Term
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Definition
Voluntary abandonment of a known or legal right.
(An insurance company is considered to have waived rights surrounding any unanswered questions in the application once the policy is issued) |
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Term
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Definition
| Effective Date- when coverage begins |
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Term
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Definition
| Indemnifying against loss or damage from a Contigent or Unknown event |
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Term
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Definition
- Large number of like units (make loss predictable)
-Loss is calculable
- Accidental
- Cause Financial Hardship
- Exclude catastrophic perils |
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Term
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Definition
| Reinsurance agreement: Ceding insurer and reinsurance co. can exchange advice about the underwriting. |
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Term
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Definition
Possibility of economic loss due to sickness or death
Life: must exist at time of application |
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Term
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Definition
| Written document in which insurance contract is set forth |
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Term
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Definition
| Money that accumulates in a permanent LIFE policy from the premiums/interest. May be withdrawn if the policy is surrendered, and is paid out on maturity (endowment) of the policy |
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Term
| Human Value Life Approach |
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Definition
| Measures future earnings, annual expenses and assets to determine life policy coverage needed |
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Term
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Definition
| Assesses need for coverage by looking at assets vs financial needs caused by death (child tuition) to determine life policy coverage level. Assumes immediate death |
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Term
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Definition
| Analyzing insurance needs for an 'income objective' by assuming both principal and interest in assets are liquidated over time. |
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Term
| Captial Retention/Conservatin |
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Definition
| Analyzing insurance needs for an 'income objective' by assuming desired income will be generated by investment earnings, not principal |
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Term
| Disadvantages to NOT having a Buy Sell agreement |
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Definition
- Income to surviving family stops
-Surviving owners may suffer a loss
- Asset reduction and delayed estate transfer; forced liquidation |
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Term
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Definition
| If ER is NOT beneficiary, but is owner and premium payor- may be deducted as business expense. |
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Term
| Deferred Compensation Life Plan |
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Definition
| ER promises to pay key employees certain amounts of money at future date- Taxes are deferred on this until the employee takes possession, and if EE dies before retirement, benefit is paid to ER who then pays beneficiaries. |
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Term
| SERP (Supplemental Executive Retirement Plan) |
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Definition
| benefits in addition to traditional 401k- non tax qualified as usually used for key employees |
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Term
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Definition
| Premiums are bonused to shareholders to cover the cost of the policies owned on other shareholds (cross purchase plan) |
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Term
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Definition
- makes up 40% of life insurance.
-85% of group is ER-EE
- renewable term basis |
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Term
| Home Service Life Insurance (Industrial) |
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Definition
| (Debit Life Insurance)- $10,000 or less to pay funeral expenses. |
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Term
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Definition
| Pay back premiums, plus interest and Prove Insurability- available within 3 years from lapse |
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Term
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Definition
Policy + Riders + Copy of Application
- Statements on app considered representations and NOT warranties |
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Term
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Definition
| Approved by policyowner, signed by executive officer and made part of contract |
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Term
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Definition
| Death from war, only premiums are refunded |
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Term
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Definition
| If in first 2 years, only refund of premium. If after 2 years- full face amount is paid. |
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Term
| Loan Rate Provisions (Life) |
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Definition
- Fixed: Maximum is 8%
-Adjustible: Maximum based on Moody's Corporate Bond Yield Average |
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Term
| Prohibited Provisions (Life) |
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Definition
Any that:
- Limit the time for legal action to Less than 1 year
- Allow backdating other than to conserve age
- Allow settlement to be less than face amount
- Designate Agent as representative
- Require forfeiture if loan is less than loan value |
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Term
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Definition
| 'Per Person': if 1 beneficiary dies, money is split between other beneficiaries |
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Term
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Definition
| 'Per Beneficiary': if 1 beneficiary dies, money is split between other beneficiaries + heirs of deceased beneficiary |
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Term
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Definition
| Corporate Owned Life Insurance: May change out one insured for another of similar qualifications (exchanging 1 insured exec for another) |
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Term
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Definition
| Death benefit decreases but premiums remain level (often used against a mortgage or credit life insurance- to cover an oustanding loan in case of death) |
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Term
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Definition
| Death benefit increases, premiums remain level. |
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Term
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Definition
| Lower premiums at issue, renewed at lower premiums as long as can prove Evidence of Insurability. Health declines: premiums increase |
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Term
| Life Expectancy Term (Life) |
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Definition
| uses mortality table to provide level term benefit over life expectancy. Cash value accumulates to offset premiums in later years. |
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Term
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Definition
| Renew without evidence of insurability- premium based on Attained Age |
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Term
| Convertability (Term Life) |
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Definition
| Covert to permanent without evidence of insurability- premium is based on Attained age or Issue age |
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Term
| Pure Insurance Protection (Whole Life) |
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Definition
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Term
| Straight Life (Whole Life) |
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Definition
| Premium and Face amount remain level till death or age 100 |
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Term
| Limited Payment (Whole Life) |
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Definition
| Premium payments are for specified time, face amount remains level |
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Term
| Current Assumption (Interest Sensitive) Whole Life |
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Definition
| Flexible premiums, face amount doesn't fluctuate. Current interest rate is higher than with traditional life. |
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Term
| Enhanced Whole life (Economatic) |
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Definition
| Uses dividends to purchase additional insurance (if individual needs more protection than can afford. |
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Term
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Definition
| Matures prior to 100 (like limited payment). Level premium and face amount. Emphasis on savings rather than insurance. |
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Term
| Adjustable Life (Flexible Design) |
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Definition
| Level Premium & Death benefit- policyowner can Adjust TYPE or AMOUNT of coverage without changing existing policy and premiums may change as a result. (good for those with fluctuating income) |
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Term
| Universal Life (Flexible) |
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Definition
Face amount and Premiums are adjustable (with approval).
- death benefit is one year renewable term
- cash value earns interest at current rate (premiums placed in cash value account, interest credited to cash value)
- premiums adjust with the cash value allowing more or fewer premiums. |
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Term
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Definition
fixed premium- death benefit/cash value varies reflecting the investment experience.
- Guaranteed minimum face amount (original issue amount)
FINRA license needed to sell |
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Term
| Variable Universal Life (Flexible) |
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Definition
| Premium and death benefit are flexible- policyholder selects the separate accounts (mutual accounts) to invest in. |
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Term
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Definition
| provides specific monthly income for the Remainder of the term period if insured dies within the term period. |
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Term
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Definition
| Provides specific monthly income for a specific period Beyond the insureds death, if they die within the term period. |
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Term
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Definition
| Adds Spouse (to age 65) and Children (to 25) on the head of houses insurance. If primary insured dies, rider is paid up until each family's term expires. |
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Term
| Joint Life (First to Die) |
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Definition
| Death benefit is paid on first to die- provides income protection for spouse. |
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Term
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Definition
| Death benefit paid on the last to die- provides beneficiary income protection |
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Term
| Surrender Cost Index (SCI) |
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Definition
| Most recognized method of comparing policies with fixed interest rates. |
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Term
| Comparative Interest Rate (CIR) |
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Definition
| Compares cash value policies with term plans using interest rates. |
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Term
| Waiver of Cost of Insurance (Life Rider) |
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Definition
| Waives the deduction of cost of insurance from a Universal Life Policy while insured is totally disabled (usually after 6 months of disability) |
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Term
| Guaranteed Insurability (Life Rider) |
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Definition
Insured can purchase additional amounts of insurance at certain ages Without evidence of Insurability.
-premiums based on attained age |
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Term
| Return of Cash Value (Life Rider) |
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Definition
| Increasing Term insurance equal to the cash value- provides payment of term insurance equal to the cash value amount at time of death. |
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Term
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Definition
| Case establishing Life Insurance as property that could be transferred (assigned) |
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Term
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Definition
| Settlement Option: Paying out the interest only from a Life Policy as form of income (taxable) |
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Term
| Life Income Joint and Survivor |
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Definition
| payments are guaranteed to two or more recipients- upon death of first benefits continue to survivors |
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Term
| Joint Life (Settlement Option) |
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Definition
| payments guaranteed to two or more, after death of first, payments cease. |
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Term
| Extended Term (Life Nonforfeiture option) |
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Definition
| 'Automatic Option'- cash value used to buy a single premium term policy for as long a period as it will buy. |
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Term
| Premium Reduction (Life Dividend Option) |
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Definition
| Using dividends towards the next premium due. |
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Term
| Accumulate at Interest (Life Dividend Option) |
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Definition
| Dividends are trained and interest rate paid the policyowner is compounded annually |
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Term
| Paid Up Additions (Life Dividend Option) |
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Definition
| Purchases Single Premium premanent benefit At Insureds Attained Age |
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Term
| One Year Term (Life Dividend Option) |
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Definition
| Purchases Single Premium one year term policy (normally if doing something more dangerous that year) |
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Term
| Paid Up Option (Life Dividend Option) |
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Definition
| Pays off the policy more quickly than scheduled. |
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Term
| Acceleration of Endowment (Life Dividend Option) |
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Definition
| Reduces the time period for the policy to endow |
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Term
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Definition
| Automatically borrows form the cash value to cover a premium payment at the end of the Grace Period |
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Term
| MET (Multiple Employer Group- Life, Health and Disability) |
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Definition
-Sponsored by Insurers, or two or more employers of the same industry.
-Sponsor (usually administrator) must design the plan and select groups permitted to participate
-Must have Trustee that routes all financial transactions |
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Term
1. OASI (1935)
2. OASDI (1956
3. Title XVIII (1965)
4. Medicare 2006 |
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Definition
1. Social Security- old age retirement benefit
2. Disability Income benefits added to Social Security (unable to engage in ANY employment lasted at least 12 months- 5 month waiting period)
3. Medicare
4. Medicare part D was added
- Federally Funded
- ER withholds employee's tax
-Self Employed can pay amount equal to ER + EE
- Actuarial values of contributions DO NOT equal Actuarial values of benefits |
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Term
| Annuity (Liquidation) Period |
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Definition
| Starts at receipt of first periodic payment |
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Term
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Definition
| Change annuity date, beneficiary and settlement options. - if beneficiary is spouse, IRS allows spouse to assume ownership upon annuitants death. |
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Term
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Definition
| May be used as a pension plan for employees |
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Term
| Fixed (Guaranteed) Annuity |
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Definition
-Minimum rate of interest and payout
-20 year projected schedule of cash availability shown on each anniversary
-Insurer bears any investment risk
- If interest rate drops below current rate, may be surrendered without surrender charge (Bailout Provision) |
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Term
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Definition
Linked to equity index (houses, Standard and Poors 500 Index)
- safety of principal and minim interest |
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Term
| Market Value (Adjusted) Annuity |
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Definition
| backed with asset of bonds- purchased for 3-10 years, higher yield. |
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Term
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Definition
Annuity payment fluctuates according to Investor experience in 'separate accounts' (mutual funds).
-Owner bears risk as they direct investment
-payments are made in terms of 'units' that may fluctuate in values (like stocks)
-prospectus required to be given at time of application
- Assumed Interest Rate (AIR) used when computing payments |
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Term
| Temporary (Annuity Payment Option) |
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Definition
| benefits received for a fixed period of time or until death |
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Term
| Pure or Straight Life (Annuity Payment Option) |
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Definition
| annuity is payable for as long as annuitant lives |
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Term
| Life Income Period Certain (Annuity Payment Option) |
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Definition
| payable for life or specific period- which ever occurs LAST |
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Term
| LIfe Income & Joint Survivor (Annuity Payment Option) |
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Definition
| payable to two or more annuitants while both living- on death of first, reduced annuity is paid to survivor |
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Term
| Uniform Individual Accident and Sickness Policy Provisions Law |
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Definition
All policies MUST have:
- Entire Contract provision
- Time Limit on Certain Defenses (Incontestability)
- Grace Period
- Reinstatement
- Notice of Claim provision (20 days of loss)
- Claim form provision (15 days after notice of claim)
-Proof of Loss provision (90 days of loss)
- Time of payment of claims provision (immediately)
- Physical Exam and Autopsy provision
- Legal Actions provision (wait 60 days)
Change of Beneficiary (effective on owner's signature date) |
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Term
| Optional Uniform Provisions |
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Definition
- Change of Occupation
- Misstatement of AGe
- Other Insurance with this Insurer
- Insurance with other insurers
- Relations of Earnings to Insurance (disability benefit shall not exceed earnings)
- Unpaid Premiums (can deduct unpaid premiums from claim)
- Confirmity with Sate Statutes
-Illegal Occupation
- Intoxicants/Narcotics
- Cancellation |
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Term
| Noncancellable (Health & Disability) |
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Definition
| guaranteed renewable to 65, guaranteed premiums |
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Term
| Guaranteed Renewable (Health & Disability) |
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Definition
| renewable to 65 Without proof of insurability. Premiums not guaranteed |
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Term
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Definition
| Renewability is at option of Insurer |
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Term
| Taxable when Benefits (List them) |
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Definition
- Cash Value beyond premiums when received as benefit
- Installment payments or Interest only payments (death benefit)
- Death Benefit if assigned
- Annuity if given upon death- (amount earned over contributions)
- Annuity when annuitized (taxed on amount of earned interest)
- Surrendered annutiy; amount over cost basis.
- 403(b), section 457, IRA's |
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Term
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Definition
small firms grouped together to form an association
- usually self funded
- Department of Insurance must issue a Certificate of Compliance |
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Term
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Definition
| established a trust for unions to receive benefits from, so employer can't pay group plan carriers directly. |
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Term
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Definition
| Carriers that pay the benefits to the providers rather than the insured (most plans today) |
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Term
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Definition
- prepaid plans
- Blue Cross: hospital
- Blue Shield: Physician
- Not for profit |
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Term
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Definition
- contracts with independent medical Groups
- pays the Group Entity, not the individual physicians. |
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Term
| Uniform Individual Accident and Sickness Policy Provisions Law (List Mandatory Uniform Provisions) |
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Definition
- Entire Contract
- Time Limit on Certain Defenses (Incontestable)
- Grace Period
- Reinstatement
-Notice of Claim (20 days after loss)
- Claim Form (15 days after Notice of Claim)
- Proof of Loss (90 days after loss)
- Time of payment of Claims (immediate)
- Physical Exam and Autopsy (Insurer can order)
- Legal Actions (can't take any before 60 days)
- Change of Beneficiary (Change becomes effective on owner's signature date) |
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Term
| Uniform Individual Accident and Sickness Policy Provisions Law (List Optional Uniform Provisions) |
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Definition
- Change of Occupation
- Misstatement of Age
- Other Insurance with this insurer
- Insurance with other insurers
-Relations of Earnings to Insurance (disability insurance can't be more than monthly income)
- Unpaid Premiums (deducted from claims)
- Confirmity with State Statutes
- Illegal Acts
- Intoxicants and Narcotics
- Cancellation |
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Term
| Noncancellable (Health and Accident) |
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Definition
| Guaranteed renewable to age 65 with guaranteed premium |
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Term
| Guaranteed renewable (Health and Accident) |
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Definition
| Guaranteed renewable to age 65 Without proof of insurability (premiums not guaranteed) |
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Term
| Conditionally Renewable (Health and Accident) |
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Definition
| Renewable unless termination notice issued by insurer |
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Term
| Optionally renewable (Health and Accident) |
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Definition
| will renew only if insurer chooses to |
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Term
| Nonoccupational (disability) |
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Definition
| covers injury and sickness off the job only (workers comp used for on the job- combination is 24-hour coverage) |
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Term
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Definition
medical benefits are covered
income benefits begin after 3 day waiting period. retroactive benefits later paid back. |
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Term
| Waiver of Premium (LTC Nonforfeiture Option) |
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Definition
| premiums are waived usually after 90 days of confinement |
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Term
| Cash Surrender Value (LTC Nonforfeiture Option) |
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Definition
| Guaranteed lump sum is paid upon lapse or surrender |
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Term
| Reduced paid up (LTC Nonforfeiture Option) |
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Definition
| reduced amount of daily benefit provided for duration of benefit period after premiums discontinued |
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Term
| Extended Term (LTC Nonforfeiture Option) |
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Definition
| Full amount of daily benefit paid for a limited period of time after premiums have been discontinued. |
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Term
| LTC Prohibited Provisions |
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Definition
Can't contain provisions that:
- cancels policy on grounds of age or health
- establishes a new waiting period when coverage is replaced
- provides coverage for ONLY skilled nursing facility
- payments based on 'Usual and Customary' benefits
- renew as anything less favorable than Guaranteed renewable
- refuse an extension of benefits if insitutionalization began while policy was in force |
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Term
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Definition
| Pays stated amount in event of a loss (Disability or Life) |
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Term
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Definition
- regulates insurers
- protects against insolvency
-regulates organization and ownership
- requires all investments be approved by Board of Directors
- all insurers must file financial report
- can examine any insurer
- can step in and rehabilitate or liquidate |
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Term
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Definition
| authority in agent's contract |
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Term
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Definition
| authority public assumes agent has. |
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Term
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Definition
| authority created when agent exceeds their expressed authority and insurer doesn't counter it (taking premiums on a lapsed contract) |
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Term
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Definition
| parties exchange unequal amounts of money |
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Term
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Definition
| Take it or Leave it contract- no negotiation |
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Term
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Definition
| once premiums paid, only one party is legally bound |
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Term
| Requirements for using Illustrations in a Life Policy |
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Definition
Must include:
- contact details of insurer and agent.
- Underwriting or rating classification based on
-Generic name of policy
- Initial death benefit
-Dividend option elction
It cannot:
- use term vanishing
- represent that a premium payment will not be required each year |
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Term
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Definition
coverage will be in effect the date of application or on completion of medical exam unless declined within a specific period of time
- premium is paid when application made
- receipt issued at time of application |
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Term
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Definition
- elected by the people
- may revise the code of regulations
- Issues certificates of Authority
-regulates internal affairs of Department of Insurance
- structures and controls insolvency |
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Term
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Definition
| Persuading a policyholder by misrepresentation to cancel one policy and purchase a new one (misdemeanor with $200/6month prison fine) |
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Term
| Bureau of Fraudulent Claims |
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Definition
- operation costs borne by all insurers
- Insurer believe a fraudulent claim has been filed must report it in 60 days
- An insured signing a fraudulent claim form may be guilt of perjury |
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Term
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Definition
- Disability Income, Life, medical, dental, LTC, AD&D, Business Overhead Expense, HRA contributions (if paid by ER)
- ER contributions to qualified retirement plans |
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Term
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Definition
- Disability income insurance where ER is beneficiary
- Disability, Medical, Dental, LTC, Life for an individual. |
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Term
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Definition
- Lump sum life payment
- Dental, Medical, LTC, Disability Income Insurance if ER is beneficiary, FSA, HRA, HSA distributions
- Life Principal Amount (lump sum)
- Dividends |
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Term
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Definition
- Interest on dividends and lump sum life payment
- Disability benefits
- Interest on Life or Annuity principal or dividend amount
- Installment Life disbursements (including principal and interest)
- Life sum if transferred to stranger (STOLI)
- Surrendered Life or Annuity policy: amount above premiums paid
- Employer contributions to qualified retirement plans when benefit is received (EE taxed)
- Life Cash Value amount above Premiums Paid. |
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