Term
|
Definition
| Paying, offering or giving anything of value not specified in the policy to any person as an inducement to apply for or renew an insurance policy. The offer involves something that is not part of the contract. Rebating is illegal in most States. |
|
|
Term
| Any producer who changes his or her personal or business residence must generally notify the State Insurance Department within what period of time? |
|
Definition
|
|
Term
| Insurance License Suspension |
|
Definition
| Results from an individual engaging in an unfair trade practice or violating a state law. |
|
|
Term
| Revocation of an Insurance License |
|
Definition
| Results from violations of insurance law, rebating, and/or embezzlement of premiums. |
|
|
Term
|
Definition
| Replacement is a legal activity where a producer legally persuades a consumer to surrender an existing policy and purchase a new one. Whenever a policy is going to be replaced, the producer must provide the consumer with a "Notice Regarding Replacement." This provides the consumer with information to assist them in making a sound decision when considering the surrender of an existing plan and the purchase of a new one. |
|
|
Term
|
Definition
| The producer making the offer to a consumer in a rebating transaction is known as the offeror. |
|
|
Term
|
Definition
| When a producer or insurer makes false and maliciously critical statements about the financial condition of a competing insurer, he, she or it has engaged in the unfair practice of defamation. Making false statements with regard to the financial status or dependability of an insurer may be construed as defamation. |
|
|
Term
|
Definition
| The unfair comparison of policies by a producer to induce a policy lapse is known as twisting. Twisting is a form of misrepresentation. Other forms of misrepresentation include defamation, coercion and boycott, unfair discrimination and larceny. Engaging in such activities will result in license suspension, monetary fines and possible imprisonment. |
|
|
Term
|
Definition
| Risk reduction is a method of risk management. Reducing a risk attempts to lower the severity of a loss. It does not prevent a loss from occurring. |
|
|
Term
| The two primary classifications of risk |
|
Definition
| Speculative risk and pure risk - A pure risk is the only type of risk that may be insured. A speculative risk, such as betting on a horse race, cannot be insured since it involves the chance for loss or gain. |
|
|
Term
|
Definition
| The risk must be measurable; the loss must be accidental; the law of large numbers must apply; the loss must not be catastrophic but must be large enough to create a financial hardship; the cost to insure the risk must not be unreasonable; and the risks to be insured must involve a large number of homogeneous (similar) risks. |
|
|
Term
|
Definition
| An aleatory feature of an insurance policy means that the contract contains unequal values with regard to premiums paid and benefits received. For example, the premium paid for coverage is less than the (potential) benefit(s) payable. |
|
|
Term
|
Definition
| A hazard is a condition present that increases the chance of a loss. There are three types of hazards including physical (i.e., faulty wiring), moral (i.e., dishonest activities) and morale (indifference or carelessness). |
|
|
Term
|
Definition
| Reinsurance involves one insurer (i.e., ceding company) transferring risk to another insurer (i.e., the reinsurance company). A facultative arrangement is not agreed to in advance. The ceding company will present the risk to the reinsurer and the latter will decide (on a case-by-case basis) whether to accept the risk. |
|
|
Term
|
Definition
| Insurance policies such as medical plans are indemnity plans. Indemnity plans, theoretically, restore an individual to the same financial position that he or she existed in prior to the loss. |
|
|
Term
|
Definition
| Insurance policies are contracts of adhesion. This means that since the insurer is the party responsible for creating the contract language, if a claim problem arises and it is determined by an arbitrator that the contract language is ambiguous or confusing, a ruling is generally made in favor of the owner/insured. |
|
|
Term
| Non-insurance transfer of risk |
|
Definition
| Risk may be transferred by purchasing an insurance policy or through a non-insurance transfer mechanism such as incorporation or a hold-harmless agreement. |
|
|
Term
|
Definition
| Apparent authority is not specifically provided to the producer. It is based upon an insured's reasonable belief that the producer has the authority. |
|
|
Term
| Fastest accumulation of cash savings value: endowment or non-qualified annuity? |
|
Definition
| An endowment is characterized by an accelerated cash value as compared to other traditional forms of whole life policies. An endowment pays at the earlier of death or the end of a specified period. |
|
|
Term
| Eleven years ago, Tom bought a life insurance policy from Jack who is an agent for Benefit Mutual Life. The policy will pay Tom's wife, Lauren, $1,000 per month for twenty years when he dies. Once the monthly income ends, the insurer will pay Lauren a death benefit of $50,000. What type of plan did Tom purchase? |
|
Definition
| A family maintenance rider provides level term insurance coverage on the primary insured. This rider is generally added to a whole life policy and provides the level term coverage for a specified period of time. |
|
|
Term
| Which of the following may an individual use to fund a Simple Individual Retirement Account (IRA)? |
|
Definition
|
|
Term
|
Definition
| This rider provides an increasing amount of death protection each year. There are two types of increasing term riders including the return of premium rider and the return of cash value rider. |
|
|
Term
|
Definition
| Legal contract made up of: (1) Offer & Acceptance, (2) A consideration, (3) legal capacity, (4) legal purpose |
|
|
Term
|
Definition
| A valid offer usually made by the applicant and unconditional acceptance. |
|
|
Term
|
Definition
| Neither party can be under duress or under the influence to be deemed to have agreed to the contract. |
|
|
Term
|
Definition
| The insurance contract must have public interest in mind. |
|
|
Term
|
Definition
| Refers to an act in exchange for a promise--only one party must perform the act. |
|
|
Term
|
Definition
| Insurer prevented from denying a claim if: (1) a party makes a false representation, (2) the other party relies on the claim, (3) harm then results to the insured |
|
|
Term
|
Definition
| Transfer of risk through the accumulation of funds or pooling of premiums |
|
|
Term
|
Definition
| (1) Avoidance - don't invest if you dont want to lose, (2) Retention - deductible or waiting period in an insurance policy (3) Reduction - measures to reduce severity (4) Transfer - purchase insurance policy or incorporate |
|
|
Term
|
Definition
| "straight life"/"continuous premium life" - premiums paid throughout lifetime or to age 100. Death benefit, tax deferred cash value (i.e. equity), permanent insurance, level, fixed or predetermined premium, all premiums returned if you live to age 100. |
|
|
Term
| Limited payment whole life |
|
Definition
| Same as whole life, but premiums paid for a limited time. Death benefit, tax deferred cash value, permanent insurance, pre-determined premium for limited payment period. |
|
|
Term
| Single premium whole life |
|
Definition
| 1 lump sum premium, least expensive over entire life of the policy. |
|
|
Term
| Modified/graded premium whole life |
|
Definition
| Death benefit, tax deferred cash value, permanent insurance, lower premium that whole life in first five years (ten for graded, usually 5 or less for modified). |
|
|
Term
|
Definition
| Death benefit, tax deferred cash value, permanent insurance where face amount and premium may change, looks to the future (prospective), flexible/adjustable death benefit based on changing needs. Must improve insurability for to qualify for more coverage. Flexible to change face amount and premiums. |
|
|
Term
|
Definition
| Flexible death benefit, tax deferred cash value (money market rates) has a guarantee (i.e. interest rates), combines term insurance and cash savings plan, permanent insurance, flexible premium. Provides minimum interest rate, but cahse value is tied to a connected index influencing yearly increase in cash value. "Option A" - level death benefit, "Option B" - increasing death benefit |
|
|
Term
|
Definition
| Flexible death benefit, tax deferred cash value deposited in separate account and then invested in securities, permanent insurance where owner has control over investment portion, fixed premium, death benefit and cash value will vary based on performance, guaranteed min death benefit |
|
|
Term
| Universal Variable Whole Life/Variable Universal Life |
|
Definition
| Hybrid of UL and WL, flexible premiums and death benefit with control over investment aspect, combines investment feature with flexible premium |
|
|
Term
|
Definition
| Death benefit, cash value, higher premiums (than WL), quickest or accelerated cash value build-up, pays if insured dies or if he/she survives endowment (i.e., specified period), 10,20,30yr or endowment at age 65. |
|
|
Term
|
Definition
| Temporary or limited protection, lowest intial premium, level or decreasing death benefit, level term is renewable, no cash value/no equity |
|
|
Term
|
Definition
| (1) Family Income Policy - whole life + Decreasing term life protection "Family life rider" - pay monthly income + death benefit at the end. Insured must die within the specified period to receive term payments. Receive remaining yrs in policy on death (2)Family maintenace policy - whole life + level term: more expensive, if insured survives the term period, no income paid, only whole life payout. If they die they receive income for specified number of years. |
|
|
Term
| Family Policy / "Family Protection Policy" |
|
Definition
| 'Whole+level term' Whole life purchased on primary insured (bread winner) w/level term insurance covering spouse and all children. |
|
|
Term
|
Definition
| "First to die policy" - 2 or more individuals (usually husband and wife) "first to die" |
|
|
Term
| Defined contribution plan |
|
Definition
| A qualified retirement plan in which the level of contributions is based on a percentage of the employee's compensation. The money is invested by the employee according to the options available. The benefit at retirement is dependent upon the performance of the investment account. |
|
|
Term
| Salary reduction arrangements |
|
Definition
| A tax-sheltered or tax-deferred 403(b) annuity are salary reduction arrangements which provide retirement income for certain employees such as nonprofit and educational organizations. |
|
|
Term
| Taxability of disability benefits |
|
Definition
| Generally, premiums are not tax deductible, but proceeds from the policy are received tax free. (Exception: group disability benefits paid to a disabled employee are taxable if premiums are paid by the employer, if its contributory then its taxed in proportion to the contribution) |
|
|
Term
| Occupational vs non-occupational disability plans |
|
Definition
| non-occupational means that it does not pay if the injury occured on the job and that person is entitled to worker's comp, occupational disability is paid along with worker's comp if it occurs on the job AND off the job |
|
|
