L&H Vocab Flashcards
Policy Provision
A clause that stipulates the rights and obligations under an insurance contract
Peril
Cause of loss
Field Underwriter
An insurance agent who conducts initial policy solicitation and application (the company’s front line of underwriting)
Reinsurance
Agreement between insurance companies under which one accepts all or part of the risk of loss of the other
Renewal
The continuation in full force and effect of a policy that is about to expire
Fiduciary
A producer who handles insurer’s funds in a trust capacity
Exclusions
Certain risks or perils that are not covered by the policy and for which no benefits are payable, including war or military service, aviation, hazardous hobbies, or self-inflicted injuries
Domestic Insurer
An insurance company formed under the laws of the state in which it transacts insurance
Adverse Selection
A tendency risks with higher probability of loss to purchase and maintain insurance more often than the risks who present lower probability of loss
Disclosure
Revealed information to help someone make an informed decision
Credit Insurance
Insurance on a debtor in favor of a lender, intended to pay off a loan or the balance due thereon if the insured dies or is disabled.
Agent/Producer
A legal representative of an insurance company who is licensed to sell, negotiate, or effect insurance contracts on behalf of the insurer
Absolute Assignment
A permanent and irrevocable transfer of all policy rights of ownership by the policy owner to a third party
Contract of Adhesion
A contract prepared by one party that must be accepted as written or rejected by the other party
Contingent Beneficiary
person or persons named to receive benefits if the primary beneficiary is not alive when the insured dies (has second claim to the policy proceeds)
Representation
A statement made by the application on the insurance application that is believed to be true
Consideration
The binding force in a contract that requires something of value to be exchanged for the transfer of risk. The consideration on the part of the insured is the representations made in the application and the payment of premium; the consideration on the part of the insurer is the promise to pay in the event of loss
Conditions
the part of an insurance contract setting out the responsibilities of both the insured and the insurer, such as the requirements regarding notice of claim and proof of loss
Concealment
The withholding of known facts, if material, can void a contract
Suitability
Facts that determine if an insurance product is appropriate for a particular customer
Foreign Insurer
An insurer organized under laws of a state other than the one in which the insurance is written
Solvency
An insurer’s ability to meet its financial obligations to policy owners, insureds and beneficiaries
Premium
A payment by the policy owner to the insurance company to keep a policy in force
Applicant
The party making the application to the insurance company for the policy of insurance who must provide the insurer with representations, or truthful statements to the best of the applicant’s knowledge
Third-Party Ownership
An insurance arrangement in which the policy owner and the insured are not the same person
Alien Insurer
An insurer organized and domiciled outside of the United States
Certificate of insurance
A document issued to insureds under a group that states that coverage has been issued and indicates coverage type and amounts
Cancellation
Termination of a contract of insurance mid-term (rather than at the renewal date) by voluntary act of the insurance company or insured, effected in accordance with provisions in the contract or by mutual agreement
Twisting
Misrepresentation or incomplete of fraudulent comparison of insurance policies that persuades an insured or the policy owner, to his or her detriment, to cancel, lapse, switch policies, or take out a policy with another insurer
Business Insurance
Life or health insurance written to cover business situations, such as key person, sole proprietor, partnership, or corporations
Authorized/Admitted Insurer
An insurer permitted to transact insurance within a state; must obtain a Certificate of Authority from the Insurance Commissioner, Director, or Superintendent from every state the insurer does business
Application
A form on which the prospective insured states facts requested by the insurer and on the basis of which (together with any information from medical examiners, attending physicians, investigators and the producer) the insurer decides whether to accept the risk or modify coverage
Insurer (Principal)
The company that issues an insurance policy
Insured
The person covered by the insurance policy
Underwriting
The risk selection and classification process
Unfair Trade Practice
Any fraudulent, deceptive, or dishonest business practice that is prohibited by statutes and regulations
Indemnity
Making financially whole again; insurance is designed to restore the policyholder to the same financial condition as prior to a loss
Hazard
Any factor that increases the likelihood of a loss; may be physical, moral or morale
Guaranty Association
A state mandated nonprofit legal entity comprised of all authorized insurance companies, designed to protect consumers from impaired or insolvent insurers
Unilateral Contract
A contract in which only one of the parties bound to fulfill its obligations
Group Contract
A contract of insurance between the insurer and an employer or other entity that covers a group of people identified as individuals by reference to their relationship to the group sponsor
Fraud
An intentional misrepresentation made by a person with intent to gain advantage and relied upon by a second party the suffers a loss
Waiting Period
A period of time that must pass after a loss occurs before the insurer starts paying policy benefits (also known as the elimination period, or a time deductible)
Waiver
Relinquishment of a legal right or interest, such as a rider waiving liability for a stated cause of accident, or provision allowing the insured to waive premium payment during a period of disability
Claim
A request for payment of the benefit under the insurance policy
Insuring Clause
The clause in a policy that specifies in brief the contract’s intent and benefits, also known as the Insuring Agreement
Material Misrepresentation
A misrepresentation that would have been important or essential to the underwriter’s decision to issue the policy; if it is intentional it is considered fraud
Master Policy
The contract issued to the sponsor of a group insurance plan (usually the employer). The employees covered by a group plan are considered to be insureds, but they only receive certificates of insurance
Loss
An unpredictable reduction in the quality, quantity, or value of something by a peril insured against, such as bodily injury, disease, property damage, or death
Warranty
An absolutely true statement that, if breached, may void an insurance contract
Surrender
Early termination of policy by the policy owner
Policyowner
The person entitled to exercise the rights and privileges in the policy
Rebating
Any inducement offered in the sale of an insurance product that is not specified in the policy. Rebating is illegal in most states
Rider
A written modification attached to a policy that increases or decreases coverage and premiums
Mode of Premium Payment
Frequency with which the policy owner pays the policy premium, such as monthly, quarterly, semi-annually, or annually. the less frequent the payment, the lower the annual cost
Nonrenewal
Termination of an insurance policy by an insurer on its expiration or renewal date by not offering a continuation of the existing policy or a replacement policy
Lapse
Termination of a policy of failure to pay the premium; a policy lapses at the end of its grace period
Risk
The uncertainty of loss that exists whenever more than one outcome is possible, the chance of loss. Only pure risks are insurable (those that offer a chance of loss without any chance for gain)
Nonresident Producer
A producer licensed in a state in which he or she is not a resident. In most states, no exam is required to obtain a nonresident license as long as the producer is licensed for the same line of authority and in good standing in his or her home state
Misrepresentation
The use of written or oral statements of the insured or insurance company misrepresenting the risk, terms, coverage, benefits, privileges or estimated future dividends of any policy
Law of Large Numbers
A principle stating the the larger the number of similar exposures considered, the more closely the losses reported will equal the underlying probability of loss. The law of large numbers allows insurers to make accurate predictions regarding insured risks
NAIC (National Association of Insurance Commissioners)
An organization made up of the Insurance Commissioners from all 50 states, the District of Columbia and the U.S territories, formed to resolve insurance regulatory
