardous occupation, benefits are reduced; if changing to a less hazardous occupation, premiums are reduced.
Spousal IRA
An individual retirement account set up on behalf of a non-working or low-earning spouse.
Profit-Sharing Plan
Any plan whereby a portion of a company’s profits are set aside for distribution to employees who qualify under the plan.
Rollover IRA
The owner of a retirement plan or IRA liquidates his account, receives the funds and reinvests all of the funds into another plan within 60 days.
Lapse
Termination of a policy upon the policyowner’s failure to pay the premium by the end of the grace period.
Life Insurance Buyer’s Guide
A generic publication that explains life insurance in a way that an average consumer can understand. It does not contain specific product or policy information.
Common Disaster Provision
This policy provision provides an alternative beneficiary in the event that the insured and the original beneficiary dies as the result of a common accident.
Primary Insurance Amount (PIA)
Amount equal to a covered worker’s full Social Security retirement benefit or disability benefit.
Presumptive Disability Benefit
Regardless if the insured is able to work, he is eligible for full disability benefits if he has complete loss of speech, hearing, vision or the loss of use of two or more limbs.
Major Medical Expense Policy
Health insurance policy that provides broad coverage for reasonable and necessary medical expenses. Characterized by deductibles and coinsurance cost sharing.
Medicare Part B
Covers physicians and outpatient treatment, subject to a monthly premium, annual deductible and coinsurance.
Master Contract
An insurance policy issued to the group sponsor of a group plan. Individuals participating in the group plan receive individual certificates of coverage.
Peril
The reason for the loss (fire, wind, hail, and so forth).
Collateral Assignment
Assignment of a policy to a creditor as security for a debt. At the insured’s death, the creditor is entitled to be reimbursed our of policy proceeds for the amount owed and any excess will go to the beneficiary.
Health Insurance Buyer’s Guides
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 coverage are being considered.
Basic Medical Expense Policy
Health Insurance policy that provides FIRST DOLLAR coverage for specified (and limited) health care, such as hospitalization, surgery, or physician services. Characterized by limited benefit periods and relatively low coverage limits.
Capital Sum
Maximum benefit payable for the accidental loss of vision in one or both eyes, or the loss of a limb at or above the wrist or the ankle.
Business Overhead Expense Insurance
If a business owner becomes disabled, this policy will not replace the owner’s income, but will instead help pay the expenses of operating the business such as rent, utilities and wages.
Own Occupation
A definition of total disability. The insured must be unable to work at her own occupation. It is easier for the insured to receive benefits under policies using this definition.
Offer
This element of a contract is either made by the applicant (when an application is completed and premium is submitted) or is made by the insurance company (when no premium is submitted with the application).
Nonscheduled Plan
Pays on the basis of what is considered usual, customary, and reasonable (URC) in a certain geographic area and based on amount physicians in area usually charge for same or similar producers.
Noncancelable Renewal Provision
This renewal provision is most favorable to the insured as the insurer cannot cancel coverage (except for nonpayment of premium) nor increase the premium.
Irrevocable Beneficiary
Beneficiary whose interest cannot be revoked by the policyowner without the beneficiary’s written consent.
Assignment of Benefits
The policyowner allows a health care provider to bill the insurer and receive benefits on the policyowner’s behalf.
Annual Renewable Term (ART)
A form of renewable term insurance that provides coverage for one year and allows the policyowner to renew coverage each year, without evidence of insurability.
Sharing, Transfer, Avoidance, Reduction, and Retention (S.T.A.R.R.)
The five methods of handling risk.
Participating (PAR) Policies
In mutual and fraternal insurance companies, the policyowners participate in the ownership of the company. If there is a surplus of premium over the company expenses, the owners will receive a dividend.
Fraternal Insurance
- A not-for-profit insurance company
- Owned by policy owners
- Issues participating (PAR) policies
- Run by the lodge system
- May assess policy owners
- No legal reserve requirement
Beneficiary
Person to whom the proceeds of a life or accident policy are payable when the insured dies.
Law of Large Numbers
Basic principle of statistics, used by insurance actuaries, where the larger the number of exposures to study, the more accurate the prediction.
Dividend
Policyowner’s share in the divisible surplus of a company issuing participating policies; paid as a return of premium.
Producer
A general term applied to an agent, broker, intermediary, personal producing general agent, solicitor, or other person who sells insurance.
Consideration
Element of a legal contract consisting of premium payment and statements made by the prospective insured in the application.
Conditional Receipt
Given to the policyowners when they pay a premium at time of application. In this case, the applicant is covered the later of the date of the application or proof of insurability, even though the policy may not have been issued.
Warranties
Statements made on an application for insurance that must be true if the insurer is to pay a claim. For example, if an applicant for life insurance signs the application knowing he is terminally ill, the policy may be voided by the insurer.
Rebating
Giving anything of value to the applicant as an inducement to buy the policy.
Simplified Employee Pension Plan (SEP)
A type of qualified retirement plan under which an employer or self-employed individual may contribute to the plan. Employees may not contribute.
Savings Incentive Math Plan for Employees (SIMPLE)
A qualified employer retirement plan for companies with 100 or fewer employees and which have no other retirement plan in place.
Transacting Insurance
Conducting insurance business, such as soliciting or negotiating to buy or sell an insurance policy.
Viatical Settlement
An agreement under which the owner of a life insurance policy assigns the policy to a viatical company in exchange for a payment, which is generally less than the expected death benefit under the policy.
Fiduciary
Person in a position of special trust and confidence (e.g., in handling or supervising affairs or funds of another).
Enrollment Period
Period during which new employees can sign up for coverage under a group insurance plan without proof of insurability.
Accidental Death Benefit Rider
A life insurance policy rider providing for payment of an additional benefit when the death occurs by accidental means.
Accelerated Benefits Rider
A life insurance rider that allows for the early payment of some portion of the policy’s face amount should the insured suffer from a terminal illness or injury.
Uniform Simultaneous Death Act
Model law that states when an insured and beneficiary die at the same time, it is presumed that the insured survived the beneficiary.
Incontestable Clause
Provides that, for certain reasons such as material misstatements or concealments on the application, the insurer may avoid a life insurance policy, usually limited to two years after issue.
Limited Pay Life Insurance
A form of permanent life insurance characterized by premium payments only being made for a specified or limited number of years.
Whole Life Insurance
A life insurance policy providing guaranteed level premiums, guaranteed increasing cash value, and a guaranteed level death benefit that endows at maturity (usually at age 100).
Contributory Plan
Group insurance plan issued to an employer under which both the employer and employees contribute to the cost of the plan. Generally, 75% of the eligible employees must be insured.
Single-Premium Whole Life Insurance
Whole life insurance for which the entire premium is paid in one sum at the beginning of the contract period.
Renewable Term Insurance
Temporary insurance which renews either annually or after a longer period without proving insurability.
Medical Information Bureau (MIB)
A consumer reporting agency that operates a database of medical information on individuals who have previously applied for life and health insurance. Member issuers can access this data with the consent of an applicant.
Underwriting
A department found within an insurance company that reviews applications to evaluate risk and eliminates those that do not meet standards.
Individual Retirement Account (IRA)
A personal retirement account through which eligible individuals accumulate tax-deferred income up to a certain amount each year, depending on the person’s tax bracket.
Exclusion Ration
A percentage used to determine the amount of annual annuity income exempt from federal income tax.
Aviation Exclusion
The insurer will not pay a claim if the insured dies as a result of flying an aircraft or acting as a member of a flight crew. In most cases, the insurer will offer the applicant the opportunity to purchase a rider offsetting the exclusion.
Tax-Sheltered Annuity
Now referred to as a 403 (b) plan, the investment options are now identical to 401(k) plans. At one time, investments in 403(b) plans were limited to tax-sheltered annuities (also known as TSA plans).
403(b) plans are only available to nonprofit organizations, schools, universities, and so forth.
Qualified Plan
A retirement or employee compensation plan established and maintained by an employer that meets specific guidelines spelled out by the IRS and consequently receives favorable tax treatment.
Noncontributory Plan
Employee benefit plan under which the employer bears the full cost of the employee’s benefits; must insure 100% of eligible employees.
Nonqualified Plan
A retirement plan that does not fall under certain IRS rules, including the Employee Retirement Income Security Act (ERISA). Contributions are not tax deductible, but growth is tax deferred.
Viator
An individual suffering from a terminal illness or severe chronic illness who assigns his life insurance Policy to a viatical company. The company becomes the policyowner and receives the death benefits when the insured dies.
Twisting
Replacing one life contract with another from a different company without demonstrating a benefit to the client.
Graded Premium Whole Life
Variation of a traditional whole life contract providing for lower than normal premium rates during the first few policy years, with premiums increasing gradually each year. After the preliminary period, premiums level off and remain constant.
Extended Term Insurance
Nonforfeiture option providing for the cash surrender value of a policy to be used as a net single premium at the insured’s attained age to purchase term insurance for the net death benefit (face amount of the policy, less loans).
Endow
When the cash value in a permanent policy is equal to the death benefit, the policy matures (or is paid out). This is assumed to happen at age 100.
Defined Benefit Plan
A pension plan under which benefits are determined by a percentage of the recipient’s salary.
Credit Life Insurance
Decreasing term insurance covering the unpaid balance of a mortgage or installment loan. If the borrower dies, benefits pay balance due. May be individual or group policy.
Defined Contribution Plan
A tax-qualified retirement plan in which annual contributions are determined by a percentage of the employee’s salary.
Conversion Privilege (Convertibility)
Allows the policyowner, before an original insurance policy expires, to elect to have a new permanent policy issued that will continue the insurance coverage without evidence of insurability.
Admitted Insurer
An insurance company that has been approved to operate within a given jurisdiction. (Also known as an authorized or approved company or carrier.)
Face Amount
This is the same as the guaranteed death benefit. This benefit may be decreased by loans or increased by additional riders or provisions.
Cash Value
The equity amount or savings accumulation in a permanent life policy.
Attained Age
With reference to an insured, the current insurance age.
Adjustable Life
This policy allows the policyowner to adjust the policy’s face amount, premium, and type of protection without having to complete a new application or any additional underwriting.
COBRA
Extends group health coverage to an employee who loses their job for reasons other than gross misconduct. Coverage may also be extended for family members who lose coverage for various reasons such as death or divorce.
Custodial Care
Health or medical care designed to help an individual perform the activities of daily living. Coverage for this type of care is only provided by long-term care insurance.
Corridor Deductible
In superimposed or comprehensive major medical plans, a deductible amount is not required until the insurer has paid coverage under the base plan. The deductible then creates what looks like a corridor between the base plan and the major medical benefits.
Blanket Policy
Covers a number of individuals who are exposed to the same hazards, such as members of an athletic team, company officials who are passengers in the same company plane, and so forth.
Credit Accident and Health Insurance
In the event of total disability, this policy will pay loan or credit card payments on behalf of the insured.
Dental Insurance
A scheduled benefit policy which specifies how much it will pay for dental treatments, such as checkups, cleaning, fillings, crowns, and so forth.
Disability Income Insurance
Provides for the monthly payment of a portion of the insured’s income should the insured become disabled.
Hospital Indemnity
Pays a daily, weekly, or monthly cash benefit during hospital confinement. This benefit is payable regardless of other insurance benefits received.
Hospital Expense Insurance
Coverage for hospital room and board as well as other expenses. Often subject to daily and maximum limits.
Limited Policies
Restrict benefits to specified accidents or diseases, such as travel policies, dread disease (cancer) policies, and so forth.
Coinsurance
The insurer and insured share any expenses above the deductible amount. This is applied after the insured has satisfied his deductible requirement.
Disability
Physical or mental impairment making a person incapable of working.
Prospective Review
Insurer reviews all proposed nonemergency hospital admission and requires approval before admission.
Proof of Loss
A mandatory NAIC provision stating that the insured must submit a completed claim form with documentation of loss to the insurer within 90 days of the date of loss.
Long-Term Care
Refers to the broad range of medical and personal services for individuals (often the elderly) who need assistance with daily activities for an extended period of time for chronic illnesses like arthritis, rheumatism, and so forth.
Spendthrift Provision
On the death of the insured, the insurer pays the death claim in installments to prevent creditors of the beneficiary from collecting directly from the insurance proceeds.
Per Capita Rule
Death proceeds from an insurance policy are divided equally among the living primary beneficiaries.
Substandard Risk
Person who is considered an under-average or impaired insurance risk and is charged a higher than standard premium.
Representation
A statement believed to be true to the best of one’s knowledge.
Recurrent Disability Provision
A disability income policy provision that specifies the period of time during which the reoccurrence of a disability is considered a continuation of a prior disability.
Reasonable and Customary Charge
Charge for health care service consistent with the going rate of charge in a given geographical area for identical or similar services.
Disability Buy-Sell Agreement
A business partner agrees to sell his share of the business to the other partners if he becomes disabled. Funds for this purchase generally come from a disability policy.
Deductible
Amount of expense or loss to be paid by the insured before a health insurance policy starts paying benefits. It prevents overutilization of insurance benefits by the insured and helps reduce the premium cost.
Any Occupation
A definition of total disability. The insured must be unable to perform any job for which they are “reasonably suited by reason of education, training, or experience.” It is more difficult for the insured to collect benefits under this definition.
Preferred, Standard, Substandard, or Decline
The four ways risks are classified.
Agency
Situation wherein one party (an agent) has the power to act for another (the principal) in dealing with third parties.
Accidental Means Provision
Accident policies require that claims must result from an accident rather than illness. For example, a dismemberment policy will not pay for amputation of a diseased limb.
Aleatory
Insurance premiums will always be unequal to the benefits received. Benefits will usually be larger than the premium.
Adverse Selection
Selection against the company. Tendency of less favorable insurance risks to seek or continue insurance to a greater extent than others. Also, tendency of policyowners to take advantage of favorable options in insurance contracts.
90 Days
In the proof of loss provision, the insured must submit written proof of loss within this timeframe.
Respite Care
Type of health or medical care designed to provide a short rest period for a caregiver.
Residual Disability Benefit
While not totally disabled, the policy will pay the insured a portion of his lost income if he is not able to work as much or is forced to work at a job that pays less.
Total Disability
Definition of disability where the insured is unable to work.
Stop-Loss Provision
Limits the maximum out-of-pocket expense an insured must pay for health care and once this threshold has been met, the health insurance policy covers all expenses for the remainder of the year at 100%.
Scheduled Benefit
List of cash allowances payable for various types of benefits which does not reimburse the insured for actual expenses but pays what is listed.
Per Stirpes Rule
Death proceeds from an insurance policy are divided equally among the named beneficiaries. If a named beneficiary is deceased, that beneficiary’s share then goes to the living descendants of that individual.
Annuitant
One to whom an annuity is payable, or a person upon the continuance of whose life further payment depends.
Mutual Insurer
- An insurance company owned by its policy owners
- Issues participating (PAR) policies
- Run by a board of directors
- Dividends are paid to the policyowner
- Dividends are not taxable (considered an overpayment of premium)
Concealment
The intentional withholding of known information.
Competent Parties
The applicant must be sane, sober, and of legal age to enter a contract.
Utilization Review
Managed care organizations may control hospitalization costs by these methods:
- Prospective review: Pre-approval before admission
- Concurrent review: Continuing review during the period of hospitalization
Skilled Nursing Care
Medical care leading to recovery which is received on a daily basis.
Nondisabling Injury
Requires medical care, but does not result in loss of time from work.
Notice of Claims Provision
Mandatory NAIC provision that describes the insured’s obligation to provide notification of loss to the insurer within a reasonable period of time.
Open-Panel HMO
A network of physicians who work out of their own offices and participate in the HMO on a part-time basis.
Partial Disability
Illness or injury preventing insured from performing at least on or more, but not all, of the insured’s occupational duties.
Stock Insurer
- An insurance company owned by share holders
- Issues nonparticipating policies
- Run by a board of directors
- Legal reserve requirements
Universal Life
Permanent life insurance where the premium is flexible and the death benefit is adjustable. premiums paid into the policy go into the cash value after mortality and interest charges are deducted. Policy has two different death benefits options (A - level death benefit and B - increasing death benefit).
Consideration, Legal Purpose, Offer, Acceptance, and Competent Parties
The five parts of a legal contract.
Blackout Period
Social Security pays a benefit to a surviving spouse left to care for a child under the age of 16. That benefit stops when the child turns 16 and will not resume until the surviving spouse is at least 60.
Domestic Insurer
An insurer that is incorporated, organized, or domiciled in this state.
Experience Rating
The method of establishing the premium for a group based on the group’s previous claims experience.
Hazard
Any factor that gives rise to a peril; making the situation more dangerous.
Key-Person Insurance
Protection of a business against financial loss caused by the death or disability of a vital member of the company.
Stock Redemption Plan
An agreement under which a corporation purchases a stockholder’s interest, usually upon the stockholder’s death, disability, or retirement.
Personal Uses of Life Insurance
- Survivor Protection
- Estate Creation
- Liquidity
- Estate Conservation
- Life Settlements
Primary Beneficiary
The beneficiary first in line to receive policy benefits when the insured dies.
Preexisting Condition
An illness or medical condition that existed before a policy’s effective date.
Indemnity Approach
Payment based on a predetermined, fixed amount for the medical services provided, regardless of the actual expenses incurred or reimbursement received from other insurance.
Needs Approach
A method for determining how much insurance protection a person should have by analyzing a family’s or business’ needs and objectives should the insured die, become disabled, or retire.
Preferred Provider Organization (PPO)
Association of health care providers, such as doctors and hospitals, who agree to provide health care to members of a particular group at a discounted rate.
Express Authority
The specific authority given in writing to the agent in the contract of agency.
Probationary Period
A period of time between the issuance of a policy and the date coverage begins (sickness is not covered during this time).
Implied Authority
Authority not specifically granted to the agent in the contract of agency, but which common sense dictates the agent has. It enables the agent to carry out routine responsibilities.
Fraud
An act of deceit; concealment or misrepresentation of a material fact.
Insurance
Transfers the risk of loss from insured to insurer through a legal contract.
Legal Purpose
In contract law, the requirement that the object of, or reason for, the contract must be legal.
Lloyd’s of London
Ann association of individuals and companies that underwrite insurance on their own accounts and provide specialized coverages.
Independent Agency System
A system for marketing, selling, and distributing insurance in which independent brokers are not affiliated with any one insurer but represent any number of insurers.
Unilateral
A unique characteristic of insurance, stating insurers are required by law to pay legitimate claims where the policyowner is not required by law to pay a premium. Only the insurer makes a legally enforceable promise.
Reinsurance
Insurance purchased by an insurance company from another insurance company as a means of risk management or spreading the risk.
Speculative Risk
A type of risk that involves the chance of both loss and gain; no insurable.
Medicare Part A
Hospitalization insurance that provides specified in-hospital and related benefits. Hospital admissions are subject to a deductible and possible co-pays.
Misstatement of Age or Sex Provision
If the insured’s age or sex is misstated in an application for insurance, the benefit payable is adjusted to what the premiums paid should have purchased.
Medicare Part D
Private insurance coverage for prescription drugs which is subject to Medicare rules.
Medicare
Federally sponsored health insurance and medical program for persons age 65 or older, or who have been receiving Social Security disability for the past 24 months, or who have permanent kidney failure.
Buy-Sell Agreement
Agreement that a deceased business owner’s interest will be sold and purchased at a predetermined price or at a price according to a predetermined formula.
Manage Care Organization
An organization or program that seeks to control costs through utilization review and other methods.
Impairment Rider
Excludes coverage for a specific ailment or condition that otherwise would be covered (e.g., previous back injury).
Health Maintenance Organization (HMO)
Health care management stressing preventive health care, early diagnosis, and treatment on an outpatient basis. Persons generally enroll voluntarily by paying a fixed fee periodically.
Intermediate Nursing Care
Medical care leading to recovery which is received on an occasional basis as opposed to intense, daily care.
Insuring Clause
Found within the insurance policy representing the insurer’s promise to pay under the conditions found in the policy; names the parties to the contract and describes the general scope of coverage.
Guaranteed Renewable
Insurance contract where the insurer may not cancel the contract as long as premiums have been paid. The insurer is only entitled to an increase of premiums if the increase applies to all insureds in the same class.
Home Health Care
Care provided in an individual’s home, usually on a part-time basis.
Exclusion Rider
The insurer excludes a specified preexisting condition.
Fully Insured
A status of complete eligibility where a worker has paid social security taxes for at least 40 quarters of covered employment. Social Security benefits include: death benefits, retirement benefits, disability benefits, and Medicare benefits.
Entire Contract Provision
An insurance policy provision stating the rules in which both the insurer and insured will follow and includes the policy, application, and any attached riders.
Marketing (Distribution) Systems
Insurance Companies market their product by using producers (independent agents, captive agents, general agents, or direct-writing companies) or by mass marketing (direct response, franchise, or vending machine sales).
Insurable Interest
Basic rule governing insurance stating before an individual can benefit from insurance, there must be a legitimate interest in the preservation of life or property involved. This must be proven at time of application.
Gross Premium
The total premium paid by the policyowner; it generally consists of the net premium plus the expense of the operation minus interest.
Principal Sum
The amount under an AD&D policy that is payable as a death benefit if death is due to an accident.
Estate
Most commonly, the quantity of wealth or property at an individual’s death.
Churning
Replacing one life contract with another within the same company without demonstrating a benefit to the client.
Guaranty Association
Established by each state to support insurers and product consumers in the case of insurer insolvency, guaranty associations are funded by assessments on insurers.
Mortgage Insurance
Decreasing term life insurance designed to pay off a mortgage balance. The insurance generally is made payable to a family beneficiary instead of the mortgage holder. (See credit life insurance)
Multiple Employer Welfare Arrangement (MEWA)
An arrangement where a group of smaller employers pool their risk and self-insure.
Policy Summary
Addresses the specific product being presented for sale (premium, riders attached, benefit amounts, cash surrender values, and so forth).
