IA 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 love-and-affection interest in a person's continued life that must exist at the time the life insurance application is made; without it the contract is void.

Adverse selection

The tendency of people with greater-than-average risk to buy or keep insurance. Insurers counter it through underwriting, exclusions, waiting periods, and premium classification.

Aleatory contract

A contract in which the values exchanged are unequal and depend on an uncertain event; the insured may pay small premiums and receive a large death benefit, or receive nothing.

Contract of adhesion

A contract drafted by one party (the insurer) and accepted or rejected by the other; ambiguities are interpreted against the drafter, the insurer.

Law of large numbers

Statistical principle that as the number of similar, independent exposure units increases, actual losses more closely match expected losses, making premiums more predictable and stable.

Subrogation

The insurer's right, after paying a claim, to recover those costs from the negligent third party responsible for the loss; it applies to health insurance, not life insurance.

Waiver and estoppel

Waiver is the voluntary surrender of a known right; estoppel prevents a party from later asserting a right it has waived if another relied on that waiver to their detriment.

Moral hazard

A risk factor arising from the insured's dishonesty or character, such as filing false claims or intentionally causing a loss; it increases the chance of loss and may make a person uninsurable.

Grace period

A period, typically 30 days after a premium due date, during which the policy remains in force; if death occurs, the unpaid premium is deducted from the benefit.

Incontestability clause

After the policy has been in force for two years from issue, the insurer cannot contest the contract or deny a claim for misrepresentation in the application, except for nonpayment of premium.

Suicide clause

A provision limiting payment if the insured dies by suicide within a stated period, usually two years of issue; the insurer instead returns the premiums paid.

Reinstatement provision

Allows a lapsed policy to be restored, usually within three years, on proof of insurability and payment of overdue premiums with interest; a new contestability period generally begins.

Nonforfeiture options

Choices available when a whole life policy with cash value is surrendered or lapses: cash surrender, reduced paid-up insurance, or extended term insurance.

Automatic premium loan

An option that lets the insurer borrow from the cash value to pay a premium unpaid at the end of the grace period, preventing lapse; the loan plus interest reduces the death benefit.

Misstatement of age provision

If the insured's age or sex was misstated, the insurer adjusts the death benefit to the amount the premium paid would have purchased at the correct age and sex.

Universal life insurance

Flexible-premium permanent coverage with an unbundled structure: the insurer credits interest to the cash value and deducts monthly mortality and expense charges; the death benefit and premium are adjustable.

Coinsurance

The percentage of covered expenses, after the deductible, that the insured pays, for example 20 percent, with the insurer paying the remaining 80 percent up to the out-of-pocket maximum.

Elimination period

The waiting period after a disability or illness begins before benefits become payable; a longer elimination period lowers the premium because it reduces the insurer's exposure.

Own-occupation definition

A disability income definition that pays benefits when the insured cannot perform the duties of the occupation held at the time of disability; it is the most favorable definition for the insured.

Guaranteed renewable policy

The insurer must renew the policy at the insured's option while premiums are paid, but may raise premiums for an entire class of policyholders; it cannot cancel one individual.

Coordination of benefits

Rules that set the order in which two health plans pay so combined payments do not exceed the covered expense; the primary plan pays first, the secondary pays the balance.

Residual disability benefit

Pays a reduced, proportional benefit when the insured returns to work at lower income because of disability, instead of requiring total inability to work.

Stop-loss limit

The maximum out-of-pocket amount an insured must pay for covered expenses in a benefit period; after it is reached, the insurer pays 100 percent of covered charges.

Birthday rule

For dependent children covered under both parents' group plans, the plan of the parent whose birthday falls earlier in the calendar year is primary.

Iowa Insurance Division

The state agency that regulates insurers, producers, and insurance transactions in Iowa, headed by the Commissioner of Insurance, who is appointed by the Governor.

Producer fiduciary duty

Premiums and funds collected from applicants belong to the insurer or the insured, not the producer; commingling them with personal funds is prohibited and grounds for license action.

Rebating

Offering or giving anything of value, such as cash or commissions, that is not specified in the policy to induce a purchase of insurance; it is an illegal unfair trade practice.

Twisting

Using misrepresentation or an incomplete comparison to induce a policyholder to lapse, surrender, or replace an existing policy; it is a prohibited unfair trade practice in Iowa.

Iowa producer continuing education

Licensed Iowa producers must complete 24 hours of approved continuing education every two years, including at least 3 hours of ethics, to renew the license.

Appointment of a producer

An insurer's written authorization allowing a producer to represent it; the insurer must file the appointment with the Iowa Insurance Division, and it continues until terminated and reported.

Iowa guaranty association coverage

For an insolvent insurer, the Iowa Life and Health Insurance Guaranty Association covers up to $300,000 in life death benefits, $100,000 in net cash surrender value, and $250,000 in annuity present value per individual.

Cease and desist order

An order the Iowa Commissioner may issue after a hearing requiring a person to stop a practice that violates insurance law; violating it can bring fines and license suspension.