ME Life & Health key terms

An insurance company that holds a license from a state's insurance department to sell policies in that state and must follow its rate, reserve, and consumer protection rules.

A license issued by a state insurance department that allows an insurer to operate as an admitted carrier in that state; it must be renewed and can be suspended or revoked.

A state-created organization funded by member insurers that pays claims of policyholders of an insolvent admitted insurer, within statutory limits; it is not a general government insurance program.

A carrier not licensed in the state that may sell coverage only when admitted insurers decline the risk; policies are placed through specially licensed brokers and are generally not backed by the guaranty association.

An insurer's written authorization, filed with the state, that allows a licensed producer to represent that insurer and submit business on its behalf.

An unfair trade practice of inducing a policyholder to drop existing coverage by using misleading or incomplete comparisons, usually to sell a replacement policy that is not in the buyer's interest.

Offering a prospect anything of value that is not stated in the policy, such as cash, gifts, or part of the commission, as an inducement to buy insurance; illegal in nearly every state.

A producer's legal obligation to hold money belonging to clients or insurers in a trust capacity, keep it separate from personal funds, and account for it promptly.

A financial stake in the continued life or health of the insured person, such as a family relationship or a business debt, that must exist when a life policy is purchased.

The tendency of people with the greatest health or longevity risk to buy or keep insurance, which raises costs for insurers and is managed through underwriting, exclusions, and waiting periods.

A condition that increases the chance or severity of a loss, such as smoking, poor maintenance, or careless driving; it differs from the peril, which is the actual cause of loss.

An arrangement in which an insurer transfers part of its risk to another insurer to limit exposure and free up capacity; the original policyholder still deals only with the first insurer.

The principle that insurance restores the insured to roughly the same financial position as before a loss, without allowing a profit to be made from the claim.

The death benefit stated on the cover of a life policy, payable to the beneficiary if the insured dies while the policy is in force, not counting riders or dividends.

The savings portion of a permanent life policy that builds over time and can be borrowed against, withdrawn, or received on surrender; term policies have none.

A premium that stays the same for the life of the policy, so the insured pays more than the current cost of protection in later years and builds reserves in the early years.

The producer's job of gathering accurate information from an applicant, noting risk factors, and submitting a complete application so the insurer can classify the risk correctly.

Guaranteed choices a permanent policy owner has if premiums stop: take the cash surrender value, reduced paid-up insurance, or extended term insurance.

Money borrowed from a life policy using its cash value as security; interest accrues, and any unpaid balance is deducted from the death benefit or the surrender value.

A beneficiary whose right to the death benefit can be changed by the policy owner at any time without that person's consent, as long as the owner is living.

A set number of days after a premium due date, usually 30 or 31 for life insurance, in which the policy stays in force and a late payment can be made without penalty.

A provision stating that after the policy has been in force for a set period, usually two years, the insurer cannot cancel coverage or deny a claim because of misstatements on the application.

A rider that suspends premium payments when the insured becomes totally disabled for a stated period, while keeping the policy and its benefits in force.

A provision that lets a terminally or chronically ill insured receive part of the death benefit early; the amount received reduces the benefit paid at death.

A contract in which an insurer accepts money and later pays it back as regular income, used mainly to provide retirement income for as long as the annuitant lives.

The point at which an annuity's accumulated value is converted into a series of periodic payments, after which the money generally cannot be taken as a lump sum.

A fee an insurer deducts when an annuity or permanent policy is cashed in during the early contract years, often declining to zero over a set schedule.

An annuity whose value is tied to a separate account of investments chosen by the owner, so payments rise or fall with market performance and the owner bears the investment risk.

A tax-free transfer of cash value from one life insurance policy or annuity to another under Section 1035 of the tax code, allowing gains to keep growing without current taxation.

A retirement account funded with after-tax dollars that allows tax-free qualified withdrawals; contributions can be taken out at any time, and the owner faces no lifetime required distributions.

A life policy funded with more premium than federal tests allow, which loses favorable tax treatment; loans and withdrawals are taxed as income first and may face a penalty before age 59 1/2.

The minimum amount that must be withdrawn each year from most tax-deferred retirement accounts once the owner reaches the age set by law, or a steep tax penalty applies.

The amount an insured must pay out of pocket for covered care each year before the health plan begins to pay its share, not counting certain preventive services.

The share of covered medical costs, stated as a percentage, that the insured pays after the deductible is met; the insurer pays the rest up to the out-of-pocket limit.

Rules that decide which health plan pays first when a person is covered by more than one plan, so that total payments do not exceed the cost of care.

The federal health program for people 65 and older and some younger people with disabilities, made up of Part A hospital coverage, Part B medical coverage, and optional Part C and Part D plans.

A joint federal-state program that pays medical costs for people with low income, including long-term care, with eligibility rules and covered benefits set by each state.

The waiting time, stated in days or months, that must pass after a disability or long-term care event begins before benefits are paid; longer periods lower the premium.

Basic self-care tasks such as bathing, dressing, eating, toileting, transferring, and continence; needing help with several of them typically triggers long-term care benefits.

A partial disability benefit that pays when the insured can still work but earns less than before the disability, usually a percentage of the income that was lost.