SC Life & Health key terms

A license issued by a state insurance department that allows an insurer to transact insurance business in that state. Selling insurance without one is illegal.

A producer's legal obligation to handle funds collected from clients, such as premiums, honestly and to remit them promptly to the insurer or the person entitled to them.

Sales and claims behaviors prohibited by state insurance law, including misrepresentation, twisting, rebating, and unfair claim settlement. Violations can lead to fines, suspension, or license revocation.

A state-created organization funded by admitted insurers that pays covered claims of policyholders when an insurer becomes insolvent, up to statutory limits.

A financial stake in the continued life or health of the insured such that the policyholder would suffer a real economic loss if the insured died or became ill. It is required when the policy is applied for.

The principle that insurance should restore the insured to roughly the same financial position held before a loss, without allowing the insured to profit from the loss.

The mutual duty of the applicant and the insurer to disclose material facts honestly. Concealment or material misrepresentation can give the other party grounds to void the contract.

A contract prepared by one party, the insurer, and offered to the other on a take-it-or-leave-it basis. Ambiguities are generally interpreted in favor of the insured.

The statistical principle that predictions of future losses become more reliable as the number of similar, independent exposure units increases. It is the basis for insurance rate making.

The death benefit shown on the policy's face that is paid to the beneficiary when the insured dies, apart from cash value or rider amounts.

The savings component of a permanent life policy that grows over time and can be accessed through policy loans, surrender, or nonforfeiture options.

The person or entity named in the policy to receive the death benefit. A primary beneficiary is first in line; a contingent beneficiary is paid if the primary is not living.

A life insurance policy that may pay policy dividends, which represent a return of divisible surplus and are not guaranteed. Dividends may be taken in cash, used to buy paid-up additions, or applied to premiums.

The time after a premium due date, commonly 31 days for life insurance, during which the policy remains in force. A death claim during this period may be reduced by the unpaid premium.

A provision stating that after the policy has been in force for a set period, usually two years, the insurer cannot void coverage because of misstatements on the application, except for nonpayment of premium.

Restoring a lapsed policy to full force by paying overdue premiums with interest and providing proof of insurability, typically within a limited period after the lapse.

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

A rider that waives premiums while the insured is totally disabled for a stated period, keeping the policy and its cash value growth in force without further payment.

A rider allowing the insured to receive part of the face amount early when diagnosed with a terminal or other qualifying illness, which reduces the death benefit later paid.

A contract, usually issued by an insurer, that accumulates money and then pays a stream of income for a set period or for life.

The period during which an annuity owner makes contributions and the contract earns interest or investment returns before any payout begins.

The process of converting an annuity's accumulated value into a regular series of income payments, either for a fixed period or for life.

The calculation that determines how much of each annuity payment is a tax-free return of the owner's after-tax investment and how much is taxable earnings.

A fee the insurer deducts when an annuity owner withdraws money or cancels the contract early. It typically declines each year until it disappears at the end of the surrender period.

The amount the insured must pay out of pocket for covered medical services each period before the insurer begins paying its share of the cost.

The share of covered medical expenses, stated as a percentage, that the insured pays after the deductible. In an 80/20 plan the insurer pays 80 percent.

A limit on the insured's cost sharing, such as deductibles, copayments, and coinsurance, in a benefit period. Once reached, the plan pays 100 percent of covered expenses.

Rules that decide which of two or more health plans pays first when a person is covered by more than one plan, so benefits are not duplicated.

The benchmark for allowed charges based on the range of fees typically charged for the same service by similar providers in the same geographic area.

The waiting period after a disability or long-term care event begins before benefits are payable. It works like a deductible measured in time.

A disability definition that pays benefits when the insured cannot perform the material duties of their own specific occupation, even if able to work elsewhere.

A benefit that pays a reduced, proportionate amount when the insured returns to work but loses income because of the continuing effects of the disability.

Basic self-care tasks such as bathing, dressing, eating, toileting, transferring, and continence. Long-term care policies often pay when the insured cannot perform a set number of them.

Coverage that pays for extended custodial care, such as nursing home, assisted living, or home care, for people with chronic illness or disability.

The single insurance contract issued to an employer or other group sponsor. Covered members receive certificates that summarize their benefits under the master policy.

A federal law that lets qualified employees and dependents continue group health coverage for a limited time after a qualifying event such as termination, at their own expense.

Hospital insurance under Medicare covering inpatient hospital care, skilled nursing facility care after a hospital stay, hospice, and some home health services. Most people qualify premium-free.

Private plans approved by Medicare that deliver Part A and Part B benefits, often adding drug coverage and extra services, as an alternative to original Medicare.

A joint federal-state program that pays medical costs for people with low income and limited resources, with eligibility rules set by each state.