WV Life & Health key terms

A license issued by a state insurance department that authorizes an insurer to transact insurance business in that state; without one, the insurer cannot legally sell policies there.

The formal authorization by an insurer that lets a licensed producer sell its products; the insurer files the appointment with the state, and the producer cannot submit business for that company until it is in place.

Giving a prospect any part of the producer's commission, or offering something of value not stated in the policy, to persuade the person to buy; it is an illegal unfair trade practice in nearly every state.

An unfair trade practice in which a producer uses misrepresentation or incomplete comparisons to persuade a policyholder to lapse or surrender existing coverage and replace it with another policy.

A state-created entity, funded by member insurers, that pays claims of policyholders of an insolvent life or health insurer, subject to statutory limits and coverage rules.

The legal duty of a producer who holds money or documents belonging to others to act in the client's or insurer's best interest and to account for and remit those funds promptly and accurately.

A financial or love-and-affection relationship that makes a person stand to lose if the insured dies or becomes ill; it must exist when the policy is applied for.

An insurance policy drafted by the insurer and offered on a take-it-or-leave-it basis, so ambiguity is generally resolved in favor of the policyholder rather than the insurer.

An agreement in which the amounts exchanged by the parties are unequal and depend on chance; the insured may pay small premiums and receive a large benefit, or may receive nothing.

The principle that both insurer and applicant must deal honestly and disclose all material facts; a material misrepresentation can give the insurer grounds to rescind the contract.

The death benefit stated on the policy's face page, paid to the beneficiary if the insured dies while the policy is in force, apart from any additional amounts provided by riders.

A receipt given when the first premium is paid with the application; it provides coverage from the application date only if the insurer would have approved the risk under its underwriting rules.

A beneficiary whose right to the policy proceeds cannot be changed or cancelled without that person's written consent, even by the policyowner.

A tax-free transfer of cash value from one life insurance policy or annuity to another, or from a life policy to an annuity, permitted under Internal Revenue Code Section 1035.

A life policy that fails the federal seven-pay test because it is funded too heavily too soon; loans and withdrawals are taxed on a first-in, first-out basis and may carry a penalty before age 59½.

Temporary coverage for a set number of years that pays a death benefit only if the insured dies during that period and builds no cash value.

Permanent coverage that stays in force for the insured's lifetime, charges a level premium, and builds guaranteed cash value the owner can borrow against or surrender.

Flexible permanent coverage in which the owner varies premium payments within limits; the cash value earns interest while monthly cost-of-insurance and expense charges are deducted from it.

Permanent coverage whose cash value is invested in separate account subaccounts chosen by the owner; the owner bears the investment risk, and the policy is a security requiring a securities license.

A set number of days, commonly 31 for life insurance, after a premium due date during which the policy stays in force; a death in that period has the overdue premium deducted from the benefit.

A provision stating that after the policy has been in force for a stated period, usually two years, the insurer can no longer void coverage because of a material misstatement on the application.

Choices given to a whole life owner who stops paying premiums: take the cash surrender value, a reduced paid-up policy, or extended term insurance for the same face amount.

A provision that lets the insurer pay an overdue premium from the policy's cash value to keep the policy from lapsing, with the amount treated as a loan plus interest.

A rider that cancels premium payments when the insured becomes totally disabled for a stated waiting period, usually six months, while keeping the policy and its values intact.

A rider that lets a terminally or chronically ill insured collect part or all of the death benefit early; the amount paid is subtracted from the benefit the beneficiary later receives.

A contract in which the insurer guarantees a minimum interest rate during accumulation and a fixed dollar payout, so the insurer, not the annuitant, bears the investment risk.

A contract in which premiums are invested in separate account subaccounts; the annuitant bears investment risk and the value fluctuates, and the product is a security requiring registration.

The point at which accumulated annuity funds are converted into a stream of periodic income payments, either for a set period or for the annuitant's lifetime.

The fraction of each annuity payment that is a tax-free return of the annuitant's investment in the contract, found by dividing that investment by the expected total payout.

A cost-sharing percentage, such as 80/20, under which the insured pays a share of covered expenses after the deductible and the insurer pays the rest, up to any limit.

A yearly cap on the deductibles, copayments, and coinsurance an insured pays for covered essential benefits; after it is met the plan pays 100% of covered expenses.

A policy provision that limits or denies coverage for a condition the insured was diagnosed with or treated for during a set look-back period before coverage started.

A disability policy standard that pays benefits when the insured cannot perform the material duties of the occupation he or she was trained for and working in, even if able to work elsewhere.

The waiting period, stated in days, after a disability begins before disability income benefits start; it works like a time deductible.

A benefit that pays a partial monthly amount, often proportional to lost income, when a disabled insured returns to work but earns less than before or cannot perform every duty.

The single contract a group plan sponsor holds with the insurer; individuals in the group receive certificates of coverage that summarize, but do not replace, the master contract.

Optional federal coverage for physician services, outpatient care, preventive care, and durable medical equipment; it requires a monthly premium plus a deductible, then 20% coinsurance.

A private policy sold to Medicare enrollees to fill gaps such as deductibles and coinsurance; plans are standardized by letter, and it cannot be paired with a Medicare Advantage plan.

A tax-advantaged account available to people covered by a qualifying high-deductible health plan, funded with pre-tax dollars for qualified medical expenses; funds roll over and stay with the owner.

Benefits from an employer-paid disability plan are fully taxable to the employee, while benefits from a plan the employee bought with after-tax dollars are received free of income tax.