FL Life & Health key terms

A financial or personal stake a person has in the continued life or health of the insured, such that the person would suffer a real loss if the insured died or became ill. It must exist when the policy is applied for.

The idea that an insured should be restored to roughly the same financial position as before a loss, no better and no worse. It limits health and disability benefits to actual loss and does not apply to life insurance death benefits.

A contract drafted by one party, the insurer, and offered to the other on a take-it-or-leave-it basis. Because the insured has no bargaining power over the wording, ambiguities are generally interpreted in the insured's favor.

The mutual duty of applicant and insurer to deal honestly and disclose all facts material to the risk. Applicants answer application questions truthfully and insurers explain coverage clearly; a serious breach can allow the insurer to rescind.

Life insurance that pays a death benefit only if the insured dies during a stated period, such as 10, 20, or 30 years. It builds no cash value, so premiums are typically lower than permanent coverage for the same face amount.

Permanent life insurance that stays in force for the insured's entire life, as long as required premiums are paid, and guarantees a cash value plus a level death benefit. Premiums are usually fixed and higher than term.

A flexible permanent policy that separates the death benefit from the cash account. The owner may adjust premium amounts and, within limits, the death benefit, while the insurer credits interest and deducts monthly mortality and expense charges.

The savings portion of a permanent life insurance policy that builds over time and belongs to the policyowner. It can be borrowed against, withdrawn, or received on surrender, and it reduces the insurer's net amount at risk.

A provision stating that after the policy has been in force for a set period, usually two years, the insurer cannot void coverage for misstatements on the application, although it may still adjust benefits for age or sex errors.

The extra time, commonly 30 or 31 days, after a premium due date during which the policy remains in force. If the insured dies within the grace period, the unpaid premium is deducted from the death benefit.

The right to restore a lapsed policy by paying overdue premiums with interest and providing evidence of insurability, usually within a stated number of years. Certain protections, such as a new contestability period, may restart.

Choices that give a policyowner some value if a permanent policy with cash value is surrendered or lapses. The common options are cash surrender, reduced paid-up insurance, and extended term insurance.

The ways a beneficiary may receive life insurance proceeds: lump sum, interest only, fixed-period installments, fixed-amount installments, or life income. The owner usually selects the method, and the beneficiary may choose among alternatives offered.

A beneficiary distribution method in which a deceased beneficiary's share passes to that beneficiary's own descendants rather than being split among surviving beneficiaries. It keeps each family branch's portion intact.

A contract, usually issued by an insurer, that turns a lump sum or a series of payments into a stream of income, often for life. It is designed to protect against outliving one's money in retirement.

The point at which an annuity's accumulated value is converted into regular income payments. Payouts may run for a fixed period or for life, and the choice is generally irrevocable once made.

The fraction of each nonqualified annuity payment that represents a tax-free return of the owner's after-tax cost basis. The remainder is taxable interest, and the ratio applies once payments have been annuitized.

The amount an insured must pay out of pocket for covered services before the health plan begins to pay its share, usually applied per year or per episode of care. Higher deductibles generally mean lower premiums.

The percentage of covered medical costs, after the deductible is met, that the insured and the insurer each pay. For example, an 80/20 plan pays 80 percent and leaves the insured responsible for 20 percent.

The cap on what an insured pays in deductibles, copayments, and coinsurance for covered in-network care during a plan year. Once it is reached, the plan generally pays 100 percent of covered benefits.

A method of deciding which of two or more health plans pays first when a person is covered by more than one, so total benefits do not exceed the actual expense. The primary plan pays first and the secondary plan considers the remainder.

The waiting period, stated in days of disability or days of care, that must pass before disability income or long-term care benefits begin. A longer elimination period reduces the premium.

A disability standard that treats an insured as totally disabled if unable to perform the duties of the occupation he or she was trained for, even if able to work elsewhere. It is more favorable to claimants than an any-occupation standard.

Basic self-care tasks such as bathing, dressing, eating, toileting, transferring, and continence. Long-term care policies commonly begin paying benefits when a person cannot perform a set number of these without help.

Coverage that pays for extended care, such as nursing home, assisted living, or home care, when a person needs help with daily activities because of chronic illness, disability, or cognitive impairment. Benefits are often triggered by lost ADLs.

The single contract a group insurer issues to the employer or other plan sponsor, which sets the terms for everyone covered. Each participant receives a certificate summarizing his or her coverage under that contract.

A group insurance plan in which covered employees or members pay part of the premium. When a plan is contributory, a minimum percentage of eligible individuals usually must enroll before the group coverage is issued.

The right of a person leaving a group plan to convert the group coverage into an individual policy without proving insurability, typically within a limited time after coverage ends. Premiums reflect the person's attained age.

A federal law that lets certain employees and dependents continue group health coverage after a qualifying event such as job loss or divorce, at their own expense, for a limited period set by law and by plan size.

A life insurance policy that fails the federal seven-pay test because it is funded too quickly. Loans and withdrawals are taxed as income first and may face a 10 percent penalty before age 59½.

A tax-free exchange of one life insurance policy, annuity, or qualified long-term care contract for another of the same general type under Internal Revenue Code Section 1035. The original cost basis carries over to the new contract.

Employer-paid group term life coverage of up to $50,000 per employee is not taxable income to the employee. Coverage above that amount creates taxable imputed income figured from IRS Table I rates.

The authorization an insurer gives a licensed agent to act on its behalf and sell its products. In Florida, an agent must be appointed by the insurer before soliciting or transacting that insurer's business.

The state agency that regulates insurers doing business in Florida, reviewing policy forms and rates, issuing insurer certificates of authority, and enforcing the insurance code. Licensing of agents is handled by the Department of Financial Services.

The legal obligation of an agent or producer to act in the best interest of the client or insurer and to handle money held for others responsibly, including promptly remitting premiums and never commingling funds.

The agent's role in gathering accurate information about the applicant, completing the application, and deciding whether to submit the case, helping the insurer classify risk and avoid adverse selection.

A receipt given with the initial premium that provides temporary coverage as of the date of application or medical exam, provided the applicant proves insurable and all stated conditions are met. Otherwise no coverage exists.

A transaction in which new life insurance or an annuity is purchased and existing coverage is lapsed, surrendered, or reduced. Florida requires a signed replacement notice and disclosure comparing the old and new policies.

An unfair trade practice of using misleading or incomplete statements to persuade a policyholder to drop existing insurance and buy a different policy. The misrepresentation must be what induces the replacement.

Giving or offering anything of value to an applicant as an inducement to buy insurance, other than items the law allows. It is prohibited in Florida as an unfair trade practice and can lead to license penalties.