MD 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 emotional relationship such that the policyowner would suffer a loss if the insured died; it must exist at application and supports the contract's validity.

Law of large numbers

The statistical principle that the more homogeneous exposure units an insurer covers, the more accurately it can predict actual losses and set stable, adequate rates.

Admitted insurer

An insurer authorized by the state insurance department to transact business there; it must file rates and forms and is protected by the state guaranty association.

Mutual insurer

An insurer owned by its policyholders rather than shareholders; eligible policyholders may receive dividends, which are not guaranteed and are treated as a return of premium.

Twisting

An unfair trade practice in which a producer induces a policyholder to lapse or surrender an existing policy through misrepresentation in order to sell a replacement policy.

Producer fiduciary duty

Producers hold premiums and funds belonging to insurers or insureds in trust; commingling those funds with personal money is prohibited and can lead to license revocation.

Term life insurance

Provides death protection for a specified period with no cash value; it pays a benefit only if the insured dies while the policy remains in force.

Convertible term

A term policy feature allowing the insured to exchange term coverage for permanent insurance without evidence of insurability, usually before a stated age or duration.

Whole life insurance

Permanent coverage with level premiums, guaranteed cash value, and a guaranteed death benefit that stays in force for the insured's lifetime as long as premiums are paid.

Universal life Option A

A level death benefit equal to the face amount; as cash value grows the net amount at risk shrinks, so cost-of-insurance charges are lower than under Option B.

Variable life insurance

Permanent insurance whose cash value is invested in separate-account subaccounts; the owner bears market risk and the policy is a security requiring prospectus delivery.

Modified endowment contract

A life policy that fails the 7-pay test, losing favorable tax treatment; loans and withdrawals are taxed income first and may incur a 10% penalty before age 59½.

Incontestability clause

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

Entire contract clause

States that the policy and attached application constitute the whole agreement; only an authorized officer may modify the contract or waive any of its terms.

Reduced paid-up option

A nonforfeiture option using existing cash value to purchase a smaller paid-up whole life policy maturing at the original date, with no further premiums due.

Extended term option

A nonforfeiture option that applies the cash value to buy term coverage equal to the face amount for whatever period the cash value will purchase.

Waiver of premium rider

Waives premiums after the insured has been totally disabled for a stated elimination period, often six months, and remains disabled; the policy stays fully in force.

Per stirpes

A beneficiary designation that divides proceeds by family branch, so a deceased child's share passes to that child's descendants rather than to surviving siblings.

Immediate annuity

Purchased with a single premium, it begins income payments within one payment period, often one month, and has no accumulation phase before payouts start.

Exclusion ratio

The portion of each annuitized payment treated as a tax-free return of the after-tax investment in the contract; the remainder is taxed as ordinary income.

Life with period certain

Guarantees income for life and, if the annuitant dies early, continues payments to a beneficiary for the balance of the stated guaranteed period.

Variable annuity

An annuity whose value fluctuates with separate-account investments; the owner bears investment risk and the contract is a security sold with a prospectus.

1035 exchange

A tax-free transfer of an existing life policy or annuity into a new life or annuity contract; cost basis carries over and surrender charges may still apply.

Coinsurance

The percentage of covered expenses after the deductible shared by insured and insurer, commonly 20% paid by the insured until the out-of-pocket maximum is reached.

HMO gatekeeper

A primary care physician in a health maintenance organization who must authorize specialist referrals; non-emergency care outside the network is generally not covered.

Elimination period

The waiting period, stated in days, after a disability begins before disability income benefits become payable; a longer elimination period reduces the premium.

Own occupation definition

A disability income definition that pays when the insured cannot perform the duties of their own occupation, even if working elsewhere; broader than any occupation.

COBRA continuation

Federal law requiring employers with 20 or more employees to allow qualified beneficiaries to continue group health coverage, usually up to 18 months, at their own expense.

Long-term care trigger

Benefits begin when the insured cannot perform at least two of six activities of daily living or has a cognitive impairment requiring substantial supervision for safety.

Maryland Insurance Administration

The state agency that licenses insurers and producers, reviews rates and forms, and enforces the Insurance Article; its Commissioner is appointed by the Governor.

Maryland continuing education

Licensed Maryland producers must complete 24 credit hours every two years, including at least 3 hours of ethics, to renew a life and health license.

Maryland individual mandate

Maryland imposes a state-level requirement to carry health coverage; uninsured residents report a penalty on their state income tax return unless an exemption applies.