Flashcards

In a contributory group life plan the employee pays part of the premium. The participation percentage for a contributory life policy is 75%. 75% of the eligible employees must participate.

The right to change (convert) insurance coverage from one type of policy to another. For example, the right to change from an individual term insurance policy to an individual whole life insurance policy.

A convertible term insurance policy may be converted to whole life insurance regardless of the insured’s health. The premium on the whole life insurance policy will be based on the insured’s current (attained) age.

A rider that is available for an additional premium that provides for an automatic increase in benefits. The increase may be a set percentage as stated in the policy or may be tied to the Consumer Price Index (CPI), offsetting the effect of inflation.

A type of group term life insurance that can pay off or reduce the balance of a consumer loan or a loan for the purchase of consumer goods in the event of the insured’s death. Credit life is decreasing term insurance, meaning that over time the death benefit amount tracks with the loan balance due. If the borrower dies with the loan outstanding the credit life policy will pay the balance due.

Amount paid to the beneficiary upon the death of the insured.

Term life insurance with a face amount that goes down over time. Decreasing term has a level premium.

Defamation is being false or maliciously critical of an insurer’s financial condition.

An annuity under which the annuity payment period is scheduled to begin at some future date. May be purchased with a level, flexible, or single premium.

The deferral of an employee’s compensation to some future age or date. Deferred compensation is a non-qualified plan. It is discriminatory and set up in favor of higher-paid workers. The employer does not fund a non-qualified plan. If the employer should go broke the employee will not get paid.

A type of qualified retirement plan (pension plan) in which benefits are determined using a specific benefit formula.

A type of qualified retirement plan in which annual contributions are determined by a formula set forth in the plan.

Insurance sold directly to the insured by an insurance company through its own employees by mail or over the counter

A life insurance policy addendum providing income payments to the policyholder, and/or waiving premium payments due, when income is interrupted or terminated because of illness or injury.

A return of part of the premium on participating insurance to reflect the difference between the premium charged and the combination of actual mortality, expense, and investment experience. Dividends are not considered to be taxable distributions because they are interpreted as a refund of a portion of the premium paid.

A domestic insurer is one whose home office is in this state. The domestic insurer is doing business in this state.

The date on which an insurance policy becomes effective.

There are four elements required to have a legal contract: C – O – A – L. Consideration, offer, acceptance, and legal purpose and capacity.

Not all risks are insurable. Pure risk involves no chance of gain. Pure risk is insurable. Speculative risk, like gambling, involves a chance of gain or chance of loss. Speculative risk is not insurable.

The entire contract is admissible in court. The entire contract includes the policy and anything else attached at issue, such as the application and any riders. The entire contract clause protects both the insurer and the insured. No changes may be made to the policy after issuance unless both parties agree to the change.

A fixed deferred annuity that combines a minimum guaranteed interest rate with the ability to be credited with additional earnings depending upon the performance of an index.

A type of professional liability insurance that protects an insurance producer from claims arising from services provided (or those not provided). E&O does not cover criminal acts.

The quantity of wealth or property at an individual’s death.

Due within 9 months of a person’s death, estate tax is only owed on the amount over the current year’s estate tax exclusion. When a married person dies their assets pass in their entirety to the surviving spouse. Estate taxes are not due until the death of the second spouse (if owed at all).

A statement or proof of your health, finances, or job, which helps the insurer decide if you are an acceptable risk for life insurance.

An exclusion is an event (peril, accident, occupation, avocation) that an insurance policy will not cover.

Executive bonus life insurance is a type of group life insurance product offered to individuals in C-suite positions, such as chief executives, operations executives, or chief financial officers. Executive bonus life insurance enables a business to provide life insurance to a given key employee or high-performance employees in a tax-advantaged way. The premium paid by the business for executive bonus life insurance is tax deductible so long as the bonus is considered reasonable compensation. The policy is owned by the executive. The key employee names the beneficiary and can access the policy’s cash value.

Your policy’s share of the company’s operating costs; fees for medical examinations and inspection reports, underwriting, printing costs, commissions, advertising, agency expenses, premium taxes, salaries, rent, etc. Such costs are important in determining dividends and premium rates.

In insurance, exposure is a measure of the potential risk faced by an insurance company as a result of their normal business operations—namely, selling insurance policies. When an insurer sells a policy, they must cover insured losses that fall within the terms and conditions of coverage.

Express authority in insurance refers to the explicit powers and permissions granted to an agent (producer) through a written agreement. It outlines the agent’s scope of authority and activities they are authorized to undertake on behalf of the insurer.

One of the three non-forfeiture options. Extended term may be chosen by the insured. It is the automatic option when a life insurance policy with cash value has lapsed and the insurer has not heard otherwise from the owner. The extended term policy will have the same face amount as the original whole life insurance policy. How long the term is will be a function of how much cash value was there, as well as the age, and gender of the insured.

The amount stated on the face of the policy that will be paid in case of death or at the maturity of the policy. It does not include additional amounts payable under accidental death or other special provisions, or acquired through the application of policy dividends.

The Act (Title VI of the Consumer Credit Protection Act) protects information collected by consumer reporting agencies such as credit bureaus, medical information companies, and tenant screening services. Information in a consumer report cannot be provided to anyone who does not have a purpose specified in the Act.

Misstating an insurance company’s financial position is an unfair trade practice.

False or deceptive advertising is an unfair trade practice.

A fixed annuity promises to pay the annuitant a minimum guaranteed interest rate. Once annuitized a fixed annuity promises to pay a guaranteed income stream for life. Usually purchased to supplement retirement. Most annuities are non-qualified, funded with after-tax dollars.

A foreign insurer is one whose home office is in another state. The foreign insurer is doing business in this state.

Insurance fraud occurs when an insurance company, agent, adjuster, or consumer commits a deliberate deception in order to obtain an illegitimate gain. It can occur during the process of buying, using, selling, or underwriting insurance.

A certain amount of time provided (usually between 10-30 days) to an insured in order to examine the insurance policy and if not satisfied, to return it to the company for a full refund.

Specific life insurance policies or annuities having a low initial face amount (often $20,000 or less) that are designated by the purchaser for the payment of funeral and burial expenses.

The time during which a policy remains in force after the premium is due but not paid. The policy lapses as of the day the premium was originally due unless the premium is paid before the end of the grace period or the insured dies.

The Gramm-Leach-Bliley Act seeks to protect consumer financial privacy. Its provisions limit when a financial institution may disclose a consumer’s nonpublic personal information to nonaffiliated third parties.

Life insurance provided for employees of a common employer or members of an association provided it is not formed for the purposes of buying insurance. The cost is usually lower than for individual policies, but choices among plans and benefit amounts may be limited. Under a group plan, the insurer issues a single master policy to the employer or association and certificates of insurance are issued to the individual insureds. Most group programs provide coverage on a term basis, but the group plan can be used for most types of life insurance and annuity products.

GIR stands for guaranteed insurability rider. This rider allows the insured to purchase additional amounts of insurance regardless of health, at specific dates. If an option date is missed it is lost and cannot be made up. Additional dates may be added for marriage and/or the birth of a child. When buying additional coverage under the guaranteed insurability rider the premium is based upon the insured’s attained (current) age, not the original age when they purchased the policy.

Established at the state level to support insurers and protect consumers in the event of insurer insolvency. Guaranty Associations are funded through assessments charged to admitted insurers.

A hazard is something that increases the risk. Hazards may be physical, moral, or morale hazards.

Skilled or unskilled care provided in an individual’s home, typically on a part-time basis.

The human life value approach looks at how much income the person is expected to generate over their life and determines a face value based on that amount.

An immediate annuity is funded with a single premium. The monthly payments begin one month after funding.

Implied authority refers to the actions of an agent (producer) that may extend beyond the rights and powers explicitly provided in the agency contract.