Vocabulary Flashcards
Adverse Selection
The tendency of risks with higher probability of loss to purchase and maintain insurance more often than the risk who present lower probability
Aleatory
A contract in which participating parties exchange unequal amount. Insurance contracts are aleatory in that the amount the insured will pay in premiums is unequal to the amount the insurer will pay in the event of loss.
Apparent authority
The appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.
Basic hospital expense insurance
Coverage that provides benefits for room, board and miscellaneous hospital expenses for a certain number of days during a hospital stay.
Basic medical expense insurance
Coverage for doctors visits, x-rays, lab tests, and emergency room visits; benefits, however, are limited to specified dollar amounts.
Buyer’s Guide
A booklet that describes insurance policies and concepts and provides GENERAL information to help an applicant make an informed decision.
Capital amount
A percentage of the principal amount of a policy paid to the insured if they suffered the loss of an appendage.
COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985)
The law that provides for the continuation of group health care benefits for the insured for up to 18 months if they terminate employment or are no longer eligible, and for the insured’s dependents for up to 36 months in cases of loss of eligibility due to death of the insured, divorce, or attainment of limiting age.
Coinsurance
An agreement between an insurer and insured in which both parties are expected to pay a certain portion of the potential loss and other expenses
Coinsurance clause
A provision that states that the insurer and the insured will share the losses covered by the policy in a proportion agreed upon in advance.
Commissioner
The chief executive and administrative officer of the insurance department
Comprehensive policy
A plan that provides a package of health care services, including preventive care, routine physicals, immunization, outpatient services and hospitalization.
Comprehensive major medical
A combination of basic coverage and major medical coverage that features low deductibles, high maximum benefits and Coinsurance.
Consideration
The binding force in a contract that requires something of value to be exchanged for the transfer of risk. The consideration on the part of the insured is the representations made in the application and payment of premium; the consideration on the part of the insurer is the promise to pay in the event of loss.
Consideration clause
A part of the insurance contract that states that both parties must give something of value for the transfer of risk, and specifies the condition of the exchange.
Consumer report
A written and or oral statement regarding a consumer’s credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.
Coordination of benefits
A provision that helps determine the primary provider in situations where an insured is covered by more than one policy, thus avoiding claims overpayments.
Custodial care
Care that is rendered to help and insured complete their activities of daily living.
Director
The chief executive and administrative officer of the insurance department
Dread (specified) disease policy
A policy with a high maximum limit that covers certain diseases names in the contract (such as polio and meningitis)
Dual choice
A federal requirement that employers who have 25 or more employees, who are within the service area of a qualified HMO, who pay minimum wage, and offer a health plan, must offer HMO coverage as well as an indemnity plan.
Elimination period
A WAITING PERIOD that is imposed on the insured from the onset of disability until benefit payment begins.
Endodontics
An area of dentistry that deals with diagnosis, prevention and treatment of dental pulp within natural teeth at the root canal.
Estoppel
A legal impediment to denying a fact or restoring a right that has been previously waived
Excess charge
The difference between the Medicare approved amount for service or supply and the actual charge.
Exposure
A unit of measurement used to determine rates charged for insurance coverage
Express authority
the authority granted to an event by means of the agent’s written contract.
Fair credit reporting act
A federal law that establishes procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant and properly used.
Fiduciary
An agent or broker who handles insurers’ funds in a trust capacity
Flexible spending account (FSA)
A salary reduction cafeteria plan that uses employee funds to provide various toes of health care benefits.
Fraternal benefit societies
Life or health insurance companies formed to provide insurance for members of an affiliated lodge, religious organization, or fraternal organization with a representative form of government
Gatekeeper model
A model of HMO and PPO Organizations that uses the insured’s primary care physician (the gatekeeper) as the initial contact for the patient for medical care and for referrals.
Hazard, moral
The effect of a person’s reputation, character, living habits etc. on their insurability.
Hazard, Morale
The effect a person’s life indifference concerning loss has on the risk to be insured.
Health maintenance organization (HMO)
A prepaid medical service plan in which specified medical service providers contract with the HMO to provide services. The focus of the HMO is preventive medicine.
Health reimbursement accounts (HRA)
Plans that allow employers to set aside funds for reimbursing employers for qualified medical expenses.
Health savings account (HSA)
Plans designed to help individuals save for qualified health expenses
Home health services
A covered expense under part A of Medicare in which a licensed home health agency provides home health care to am insured.
Hospital confinement rider
An optional disability income rider that waives the elimination period when an insured is hospitalized as an inpatient.
Income replacement contracts
Policies which replace a certain percentage of the insureds pure loss of income due to a covered accident or sickness.
Indemnify
To restore the insured to the same condition as prior to loss with no intent of loss or gain
Insolvent Organization
A member organization which is unable to pay its contractual obligations and is placed under a final order of liquidation or rehabilitation by a court of competent jurors.
Insuring clause
A general statement that identifies the basic agreement between the insurance company and the insured, usually located on the first page of the policy.
Intermediaries
Organizations that process inpatient and outpatient claims on individuals by hospitals, skilled nursing facilities, home health agencies, hospices and certain other providers of health services
Intermediate care
A level of care that is one step down from a skilled nursing care; provided under the supervision of physicians or registered nurses.
Law of large numbers
A principle stating that the leather the number of similar exposure units considered, the more closely the losses reported will equal the underlying three probability of loss.
Limiting charge
The maximum amount a physician may charge a Medicare beneficiary for a covered service of the physician does not accept the assignment of Medicare approved amount.
Lloyd’s association
Organizations that provide support facilities for underwriters or groups of individuals that accept insurance risk.
Major medical expenses
A type of health insurance that usually carries a large deductible and pays covered expenses up to high limit whether the insured is in or out of the hospital.
Medical information bureau (MIB)
An information database that stores the health histories of individuals who have applied for insurance in the past. Most insurance companies subscribe to this database for underwriting purposes.
Medical savings account
An employer funded account linked to a high deductible medical insurance plan.
Multiple-employer trust (MET)
A group of small employers who do not qualify for group insurance individually, formed to establish a group health plan or self funded plan.
Multiple employer welfare association (MEWA)
Any entity of at least two employers, other than a fully admitted insurer, that establishes an employee benefit plan for the purpose of offering or providing accident and sickness or death benefits to the employees.
Mutual companies
Insurance organizations that have no capital stock, but are owned by the policy holders.
Nonadmitted (nonauthorized)
An insurance company that has not applied for, or has applied and been denied a Certificate of Authority and may not transact insurance in a particular state.
Noncancellable
An insurance contract that the insured has a right to continue in force by payment of premiums that remain the same for a substantial period of time.
Non medical
A life or health insurance policy that is underwritten based on the insured’s statement of health rather than a medical examination.
Over insurance
An excessive amount of insurance that would result in overpayment to the insured in the event of loss.
Peril
The cause of a possible loss
Periodontics
A specialty of dentistry that involves treatment of surrounding and supporting tissue of the teeth such as treatment for gum disease.
Persistency
The tendency of likelihood of insurance policies not lapsing or being replaced with insurance from insurer.
Personal contact
An agreement between an insurance company and an individual that states that insurance policies cover the individuals insurable interest.
Policyholder
The person who has possession of the policy, usually the insured
Policyowner
The person who is entitled to exercise the rights and privileges in the policy. This person may or may not be the insured.
Preferred provider organization (PPO)
An organization of medical professionals and hospitals who provide services to an insurance company’s clients for a set fee.
Preferred risk
An insurance classification for applicants who have a lower expectation of incurring loss, and who, therefore, are covered at a reduced rate.
Presumptive disability
A provision that is found in most disability income policies which specifies the conditions that will automatically qualify the insured for full disability benefits. (Loss of 2 limbs, 2 eyes, 2 ears, 2 lips)
Principal amount
The full face value (death benefit) of a policy.
PrinciPAL (pal, a person) has a face (value)
Pro Rata Cancellation
Termination of an insurance policy, with an adjustment of the premium charge in proportion to the exact coverage that has been in force.
Prosthodontics
A special area of dentistry that involves the replacement of missing teeth with artificial devices like bridgework or dentures.
Pure risk
The uncertainty or chance of a loss occurring in a situation that can only result in a loss or no change
Rate service organization
An organization that is formed by, or on behalf of, a group of insurers to develop rates for those insurers, and to file the rates with the insurance department on behalf of its members. They may also act as a collection point for actuarial data.
Rebating
Any inducement offered in the sale of insurance products that is not specified in the policy
Reciprocal exchange
An unincorporated group of individuals who mutually insure one another, each separately assuming a share of each risk.
Reciprocity
A situation in which two parties provide the same help or advantages to each other (for example, producer A living in state A can transact business as a nonresident in state B if state Bs resident producers can transact business in state A)
Reduction
Lessening the possibility or severity of a loss
Reinsurance
A form of insurance whereby one insurance company (the reinsurer) in consideration of a premium paid to it, agrees to indemnify another insurance company (the ceding company) for part or all of its liabilities from insurance policies it has issued.
Rescission
The termination of insurance contract due either to material misrepresentation by the insured or by fraud, misrepresentation, or duress on the part of the agent/insurer.
Reserve
An amount representing actual or potential liabilities kept by an insurer kept by an insurer in a separate account to cover debt to policyholders.
Residual disability
Type of disability income policy that provides benefits for loss of income when a person returns to work after a total disability, but is still not able to perform at the same level as before becoming disabled.
Respite care
A type of temporary health or medical care provided either by paid workers who come to the home or by nursing facility where a patient stays to give a caregiver a short rest.
Restorative Care
An area of dentistry that involves treatments that restore functional use to natural teeth such as fillings or crowns.
Risk Retention Group
A liability insurance company owned by its members, which are exposed to similar liability risks by virtue of being in the same business or industry.
Risk, Speculative
The uncertainty or chance of a loss occurring in a situation that involves the opportunity for either loss or gain.
Risk, Standard
An applicant or insured who is considered to have an average probability of a loss based on health, vocation and lifestyle.
Risk, Substandard
An applicant or insured who has a higher than normal probability of loss, and who may be subject to an increased premium.
Service Plans
Insurance plans where the health care services rendered are the benefits instead of monetary benefits.
Short-Rate Cancellation
Canceling the policy with a less than proportionate return of premium.
Standard Provisions
Requirements approved by state law that must appear in all insurance policies.
Stock Companies
companies owned by the stockholders whose investment provide the capital necessary to establish and operate the insurance company
Subrogation
The legal process by which an insurance company seeks recovery of the amount paid to the insured from a third party who may have caused the loss.
Substandard risk
An applicant or insured who has higher than normal probability of loss, and who may be subject to an increased premium.
Superintendent (commissioner, director)
The head of the state department of insurance
Terminally ill
In most states, this is defined as a patient who is expected to die within 6 months of a specific illness or sickness.
Unearned premium
The portion of premium for which policy protection has not yet been given.
