104 terms

KAPLAN Life and Health Insurance

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What is Insurance
a contract that indemnifies (make a person whole) against loss or damage or liability to transfer risk
policy owner
the insured
insurer
the insurance company
premium
set amount of money paid
what in return does the insurer do when it is paid a premium?
legal document agreement, insured beneficiary
claims
demand for payment of insurance benefit to the person named in the policy
two types of risk
pure and speculative
risk
uncertainty of loss; when more than one outcome is possible
pure risk
insurable; there is a definite possibility for a chance of loss, no possibility for a gain
speculative risk
uncertainty of loss/gain
two factors that give rise to risk
perils and hazards
peril
the cause of loss
ex. death is cause for life insurance
accidents/illness cause for health insurance
hazard
gives rise to cause of loss/increases chance
3 types of hazard risk
physical, moral, and morale
physical
structural/operational causes of risk
moral
people's habits/values that cause risk
morale
human clumsiness that cause risk
the risk management method
STAR
what are the four parts of the risk management method?
Sharing
Transfer
Avoidance
Reduction
Retention
law of large numbers
predicts how many dollars in claims a company will have to pay out based on the past. The larger the group, the more predictable the number
exposure unit
item/property of the person insured
ex. 1 economic value of ind. person's life (life insurance)
ex. 2 # of cars or homes in (property and casualty insurance)
acronym for characteristics of risks that can be insured
C
Affordable (for an avg consumer)
Non-Catastrophic (events will not cause undispensed losses)
Homogeniety (risks must be similar to factors that affect change)
Accidental (method of handling risk)
Measurable (less estimated @ dollar amount)
reinsurer
protects insurers from catastrophic losses
adverse
tendency for high risk individuals to get/keep insurance more than average risk individuals
underwriting
makes extensive evaluation of info related to risk and determines if insurer should charge a higher risk
subrogation
clause in an insurance policy the gives insurer the right to sue
limit of liability
maximum amount insurer will pay for specified insured contingency
deductibles
initial amount of covered loss the insured must absorb before the insurer begins to pay for additional loss amounts
coinsurance
depending on the amount for deductibles presented in the policy, and percentage the insurer and insured pays, the allowable expenses are split
types of insurance (6)
Property (of every kind)
Life Insurance (protects family/business when individual dies)
Annuities (guaranteed income for life)
Accident (protects financial loss caused by sickness)
Casualty (protects against legal liability consequences of death, injury, disability
Credit (usually unable to pay debts)
credit
limited line of increases protecting the insured
private commercial insurers
profit marketing (private life and health insurance)
private non commercial insurers
nonprofit service orgs
Special non profit
gov
three types of insurers
private commercial
private noncommercial
US government
stock insurers
stockholders who own shares; nonparticipating company because policy holders do not participate in dividends from stock ownership
mutual insurer
ownership rests with policy owner and funds that are not paid out are returned to the policyowners as dividends
reciprocal insurers
groups of people that provide insurance for one another; each member is called a subscriber who pays an equal premium
fraternal insurers
like a social org; operate under special section of state insurance and receive some income tax advantages
excess and surplus lines
name given to insurance for which there is no market
risk retention group
spreads liability exposure to all members regulated by the state
self-insurers
retains risk; sets aside reserve funds to cover losses and purchase
US Government
social security, military life insurance
places of origin for insurance
domestic, foreign, and alien
domestic
insurer specific to the state
foreign
licensed to conduct business in where state aside from its original
alien
countries incorporated aside from its original
two ways a company markets products
(1) using producers
(2) selling products directly
independent insurance agents
sell insurance products of several companies and work for themselves
exclusive/captive agents
represent one company
general/managing agents
hire/train/supervise other career agents working
direct-writing companies
pay salaries to employees whose job function is to sell company's products
types of producers
life and health
property and casualty
brokers
solicitor
insurance consultants
life and health agents
do not receive premiums except the first, only in industrial life insurance; company approves of and issues life insurance
property and casualty agents
may bind or commit companies by an oral or written agreement
brokers
can represent insurer for purchaser or agent to insurer
solicitor
salesperson who works for broker in property/casualty field
insurance consultants
small group of insurance professionals that are paid for with a fee
three channels of insurance business
federal regulation
state regulation
self-regulation
federal regulation
individuals/companies that affect interstate commerce not covered by state regulation
What are the 7 types of insurers
Stock insurers
Mutual insurers
Reciprocal insurers
Fraternal insurers
Lloyds
Reinsurers
Excess and surplus lines
Risk retention groups
Risk retention
Self insurers
Us state government insurers
Pretext interview
Pretends to be someone else; misrepresents the purpose of the interview or refuse to properly identify self
true or false? a policy owner in a mutual company must receive a dividend
true
an agent that has an exclusive contract with an insurer, not being able to sell identical policies for different insurers
captive agent
producer of insurance who is not an agent of an insurer who solicits, negotiates, or produces is...
a broker
corporation/limited liability association that assumes and spreads liability exposure
risk retention group
the primary purpose of a life insurance company that is organized as a stock company
maximize profit for its shareholders
health coverage issued to members of an association or professional society
franchise health plans
What did the federal HMO law do to encourage the formation of HMOs?
Provided federal assistance for federally qualified HMOs
To control costs, medical insurance plans available from commercial insurers and fraternal organizations are likely to provide care through:
An open network
when an employer allows an employee to deposit a paycheck into an account before paying income taxes--employee is reimbursed for eligible health care and dependent care expenses
flexible spending
who members obtain medical services from outside of their organization
preferred providers
not classified as a service organization
health insurance company
A health care plan designed to combine small employers together into a group to purchase medical expense coverage for their employees is called
MEWA (multiple employer welfare association)
Under the laws of most states, how often may a disabled employee receive workers' compensation benefits?
monthly
This type of policy requires that both the cause and the result of an accident be unintentional
A&D
where policies are sold directly to consumers through vending machines, advertisements, or salaried sales representatives.
DIRECT SELLING
failing to pay a claim in an untimely manner according to...
Unfair Trade Practices Act
Omitting or misrepresenting information about the benefits, advantages, conditions or terms of a policy is considered misrepresentation.
misrepresentation
An impaired insurer is a company that:
is potentially unable to fulfill its contractual obligations
an oral or written statement that is false and malicious or derogatory concerning the financial or personal condition of a person engaged in the insurance business.
defamation
how do insurers express the rate of premiums?
cost per 1,000 of face amount
The annual gross premium of a life insurance policy is defined as the:
net premium plus expense
considered an above average risk, therefore rating considerations may include rating using a higher age, charging a flat additional premium and modifying death benefits.
substandard risk
Regular notices sent to policyowners for payment of their life insurance policy premiums reflect:
gross premium
speculative risk
uncertainty as to whether the final outcome will be a gain or loss
authorized insurer
admitted insurer
insurer's promise in the contract to pay claims
consideration
agent has authority through words, actions, or deeds
apparent authority
authority an agent may have in the transaction part of signing a policy
implied authority
statements made by an applicant that are believed to be true
representations
what will a hospital indemnity policy pay
a benefit each day the insured is in the hospital
the indemnity policy will pay based on
number of days in the hospital
voluntarily giving up insurance by the insured
cancellation
The difference between group and individual medical insurance plans
Underwriting
What is not needed when writing group life insurance
Medical examinations and employees do not need to be in good health
If group insurance is noncontributory, what percentage of employees must participate
100
Establishing a premium for group based on previous claims experience in group insurance is called what
Experience rating
Three equal partners in a business worth 600,000 decide to set up a insured cross-purchase buy-sell agreement. How large a policy would each partner buy to insure the lives of the other partners?
100,000 for each because when the other dies 200,000 would be covered for the two
What does Not need to be known to determine proper amount of insurance protection in needs analysis?
Projected future earnings
What needs to be known in human life approach?
Average future earnings according to the number of years the person expects to work until retirement
What can life insurance not be used for?
Providing a retirement plan
A new policy written to take the place of a policy already in force
Replacement
When replacement is involved, to whom must the agent provide the Notice Regarding Replacement of Life Insurance
The applicant