M5: 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. Also called “double indemnity.”

Answer 2

Accidental death and dismemberment provision

Question 3

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.

Answer 3

Activities of daily living (ADLs)

Question 4

The recipient of annuity distributions.

Answer 4

Annuitant

Question 5

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

Answer 5

Annuitization

Question 6

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.

Answer 6

“Any occupation” definition of disability

Question 7

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 7

Assignment

Question 8

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

Answer 8

Association group disability insurance

Question 9

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

Answer 9

Beneficiary

Question 10

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.

Answer 10

Breakpoint

Question 11

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.

Answer 11

Cash surrender value option

Question 12

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 12

Consolidated Omnibus Budget Reconciliation Act (COBRA)

Question 13

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 13

Coinsurance

Question 14

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.

Answer 14

Conditionally renewable

Question 15

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.

Answer 15

Contestable period

Question 16

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

Answer 16

Conventional annuity

Question 17

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 17

Conversion right

Question 18

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.

Answer 18

Coordination of benefits provision

Question 19

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

Answer 19

Custodial care

Question 20

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.

Answer 20

Deductible

Question 21

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

Answer 21

Deferred annuity

Question 22

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.

Answer 22

Disability income rider

Question 23

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.

Answer 23

Double indemnity rider

Question 24

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 24

Endorsement

Question 25

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.

Answer 25

Endowment life insurace

Question 26

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.

Answer 26

Extended term insurance option

Question 27

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 27

Fixed-amount annuity

Question 28

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 28

Fixed-amount settlement option

Question 29

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.

Answer 29

Fixed-period annuity

Question 30

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).

Answer 30

Fixed-period settlement option

Question 31

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.

Answer 31

Grace period

Question 32

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

Answer 32

Group life insurance

Question 33

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.

Answer 33

Guaranteed insurability rider

Question 34

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 34

Guaranteed renewable

Question 35

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 35

Health maintenance organizations (HMOs)

Question 36

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 36

Indemnity

Question 37

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

Answer 37

Individual annuity

Question 38

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 38

Insurable interest

Question 39

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 39

Insurance

Question 40

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 40

Interest settlement option

Question 41

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.

Answer 41

Joint and last survivor annuity

Question 42

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 42

Joint survivorship life insurance

Question 43

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 43

Liability insurance

Question 44

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

Answer 44

Life income annuity

Question 45

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.

Answer 45

Life income with period certain settlement option

Question 46

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

Answer 46

Long-term care (LTC) insurance

Question 47

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 47

Long-term care rider

Question 48

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 48

Loss of income policies

Question 49

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.

Answer 49

Maximum benefit period

Question 50

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

Answer 50

Medicaid

Question 51

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 51

Medicare (hospital and medical)

Question 52

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

Answer 52

Medigap

Question 53

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.

Answer 53

Modified endowment contract

Question 54

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 54

Morbidity rate

Question 55

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.

Answer 55

Mortality rate

Question 56

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.

Answer 56

Noncancelable provision

Question 57

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

Answer 57

Nonparticipating life policy

Question 58

A one-time withdrawal taken from an annuity.

Answer 58

Nonperiodic withdrawal

Question 59

Provides protection for qualified participants and their beneficiaries against losses associated with retirement, death, disability, and illness.

Answer 59

Old Age, Survivors, Disability, and Health Insurance (OASDHI) program

Question 60

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.

Answer 60

“own occupation” definition of disability

Question 61

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

Answer 61

Paid-up additions

Question 62

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 62

Partial disability benefit

Question 63

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.

Answer 63

Participating policy

Question 64

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

Answer 64

Periodic withdrawal

Question 65

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.

Answer 65

Policy loan provision

Question 66

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.

Answer 66

Preexisting conditions

Question 67

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.

Answer 67

Preferred provider organizations (PPOs)

Question 68

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 68

Professional liability

Question 69

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 69

Pure life income options

Question 70

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.

Answer 70

Reduced paid-up insurance option

Question 71

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.

Answer 71

Refund life income settlement option

Question 72

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.

Answer 72

Reinstatement provision

Question 73

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 73

Replacement cost provision

Question 74

Pertains to life insurance. The policyowner retains the right to change the beneficiary.

Answer 74

Revocable beneficiary designation

Question 75

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

Answer 75

Rider

Question 76

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 76

Risk management

Question 77

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

Answer 77

Risk reduction

Question 78

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.

Answer 78

Single premium whole life insurance

Question 79

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.

Answer 79

“Split” definition of disability

Question 80

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 80

Suicide clause

Question 81

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.

Answer 81

Term life insurance

Question 82

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.

Answer 82

Universal life insurance

Question 83

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

Answer 83

Variable annuity

Question 84

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

Answer 84

Variable life insurance

Question 85

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

Answer 85

Variable universal life insurance

Question 86

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.

Answer 86

Waiver of premium provision

Question 87

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 87

Whole life insurance