SC 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 permitting an insurer to transact insurance business in that state; operating without one is unauthorized insurance.

Fiduciary responsibility

Producers who handle premiums hold those funds in a trust capacity; commingling premium money with personal funds is prohibited and can lead to license revocation.

Rebating

Offering part of a producer's commission or anything of value to a client as an inducement to purchase insurance; an illegal unfair trade practice in most states.

Twisting

Inducing a policyholder to lapse or surrender an existing policy through misrepresentation in order to sell a replacement policy; classified as an unfair trade practice.

Law of large numbers

Statistical principle that predicted loss experience becomes more accurate as the number of similar exposure units increases, allowing insurers to set reliable premium rates.

Adverse selection

The tendency of higher-than-average risks to seek or retain insurance at standard rates, which insurers control through underwriting, exclusions, and participation requirements.

Aleatory contract

An insurance contract in which the amounts exchanged by the parties are unequal and depend on an uncertain event; the insured may receive far more than premiums paid.

Level term insurance

Term policy whose death benefit stays constant for the policy term while premiums remain level; it builds no cash value and expires at the end of the term.

Universal life option A

Level death benefit option in which the death benefit stays fixed while the pure amount at risk decreases as the policy cash value grows.

Reduced paid-up option

Nonforfeiture option that uses accumulated cash value to purchase a smaller whole life policy, paid up for life with no further premiums required.

Waiver of premium rider

Rider that waives premiums after the insured is totally disabled for a specified period, usually six months, keeping the policy in force during the disability.

Incontestability clause

After the policy has been in force for typically two years, the insurer cannot contest the validity of the contract based on misstatements in the application.

Entire contract provision

Provision stating that the policy plus the attached copy of the application constitute the whole agreement, and no other documents are part of the contract.

Automatic premium loan

Provision that uses available cash value to pay an overdue premium at the end of the grace period, preventing unintentional lapse of the policy.

Per stirpes

Beneficiary distribution method that passes a deceased beneficiary's share to that beneficiary's descendants rather than dividing it among the remaining named survivors.

Exclusion ratio

Formula dividing the investment in the contract by the expected return to determine the tax-free portion of each annuity payment; the remainder is taxable.

Fixed annuity

Contract in which the insurer guarantees a minimum interest rate and a fixed dollar benefit, placing investment risk on the insurer rather than the contract owner.

Straight life annuity

Payout option providing the largest income for life, with payments ending at death and no refund or survivor benefit paid to anyone.

Coinsurance

The percentage of covered expenses after the deductible that the insured pays, such as 20%, with the insurer paying the remainder up to the out-of-pocket maximum.

Out-of-pocket maximum

The annual limit on covered in-network costs an insured pays, including deductible and coinsurance but excluding premiums; the plan pays 100% beyond it.

Coordination of benefits

Rules that determine which of two health plans pays first when a person is covered by more than one plan, preventing total payment above actual expenses.

Health maintenance organization

Prepaid managed care plan providing services through a provider network, typically requiring a primary care physician and referrals before seeing specialists.

Own occupation definition

Disability definition that pays benefits when the insured cannot perform the duties of their specific occupation, even if they are able to work elsewhere.

Elimination period

The waiting period at the start of a disability during which no benefits are payable; longer elimination periods lower the premium charged.

Residual disability benefit

Benefit that pays a reduced, proportional amount when the insured returns to work at a lower income because of the disabling condition.

Activities of daily living

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

COBRA continuation

Federal law allowing employees and dependents to continue group health coverage after a qualifying event, generally for 18, 29, or 36 months.

Master policy

The single contract issued to an employer or association under a group plan; participating employees receive certificates of insurance as evidence of coverage.

Noncontributory group plan

Plan in which the employer pays the full premium; typically 100% of eligible employees must participate to limit adverse selection.

Medicare Part B

Optional medical insurance covering physician services, outpatient care, and preventive services, financed by monthly premiums and federal general revenues.

Medigap open enrollment

Six-month period beginning when a person first enrolls in Part B at age 65, during which insurers must sell any Medigap policy regardless of health.

Medicaid

Joint federal-state, income-tested program providing health coverage to low-income individuals, including long-term custodial care that Medicare generally does not cover.