Definition Terms Flashcards
(54 cards)
Riders
Optional coverages that can be added to policies that provide additional benefits or protections. Vary form policy to policy and company to company. Also known as addendums, additions, amendments, or additional policy benefits.
Replacement
The exchange of one policy for another
Fair Credit Reporting Act
Consumer Report
Contingent Beneficiary
An alternate beneficiary designated to receive the policy proceeds in the event that the primary beneficiary dies before the insured.
Unilateral
One-sided promise. Only one party makes a legally enforceable promise. The insurance company promises to pay the policy proceeds at some future date or event.
hazard
Anything that increases the likelihood that a loss will occur (faulty wiring)
Interest Settlement Option
Upon maturity of an insurance policy the beneficiary receives periodic payments of the interest earned from the company’s investment of the policy proceed.
Variable Annuity
The product is invested in a separate account and has no guaranteed rate of growth. The annuity promises to pay a fixed number of annuity units to the annuitant for the rest of his/her life. The value of the annuity units varies depending on the performance of the investments of the separate account.
Policy Loan Provision
Describes the conditoins by which a policyowner can borrow from the policy’s cash value.
Face Amount
Amount payable in the event of death of the insured. Also called face value, death benefit, plicy proceeds, coverage, stated amount, indemnity amount or proceeds to the beneficiary.
Incontestable Clause
A state mandated provision that limits the amount of time that an insurer can rescind a policy or contest a claim due to misrepresentation or concealment.
Insurable Interest
A financial interest in the life of another person. In a position to loose something of value if the insured should die.
Consideration
A necessary element of a contract; something of value exchanged for the transfer of risk. INsured’s consideration is payment of premiums and truthful statements on the application. Insurer’s consideration is promises contained in the contract.
401 K Plan
A qualified retirement plan in which the employee can set aside a portion of their income with pre-tax dollars.
Cash (Nonforfeiture Option i.e. Surrender)
Policyowner receives a lump-sum payment of the current cash value of the policy upon surrender of the policy. The policy cannot be reinstated.
Decreasing Term
Term life insurance in which the face amount of the policy decreases over time in scheduled steps. Most often used to cover a debt obligation (mortgage)
Individual Retirement Account (IRA)
A qualified retirement plan for any individual with earned income.
Conditional Receipt
An interim insuring agreement under which the insurance company agrees to start coverage on the later of either the date of application or the date of the medical exam IF the proposed insured is found to be insurable on that date.
Appointment
Authorization of an agent/producer by an insurer to represent the company.
Proof of Insurability
A statement about or evidence of person’s physcial and/or mental health, personal character, occupation, living habits, etc. Used by the insurance company in assessing whether to accept the person’s risk.
Third Party Ownership
When a person(s) other than the insured purchases the insurance policy.
Estoppel
Legally preventing someone from asserting or re-asserting a known right that they have previously waived.
Adverse Selection
The tendency for less favorable risks to seek or continue insurance to a greater extent than more favorable risks.
Law of Agency
The actions of an agent/producer within the scope of the authority granted to him/her by the insurer become the actions of the company.
