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A concise question and answer review of key concepts in accident and health insurance, covering topics such as risk management, life insurance uses, underwriting duties, and policy provisions. It includes definitions and explanations of terms like indemnity, mortality, hazards, reinsurance, and various insurance plans and regulations. This study guide is designed to help students and professionals prepare for insurance licensing exams and enhance their understanding of insurance principles and practices. It offers a structured approach to learning and reinforcing essential knowledge in the field of insurance. Useful for exam preparation and quick reference.
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Insurance contracts are contracts of....
indemity
5 Methods of Risk Management
-Avoidance
-Retention
-Sharing
-Reduction
-Transfer
Mortality is the ______?_______ of death at a particular age for an individual.
probability
Who do solicitors represent?
agents
3 types of hazards
-Physical
-Moral
-Morale
Personal Uses of Life Insurance
-survivor protection
-debt payment
-estate protection
-education expenses
-funeral expenses
2 basic types of reinsurance
facultative; automatic
Other than human life values and needs approach, what other methods are used to determine the amount of a life insurance?
-multiple of earnings
-interest only
-"seat of the pants"
-single needs
-capital needs
Info in Section 1 of a Life insurance policy?
-name
-address
-date of birth
-salary
-occupation
When does coverage begin in a conditional receipt policy?
The offer & acceptance is also known as the ____?___
agreement
Who is a representative of the consumer?
broker
Which 2 legal principles prevent an insurer from denying a claim?
waiver & estopple
a contract that pays a larger amount in return for a smaller fee is known as an ____?____ contract
aleatory
if a person needs to obtain coverage for a substandard risk or unusual risk he would use a ? broker
surplus lines broker
Guaranteed Insurability Rider
Allows insured to purchase additional amounts of disability income insurance at future dates
Accelerated Death benefits rider
pays out before death (tax free)
Long term rider
lets you take out money for in home care expenses
Primary Beneficiary
has the first claim to the policy proceeds after the death of insured.
Contingent Beneficiary
has second claim to the policy proceeds after the death of the insured (usually after death of the primary beneficiary)
Probationary period
period of time during which a new employee is eligible for group health insurance coverage
Medicare
-provides hospital &medical expense insurance protection to those 65 or older
-provides insurance protection to anyone who suffers from a chronic kidney disease or whose been getting SSD benefits for at least 24 months (regardless of age)
-healthcare to poor people
-dental care not covered
Medicare Part A (aka Hospital Insurance)
covers inpatient care in hospitals & skilled nursing facilities & it covers care provided in hospice & at home care
-funded by general tax revenue & user premiums
Contributory Plan
employees share part of the cost of the plan and make contributions from their salary
-requires 75% of participation
Non-contributory plan
-employer pays the entire premium and 100% of the employees must participate
Department of Banking and Insurance
-regulates banking& insurance industries
-regulates the designation of Certified Insurance Counselor
Fair Credit Reporting Act (FCRA)
U.S act that protects privacy of background information and ensures that information supplied is accurate.
-insurers must inform applicants about any investigation that are being made upon completion of application
Domestic Insurer
An insurance company that is incorporated in the state.
Foreign Insurer
An insurance company that is incorporated in another state.
Alien Insurer
An insurance company that is incorporated outside the United States.
Twisting
the unfair trade practice of replacing an insurance policy from one insurer to another based on misrepresentation
McCarran-Ferguson Act (1945)
states that's continued regulations of insurance by individual states was in the public interest
-enacted by Congress, Public Law 15
Underwriting
the process of selecting, classifying, and pricing applicants for insurance
Lloyd's of London
is not an insurer, but a society of members who underwrite insurance in syndicates
-gather and disseminate underwriting info
Policy Summary
a written statement describing the features and elements of the policy being issued
provides federal protections for personal health information held by covered entities and gives patients an array of rights with respect to that information
Grace Period
to give policyowner additional time to pay overdue premiums
Reinstatement Provision
Specifies that if an insured fails to pay a renewal premium within the time granted but the insurer subsequently accepts the premium, coverage may be restored.
Notice of Claim provision
describes the policy owners obligation to the insurer to provide notification of loss within a reasonable period of time
-typically the period is 20 days after the occurrence or a commencement of the loss, or as soon thereafter as is reasonably possible
Time of payment of claims provision
Provides for Immediate payment of claim after the insurer receives notification and proof of loss.
-Purpose is to prevent insurer from delaying claim payments
Payment of Claims Provision
Specifies how and to whom claim payments are to be made
Legal Actions Provision
dictates the time limit for filing claim disputes
Free Look Provision
gives policyowners the right to return the policy for a full premium refund within a specified period of time (10 days) if they decide not to purchase the insurance.
cost of living
gives applicants the ability's to guard against the eroding effects of inflation
Optionally Renewable Policies
give the insurer the option to terminate the policy on a date specified in the contract.
-If the insurer decides to renew (not cancel) the policy, they also have the option (and usually choose to) increase the premiums on the anniversary date.
Cancellable Policies
may be terminated by either the insured or the insurer
-allows insurer to cancel at anytime
Conditionally Renewable Policies
Allows an insurer to terminate the coverage but only in the event of one or more conditions stated in the contract
National Association of Insurance Commissioners
Organization composed of insurance commissioners from all 50 states, DC, and the four US territories; responsible for resolving insurance regulatory problems and they are active in the formation and recommendation of insurance legislation - designed to bring uniformity from state to state and simplify the marketing of insurance
Insuring Clause
insurers basic promise to pay specified benefits to a designated person in the event of a covered loss
-agreement & promise to pay death benefit
Misstatement of Age or Sex
Allows the insurer to adjust the policy benefits if the insured's age or sex is misstated on the policy application.
Absolute Assignment
Occurs when the assignee receives control of the policy and the rights to the policy benefits from the current policyowner
Collateral Assignment
the partial and temporary transfer of rights to another person or entity
Nonforfeiture Options
Certain guarantees are built into the policy that cannot be forfeited by the policy owner
U.S. vs. South-Eastern Underwriters Association (1944)
the court ruled that insurance was interstate commerce when conducted across state lines &subject to federal antitrust laws
Paul vs. Virginia
transact of ins across state lines was not interstate commerce and therefore should be regulated by local law, held for 75 yrs
false advertising
Advertisements cannot include any untrue, deceptive, or misleading statements that apply to the business of insurance or anyone who conducts it.
Rebating
Any inducement offered in the sale of insurance products that is not specified in the policy.
coercion
to require, as a condition of the loan that the applicant purchase insurance from a specific insurer
Defamation
occurs when false statements either cause a person to be ridiculed or damage the person's reputation
Children's Term Rider
Allows children of the insured to be added to coverage for a limited period of time for a specified amount.
Family Term Rider
incorporates the spouse term rider along with the children's term rider in a single rider
Accidental Death Rider
pays some multiple of the face amount if death is the result of an accident as defined in the policy
Accidental Death and Dismemberment Rider
Pays the principal sum (face amount) upon accidental death, loss of sight, or loss of 2 limbs. It pays the capital sum per policy schedule (up to 50% of the face amount) for the loss of vision in 1 eye or loss of 1 limb. It may be a stand-alone policy or added as a rider to a Disability Income, Medical Expense or a Life Insurance Policy.
Return of Premium Rider
Implemented by using increasing term insurance. When added to a whole life policy, it provides that at death prior to a given age, not only is the original face amount payable, but an amount equal to all premiums previously paid is also payable to the beneficiary.
Term Rider
allow for an additional amount of temporary insurance to be provided on the insured without the need to issue another policy. they are usually attached to a whole life policy to provide greater protection at a reduced cost.
Spousal Term Rider
a life insurance product that rides on the primary policy and covers the life of the primary insureds spouse
Assignment Clause
The right to transfer policy rights to another person or entity
Consideration Clause
states a policyowner must pay a premium in exchange for the insurer's promise to pay benefits.
Exlcusions
feature of life insurance policy stating that the policy will not cover certain risks
-war/military service
-aviation
-hazardous occupation/ hobby
-criminal activity
Suicide Clause
protect insurance companies against the purchase of a policy in contemplation of suicide
1035 Contract Exchange
applies to annuities. If an annuity is exchanged for another annuity, a gain (for tax purposes) is not realized. This is also true for a life insurance policy or an endowment
(FDR) 1935, guaranteed retirement payments for enrolled workers beginning at age 65
-set up federal-state system of unemployment insurance and care for dependent mothers and children, the handicapped, and public health
Roth IRA
A personal savings plan; contributions are not tax-deductible; earnings are tax-free
Traditional IRA
Individual Retirement Account - A personal qualified retirement account through which eligible individuals accumulate tax-deferred income up to a certain amount each year, depending on the person's tax bracket.
an insurance contract is conditional which means....
the insurer's promise to pay benefits depends on the occurrence of an event covered by contract
All completed receipt books must be retained for at least....
5 yrs
Level Term
has a level face amount and level premiums. Premiums tend to be higher than annual renewable term because they are level throughout the policy period. However, the premiums will increase at each renewal.
Decreasing Term
Term life insurance that provides an annually decreasing face amount over time with level premiums. These policies are usually used for mortgage protection.
Increasing Term
Term life insurance that provides an increasing face amount over time based on specific amounts or a percentage of the original face amount.
Convertible Term
a provision that allows policyowners to convert their term insurance into permanent policies without showing proof of insurability
Renewable Term
Term insurance that guarantees the insured the right to continue term coverage after expiration of the initial policy period without having to prove insurability.
whole life insurance
provides death benefits for the entire life of the insured
-also provides living benefits in the form of cash values
Modified Endowment Contract (MEC)
a policy that exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
Cash Value
The equity amount or "savings" accumulation in a whole life policy.
