DE Life & Health key terms

A license issued by a state insurance department that allows an insurer to transact insurance business in that state. An insurer must obtain one in every state where it operates.

An insurer not licensed in a state that may sell coverage there through a specially licensed broker when admitted insurers will not write the risk. Policyholders generally get no guaranty fund protection.

An unfair trade practice in which a producer uses misleading or false statements to persuade a policyholder to drop one policy and buy another, usually to earn a new commission.

A state-created entity funded by insurers that pays covered claims of policyholders when a licensed insurer becomes insolvent, up to statutory limits. It is not a government insurance program.

A financial stake in a person's continued life or health such that the buyer would suffer a real economic loss if that person died. It must exist when a life policy is purchased.

An insurance contract in which the amounts exchanged by the parties are unequal and depend on chance. A small premium may buy a large death benefit, or nothing may be paid at all.

An insurance policy drafted by the insurer and offered to the buyer on a take-it-or-leave-it basis. Because the insurer writes the wording, ambiguities are interpreted in the insured's favor.

The principle that both parties to an insurance contract must deal honestly and disclose material facts. Insurers rely on applicant disclosures rather than inspecting the risk themselves.

The death benefit stated on the face of a life insurance policy, payable to the beneficiary when the insured dies unless the policy provides otherwise. It does not include dividends or rider benefits.

The savings component of permanent life insurance that builds over time and is paid if the policy is surrendered. It also supports policy loans and the nonforfeiture options.

The person or entity named in a life insurance policy to receive the death proceeds. Designations may be revocable or irrevocable and are chosen by the policyowner.

A receipt given at application that provides temporary life coverage, typically effective the date of the application or medical exam, provided the proposed insured proves insurable under the insurer's rules.

Pure protection for a specified number of years with no cash value. It pays the face amount only if the insured dies during the term while the policy is in force.

Permanent coverage for the insured's entire lifetime with level premiums, guaranteed cash value, and a guaranteed death benefit. Premiums are usually payable to age 100 or for life.

Permanent insurance with a cash account that earns interest and is charged monthly for expenses and cost of insurance. Owners may vary premium payments and raise the death benefit with insurability proof.

Permanent insurance whose cash value and, if chosen, death benefit fluctuate with the performance of separate accounts the owner selects. It is a security, requiring a prospectus and a securities license.

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

A period, commonly 30 or 31 days after a premium due date, during which the policy stays in force although the premium is unpaid. A death during this period still pays, minus the premium due.

Choices available when a cash-value policy lapses, letting the owner take the accumulated value as cash, reduced paid-up insurance, or extended term insurance.

A rider or provision allowing a terminally or chronically ill insured to receive part of the death benefit early. The amount received is subtracted from the eventual death benefit.

A rider that excuses premium payments if the insured becomes totally disabled for a stated period, usually six months, while keeping the policy and its benefits in force.

The person whose life expectancy determines the amount and duration of annuity payments. The annuitant may be different from the contract owner, who controls the contract.

The phase of an annuity during which premiums are paid and the account earns interest or investment returns tax-deferred, before any income payments begin.

The process of converting an annuity's accumulated value into a stream of regular income payments that continues for a chosen period or for life.

A fee charged by an insurer when an annuity or cash-value policy is cashed out early, typically during the first several contract years, to recover the cost of acquiring the business.

A tax-free transfer of an existing life insurance policy, annuity, or endowment into a new one of like kind, permitted under Internal Revenue Code Section 1035 without recognizing gain.

A life insurance policy that fails the seven-pay test and loses favorable tax treatment. Loans and withdrawals are taxed as income first and may incur a 10% penalty before age 59½.

The feature whereby interest or investment earnings inside a life insurance policy or annuity are not taxed each year but accumulate until withdrawn or paid out as a death benefit.

The amount an insured must pay out of pocket for covered health services each year before the insurer begins paying its share of the bill.

The percentage of covered health care costs, after the deductible is met, that the insured pays, with the insurer paying the remainder. For example, 80/20 means the insured pays 20%.

Rules that determine which of two health plans pays first when a person is covered by more than one, so that combined payments do not exceed the covered expense.

A health condition for which the insured received a diagnosis or treatment before a new policy's effective date, and which may be excluded from coverage for a stated period.

A health plan that contracts with a provider network for a fixed monthly fee. Care is coordinated through a primary care physician, and non-emergency out-of-network care is generally not covered.

A health plan offering a network of preferred providers at negotiated rates. Members may use out-of-network providers at a higher cost, often without a referral from a primary care physician.

Coverage that replaces a portion of the insured's income, usually 60% to 70%, when illness or injury prevents working. Benefits begin after an elimination period and follow an occupation-based definition.

The federal health insurance program for people 65 and older and for certain disabled individuals, made up of Part A hospital coverage, Part B medical coverage, Part C Medicare Advantage, and Part D drug coverage.

A joint federal-state program that provides health coverage to low-income children, pregnant women, older adults, and people with disabilities, with eligibility rules set by each state.

A federal law requiring employers with 20 or more workers to let departing employees and their dependents continue group health coverage for a limited time at their own expense.

A federal law that protects the privacy of health information, sets portability rules for group coverage, and limits exclusions for pre-existing conditions when a person moves between group plans.