life and health insurance license
Terms in this set (168)
decrease in value of an asset due to a peril
legal agreement made between an insurance company and an individual
set cost of insurance coverage payed by policyholder
insureds notification to the insurer that a payment is requestedq
possibility of a loss occuring
law of large numbers
States that as a group increases in size, the easier it is to predict the number of future losses over a certain period of time
mathematicians employed by insurance companies who collect and analyze risk data
A party wishing to buy an insurance policy on another party- valid concern about the health or well being of the party- business partner, blood relationship, marriage etc. [[must show interest when the other person is applying for the policy]]
sharing possibility of loss over a large group of people
not covered by insurance. ex gambling
insurable. accent, illness, death
cause of the loss and the event insured against. In life and health insurance, the perils are premature death, dependency during old age, accident, and sickness.
being subject to loss because of your surroundings. ex) living with a smoker
anything that increases the chance of a loss occurring. icy roads, driving while intoxicated
tendency for poorer than average risks to seek out insurance (smokers). Insurers must seek to minimize this.
spreading risk from one insurer to one or more other insurers.
The named individuals or entities designated by the policyowner to receive the policy proceeds/benefits
insurance that compensates the beneficiaries of the policies for their actual economic losses, up to the limiting amount of the insurance policy. [INDEMNITY=TO MAKE WHOLE]
intended to ward off financial hardship that may result due to a person's premature death. (burial costs, funeral cost, final expenses)
limit of liability
total amount the insurer will pay for an insured risk
amount the insured must pay before the insurer will pay for the claim. [EXAMPLE- if an insured has a $500 deductible but incurs $3,000 worth of loss, the insured will be required to pay $500 out-of-pocket before the insurer will cover the remaining $2,500] ((Prevents abuse of a policy by unnecessary claim))
cost-sharing mechanism between the insurer and the insured, and applies only to medical insurance. Insurer agrees to pay a large percentage of the expenses, and the insured is responsible for paying the remainder. ((typical coinsurance is 80/20))
protects against the severity of financial loss due to illness, disease, short or long-term disability, wages lost while ill or disabled, and medical expenses.
protect against the risk of living longer than expected. Annuities provide a guaranteed life income to protect against the risk of depleting retirement funds. [annuities are earned by putting x amnt dollars. save a mill, when u turn 65 get paid 5k for the rest of your life. gains interest, pays it out]
protects against the risk of damage and destruction to all types of property.
protects against the risk of legal liability for injury, death, disability, damage and destruction to property.
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. Credit life and credit health insurance cover these risks.
offer insurance to people through the individual market- aflac, bluecross, etc
redistributes incomes to help people afford costs associated with fundamental risks- medicare, medicaid etc
companies owned by their stockholders. Each stockholder owns portion of the insurer, and is a source of capital for the insurer. Because stockholders are co-owners of the stock insurer, they take part in profits & losses that the insurer experiences. When stock insurers experience profits, the board of directors will pay out earnings to stockholders in the form of dividends [NONPARTICIPATING]
return of overcharged premium. profits distributed by mutual insurers to policyholders. not taxxable
stock insturer into a mutual insurer
mutual insurer into a stock insurer
owned by their policyholders
service orgs that provide prepaid health plans for medical, surgical, and hospital expenses. Service providers sell medical services to members, who are termed subscribers. blue cross- strictly health insurance coverage.
fraternal benefit society
mutual insurers that provide insurance solely to their members. [[exempt from federal income tax and state premium tax.]]
select, classify and rate risks
not technically insurance companies, but are better described as a market where individuals and groups gather to exchange insurance.
risk retention groups
limited liability companies or member-owned corporations which collectively assume and spread its members' liability risks through self insurance. All members of a risk retention group must be employed in similar types of businesses so that they have similar liability exposures.
risk purchasing group
do not have risk
unincorporated groups of individuals. Each individual member, called a subscriber, provides insurance for other members through indemnity contracts. each subscriber's loss is shared among all subscribers in the reciprocal.
Reinsurers accept risks of other insurers. Reinsurers are responsible for any portion of risk assumed by the ceding insurer.
assess policyholders a premium when losses are incurred. Some assessment insurers only collect premiums when losses are incurred, while others collect advance premiums and additional premiums as necessary if losses cannot be sufficiently covered by the advance premium.
Insurance producers who represent the insured or purchaser of insurance, not the insurer. They work for several different insurers.
excess&surplus line unauthorized insurers
dont have a licence yet.insure risks that traditional insurers will not insure due to the nature or amount of coverage of the risk
provide protection against fundamental risks by redistributing income to help people who cannot afford to pay the cost of incurring such losses themselves.
Federal social insurance program which provides retirement, disability, and survivors benefits. Also referred to as OASDI, or Old Age, Survivors, and Disability Insurance.
Government health insurance coverage for individuals over the age of 65, and special needs individuals.
State and federally-funded medical assistance program for financially disadvantaged individuals.
insurers who have received a certificate of authority
independent rating service
credit rating agencies that rate or--grade--the financial strength and stability of insurers based on claims, reserves, and company profits.
the ways insurance products are marketed and sold to the public
work for only one insurance comp
licensed salespeople who work for an agent or broker. Solicitors perform the duties of brokers; however, like brokers, they cannot bind coverage.
provide insurance advice to insureds for a fee. Consultants work for insureds, not insurers.
explicit authority granted to the agent by the principal as written in the agency contract.
not specifically expressed by the principal to the agent in the agency contract, but is implicit in the agent's duties. ex collecting premiums
lingering implied authority
occurs when the agent retains evidence of authority, such as sales brochures and applications, when the agent no longer has expressed authority with the insurer.
relationship btwn the insurer, the agent and the customer. 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.
Coverage written on a producer's or agent's own life or health and on the lives or health of individuals who are relatives or business associates of the producer
A person in a position of financial trust and responsibility. Producers are fiduciaries.
paul v. virginia
U.S. Supreme Court ruled that insurance transactions crossing state lines are not interstate commerce.
United States v. South-Eastern Underwriters Association
ruled that insurance transactions crossing state lines are interstate commerce and are subject to federal regulation.
mccarran ferguson act
stated 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.
fair credit reporting act
passed in 1970 with the purpose of regulating the way credit information is collected and used.
collect, classify, and rate risk
investigative consumer reports [inspection report]
contain information on a consumer's character, general reputation, personal characteristics, or mode of living but are [[[obtained through personal interviews with neighbors, friends, or associates of the consumer]]]
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
Consumer reporting agencies compile and maintain credit information about consumers nationwide, and issue credit reports to third parties who have a valid business need for the information.
National Association of Insurance Commissioners (NAIC)
purpose of the organization is to advance the uniformity of regulation between states in insurance matters
National Association of Insurance and Financial Advisors (NAIFA)
works for the best interest of policyholders and seeks to broaden the opportunity and advancement of the individual agent
protect insureds in the event of insurer insolvency, or inability to pay claims.
fraud and false statements
provide punishment for people who willfully engage in insurance fraud
how many days does a consumer have to request info about a report
one time thing
violate fair credit reporting act
penalty up to 50,000
if an agent commits fraud they must
obtain waiver of consent from the state insurance department
any false, maliciously critical, or derogatory communication - written or oral - that injures another's rep.
occurs if a buyer of an insurance policy is given anything of significant value as an inducement to purchase or renew a policy. example]] the free use of a vacation condominium, seats at ballgames, tickets to special events, or anything else not specifically named as part of the contract may be rebates.
unethical act of persuading a policyowner to drop a policy solely for the purpose of selling another policy without regard to possible disadvantages to the policyowner
using misrepresentation to induce a policyholder to [[[[replace]]] a policy issued by the insurer the producer represents, rather than the policy of a competitor
manipulates through the prospect of something desirable. [[suggesting a selective club if the person purchases a particular policy]]
manipulates through the threat of a negative result
individual or group refuses to do business with a company or individual, either to drive them out of business or to force them to act in certain way.
law based on legal contracts
Law based on legal liability for civil wrongs.
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.
insuring clause of the policy
insurer's promise to pay covered losses as long as the insured pays premiums and abides by the terms and conditions of the policy
conditions of the policy
rights and responsibilities of all parties of the contract.
exclusions of the policy
states what the insurer will not do. This includes the risks that the insurer will not cover.
contract of adhesion
Take it or leave it agreements, where the insured has no say in the contract terms and conditions.
unequal exchange of value. EX Insurance contracts are aleatory because payment of benefits is contingent upon the occurrence of an uncertain loss. [ex when a young healthy person dies abruptly insurance company loses.] [ex when someone lives to be 100 they lose]
A contract between an individual and an insurer.
one sided because the company makes legally enforced promises to pay benefits while the policyholder doesnt make any promises to pay premiums
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. IF someone dies THEN the beneficiary can send the death cerfiticate and get the death benefit payment
The right of the insurer to assume the rights of the insured and sue the responsible third party for damages inflicted upon the insured.
statements made by the insured, to the best of his knowledge.
intentional misstatements made by the insured. misrepresentations that are material to the risk may void the contract. [[lying on applications saying you do not have a history of headaches when you indeed do.]
Withholding information material to the risk. Insurers may void policies if the concealment is intentional and material to the risk.
apply to life insurance and disability income policies. Iinsurance contract pays a stated amount. The insured is paid a fixed periodic income while disabled. The periodic income is always less than the insured's income earnings to prevent profiting from loss. In life insurance a stated amount (the death benefit) is payable upon the insured's death. Benefits are based on cash payment of the face amount stipulated in the policy.
what the insured can expect that the insurer will do
surrendering a known right
The legal process of preventing one party from reclaiming a right that was waived. [[EXAMPLE: The insurer does not include the suicide exclusion on Bob's policy. Bob commits suicide three months later, and the insurer refuses to pay the death benefit. Which of the following terms describes the insurer's inability to reclaim a waived right, and consequently the insurer's duty to pay the death benefit?]]
parol evidence rule
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.
agreement that doesn't have legal effect
intentional misrepresentation or concealment of material fact made by one party in order to cheat another party out of something that has economic value.
voiding of an insurance policy bc they conceal info
third party ownership
A person other than the insured is the owner of the policy.
the person who has all ownership rights under the policy (such as assignment and naming beneficiaries), pays premiums and accepts the policy when delivered. In most cases, the policyowner is the applicant.
Insurance premium paid in advance which is used for future coverage.
attending physician statement (APS)
when further investigation is needed on someones health status
used when underwriters need persons credit history. Consumers must also be informed that they have the right to request additional information about the report, such as the name of the company that provided them with a report. Such additional information must be provided to consumers within [[FIVE DAYS]] if requested.
medical information bureau
nonprofit trade organization that maintains medical information about individuals that is used by life and health insurers. [prevents fraud] only provides info to insurance company NEVER the individual
proportion of losses incurred by an insurer with respect to the total dollar value of premiums received (total losses divided by total premiums)
Underwriting done by the [agent] FACE TO FACE with the applicant.
process of predating the application a certain number of months to achieve a lower premium
stating that except for nonpayment of premium, the policy is incontestable after having been in force for at least two years.
provides instantcoverage and is intended for people who plan on purchasing permanent life insurance coverage within one year.
Handing over control of the policy to another person. insurer giving it to the agent
agent personally delivers policy to the insured. good practice bc agent can explain coverage to the insured.
rejected business rule
If an agent turns in an application to his/her standard company and the company declines to issue the policy standard, the rejected business rule allows the agent to then go to another company to issue the policy.
statement of good health
verifies that the insured has not become ill, injured or disabled during the policy approval process
process of concealing the origin of money obtained through illegal activities, such as crime or drug trafficking.
allows the government to obtain certain records to prevent terrorism, as well as prevent money laundering.
All of the insured's assets and liabilities.
human life value approach
This method calculates the amount of money a person is expected to earn over his lifetime to determine the face amount of life insurance needed, thereby [PLACING DOLLAR VALUE ON THE INDIVIDUAL]
This method [calculates the amount of life insurance a family needs immediately upon the death of the insured to pay for their expenses] and basic necessities, by looking at expenses, maintenance income, debts or mortgages, and dependent children's education.
business continuation agreements and are used to assure the ownership of the business is properly transferred upon the death or disability of an owner or partner.
key person insurance
Insurance purchased to protect a business from potential loss due to the death of a key employee. [CEOS & upper management]
employee benefit plans
perks and privileges that employers give their employees as an incentive to join and remain with the company long-term.
executive bonus plan
An employee benefit plan in which an employer gives an employee a bonus in the amount of the premium payments on a life insurance policy.[owned by employes but paid for by business] [employee is insured AND owner of the policy]
An executive benefit that an employer can use to pay a highly paid employee at a later date, such as upon disability, retirement or death.
split dollar plan
An employee benefit plan in which an employer and an employee share in the cost of purchasing a life insurance policy on the employee. [[[[employer owns the policy and recieves portion of death benefit when employee dies. other portion paid to employees spouse]]]
section 303 plan
A plan that allows a deceased stockholder's heirs to retain ownership while a portion of the deceased stockholder's shares are redeemed by the corporation
stock redemption plan
allows a corporation to redeem a portion of the deceased shareholder's shares [without handing over control of the corporation's ownership]
group life insurance
provide life insurance to many people under one policy [master policy not individual policies]
perm life insurance
cash value. last until person is 100.
term life insurance
no cash value. only lasts for a certain amoutn of time. death benefit is only paid if person dies within the term.
pay dividends to policyholders and they can decide what to do with it ----> cash, accum w interest, purchase more coverage etc. overcharge the premium just in case and return premium via dividends
pay dividents to shareholders
fixed life insurance
Policies that earn a constant rate of interest and provide guaranteed minimum benefits.
variable life insurance
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.
Optional life insurance provision stating that the policy will be voided and no death benefit will be paid if the insured commits suicide within a stipulated time period.
purchasing a new life insurance policy or annuity contract to replace an existing policy or contract.
nonguaranteed elements of an insurance policy
surrender cost index
comparison of the policy's projected cash value to premiums paid over several years
to sell variable life insurance u need
Life and variable products and securities licenses
net single premium
mortaliity minus interest.amount an applicant would pay if he were to only pay one premium on the policy. Most people do not fund life insurance in this manner. Instead, they pay premiums over several years.
gross annual premium
Net premium plus loading expenses for ONE YEAR
annual renewable term
Level term insurance which has a level face amount and increasing premiums. (to account for old people at higher risk)
savings portion of a whole life policy
funds the insurance company must set aside to pay future claims
premium payment mode
Frequency at which premium payments are made. can be made monthly, yearly, or at one shot. monthly are more expensive bc there is more costs to process all of the payments
The amount the insured must pay before the insurer will pay for a health insurance claim.
used to predict the likelihood of death in a given population. Data in them are categorized by underwriting factors such as age, sex and smoking habits.
premiums paid on business life insurance are
ordinary life insurance
most common sold.Coverage has a level face amount and level premiums payable over the entire life of the insured.
industrial life insurance
home service life insurance issued in very small face amounts, such as $1,000 to $5,000. Premiums are paid weekly or monthly.
group life insurance
insurance written for members of a group, such as an employer-employee group, association, union or creditor-debtor group. Coverage is provided to the members of the group under one master contract. The group is underwritten as a whole, not on each individual member.
allows a policyowner to renew existing term coverage and receive a lower premium by providing proof of insurability.
provides instantaneous coverage and is intended for people who plan on purchasing permanent life insurance coverage within a year.
whole life policy that will pay the face amount under one of two situations: 1.) if the insured is alive at the contract maturity date, or 2.) if the insured dies during the policy period. The policy cash value must equal the face amount by the end of the policy period.
current assumption whole life
Coverage provides flexible premiums based on a changing interest rate. Synonymous with interest-sensitive whole life.
economatic whole life
Combines a whole life policy with a term rider in which [[dividends]] are used to buy paid-up coverage. Synonymous with enhanced ordinary life and extra ordinary life.
modified whole life
Policies which use convertible term and whole life to provide permanent protection that has lower premiums during the early policy years.
graded premium whole life
Coverage has several premium increases that occur annually during each year of the step-rate premium period, which is usually the first five or ten years of the policy. After this period, premiums level off at the higher rate for the remainder of the policy.
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