FL Life & Health flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Insurable interest

A financial or relationship-based stake in the continued life of the insured, required at policy inception for life insurance; without it the contract would be a wagering agreement and is void.

Aleatory contract

A contract in which the values exchanged by the parties are unequal and depend on an uncertain future event, such as death, which may occur early or not at all.

Law of large numbers

The principle that as the number of similar exposure units increases, actual losses more closely predict expected losses, allowing insurers to set more accurate rates and premiums.

Level term insurance

Pure protection policy with a fixed death benefit and level premium for a specified number of years, no cash value, and typically convertible or renewable features.

Variable life insurance

Permanent policy whose cash value is invested in separate subaccounts; the owner bears investment risk, and the sale requires both a life license and securities registration.

Modified endowment contract

A life policy that fails the seven-pay test, causing loans and distributions to be taxed on a last-in first-out basis, possibly with a ten percent penalty.

Survivorship life insurance

Second-to-die coverage insuring two people that pays a death benefit after the second death, typically used to fund estate tax liability and settlement costs.

Incontestability clause

Provision stating that after the policy has been in force for generally two years, the insurer can no longer contest the policy based on misstatements in the application.

Nonforfeiture options

Cash value choices available when a whole life policyowner stops paying premiums: cash surrender, reduced paid-up insurance, or extended term insurance.

Settlement options

Choices for how the insurer pays a death benefit: lump sum, interest only, fixed period, fixed amount, or a life income arrangement.

Misstatement of age provision

Provision that adjusts the death benefit to the amount the premium actually paid would have purchased at the insured's true age, rather than voiding the policy.

Exclusion ratio

The portion of each annuity payment considered a tax-free return of the owner's after-tax investment, calculated as investment in the contract divided by expected return.

Annuitization

The conversion of an annuity's accumulated value into a stream of periodic income payments that continues over a chosen payout period, usually irrevocable once started.

Fixed annuity

Contract in which the insurer guarantees a minimum interest rate during accumulation and a fixed payment amount during payout, placing investment risk on the insurer.

Coinsurance

The percentage of covered medical costs, after the deductible, that the insured and insurer share; an eighty-twenty plan leaves the insured responsible for twenty percent.

Out-of-pocket maximum

The most an insured pays in a plan year for covered in-network expenses, after which the insurer generally pays one hundred percent of covered benefits.

Medicare Part B

Voluntary federal medical insurance covering physician services, outpatient care, durable medical equipment, and preventive services, funded by premiums and general revenue.

Elimination period

The waiting period between the onset of a disability or long-term care stay and the start of benefit payments; a longer period reduces the premium.

Any occupation definition

Disability standard that pays only if the insured cannot perform the duties of any occupation for which they are reasonably suited by education, training, or experience.

Long-term care ADL trigger

Benefits become payable when the insured cannot perform at least two of six activities of daily living for an expected period of ninety days or more.

Master policy

The single contract issued to an employer or other group sponsor; covered individuals receive certificates summarizing coverage but are not parties to the contract.

COBRA continuation

Federal law letting employees and dependents keep group health coverage after a qualifying event, generally eighteen months for termination and thirty-six months for dependents.

Conversion privilege

Right of a group insured to convert group coverage to an individual policy without proving insurability, usually within thirty-one days after group coverage ends.

Section 1035 exchange

A tax-free exchange of an existing life insurance policy or annuity for a new annuity or life policy, deferring gain that would otherwise be recognized.

Table I imputed income

The cost of employer-provided group term life coverage above fifty thousand dollars, reported as taxable income to the employee using IRS-provided rates.

Taxation of disability benefits

Benefits are taxed as ordinary income when the employer paid the premiums with pre-tax dollars, but are tax free when the employee paid premiums with after-tax dollars.

Florida 2-15 license

A Florida agent license authorizing the sale of life insurance, health insurance, and variable annuities; it requires a state exam, an appointment, and continuing education.

Fiduciary premium handling

Agents who collect premiums hold those funds in trust for the insurer; commingling them with personal funds is prohibited and can result in license discipline.

Conditional receipt

A receipt making coverage effective as of the application date and premium payment, provided the applicant proves insurable under the insurer's underwriting rules.

Material misrepresentation

A false statement on an application that would have influenced the insurer's decision to issue coverage or set the premium, allowing the insurer to rescind.

Twisting

An unfair trade practice in which an agent uses misrepresentation or an incomplete comparison to persuade a policyholder to lapse or surrender existing coverage.

Rebating

Offering part of the commission, an unearned premium refund, or any inducement not stated in the policy to persuade a buyer to purchase insurance; illegal in Florida.