Indiana Health & Life Insurance-Basic & Life Insurance

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Conditions

The section of an insurance policy that indicates the general rules or procedures that the insurer and insured agree to follow under the terms of the policy.
or
The rights and responsibilities of all parties of the contract.

Standard

Underwriting classification in which individuals are in average physical condition with average lifestyles and habits for people of their respective sex and age group.

Rate

Premium

Contract

A legally binding agreement between 2 or more parties where a promise of consideration is exchanged.

Beneficiary

The named person(s) who receive the policy benefits.

Claim

The insured's demand for payment of benefits.

Actuaries

Mathematicians who analyze statistical risk information for insurance companies.

Risk Pooling

Combining similar losses from many people so the average loss over the entire group remains relatively constant.

Insurance

Transferring uncertainty of loss to the insurance company.

Risk Management

The process of identifying the areas of potential risk, using measurement techniques to determine the severity & frequency with which the risk may occur, evaluating & analyzing all costs involved with each type of risk, & establishing procedures for managing, controlling, retaining, & financing each risk.

Ownership

A required provision in a life insurance policy which stipulates the rights of the policy-owner.

Changes

A required provision in a life insurance policy stating only the policy-owner has the right to request permitted changes to the policy, & only an authorized officer of the insurer can make changes to the policy. Producers cannot make any change to the policy.

Economic Loss

An asset's value is decreased due to a peril.

Death Benefit

The amount paid to the beneficiary under an insurance policy upon the death of the insured.

Application

The form filled out by the applicant that includes information about the proposed insured's health history and background. The applicant's statements made on it are representations.

Hazard

Anything that increases the chance of a loss occurring from a particular peril.

Indemnity

Compensation for a loss. "To make whole". To restore a financial loss to the state prior to the occurrence of the loss

Expenses

The insurer's costs which include: acquisition costs, staff salaries, retirement, contingency funds, and claims payments.

Credit Insurance

It protects against the risk that a person in debt, termed debtor, cannot repay the debt to the creditor because of accident, sickness, disability or death.

Surplus

The amount of money of an insurance company's assets minus liabilities.

Offer

It is made when the applicant submits an application for insurance with initial premium to the insurer.

Reserves

The amount of money representing the insurance company's actual or potential liabilities to cover debts to its policy-owners.

Private Insurers

Insurance which offers coverage to people through the individual market.
3 types: Commercial, Noncommercial, & Private insurers.

Non-Commercial Organizations

Nonprofit entities offering strictly health coverage on a service basis. (Pay benefits directly to the health care providers the subscribers use.)

Commercial Insurers

Insurers who sell insurance to make a profit.
2 types: Stock & Mutual insurers.

Stock, Capital Stock, or Nonparticipating insurers

Incorporated companies owned by their stockholders. (Pay dividends to stockholders, not policyholders.)

Mutual or Participating Insurers

Commercial insurers who are owned by their policyholders. Issue dividends to their policyholders.

Mutualization

Transformation of a stock insurer into a mutual insurer.

Demutualization

Transformation of a mutual insurer into a stock insurer.

Dividends

A return of overcharged premium, which is not taxable.

Authorized Insurers

Insurers that possess a certificate of authority to transact insurance in a state.

Excess and surplus lines

Unauthorized insurers which cover risks the traditional market will not insure due to the nature or amount of coverage required for a risk.

Assessment insurers

Assess policyholders a premium when losses are incurred.

Risk Purchasing or Purchasing groups

Unlike risk retention groups, risk purchasing group do not retain risk. Risk purchasing groups do not act as insurers, underwrite coverage nor require members to provide capital. (They buy group liability insurance from an outside insurer or from a risk retention group.)

Risk retention groups

Limited liability companies or member-owned corporations which collectively assume and spread its members' liability risks through self insurance.
-Property & casualty insurance.

Underwriting

The process that insurers use to select, classify and rate risks so that they accurately reflect the amount of risk undertaken.

Unauthorized Insurers

Non-licensed or nonadmitted insurers. These insurers do not have licensure because they have not yet applied, have applied and been denied licensure, or are excess and surplus lines insurers.

Separate Account

The insurer's account used to invest premium dollars for variable life insurance and annuities.

Self insurers

They retain risk.

Reciprocal or Interinsurance exchanges

-Unincorporated groups of individuals. Each individual member, called a subscriber, provides insurance for other members through indemnity contracts. (run by an attorney-in-fact)
-Each subscriber acts as both the insurer and the insured.
-A separate account is set up for each subscriber to which premiums are paid and losses are assessed.

Names

Individuals who are members of a Lloyd's syndicate.

Group Life Insurance

Insurance which provides life insurance to many people under one policy, where a master policy is issued to the organization and individual certificates are given to each member.

Government Insurance

Insurance which provides protection against fundamental risks by redistributing income to help people who cannot afford to pay the cost of incurring such losses themselves.

Fraternals or Fraternal benefit societies

-Special types of mutual insurers/ nonprofit religious, ethnic or charitable organizations that provide insurance solely to their members. (are exempt from federal income tax and state premium tax.)
-Typically sell Life & Health insurance.

OSADI or Social Security

Old age, Survivors And Disability Insurance

Certificate of authority

The "license" issued to an insurance company authorizing it transact insurance in a state. Certificates of authority are issued by a state insurance department.

Unauthorized Insurers

Non-licensed or nonadmitted insurers. These insurers do not have licensure because they have not yet applied, have applied and been denied licensure, or are excess and surplus lines insurers.

Rights

A required provision in a life insurance policy stating the policyowner's ownership privileges.

Producers

People who sell, solicit and negotiate insurance. It is an all-encompassing term which includes agents and brokers.

Agents

Insurance producers who represent the insurer, not the insured.

Brokers

Insurance producers who represent the insured or purchaser of insurance. (They work for several different insurers.)

Solicitors

Licensed salespeople who work for an agent or broker.

Payment of Claims

A required provision in a life insurance policy stating that once the insurer receives notice of the insured's death and receives the death certificate, the insurer must pay the claim within a certain number of days, usually 60.

Independent insurance agents

Appointed to work for several insurers non-exclusively.

Foreign Insurer

Any insurer that conducts business in a state, district, or commonwealth in which it WASN'T incorporated.

Exclusive agents

Work for only one insurer - synonymous with captive producers and career agents.

Domestic Insurer

An insurer that conducts business in the state, district or commonwealth in which it WAS incorporated.

Direct writing companies

They do not use producers to market and sell their policies.

Captive Producer, Career or Exclusive Agent

Work for only one insurer.

Authorized or Admitted Insurers

They have a certificate of authority to transact insurance in a particular state, district or commonwealth.

Alien Insurer

Any insurer that conducts business in a country in which it WASN'T incorporated.

Agency

Insurance distribution system that uses producers to transact insurance.

Fraud

An intentional misrepresentation or concealment of material fact made by one party in order to cheat another party out of something that has economic value.

Implied authority

Not specifically expressed by the principal to the agent in the agency contract, but is implicit in the agent.

Express authority

Explicit authority granted to the agent by the principal as written in the agency contract.

Apparent authority

It deals with the relationship between the insurer, the agent and the customer. It is a situation in which the insurer gives the customer reasonable belief that an agent has the power and authority to bind the principal even in cases where the agent does not have such authority.

Lingering Implied Authority

When the agent retains evidence of authority, such as sales brochures and applications, after the agent no longer has expressed authority with the insurer.

Customer

A consumer who has a customer relationship with a company (someone who has purchased products or services from a company is a customer).

Principal

The insurer.

Noninsurance sponsors

Issue insurance policies but are not insurers themselves. These include financial institutions including the banking and credit issuing companies.

Market Conduct Examination

It is a non-financial examination used to establish an insurer's authority to transact insurance in a particular state.

Market Conduct

Ethical code describing how insurers and producers handle business.

Industrial life or Home Service insurance

It is sold by debit agents who collect premiums from policyholders on a weekly basis.

Fiduciary

A person in a position of financial trust and responsibility. An example is a Producer.

Consultants

Provide insurance advice to insurers and prospective buyers for a fee.

Vending machine sales

Sells policies with large amounts of coverage for a low premium and typically limited coverage period.

Franchise marketing distribution

-Sell policy to associations & smaller companies.
-individuals insured under franchise policies each receive their own individual policy.

Direct response marketing

-Type of Mass Marketing that does not use agents.
-Includes insurance advertised and sold through television and radio advertisements, print sources found in newspapers and magazines, by mail and over the Internet.
-tend to have lower premiums and restricted policy benefits
-Policy applications are completed by the applicant and submitted to the insurer online or by mail.

Consumer

An individual seeking to obtain a product or service from a company.

Commissioner

The person who heads the Insurance Department of a state.

Cease and desist order

An order issued by a government agency to prohibit a person or entity from continuing to do an activity.

Reinstatement

A required provision in a life insurance policy which permits the policyowner to reinstate a policy that has lapsed, as long as the policyowner can provide proof of insurability, within 3 years.

Preferred

Underwriting classification in which individuals are above average in terms of physical condition and lifestyle and present a less than average risk to the insurer.

Paul v. Virginia

Court ruling that insurance transactions crossing states lines are not interstate commerce which meant that insurance transactions would be regulated on state and local levels, rather than on the federal level.

United States v. South-Eastern Underwriters Association

Statute stating that insurance transactions crossing state lines are interstate commerce and are subject to federal regulation.

McCarran Ferguson Act or Public Law 15

A statute stating that while the federal government has the power to regulate the insurance industry, it may not exercise such rights if the insurance industry is effectively and adequately regulated on the state level.

Privacy Act of 1974

Statute that establishes a code of fair information practices dictating how information is handled by federal agencies.

Opt out

A direction from a consumer that a company not disclose nonpublic personal financial information about that consumer to a nonaffiliated third party.

Customer

A consumer who has a customer relationship with a company (someone who has purchased products or services from a company is a customer).

NAIC

National Association of Insurance Commissioners—Association that promotes the standardization of insurance laws between states on a state-level.

Waiver

Intentionally or voluntarily surrendering a known right.

Rights

A required provision in a life insurance policy stating the policyowner's ownership privileges.

Provisions

The characteristics, privileges, duties of all parties, and rights of a policy.

Investigative consumer reports

-They are reports that contain information about a consumer's character, general reputation, personal characteristics, or mode of living (not credit information).
-Are obtained through personal interviews with neighbors, friends, or associates of the consumer.

Gramm-Leach-Bliley Act or GLBA

Act which allows financial entities to merge and accommodate greater competition, including the ability to merge with banks, and either financial institution to perform the duties of both. Regardless, any entity acting as an insurer is regulated by its repective state insurance department.
-Two disclosures must be made to customers. The 1st disclosure must be made when the customer relationship is established. The 2nd disclosure must be made before disclosure of protected information.
-must provide customers with an update of privacy policies on an annual basis.

Face amount or Face Value

The amount of coverage under a life insurance policy - synonymous with face value.

Consumer reports

Any written, oral, or other communication of information by a consumer reporting agency about a consumer's credit worthiness, character, general reputation, personal characteristics or mode of living which are used to determine a consumer's eligibility for credit, insurance, employment, or other authorized purposes.

Consumer reporting agencies

They compile and maintain credit information about consumers nationwide, and issue credit reports to third parties who have a valid business need for the information. Examples: MIB, Experian and Equifax.

Fair Credit Reporting Act

-The Act requires consumer reporting agencies to implement policies and procedures to preserve the confidentiality, accuracy, relevance, and appropriate utilization of consumer's private credit information.
- Investigative consumer reports cannot be performed unless the consumer has been notified in writing of the report within three days of when the report was initially requested.
-Consumers must be informed that they have the right to request additional information about the report; such information must be provided to consumers within five days if requested.

Exclusions

The section of an insurance policy that details what perils are not insured and what persons are not insured. Exclusions restrict some of the broad terms used in the insuring agreement.

Conditions

The section of an insurance policy that indicates the general rules or procedures that the insurer and insured agree to follow under the terms of the policy.

Conditional Contract

Insurance contracts are conditional because certain conditions must be met by all parties to the contract when a loss occurs in order for the contract to be legally enforceable.

Unilateral Contract

One sided agreement, where only the insurer is legally bound.

Aleatory Contract

Unequal exchange because payment of benefits is contingent upon the occurrence of an uncertain loss.

Contract of Adhesion

Take it or leave it agreements, where the insured has no say in the contract terms and conditions.

Legal Purpose

An insurance contract must be legal and not in opposition of public policy. If an insurance contract has insurable interest and the insured has provided written consent, it has legal purpose.

Competent Parties

All parties must be of legal competence, meaning they must be of legal age, mentally capable of understanding the terms, and not influenced by drugs or alcohol.
(1 of 4 elements required in a contract)

Consideration

An exchange of value between parties of the contract. The insured provides consideration in the statements on the application and payment of premium. The insurer provides consideration by promising to pay a covered loss.
(1 of 4 elements required in a contract)

Tort Law

Law based on legal liability for civil wrongs.

Rights

A required provision in a life insurance policy stating the policyowner's ownership privileges.

Provisions

The characteristics, privileges, duties of all parties, and rights of a policy.

Policyowner

The person who has all the ownership rights under the policy, pays premiums, and accepts the policy when delivered - synonymous with policyholder.

Policy Face

The title page of the contract, identifying the insured's name, policy number, issue date, limits, premiums, due dates, right to return provision, and the insurer's signature.

Personal Contract

A contract between an individual and an insurer.

Ownership

A required provision in a life insurance policy which stipulates the rights of the policyowner.

Offer

It is made when the applicant submits an application for insurance with initial premium to the insurer.

Initial Premium

The first premium due on an insurance policy. Typically, it is collected upon application submittal.

Death Benefit

The amount paid to the beneficiary under an insurance policy upon the death of the insured.

Counter-offer

If the insurer receives an application & initial premium, BUT issues the policy with modified coverage or premium.

Contract

A legally binding agreement between two or more parties where a promise of consideration is exchanged.

Contract Law

Law based on legal contracts.

Conditions

The rights & responsibilities of all parties of the contract.

Conditional Contract

A contract where certain conditions must be met by all parties to the contract when a loss occurs in order for the contract to be legally enforceable.

Applicant

The person applying for the policy who fills out the application.

Warranties

Statements that are guaranteed to be true and are part of the legal contract. Breach of it is grounds for voiding an insurance contract.

Waiver

Surrendering a known right.

Subrogation

The right of the insurer to assume the rights of the insured and sue the responsible third party for damages inflicted upon the insured.

Rescission

Insurance contracts may be voided if one or more parties to the contract commit a material misrepresentation or concealment.

Representations

Statements made by the insured, to the best of his knowledge.

Parol Evidence Rule

Rule that prevents parties to a contract from changing the meaning of a written contract by introducing oral or written statements made prior to the formation of the contract but are not part of the contract.

Misrepresentations

Intentional misstatements made by the insured. If they are material to the risk it may void the contract.

Material to the risk

Information that is fundamental to insuring a risk.

Estoppel

The legal process of preventing one party from reclaiming a right that was waived.

Concealment

Withholding information material to the risk. Insurers may void policies if it is intentional and material to the risk.

Cash Payment

Dividend option in which the policyowner receives a check for the amount of the dividend.

Third Party Ownership

A person other than the insured is the owner of the policy.

Substandard

Underwriting classification in which the risk is greater than standard risks, due to the applicant's physical condition, medical history, hazardous occupation or dangerous hobbies or habits.

Simplified Issue Life Insurance

A life insurance policy that does not require the prospective insured to undergo a medical examination.

Preferred

Underwriting classification in which individuals are above average in terms of physical condition and lifestyle and present a less than average risk to the insurer.

Paramedical Report

Report made on a prospective insured from an abbreviated medical examination. They are made by a paramedic or a registered nurse.

Loss Ratio

The proportion of losses incurred by an insurer with respect to the total dollar value of premiums received (total losses divided by total premiums).

Inspection Report

Investigative consumer report.

Declined

Underwriting classification in which the risk is uninsurable because the applicant poses too great a risk for the insurer to provide coverage.

Agent Report

Part III of the application, also referred to as the producer's report. It is used to underwrite coverage, but does not become part of the policy.

Variable Universal Life

-Universal life insurance with a separate account. The variable portion of premiums is invested in the insurer's separate account.
-Policies that earn a fluctuating rate of interest and do not guarantee a certain cash value. Policies have fixed level premiums and a guaranteed minimum death benefit.

Universal Life

Life insurance that allows the policyowner to buy term and invest the difference. Synonymous with unbundled life insurance and flexible premium adjustable life.

Settlement Options

The ways, other than lump-sum, that life insurance policy proceeds are paid out to beneficiaries upon the insured's death or when the policy endows.

Series 6 License

Securities license permitting a person to transact only mutual funds and variable annuities.

Securities Act of 1934

Legislation requiring sales representatives have a Series 6 license. Legislation also regulates the duties of sales representatives.

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