MI Life & Health flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Certificate of Authority

A license issued by a state insurance department that authorizes an insurer to transact insurance business in that state; operating without one is illegal.

Michigan DIFS

The Michigan Department of Insurance and Financial Services, the state agency that licenses producers and insurers and enforces Michigan insurance law.

Rebating

Offering a prospect anything of value not stated in the policy, such as cash or gifts, to induce a sale; it is an illegal unfair trade practice in Michigan.

Law of Large Numbers

The principle that as the number of similar exposure units increases, actual loss experience more closely approximates the expected or predicted loss level, making rates more reliable.

Adverse Selection

The tendency of people with greater-than-average risk of loss to seek or keep insurance, which can cause higher claims and is controlled through underwriting and exclusions.

Aleatory Contract

An insurance contract in which the amounts exchanged by the parties are unequal and depend on chance; a small premium may produce a large benefit payment.

Insurable Interest

A financial or emotional interest in the continuation of another person's life; for life insurance it must exist at the time of application, not at death.

Conditional Receipt

A receipt given with the initial premium that provides coverage only if the applicant proves insurability and meets stated conditions; coverage begins on the later of the application date or the medical exam.

Human Life Value

An approach to determining life insurance needs that estimates the present value of the insured's future earnings and contributions to dependents, replacing that economic value.

MEC Seven-Pay Test

A federal tax test that classifies a life policy as a modified endowment contract if premiums paid in the first seven years exceed what would fund the policy in seven level annual payments.

Attained-Age Conversion

Converting term life to permanent coverage at the insured's current age, producing a higher premium than original-age conversion but requiring no new evidence of insurability.

Universal Life Option A

A death benefit design that stays level and does not increase with cash value, so the pure insurance amount decreases as the policy's cash value grows.

Return of Premium Term

A term life option that refunds the premiums paid if the insured survives the term; it costs more than ordinary term and builds no cash value.

Waiver of Premium Rider

A rider that pays premiums while the insured is totally disabled, usually after a six-month waiting period, keeping the policy in force without further payment.

Guaranteed Insurability Rider

A rider allowing the policyowner to buy specified additional amounts of coverage at stated ages or events without providing new evidence of insurability.

Automatic Premium Loan

A provision that borrows from the policy's cash value to pay an overdue premium at the end of the grace period, preventing unintentional lapse.

Reduced Paid-Up Option

A nonforfeiture option that uses the policy's cash value to buy a smaller face amount of fully paid permanent coverage that stays in force for life.

Exclusion Ratio

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

Annuitization

The process of converting an annuity's accumulated value into a stream of periodic income payments that continues according to the payout option selected.

Accumulation Units

In a variable annuity, units that measure the value of the contract during its accumulation phase and fluctuate with the separate account's investment performance.

Coinsurance

The insured's share of covered medical expenses, stated as a percentage such as 20 percent, with the insurer paying the remainder after the deductible is satisfied.

Stop-Loss Limit

The maximum the insured pays out of pocket for covered expenses before the insurer pays 100 percent, capping the insured's annual coinsurance exposure.

Health HMO Model

A managed care plan in which a primary care physician acts as gatekeeper and providers are often paid by capitation; non-emergency care outside the network is generally not covered.

Incontestability Clause

A health policy provision stating that after the policy has been in force for two years, the insurer cannot deny a claim based on misstatements in the application.

Coordination of Benefits

Rules in group health coverage that determine which plan pays first when a person is covered by more than one plan, preventing duplicate payment for the same expense.

Change of Occupation Provision

A health policy provision that reduces benefits if the insured changes to a more hazardous occupation than the one on which the premium was based.

Elimination Period

The waiting period after a disability begins before disability income benefits become payable; common periods range from 30 to 90 days.

Residual Disability

A disability measure that pays a reduced, proportional benefit when the insured returns to work but still suffers a loss of income.

Activities of Daily Living

Basic self-care tasks such as bathing, eating, dressing, toileting, transferring, and continence; inability to perform a stated number triggers long-term care benefits.

COBRA Continuation

A federal law allowing qualified beneficiaries to continue group health coverage after a qualifying event at their own expense, generally for 18 to 36 months.

Medicare Part B

The part of Medicare that covers physician visits, outpatient care, preventive services, and durable medical equipment and requires a monthly premium.

Group Health Certificate

A document issued to each participant in a group health plan that summarizes coverage, exclusions, and claims procedures; the master policy remains the actual contract.