RI Life & Health key terms

A person licensed by the state to sell, solicit, or negotiate insurance on behalf of an insurer. A producer must hold a license for each line of insurance handled and follow state conduct rules.

Offering a buyer part of the producer's commission, or anything else of value not stated in the policy, as an inducement to purchase insurance. State law treats rebating as an illegal unfair trade practice.

Misrepresenting or unfairly comparing an existing policy to persuade a policyholder to drop it and buy another. Twisting is an illegal unfair trade practice because it can harm consumers.

A state-created organization that pays covered claims of policyholders when an insurer becomes insolvent, up to statutory limits. It is a safety net, not a substitute for a solvent insurer.

Uncertainty about whether a loss will happen and how large it will be. Insurance transfers the financial consequences of risk from an individual or business to an insurer.

A legitimate financial stake in the continued life of the insured, such that the policyowner would suffer real economic loss if the insured died. It must exist when the application is made.

The tendency for people at higher-than-average risk to buy or keep insurance more often than low-risk people do. Insurers counter it with underwriting, exclusions, and risk-based pricing.

The specific event or cause of a loss, such as death, accident, illness, or disability. Policies list the perils they cover and exclude others.

A condition that increases the likelihood or severity of a loss, such as smoking, poor health, or a dangerous job. Underwriters evaluate hazards when setting rates.

Restoring an insured to roughly the same financial position as before a loss, no better off. Health insurance pays benefits based on actual covered expenses, subject to deductibles and limits.

The person, trust, or estate named in a life insurance policy to receive the death benefit when the insured dies. The policyowner usually chooses and may change the beneficiary.

The person or entity named to receive life insurance proceeds if the primary beneficiary dies before the insured. Also called a secondary beneficiary.

A beneficiary whose written consent is needed before the policyowner can change the designation, borrow against the policy, or surrender it. The owner permanently gives up those rights.

Life insurance that pays a death benefit only if the insured dies within a stated period, such as 10 or 20 years. It builds no cash value and generally costs less than permanent coverage.

Permanent life insurance that stays in force for the insured's lifetime as long as required premiums are paid. It features a level premium, guaranteed cash value, and a guaranteed death benefit.

Permanent life insurance with flexible premium payments and an adjustable death benefit. The cash value earns interest, and the insurer deducts monthly cost-of-insurance and expense charges from it.

The savings component inside permanent life insurance that grows over time and can be reached through policy loans, withdrawals, or surrender. Term policies generally have no cash value.

A policyholder right to return a newly delivered policy within a set number of days, commonly 10 to 30, and receive a full refund of premiums paid.

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

A set number of days, often 30 or 31, after a premium due date during which the policy stays in force even though the premium is unpaid. A covered death during this time still pays.

A receipt issued when an application and the initial premium are submitted. It provides temporary coverage that starts only if the applicant meets the insurer's underwriting requirements.

Choices available when a permanent policy with cash value lapses for nonpayment: take the cash surrender value, reduced paid-up insurance, or extended term insurance.

Money the policyowner borrows from the insurer using a permanent policy's cash value as collateral. Interest accrues, and any unpaid loan plus interest reduces the death benefit.

A rider that cancels premium payments while the insured is totally disabled, as defined in the policy, so coverage continues without payment during the disability.

A contract in which an insurer receives premiums and later pays a series of income payments, often guaranteed for life. Annuities are mainly used to accumulate retirement savings and turn them into income.

The conversion of an annuity's accumulated value into a scheduled stream of income payments, using a payout option the owner selects, such as life income or a fixed period.

The period before an annuity starts paying income, during which premiums are paid and the contract's value grows with tax deferral.

A fee deducted when an annuity or permanent life policy is cashed out early, usually during the first several years, to recover the insurer's sales and issue costs.

The portion of each annuity payment that is a tax-free return of the owner's after-tax investment. The remaining portion is taxed as ordinary income.

A managed care health plan that provides services through contracted providers and usually requires members to see a primary care physician for referrals. Non-emergency care outside the network is generally not covered.

A health plan that contracts with a network of providers. Members pay less when they use in-network providers and more, often with a separate deductible, when they go outside the network.

The amount a member must pay for covered services each year before the health plan starts paying, except for services the plan covers before the deductible is met.

The percentage of covered medical costs a member pays after meeting the deductible, such as 20 percent, while the plan pays the remaining share.

Insurance that replaces part of an insured's earned income when illness or injury prevents working. Benefits are paid monthly after an elimination period, up to a policy limit.

Rules that decide which health plan pays first when a person has coverage under more than one plan, so combined payments do not exceed the cost of care.

A health condition for which the insured was diagnosed or treated before coverage started. Most job-based and individual plans now cannot exclude such conditions under federal rules.

The waiting time after a disability or illness begins before benefits become payable. Also called a waiting period; longer periods usually lower the premium.