KY Life & Health key terms

The state agency that licenses insurers and producers, approves policy forms and rates, investigates consumer complaints, and enforces Kentucky's insurance code through fines, license suspension, or revocation.

A license issued by the Kentucky Department of Insurance that authorizes an insurer to transact specific lines of insurance business in the state; operating without one is unlawful.

A Kentucky producer license granted to someone already licensed in a home state, usually issued through reciprocity so the producer can solicit Kentucky business without retaking the state exam.

An unfair trade practice in which a producer induces a policyholder to lapse, surrender, or replace coverage by misrepresenting the terms of the existing policy or the replacement policy.

Offering any part of a producer's commission, or anything of value not stated in the policy, to induce a person to buy insurance; it is prohibited as an unfair trade practice in Kentucky.

A financial or love-and-affection relationship that would cause a person to suffer a genuine loss if the insured died; it must exist when the life policy is purchased.

The tendency of people with the greatest likelihood of loss to seek or keep insurance, forcing insurers to price coverage carefully and underwrite to avoid disproportionate claims.

A statistical principle holding that the more similar exposure units an insurer covers, the more closely actual losses will match predicted losses, making rates more reliable.

An insurance contract in which the amounts exchanged by the parties are unequal and depend on chance, since the insurer may pay far more or far less than the premiums collected.

An arrangement in which one insurer transfers part of its risk to another insurer to limit large losses and free up capacity to write additional business.

A method of estimating how much life insurance a person needs by calculating the present value of the income and services that person would have provided to dependents.

A receipt given when an application and initial premium are submitted, providing temporary coverage that begins only if the proposed insured meets the insurer's underwriting requirements.

The producer's role in gathering accurate information on the application, reporting known risk factors, and submitting a complete, honest application so the insurer can properly classify the risk.

A beneficiary distribution method in which a deceased beneficiary's share passes to that beneficiary's own heirs, who divide it among themselves by right of representation.

The person or entity named to receive policy proceeds if the primary beneficiary dies before the insured, or before all proceeds have been paid out.

Level-premium term insurance whose face amount declines on a schedule over the policy period, often used to match a shrinking debt such as a mortgage.

A life policy that entitles the owner to share in the insurer's divisible surplus through dividends, which are not guaranteed and are treated as a return of premium for tax purposes.

A policy provision stating that after the policy has been in force for a set period, usually two years, the insurer can no longer void coverage for material misstatements on the application.

A specified period, commonly 31 days, after a premium due date during which the policy stays in force; a death during that time has the unpaid premium deducted from the benefit.

Guaranteed choices available when a cash value policy is surrendered or lapses, allowing the owner to take the cash value, reduced paid-up insurance, or extended term insurance.

A loan from the insurer secured by a permanent policy's cash value; interest accrues, and any unpaid balance plus interest reduces the death benefit or cash value.

A rider that pays the policy's premiums while the insured remains totally disabled beyond a stated waiting period, keeping the coverage and cash values intact.

A rider that lets a terminally or chronically ill insured receive part of the policy's face amount early, with the remaining benefit reduced accordingly.

A short window after delivery of a policy, generally ten days for individual life coverage in Kentucky, during which the owner may return it for a full premium refund.

The process of converting an annuity's accumulated value into a stream of periodic payments, either for a fixed period or for life.

A fee imposed by an insurer when an annuity or cash value policy is surrendered during the early policy years, used to recover the insurer's selling costs.

The fraction of each annuity payment that represents a tax-free return of the annuitant's after-tax cost basis, found by dividing investment in the contract by expected return.

A life policy funded with more premium than the seven-pay test allows, causing loans and withdrawals to be taxed like annuity distributions and possibly penalized before age 59 1/2.

A tax-free transfer of a life insurance policy, annuity, or qualified long-term care contract into a like-kind contract under the Internal Revenue Code.

The percentage of covered expenses, after the deductible, that the insured and the insurer each pay according to the policy, such as an 80/20 split.

A physical or mental condition for which the covered person received diagnosis, care, or treatment during a defined look-back period before coverage began; benefits may be delayed or limited.

A disability definition that pays benefits when the insured cannot perform the material duties of the occupation he or she was trained for, even if other work is available.

A benefit that pays a portion of the monthly amount when the insured returns to work but earns less income, or cannot perform some duties, because of disability.

The waiting period at the start of a disability or long-term care claim during which no benefits are paid; a longer period reduces the premium.

A provision that determines the order in which two or more health plans pay, so combined payments do not exceed the cost of covered services.

Basic self-care tasks such as bathing, dressing, eating, toileting, transferring, and continence, used to trigger long-term care benefits under a policy.

A right allowing a person covered under a group or term policy to change to an individual permanent policy, usually without evidence of insurability, within a stated time.

A managed care organization that provides comprehensive medical services to members through a network of contracted providers in exchange for a fixed prepaid premium.