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

1945 federal law that reserves regulation of the business of insurance to the individual states and exempts insurance from most federal antitrust law while state regulation exists.

Appointment

An insurer's authorization of a licensed producer to represent it for a specific line of insurance; soliciting business without a valid appointment is typically unlawful.

Fiduciary responsibility

A producer's duty to hold premiums and insurer funds in a trust capacity, keep them separate from personal money, and account for them accurately.

Insurable interest

A financial or love-and-affection relationship with the insured such that the policyholder benefits from that person's continued life and suffers loss at death.

Contract of adhesion

A policy drafted by the insurer and accepted or rejected by the applicant; because the insurer writes it, ambiguities are interpreted against the insurer.

Moral hazard

A risk factor arising from an applicant's dishonest tendencies or character, such as a fraud history, that increases the likelihood or size of a loss.

Conditional receipt

A receipt giving temporary coverage from the application date only if the proposed insured satisfies the insurer's underwriting requirements; if not, no coverage existed.

Primary beneficiary

The person or entity first entitled to receive policy proceeds at the insured's death; a contingent beneficiary receives them only if the primary is unavailable.

Human life value

An approach to estimating needed coverage by capitalizing the insured's future earnings and services that would be lost by premature death.

Decreasing term

Term insurance whose face amount steadily declines over the policy period while the premium stays level, often used to match a declining mortgage balance.

Universal life option B

An increasing death benefit equal to the level specified amount plus accumulated cash value, with cost of insurance charged on the total amount at risk.

Variable life insurance

Permanent coverage whose cash value is invested in a separate account of subaccounts; it is a security requiring a prospectus and a registered representative license.

Incontestability clause

After a life policy has been in force two years, the insurer cannot deny a claim or rescind for application misstatements, except for nonpayment of premium.

Reduced paid-up option

A nonforfeiture option using cash value to buy a smaller face amount of whole life coverage with no further premiums, remaining in force for life.

Waiver of premium rider

A rider that waives premiums after the insured is totally disabled for a stated period, usually six months, and refunds premiums paid during that waiting period.

Exclusion ratio

The portion of each annuity payment treated as a tax-free return of the investment in the contract, computed by dividing the investment by expected return.

Straight life annuity

A payout option providing income for the annuitant's lifetime only; it produces the largest payment but nothing is paid to survivors after death.

Accumulation units

Units credited to a variable annuity during the accumulation phase; their value fluctuates with the investment performance of the separate account.

Modified endowment contract

A life policy that fails the seven-pay test; loans and withdrawals are taxed income first with a 10% penalty before age 59 1/2.

Section 1035 exchange

A tax-free replacement of a life policy, annuity, or qualified long-term care policy with a like-kind contract, deferring recognition of gain.

Group term over $50,000

Employer-paid group term life coverage above $50,000 creates imputed taxable income for the employee equal to the IRS Table I cost of the excess.

Coinsurance clause

A cost-sharing provision requiring the insured to pay a specified percentage of covered expenses after the deductible while the insurer pays the remainder.

Noncancellable policy

The insured may keep the policy in force by paying premiums, and the insurer cannot cancel or raise the premium before the stated age.

Morbidity rate

The statistical measure of the frequency and severity of illness or injury within a population, used by insurers to price health insurance coverage.

Coordination of benefits

Rules establishing the order in which multiple health plans pay so that total benefits do not exceed the covered expenses of the claim.

Change of occupation provision

If the insured switches to a more hazardous occupation than the one rated, benefits are reduced to what the premium paid would have purchased for the new class.

Own occupation definition

A disability standard that pays benefits when the insured cannot perform the duties of the specific occupation held at the time disability began.

Elimination period

The waiting period after a disability or long-term care event begins before benefits become payable; it functions as a time deductible.

COBRA continuation

Federal law requiring employers with 20 or more employees to offer continued group health coverage, generally up to 18 months after a qualifying event.

Medicare Part A

Hospital insurance funded by payroll taxes that covers inpatient hospital stays, skilled nursing after a qualifying stay, hospice care, and some home health services.

Principal sum

The amount payable for accidental loss of life under an accidental death and dismemberment policy; other covered losses pay a stated fraction of it.

Workers' compensation

A state-mandated no-fault benefit system paying medical costs and wage replacement for employees injured or made ill by work-related causes.