Vocab. Set 3 Flashcards
(32 cards)
Self-Inflicted Injury
An injury to the body of the insured inflicted by the insured, usually not covered on Health insurance.
On Life insurance, although insurers do not want to cover suicide, most states require it to be covered after the policy has been in force for two years (one year in Colorado).
However, if an insured dies as a result of suicide within the first two years,the premiums paid are refunded to the beneficiary.
Service Plans
An arrangement by a pre-paid Health Services Organization to pay certain vendors of health-care services directly for rendering approved services to covered persons. These arrangements may preclude or limit any additional charges for the defined services. HMOs are the best known, but not the only, form of pre-paid service plans.
Settlement Options
Themethod of receiving Life insurance proceeds.Generally, there are five Life insurance Settlement Options:
- Cash,
- Interest,
- Fixed Period,
- Fixed Amount
- or the beneficiary may use the proceeds of the policy to purchase an Annuity
(remember the acronym of C-I-F-F-A).Proceeds paid to the beneficiary of a Life policy are tax free. However, if the beneficiary selects the Interest Option, the interest received will be taxable to the beneficiary.
Short Term Disability
A form of disability income insurance paying benefits which is usually written on a group basis with short waiting periods (often seven days) and short benefit periods (often six months).
Sickness Insurance
A generic name for Health insurance coveringloss by illness or disease. Illness or disease does not include accidental bodily injury. Sickness insurance may provide benefits for loss of time or expense incurred by pregnancy.Watch out on the state exam for these definitions! Health insurance is a broad term that includes Medical Expense, Disability Income and AD&D insurance. Disability insurance is just another name of Health insurance. However, Disability Income insurance is a specific type of Health insurance.
Single-Premium Annuity
An Annuity purchased with one lump-sum payment, generally with after tax dollars.
You can buy either a Single Premium Immediate Annuity, which allows you to “annuitize” right away, or you can buy a Single Premium Deferred Annuity, where you annuitize sometime in the future, perhaps at retirement age.
Single-Premium Policy
A Life insurance policy on which the entire premium is paid in one payment, which creates an immediate cash value. Remember, in lieu of a traditional Whole life policy where payments are payable to age 100, you can buy a Limited Pay Whole Life policy, such as a LP 65, a 20 Pay Life or even a 1 Pay life. Universal Life policies were often purchased with a single premium before tax law rules regarding Modified Endowment Contracts (MECs) were adopted.
Solicitor
A person who finds insurance prospects for a producer.
Standard
A risk that meets the same conditions of health, physical condition, morals, and other underwriting criteriaas the tabular risks on which the rate is based.The Standard Risk is also known as the Average Risk. Remember, most people are insurable. It is just a matter of classifying them into the proper rating category: Preferred, Standard or Non-Standard
Standard Non-forfeiture Law
A law adopted by most states that provides that any cash-value accumulation or its equivalent must be made available to the policy owner should he/shestop paying the premiums.Any time a cash value Life insurance policy lapses, the policy owner must be given the choice of three Non-forfeiture options: Cash Surrender, Reduced Paid Up or the Extended Term option. In other words, the cash value may not be forfeited to the insurer!
Standard Provisions
A set of statutory provisions required by most states to be included in every Health policy issued. Also called Uniform Policy Provisions or Mandatory Policy Provisions.Generally, Standard Provisions, such as the Grace Period, are designed to protect the policy holder. There are 12 required Standard Provisions contained in individual Health policies. There are also several Optional Provisions that Health insurers may include, such as Change of Occupation. Optional Provisions are generally included to protect the insurance company.
Stated Amount
Relating to an agreement to pay a specified amount of money to or on behalf of the insured upon the occurrence of a defined loss. For example, the principal sum on an AD&D policy.AD&D and Life insurance are considered to be “valued” policies, since the amount payable in the event of a claim is determined when the policy is first issued. However, Health insurance follows the Principle of Indemnity, in that the policy will pay the policy limit or the amount of the claim, whichever is less.
Stock Insurance Company
An incorporated insurance company with capital divided into shares and owned by the shareholders.Stock companies issue “non-participating” policies, in that dividends (if declared) are payable to the stockholders rather than to the policyholders, an ARE TAXABLE.
Surgical Schedule
A list of specific maximum amounts payable for surgical procedures in Basic Health insurance indemnity type policies.Sometimes called a Relative Value Schedule.
Surrender
Withdrawing the cash value of a Life policy and surrendering the policy to the insurer.No further coverage exists and the policy may not be reinstated. Cash Surrender is one of the three required Non-forfeiture options.
A policy may be surrendered for cash at any time. However, amounts received in excess of premiums paid upon cash surrender are TAXABLE.
Term Insurance
Life insurance that normally does not have cash accumulation and is issued to remain in force for a specified period of time, following which it is subject to renewal or termination.Term insurance is considered to be temporary coverage. Remember, the word “term” means time. Term policies only cover you for a period of time and you must die in the term in order to be covered. Whole life, however, is permanent in that it covers you until you die.
Tertiary Beneficiary
Next in line behind the Contingent Beneficiary to receive policy proceeds if both the Primary and Contingent Beneficiaries are deceased. Also known as the Final Beneficiary, which is usually the estate of the insured.The word “Tertiary” means “third.”
Time Limit on Certain Defenses
A Uniform Provision on Health Insurance policies specifying that after a given number of years (usually two), no statements (except fraudulent misstatements) made in the application shall be used to deny a claim or void the policy and that no claim shall be denied or reduced on the ground that a disease or physical condition not excluded at time of issue existed prior to effective date. Also known as the Incontestability Clause. A Healthpolicy is contestable for the first two years and incontestable thereafter, except for fraud
Total Disability
A degree of disability from injury or sickness that prevents the insured from performing duties for remuneration or profit. The definition in any given case depends on the wording in a covering policy.This definition actually varies by company. In other words, on Disability Income insurance, you get what you pay for. If this definition is broad, such as you are totally disabled if you cannot perform your own job, the policy will be expensive. However, if the definition states that you are totally disabled only if you are confined to the hospital, it won’t cost much.
Travel Accident
A form of accident insurance limiting coverage to accidents occurring while the insured is traveling.This is a form of AD&D insurance, and is considered to be a limited policy since it covers accidents only. These policies have many exclusions, such as no coverage if your injury occurs while you are under the influence of drugs or alcohol.
Twisting
Inducing or seeking to induce a policy owner by misrepresentation to terminate an existing Life policy to replace it with a new policy. In most states twisting is illegal and/or unethical. Producers are naturally tempted to engage in “replacement,” since the commission paid on new policies generally exceeds the commissions paid on renewal policies. Replacement is not illegal, unless it is detrimental to the client. However, “twisting” the facts in order to induce replacement is an illegal and/or unethical trade practice.
Unauthorized Company
An insurer not permitted to sell insurance within a state. Generally, you are prohibited from selling insurance for an unauthorized company. All insurers must be “authorized”to sell insurance in a state, which means that they must obtain a Certificate of Authority from the state.
However, Surplus Lines companies (such as Lloyds of London) and companies who “reinsure” other companies are exempt from this requirement. Most states allow Surplus Lines companies to write the risks that authorized companies won’t take. Surplus Lines companies do not participate in the State Guaranty Fund (Association) and are generally unregulated as to rates and policy forms used.
Underwriter
1) A salaried company employee trained in evaluating risks and determining the rates and coverages.No license is required.
2) A producer, especially a Life insurance producer, is considered to be a “Field Underwriter”or “Front Line Underwriter.”In theory, the producer is supposed to do some underwriting before submitting the case to the home office underwriter in order to assist in making a decision on the basis of known facts. The producer is required to report all facts known to him/her that might affect the risk. Remember, the producer represents the insurer, not the insured.
Underwriting
The process of evaluating a risk for the purpose ofissuing insurance coverage. Also known as risk classification.The underwriter’s job is to select business that fits into the rate structure of the insurer, allowing the insurer to not only pay claims and expenses, but to make an underwriting profit.
