IN Life & Health flashcards

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

McCarran-Ferguson Act

The 1945 federal law that left regulation of the business of insurance primarily to the states, while federal antitrust laws apply only where states do not regulate.

Twisting

A prohibited practice in which a producer misrepresents a policy to induce a policyholder to lapse or replace existing coverage, often to earn a new commission.

Pure risk

A risk that involves only the chance of loss or no loss, with no possibility of gain; it is the type of risk generally considered insurable.

Adverse selection

The tendency of people with higher-than-average risk to seek insurance more often than lower-risk people, which can raise costs unless controlled by underwriting.

Insurable interest

A financial or legal relationship that gives a person a legitimate reason to insure another's life; it must exist when the policy is issued.

Human life value

An insurance needs method that calculates the present value of an insured's future earnings available to dependents after personal expenses.

Modified endowment contract

A life policy that fails the seven-pay test; withdrawals are taxed as income first and may incur a 10% penalty before age 59½.

Term life insurance

Coverage that provides a death benefit for a specified period and builds no cash value; it is pure protection.

Universal life insurance

Permanent coverage with flexible premiums and an adjustable death benefit; the cash value earns interest and monthly cost of insurance is deducted.

Survivorship life insurance

A joint policy that pays the death benefit after the second insured dies, commonly used to fund estate taxes.

Incontestability clause

A life insurance provision that prevents the insurer from contesting the policy for misrepresentation after it has been in force for two years, except for nonpayment.

Grace period

A period after a premium due date during which coverage remains in force; life policies commonly allow 30 or 31 days.

Waiver of premium rider

A rider that pays premiums if the insured becomes totally disabled, keeping the policy in force without further premium payments.

Annuity

A contract in which an insurer accepts a sum of money and makes periodic payments, usually for life, protecting against longevity risk.

Exclusion ratio

For nonqualified annuity payments, the percentage of each payment excluded from income, calculated as investment in the contract divided by expected return.

1035 exchange

A tax-free transfer of a life insurance policy or annuity to a new contract under Internal Revenue Code Section 1035.

HMO

A managed care plan that uses a network and primary care gatekeeper; care outside the network is generally not covered except in emergencies.

Coordination of benefits

A provision that determines which of two health plans pays first and which pays second, preventing duplicate payment for the same expenses.

COBRA

A federal law that allows qualified beneficiaries to continue group health coverage for 18, 29, or 36 months after a qualifying event, at their own expense.

Guaranteed renewable policy

A health policy the insurer must renew at the insured's option; the insurer may increase premiums for an entire class but not cancel the individual.

Preexisting condition

An illness or injury diagnosed or treated before health coverage begins; exclusion periods are limited by federal and state rules.

Conversion privilege

A group health provision allowing an insured to convert group coverage to an individual policy without providing evidence of insurability.

Elimination period

The waiting period after a disability begins before disability income benefits become payable; it acts like a deductible in time.

Own-occupation definition

A disability definition that pays benefits when the insured cannot perform the duties of their own occupation, even if able to work elsewhere.

Residual disability benefit

A partial disability benefit that pays a percentage based on the insured's loss of income rather than requiring complete inability to work.

Medigap

Private Medicare Supplement insurance that helps pay Medicare cost-sharing such as deductibles and coinsurance; plans are standardized by letter.

Out-of-pocket maximum

The most an insured must pay for covered services in a plan year before the plan pays 100% of covered expenses.

Activities of daily living

Basic self-care tasks used as long-term care benefit triggers: bathing, dressing, eating, toileting, transferring, and continence.

Nonforfeiture benefit

A long-term care policy feature that provides a reduced benefit or return of premiums if the insured lets the policy lapse after paying premiums for a required period.

Hospital indemnity policy

A health policy that pays a fixed daily or per-admission benefit for a hospital stay, regardless of the actual medical expenses.

Critical illness insurance

Coverage that pays a lump sum when the insured is diagnosed with a covered serious condition such as cancer, heart attack, or stroke.

Health savings account

A tax-advantaged account paired with a high-deductible health plan; contributions are deductible and qualified withdrawals for medical expenses are tax-free.