Terms Flashcards
The person or entity designated in a life insurance policy to receive the death proceeds
Beneficiary
The beneficiary second in line to receive death benefit proceeds if the primary beneficiary dies before the insured
Contingent (Secondary) Beneficiary
A measure of what it costs an insurance company to operate
Expense Factor (also known as Loading Charge)
Issues very small face amounts such as $1000 or $2000. The premiums are paid weekly and collected by debt agents. They were designed for burial coverage.
Industrial life insurance
Life insurance of commercial companies not issued on the weekly premium basis. It is made up of several types of individual life insurance such as temporary (term), permanent (whole)
Ordinary life insurance 
Insurance written for members of a group, such as a place of employment association, or a union. Coverage is provided to the members of the group under one master contract. There is no evidence of insurability required.
Group life insurance
Gives the greatest amount of coverage for a limited period of time.
Term life insurance
Has a termination date. Is the cheapest type of pure life insurance. Does not have any cash value. Always cheaper than a whole life policy with the same face value.
Term life insurance
Life insurance written to cover a need for a specified period of time at the lowest premium
Level term 
Premiums for this type of term insurance tend to be higher than annual renewable term because they are level throughout the policy period. The premiums will increase at each renewal.
Level term
Provides a fixed, low premium in exchange for coverage, which lasts a specified time.
Level term 
Life insurance that provides an annually, decreasing face amount over time with level premiums. Typically used for mortgage protection.
Decreasing term
Life insurance designed to cover the life of a debtor and pay the amount due on a loan. If the debtor dies before the loan is repaid. Can only be purchased for up to the amount of the debt or alone outstanding.
Credit policies 
Term life insurance that provides an increasing face amount, overtime based on specific amounts, or a percentage of the original face amount
Increasing term 
A provision that allows policy owners to convert their term insurance into permanent policies without showing proof of insurability
Convertible term
Term insurance that guarantees the insured the right to continue term coverage after expiration of the initial policy. Without having to prove insurability. 
Renewable term 
True or false: all term insurance has a final termination date were you can no longer renew it
True 
Term coverage that provides a level face amount that renews annually. This type of coverage is guaranteed renewable annually without proof of insurability.
Annual renewable term 
A type of life insurance products, which covers children under their parents policy.
Term rider 
Allow for additional family members to be covered under one policy by attaching everyone to a main policy.
Term riders
Provides death benefits for the entire life of the insured also provides living benefits in the form of cash values
Whole life insurance
This type of insurance matures at age 100 and normally has a level premium
Whole life insurance 
A type of whole life insurance which allows you to maintain coverage throughout your entire lifetime and spread the cost out over your entire life
Straight life insurance 
A whole life insurance policy, which covers an insured’s whole life with level premiums paid over a limited time
Limited pay life insurance 
A whole life policy where is a premium stays fixed for the first five years, and then increases in your six and stays level for the remainder of the policy
Modified whole life insurance 
A whole life insurance policy that exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
Whole life - Modified Endowment Contract (MEC)
A policy, which pays the face amount after the first person covered on the policy dies.
Joint life policy
A policy which will only pay the death benefit upon the death of the last insured person
Joint life survivor/last survivor life policies 
A policy which provides an income for a specific period starting at the death of the insured.
Family income policy 
This policy pays a monthly income from the date of death of the insured to the end of the preselected period. The payment of the face value amount of the policy is payable at the end of such pre-selected period.
Family maintenance policy 
Combines whole life and term life into a single plan
Adjustable life policy 
As financial needs and objectives change, the policy owner can make adjustments to the premium and/or face amount of this type of insurance policy
Adjustable life policy 
Incorporates, flexible premiums, and and adjustable death benefit
Universal life insurance policy 
A customer who wants a policy that gives them the most options, and the most control would be looking for this type of policy
Universal life policy 
Requires a producer to have proper FINRA and NATIONAL ASSOCIATION OF SECURITIES DEALERS (NASD) securities registration 
Variable life insurance policies 
A policy that usually has a fixed level premium, but the cash value in death benefits can fluctuate according to the performance of its underlying investment portfolio
Variable life policy 
 Known as interest, sensitive policies
Variable life insurance policies
Investment account grows through mutual funds, stocks, and bonds.
Variable life insurance policies
Gives policy owners the best of both of Variable Life and Universal Life
Variable universal whole life (VUL)
If a policy owner was looking for a policy that allowed them to control how much, and when premium was due, what investment accounts for used for funding, and where the returns from those investment accounts went, they would be looking for this type of policy
Variable Universal Whole Life Policy 
Combines most of the features, benefits, and security of traditional life insurance, with the potential of earned interest based on the upward movement of an equity index
Equity Index Universal Life Insurance
This plan allows policyholders to link accumulation values to an outside equity index
Equity, indexed universal life insurance 
These policies are characterized by a guaranteed minimum interest rate, tax deferral of interest, accumulations, and policy loan access
Equity index universal life insurance 
 When an investor purchases a policy on the life of someone else to profit upon that persons death
Investor (or stranger) originated life insurance policy S(I)OLI
The equity amount or “savings” accumulation in a whole life policy
Cash value 
A contract providing for payment of the face amount at the end of a fixed., At a specified age of the insured, or at the insurance death before the end of the stated period
Endowment policy 
A contract that promises to pay at the insurance death the face amount of the policy plus a sum equal to the policies cash value
Face amount plus cash value policy 
An insurance written on the lives of children, who are within a specified age limits, and generally under parental control
Juvenile insurance 
This insurance typically does not require a medical exam and tends to be more expensive than medically under written policies
Non-medical life insurance
A suggested a premium used in universal life policies
Target premium 
Accident, health property, and casualty insurance contracts are all contracts of
Indemnity 
A principle of actuarial science that states that the higher the number of risks insured in the same pool, the more predictable losses become
Law of large numbers 
Some thing that can cause financial loss
Peril
Individually lists perils that they cover
Specified or named perils 
Insurance policies do not name the perils they cover, but instead begin by saying that cover all direct causes of loss
Special or open peril 
An unintentional decrease in the value of an asset due to a peril
Loss 
Results when a person or property is damaged, destroyed, or killed by apparel without any intervening cause
Direct loss 
And indirect loss is also known as
Consequential loss 
Any event that causes a loss
Occurrence 
A condition or situation that creates or increases a chance of loss. Examples include physical, moral, and moral.
Hazard 
Physical or tangible conditions, existing in a manner that makes a lot more likely to occur
Physical hazards 
Make the lost more likely to occur due to the dishonest or villainess character of the insured
Moral hazards 
A hazard created based as a result of the personal or subjective thought process of the insured 
Morale hazard 
Defined as a potential for loss. There are two types, speculative and pure. 
Risk 
These risks are considered to have an average potential for loss
Standard risks
These risks are considered to be a poor risk for the insurance company and have a higher potential for a loss
Substandard risks
Also known as loss, sharing, spreads risk by sharing the possibility of loss over a large number of people
Risk pooling 
Sound and competent underwriting may reduce the chance of what?
Adverse selection (the tendency for poorer than average risks to seek out insurance) 
Treatment of risk includes implementing the 5 following strategies
- Risk avoidance
- Risk reduction
- Risk retention
- Risk transfer
- Risk sharing
Risk can be transferred or passed from one party to another through what?
An Insurance contract 
The spreading of risk from one insurer to one or more other insurers 
Reinsurance 
Involves taking actions to eliminate damage or loss
Loss prevention 
Companies that sell more than one line of insurance are known as what?
Multi-line insurers
Typically issues non-participating insurance policies
A stock insurance company 
These policies do not allow policyholders to participate in board, elections or dividends, and instead a.m. to increase profit for the shareholders
Nonparticipating 
Referred to as PARTICIPATING companies, because the policy owners participate in dividends
Mutual companies 
Allow policyholders to participate in the company by electing the board of directors and receiving dividends from the divisible surplus
Participating policies 
The amount of earnings paid to policy owners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, and general business purposes
The divisible surplus
Operates on the basis of loss sharing by group members
Pure assessment mutual company
Only has to be licensed in one state, but may ensure members in any state
A risk retention group/risk purchasing group
A type of insurer organized on the basis of ownership by their policy holders
Reciprocal insurers
This is not an insurer, but rather a syndicate of individuals and companies that individually underwrite insurance
Lloyd’s of London
The company transferring the risk is called the what?
Ceding company
The company, assuming the risk of the primary insurer
Reinsurer
In a reinsurance agreement the insurance company that transfers it’s a loss exposure to another insurer is called the what?
Primary insurer
The most common insurance contract between two insurance companies is called what?
Treaty reinsurance
An insurer established and owned by a parent firm for the purpose of ensuring the parent firms loss exposure is known as what?
A Captive insurer
Refer to the nontraditional insurance market
Surplus lines
Insurance characterized by relatively small face amounts with premiums paid weekly
Industrial insurance
A person who establishes a self funded plan to cover potential losses
A self insurer
Divisions responsible for renewing applications, conducting investigations to gain additional information about applicants, assigning risk classifications, and approving or declining an application
The marketing or sales divisions
The department responsible for processing, investigating, and pen, claims for losses incurred by insureds
The claims department 
Typically the department completing the application
The sales department 
The department responsible for reviewing applications, contacting investigations to get an additional information about applicants, assigning risk classification, and approving or declining an application
The underwriting department 
The department that calculates policy rates, reserves, and dividends, and makes the other applicable statistical studies and reports focusing on morbidity and mortality tables
The actuarial department 
True or false: in any dispute between the insured or beneficiary and the insurer, the agent who solicits an insurance application represents the insurer and not the insured or the beneficiary
True
Branches of major stuck in mutual insurance companies that are contracted to represent an insurer in a specific area
Career agencies 
This case, in which the US Supreme Court decided, involved one states attempt to regulate insurance company, domicile in another state 
1868 Dash Paul v. Virginia 
In this case, the Supreme Court ruled that the insurance industry is subject to a series of federal laws, many of which conflicted with existing state laws. As such, insurance is a form of interstate commerce to be regulated by the federal government.
1944 – United States v. Southeastern Underwriters Association (SEUA)
This law made it clear that the states continued regulation of insurance was in the public’s best interest. However, it also made possible the application of federal antitrust laws to the extent that [the insurance business] is not regulated by state law.
1945 – The McCarran–Ferguson Act
True or False: In 1958 with the Supreme Court held that The McCarran-Ferguson Act disallowed such supervision by the FTC, the federal agency. Additional attempts have been made by the FTC to force further federal control, but not have been successful.
True
1958 - FTC Intervention
True or False: The Supreme Court ruled that federal securities laws applied to insurers that issued variable annuities, and thus, required these insurers to conform to both SEC and state regulation. The SEC regulates variable life insurance.
True
1959 - SEC Intervention
The act which requires fair and accurate reporting of information about consumers, including applications for insurance. Insurers must inform applicants about any investigations that are being made upon completion of the application.
1970 – Fair Credit Reporting Act
It is a criminal offense for an individual who has been convicted of a felony involving dishonesty or breach of trust to willfully, engage or participate in any capacity in the business of insurance, without first obtaining a “letter of written consent to engage in the business of insurance” from the regulating insurance department of the individual state of residence. Where is this code referenced?
1994 – United States Code (USC) Sections 1033 and 1034. According to 18 U.S.C.1033 & 1034.
What was the name of the act passed by Congress in 1999 which repealed the Glass Steagall Act. Under this new legislation, commercial banks, investment banks, retail brokerages, and insurance companies can now enter each others lines of business?
1999 – Financial Services Modernization Act
The act which amends the bank, secrecy act (BSA) was adopted in response to the September 11, 2001, terrorist attacks. This act is intended to strengthen US measures to prevent, detect, and deter Terrace and their funding. The act also aims to prosecute, international money, laundering, and the financing of terrorism. These efforts include anti-money laundering (AML) tools that impact the banking, financial, and investment communities
The Patriot Act
2001 – Uniting and Strengthening America, by Providing Appropriate Tools, Required to Intercept and Obstruct Terrorism Act
The do not call registry allows consumers to include their phone numbers on the list to which telemarketers cannot make solicitation calls
2003 – Do Not Call Implementation Act
The act which represents one of the most significant regulatory overhauls and expansions of health insurance coverage in US history
2010 – Patient Protection and Affordable Care Act (PPACA)
Also:
Affordable Care Act (ACA)
A person who acts for another person, or entity, known as the principal with regard to contractual arrangement with third parties
An agent
The authority a principal deliberately gives to its agent
Express authority
The unwritten authority that is not expressly granted, but which the agent is assumed to have, in order to transact the business of the principal.
Implied authority
The appearance or assumption of authority, based on the principles, actions, words, or deeds.
Apparent authority
A company whose primary purpose is to determine the financial strength of the industries insurers
Rating service
The accounting measurement of an insurer’s future obligations to its policyholders
Reserves
Indicates a Company’s ability to make unpredictable payouts to policy holders
Liquidity 
Three factors that influence the gross premiums charged for life insurance
- Mortality
- Interest
- Expenses
Which factor has the greatest effect on premium calculations or rate making?
The Mortality Factor
A reflection of an insurer’s return on their investment
The interest factor
A premium that makes provision for mortality, cost and interest. It is influenced by the assumed interest rate, the proposed insured‘s gender, the benefits to be provided, and the mortality rate.
Net single Premium
Mortality cost - Interest = Net single Premium
The premium charged by an insurer that is comprised of or influenced by mortality, interest, and expenses. It is the actual premium paid by the policy owner for life insurance coverage.
Gross premium
Net premium + Insurer expenses, = Gross premium
The tendency of a disproportionate number of poor risks to seek or buy insurance or maintain existing insurance in force (i.e. the selection against the insurance company.)
Adverse selection
The date halfway between a birthdays when the applicants age changes to the next higher age. With some insurers, the age is based upon the applicants age at his nearest birthday. And others, it is based upon the age of his last birthday.
Age change
The statement of information given when a person applies for life, health, or disability insurance. The underwriter uses this information as a basis in determining whether the applicant qualifies for acceptance under the companies guidelines.
Application
These are used when the application or medical examiners report reveals conditions or situations, past or present, about which more information is desired
Attending Physician Statement (APS)
The practice of making the effective date of a policy earlier than the application date
Backdating 
Backdating is not allowed in what type of contract?
Variable contracts
State laws usually limit the time to which policies can be backdated to how long?
6 months
Binding receipts are also known as what?
Unconditional receipts
True or false: Binding receipts are one of the types of receipts given by an insurance company upon the completion of an insurance application if the initial premium is collected with the application
True
A pamphlet that describes an compares various forms of life and health insurance
Buyers guide
A form customarily required to be signed by the agent, and given to the perspective owner at the time a new application is completed
Conditional receipt
A detailed background investigation that may include an interview with coworkers, friends, and neighbors about the applicant’s character, reputation, lifestyle, etc.
Consumer report
A summary of an insurance applicants credit history
Credit report
An individual whose application for coverage was rejected by an insurance company
Declined risk
A federal law passed in 1970 that provides an insurer with the right to receive additional information with regard to applicants for insurance coverage
Fair credit reporting act
The financial or emotional relationship between two or more parties justifying one owning a life insurance policy on the other
Insurable interest
An applicant who represents the likelihood of risk lower than that of the standard applicant
Preferred risk
The person whose life is requesting to be insured. Typically, but I always, this is also the applicant.
Proposed insured
The basis for an additional charge to the standard premium, because the person insured is classified as a higher than average risk
Rated policy (Rating up)
A legal activity where a producer convinces a prospective client to lapse or surrender a Life or health policy and purchase a new one
Replacement
The underwriting category into which risk is placed, depending upon the applicants susceptibility to injury, death, or illness
Risk classification
An applicant who cannot qualify for a standard policy it, but may secure one with a writer, waving the payment for a loss involved in certain existing health impairments
Special class
A person who, according to accompanies underwriting standards, is considered an average risk an insurable at standard rates
Standard risk
An applicant his physical condition does not me at the usual minimum standards
Substandard risk (impaired risk)
A person who identifies, examines, and classifies the degree of risk, represented by a proposed insured in order to determine whether or not coverage should be provided and, if so, at what rate
Underwriter
The analysis of information obtained from various sources pertaining to an applicant for insurance, and the determination of whether or not, the insurance should be issued as requested, offered at a higher premium, or declined.
Underwriting
A statement that is absolutely and literally true
Warranty
Characteristics that contribute to a preferred risk rating include
Not smoking, weighing within an ideal range, and not drinking
The three essential parts to a typical life insurance application
- General applicant information
- Medical and health history
- The agents report or statement
Policies that are issued to cover a group who may be exposed to the same risks, but the individuals within the group are continually changing. (For example, an airline or bus company would use this to cover its passengers.)
Blanket health policies
A document issued by an insurance company/broker that is used to verify the existence of insurance coverage under specific conditions granted to listed individuals.
Certificate of insurance
With group insurance, the group (typically employer) is the policy owner and maintains a master policy. The insureds (typically employees) receive this instead of a policy
Certificate of insurance
A group insurance plan issued to an employer, under which both the employer and employee is contribute to the cost of the plan. Generally 70% of the eligible employees must be insured in most states.
Contributory plan
Allows the policy owner, before an original insurance policy expires, to elect to have a new policy issued that will continue the insurance coverage.
Conversion privilege
Designed to help the insured pay off a loan in the event they are disabled due to an accident or sickness, or in the event they die.
Credit policies
Generally written for groups too small to qualify for regular group. Coverage may be called wholesale insurance when the policy is life insurance.
Franchise insurance
Policy issued to the employer under a group plan; contains all the insuring clauses defining employee benefits.
Master policy
An employee benefit plan under which the employer bares the full cost of the employees benefits; in most states, the plan must cover 100% of eligible employees. The employees do not contribute to the cost of the plan.
Non-contributory plan
The percentage of policies an insurer has in forest after a specified period of time
Persistency
Coverage provided for full-time members of the armed services.
Servicemember’s group life insurance (SGLI)
A component of the service members group life insurance program, which provides coverage for spouses and children of service members insured under SGLI
Family service members group life insurance coverage (FSGLI)
Provides for the conversion of service members group, life insurance coverage to a renewable term policy of insurance protection after a service members separation from the service
Veterans group life insurance, and federal (VGLI)
Provides group term, life insurance for all other federal employees or civil service workers
Federal employees group life insurance (FEGLI)
A retirement plan for certain employees of public schools, employees of specific, tax, exempt organizations, and certain ministers
403(B) plan
The period in which the premiums an annuitant pays into annuities are credited as accumulation units.
The accumulation period
Units which make up the value of contributions made by the annuitant, less a deduction for expenses
Accumulation units
One to whom an annuity is payable or a person upon the continuance of whose life further payment depends
Annuitant
Units that are the converted accumulation units once variable annuity benefits are to be paid out to the annuitant.
Annuity units
An option that provides that, upon the death of the annuitant before payments totaling the purchase price have been made, the excess of the amount paid by the purchaser over the total annuity payments received will be paid in a one sum to designated beneficiaries
Cash refund option
This provides for postponement of the payment of an annuity, until after a specified period, or until the annuitant attains a specified age
Deferred annuity
A fixed deferred annuity that offers the traditional guaranteed minimum interest rate and an excess interest feature that is based on the performance of an external equities market index
Equity indexed annuity
A fraction used to determine the amount of annual annuity, income exempt from federal income tax.
Exclusion ratio
The total contribution or investment in the annuity divided by the expected ratio
Exclusion ratio
Provides a guaranteed rate of return
Fixed annuity
Provides for payment of an annuity benefit at one payment interval from the date of purchase
Immediate annuity
An option which provides for payment of the annuity to two people if either person dies the same income payments continue to the survivor for life
Joint life and survivor option
An annuity income option that guarantees a definite minimum period of payments, i.e. 10 years
Period certain annuity.
Designed to pay the annuitant, an income for life, but guarantees a definite minimum period of payments.
Life with Period Certain Annuity
Describes an annuity owner, making multiple premium payments to accumulate principle typically after the initial premium these payments are flexible with frequency and amount
Periodic payment annuity (Flexible Premium)
Another name for flexible premium
Periodic payment annuity
The original sum of money paid into an annuity through premiums
Principal
An annuity for which the entire premium is paid in one sum at the beginning of the contract period.
Single premium annuity
An annuity income option that pays a guaranteed income for the annuitants lifetime after which time payments stop
Straight life annuity
Annuities which shift the investment risk from the insurer to the contract owner
Variable annuity
True or false: an annuity certain guarantees payments will be made for at least a certain period of time. A refund annuity guarantees the entire principle will be depleted.
True
True or false: before annuitization, the nonforfeiture value of an annuity equals all premiums paid, plus interest, minus any withdrawals and surrender charges. If the annuitant dies before the annuity period start date, and the beneficiary receives the premiums paid plus interest earned.
True
An insurance product that offers the annuitant with tax deferred growth
Annuity
True or false: in addition to TSA’s, and IRAs, annuities are an acceptable funding mechanism for other qualified plans, including pensions, and 401(k) plans
True
True or false: while partial with drawls from a life insurance policy or text on a “first in first out basis,” while partial withdrawals from annuities are taxed on a “last in first out basis”
True
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n):
Straight life annuity
How does an indexed annuity differ from a fixed annuity?
Indexed annuity owners may receive credited interest tied to the fluctuations of the linked index
