NY Life & Health key terms

A duty requiring a producer who handles client money or applications to act in the client's best interest, keep those funds separate, and account promptly for every premium collected.

Mixing premium money belonging to clients with a producer's or agency's own funds. New York prohibits it, so collected premiums must sit in a separate fiduciary account until sent to the insurer.

Giving back part of a commission, or offering any inducement not stated in the policy, to persuade a buyer to purchase. New York treats it as an illegal unfair trade practice.

Knowingly making misleading or incomplete comparisons to push a policyholder into lapsing, surrendering, or replacing existing coverage. It is an unfair trade practice that can cost a producer their license.

An insurer's written authorization letting a licensed producer solicit and sell its products as its agent. In practice a producer usually must be appointed before the company will accept business from them.

A financial or love-and-affection stake in another person's continued life that justifies insuring them. It must exist when the application is made, though not necessarily at the time of death.

The idea that insurance should put a policyholder back in roughly the same financial position as before a loss rather than create profit. Life insurance is a limited exception because a life has no measurable cash value.

An agreement where the amounts the parties exchange are unequal and depend on chance. The policyholder pays modest premiums while the insurer may owe a large death benefit, or nothing at all.

A contract written by one party, the insurer, and offered on a take-it-or-leave-it basis. Ambiguous wording is construed against the drafter, so unclear language is generally read in favor of the insured.

The insurer's process of reviewing an applicant's health, habits, occupation, and finances to decide whether to accept the risk and at what premium and rating class.

Sorting applicants with similar expected mortality or morbidity into groups such as preferred, standard, substandard, or declined, so that each group pays a premium matching its expected claims.

A receipt issued when the first premium accompanies the application. It provides temporary coverage that starts only if the applicant turns out to be insurable under the insurer's ordinary underwriting rules.

The policyowner's written instruction naming who receives the proceeds when the insured dies. A primary beneficiary is paid first, and a contingent beneficiary receives the money only if the primary cannot.

A distribution method in which a deceased beneficiary's share passes down to that beneficiary's own descendants in equal portions instead of going to the remaining named beneficiaries.

Temporary coverage lasting a chosen number of years that pays a death benefit only if the insured dies during that period. It builds no cash value and usually costs less than permanent coverage.

Permanent coverage with a level premium paid for life or to a stated age, guaranteed cash values, and a death benefit payable whenever death occurs, as long as required premiums are paid.

Permanent coverage that separates the death benefit from a cash value account. Within limits the owner can vary premium payments and adjust the death benefit, provided the policy remains adequately funded.

Permanent coverage whose cash value, and in some designs the death benefit, rises or falls with the investment results of separate accounts the owner selects. The owner carries the investment risk.

Coverage issued to an employer or association for a defined group under a single master contract. Members usually get certificates and are underwritten as a group rather than individually.

A window after policy delivery during which the owner can cancel for a full premium refund. New York generally gives 10 days on life policies, with longer periods in some replacement and annuity situations.

Time allowed after a premium due date, commonly 31 days on life insurance, during which the policy stays in force. If the insured dies then, the unpaid premium is subtracted from the benefit.

A provision stating that after the policy has been in force for a set period, usually two years, the insurer cannot void it because of misstatements on the application. Nonpayment of premium is still enforceable.

The choices available when a cash value policy is surrendered or lapses: take the cash value, convert to reduced paid-up insurance, or continue the full face amount as extended term insurance.

A rider that stops premium payments while the insured is totally disabled for a specified period, typically six months, keeping the policy and all its benefits fully in force.

A contract that converts a lump sum or a series of deposits into a stream of payments, usually for retirement. It guards against living too long, the mirror image of life insurance's protection against dying too soon.

The irreversible conversion of an annuity's accumulated value into regular income payments under a payout option such as life only, life with a period certain, or joint and survivor.

A fee taken when an annuity or cash value policy is cashed in early, usually during the first several contract years. It helps the insurer recover the costs of issuing the contract.

An annuity whose value sits in separate accounts invested in stock, bond, or other portfolios the owner chooses. Cash value and payments fluctuate with markets, so the owner bears the investment risk.

A tax-free transfer of cash value from one life policy, annuity, or endowment contract into another qualifying contract of the same or an allowed type, under Internal Revenue Code Section 1035.

A life policy funded above the seven-pay test limit, which loses favorable tax treatment. Loans and withdrawals are taxed as income first and may carry a penalty before age 59 and a half.

A retirement plan meeting Internal Revenue Code and ERISA rules, such as a 401(k) or defined benefit plan, so employer contributions are deductible and earnings grow tax-deferred until distribution.

A legal arrangement among business owners requiring the surviving owners or the business itself to buy a departing owner's interest at a set price. Life insurance is often used to fund that purchase.

Coverage that replaces part of earned income, often 50 to 70 percent, when illness or injury keeps the insured from working. Benefits are paid monthly after an elimination period.

A disability standard that pays when the insured cannot perform the material duties of their own specific occupation, even if they could work somewhere else. It is broader than an any-occupation test.

The waiting period, often 30 to 180 days, between the start of a disability and the first benefit check. Choosing a longer waiting period lowers the premium.

A method of avoiding duplicate payment when someone is covered by two health plans. One plan pays as primary and the other pays only remaining allowable expenses, up to its own limit.

A benefit paying a partial, proportional amount when the insured goes back to work but still earns less because of the disability, instead of being totally unable to work.