Arkansas Life & Health key terms

Spreading the losses of a few members of a large group across all members by collecting premiums from everyone; the more numerous and similar the exposures, the more predictable the group's total losses become.

The tendency of people with higher-than-average risk to buy or keep coverage more readily than low-risk people, which can push claims above the level assumed when premiums were set.

A financial stake in the continued life or health of the person insured, such that the policyholder would suffer a real economic loss if that person died or became ill; it must exist when the application is made.

The mutual duty of applicant and insurer to deal honestly and disclose material facts; a breach, such as a material misrepresentation on the application, can let the other party avoid the contract.

An agreement drafted by the insurer and offered to the applicant on a take-it-or-leave-it basis; because the insured had no hand in writing it, ambiguities are generally construed against the insurer.

An agreement in which the amounts exchanged are unequal and depend on chance: the insured pays a set premium, while the insurer may pay nothing at all or a far larger benefit.

The value each party gives to make a contract binding: the applicant's premium and statements on the application, and the insurer's promise to pay covered claims.

Waiver is voluntarily giving up a known contractual right; estoppel prevents the party who gave it up from later asserting that right when the other party relied on the surrender to their detriment.

Authority an insurer's agent appears to hold because of the insurer's own words or conduct, even when the agent's written authority is narrower; the insurer can be bound by acts within that appearance.

The legal obligation of a producer or other person handling money or information for others to act in their best interest, keep those funds separate and accounted for, and never use them for personal gain.

Temporary coverage for a set number of years that pays a death benefit only if the insured dies during that term; it builds no cash value and usually renews or converts at a higher cost.

Permanent coverage that stays in force for the insured's entire life, charges a level premium, and builds guaranteed cash value the owner can borrow against or receive at surrender.

Permanent coverage with flexible premiums and an adjustable death benefit; the policy is unbundled, so the insurer credits interest to the cash value and deducts monthly cost-of-insurance and expense charges.

A contract with an insurer that converts a lump sum or series of payments into a stream of income, usually for retirement; the accumulation phase builds value and the payout phase distributes it.

The savings portion of a permanent life policy that grows tax-deferred and belongs to the owner, who may borrow against it, withdraw it, or receive it on surrender or when the policy is paid up.

Guaranteed choices a permanent policy owner has when premiums stop and the policy lapses with cash value: take the cash, buy reduced paid-up insurance, or buy extended term coverage for the full face amount.

A provision stating that after the policy has been in force for a set period, usually two years, the insurer generally cannot rescind coverage because of a misstatement on the application; misstatement of age and nonpayment are handled separately.

A short window, commonly 30 or 31 days after a premium due date, during which the policy stays in force even though the premium has not been paid; a claim within the window is reduced by the unpaid premium.

The ways a beneficiary may receive a death benefit, such as a lump sum, fixed-period installments, fixed-amount installments, interest only, or a life income arrangement.

The policy owner's written naming of who receives the death benefit, typically a primary beneficiary plus one or more contingent beneficiaries who take if the primary beneficiary dies first.

A rider that keeps a policy in force without further premium payments if the insured becomes totally disabled for a stated waiting period, usually six months, and meets the policy's definition of disability.

A rider letting the owner collect part of the face amount early, usually after diagnosis of a terminal illness or when long-term care is needed; the eventual death benefit is reduced by the amount paid.

The amount the insured must pay out of pocket for covered services each year before the health plan begins paying its share; preventive care is often exempt from the deductible.

The percentage split of covered costs between the plan and the insured after the deductible is met, for example the insurer paying 80 percent and the member paying 20 percent.

A fixed dollar amount the insured pays for a specific covered service, such as $30 for an office visit, usually due at the time of service and often not subject to the deductible.

The most the insured will pay in a plan year for covered essential benefits, combining deductibles, coinsurance and copayments; once it is reached the plan pays 100 percent of covered care.

A managed care plan in which members generally must use network providers and get a referral from a primary care physician for specialist care; care outside the network is usually not covered except in emergencies.

A managed care plan that contracts with a network of providers at discounted rates; members may use in-network providers with lower cost sharing or go out of network at higher cost, generally without a referral.

Rules that decide the order in which two or more health plans pay when a person is covered under more than one policy, so combined payments do not exceed the cost of the care.

Coverage that replaces a portion of the insured's earned income, typically 60 to 70 percent, when illness or injury prevents working; benefits depend on the definition of disability and the waiting period.

The waiting period, counted in days of disability, that must pass after a disability begins before disability income benefits start; a longer period lowers the premium.

Coverage that pays for services such as nursing home care, home care or assisted living when the insured cannot perform a set number of activities of daily living or has a cognitive impairment.

The state agency that licenses insurers, producers and adjusters, examines company finances, enforces the insurance code, and handles consumer complaints about coverage and claim handling.

The official who heads the Arkansas Insurance Department, issues licenses and certificates of authority, adopts rules, holds hearings, and imposes penalties for violations of state insurance law.

The license the Arkansas Insurance Department issues to an insurer before it may transact insurance business in the state; holding one shows the company met capital, solvency and filing requirements.

The notice an insurer files with the state confirming that a licensed producer may sell its products on the company's behalf; the appointment must be in place before the producer writes business for that insurer.

Credit hours a licensed Arkansas producer must complete during each renewal period, including required ethics hours, to keep the license active; records must be kept and reported to the department.

A statutory entity funded by member insurers that pays specified benefits, up to statutory limits, to policyholders of an insolvent life or health insurer licensed in Arkansas.

Prohibited conduct by insurers and producers, such as misrepresentation, rebating, twisting, coercion and unfair claim settlement, that the Commissioner may investigate and penalize with fines or license action.

A short period after a life insurance policy is delivered, generally 10 days, during which the owner may return it for a full refund of the premium paid, without having to give a reason.