NIA Micro Life Agent flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Adverse selection
- The tendency of applicants with higher-than-average risk to seek insurance, which can raise costs. Insurers counter it with underwriting, exclusions, waiting periods, and accurate classification of risks.
- Insurable interest
- A financial or love-and-affection relationship that would suffer loss from the insured's death. It must exist when a life policy is issued and supports the contract's validity.
- Principle of indemnity
- The rule that insurance restores the insured to approximately the pre-loss financial position without profit. Life insurance death benefits are an agreed sum rather than strict indemnity.
- Utmost good faith
- The mutual duty of insurer and applicant to deal honestly and disclose material facts. In life insurance, the applicant must reveal information that would affect underwriting.
- Aleatory contract
- A contract in which the amounts exchanged depend on an uncertain event, so premiums and benefits need not be equal. Life insurance is aleatory rather than an even exchange.
- Conditional receipt
- A receipt that makes coverage effective as of the application or medical exam date only if the proposed insured meets the insurer's insurability conditions.
- Entire contract clause
- A provision stating the policy and attached application and riders form the complete agreement. No outside document or oral statement can modify the contract.
- Free-look provision
- A right to return a newly delivered policy within a stated period, commonly 10 to 30 days, for a full premium refund and cancellation of coverage.
- Waiver and estoppel
- Knowingly giving up a contractual right can prevent the insurer from later enforcing it if the other party relied on that conduct to their detriment.
- Term life insurance
- Coverage for a specified period with a death benefit and no cash value. It is often renewable or convertible and provides the most death benefit per premium dollar.
- Universal life insurance
- Permanent coverage with a separate account value. Interest credits and cost-of-insurance charges vary, and the owner can adjust premiums and death benefit within limits.
- Variable life insurance
- Permanent coverage whose cash value invests in separate accounts tied to market performance. It is a security, requires a prospectus, and needs a securities license.
- Survivorship life insurance
- A second-to-die policy paying on the death of the last insured. It is commonly used to fund estate taxes and provide liquidity at the second death.
- Annuitization
- The phase in which an annuity's accumulated value is converted into a stream of periodic income payments under a chosen payout option.
- Exclusion ratio
- The formula that determines the tax-free portion of each annuity payment: investment in the contract divided by expected return, multiplied by the payment amount.
- Surrender charge
- A fee for withdrawing more than the free withdrawal amount during the early contract years. It typically declines to zero over a stated surrender charge period.
- 1035 exchange
- A tax-free transfer of an annuity or life insurance contract to a like-kind contract. Basis and surrender charge schedules generally carry over to the new contract.
- Coinsurance
- The insured's percentage share of covered medical costs after the deductible is met, such as 20 percent, with the insurer paying the remainder up to the out-of-pocket maximum.
- Elimination period
- The waiting period after a disability begins before disability income benefits start. Longer elimination periods reduce the premium and the insurer's exposure.
- Own-occupation definition
- A disability standard that pays benefits when the insured cannot perform the duties of their own occupation, even if able to work in another field.
- Coordination of benefits
- Rules that decide which health plan pays first when an insured has multiple coverages. The primary plan pays, and the secondary plan pays the remaining covered costs.
- Incontestability clause
- After a policy has been in force for a stated period, commonly two years, the insurer cannot contest it for material misrepresentation, except for nonpayment of premium.
- Automatic premium loan
- A provision that uses available cash value to pay an overdue premium and prevent lapse, creating a loan against the policy's value.
- Guaranteed insurability rider
- A rider allowing the owner to purchase additional coverage at stated option dates without proving insurability, usually at the insured's attained age rates.
- Waiver of premium rider
- A rider that waives premiums after the insured becomes totally disabled for a stated period, typically six months, while keeping the policy in force.
- Nonforfeiture options
- Choices available when a cash value policy owner stops paying premiums: cash surrender, reduced paid-up insurance, or extended term insurance.
- Substandard risk
- An applicant with higher-than-average mortality risk, such as a health impairment. The insurer may issue coverage with a table rating, extra premium, or modified benefits.
- Premium mode
- The frequency of premium payment, such as annual, semiannual, quarterly, or monthly. More frequent modes add installment loading and raise the total annual cost.
- Per stirpes
- A beneficiary distribution method that divides a deceased beneficiary's share among that beneficiary's own descendants, preserving the family branch's share.
- Twisting
- Inducing a policyholder to lapse or replace a policy through misleading or incomplete comparisons, which is prohibited as an unfair trade practice.
- Rebating
- Offering part of an agent's commission or anything of value not stated in the policy to induce a purchase. It is prohibited in most states.
- Certificate of authority
- A license issued by a state insurance department allowing an insurer to transact insurance business in that state. Unauthorized insurers may not solicit there.