Insurance Terminology and Concepts, Exams of Insurance law

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HS 311- Fundamentals of Insurance Planning

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reasoning with conclusions that are based on self-evident propositions (also known as deductive reasoning). One can reason a priori that the probability of a result of tails in the flip of a coin is one in two. - correct answer-a priori reasoning an advisory organization that provides various services to its member companies, including the development and filing of standardized property and liability insurance forms - correct answer-AAIS (American Association of Insurance Services) a provision in a life insurance policy that allows death benefits to be paid to the policyowner prior to the insured's death under certain circumstances such as if the insured is terminally ill - correct answer- accelerated benefits provision a life insurance rider that increases the death benefit, usually doubling it, if the insured dies accidentally

• correct answer-accidental death benefit rider the time period within which expenses used to satisfy a per-cause deductible must be incurred for each illness or accident - correct answer-accumulation period a specific segment of invested funds in a deferred variable annuity that will increase with investment performance; it is similar to the net asset value of a mutual fund - correct answer-accumulation unit a provision in a group insurance master contract specifying that the employee is not eligible for coverage if he or she is not actively on the job on the otherwise effective date of coverage. Coverage commences when the employee returns to work. - correct answer-active-at-work requirement the criteria used to establish benefit eligibility under a long-term care contract- in other words, the telling signs of the need for nursing home care. They include eating, bathing, dressing, transferring from bed to chair, using the toilet, and maintaining continence. - correct answer-activities of daily living (ADLs)

replacement cost less a reduction for depreciation and/or obsolescence - correct answer-actual cash value a no-fault type of auto insurance system that makes first-party benefits available but does not restrict the right to sue for damages - correct answer-add-on plan the extra costs of maintaining a family's standard of living while the family's residence is being repaired or rebuilt following a covered loss. covered by homeowners policies. - correct answer-additional living expenses day care provided at centers specifically designed for seniors who live at home but whose families are not available to stay at home for the day. All offer social activities; some also provide health and rehabilitation services. - correct answer-adult day care a mutual insurance company that establishes the full premium for coverage at the start of the policy period - correct answer-advance-premium mutual the tendency of persons with a higher-than-average chance of loss to seek insurance at standard (average) rates. Because this is selection against the insurer, it will result in higher-than-expected losses if it is not controlled by underwriting - correct answer-adverse selection liability that can arise out of (1) oral or written publication of slanderous or libelous material or (2) material that violates a person's rights of privacy. It also includes liability that arises through the misappropriation of advertising ideas or styles of doing business and infringement of copy-right, title, or slogan. - correct answer-advertising injury liability an organization that assists insurance companies in such areas as gathering and analyzing statistical information for rate-making purposes and drafting recommended policy language - correct answer- advisory organization an assumption for rating purposes than an annuitant is some years younger than his or her actual age - correct answer-age setback

a legal representative of an insurance company with authority to act on behalf of the insurer - correct answer-agent (insurance) a method of valuing property in which value is determined before loss and the agreed value is paid in the event of a total loss - correct answer-agreed value an insurance company with the authority to conduct business in the state but is domiciled in another country - correct answer-alien insurer the act of making changes to a document in a manner that is neither authorized nor originally intended - correct answer-alteration a facility with a high level of staffing and other capabilities to provide the personal assistance individuals with Alzheimer's disease need. - correct answer-Alzheimer's facility an indexed gift tax exclusion that a donor is allowed each year for each donee, provided the gift is one of a present interest - correct answer-annual exclusion a document that insurance companies are required to file with state insurance commissioners to report the company's current financial conditions and changes that have occurred during the year - correct answer-Annual Statement a type of inland marine insurance policy that covers all shipments during an annual period - correct answer-annual transit policy the person whose life is the measuring life for an annuity - correct answer-annuitant the annual payment of an allowance or income for a lifetime or a specified number of years - correct answer-annuity a contract that provides an income for a specified number of years, regardless of life, or death. The payments are not linked to the duration of a specified human life. - correct answer-annuity certain

the concept of many persons pooling their funds to provide annuities to all while they live or for some period certain. Each person receives annuity payments consisting of the annuitants' principal, the unliquidated principal of other annuitants who die early, and investment income on these funds. - correct answer-annuity principle a measure for valuing a variable annuity during its liquidation stage. The dollar value of each unit fluctuates with the investment performance of the separate account underlying the annuity. - correct answer-annuity unit legislation that prevents managed care organizations from including provisions in contracts with doctors that prevent them from discussing with patients treatment options that may not be covered under their plans or from referring extremely ill patients for specialized care outside of their plans - correct answer- antigag clause rules a strict definition of disability that requires a person to be so severely disabled that he or she cannot engage in any occupation - correct answer-any-occupation authority that, in the absence of contrary action by the principal, appears to a reasonable person to be possessed by the principal's agent applicant the person or organization that applies for insurance - correct answer-apparent authority a type of personal savings account from which unreimbursed medical expenses can be paid, It can be used fr employees of small employers or the self-employed and is established in conjunction with a high- deductible health plan. New Archer MSAs can no longer be established. - correct answer-Archer MSA a mutual insurance company that reserves the right to levy assessments on its policyowners to cover adverse underwriting experience - correct answer-assessment mutual a life insurance policy provision that specifies the conditions under which a policyowner can transfer some or all of his or her rights in the policy to another - correct answer-assignment provision care provided in facilities that provide care for the frail elderly who are no longer able to care for themselves but who do not need the level of care provided in a nursing home - correct answer-assisted- living care

a common-law defense formerly available to employers under which a worker could not recover damages for an injury if he or she knowingly assumed the risks inherent in the job - correct answer- assumption-of-risk doctrine the insurance rate at the insured's present age, used for attained age term conversions and sometimes for long-term care insurance upgrades - correct answer-attained age rate a condition of carelessness or indifference on the part of an individual as to whether a loss occurs and.or the size of a loss if one does occur - correct answer-attitudinal hazard someone who is authorized by another to act in his or her place for a particular purpose or to transact general business. This term has generally been replaced with the more modern term agent. - correct answer-attorney-in-fact a property and liability insurance policy that provides (1) liability coverage for losses that arise out of the use, operation, or maintenance of an auto, (2) medical payments benefits, (3) uninsured motorists benefits, and (4) physical damage coverage automatic premium loan option - life insurance policy provision by which a delinquent premium is automatically paid by a policy loan - correct answer-auto insurance a state plan that assigns drivers who have been unable to obtain auto insurance to insurance companies in proportion to their volume of business in a state. Formerly called assigned risk - correct answer- automobile insurance plan insurance policies to provide liability, physical damage and medical payments coverage for the owners of the aircraft - correct answer-aviation insurance issuance of a life insurance policy as if it had been purchased when the insured was younger in order to obtain a lower periodic premium - correct answer-backdating a bond that guarantees that the bonded person will appear in court at the appointed time - correct answer-bail bond

a person or organization in temporary custody of the property of another for some reason, such as for service or repair of the property - correct answer-bailee an insurance policy that covers customer's' goods whether or not a bailee is liable for their loss or destruction - correct answer-bailees customers policy the situation in which a person or business has temporary custody of the property of others - correct answer-bailment a clause in an annuity contract that allows the purchaser to surrender the contract without a surrender charge if the interest rate being credited falls below a specified but nonguaranteed minimum - correct answer-bail-out provision a benefit that continues policy payments to an LTC facility for a limited time if the insured temporarily leaves the facility for any reason. - correct answer-bed reservation benefit the person who normally inherits the annuity proceeds at the death of the annuitant - correct answer- beneficiary a temporary written or oral agreement between an agent an an applicant for insurance whereby the principal-insurer is committed to provide the desired insurance - correct answer-binder nonprofit organizations formed for the purpose of prepaying subscribers' medical care expenses. Blue Cross plans provide coverage primarily for hospital expenses, and Blue Shield plans provide coverage primarily for physicians' services - correct answer-Blue Cross+ Blue Shield Plans a full-time insurance producer who works independently and has no primary relationship or minimum production requirements with any company - correct answer-broker insurance that covers business losses after the occurrence of a direct physical damage loss that results in the suspension of business operations. The three basic types of losses covered include net income, normal ongoing business expenses, and extra expenses. Formerly called business interruption insurance.

• correct answer-business income insurance

a policy available to cover many of the ongoing costs of operating a business while the business owner is totally disabled - correct answer-business overhead expense insurance a common type of policy designed to meet most property and liability needs of certain small and medium size businesses - correct answer-businessowners policy (BOP) planning method used for the disposition and continuation of small business interests, the goals of which are the acquisition of a decedent business owner;s interest by one or more business survivors or by the entity itself, and to peg the value of business interests or stock for transfer tax purposes - correct answer-buy-sell agreement a benefit plan under which a covered person can purchase additional coverage at this or her own expense - correct answer-buy-up plan a benefit program in which employees can design their own benefit packages by purchasing benefits with a prescribed amount of employer dollars from a number of available options - correct answer- cafeteria plan an all-causes deductible that applies to medical expenses incurred within a calendar year. A new deductible must be satisfied in a subsequent calendar year - correct answer-calendar-year deductible a contract feature that allows the insurance company to terminate the coverage at any time (and perhaps for any reason) during the term of coverage by notifying the insured - correct answer-cancelable a method of computing a desired income level that can continue indefinitely - correct answer-capital needs analysis a lump sum payable under a disability income policy if the insured suffers a serious injury, such as the loss of sight or severance of a hand or a foot - correct answer-capital sum an insurance company owned by a parent corporation and formed primarily to insure the loss exposures of the parent corporation - correct answer-captive insurer

a person who assesses a LTC patient who shows some degree of impairment to determine the care needs and the development of a care plan to meet those needs - correct answer-care coordinator a provision in a medical expense plan that allows any expenses applied to the deductible and incurred during the last 3 months of the year to be applied to the deductible for the following year - correct answer-carryover provision the practice of excluding certain classes of employees from a benefit plan and providing benefits to them under an alternative arrangement. Carve-outs are generally used to contain employee costs or provide broader or tax favored benefits to key employees and executives - correct answer-carve-out (benefit plan) coverage under a medical expense plan that has been singled out for individual management by a party other than the employer or the employee;s primary health plan provider - correct answer-carve-out (medical expense insurance) an option that allows an annuitant, at the start of the liquidation period, to withdraw the funds in cash, rather than as an annuity - correct answer-cash option a type of refund annuity that promises that upon the death of the annuitant it will pay to the annuitant's estate or a contingent beneficiary a lump sum that is the difference, if any, between the purchase price of the annuity and the sum of the monthly payments already distributed - correct answer-cash refund annuity the amount of equity in a policy against which a loan can be made. The savings element results when premiums during the early years of a whole life policy exceed what is necessary to pay death claims. This excess is set aside and accumulates for the benefit of the insured. - correct answer-cash value a procedure by which the cash value of a policy is generally limited to the net single premium that would be needed to fund the policy's death benefit - correct answer-cash value accumulation test a type of life insurance under which premiums are sufficient not only to pay the insurer's death claims and expenses but also to build up a savings fund within the policy - correct answer-cash value life insurance

physical damage to a decedent's property during the administration of the estate, resulting from a sudden, unexpected or unusual force - correct answer-casulaty loss a rider to a disability insurance contact that provides additional benefits if the insured suffers a severe disability. The benefit triggers are the same criteria that trigger benefits in long-term care policies - correct answer-catastrophic benefits rider transfer a portion of the amount of insurance written by a primary or original insurer to a re-insurer - correct answer-cede a description of the coverage provided to employees. Although it is given to the employees, it is not part of the master contract. - correct answer-certificate of insurance a modified no fault law that allows an insurance applicant either to elect traditional tort coverage or to elect no fault coverage at a reduced premium - correct answer-choice no-fault a person who has been certified by a health care practitioner as being either (1) unable to perform, without substantial assistance from another person, at least two activities of daily living (ADLs) for a period of at least 90 days due to a loss of functional capacity, or (2) suffering from severe cognitive impairment and requiring substantial supervision to protect his or her health and safety - correct answer-chronically ill individual a legal wrong other than a criminal wrong. It is based upon torts or contracts - correct answer-civil wrong the basic insurance function of paying covered claims - correct answer-claims adjusting a liability insurance policy that covers only claims that are first reported during the policy period as long as the event that caused the claims occurred after a specified retroactive date in the policy - correct answer-claims made policy an average price per unit of insurance that applies to a category or classification of similar insureds - correct answer-class rate

a benefit plan under which covered persons must obtain services from practitioners selected by the provider of benefits - correct answer-closed panel plan the Consolidated Omnibus Budget Reconciliation Act of 1985. This act requires that group health plans allow employees and dependents covered under the plans to elect to have their current health insurance coverage extended at group rates for up to 36 months following a qualifying event that results in a loss of coverage. The act applies only to employers with 20 or more full-time employees. - correct answer-COBRA the percentage of covered expenses under a medical insurance plan that is paid by the insurance company once a deductible is satisfied. Eighty percent is common. - correct answer-coinsurance the technique used with split dollar life insurance whereby the employee owns the policy and is responsible for paying the premium. The employers' share of the policy is secured by an assignment. - correct answer-collateral assignment method commercial liability insurance designed to cover a wide variety of liability loss exposures that can face an organization, including premises, businesses and other organizations - correct answer-commercial general liability (CGL) insurance the legal principle whereby an injured party can recover a portion of the damages for his or her injuries if he or she was also negligent. In some jurisdictions, a plaintiff can recover only if his or her negligence is less than the defendant's negligence. - correct answer-comparative negligence