RI Life & Health flashcards

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

McCarran-Ferguson Act

1945 federal law confirming that states primarily regulate the business of insurance; federal antitrust laws apply only where states fail to regulate.

Twisting

Unfair trade practice of inducing a policyholder to drop an existing policy through misrepresentation or incomplete comparison in order to sell a replacement policy.

Rebating

Offering a prospect part of the agent's commission or any inducement not stated in the policy contract; an illegal unfair trade practice in most states.

State guaranty association

Entity that pays claims of insolvent insurers' policyholders, subject to statutory limits such as $300,000 in life death benefits and $100,000 in cash surrender value.

Pure risk

A situation offering only the chance of loss or no loss, with no possibility of gain; the only type of risk normally insurable.

Adverse selection

Tendency of people with the greatest likelihood of loss to seek or keep insurance more actively than average risks, raising insurer costs.

Law of large numbers

Principle that the larger the number of similar exposure units, the more closely actual losses match predicted losses, enabling accurate rate setting.

Utmost good faith

Insurance contract principle requiring both parties to disclose all material facts honestly; material concealment or misrepresentation can void the contract.

Insurable interest

Financial or emotional stake in another person's continued life; it must exist at application and issue but need not exist at the time of death.

Conditional receipt

Gives interim coverage from the application date if the proposed insured meets the insurer's standard underwriting requirements; otherwise no coverage exists.

Human life value

Method of estimating life insurance needs by calculating the present value of the insured's future earnings and contributions to dependents.

Per stirpes

Beneficiary distribution method that pays a deceased beneficiary's share to that beneficiary's heirs rather than to the surviving named beneficiaries equally.

Decreasing term

Term policy whose face amount declines on a schedule while the premium stays level; commonly used for mortgage protection.

Universal life option A

Level death benefit design paying a fixed face amount; as cash value grows, the pure insurance portion of the benefit decreases.

Variable life insurance

Permanent policy whose cash value is invested in a separate account of subaccounts chosen by the owner; it is a security requiring a prospectus.

Survivorship life

Second-to-die policy covering two people and paying at the death of the survivor; often used for estate planning and estate tax liquidity.

Incontestability clause

After a policy has been in force for two years, the insurer cannot deny a claim or void coverage based on misrepresentations on the application.

Extended term option

Nonforfeiture option using cash value to buy term coverage for the full face amount for whatever period the cash value will purchase.

Automatic premium loan

Provision allowing the insurer to pay an overdue premium from available cash value so the policy stays in force.

Waiver of premium

Rider that suspends premium payments when the insured becomes totally disabled, usually after a six-month waiting period, keeping the policy in force.

Exclusion ratio

Fraction of each nonqualified annuity payment that is a tax-free return of the investment in the contract, divided by expected return.

Accumulation units

Units credited during the accumulation period of a variable annuity that measure the owner's interest in the separate account.

Straight life annuity

Payout option making income payments only for the annuitant's lifetime, producing the largest payment but leaving nothing to survivors.

Joint and survivor annuity

Payout that continues income to a second person, usually a spouse, after the annuitant dies; payments are reduced for the survivor.

Elimination period

Waiting period at the start of a disability, typically 60 to 90 days, before disability income benefits begin to be paid.

Own occupation disability

Definition paying benefits when the insured cannot perform the material duties of their own specific occupation, regardless of other work available.

Out-of-pocket maximum

Cap on covered medical spending including deductibles and coinsurance in a plan year, after which the insurer pays 100 percent of covered charges.

Long-term care benefit trigger

Benefits begin when the insured cannot perform two of six activities of daily living or has a severe cognitive impairment.

Change of occupation provision

Health provision allowing the insurer to adjust benefits if the insured changes to a more hazardous occupation, paying less than the policy amount.

Coordination of benefits

Rules determining which of two or more health plans pays first and limiting total benefits to no more than the covered expense.

Conditionally renewable

Policy the insurer may decline to renew only on grounds stated in the contract, such as the insured reaching a specified age.

Time limit on certain defenses

Health provision barring the insurer from contesting the policy or denying a claim for misstatements after a stated period, usually two years.