Life and Health Insurance

Question 1

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.”

Answer 1

Accelerated death benefit life provision

Question 2

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.”)

Answer 2

Accidental death and dismemberment provision

Question 3

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.

Answer 3

Activities of daily living (ADLs)

Question 4

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

Answer 4

Adverse selection

Question 5

Individual who sells insurance for a particular insurance company

Answer 5

Agent

Question 6

The recipient of annuity distributions

Answer 6

Annuitant

Question 7

Selecting one of the payment options available from an annuity, and starting the periodic payments.

Answer 7

Annuitization

Question 8

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

Answer 8

“Any occupation” definition of disability”

Question 9

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.

Answer 9

Assignment

Question 10

Group disability insurance that is available to an individual as a result of membership in a particular association.

Answer 10

Association group disability insurance

Question 11

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

Answer 11

Automatic premium loan provision

Question 12

The person or entity that has a remainder interest in policy proceeds. Trusts: The person whom the trust is to benefit.

Answer 12

Beneficiary

Question 13

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.

Answer 13

Breakpoint

Question 14

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.

Answer 14

Cash surrender value option.

Question 15

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

Answer 15

COBRA

Question 16

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

Answer 16

Conditionally renewable

Question 17

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

Answer 17

Coinsurance

Question 18

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.

Answer 18

Conditionally Renewable

Question 19

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.

Answer 19

Conditions

Question 20

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.

Answer 20

Contestable Period

Question 21

An annuity product in which a specified benefit payment amount is guaranteed to the annuitant

Answer 21

Conventional annuity

Question 22

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.

Answer 22

Conversion Right

Question 23

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

Answer 23

Coordination of benefits provision

Question 24

Pertains to long-term care—specifically, institutional care, such as that provided by a nursing home

Answer 24

Custodial care

Question 25

One of four major components of an insurance contract. The _________ provides information about the person or property being insured

Answer 25

Declaration

Question 26

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.

Answer 26

Deductible

Question 27

An annuity product in which payments do not begin immediately upon funding; rather, they are _____ until a stated future date

Answer 27

Deferred Annuity

Question 28

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.

Answer 28

Delay Clause

Question 29

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

Answer 29

Disability Income Rider

Question 30

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.

Answer 30

Double Indemnity Rider

Question 31

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.

Answer 31

Endorsement

Question 32

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.

Answer 32

Endowment life insurance

Question 33

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

Answer 33

Exclusions (insurance)

Question 34

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.

Answer 34

Extended term insurance option

Question 35

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

Answer 35

Fixed-amount annuity

Question 36

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

Answer 36

Fixed-amount settlement option

Question 37

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.

Answer 37

Fixed-period annuity

Question 38

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.

Answer 38

Grace Period

Question 39

Life insurance that is available to an individual by virtue of affiliation with a particular employer, association, or other group

Answer 39

Group Life Insurance

Question 40

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.

Answer 40

Guaranteed insurability rider

Question 41

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.

Answer 41

Guaranteed renewable

Question 42

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.

Answer 42

Health maintenance organizations (HMOs)

Question 43

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

Answer 43

Indemnity

Question 44

An annuity product that provides payments over the life of one individual

Answer 44

Individual Annuity

Question 45

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

Answer 45

Insurable interest.

Question 46

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.

Answer 46

Insurance

Question 47

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

Answer 47

Insuring agreement

Question 48

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.

Answer 48

Interest settlement option

Question 49

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.

Answer 49

Joint and last survivor annuity

Question 50

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

Answer 50

Joint survivorship life insurance

Question 51

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.

Answer 51

Liability insurance

Question 52

An annuity product in which payments are distributed only until the annuitant dies. No benefits are payable to a beneficiary.

Answer 52

Life income annuity

Question 53

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

Answer 53

Life income with period certain settlement option

Question 54

Provides coverage for various custodial care expenses in the event the insured person becomes incapacitated as defined in the policy

Answer 54

Long-term care (LTC) insurance

Question 55

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.

Answer 55

Long-term care rider

Question 56

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

Answer 56

Loss of income policies

Question 57

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

Answer 57

Maximum Benefit Period

Question 58

A public assistance program designed to provide broad medical expense benefits, including long-term care, to certain categories of needy individuals.

Answer 58

Medicaid

Question 59

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.

Answer 59

Medicare (hospital and medical)

Question 60

. Insurance, sometimes sold to Medicare users by private companies, that is intended to supplement Medicare coverage

Answer 60

Medigap

Question 61

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.

Answer 61

Modified endowment contract

Question 62

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

Answer 62

Morbidity Rate

Question 63

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

Answer 63

Mortality rate.

Question 64

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.

Answer 64

Noncancelable provision

Question 65

A life insurance policy in which excess premium payments (“dividends”) are not distributed to the policy owner.

Answer 65

Nonparticipating life policy.

Question 66

A one-time withdrawal taken from an annuity

Answer 66

Nonperiodic withdrawal

Question 67

Pertains to health insurance. The insurer has the right to refuse renewal as of any premium due date or policy anniversary.

Answer 67

Optionally renewable

Question 68

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

Answer 68

“Own occupation”

Question 69

. A dividend option with life insurance, where the dividend is used to purchase additional permanent insurance that is paid-up for life.

Answer 69

Paid-up additions

Question 70

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.

Answer 70

Partial disability benefit

Question 71

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

Answer 71

Participating policy

Question 72

An annuity payment that is the same amount recurring at the same interval, such as a monthly payment of $500

Answer 72

Periodic withdrawal

Question 73

. 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

Answer 73

Policy loan provision

Question 74

A measure of financial soundness for an insurer. It compares the insurer’s net worth to its liabilities

Answer 74

Policyholder’s surplus ratio

Question 75

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.

Answer 75

Preexisting conditions

Question 76

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.

Answer 76

Preferred provider organizations (PPOs)

Question 77

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.

Answer 77

Professional liability

Question 78

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

Answer 78

Pure life income option

Question 79

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

Answer 79

Reciprocal insurance exchange

Question 80

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.

Answer 80

Reduced paid-up insurance option

Question 81

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

Answer 81

Refund life income settlement option

Question 82

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.

Answer 82

Reinstatement provision

Question 83

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.

Answer 83

Replacement cost provision

Question 84

Pertains to life insurance. The policy owner retains the right to change the beneficiary

Answer 84

Revocable beneficiary designation

Question 85

Provisions added to an insurance policy to supplement or modify it to meet the special needs of the insured.

Answer 85

Rider

Question 86

The identification, analysis, and management of personal risks. Management involves using strategies to reduce the probability of loss and the financial impact of loss

Answer 86

Risk Management

Question 87

Activities intended to prevent the occurrence of loss, such as removing combustible materials from a home or garage and installing sprinkler systems

Answer 87

Risk reduction

Question 88

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.

Answer 88

Single premium whole life insurance

Question 89

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.

Answer 89

“Split” definition of disability

Question 90

A for-profit insurer that is owned by stockholders.

Answer 90

Stock insurance company.

Question 91

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.

Answer 91

Substandard Risk

Question 92

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

Answer 92

Suicide provision

Question 93

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.

Answer 93

Term life insurance

Question 94

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

Answer 94

Transfer of risk.

Question 95

The process of determining whether a risk is acceptable and at what price.

Answer 95

Underwriting

Question 96

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.

Answer 96

Universal life insurance

Question 97

Combines the flexibility of universal life insurance with the investment options of variable life insurance.

Answer 97

Universal variable life insurance.

Question 98

An annuity product in which the benefits paid out vary according to the insurer’s earnings on the investment portfolio supporting the annuity.

Answer 98

Variable annuity

Question 99

An insurance policy in which the cash value is invested in an investment vehicle selected by the insured from several available options.

Answer 99

Variable life insurance

Question 100

Also known as flexible premium variable life, this combines the flexibility of universal life insurance with the investment aspect of variable life insurance.

Answer 100

Variable-universal life insurance.

Question 101

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

Answer 101

Waiver of premium provision.

Question 102

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.

Answer 102

Whole life insurance.