Vocabulary Words Flashcards
1
Q
Absolute assignment
A
Policy assignment under which the assignee receives full control over the policy and also full rights to its benefits. Generally, when a policy is assigned to secure debt, the owner retains all rights in the policy in excess of the debt, even though the assignment is absolute in form.
2
Q
Accelerated benefits rider
A
A life insurance rider that allows for the early payment of some portion of the policies face amount should the insured suffers from a terminal illness.
3
Q
Accidental bodily injury provision
A
Disability income or accident policy provision that requires that the injury be accidental in order for benefits to be payable.
4
Q
Accidental death and dismemberment (AD&D)
A
Insurance providing payment if the insured’s death results from an accident, if the insured accidentally severs a limb above the wrist or ankle joints, or totally and irreversibly loses eyesight.
5
Q
Accidental death benefit rider
A
A life insurance policy rider providing for payment of an additional benefit when death occurs by accidental means
6
Q
Accidental dismemberment
A
The severance of limbs at or above the wrists or ankle joints, or the entire irrevocable loss of sight. Loss of use in itself may or not be considered dismemberment
7
Q
Accidental means provision
A
Unforeseen, unexpected, unintended cause of an accident. Requirement of an accident-based policy that the cause of the mishap must be accidental for any claim to be payable
8
Q
Accident and health insurance
A
Under which benefits are payable in case of disease, accidental injury, or accidental death. Also called health insurance, personal health insurance, and sickness and accident insurance.
9
Q
Accumulation unit
A
Premiums an annunitant pays into annuities are credited as accumulation units. At the end of the accumulation period, accumulation units are converted to annuity units
10
Q
Acquired immune deficiency syndrome (AIDS)
A
A life-threatening condition brought on by the human immunodeficiency virus; insurers must adhere to strict underwriting and claims guidelines in regard to AIDS risks and AIDS related conditions.
11
Q
Acute illness
A
A serious condition, such as pneumonia, from which the body can fully recover with proper medical attention
12
Q
Adhesion
A
A life insurance policy is a contract of adhesion because buyers must adhere to the terms of the contract already in existence. They have no opportunity to negotiate terms, rate, values, and so on.
13
Q
Adjustable life insurance
A
Combines features of both term and whole life coverage with the length of coverage and amount of accumulated cash value as the adjustable factors. Premiums may be increased or decreased to fit the specific needs. Such adjustments are not retroactive and apply only to the future
14
Q
Administrative services only (ASO) Plan
A
Arrangement under which an insurance company or an independent organization, for a fee, handles the administration claims, benefits, and other administrative functions for self insured group
15
Q
Admitted insurer
A
An insurance company that has met the legal and financial requirements for operation within a given state
16
Q
Adult day care
A
Type of care (usually custodial) designed for individuals who require assistance with various activities of daily living, while their primary caregivers are absent. Offered in care centers
17
Q
Adverse selection
A
Selection “against the company” tendency of less favorable insurance risks to seek or continue insurance to a greater extent than others. Also, tendency of policy owners to take advantage of favorable options in insurance contracts
18
Q
Adverse selection
A
Rules established by the National Association of Insurance Commissioners (NAIC) to regulate insurance
advertising
19
Q
Agency
A
Situation wherein one party (an agent) has the power to act for another (the principal) in dealing with third parties
20
Q
Agent
A
Anyone not a duly licensed broker who solicits insurance or aids in placing risks, delivering policies, or collecting premiums
on behalf of an insurance company.
21
Q
Agent’s report
A
The section of an insurance application where the agent reports personal observations about the applicant
22
Q
Aleatory
A
Feature of insurance contracts in that there is an element of chance for both parties and that the dollar given by the
policyholder (premiums) and the insurer (benefits) may not be equal
23
Q
Alien Insurer
A
Company incorporated or organized under the laws of any foreign nation, providence, or territory
24
Q
Ambulatory surgery
A
Surgery performed on an outpatient basis
25
Amount at risk
Difference between the face amount of the policy and the reserve or policy value at a given time. In other words,
the dollar amount over what the policy owner has contributed of cash value toward payment of the policyowner’s own claim.
Because the cash value increases every year, the net amount at risk naturally decreases until it finally reaches zero when the cash
value or reserve become the face amount
26
Annually renewable term (ART)
A form of renewable term insurance that provides coverage for one year and allows the policy
owner to renew coverage each year without evidence of insurability. Also called yearly renewable term(YRT)
27
Annuitant
One to whom an annuity is payable, or a person upon the continuance of whose life further payment depends
28
Annuity unit
The number of annuity units denotes the share of the funds an annuitant will receive from a variable annuity
account after the accumulation period ends and benefits begin. A formula is used to convert accumulation units to annuity units
29
Any occupation
A definition of total disability that requires that for disability income benefits to be payable, the insured must be
unable to perform any job for which the insured is "reasonably suited by reason of education, training, or experience."
30
Apparent authority
The authority an agent appears to have, based on the principal’s (the insurer’s) actions, words,
deeds, or because of circumstances the principal (the insurer) created
31
Application
Form supplied by the insurance company, usually filled in by the agent and medical examiner (if applicable) on the basis
of information received from the applicant. It is signed by the applicant and is part of the insurance policy if it is issued. It gives
information to the home office underwriting department, so it may consider whether an insurance policy will be issued and, if so, in
what classification and at what premium rate
32
Appointment
Authorization or certification of an agent to act for or represent an insurance company
33
Approval receipt
Rarely used today, a type of conditional receipt that provides that coverage is effective as of the date the
application is approved (before the policy is delivered)
34
Assessment mutual insurer
An insurance company characterized by member-insureds who are assessed an individual portion of
each loss that occurs. No premium payment is payable in advance
35
Assignee
Person (including corporation, partnership, or other organization) to whom a right or rights under a policy are transferred
by means of an assignment
36
Assignment provision (health contracts)
Commercial health policy provision that allows the policy owner to assign benefit
payments from the insurer directly to the health care provider
37
Assignment
Signed transfer of benefits of a policy by an insured to another party. The company does not guarantee the validity of
an assignment
38
Assignor
Person (including corporation, partnership, or other organization or entity) who transfers a right or rights under an
insurance policy to another by means of an assignment
39
Attained age
With reference to an insured, the current insurance age
40
Authority
The actions and deeds an agent is authorized to conduct on behalf of an insurance company, as specified in the
agent's contract
41
Authorized company
Company duly authorized by the insurance department to operate in the state
42
Automatic premium loan provision
Authorizes insurer to automatically pay any premium in default at the end of the grace
period and charge the amount so paid against the life insurance policy as a policy loan
43
Average Indexed Monthly Earnings (AIME)
The basis used for calculating the primary insurance amount (PIA) for Social Security
benefits
44
Average Monthly Wage (AMW)
The average wage base for computing virtually all Social Security benefits prior to
45
Aviation exclusion
Either attached by rider or included in standard policy language excepting from coverage certain deaths or
disabilities due to aviation, such as "other than a fare-paying passenger."
46
Backdating
The practice of making a policy effective at an earlier date than the present
47
Basic medical expense policy
Health insurance policy that provides "first dollar" benefits for specified (and limited) health care,
such as hospitalization, surgery, or physician services. Characterized by limited benefit periods and relatively low coverage limits
48
Beneficiary
Person to whom the proceeds of a life or accident policy are payable when the insured dies. The various types of
beneficiaries are primary beneficiaries (those first entitled to proceeds), secondary beneficiaries (those entitled to proceeds if no
primary beneficiary is living when the insured dies), and tertiary beneficiaries (those entitled to proceeds if no primary or secondary
beneficiaries are alive when the insured dies)
49
Benefit
May be either money or a right to the policy owner upon the happening of the conditions set out in the policy
50
Benefit period
Maximum length of time that insurance benefits will be paid for any one accident, illness, or hospital stay
51
Best's insurance report
A guide, published by A.M. Best, Inc. that rates insurers' financial integrity and managerial and operational
strengths
52
Binding receipt
Given by a company upon an applicant's first premium payment. The policy, if approved, becomes effective from
the date of the receipt
53
Blackout period
Period following the death of a family breadwinner during which no Social Security benefits are available to the
surviving spouse
54
Blanket policy
Covers a number of individuals who are exposed to the same hazards, such as members of an athletic team, company
officials who are passengers in the same company plane, and so on
55
Broker
Licensed insurance representative who does not represent a specific company, but places business among various companies.
Legally, the broker is usually regarded as a representative of the insured rather than the company
56
Business continuation plan
Arrangements between the business owners that provide that the shares owned by any one of them
who dies or becomes disabled shall be sold to and purchased by the other co-owners or by the business
57
Business overhead expense insurance
A form of disability income coverage designed to pay necessary business overhead
expenses, such as rent, should the insured business owner become disabled
58
Buyer's guides
Informational consumer guidebooks that explain insurance policies and insurance concepts; in many states, they are
required to be given to applicants when certain types of coverages are being considered
59
Buy-sell agreement
Agreement that a deceased business owner's interest will be sold and purchased at a predetermined price or at
a price according to a predetermined formula
60
Cafeteria plan
Employee benefit arrangements in which employees can select from a range of benefits
61
Cancellable contract
Health insurance contract that may be terminated by the company or that is renewable at its option
62
Capital sum
Amount provided for accidental dismemberment or loss of eyesight. Indemnities for loss of one member or sight of one
eye are percentages of the capital sum
63
Career agency system
A method of marketing, selling, and distributing insurance, it is represented by agencies or branch offices
committed to the ongoing recruitment and development of career agents
64
Case management
The professional arrangement and coordination of health services through assessment, service plan
development, and monitoring
65
Cash or deferred arrangements
A qualified employer retirement plan under which employees can defer amounts of their salaries
into a retirement plan. These amounts are not included in the employee's gross income and so are tax deferred. Also called (k) plans
66
Cash refund annuity
Provides that, upon the death of an 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 one sum to designated
beneficiaries
67
Cash surrender option
A nonforfeiture option that allows whole life insurance policy owners to receive a payout of their policy's
cash values
68
cash surrender value
Amount available to the owner when a life insurance policy is surrendered to the company. During the early
policy years, the cash value is the reserve less a "surrender charge"; in later policy years, it usually equals or closely approximates
the reserve value at time of surrender
69
Cash value
The equity amount or "savings" accumulation in a whole life policy
70
Churning
The practice by which policy values in an existing life insurance policy or annuity contract are used to purchase
another policy or contract with that same insurer for the purpose of earning additional premiums or commissions without an
objectively reasonable basis for believing that the new policy will result in an actual and demonstrable benefit
71
Class designation
A beneficiary designation. Rather than specifying one or more beneficiaries by name, the policy owner designates
a class or group of beneficiaries. For example, "my children."
72
Classification
Occupational category of a risk
73
Cleft lip
A congenital furrow or groove in the upper lip that results from incomplete embryonic development. This condition may
be associated with a cleft palate. Also called a hare lip
74
Cleft palate
A congenital furrow or groove in the roof of the mouth that results from incomplete embryonic development. This
condition may be associated with a cleft lip
75
Close corporation
A corporation owned by a small group of stockholders, each of whom usually has a voice in operating the
business
76
COBRA (Consolidated Omnibus Budget Reconciliation Act)
Extends group health coverage to terminated employees and
their families
77
Coinsurance (percentage participation)
Principle under which the company insures only part of the potential loss, the policyowners
paying the other part. For instance, in a major medical policy, the company may agree to pay % of the insured expenses, with the
insured to pay the other %
78
Collateral assignment
Assignment of a policy to a creditor as security for a debt. The creditor is entitled to be reimbursed out of
policy proceeds for the amount owed. The beneficiary is entitled to any excess of
policy proceeds over the amount due the creditor in the event of the insured's death
79
Combination company
Company whose agents sell both weekly premium life and health insurance and ordinary life insurance.
Also called a multi-line company
80
Commercial health insurers
Insurance companies that function on the reimbursement approach, which allows policy owners
to seek medical treatment then submit the charges to the insurer for reimbursement
81
Commissioner
Head of a state insurance department; public officer charged with supervising the insurance business in a state and
administrating insurance laws. Called "superintendent" in some states, "director" in others
82
Commissioner's Standard Ordinary (CSO) Table
Table of mortality based on intercompany experience over a period of time, which
is legally recognized as the mortality basis for computing maximum reserves on policies issued within past years
83
Common disaster provision
Sometimes added to a policy and designed to provide an alternative beneficiary in the event that the
insured as well as the original beneficiary dies as the result of a common accident
84
Competent parties
To be enforceable, a contract must be entered into by competent parties. A competent party is one who is
capable of understanding the contract being agreed to
85
Comprehensive major medical insurance
Designed to give the protection offered by both a basic medical expense and major
medical policy. It is characterized by a low deductible amount, coinsurance clause, and
high maximum benefits
86
Concealment
Failure of the insured to disclose to the company a fact material to the acceptance of the risk at the time application is
made
87
Conditional contract
Characteristic of an insurance contract in that the payment of benefits is dependent on or a condition of the
occurrence of the risk insured against
88
Conditionally renewable contract
Health insurance policy providing that the insured may renew the contract from period to
period or continue it to a stated date or an advanced age, subject to the right of the insurer to decline renewal only under
conditions defined in the contract
89
Conditional receipt
Given to the policy owners when they pay a premium at time of application. Such receipts bind the insurance
company if the risk is approved as applied for, subject to any other conditions stated on the receipt
90
Consideration clause
The part of an insurance contract setting forth the amount of initial and renewal premiums and frequency of
future payments
91
Consideration
Element of a binding contract; acceptance by the company of payment of the premium and statements made by the
prospective insured in the application
92
Contestable period
Period during which the company may contest a claim on a policy because of misleading or incomplete
information in the application
93
Contingent beneficiary
Person(s) named to receive proceeds in case the original beneficiary is not alive. Also referred to as
secondary
94
Continuing Care
Type of health or medical care designed to provide a benefit for elderly individuals who live in a retirement
community; addresses full-time needs, both social and medical. Also known as residential care
95
Contract
An agreement enforceable by law whereby one party binds itself to certain promises or deeds
96
Contract of agency
A legal document containing the terms of the contract between the agent and company, signed by both parties.
Also called agency agreement
97
Contributory plan
Group insurance plan issued to an employer under which both the employer and employees contribute to the
cost of the plan. Generally, % of the eligible employees must be insured.(See
noncontributory plan)
98
Conversion factor
A stated dollar-per-point amount used to determine benefit amounts paid for the cost of a procedure under a
health insurance plan
99
Conversion privilege
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 may be affected at attained
age (premiums based on the age attained at time of conversion) or at original age (premiums based on age at time of original issue)
100
Convertible term
Contract that may be converted to a permanent form of insurance without medical examination
101
Coordination of benefits (COB) provision
Designed to prevent duplication of group insurance benefits. Limits benefits from multiple
group health insurance policies in a particular case to % of the expenses covered and designates the order in which the multiple
carriers are to pay benefits
102
Corridor deductible
In superimposed major medical plans, a deductible amount between the benefits paid by the basic plan and
the beginning of the major medical benefits
103
Cost of Living (COL) rider
A rider available with some policies that provides for an automatic increase in benefits (typically tied to
the Consumer Price Index), offsetting the effects of inflation
104
Coverage requirements
Standards of coverage that prevent retirement plans from discriminating in favor of highly compensated
employees. A plan must pass an IRS coverage test to be considered qualified
105
Credit accident and health insurance
If the insured debtor becomes totally disabled due to an accident or sickness, the policy
premiums are paid during the period of disability or the loan is paid off. May be individual or group policy
106
Credit Life insurance
Usually written as decreasing term on a relatively small decreasing balance installment loan that may reflect
direct borrowing or a balance due for merchandise purchased. If borrower dies, benefits pay balance due. May be individual or
group policy
107
Credit report
A summary of an insurance applicant’s credit history made by an independent organization that has investigated the
applicant's credit standing
108
Cross-purchase plan
An agreement that provides that upon a business owner's death, surviving owners will purchase the deceased's
interest, often with funds from life insurance policies owned by each principal on the lives of all other principals
109
Currently insured
Under Social Security, a status of limited eligibility that provides only death benefits
110
Custodial care
Level of health or medical care given to meet daily personal needs, such as dressing, bathing, getting out of bed, and
so on. Though it does not require medical training, it must be administered under a physician's order
111
Death Rate
Proportion of persons in each age group who die within a year; usually expressed as so many deaths per thousand
persons
112
Decreasing term insurance
Term life insurance on which the face value slowly decreases in scheduled steps from the date the
policy comes into force to the date the policy expires, while the premium remains level. The intervals between decreases are usually
monthly or annually
113
Deductible
Amount of expense or loss to be paid by the insured before a health insurance policy starts paying benefits
114
Deferred annuity
Provides for postponement of the commencement of an annuity until after a specified period or until the
annuitant attains a specified age. May be purchased either on single-premium or flexible premium basis
115
Deferred compensation plans
The deferral of an employee's compensation to some future age or date. These plans are frequently
used to provide fringe benefits, such as retirement income, to selected personnel
116
117
Defined benefits plan
A pension plan under which benefits are determined by a specific benefit formula
118
Defined contribution plan
A tax-qualified retirement plan in which annual contributions are determined by a formula set forth in
the plan. Benefits paid to a participant vary with the amount of contributions made on the participant's behalf and the length of
service under the plan
119
Delayed disability provision
isability income policy provision that allows a certain amount of time after an accident for a
disability to result, and the insured remains eligible for benefits
120
Dental Insurance
A relatively new form of health insurance coverage typically offered on a group basis, it covers the costs of normal
dental maintenance as well as oral surgery and root canal therapy
121
Dependency period
Period following the death of the breadwinner up until the youngest child reaches maturity
122
Deposit term
as modest endowment feature. Normally is sold for -year terms with a higher
first-year premium than for subsequent years. If policy lapses, insured forfeits the "deposit" and receives no refund
123
Disability buy-sell agreement
An agreement between business co-owners that provides that shares owned by any one of them
who becomes disabled shall be sold to and purchased by the other co-owners or by the business using funds from disability income
insurance
124
Disability income insurance
A type of health insurance coverage, it provides for the payment of regular, periodic income should the
insured become disabled from illness or injury
125
Disability income rider
Typically a rider to a life insurance policy, it provides benefits in the form of income in the event the insured
becomes totally disabled
126
Disability
Physical or mental impairment making a person incapable of performing one or more duties of that person's occupation
127
Discrimination
In insurance, the act of treating certain groups of people unfairly in the sale and/or pricing of policies; treating any of
a given class of risk differently from other like risks. Discrimination is expressly prohibited in most state insurance codes
