M5: 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. Also called “double indemnity.”
Accidental death and dismemberment provision
Pertinent to long-term care policies. blanks operate 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. Listed blanks include such activities as eating, toileting, walking, and dressing. The long-term care policy will specify what the blanks are and how many of the blanks must be unperformable by the insured person before benefits are available.
Activities of daily living (ADLs)
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 they are unable to perform blank. 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
Insurance: 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 their maximum out-of-pocked (MOOP) amount. The blank 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 policyowner wishes to surrender the insurance contract, the blank enables him or her to receive cash equal to the policy’s accumulated value. Upon payout of the blank, 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.
Consolidated Omnibus Budget Reconciliation Act (COBRA)
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. A blank policy may be renewed by the insured if they meet 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 life insurance. During the blank, the insurer may deny a claim because of error, concealment, or misstatement on the part of the insured. After the blank 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 they may be covered by more than one health insurance pay.
Coordination of benefits provision
Pertains to long-term care—specifically, institutional care, such as that provided by a nursing home.
Custodial care
A cost-sharing device frequently contained in insurance policies. When a covered loss occurs, the blank amount is the amount that the insured must pay before the insurer’s responsibility for payment begins. The blank is a means of retaining small, predictable amounts of risk. Typically, the larger the blank amount, the lower the policy premium because the insurer will be called upon only to indemnify larger losses.
Deductible
An annuity product in which payments do not begin immediately upon funding; rather, they are deferred until a stated future date.
Deferred annuity
Pertains to life insurance. Disability income 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 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 time period, 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 they outlive the policy period.
Endowment life insurace
A nonforfeiture option in a whole life insurance policy. The policyowner 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, they will continue to receive payments until death; however, no benefits would be payable to a beneficiary.
Fixed-period annuity
Pertains to life insurance policies. The time period over which payments are made to a beneficiary are fixed. Payment amounts vary based on the payout term chosen (i.e., payments for 10 years will be higher than if payments are made over 20 years).
Fixed-period settlement option
Pertains to a failure to pay a premium on life insurance. The blank 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 their 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
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 sometime reduced by a quarter or half. A joint and last survivorship settlement is also one option by which lief 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, they continue 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 maximum amount of time that an insured can receive a disability benefit from the insurer. In many cases, the blank 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, which 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 blank 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 blank 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 time period, such as to 65.
Noncancelable provision
A life insurance policy in which excess premium payments (“dividends”) are not distributed to the policyowner.
Nonparticipating life policy
A one-time withdrawal taken from an annuity.
Nonperiodic withdrawal
Provides protection for qualified participants and their beneficiaries against losses associated with retirement, death, disability, and illness.
Old Age, Survivors, Disability, and Health Insurance (OASDHI) program
A definition of disability that considers the insured to be disabled only if the individual is unable to perform their blank. It is the least restrictive definition of disability.
“own occupation” definition of disability
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 policyowner. The dividends are actually a return of premiums that were excessive, given the insurer’s actual claims experience or level of expenses.
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 policyowner to borrow an amount up to the policy’s cash surrender value. The interest charged is stated in the policy, and it is usually quite low. Death proceeds are reduced by the borrowed amount outstanding at the time of the insured’s death.
Policy loan provision
Pertains to health insurance. Generally speaking, medical insurance policies can sometimes exclude coverage for a limited time period for conditions or illnesses that existed prior to the purchase of insurance. The Affordable Care Act has essentially eliminated blank.
Preexisting conditions
blanks are nominally similar to HMOs, but they operate in a dissimilar manner. blank 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 options
Pertains to life insurance nonforfeiture. The policyowner 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 their 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 alternative beneficiary.
Refund life income settlement option
Pertains to life insurance. The insured can reinstate a lapsed insurance policy within a specified time period following failure to pay back premiums. However, they 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 policyowner 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
Whole life insurance in which the 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 their own job for a time period, then as the inability of the worker to perform any job. This is the most commonly available definition of disability.
“Split” definition of disability
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 clause
Life insurance that provides protection for a stated time period and pays a benefit only if the insured dies within that period. It is frequently referred to as pure protection, because it does not have a savings feature.
Term life insurance
Combines pure insurance protection (term) with a cash value fund that accumulates tax-deferred interest. Premiums are unbundled, which creates greater flexibility for the policyowner.
Universal 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 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
