LUTCF Course 1 key terms

A legal requirement that the policy owner would suffer a genuine financial or emotional loss if the insured died, giving the owner a valid reason to purchase coverage on that person's life.

The tendency for people with the greatest health or longevity risk to seek or retain coverage more eagerly than low-risk applicants, which forces insurers to underwrite carefully and price for the average cost of claims.

The insurer's process of evaluating an applicant's health, occupation, hobbies, and financial profile to decide whether to issue coverage and at what rate class.

A statistical chart showing the rate of death at each age for a defined population, used by insurers to project claims and set premium levels for life products.

A statistical chart showing the expected frequency and duration of illness or disability by age and gender, used to price health and disability income policies.

The grouping of insureds into rate classes such as preferred, standard, or substandard based on expected claim cost, so each group pays a premium matching its risk.

An applicant whose health or lifestyle raises expected mortality above average, so the insurer charges an extra premium or adds a rating rather than declining coverage.

The person or entity that holds all rights in a life insurance contract, including naming beneficiaries, taking loans, surrendering the policy, and assigning ownership.

An arrangement in which someone other than the insured owns the policy, such as a business insuring a key employee or a spouse insuring a partner, requiring insurable interest at issue.

Pure death protection with a fixed face amount and fixed premium for a stated number of years, paying a benefit only if the insured dies during that period.

Permanent coverage with a level premium payable for life or to a stated age, guaranteed cash value accumulation, and a death benefit that generally stays in force as long as premiums are paid.

The accumulation inside a permanent policy that belongs to the owner, available through surrender, policy loans, or as a source of paid-up coverage.

A borrowing of available cash value from the insurer, secured by the policy, which accrues interest and reduces the death benefit if left unpaid.

Guaranteed choices available when a permanent policyholder stops paying premiums, such as cash surrender, reduced paid-up insurance, or extended term insurance.

A fee deducted from cash value if the owner cancels or withdraws funds during an early policy period, designed to recover acquisition costs.

An optional provision added to a policy that expands or limits benefits, often at extra cost, such as a waiver of premium or accelerated death benefit.

A rider allowing the policy owner to receive part of the face amount early when the insured is diagnosed with a terminal illness or qualifying condition.

The sale of an existing life policy by its owner to a third-party investor, typically at a discount to face amount, when the insured has a shortened life expectancy.

A policy feature guaranteeing the insured the right to continue coverage at expiration without proving insurability, usually at a higher premium.

A term policy provision letting the insured exchange coverage for a permanent policy without new evidence of insurability, priced according to attained or original age.

A rider that suspends premium payments while the insured is totally disabled for a waiting period, keeping the policy and its values intact.

Rules that determine which of two or more health plans pays first when a person is covered twice, preventing total reimbursement from exceeding the actual expense.

The amount an insured must pay out of pocket for covered services each period before the health plan begins paying its share of the claim.

The percentage split of covered costs shared between insurer and insured after the deductible is met, such as the plan paying 80 percent and the member 20 percent.

The cap on the insured's cost sharing for covered in-network services in a plan year, after which the insurer pays all covered expenses.

An employer-funded account that reimburses employees for qualified medical expenses, owned by the employer and often paired with a high-deductible health plan.

A tax-advantaged account available to people enrolled in a qualifying high-deductible health plan, funded with pre-tax dollars and used for medical expenses.

Coverage that replaces a portion of earned income, usually 50 to 70 percent, when the insured cannot work because of illness or injury.

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

A stricter disability standard that pays only when the insured cannot perform the duties of any occupation for which they are reasonably suited by training or experience.

The waiting time, often 60 to 180 days, between the onset of disability and the start of benefit payments, functioning like a deductible measured in time.

A partial disability benefit that pays a proportional amount when the insured returns to work at reduced hours or income after a covered disability.

A contract in which an insurer accepts a lump sum or series of payments and later pays income, either for a fixed period or for life.

The period during which an annuity's value grows tax-deferred through contributions and investment earnings before any income payments begin.

The irrevocable conversion of an annuity's accumulated value into a stream of periodic income payments, which may continue for life or a set term.

The early years of a deferred annuity when withdrawals above a free amount trigger a declining penalty, protecting the insurer's acquisition and commission costs.

A contract feature permitting the owner to withdraw a set percentage, commonly 10 percent of value, each year without surrender charges or penalty.

An employer-sponsored retirement arrangement that meets tax code requirements, allowing deductible contributions and tax-deferred growth in exchange for coverage and nondiscrimination rules.

A tax-advantaged personal retirement account, either traditional with deductible contributions and taxable withdrawals or Roth with after-tax contributions and tax-free qualified withdrawals.

The minimum amount that must be withdrawn annually from most tax-deferred retirement accounts after the owner reaches the required beginning age, with penalties for shortfalls.

The obligation to act solely in the client's best interest, placing the client's needs ahead of the advisor's compensation or convenience, with full disclosure of conflicts.

The requirement that a recommendation be reasonably appropriate for the client's objectives, financial situation, and needs, a lower bar than acting as a fiduciary.

The practice of gathering and documenting a client's goals, finances, risk tolerance, time horizon, and health before recommending any product or strategy.

A structured questionnaire or interview tool used to collect personal, financial, and insurance information that forms the basis of a planning recommendation.

A systematic comparison of the resources a family would have after a death or disability against the income, debts, and expenses they would require.

An approach to sizing coverage that estimates the present value of the insured's future earnings and services that dependents would lose.

The required set of internal controls, designated compliance officer, training, and independent testing an insurance producer or firm uses to detect and report suspicious client activity.