Life and Health Insurance Flashcards
Provision sometimes contained in life insurance policies that dictates under what conditions the policy owner is able to receive a reduced policy benefit while alive. Typical conditions include the onset of serious or terminal illness or permanent confinement to a nursing home. Also called “living benefits.”
Accelerated death benefit life provision
Provision sometimes contained in life insurance policies that provides additional benefit if the insured dies as a result of an accident or loses stated body parts as a result of an accident. In the event of death, twice the policy face amount is typically payable to the beneficiary. (This is also referred to as “double indemnity.”)
Accidental death and dismemberment provision
Pertinent to long-term care policies. Operates in a manner similar to the definition of disability in a disability policy— i.e., they define what will trigger the need for long-term care benefits. Includes such activities as eating, toileting, walking, and dressing. The long-term care policy will specify what the ADLs are and how many of the ADLs must be unperformable by the insured person before benefits are available.
Activities of daily living (ADLs)
The tendency of individuals who most need the insurance being the ones most likely to want to purchase it. Insurance companies have to guard against __________ since there needs to be a large enough group of policyholders paying premiums to then be able to pay those who have claims
Adverse selection
Individual who sells insurance for a particular insurance company
Agent
The recipient of annuity distributions
Annuitant
Selecting one of the payment options available from an annuity, and starting the periodic payments.
Annuitization
A definition of disability that specifies that the person will be considered disabled for purposes of receiving benefits only if he or she is unable to perform any occupation. It is the most restrictive of all definitions of disability
“Any occupation” definition of disability”
Pertains to life insurance policies. The owner of a life insurance policy may transfer ownership of the policy to another under this clause of a policy.
Assignment
Group disability insurance that is available to an individual as a result of membership in a particular association.
Association group disability insurance
Provision sometimes included in life insurance policies. It enables the premium to be paid out of the accumulated policy loan value if the policy owner fails to pay the premium
Automatic premium loan provision
The person or entity that has a remainder interest in policy proceeds. Trusts: The person whom the trust is to benefit.
Beneficiary
Pertains to health insurance policies and is where the insured has paid his or her maximum out-of-pocket (MOOP) amount. The breakpoint is the point at which the insured is no longer required to pay a percentage of covered expenses and the insurer takes over completely.
Breakpoint
Pertains to nonforfeiture options on life insurance policies. If a policy owner wishes to surrender the insurance contract, the __________________ option enables him or her to receive cash equal to the policy’s accumulated value. Upon payout the insurer is no longer responsible for providing coverage.
Cash surrender value option.
A 1985 law that enables employees and their dependents to continue group health coverage up to 18 or 36 months after leaving employment. Coverage is the same as that provided under the group plan, and the employee pays a premium that may be no greater than 102% of the cost of the coverage to the plan
COBRA
Pertains to health insurance coverages. A __________ policy may be renewed by the insured if he or she meets the insurer’s conditions for renewal. For example, with a group insurance policy, renewal may depend upon the insured’s continued employment or membership in an association
Conditionally renewable
Pertains to major medical insurance. Following satisfaction of deductible requirements, an insured is responsible for a portion of covered medical expenses (frequently 20%) with the insurer bearing responsibility for the rest (frequently 80%). Upon reaching the policy breakpoint, the insurer is responsible for all covered medical expenses
Coinsurance
Pertains to health insurance coverages. may be renewed by the insured if he or she meets the insurer’s conditions for renewal. For example, with a group insurance policy, renewal may depend upon the insured’s continued employment or membership in an association.
Conditionally Renewable
One of four components of an insurance contract. Describes the responsibilities of the insured and insurer that must be accepted if the insurer is to be liable for a covered loss. Typically include the insured’s responsibilities in the event of a loss, the insurer’s rights with regard to fraud or concealment by the insured, policy cancellation procedures, and policy assignment procedures.
Conditions
Pertains to life insurance. During the _____ , the insurer may deny a claim because of error, concealment, or misstatement on the part of the insured. After it passes, the insurer agrees not to deny a claim for these reasons.
Contestable Period
An annuity product in which a specified benefit payment amount is guaranteed to the annuitant
Conventional annuity
Pertains to life insurance. It is a provision that enables the insured to convert term insurance to whole life insurance during a specified conversion period.
Conversion Right
Pertains to health insurance. It ensures that an insured will be indemnified only to the extent of actual losses even though he or she may be covered by more than one health insurance policy
Coordination of benefits provision
Pertains to long-term care—specifically, institutional care, such as that provided by a nursing home
Custodial care
One of four major components of an insurance contract. The _________ provides information about the person or property being insured
Declaration
A cost-sharing device frequently contained in insurance policies. When a covered loss occurs, the ______ amount is the amount that the insured must pay before the insurer’s responsibility for payment begins.
Deductible
An annuity product in which payments do not begin immediately upon funding; rather, they are _____ until a stated future date
Deferred Annuity
Pertains to life insurance. A _____ gives an insurance company the right to postpone payment of the policy cash surrender (or loan) value for six months after it is requested by the insured. This delay typically would happen only during periods of severe economic stress, such as during an extreme depression.
Delay Clause
Pertains to life insurance. _______ benefits may be added to basic life insurance coverage. The amount of the disability benefits typically is tied to the face amount of the life insurance policy
Disability Income Rider
Pertains to life insurance. It enables the beneficiary to receive twice the face amount of the life insurance policy if the insured person dies as a result of an accident.
Double Indemnity Rider
A provision that is added to an insurance policy to supplement or modify a standard policy to meet the special needs of the insured individual.
Endorsement
Policy that provides insurance protection for a specified period of time, beyond which a surviving insured is paid the face value of the policy. In other words, the face amount of the policy is paid to the beneficiary if the insured dies during the policy period, or it is paid to the insured if he or she outlives the policy period.
Endowment life insurance
One of four major components of an insurance contract. The exclusions section states the perils, losses, and/or property for which the insurer will not provide coverage under the policy
Exclusions (insurance)
A nonforfeiture option in a whole life insurance policy. The policyholder may exchange the cash surrender value of paid-up term insurance for the full face amount of the original insurance contract. The duration of the term is based upon the cash surrender value of the original policy.
Extended term insurance option
Retirement product in which the dollar amount of the payout must be at least the amount of the premium paid. If the annuitant dies before full receipt of this amount, the remainder is payable to a beneficiary. However, if the annuitant dies after the guaranteed amount is paid, the beneficiary receives nothing. The annuitant receives payments until death, even after the guaranteed amount is paid
Fixed-amount annuity
Pertains to life insurance. Provides the beneficiary a stated amount of income each month until the insurance proceeds are exhausted. During the period of distribution, interest builds. Each payment consists partly of interest and partly of principal. The insurer guarantees a minimum rate, but usually pays the rate actually earned on investments
Fixed-amount settlement option
Retirement product in which the number of payments that an annuitant will receive is guaranteed. If the annuitant dies before the guaranteed number of payments has been distributed, the balance is payable to the beneficiary. If the annuitant outlives the guaranteed period, he or she will continue to receive payments until death; however, no benefits would be payable to a beneficiary.
Fixed-period annuity
Pertains to a failure to pay a premium on life insurance. The __________ is the amount of time following such a failure that the policy remains in force.
Grace Period
Life insurance that is available to an individual by virtue of affiliation with a particular employer, association, or other group
Group Life Insurance
Pertains to disability and life insurance. Disability insurance: On stated dates, the insured may purchase specified additional amounts of disability income benefit as of his or her attained age, at the insurer’s rates currently in effect, without having to provide additional evidence of insurability. Life insurance: The insured may purchase additional amounts of coverage at stated intervals without providing additional proof of insurability.
Guaranteed insurability rider
Applies to health insurance. The insured has the right to continue the policy by timely payment of premiums up to a specified time. During this time, the insurer cannot change the policy, except for changes in premium rates for whole categories of insured individuals.
Guaranteed renewable
Alternative to medical insurance. They provide comprehensive service benefits, with emphasis on preventive care. Care is typically provided through physicians and facilities that contract with, or are managed by, the organization.
Health maintenance organizations (HMOs)
Pertains to insurance. The insurer is obligated to pay a claim only if there is a loss, and then only to the extent of the dollar loss
Indemnity
An annuity product that provides payments over the life of one individual
Individual Annuity
Pertains to insurance. The person applying for insurance coverage must be subject to a personal financial loss if the event for which insurance is being obtained occurs. For example, a person cannot normally apply for homeowners coverage on a neighbor’s house because, if damage occurred to the neighbor’s house, the person holding the policy would not suffer a financial loss
Insurable interest.
A device by which an individual can contract with another party to exchange a large, uncertain risk for a relatively small, certain premium. It is a risk transfer technique.
Insurance
One of four major components of an insurance contract. It states the insurer’s intention to cover losses resulting from certain specified perils or from all perils not specifically excluded from the contract
Insuring agreement
Pertains to life insurance proceeds. The beneficiary may leave such proceeds with the insurer to accumulate interest at a guaranteed rate. Many insurers pay interest above the guaranteed rate, consistent with investment earnings.
Interest settlement option
An annuity product option in which the annuity is paid over the lifetimes of more than one person. When an annuitant dies, the annuity amount for the survivor is sometimes reduced by a quarter or half. A joint and last survivor settlement is also one option by which life insurance benefits may be distributed.
Joint and last survivor annuity
Life insurance that covers more than one life. First-to-die life insurance pays benefits upon the death of the first of the two parties to die. Last-to-die policies would pay benefits upon the death of the last survivor of the lives covered
Joint survivorship life insurance
Covers the legal obligation of the insured to compensate others for bodily injury or property damage caused by acts of, or negligence by, the insured.
Liability insurance
An annuity product in which payments are distributed only until the annuitant dies. No benefits are payable to a beneficiary.
Life income annuity
A life insurance settlement option in which payments are guaranteed for a stated amount of time. If the annuitant outlives this guaranteed period, he or she continues to receive payments until death, but there is no benefit for a beneficiary. If the annuitant dies before the guaranteed period is over, payments continue to a beneficiary until the end of the guaranteed period
Life income with period certain settlement option
Provides coverage for various custodial care expenses in the event the insured person becomes incapacitated as defined in the policy
Long-term care (LTC) insurance
Sometimes included an attachment to life insurance policies. It provides coverage for various custodial care expenses in the event that the insured person becomes incapacitated as defined in the policy.
Long-term care rider
Type of disability policy that may pay a benefit if the loss of income is due to illness or injury, even if the insured continues to work. Benefits typically are paid in proportion to the lost earnings
Loss of income policies
Pertains to disability insurance. The _______ is the maximum amount of time that an insured can receive a disability benefit from the insurer. In many cases, the maximum benefit period is to age 65, which means that the benefit would be payable until the insured attains that age
Maximum Benefit Period
A public assistance program designed to provide broad medical expense benefits, including long-term care, to certain categories of needy individuals.
Medicaid
A Social Security benefit available to persons age 65 or over who are eligible for Social Security retirement benefits. It provides medical expense coverage, including hospital and supplementary medical insurance. Hospital insurance is available to all persons eligible for Social Security benefits who are age 65 or over, while supplementary medical coverage requires an additional premium.
Medicare (hospital and medical)
. Insurance, sometimes sold to Medicare users by private companies, that is intended to supplement Medicare coverage
Medigap
An insurance contract (defined under the Technical and Miscellaneous Revenue Act of 1988) entered into after June 20, 1988, in which the accumulated premiums at any time during the first seven years of the policy are greater than the sum of the premiums for a paid-up policy at the end of seven years. A policy classified as a modified endowment contract loses some of the tax benefits of insurance policies.
Modified endowment contract
A measure of the number of individuals who become sick or disabled. This rate comes into play with health, disability, and long-term care insurance
Morbidity Rate
A measure of the number of deaths in a given population. The mortality rate comes into play when developing life expectancy tables, and pricing life insurance
Mortality rate.
Pertains to health insurance. The provision gives the insured the right to continue the policy in force by timely payment of premiums as specified in the policy, usually for a specified period of time, such as to age 65.
Noncancelable provision
A life insurance policy in which excess premium payments (“dividends”) are not distributed to the policy owner.
Nonparticipating life policy.
A one-time withdrawal taken from an annuity
Nonperiodic withdrawal
Pertains to health insurance. The insurer has the right to refuse renewal as of any premium due date or policy anniversary.
Optionally renewable
A definition of disability that considers the insured to be disabled only if the individual is unable to perform his or her own occupation. It is the least restrictive definition of disability
“Own occupation”
. A dividend option with life insurance, where the dividend is used to purchase additional permanent insurance that is paid-up for life.
Paid-up additions
Also called a residual disability benefit. It normally pays a proportionate part of the total disability benefit when the insured suffers at least a specified percentage of reduction in earned income.
Partial disability benefit
A life insurance policy in which “dividends” may be paid to the policy owner. The dividends are actually a return of premiums that were excessive, given the insurer’s actual claims experience or level of expense
Participating policy
An annuity payment that is the same amount recurring at the same interval, such as a monthly payment of $500
Periodic withdrawal
. A provision included in cash value life insurance policies. It enables the policy owner to borrow an amount up to the policy’s cash surrender value. The interest charged is stated in the policy, and it is usually is quite low. Death proceeds are reduced by the borrowed amount outstanding at the time of the insured’s death
Policy loan provision
A measure of financial soundness for an insurer. It compares the insurer’s net worth to its liabilities
Policyholder’s surplus ratio
Pertains to health insurance. Generally speaking, medical insurance policies can sometimes exclude coverage for a limited period of time for conditions or illnesses that existed prior to the purchase of insurance. The Affordable Care Act.
Preexisting conditions
PPOs are nominally similar to HMOs, but they operate in a dissimilar manner. PPO services are provided by physicians and hospitals that contract with an insurer, plan administration, or employer to provide health care services.
Preferred provider organizations (PPOs)
Insurance that covers acts of negligence in conjunction with work or professional pursuits for which the insured is found liable. Financial advisers purchase errors and omissions insurance to protect themselves.
Professional liability
Pertains to life insurance settlement. Life insurance proceeds are payable over the lifetime of the beneficiary, but no residual benefits are available to a second beneficiary if the first one dies
Pure life income option
A nonprofit insurer that requires insureds to assume a proportionate share of every risk being pooled except their own. Reciprocals write the bulk of their business on automobile and fire insurance
Reciprocal insurance exchange
Pertains to life insurance nonforfeiture. The policyholder may take the cash value as paid-up insurance of the same type as the original but for a reduced face amount.
Reduced paid-up insurance option
Provides the life insurance beneficiary with income throughout his or her lifetime, with the guarantee that if the beneficiary dies before receiving the full amount of the original life insurance proceeds, the shortfall will be paid to an alternate beneficiary
Refund life income settlement option
Pertains to life insurance. The insured can reinstate a lapsed insurance policy within a specified period of time following failure to pay back premiums. However, he or she generally must provide evidence of insurability and pay back premiums and interest on the premiums prior to reinstatement.
Reinstatement provision
Pertains to homeowners insurance. A provision allowing that if the insured carries insurance on a building equal to at least 80% of its replacement cost new, any covered loss to the building will be paid to the extent of the full cost to repair or replace the damage without deducting depreciation, up to the policy limit.
Replacement cost provision
Pertains to life insurance. The policy owner retains the right to change the beneficiary
Revocable beneficiary designation
Provisions added to an insurance policy to supplement or modify it to meet the special needs of the insured.
Rider
The identification, analysis, and management of personal risks. Management involves using strategies to reduce the probability of loss and the financial impact of loss
Risk Management
Activities intended to prevent the occurrence of loss, such as removing combustible materials from a home or garage and installing sprinkler systems
Risk reduction
premium is paid in a lump sum. This was a popular means of saving funds on a tax-deferred basis within an insurance contract prior to TAMRA ’88, but currently it is classified as a modified endowment contract.
Single premium whole life insurance
Defines disability as the inability of the worker to perform his or her own job for a period of time, then as the inability of the worker to perform any job. This is the most commonly available definition of disability.
“Split” definition of disability
A for-profit insurer that is owned by stockholders.
Stock insurance company.
Pertains to insurance. is one in which the probability of loss is higher than in the general population. For example, a person who has a heart condition that increases the likelihood of premature death may be classified as a substandard risk. As a result of this classification, the insurance company may decide not to provide coverage for the individual or may group the individual with similar substandard risks and provide coverage at a high premium to reflect the insurer’s increased potential claims.
Substandard Risk
Pertains to life insurance. If the insured commits suicide within a specified number of years, the insurer is not required to pay the life insurance policy face value. The insurer is liable only to return premiums paid
Suicide provision
Life insurance that provides protection for a stated time period and pays benefits only if the insured dies within that period. It is frequently referred to as pure protection, since it does not have a savings feature.
Term life insurance
A risk management technique that moves financial responsibility from one person to another. An example is insurance, in which the insured transfers responsibility for losses to an insurer
Transfer of risk.
The process of determining whether a risk is acceptable and at what price.
Underwriting
Combines pure insurance protection (term) with a cash value fund that accumulates tax-deferred interest. Premiums are unbundled, which creates greater flexibility for the policyholder.
Universal life insurance
Combines the flexibility of universal life insurance with the investment options of variable life insurance.
Universal variable life insurance.
An annuity product in which the benefits paid out vary according to the insurer’s earnings on the investment portfolio supporting the annuity.
Variable annuity
An insurance policy in which the cash value is invested in an investment vehicle selected by the insured from several available options.
Variable life insurance
Also known as flexible premium variable life, this combines the flexibility of universal life insurance with the investment aspect of variable life insurance.
Variable-universal life insurance.
A rider that can be included as a part of a life insurance policy. If the insured becomes totally disabled before a certain age and disability lasts longer than a stated period, premiums on the life insurance policy will be waived during the period of disability, but the policy will remain in force
Waiver of premium provision.
Furnishes life insurance protection at a level premium amount for the insured’s whole life. It includes a savings element on which a minimum rate of return is guaranteed.
Whole life insurance.
