DC Life & Health key terms

A license issued by the DC Department of Insurance, Securities and Banking that authorizes an insurer to transact insurance business in the District. An insurer must hold one before selling policies there.

A state-issued credential that allows an individual or business to sell, solicit, or negotiate insurance contracts. Producers must meet prelicensing education, exam, and continuing education requirements and may sell only in the lines they are licensed for.

The legal obligation of an insurance producer to act in the client's best interest when handling premium money and policy transactions. Premiums held for an insurer must be kept separate and accounted for accurately.

An unfair trade practice in which a producer uses misrepresentation or incomplete comparisons to persuade a policyholder to drop existing coverage and buy a replacement policy, usually to the client's disadvantage.

A financial stake in the continuation of a person's life or health such that the insured's death or illness would cause a genuine economic loss. It must exist when a life policy is purchased, or the contract is void.

The principle that insurance restores the insured to approximately the same financial position held before a loss, without allowing a profit from the loss. Life insurance is a valued contract, so indemnity applies more strictly to health and property coverage.

The principle requiring both insurer and applicant to deal honestly and disclose all material facts. The applicant must answer questions truthfully, and the insurer must clearly explain what the policy covers and excludes.

The tendency of people at higher-than-average risk to seek insurance more often than low-risk people. Insurers counter it through underwriting, exclusions, waiting periods, and premium rating so that claims costs remain predictable.

The stated death benefit of a life insurance policy, paid to the beneficiary when the insured dies while coverage is in force. It is also called the death benefit or the policy's principal sum.

The savings-like portion of permanent life insurance that builds over time and belongs to the policyowner. The owner can borrow against it, withdraw it, or receive it when the policy is surrendered or endows.

The person, business, or trust named in a life insurance policy to receive the death benefit when the insured dies. A primary beneficiary is paid first, and a contingent beneficiary is paid only if the primary is unavailable.

The amount a policyowner pays to keep an insurance policy in force, usually paid monthly, quarterly, semiannually, or annually. Premiums reflect risk factors such as age, health, and type of coverage, plus the insurer's expenses and profit.

Life coverage that provides a death benefit for a set period, such as 10, 20, or 30 years, and pays nothing if the insured lives beyond that term. It typically has no cash value and costs less than permanent coverage.

A permanent life policy with level premiums, a guaranteed death benefit, and guaranteed cash value that grows over the insured's lifetime. Premiums are usually paid for life or until a stated age, and coverage does not expire.

A permanent life policy with flexible premiums and an adjustable death benefit. The policy has a cash account that earns interest, and charges for cost of insurance are deducted from that account each month.

A permanent life policy whose cash value and sometimes death benefit are invested in mutual funds selected by the owner. Because investment risk is borne by the owner, it is a securities product requiring a prospectus.

A policy provision stating that after the policy has been in force for a set period, usually two years, the insurer cannot contest the contract or deny a claim based on misstatements in the application.

The time allowed, commonly 30 or 31 days after a premium due date, during which the policy stays in force even though payment is late. If the insured dies during this period, the overdue premium may be deducted from the benefit.

The process of restoring a lapsed life insurance policy by proving insurability and paying overdue premiums plus interest. Reinstated policies usually restart the contestable period and may reduce the policy's cash value.

Choices available to a whole life policyowner who stops paying premiums, allowing the accumulated cash value to be used rather than lost. Common options are cash surrender, reduced paid-up insurance, and extended term insurance.

Money borrowed from an insurer using a permanent policy's cash value as collateral. The loan accrues interest, and any unpaid balance plus interest is deducted from the death benefit or surrender value.

An insurance contract that accumulates money and then pays the annuitant a series of income payments, often for life. It is designed to protect against outliving one's savings and can be immediate or deferred.

The period during which an annuity's funds grow tax-deferred through premiums and investment earnings before any income payments begin. Surrender charges and withdrawal rules often apply during this time.

The point at which an annuity owner converts the accumulated funds into a stream of regular income payments. Once annuitized, the choice is generally irrevocable and payment amounts depend on the selected payout option.

The amount an insured must pay out of pocket for covered health services before the insurer begins to pay its share. Deductibles reset each plan year and do not apply to every service.

The percentage of covered medical costs that the insured pays after the deductible is met, such as 20 percent while the insurer pays 80 percent. It continues until the out-of-pocket maximum is reached.

The most an insured will pay in a plan year for covered in-network care, including deductibles, copayments, and coinsurance. After reaching it, the insurer pays 100 percent of covered benefits for the rest of the year.

A health condition for which the insured received diagnosis or treatment before the new plan's effective date. Under current federal rules, group and individual major medical plans generally cannot exclude coverage for pre-existing conditions.

A waiting period in a disability income policy during which no benefits are paid after the disability begins. It functions like a deductible measured in time, and longer periods reduce the premium.

The rules that determine how two health plans share the cost of a claim when a person is covered by more than one plan. One plan pays primary, and the other may pay secondary up to covered expenses.

A health policy provision that lets the insured renew coverage at each premium due date without proving insurability. The insurer can raise premiums for an entire class of policyholders but cannot cancel the individual policy.

The group insurance contract issued to an employer or other sponsoring organization that covers all eligible members. Individual participants receive a certificate of coverage that summarizes their rights and benefits under the master policy.

A document given to a person covered under a group insurance plan that describes the benefits, limitations, and exclusions of the group master policy. It is not the contract itself but evidence of coverage.

A federal law that lets eligible employees and dependents continue group health coverage for a limited time after a qualifying event such as job loss, reduced hours, divorce, or a dependent aging out. The individual usually pays the full premium.

The hospital insurance portion of Medicare, covering inpatient hospital stays, skilled nursing facility care after a hospital stay, hospice, and some home health care. Most people qualify without paying a premium based on work history.

The medical insurance portion of Medicare, covering doctor visits, outpatient care, preventive services, and some medical equipment. It requires a monthly premium and has an annual deductible and coinsurance.

A private plan approved by Medicare that provides Part A and Part B benefits, and often Part D drug coverage, in place of original Medicare. Plans may use networks and may include extra benefits such as dental or vision.

A private supplemental policy sold to people with original Medicare to help pay costs that Medicare does not cover, such as deductibles, coinsurance, and copayments. Medigap plans are standardized by letter and do not include drug coverage.