GA Life & Health key terms

A license issued by a state insurance department that authorizes an insurer to transact insurance business in that state. Without one, the company cannot legally sell policies there.

The formal authorization an insurer files with the state giving a licensed producer the authority to sell that insurer's products. A producer generally cannot submit business for a company until appointed.

The legal obligation of a producer or insurer to hold money belonging to clients or insurers, such as premiums, in a trust account and use it only for the purpose intended.

Using misleading or incomplete comparisons to persuade a policyholder to drop an existing policy and buy a different one. It is an unfair trade practice prohibited by state law.

Offering a client part of the producer's commission, or anything else of value not stated in the policy, as an inducement to buy insurance. It is prohibited as an unfair trade practice.

Surrendering, lapsing, or borrowing against an existing life policy in order to buy a new one. Insurers must give the applicant a disclosure notice comparing the old and new coverage.

A required period, commonly ten days after a life policy or annuity is delivered, during which the owner may return it for a full premium refund without giving a reason.

A financial or emotional stake in the continued life of the insured that justifies buying insurance on that person. It must exist at the time the policy is applied for.

The principle that insurance should restore the insured to roughly the same financial position as before a loss rather than create a profit. Life insurance pays a stated amount, so it is valued rather than strictly indemnity.

The mutual duty of applicant and insurer to deal honestly and to disclose all material facts. A material misrepresentation or concealment can allow the other party to void the contract.

A policy drafted by the insurer and offered to the applicant on a take-it-or-leave-it basis. Because the insured had no part in writing it, ambiguities are generally resolved in the insured's favor.

An agreement in which the values exchanged are unequal and depend on chance. The insured may pay modest premiums and receive a large benefit, or may receive nothing at all.

Waiver is the voluntary giving up of a known right. Estoppel prevents the party who waived that right from later asserting it if the other party reasonably relied on the waiver.

The tendency of people with higher than average risk to seek insurance more eagerly than low-risk people. Insurers counter it through underwriting, exclusions, and properly set premiums.

Coverage that lasts a set number of years and pays a death benefit only if the insured dies during that period. It builds no cash value and is often renewable or convertible.

Permanent coverage that stays in force for the insured's lifetime as long as required premiums are paid, featuring level premiums and guaranteed cash value accumulation.

Permanent coverage with flexible premium payments and a separately tracked cash value that earns interest. The policy remains in force as long as the cash value covers the cost of insurance.

Permanent coverage whose cash value is invested in subaccounts the owner selects. Because the owner bears the investment risk, selling it also requires a securities license.

Choices that let a policyowner keep some of the value built up when a cash value policy lapses, typically cash surrender, reduced paid-up insurance, or extended term insurance.

A provision stating that after the policy has been in force for a set period, usually two years, the insurer can no longer contest the policy or deny a claim because of a misstatement on the application.

A policy provision stating that if the insured's age was reported incorrectly, the insurer adjusts the benefit to what the premium paid would have purchased at the correct age instead of voiding coverage.

A provision authorizing the insurer to use available cash value to pay an overdue premium at the end of the grace period, preventing an unintended lapse of coverage.

A beneficiary arrangement in which a deceased beneficiary's share passes to that beneficiary's own descendants rather than being divided among the remaining named beneficiaries.

A life policy funded so heavily in its early years that it loses favorable tax treatment. Loans and withdrawals are taxed like annuity distributions, with a penalty before age 59 and a half.

The point at which an annuity's accumulated funds are converted into a stream of income payments, usually guaranteed for life or for a specified period.

An annuity bought with a single payment that begins paying income within a year, often within a month. It has no meaningful accumulation phase.

An annuity that guarantees a minimum interest rate during accumulation and a fixed payment amount each benefit period. The insurer bears the investment risk.

An annuity whose value rises and falls with the performance of investment subaccounts selected by the owner. The owner bears the investment risk, so a securities license is required to sell it.

A fee charged when an annuity or cash value life policy is cashed out early, usually a percentage of the account value that declines each year during the surrender period.

The calculation that determines how much of each annuity payment is a tax-free return of the owner's after-tax investment; the remaining portion is taxed as ordinary income.

The amount the insured must pay toward covered medical expenses during a benefit period before the insurer begins paying its share of the bill.

The percentage of covered expenses the insured pays after the deductible is satisfied, for example 20 percent, with the insurer paying the remaining share.

A cap on the covered costs an insured pays in a benefit period, including deductibles, copayments, and coinsurance. Once it is reached, the plan pays 100 percent of covered care.

A managed care plan in which members receive care through a network of contracted providers paid largely in advance. Non-emergency care outside the network is generally not covered.

A managed care plan that contracts with a provider network but still pays partial benefits for covered out-of-network care, usually with higher cost sharing for the member.

The waiting period, measured in days, between the start of a disability or other covered loss and the date benefit payments begin.

A disability standard that pays benefits when the insured cannot perform the duties of their own specific occupation, often for a limited time, even if other work is available.

Rules that decide which of two or more health plans pays first when a person is covered by more than one plan, so combined payments do not exceed the cost of care.