Business Entity
A Corporation, association, partnership, limited liability company, limited liability partnership or legal entity.
Producer
Person required under this state's law to be licensed to sell solicit or negotiate insurance.
"insurance agent' 'agent" "insurance broker" "broker
License renewal
Life and Health renews every 2 years on even years with 24 hours of continuing education, 3 hours being dedicated to ethics
Hearings
if Commissioner thinks a person is engaged in any unfair trade practice they must notify the person and hold a hearing 30 days after receiving a written demand.
Commissioner
Elected every 4 years and enforces Louisiana's insurance code and related insurance laws
Certificate of Authority
an insurance company must apply to Commissioner or a Certificate other wise may not conduct business.
Controlled Business
25% of business is made up of family, partners, employees
Shared Commissions
Renewal or other deferred commissions may be paid to a person for selling, soliciting, or negotiating insurance.
Misrepresentation
Misleadingly representing or fraudulently comparing policies; misrepresenting a policy's terms, benefits, dividends or share on proposed or similar polices
False Information & Advertising
Presenting any information or advertisement that is false or misleading about any person in the conduct of his/her insurance business
Defamation
making any false statement maliciously critical of, or derogatory to, any insurer's financial condition with the intent to injure someone in the insurance business
Boycott, Coercion, or Intimidation
Entering into action resulting in an unreasonable restraint of, or monopoly in , the insurance business.
False Financial Statement/False Entries
Knowingly filing, delivering, or placing before the public any false material statement about an insurer's financial condition.
Unfair Discrimination
Allowing individuals of the same class and equal life expectance or individuals of the same class and hazard to be charged different rates for same coverage
Rebating
offering any rebate, premium discount, advantage, or valuable consideration not specified in the policy.
Examination of Books and Records
Department must examine every insurer licensed in LA at least once every 5 years
Defrauding
Knowingly, and with intent to defraud, making or presenting a written statement supporting, opposing, or attached to an application that does either of the following: Contains materially false info. applies to a claim that contains materially false info
Louisiana Life and Health Insurance Guaranty Association
protects policy owners, insured's, and beneficiaries of life or health policies or annuity contracts when insurers fail to perform contractual obligations due to financial impairment or insolvency
Group Conversion on Terminations of Policy
if the group policy terminates, every individual insured for at least 5 years is entitled to an individual life policy from the same insurer, which must provide coverage not exceeding the lesser of: amount of insurance ceasing bc of termination or $2000
Death Pending Conversion
if a person insured under group plan dies during the conversion period, the coverage to which he/she is entitled must be paid as a claim under the group policy, whether or not he/she applied for an individual policy or paid the first premium
Grace Period
grace period for individual life policies is either 30 days or 1 month, at the insurer's option
Incontestability Period
an individual life policy is incontestable after it has been in force during the lifetime of the insured for 2 years from the date issue, except for nonpayment of premiums
Free-Look Period Life
the period of 10 days where policy owner can review policy, 20 days in the case of replacement transaction
Backdating
an individual life policy may be backdated by up to 6 months to conserve age
Settlement of Death Benefit
an insurer must settle death claims under policies issued or delivered in LA within 60 days after receiving proof of the insured's death.
Interest on Life Insurance Proceeds
Interest on Proceeds of a policy begins to accrue 20 days after the insurer receives proof of the insured's death. Interest paid shall be the same rate paid on deposits with the insurer. Does Not Apply to Accidental Death
Accelerated (living) Benefit Provision/Rider
policy may provide payment when one or more of following happens: A)Medical Condition that limits insured's lifespan, Life-support, B) insured is confined to an eligible health care facility
Payment is in lump sum
Continuation of Coverage(surviving Spouse Group)
A group, Blanket, or franchise insurance policy providing hospital, nursing, medical or surgical expense coverage must allow an insured's spouse at least 50 years of age and covered by group plan to continue coverage after insured dies. Survivor must noti
Louisiana Health Insurance Association
a nonprofit governmental entity that provides health insurance to LA residents who are otherwise unable to obtain coverage in the private insurance market.
Appointing a producer
To appoint a producer as its agent, the appointing insurer shall file with the Commissioner a notice of appointment within 15 days from the date the agency contract is executed.
Consumer Privacy information
in accordance with consumer privacy information standards, a licensee must provide a clear and conspicuous notice to customers that accurately reflects its privacy policies not less than annually during the continuation of the customer relationship
Incontestable
an individual life policy is incontestable after it has been in force during the lifetime of the insured for 2 years, except for nonpayment of premium
Death Claim Settlement
all life insurance death claims must be settle within 60 days of the insurer receiving proof of death to avoid any accrual of interest in addition to the policy amount
Insurance Companies
Manufacture and sell insurance coverage in the form of insurance policies or contracts of insurance.
Insurance Agencies
captive or independent organizations that recruit, contract with, train, and support insurance producers.
National Association of Insurance Commissioners (NAIC)
consists of all state and territorial insurance commissioners or regulators.
Provides resources, research, legislative and regulatory recommendations and interpretations for state insurance regulators.
Federal Insurance Office (FIO)
established by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
It monitors the insurance industry and identifies issues and gaps in the state regulation of insurers.
Insurance Regulation at the State Level
Legislative branch writes and passes state insurance laws, or statutes, to protect the insuring public. Judicial branch is responsible for interpreting and determining the constitutionality of the statures. Executive branch is to enforce the existing stat
Insurance Regulation at the Federal Level
in aftermath of Supreme Court decision in U.S. vs South-Eastern Underwriters the McCaran-Ferguson Act of 1945 established that the federal government will not regulate the business of insurance in areas which the states have historically had the authority
Stock Insurance Company
owned by stockholders or shareholders. directors and officers, which are elected by stockholders, put in place a management team to carry out the company's mission. May receive a TAXABLE dividend as a return
Mutual Insurance Company
owned by policyholders. A Board of Trustees or Directors is elected by policyholders. Directors and Officers put in place a management team to carry out the company's mission. May receive NON-taxable dividends as a return
Reciprocal Insurance Company
a group-owned insurer whose main activity is risk sharing. An Unincorporated, and is formed by individuals, firms, and business corporations that exchange insurance on one another.
Lloyd's of London
is not an insurance company, but consists of groups of underwriters called Syndicates, each of which specializes in insuring a particular type of risk. Provides a meeting place and clerical services for syndicate members who actually transact the business
Fraternal Benefit Societies
Primarily social organizations that engage in charitable and benevolent activities that can provide life and health insurance to their members. Membership is typically members of a given faith, lodge, order, or society. they usually organized on a non-pro
Risk Retention Groups (RRG)
group-owned insurers that primarily assume and spread the liability-related risks of its members. Owned by their policyholders, and are licensed in at least one state.
Must be made up of a large homogeneous or similar units.
Self-Insurers
assume all of the financial risk faced without transferring that risk to an insurer.
Residual Markets
A Last resort private coverage source for businesses and individuals who have been rejected by the voluntary insurance market. Coverage is written as Workers' Compensation, personal auto liability or property insurance on real property.
Joint Underwriting Association/ Joint Reinsurance Pool
requires insurers writing specific coverage lines in a given state to assume their share of profits/losses of the total voluntary market premiums written in that state.
Risk Sharing Plan
insurers agree to apportion among themselves those risks that are unable to obtain insurance through normal channels
Reinsurance companies
insurance companies that operate to accept all or a portion of the financial risk of loss from the primary insurance company. Risk of loss is shared with one or more insurance companies. All obligations are on the original company and consumers have no di
Treaty
reinsurance agreement that automatically accepts all new risks presented by the ceding insurer (the company seeking or requesting the reinsurance from the reinsurer)
Facultative
reinsurance agreement that allows the reinsurance company an opportunity to reject coverage for individual risks, or price them higher due to their substandard (higher risk) nature.
Financial Rating Services
evaluate and rate the claims paying ability and financial stability of insurance companies. these firms assign letter ratings that indicate the financial strength of each company which may be based on both public and nonpublic data.
domicile
refers to the jurisdiction where an insurer is formed or incorporated.
Domestic Insurer
insurer organized under the laws of this state, whether or not it is admitted to do business in tis state.
Foreign Insurer
insurer organized under the laws of any other state, possession, territory, or the District of Columbia of the United States, whether or not it is admitted to do business in this state
Alien Insurer
insurer organized under the laws of any jurisdiction outside the United States, whether or not it is admitted to do business in this state
Admitted insurer
is authorized by this State's Commissioner of Insurance to do business in this state and has received a Certificate of Authority to do business
Non-Admitted Insurer
has either applied for authorization to do business in this State and was declined or they have not applied. They can not do business in this State
Surplus Lines Insurance
finds coverage when insurance cannot be obtained from admitted insurers. however it cannot be utilized solely to receive lower cost coverage than would be available from an admitted carrier
Executives
oversee the operation of the business
Actuarial Department
gather and interpret statistical information used in rate making.
Underwriting Department
responsible for the selection of risks to insure and rating that determines policy premiums
Law of Agency
relationship of a person who acts on behalf of another person, company, or government, known as the principal. responsible for the acts of the agent, and the agent's acts bind the principal.
Express Authority
Authority that is written into the producer's contract.
Implied Authority
Authority the public assumes the producer has.
Apparent Authority
Authority created when the producer exceeds the authority expressed in the agency contract.
Fair Credit Reporting Act (15 USC 1681-1681d)
protects consumer privacy and protects the public from overly intrusive information collection practices. Ensures data collected is confidential, accurate, relevant, and used for a proper and specific purpose.
Speculative Risk
Situations where there is a chance for loss, gain, or neither loss or gain to occur. ( gambling, investing)
Pure Risk
Situations where there is no chance for gain; the only outcome is for nothing o occur or for a loss to occur. The ONLY Risk that can be insured.
Physical Hazard
physical condition that increases the likelihood or probability of loss; use, condition, or occupancy of property. May often be seen, heard, felt, tasted, or smelled.
Moral Hazard
Dishonest tendencies that increase the probability of a loss; certain characteristics and behaviors of people. Most closely related to some form of lying, cheating, or stealing.
Morale Hazard
An attitude of indifference toward the risk of loss that increases the probability of a loss occurring. ( driving too fast, not wearing a seat belt, ignoring stop signs
Adverse Selection
imbalance created when risks that are hard to insure are the only risk seeking insurance within a specific marketplace. ( those living earthquake-prone areas)
Sharing Risk
*investments by a large number of people may be pooled by use of a corporation or partnership.
*Pooling or spreading the risk among a large number of persons or entities.
Transfer Risk
*Transferring the risk from one party to another, such as from a consumer to an insurance company.
*Transfer the uncertainty of a loss via contract
Avoidance Risk
*Elimination of the risk.
*Avoid the activity that gives rise to the chance of loss.
*After potential areas of hazards have been identified, it may be found that some exposure to risk can be eliminated, but it is impossible to avoid all risk.
* risk may b
Risk Reduction
*Minimizing the chance of loss, but not preventing the risk. (sprinkler system, burglar alarms, pollution controls)
Risk Retention
*Assume the responsibility of loss.
*Self-insure the entire loss or a portion of the loss. Choosing deductibles is a method of risk retention.
*may be economically practical for an insured to not insure each exposure to loss and, instead insure only those
Insurable Risks
Must include: large number of homogeneous units , chance of losses must be calculable., loss must be measurable, premium must be affordable, loss must be accidental in mature, catastrophic perils are not covered.
Principal of Indemnity
insured is intended to be restored to the same financial or economic condition that existed prior to the loss, depending on the amount and type of insurance purchased. Insured should not profit from an insurance transaction, but be made "whole again
Four Elements of a Legal Contract
*Competent Parties
*Legal Purpose-all parties to a contract must enter if for legal purpose
*Agreement- one party must make and communicate an offer to other party
*Consideration- something of value is exchanged by each of the parties to the contract
Indemnity Contract
Pays a specified dollar amount as stated in the contract up to the amount of the actual loss. Are considered reimbursement plans
Parol Evidence Rule
A written contract may not be altered without the written consent of both parties.
Valued contract
A contract that pays a specified amount regardless of the actual loss. A life insurance contract is an example of a valued contract. it has a face value that provides a death benefit in the event of a loss.
Subrogation
Occurs when a claim is paid by the insurer who has the contract and the right to take legal action against a negligent third party who may have caused the loss. Life policies have no right of subrogation.
Contract of Adhesion
One Party writes the contract, without input from the other party. One party (insurer) prepares the contract and presents it to the other party (applicant) on a "take it or leave it" basis, without negotiation.
Aleatory Contract
the exchange of value is unequal. Insured's premium payment is less than the potential benefit to be received in the event of a loss. Insurer's payment in the event of a loss may be much greater, or much less that the insured's premium payment.
Personal Contract
Contract between the insurance company and an individual. Are specific to the person insured at the time the contract is formed. Owner and insured cannot be changed without consent of the insurance company.
Unilateral Contract
Only one party is legally bound to the contractual obligations after the premium is paid to the insurer. Only the insurer makes a promise of future performance, and only the insurer can be charged with breach of contract.
Conditional Contract
Both parties must perform certain duties and follow rules of conduct to make the contract enforceable. insurer must pay claims if the insured has complied with all the policy's terms and conditions.
Utmost Good Faith
Both Parties bargain in good faith when forming and entering into the contract. The two parties rely upon the statements and promises of the other assume no attempt to conceal or deceive has been made.
Representations
Statements made by the applicant on the application are considered representations and not Warranties.
Misrepresentations
a false statement contained in the application; usually does not void coverage or the policy, if it is immaterial.
Warranties
Statements in the application or stipulations in the policy that are guaranteed true in all respects. if later discovered untrue or breached coverage is voided.
concealment
willful holding back or secretion of material facts pertinent to the issuance of insurance. May result in denial of coverage and may void the policy.
Fraud
Intentional deception of the truth in order to induce another to part with something of value or to surrender a legal right.
Waiver
Voluntary surrender of a known right, claim or privilege.
Estoppel
Judicial denial of a contractual right based on prior actions contrary to what the contract requires.
Underwriting Factors
*Age
*Gender
*Tobacco Use
*Medical history and Pre-existing conditions
*Hazard hobbies and occupations
Beneficiary
one or more "parties" named in the policy to receive the policy proceeds, or death benefits, if the insured dies while the contract is in force.
Third-Party Ownership
Policy owned by a person other than the insured.
Attained Age
insured's age at any point in time, typically used at renewal or conversion.
Required Signatures
Both the producer and the applicant/insured must sign the application.
Standard Risks
Individuals who have the same health, habits, sex/gender, and occupational characteristics as those reflected in the mortality table. AVERAGE life expectancy.
Preferred Risks
Individuals who meet certain requirements and qualify for lower premiums b/c of ideal health, height and weight. LONGER THAN AVRAGE life expectancy.
Substandard Risks
Individuals who are not acceptable at standard rates b/c of poor health, bad habits or occupational hazards. Issued "RATED Policies" (surcharges)
Graded (Lien) Plan
Initially, only the premium would be refunded in case of death. Benefit increases over time with full face amount eventually payable.
Rated-up Age
Rates an insured at older than actual age.
Flat Rate
constant dollar amount added to the standard rate per $1000 of coverage.
Mortality
Tables that are used to give the company a basic estimate of how much money it will need to pay for death claims each year. Using this a life insurer can determine the average life expectancy for each age group, based on the year of birth.
Interest
Insurance premiums are paid in advance and insurance companies invest these premiums and assume a certain rate of interest will be earned. earned interest reduces the amount of premium paid.
Expense
amount charged to cover each policy's share of expenses of operation(salaries, commission, and cost of doing business) is called expense loading. this can vary from company to company based on its operations and efficiency.
Net Premium
takes into account interest and mortality factors only.
Mortality - Interest = Net Premium
Gross Premium
Additional charges (expenses) are added to the net premium rate to enable an insurer to meet all costs under the contract.
Net Premium + Expenses = Gross Premium
Survivor Protection
Providing funds for surviving spouses and dependents.
Estate Creation
Life insurance proceeds paid in a lump sum provide financial assets to create an immediate estate the insured can pass on to survivors
Estate Conservation
Provides money to pay any estate taxes or loans which must be satisfied upon the death of the estate owner ( the insured) preserving the insured's estate.
Cash Accumulation
an amount of cash accessible to the policyowner from within permanent life insurance policies.
liquidity
Immediate funds available upon death to pay creditors, taxes and final expenses as well as cash values available for policy loans, withdrawals, and full surrenders.
Pre-need Plan
a type of coverage with a small face amount, typically purchased to pa the burial expenses of the insured.
Viatical Settlements
A terminally ill insured/owner selling his/her policy to a third party for less than the death benefit but more than the cash value in order to obtain funds when no other sources are readily available.
Group Life Policy
insurance plan normally owned by an employer, creditor or association, under which coverage is provided for the employees, debtors or members.
Industrial (Home Service)
Synonymous with debit life insurance and makes up only about .03% of the life insurance today. These small policies, normally $250 to $1000 were originally sold to pay funeral expenses.
Permanent Life Insurance
a policy that remains in force to age 100 or beyond. the premium is always higher than that on a term policy at issuance when the amount of coverage and underwriting factors are equal. this policy provides for living benefits for the policy owner or insur
Term Life policy
Lowest of initial premium outlay and designed for someone with a large insurance need but with limited cash flow. this coverage is often referred to as temporary, as it is usually written to cover a short time period. does not build cash value and the ben
Participation Life Policy
a class of policy marketed by a mutually owned company. the word participating means a dividend may be paid to the policy owner when they are declared by the board of directors.
Nonparticipating Life Policy
a policy marketed by a stock insurer. Stockholders would receive any profit in the form of dividends, and are treated as ordinary income for tax purposes.
Fixed Life policy
the policy has a fixed amount of coverage, benefits and premium. without riders, future inflationary trends will cause the purchasing power of the policy's benefits to be reduced.
Flexible life policy
Universal and Variable Universal Life Policies have given the policy owner more flexibility in terms of premiums, investment objectives and other policy benefits. these assist the insured during inflationary periods with the changing needs of the policy o
Variable Life Policy
policy introduced in the 1970s that uses separate accounts for the cash value accumulation. the separate accounts are similar in nature to mutual funds, and securities and life insurance license are required to sell this policy. the policy owner takes on
Cash Value
Money accumulated in a permanent whole life policy that is considered a living benefit which the policy owner may borrow against or receive if the policy is surrendered before the insured dies.
Face Amount
the death benefit amount payable or coverage provided on a life insurance policy. this is also referred to as the limit of liability.
Endow (mature)
the point at which the policy's cash value in a whole life policy accumulates to equal the face amount and the proceeds are paid to the policy owner.
Rider
An added benefit attached to the policy that supplements existing coverage. is usually added at the time of application and typically requires a small increase in premium
Level policy
the death benefit remains level and the premiums remain level during the policy term
Decreasing Policy
the death benefit decreases, but premiums remain level for the policy term. often sold as mortgage protection with the amount of insurance decreasing as the balance of the mortgage decreases.
Credit Life Insurance
a special form of decreasing term. credit life automatically names the creditor as the beneficiary. policy cannot be written for more than the outstanding debt, since that is the limit of the creditor's insurable interest.
Increasing Policy
the death benefit increases over the life of the policy while the premiums remain level. normally written as a rider to provide cost of living or return of premium benefits.
annually Renewable Term
the simplest form of term life insurance is for one year. the death benefit remains level and the premium increases yearly as the policy renews up to a specified age.
Re-Entry Term Option
term policies with the option will allow the insured, upon the end of the original term, to renew based on attained age and may qualify at a discounted rate by proving evidence of insurability.
Renewable Policy
a benefit that will renew the contract on the renewal date without evidence of insurability. the policy may be a 1, 5, 10, or 20 year renewable contract up to a specified age, with premiums increasing at the beginning of each renewal period.
Convertible Policy
The right to convert the existing term policy to a permanent policy without evidence of insurability during the conversion period specified in the contract. the premium can be based upon attained age or issue age. the premiums will be higher than the orig
Ordinary Whole Life
Provides insurance protection to age 100, cash value accumulation to age 100, and fixed level premium payments. premium payments may be structured as Straight Life or Limited
Straight Life or Continuous Premium
premium is level and payable to age 100 or death of the insured, whichever come first. the face amount remains level throughout the life of the policy. this policy has the highest total premium outlay.
Limited Payment
Premium payments are for a specified time (20-pay life or 30-pay life) or to a specified age (life paid up at 65). the face amount remains level and cash value continues to earn interest and mature at age 100. Annual premium is higher than Straight life b
Single Premium
the entire premium is paid in a lump sum at the time of purchase and creates immediate cash value. the face amount remains level and cash value continues to earn interest and mature at age 100. has the lowest premium outlay.
Indeterminate Premium
like a non-participating whole life plan of insurance, except that it provides for adjustable premiums. the company will charge a "current" premium based on its current estimate of investment earnings, mortality, and expense costs.
Modified Premium
Provides a level death benefit and requires that premiums be paid for the life of the policy. the premiums do not remain level. starts with a premium lower than ordinary whole life for the initial 5 years then increase and remain level for remainder of po
Adjustable Life
type of permanent life insurance that combines features of term and whole life coverage, giving policy owners the option to change the characteristics of their policies. is Most appropriate for those whose income is expected to fluctuate from year to year
Current Assumption or Interest-Sensitive Whole Life
A form of whole life in which the insurance company can change the premiums or interest rate being credited to the account based on current money market rates. Interest rate changes affect the policy premiums. Has a Guaranteed minimum death benefit, but m
Indexed Universal Life (Equity Indexed)
Gives policy owners the opportunity to decide the percentage of cash value that is invested in traditional fixed income securities. the remainder of cash value is invested in an equity index account linked to a stipulated stock index, typically the S & P
Universal Life (Flexible Premium Adjustable Life Ins.)
Features insurance protection and a savings element that grows on a tax-deferred basis. Is an "unbundled policy" meaning the individual elements of the policy and premium are credited to the account separately after the premium is paid.
*Adjustable Face a
Death Benefit Option A
Pays the face amount of the policy and provides a level death benefit. as the cash value increases, the company's risk decreases.
Death Benefit Option B
pays Face amount stated in the contract which is level term, plus any cash values accumulated over the years. this provides an increasing death benefit. the Mortality charge for Option B is greater than Option A.
Variable Life
a Policy with certain benefits that will vary based on market conditions.
*Fixed Premium
*Both General Account & Separate Account
- General account is fixed and guaranteed benefit
-Separate account is invested in equity securities as offered by company.
Variable Universal Life
the policy provides flexible premiums and adjustable death benefits. Options A and B are available. However is does not have a general account, only a separate account. premiums are credited to the separate account and there is no guaranteed minimum benef
Joint Life (First to Die)
Whole life policy that is written to cover 2 or more lives. death benefit is paid upon the first insured to die. Once payment is made, the policy no longer exists.
Joint Survivorship Life (Last to die)
Whole Life policy written to cover 2 or more lives, and the death benefit is not paid until the last insured dies. Premiums are based upon a joint issue age which is obtained by an average of both insured's' ages resulting in a lower premium than two sepa
Return of premium term
this policy provides for a full refund of premiums if the insured is still living at the end of the term. these policies charge a higher premium than level term insurance.
Jumping Juvenile Policy
this policy provides an automatic increase in the face amount at a given age (usually 21 to 25) without evidence of insurability. the premium remains level for the life of the policy and usual increase in face amount is 5 times the issue amount.
Waiver of Premium Rider
if the insured becomes totally disabled, the insurer will waive premiums for the duration of the disability or the end of the policy, whoever occurs first. To qualify the insured must be disabled for a waiting period of 3-6 months.
Payor Benefit (Waiver of Payors Premium)
if the payor (policy owner) dies or becomes disabled and is unable to make the premium payments, the insurer will waive the premiums payments for a specified period of time.
Disability Income Benefit
in the event of total disability and after an initial waiting period (such as 6 months) premiums are waived and the insured is paid a monthly income. income is typically limited to a %, usually 1% of the face value. Benefit paid does not reduce the death
Waiver of Cost of Insurance
a rider that waives the deduction of the monthly cost of insurance and expense charges associated with a UL while the insured is totally disabled, usually after 6 months of continuous disability. Disability must occur prior to a stipulated age.
Spouse (other insured) Rider
this type of rider will provide level term coverage on the life of the insured's spouse. Will also provide a conversion provision permitting the spouse to convert to permanent coverage without evidence of insurability prior to the termination of the rider
Child rider
provides level term coverage on the life of all of the insured's children. is usually offered at one premium rate and may cover newborns after 14 days of life and adopted children who can be added to the coverage without increasing the premium. the childr
Family rider
This is the combination of writing both the spouse and child rider on one policy. Usually sold in units of protection, such as $5000 on the main wage earner, $1500 on the spouse and $1000 on each child
Nonfamily Rider
Provides coverage on an additional insured, other than a spouse or child such as a business partner.
Accidental Death Benefit (Double or Triple Indemnity)
in the event of a claim, the policy normally pays double or triple the face amount if death was a result of an accident. the benefit is payable only if death occurs before a specific age and within 90 days of the accident. Does not add additional values a
Accidental Death and Dismemberment
provides a benefit in addition to the base of the policy. the rider pays 100% of the amount of the rider, known as the principal sum, upon accidental death. if insured suffers an accidental dismemberment loss, rider pays 50% of the amount, known as capita
Guaranteed Insurability
allows the insured to purchase stated amount of additional insurance every 3 years based on certain ages(specifically 25, 28, 31, 34, 37, and 40) events, or specified dates without evidence of insurability up to a maximum age, usually 40. Rider drops at a
Return of Premium Rider
uses increasing term insurance to provide coverage equal to the amount of premiums paid. if the insured dies within the term, the beneficiary would receive the face amount of the policy plus the benefit of the rider equaling the total amount of premiums p
Return of Cash Value
Increasing Term insurance equal to the Cash Value. However, does not relieve the obligation to pay loans from the claim proceeds at time of death
Cost of living
Enables the insured to purchase more insurance each year to help offset increasing insurance nees due to inflation. amount that can be purchased is based on increases in the cost of living index.
Living Needs Rider
Allows the early payments of a portion of the face amount before death, should the insured become terminally ill, usually 12-24 months life expectancy. Typically amount equals 50% -90% of the policy's face amount. Rider normally provided without a premium
Long-Term Care Rider
Provides up to 100% of the policy benefits if the insured qualifies for long-term care benefits as defined in the rider, such as inability to perform 2 out of 6 activities of daily living. Benefits are paid income tax free after the insured meets the qual
Viatical Settlement
Agreement between a third party and a life insurance policy owner insuring the life of an individual with a life-threatening or terminal illness. the firm purchases the policy 60 to 80% of the face amount. insured is provided with a tax exempt discounted
Life Settlement
Similar to viatical settlement in that it is the sale of an existing life insurance policy to a third party for more than its cash surrender value, but less than its death benefits. there are no requirement for the insured to be terminally ill in order fo
Entire Contract Clause
this provision describes the parts of the life insurance contract. Policy, riders, amendments, and a copy of the application.
incontestability clause
within the first 2 years of a policy, the insurer may contest a claim and void the contract upon proof of a material misstatement or fraud.
insuring clause (proof of death)
is found on the first page of the policy and is considered the most important clause in the policy. identifies the parties to the contract and the perils or conditions in which it will pay
consideration clause
specifies the amount and frequency of premium paid by the owner as something of value provided in exchange for the company's promise to pay.
suicide clause
if the insured commits suicide, while sane or insane, within typically 2 years from the issue date, the insurer's liability is limited to a refund of premium. if commits suicide after the expiration date the insurer must pay out the death benefit to the n
owner's rights
policy owner retains all rights in the policy. unless the insured is also the policy owner, the insured does not have rights.
Assignment
the transfer of ownership. two types:
absolute assignment (permanent)- the original owner will name a new owner of the policy
collateral assignment (temporary)- the rights of owner will be subject to the assignment.
misstatement of age or gender
if the age and gender of the insured have been misstated in a policy, all benefits under the policy will be provided based upon the insured's correct age and gender according to the premium scale in effect at the time of the issuance
Exclusions
Aviation, status clause (military status), results clause (war clause), hazardous occupation, hazardous hobbies, suicide.
mode of premium
addresses the frequency of premium payments (monthly, quarterly, semiannually, or annually), and to whom the premiums are payable. the more frequent the payment, the greater the cost.
Automatic premium loans (APL)
this provision must be elected by the policyowner and can be cancelled at any time. enables the insurer to automatically borrow against the cash value to cover a premium payment to prevent the contract from lapsing unintentionally.
policy loans provision
a policy loan may be made in a cash value policy once there is sufficient cash value to borrow against. most policies cash value must be made available to borrow against after 3 years.
Partial withdrawals
is permitted in a Universal or a Variable Universal Life policy and considered a partial surrender of the policy. paid from the policy value and either reduces the amount of the death benefit.
Revocable Beneficiary
the policyowner may change at any time. does not have a vested interest in the policy.
Irrevocable Beneficiary
the policyowner may not change unless the beneficiary does or provides written consent of change.
Primary Beneficiary
the first in line to receive the death benefit upon the death of the insured.
Contingent or Secondary Beneficiary
receives the death benefit only if there is no primary alive following the death of the insured.
Tertiary Beneficiary
receives policy proceeds if both primary and contingent predecease the insured.
Individual/named beneficiary designation
this designation is very specific. and individual is specified by name. this prevents probate proceedings.
Class or classification beneficiary designation
this designation is used in instances where each beneficiary is not directly identified by name. the wording of the class designation must be specific and carefully worded to remove any doubt of the owner's intentions. "any children of this marriage" or
Per Capita designation
this designation will pay to surviving beneficiaries equally if a named beneficiary predeceases the insured.
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Per Stripes Designation
this designation will pay a deceased beneficiary's share to the heirs of the beneficiary who predecease the insured.
Estate beneficiary
estate may be the tertiary beneficiary in case the insured outlives all other beneficiaries. the death benefit increases the estate value and may have tax implications.
Trust beneficiary
when a recipient is not to have direct access to the death benefits, such as in the case of minor children, and the proceeds are to be distributed as per the insured's directions set forth in a trust. may also be used tin estate tax planning strategies wh
Minor beneficiary
if minor has been named as beneficiaries, but no trust has been established, the funds are placed in a settlement option (held with interest), with the insurer acting as trustee. the guardian may receive payments for the benefit of the child, until the ch
creditor beneficiary
designated by assignment or named at application to cover indebtedness.
common disaster clause
provides that if an insured and primary beneficiary are in the same accident, the primary must survive the insured by a specific number of days (90) or the insurance company will assume the insured dies last. designed to pay the benefits to either the con
Spendthrift trust clause
denies the beneficiary the right to assign his/her interest in the policy proceeds. purpose is to prevent creditors of a beneficiary from claiming any benefits payable to the beneficiary before they are actually received. does not protect the beneficiary
change of insured
rider found in corporate owned life insurance when an executive moves to another company or retires. allows the owner to exchange the insured covered by the policy for a new insured in which the owner has an insurable interest or to exchange the policy fo
facility of payment clause
this provision allows the insurer to pay a relative or anyone it deems entitled to the benefits in the absence of a properly designated beneficiary or in cases of no living beneficiaries. this can alleviate any lawsuits and can be used to reimburse someon
Interest Only Settlement
death benefit proceeds may be left with the insurer while interest payment are paid at least annually or more frequently. principal amount does not decrease, and the interest generated is taxed a ordinary income when paid to the beneficiary. this method o
Fixed Amount Settlement
payments are for a specified dollar amount paid monthly until the benefits, along with interest, are exhausted. only the interest portion of the benefit is taxable.
Fixed Period Settlement
Payments are guaranteed for a specifies period of time, such as 10 or 20 years after which time payments will cease. the proceeds and interest are used to may the payments. the interest will increase the amount of each payment, and the interest is taxable
Life income option
allows the insurer to use the death benefit to purchase an annuity on behalf of the beneficiary.
Straight Life (Pure or Life Income Only)
payments are guaranteed for the lifetime of the recipient. upon death, payments will cease. dollar amount of each payment will depend upon the age and gender of the recipient. (Single Life Option)
Life Income Period Certain
Payments are guaranteed for the lifetime of the recipient or a specified period of time, whichever is longer. if recipient dies prior to the end of period certain, the payments continue to another person until the end of period.
Life refund
Payments are made for the lifetime of the recipient. Upon death, if a recipient has not received an amount equal to the total death benefit, the balance is refunded to the beneficiary either in a lump sum or in installments
Joint and Survivor Income Option
Payment are guaranteed for the lifetime of 2 or more recipients. upon death of the first, payment continues to the survivor until death. survivor's payments may be full 100% 2/3 or 1/2 of the original payments
Joint Life Income Option
payments are guaranteed to 2 or more recipients until the fir dies, then all payments cease.
Nonforfeiture Options (Guaranteed Values)
these options are found in polices that accumulate cash value and protect the policyowner against total loss of benefits if the policy should lapse due to nonpayment of premium or is intentionally cancelled.
Cash Surrender Option
upon surrendering the policy back to the insurer, the policy owner will receive the cash surrender value stated in the policy less any outstanding loans and accrued interest. any amount that exceeds the premiums paid into the policy will be taxable as ord
Reduced Paid Up Option
Present cash value is used to buy a single premium, permanent paid up policy of a reduced face amount. this option probides the longest period of coverage provided by a nonforfeiture option. coverage, although reduced in face value, will continue to age 1
Extended Term Option
present cash value is used to buy a single premium term policy of the same face amount for as long a period as it will buy, expressed as a combination of years and days. Provides the largest death benefit and is sometimes referred to as the Automatic Opti
Dividend Options
Dividends represent the favorable experience of the insurer and result from excess investment earnings, favorable mortality and expense savings. Available on participating policies issued by mutual insurers and paid annually
Cash dividend option
policyowner receives the declared dividends in the form of a check on or near each policy anniversary.
Premium Reduction dividend option
dividends are applied towards the next premium due. the same could be accomplished if the policyowner received the dividends in cash and remitted the full premium. if the declared dividends equal or exceed the premium, the premium payment may be suspended
Accumulate at Interest dividend option
the dividends are retained by the insurer and the interest rate paid the policyowner is compounded annually.
Paid Up Additions Dividend Option
Purchases single premium, additional permanent benefits at the insured's attained age. additional insurance is paid out in addition to the face amount if the insured dies. while insured is living it generates cash value and dividends as if the paid up add
1 year term dividend option
purchases a single premium, 1 year term benefit. premiums are calculated at the insured's attained age; also referred to as the fifth dividend option.
Paid up dividend option
pays off the policy more quickly than scheduled. if the company's overall performance declines, premiums may have to be resumed.
Annuity
used primarily to provide a steady stream of income to an individual typically upon retirement. designed to protect against outliving an individual's retirement income by providing lifetime income. Primary functions is to liquidate an estate, or to pay be
Control of the Contract
Owner- individual who controls the contract and is responsible for payments.
Annuitant- the individual whose life the contract is based upon.
Beneficiary- the individual named in the contract to potentially receive benefits.
Insurance aspects of Annuity
are insurance products based on a mortality table. if a life contingency settlement option is chosen, the insurance company guarantees to provide an income benefit payment as long as the annuitant lives.
Death Benefits of Annuity
if annuitant dies prior to annuitizing the contract the policy has a named beneficiary the insurer pays out an amount equal to premiums paid or the account value, whichever is greater.
Single Premium Annuity
lump sum payment is made into annuity
Periodic Premium Annuity
Continuous premiums paid into the contract. most common example is flexible premium
Flexible Premium annuity
Flexible contributions may be made as often and in whatever amount the contract owner desires. however, most insurers set a minimum and maximum dollar amount they will accept
Immediate Annuity
does not have an accumulation period and is used to generate immediate income within a year of the issue date.
Deferred Annuity
will pay periodic benefits starting at some specified time in the future; benefits begin more than 1 year from the issue date. Normally purchased to defer taxes on any contract earnings.
Tax Deferred Growth
since an annuity is an insurance contract, the accumulation value grows tax deferred. allow for the naming of a beneficiary to receive any policy value if the annuitant dies prior to annuitizing. withdrawals prior to 59 1/2 are subject to income tax and g
Tax Penalty on Annuities
to discourage the use of annuities as short term tax shelters, a 10% penalty tax is levied against any premature withdrawals prior to 59 1/2 years of age. does not apply if premature distributions occur due to death or disability of owner.
Surrender Charges of Annuities
When a contract is fully surrendered, any surrender charges will lessen the contract payout. Also referred to as BACK-END LOAD. Surrender charges diminish over a stated number of years, set by insurer, until they disappear.
Bailout Provision (Escape Clause)
During the accumulation period, some contracts also offer a "bailout" provision that allows the owner to withdraw money from the annuity without surrender charges if the crediting rate falls by more than a specific amount. this will enable the policy owne
Waiver on annuity
Annuity surrender charges are generally waived if the annuitant is hospitalized for an extended period, placed in a nursing facility for a least 30 days, become disabled, or dies.
Annuity Benefit Payments
Once a contract is annuitized, the insurance company takes ownership of funds in the account. In return, the annuitant is entitled to a guaranteed income stream based on the terms of annuitization. the annuitant may be able to name a beneficiary. income i
Life Income (Pure or Straight Life) Annuity Payment
Annuity is payable for as long as the annuitant lives, and upon death all payments cease. Provides the HIGHEST monthly income than any other option.
Life Income Period Certain Annuity Payment
Annuity is payable for life, or for a specified period of time, whichever is longer. if the annuitant lives beyond the stated period, benefits continue for life of the annuitant. if dies prior to end of period a beneficiary receives the balance of the pay
Life Income with Refund (Installment or Cash Refund)
Annuity is payable for the lifetime of annuitant. upon death, if annuitant has not received amount equal to total of all payments, the balance is refunded to the beneficiary as a lump sum, cash refund, or in installments, sometimes referred to as the Inst
Life Income Joint & Survivor Annuity Payment
Annuity is payable to 2 annuitants while both are living. Upon death of the first, survivor benefits continue, either paying the full amount or reduced to 2/3 or 1/2 for the survivor's income until the survivor dies.
Joint Life Annuity Payment
Annuity is payable to 2 or more named annuitants while both are living. upon death of the first, the benefits stop.
Annuity Certain
Annuity benefit payments are received for a specified period of time or a specified amount of periodic income. if annuitant dies with time remaining or balance is left in account, the named beneficiary receives the balance of the payments.
Fixed (Guaranteed) Annuity
During the accumulation period, the insurer guarantees a minimum fixed interest rate. At annuitization benefits are paid as a minimum level fixed amount. Fixed amount purchasing power decreases as the cost of living increases. Actual rate of interest crea
Indexed (Equity Indexed) Annuity
Product with interest rates that are linked to the positive performance of a stock market related (equity) index, such as the Standard & Poor's 500 Index. Contract owner enjoys safety of principal and some guaranteed minimum returns. Typically have a fixe
Market Value Adjustment (Adjusted) Annuity
Features fixed interest rate guarantees combined with an interest rate adjustment factor that can cause the surrender value to fluctuate in response to market conditions. Upon withdrawal, theMVA will add or deduct an amount from annuity or the withdrawal
Variable annuity
are regulated by the SEC, FINRA, and State insurance department. Annuity payments and cash values fluctuate according to the investment experience of the separate account the contract owner has designated. Payments are based on "units" rather than dollars
Qualified Vs. Nonqualified Annuities
Qualified annuity - funded with pre-tax dollars, entire distribution is subject to ordinary income taxes.
Nonqualified Annuity- funded with after-tax dollars, all distributions only the earnings are taxable as ordinary income
Purchase Other Insurance
Annuities can be used as a funding vehicle for insurance premiums for which the consumer may have a need. if annuity has large amount of tax deferred earnings then, upon death, the beneficiary will receive the payout and be responsible for paying income t
Education Funding
An annuity can provide funds to help offset the costs of a college education. Using a systematic withdrawal or a settlement option will provide for and income stream to help meet or offset some of the expenses incurred.
Retirement Fund Accumulation
A deferred annuity that is held outside an IRA allows for the accumulation of earnings on a tax deferred basis. Earnings may come from current or guaranteed interest credits, excess interest credits linked to performance of a stock index, or from separate
Retirement Income
the funds accumulated inside an annuity can be used to fund all or part of a consumer's retirement income. Accumulated funds can be used to purchase a settlement option which can provide for a lifetime income stream or an income stream that can end prior
Long term Care Benefits
Today's annuities may offer riders which will help offset some of the costs associated with providing long term care. as with most riders there is an additional cost associated. Few companies offer a combination deferred annuity and long term care policy
Lump Sum Structured Settlements
Lump Sum payments from lawsuits, lottery winnings, or an inheritance can be used to purchase a structured settlement in the form of an annuity. annuity can then be used to provide guaranteed lifetime income to the annuitant.
Employer Sponsored Qualified Retirement Plans
*referred to as Group Annuity.
*used to provide pensions for employees, funding nonqualified deferred compensation plans or qualified retirement plans.
*lose the tax-deferral aspect
Group Insurance Plans
the insurer issues a Master Policy to the plan sponsor and each participant receives a Certificate of Insurance covering the participant; and if offered, his/her spouse and dependents. Participants in the plan do not have personal control of the policy. T
Contributory Group Plan
Employees must contribute to the premium payments and at least 75% of all eligible employees must participate.
Noncontributory Group Plan
Employer pays the entire premium with a mandatory 100% of the eligible employees participating.
Group Conversion
there is a period of 31 days in which the employee may, upon termination and without evidence, convert his/her group life insurance benefit to an individual permanent policy. the premium will be at a higher than normal rate.
Franchise (Wholesale) Group Plan
This Group plan does not issue a Master Policy since underwriting is on an individual basis and individual policies are issued. Evidence of insurability may be required. Employer may be the premium payor OR the premium cost may be shared.
Credit Life Insurance
is either a form of individual coverage on the life of a debtor, or group insurance issued to a creditor providing coverage on debtors for the benefit of creditors. Both are form of Decreasing Term and amount of insurance reduces as amount of obligation r
Industrial (home service)
Individual polices are issued to low income workers without medical examination requirement. the premiums are collected weekly or monthly. Normally have a face amount of $1000 or less and are written to reduce funeral cost.
Buy-Sell Agreement
this agreement contractually establishes a price wit the intent to purchase, at a predetermined value, the assets of a business should one of the contract participants predecease the others. May be used with a sole proprietorship, a partnership or with st
Cross Purchase Plan
Used when the partners of a business purchase life insurance on each other. at the death of one of the partners, policy proceeds are used to purchase that person's interest in the business from his/her heirs.
Entity Plan
A business entity enters into an agreement in which it is obligated to purchase the deceased owner's interest. entity typically buys life insurance on each of the owners. Entity would then name itself as the beneficiary on each policy.
Stock Redemption Agreement
Agreement between the shareholders and a close corporation. Each Shareholder agrees to sell their shares upon death to the corporation according to the price, terms and circumstances specified in the agreement. this type of buyout is structured so the cor
Key Person Life Policy
Provides the necessary funds to recruit, hire, and train a replacement employee, restore lost profits, and reassure customers that the business operations will continue. Either term or permanent coverage can be used to fund the plan
Third Party Ownership
a policy owned by one person insuring the life of another person. the three parties involved are the policyowner, insured and insurer. Examples: husband buying policy on a wife, parent on their child, business buying on a key employee
Social Security Funding
Is provided by both employee and employer through the Federal Insurance Contributions Act tax. the employer withholds the employee's tax and pays it along with the employer's portion. Based on one's taxable income and number of years in the workforce, eac
Fully Insured
Requires an individual to have earned a minimum of 40 Quarter credits, or approximately 10 years of employment. Benefits that may be received monthly are: Retirement starting at age 62, Spousal retirement at age 62, widows and widowers can begin receiving
Currently Insured
A worker must earn at least 6 quarter credits during the full 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or is entitled to retirement benefits.
SS Retirement Benefit
a retired worker is eligible to receive monthly income equal to his/her PIA. Full retirement age varies based on year of birth but is up to age 67. Covered workers may begin benefits as early as 62, however benefits will be permanently reduced. Benefits a
SS Death Benefits
A One time lump sum payment of $255 in total may be made after the taxpayer's death. benefit is only payable to a surviving spouse or minor children.
SS Survivor Benefits
Benefit is payable to eligible dependents of a fully insured deceased worker. A surviving spouse with a dependent child under age 16 is entitled to monthly income until the youngest child reaches 16. An Unmarried surviving spouse may received at age 60. S
Modified Endowment Contracts (MECs)
Prior to 1988, individuals could place large sums of money into a cash value policy and the cash would grow tax deferred until the insured died, at which point a death benefit was paid income tax free. Or if they needed cash, they could take a tax free li
7-Pay Test
a limitation on the total amount that can be paid into a policy in the first 7 years. It compares premiums paid for the policy during the first 7 years with the net level premiums that would have been paid on a 7-year whole life policy providing the same
Taxation
if a contract is deemed to be a MEC, then any funds that are distributed are subject to a "last in, first out" tax treatment, rather than the normal "first in, first out" tax treatment.
MEC Penalties
all cash value transactions are SUBJECT TO TAXATION and penalty. Funds are subject to a 10% penalty on gains withdrawn prior to a 59 1/2. this is considered a premature distribution. Distributions made after 59 1/2 and ones paid out due to death are not s
Transfer for Value Rule
was passed by Congress to discourage business transfers of ownership between parties looking to take advantage of the tax free status of life insurance death benefits. If policy is transferred to a new owner in return for any kind of material consideratio
Section 1035 Exchanges
Allows for the exchange of an existing insurance policy or contract for another without incurring any tax liability on the interest and /or investment gains in the current contract. Can be useful if another insurance policy has features and benefits that
Coinsurance
the cost sharing between the insurer and the insured stated as a percentage of the claim amount, payable after the deductible has been met
Copayment
stated dollar amount that applies per claim in addition to any other cost sharing
deductible
initial amount payable by the insured before insurance benefits apply
morbidity table
table showing the mathematical probability of a loss due to a sickness or injury. used to help determine premiums for accident and health insurance. comparable to the mortality table used for life insurance rating.
Disability Income
Contract that pays weekly or monthly benefits due to injury or sickness if an insured is unable to perform the duties of their job. benefit is either a percentage of the insured's past earnings or a flat dollar amount
Medical Expense
contract that covers the various expenses which an insured may incur due to an accident or sickness
Long-term Care Expense
Product designed to provide coverage for personal care services in a setting other than a acute care unit of a hospital, such as a nursing home or even one's own home.
Accidental Death and Dismemberment Health
Pays the principal sum upon accidental death, loss of sight, or loss of 2 limbs. it pays the capital sum per policy schedule for loss of vision in 1 eye or loss of 1 limb. may be a stand alone policy or added as a rider to a disability income, medical exp
Home Health Care
Benefits for limited nursing services, home health aide, light housekeeping, and related expenses may be available in both medical expense insurance and long-term care insurance.
Individual Health
purchased by and individual and is not dependent upon an employer.Some require proof of insurability; and rates apply based on underwriting factors used by the insurance company. Tend to be more costly and have higher deductibles.
Group Health
are available to employees and dependents. Group underwriting factors determine the premiums. employer makes all decisions regarding the coverage and proof of insurability is not typically required .
Private Insurers
are commercial companies, such as stock and mutual insurers that sell to general public.
Government Insurers
plans provided by government include Social Security Disability, Medicare, Medicaid, and TRICARE for Military personnel
Field Underwriting
very important due to the risk of moral hazard. it is the initial step of the total process of insuring a health risk. includes the producer's initial personal contact with the applicant and the determination of insurability while assisting the applicant
Health Underwriting Factors
*Age
*Gender
*Tobacco Use
*Occupation and Hobbies
*Physical condition
*Moral Hazard/financial Hazard
*health history
*foreign travel/residence
*other insurance
*plan applied for
Health Application
Part 1-General: contains general questions gender, marital status exc.
Part 2-Medical: Medical background, present health, any medical visits
Medical Examination
records of an examination conducted by a medical professional regarding the applicant's present health. usually requested by the insurer after determining if the amount of coverage, age of applicant or health history warrant the examination. Performed at
Attending Physician Statement
used incases in which the individual application and/or medical reports reveal conditions of which more information is required. this statement is completed by the applicant's personal physician treating a specific condition. applicant must sign a written
Medical Information Bureau
its primary purpose is to collect adverse medical information about an applicant's health and act as an information exchange. A member owned corporation that operates on a not for profit basis. the underwriting services are used exclusively by MIB member
Inspection Report
a general report of the applicant's finances, character, morals, work, hobbies, and other habits. sometimes referred to as a Consumer Investigative Report. Can be completed by the insurer or a third party provider. applicant must be made aware of any info
Agent's Report
A personal statement submitted by the producer to the insurer regarding any personal knowledge of the applicant, including information observed during the application process. information remains confidential between the producer and the insurer, and it d
Individual Selection Criteria
insurer uses all of the information collected by the field underwriter and other sources, to determine the acceptability of an individual. it is ultimately the home office underwriter's responsibility to determine if this individual meets all the underwri
Nonmedical Application
a policy requested when the applicant's age, medical history or amount of coverage does not require a medical examination for underwriting. health questions on the application are asked by the producer and are the only medical information required.
Issued as Preferred Risk
a lower rate will be used if the insured meets the insurance company's qualifications as a preferred risk (lower than average risk)
Issued as a Standard Risk
The coverage requested at the rate that was quoted. some insurance may only be issued with standard rates. premium rate-up would still be permitted for tobacco users.
Issued as a Substandard Risk
Issued Rate-up: issue the coverage as a higher rate.
issued with exclusions: may be temporary or permanent; limits the insurer's obligation to pay
Conditional Approval
the premium paid by the applicant is the Offer and the policy issued by the insurer is the Acceptance. insurer will send the policy to the producer for delivery, but coverage is in effect as of the date of application if it is accompanied by premium, or t
Indemnity Health Plan
the insured can choose any doctor or hospital without referrals or a primary care physician. the plan requires the insured to pay up front for services, and the submit a claim for reimbursement. Generally marketed through commercial insurers.
Service Health Plan
the plan pays benefits directly to the providers of health care rather than as a reimbursement to the subscriber. plan participants are called subscribers and pay a premium or subscription fee. Providers include Blue Cross and Blue Shield, Health Maintena
Self-Insured Health Plan
a plan offered through employers, associations, or unions who pay claims out of their own funds instead of funding claims through an insurer.
Blanket Payment
maximum dollar limit set, with no itemizing of costs, used for groups covered under a blanket policy for a specified period or event
Scheduled Payment
a health plan with limits as to what will be paid for covered expenses. Most associated with covering day to day losses based on a specifies or flat dollar amount. Not designed to cover catastrophic losses and have limited annual benefits.
Cash or Indemnity Payment
pays a specified daily amount up to the stated maximum number of days, or even lifetime. benefits often double or ripple while an insured is confined in an intensive care unit.
Fee-for-Service
provides a separate payment to a healthcare provider for each medical service received by a patient.
Prepaid Payment
medical benefits are provided to a subscriber in exchange for predetermined monthly premiums paid in advance
Usual, Customary, Reasonable
benefits are not scheduled, but are based on the average fee charged by all providers in a given geographical area. many insures pay the amount and the valance of any overages or costs of any disallowed services are the insured's responsibility.
Lifetime Limit
the maximum a policy will pay for covered losses during the lifetime of an insured.
Annual Limit
the maximum a policy will pay for covered losses per year
Per-Cause
the maximum a policy will pay for covered losses per claim
Blue Cross and Blue Shield Associations
Prepaid plans, with plan subscribers paying a set fee, usually monthly, for the services of doctors and hospitals at a predetermined price. Blue Cross is a HOSPITAL service plan with contractual agreement with the hospital. Blue Shield is a PHYSICIAN serv
Health Maintenance Organizations (HMOs)
Regarded as a managed health care system providing a comprehensive array of medical services on a prepaid basis, which means little or no Out of pocket expenses. All subscribers must live within a specific geographic region called the service area. Typica
Group Model HMO
HMO contracts with an independent medical group to provide a variety of medical services to subscribers. under the agreement the HMO pays a capitation fee to the medical group entity directly. Medical group will then pay the individual physicians who rema
Staff Model HMO
Contracting physicians are paid employees working on the staff of the HMO. they generally operate in a clinic setting at eh HMO's physical facilities. as hospital services are required, staff dr.s and HMO administrators arrange for these services. Staff m
Independent Practice Association Model
Gives HMO members the maximum freedom of choice of physicians and locations b/c the HMO is allowed to contract with a network of independent physicians who are part of an independent practice association. Payment to physicians is by capitation or on a fee
Preferred Provider Organization (PPOs)
are an arrangement under which a selected group of independent hospitals and medical practitioners become preferred providers in a geographic area. The providers perform services to subscribers and charge a discounted fee-for-service negotiated in advance
Exclusive Provider Organization (EPO)
A type of PPO that REQUIRES a subscriber to seek treatment from a network provider. Unlike HMO, use of a primary care physician and referral to a specialist are not required and the provider is paid a negotiated fee-for-service.
Point of Service (POS)
These plans combine PPO and HMO benefits. Members can choose which part of the plan to use. if the subscriber stays in network benefits are paid as an HMO.
Basic Health Insurance Policy
Traditionally cover an insured for nonsurgical doctor visit while in the hospital, the charges for room and board while hospitalized, and can be expanded to include payment for office visits, diagnostic x-rays, lab charges, and the cost of the operation r
Basic medical expense
pays for office visits, diagnostic x-rays, laboratory charges, ambulance, and nursing expenses when not hospitalized. some plans may include coverage for prescription drugs
Basic Hospital Expense
Pays for hospital room and board with a daily limit of coverage. Miscellaneous hospital expense may also be provided up to a specifies limit per day for inpatient x-rays, lab work, operating room expense, medication, and cost of the anesthesia
Basic Surgical Expense
Pays surgeon and anesthesiologist fees for the cost of a surgical procedure. usually provide based on a surgical schedule to specify benefit limits for each surgical procedure. if surgery is not listed in policy the company will pay based on coverage of c
Major Medical Policy
Provide benefits for potentially catastrophic and/or prolonged injury of illness. include a lifetime limit that does not include the out of pocket expenses. Hospice and Home Health Care are not normally covered.
Stop-loss Provision
maximum dollar limit set on the coinsurance to limit the out of pocket expense that an insured can incur in a policy year. may or may not include deductible.
common Accident Deductible
if several family members are injured in the same accident, only one deductible is applied.
Carryover Provision
Expenses that did not satisfy the previous year's deductible and were incurred in the last 3 months of that year are used towards satisfying the current year's deductible.
Supplemental Major Medical Policy
this plan provides for Major Medical coverage designed to supplement a Basic Plan. it is written to pay benefits once the basic plan benefits are exhausted. Basic plan provides first dollar coverage. once basic plan benefits are exhausted., a Corridor Ded
Comprehensive Major Medical Policy
Coverage combines the features of the Basic and Major Policy into a single policy. Benefits provide for reimbursement of coverage expenses on a "usual, customary, and reasonable" basis. insured has the freedom to choose any hospital, physician, or surgeon
Newborn Infant Coverage
All individual and group health insurance policies, written on an expense-incurred basis, providing coverage for dependents of the insured must provide coverage for the insured's newborn child from the moment of birth. Adopted children are covered at the
Dependent Child Coverage
Federal law requires that every policy providing coverage for a dependent child extends coverage up to age 26. this includes natural children, adopted children, married or unmarried, even if eligible for other insurance.
Mental Illness and Substance Abuse
coverage for metal illness and substance abuse will be subject to the same deductibles and coinsurance factors as those that apply to any physical illness. it is provided on an inpatient and outpatient basis and includes the treatment of alcohol abuse and
Prescription Drug
is most often found in a group helath insurance policy and some may integrate benefits with a medical plan or provide benefits for an additional cost. This benefit may be written requiring a small copayment, a flat amount, or an out of pocket percentage f
Maternity Benefits
Medical plans will usually cover the "complications of pregnancy" as an illness, but normal birthing costs may be limited or excluded. typically provide 96 hours of inpatient care following a caesarean section birth. Normal birth inpatient care is 48 hour
Vision Care
This provides for 1 routine annual examination. it may provide payment for the cost of lenses, frames, contact lenses, but not the cost to replace frames or lenses that are lost or broken. it does pay for sunglasses or safety glasses. does not pay for med
Hearing Care
Most insurance plans do not cover cost of hearing aids. some plans and supplemental programs do provide hearing aid coverage. few health insurance plans allow you, for an extra premium, to add additional hearing coverage.
Limited Policies
limited health exposures are generally covered by these policies that specify the exposure to be covered and the amount of the corresponding benefit, such as prescription drugs, vision care, etc. State law requires that the agent/insurer make special note
Limited Accident
Provides benefits for accidental injuries associated with specific events, such as traveling out of the country or on a common carrier.
Critical Illness Limited plan
provides specific benefits for a specifies sickness, such as Cancer Plans and Heart Disease Plans.
Credit Disability Insurance
Covers a debtor, with the creditor receiving benefits to pay the debt if the debtor becomes disabled as defined in the policy. it is commonly sold as group plan, however, individual contracts may be written
Dental Insurance
Offered by an insurer must state the benefits, the exclusions, and any limitations in coverage. Plans are normally written stating an annual maximum dollar benefit, not the number of appointments or the number of teeth repaired. Contracts may be written o
Endodontic
services covering dental pulp care and root canals
Orthodontics
services for teeth alignment and other irregularities of the teeth
Periodontics
Services for the treatment of gum problems and disease
Prosthodontics
services provide bridgework and dentures
restorative care
services to restore the functional use of natural teeth
Oral Surgery
Surgical treatment of diseases, injuries and jaw defects
Scheduled Plan
Benefits are paid based on a schedule of procedures. benefit maximums are commonly paid on an amount lower than the usual, customary, and reasonable dental charges.
nonscheduled Plan
Benefits are paid based on a usual, reasonable, and customary basis. dentures are a major dental expense and would be paid using this benefit provision.
Combination Plans
combines the benefits of both the Basic and Comprehensive plans. Some procedures are paid based on a schedule while others are paid on a usual, customary, and reasonable basis.
Predetermination of Benefits
although this procedure is normally not mandatory, it does allow both the patient and dentist to know what will be covered before treatment. this enables the insurer to maintain some control over unnecessary or more expensive than necessary procedures and
Referral Plans
Dental referral plans are not insurance and are of limited value. may or may not be associated with a group or individual health insurance plan and may charge monthly fees. Referrals plans only offer consumers a list of dentists willing to accept reduced
Disability Income Insurance
sometimes referred to as the "forgotten Need" many workers think they have coverage through Worker's compensation insurance without realizing it does not provide coverage for disabilities which occur outside of work. Social Security does provide disabilit
Disability Income (Indemnity) Policy
Pays an income benefit when the insured is unable to work due to illness or injury. Benefits are paid weekly or monthly and determined as a flat benefit or a percentage of the insured's current earnings, normally 60%-70%. the full income is not paid in or
Pure Loss of Income Policy
Under this policy the insured will receive benefits if loss of income is due to a covered accident or sickness, even if the insured is able to work full-time doing all the same duties as before the loss occurred.
Probationary Period of Disability income
may be included in some polices to protect the insurer from immediate claims. may be 15-30 day waiting period before losses due to a pre-existing condition. usually does not apply to losses due to an accident
Elimination Period (waiting period)
the time period an individual must be disabled before benefits become payable. usually longer than for an injury due to an accident.
Benefit Period
the time period the insured is eligible to receive payments after the elimination period has been met. may be written for a specified number of years (2,5, or 10years) to age 65 or for life. can be purchased with a short or long benefit period.
Total Disability Own Occupation
some policies require the insured's inability to perform the main duties of his/her own occupation. the own occupation definition often applies for the first 2 years of a disability, then changes to any occupation. the least restrictive and is easier to q
Total Disability any Occupation
Some policies are stricter and require the insured to be unable to perform the duties of any occupation for which he/she is reasonably suited by education, training, and experience. more restrictive and harder to qualify for benefits.
Permanent Disability
a total disability that reduces or eliminates the insured's ability to work again
Temporary Disability
an insured is able to continue to work at reduced efficiency or reduced hours, but is expected to fully recover.
Partial Disability
Disability resulting in an inability to perform 1 or more of the regular duties of the occupation. the benefit usually pays up to 50% of a total disability benefit for 3 to 6 months
Residual Disability
Provides benefits for loss of income after the insured returns to work usually following a total disability. benefits are based on the reduction of earnings as a result of the disability.
Recurrent disability
when a second disability is suffered due to the same cause within a certain period of time (usually 6 months) the elimination period will not apply and the disability will be considered continuous.
Presumptive Disability
loss is presumed to be total and permanent due to the loss of sight, hearing, speech, or the loss of 2 limbs. benefits paid are usually paid in a LUMP SUM.
Transplant Donor Benefit
when an insured is totally disabled b/c of the transplant of an organ to another individual, the insurer will deem the insured to be disabled as a result of sickness.
Age Discrimination in Employment Act
affects both the short and long term group disability benefits for the people employed after age 65. this in turn will have some effect on premium determination by the insurer when underwriting a particular group.
Short-term Disability
characterized by maximum benefits for periods of rather short duration, such as 13, 26, or 52 weeks. Often benefit periods are coordinated with the employer's "sick pay plan". will not pay benefits for disabilities lasting longer than 2 years. elimination
Long-Term Disability
Coverage is often characterized by benefit period of 2 years, 5 years to age 65 or lifetime. elimination period will most commonly be either 30, 60, 90 or 180 days. it may be possible to obtain a LTD policy with a 2 year elimination period, to be used in
Business Overhead Expense
provides the funds to cover the overhead expenses of a business when the owner becomes disabled. the benefits include expenses such as office rent, utilities, and employee labor. however owner cannot collect for loss of income under this policy.
Key Employee disability Insurance
Pays benefit to the business when a key employee becomes disabled by helping pay for a replacement, train a new employee, or replace loss of revenue due to the disabled employee's lack of ability to work.
Buy-Sell Agreement or Disability Buyout
pays lump sum enabling a partnership or business to buy out the totally disabled principle's interest in the business. a cross-purchase plan requires each partner to purchase a separate disability policy on each of the other partner. an entity plan provid
disability Reducing term
Helps a small business that has long-term commitments requiring monthly or other regular payments meet their obligations. amount of coverage remains the same monthly, but the benefit period reduces as the debt reduces.
Cost of Living Rider
Automatically increases monthly benefits after the onset of a disability, as the consumer Price Index increases. an adjustment in benefits is made on each policy anniversary while the disability continues and protects the insured against inflation.
Guaranteed Purchase Option Rider
Guarantees that on specified dates, ages, or occurrences, such as marriage, birth of a child, etc., the insured may purchase additional monthly benefits, if income justifies it, without proof o insurability. rates are based on attained age. some insurers
Impairment rider
eliminates coverage for pre-existing conditions, such as back injuries. attaching this rider excludes coverage for a condition that would otherwise be covered. the use of this rider may make insurance obtainable for an otherwise uninsurable person.
Cash Value Rider
This form of return of premium begins building value equal to the percentage of premiums paid for a disability policy. the value start building around the third year and build to 100% at age 65, which can be returned to the insured at that time, less any
Lifetime Benefit Rider
Extends the benefits for life if total disability begins before a specified age. if disability begins when the insured is older than the age specified, the rider is not in effect.
Annual Renewable Term
Some Companies will allow an insured to add a life insurance rider to disability income policy in the form of annual renewable term this provides additional death benefits if the insured dies due to disability.
Rehabilitation Benefits
Paid while the insured is totally disabled and receiving benefits, if the insured elects to participate in some form of vocational rehabilitation approved by the insurer. total disability benefits will be continued as long as the insured is actively parti
Non-Disabling Injury rider
Does not pay disability income, but pays the medical expenses that are related to an injury that does not result in total disability. it is a limited form of medical expense coverage added to a disability income policy.
Hospital Confinement Rider
Waives the elimination period if insured is hospitalized during the period of elimination, but only pays when being treated as an inpatient
Additional Monthly Benefit rider
Many insurance companies offer a short term additional benefit in the form of a rider. normally covers the first 6 to 12 months of a disability.some reger to rider as a SS Rider as it pays benefits while the insured is awaiting SS Benefits. not related to
Social Security disability insurance
the qualification for benefits is contingent upon the employee having the proper insured status either fully insured disability insured or currently insured and satisfying the waiting.
disability
to collect Social Security disability benefits and employee must be unable to engage in any substantial gainful activity due to a medically determine physical or mental condition that has lasted or is expected to last at least 12 months or result in an ea
Social Security Disability waiting period
benefits start with the 6th full calendar month of disability and they're not retroactive to the date of disablement. in no event are benefits retroactive prior to the date of application or disability determination. to be considered a full month of disab
disability income benefits
based on the employee's average indexed monthly earnings on which Social Security taxes have been paid. this is referred to as primary Insurance amount. benefits cease when employee reaches social security definition of full retirement age dies or is no l
Social Insurance Supplement Rider
Pays in addition to regular disability polices until Worker's Compensation or Social Security payments begin. it is also designed to provide benefits if SS is declined.
workers compensation
benefits of primary to either individual or group disability income benefits. The individual or group benefit will be reduced dollar-for-dollar by the amount of workers compensation. so that the total disability income benefits payable from all sources co
Social Security disability income limitation
benefits are secondary to workers compensation in any other public insurance benefits. If the total of SSDI workers compensation and other public disability benefits exceeds 80% of the workers pre disability earnings the SSDI benefit will be reduced dolla
Medicare
federal health insurance program that was originally designed to provide hospital and medical insurance primarily for people aged 65 or over. The program has been expanded to provide coverage to persons of any age who have been diagnosed with chronic or p
Medicare part A
Hospital Insurance provided by the federal government
Medicare Part B
medical insurance and outpatient expenses provided by the federal government
Medicare Part C
Medicare Advantage plan combines part A and Part B into a managed care plan offered by private insurance providers
Medicare Part D
prescription drug coverage offered by private insurance providers
initial enrollment period
last 7 months and begins 3 months before the month of an individual's 65th birthday and ends 3 months after the month following when the individual turned age 65. the actual month of Eligibility is the month of the individuals birthday
General enrollment period
provides a makeup. From January 1st to March 31st each year for those who did not enroll in Medicare Part B when they first became eligible. for individuals in Rolling during the general enrollment period coverage begins on July 1st
Medicare open enrollment
occurs every year from October 15th to December 7th and provides all individuals the chance to make changes to their Medicare coverage if needed
special enrollment period
begins when a person past age 65 who is covered by an employer-sponsored Group Health Plan is no longer covered by the plan. this. Last 8 months and allows an individual the opportunity to enroll in Medicare Part B without incurring a penalty for failure
part A inpatient hospitalization
provides coverage for up to 90 days per benefit period. Medicare will pay 100% of cover charges for Days 1 through 60. the insured will be responsible for a specified daily co-payment for days 61 through 90 and Medicare will pay the balance. if insured is
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part a mental health care
will cover inpatient mental health care on the same basis as inpatient hospital care
part a skilled nursing care
provides limited benefits for skilled nursing care following three days of hospitalization. The first 20 days are covered 100% days 21 through 100 are covered except for a daily co-payment. After 100 days there is no additional benefit from Medicare in th
part a home health care
medically necessary care following the release from the hospital including home health aide Services nurses visits and medical supplies are covered
part a hospice care
pain relief and support services provided to a terminally ill and their family members is covered
part a blood
there is a deductible amounting to the first 3 pints of blood administered per calendar year. After the deductible is met part a will cover the cost of inpatient blood transfusions for the remainder of the year
Part B medical expenses
covers Physicians and surgeons services and medically necessary outpatient medical and surgical services and supplies. Additional coverages include physical occupational and our speech therapy diagnostics test certain durable medical equipment in medicall
Part B preventive care
a one-time welcome to Medicare preventive visit is covered along with yearly Wellness visits. In addition Part B will cover vaccines and preventive screenings for cancer and several other conditions
Part B laboratory services
blood test biopsies urine analysis in other labs on an outpatient basis
Part B Home Health Care
medically necessary skilled Care home health aide services medical supplies for those who are homebound in their personal residence but who have not had qualify hospitalization
Part B mental health care
will cover Mental Health Services on an outpatient basis when provided by a healthcare provider who accepts Medicare payment. an additional co-payment Arco Insurance may be required if services are provided in a hospital outpatient clinic or Department
Part B outpatient hospital treatment
reasonable and necessary services for the Diagnostics or treatment of an illness or injury on an emergency basis
Part B blood
the cost of 3 pints of blood per year is excluded from coverage under both part A and Part B. after the first 3 pints of blood Part B will cover the cost of blood transfusions on an outpatient basis since part A covers blood transfusions in the hospital a
appeal
if an insured disagrees with a decision on the amount of Medicaid will pay on a claim he she has the right to appeal the decision
certification of providers
hospitals and other providers of healthcare that wish to participate in the Medicare program must be licensed by the state and certified by Medicare. Medicare will not pay for any services rendered by provider that is not certified
durable medical equipment
certain medical equipment like a walker wheelchair or hospital bed that's ordered by doctor for use in the home
excess charge
if one has Medicare and the amount of doctor or other health care provider is legally permitted to charge is higher than the medicare-approved amount the difference is called the excess charge
limited charge
in original Medicare the highest amount that can be charged for a covered service by doctors and other Healthcare suppliers who don't accept the assignment
medicare-approved amount
in original Medicare this is the amount a doctor or supplier that accepts assignment can be paid. it may be less than the actual amount a doctor or supplier charges. Medicare pays part of this amount in the recipient is responsible for the difference
Medicare summary notice
I noticed you get after the doctor or provider files a claim for part A or Part B services in original Medicare. it explains what the doctor a provider billed for the Medicare approved amount how much Medicare paid and what the patient must pay
non-participating provider
a provider who does not accept assignment
participating provider
a provider who agrees to accept assignment in charges the Medicare approved charges
Medicare Supplement Insurance
often referred to as Medigap, are private insurance plans that are designed to supplement Medicare coverage and fill in the gaps in Original Medicare. Pay all or some of the Medicare deductibles, copayments, and coinsurance.
Guaranteed Issue
if applied for during the open enrollment period Medicare Supplement is guaranteed issued
Permitted Compensation
agent selling Medicare Supplement is limited to the commission paid on the policy. first year cannot exceed 200% of the renewal commission in the 2nd year.
Medicare Select
is the managed health care version of the traditional Medicare supplement policy that has been offered through indemnity insurers. must cover the same benefits as any non-Select Medigap plan if the plan's network for care is used.
Medicaid
Provides increased assistance to those with a financial and medical need. Depending on the state eligibility is based on income of 133% to 138% of the federal poverty level and is adjusted for household size.
Medicaid Eligibility
65 years of age or older
blind or disabled
receiving temporary assistance to needy families program
medically needy or medically indigent refugees
pregnant women
person in skilled nursing or intermediate care facilities
children under 21
individuals needi
Medicaid Benefits
pays for hospital care, outpatient care, certain nursing facilities, doctors, laboratory and x-ray services, prescriptions, long-term Care, and some home health care after current assets are exhausted.
Benefit Triggers
a physician Certification stating the patient is chronically ill and in need of long-term care is required.
Activities of Daily Living
include Bathing, Continence, dressing, eating, toileting, and transferring. if insured can not perform 2 or more then LTC is triggered.
Cognitive Impairment
involves the loss of memory and deductive or abstract reasoning due to an organic mental illness, including Alzheimer's disease and senile dementia. Also includes impairment due to traumatic brain injury, such as a stroke or blunt-force trauma.
LTC Skilled Nursing Care
Continuous 24-hour care provided by or under the supervision of a registered nurse
includes specialized services such as feeding tubes, IV therapy and wound care
Provided in a licensed facility, such as a nursing home.
LTC Intermediate Care
Daily, but no 24-hour care, provided by or under the care of a licensed medical pro.
Includes care designed to assist with daily medical needs such as dispensing meds.
Considered "in between" care to help patients requiring less than skilled care.
Usually
LTC Custodial Care
Nonmedical care to provide assistance with activities with activities of daily living such as bathing.
Does not require the caregiver to be a licensed medical professional
May be provided in a licensed facility or in one's own home.
Comprehensive LTC Coverages
policy includes coverage for institutional, home and community based care. Home Health Care, Hospice Care, assisted Living, Adult Day Care, Respite Care.
Mandatory Uniform Provisions
were developed by the NAIC and must, by law, be included in every individual accident and health insurance policy. There are 12 Mandatory Provisions: Entire Contract Clause, Time Limit on Certain Defenses, Grace Period, Reinstatement, Notice of Claim, Cla
Mandatory Second Surgical Opinion
this requirement may be included in policies that offer surgical expense benefits, requiring the insured to consult a physician, other than the attending physician, to determine the necessity of surgery and/or alternate methods of treatment. if insured fa
Multiple Indemnity Rider
provides additional benefits to a health insurance policy for losses due to an accident. this rider can be written as Double or Triple to provide double or triple the face amount if a death or dismemberment occur within 90 days of an accident.
Multiple Employer Trusts
entities formed by unrelated businesses in the same or related industrial classification. trust is organized under a third-party administrator or sponsor and allows for small to medium-sized employers to combine their employees into a single, larger group
Muti-Employer Welfare Associations
generally formed by larger employers for the purpose of obtaining more favorable rates for life and health insurance. primarily consist of employers who self-fund their employees' health insurance benefits. employer assumes responsibility for providing pa
Labor Unions
the Taft-Hartley Act was an amendment to the National Labor Relations Act. Among the provisions of the Act, labor unions were permitted, under certain conditions, to establish primarily employer-funded trusts for the provision of health and welfare benefi
Associations
Must have a minimum number of members (usually 100) and be organized for a purpose other than buying insurance. Examples: Teachers, associations, trade associations, professional associations, and alumni associations.
Risk Pools
High-risk pools are private, self-funded health insurance plans organized by a state to serve high-risk individuals who meet enrollment criteria and do not have access to group insurance.
Experience rating
determined by examining the history of claims a particular group experiences. insurers uses past experience to predict future cost.
Community rating
determines premiums by examining a particular geographic region of all insureds in a group
Administrative Capability
group health plans handle many of the administrative issues on behalf of the sponsor, such as updating enrollments and adding new members. since many of these abilities can be handled online, the cost of administration in a group plan is less than that of
No Loss-No Gain
Requires that when group health insurance is being replaced, ongoing claims under the former policy must continue to be paid under the new policy, overriding any pre-existing conditions exclusion and establishing mandatory risk transfer.
COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985)
this ACT states employers with 20 or more employees must provide a health coverage continuation option to all covered employees and dependents up to 18 months in the event of: Termination of employee, Reduction of hours for employee, Coverage may continue
HIPAA (Health Insurance Portability and Accountability Act of 1996)
was designed to provide coverage for people with pre-existing conditions. allows for portability of coverage when transferring to a new job.
business group of one
and individual, sole proprietor, or a single full-time employee of an S Corporation, C Corporation, Limited Liability Company, or partnership who has carried on business activities for at least one year prior to the application date. Also the business mus
Small Employer
any person, firm, corporation, partnership, or association that is actively engaged in business and has 50 employees or less.
Eligible Employee
an employee who has a regular work week (30 hours). it does not include an employee who works on a temporary or substitute basis. waiting period for eligibility cannot exceed 90 days.
Worksite Plans
These plans are voluntary benefit plans offered by insurance companies and premiums are withheld as payroll deductions by the employer. allow employees to pick and choose among various types of insurance coverage's to supplement other employer-sponsored b
Civil Rights/Pregnancy Discrimination act
involves treating a woman less favorably on the basis of pregnancy childbirth, or related medical conditions. Applies to groups with 15 or more employees and Prohibits an employer from discriminating in its employment practices against a woman b/c of any
Patient Protection and Affordable Care Act
commonly referred to now and the Affordable Care Act was signed into law on March 23-2010. consists of a combination of measures to control healthcare cost, and an expansion of coverage through public and private insurance which includes broader Medicaid
Essential Health Benefits Package
Ambulatory Patient services
Behavioral health treatment
Emergency Services
Hospitalization
Laboratory services
Maternity
Mental Health services
Newborn Care
Pediatric Services
Prescription drugs
Preventive management
Rehab
Essential Health Bronze Plan
Covers 60% of the benefits cost of plan
Essential Health Silver Plan
Covers 70% of the benefit cost of the plan
Essential Health Gold Plan
Covers 80% of the benefit cost of the plan
Essential Health Platinum Plan
Covers 90% of the benefit cost of the plan
Consumer- Driven Health Plans
allow individuals to use a 3-tiered approach to funding the costs of medical services and treatment. the various plans help individuals control benefit costs by allowing them to decide how their health plan funds are used.
Tier 1 Consumer Driven plan
Pretax account, such as a Health Savings Account, Archer Savings Account, Health Reimbursement Account, and Flexible Spending Account.
Tier 2 Consumer Driven Plan
the amount the individual chooses to pay, out of pocket after the funds in the pretax account have been exhausted and before the health insurance plan's deductible is met.
Tier 3 Consumer Driven Plan
A high deductible health plan, which is a health insurance plan that has been designed to coordinate with pretax accounts to help consumers manage their spending for health care and insurance.
High Deductible Health Plan
similar to other health insurance plans, however they contain restrictions pertaining to the individual and family deductibles, as well as annual out of pocket limits.
Health Savings Accounts
available to any employer or individual for an account beneficiary (taxpayer, spouse and dependent) who has high deductible health insurance coverage. funded with pretax income, grow tax-deferred, and may be used tax-free to pay for unreimbursed qualified
Medical Savings Account
similar to HSA, however they have different contribution limits, minimum annual deductibles, and maximum out of pocket limits. designed specifically for small businesses and self-employed individuals who cannot establish HRAs or FSAs. purchased by employe
Health Reimbursement Arrangements
type of Health insurance plan that reimburses employers for qualified medical expenses. plans are entirely employer-funded and there is no limit on the amount an employer can contribute. Employees are not allowed to contribute so contributions may not be
Flexible Spending Accounts
an employer-established plan that permits the employee to defer up to $2550 on a pre-tax basis into a specifically designated account from which the employee may withdraw funds to pay for unreimbursed medical expenses such as eyeglasses, elective cosmetic
TRICARE( The Uniformed Services Health Program)
primarily for active duty and retired members of the U.S. military and their dependents. three plans now available, depending on the member's service status, such as active duty, Reserves, or retired. Plans are Standard, Prime and TRICARE For Life. as lon
Standard TRICARE
requires no premiums on the member's part but does require a $12 co-pay for office visits and a 25% co-pay for procedures.
Prime TRICARE
requires a premium, but has no out of pocket expenses for tests, operations, etc., as long as primary care manager or a TRICARE approved referral is used. there is a $12 co-pay for office visits and an $11 per day charge for hospitalization.
TRICARE For Life
serves as a second insurer for those on Medicare, Parts a and B. Medicare will be the primary payor and TFL will be secondary. there are no enrollment fees but the member must pay his own Medicare part B premiums.
Business Entity
A Corporation, association, partnership, limited liability company, limited liability partnership or legal entity.
Producer
Person required under this state's law to be licensed to sell solicit or negotiate insurance.
"insurance agent' 'agent" "insurance broker" "broker
License renewal
Life and Health renews every 2 years on even years with 24 hours of continuing education, 3 hours being dedicated to ethics
Hearings
if Commissioner thinks a person is engaged in any unfair trade practice they must notify the person and hold a hearing 30 days after receiving a written demand.
Commissioner
Elected every 4 years and enforces Louisiana's insurance code and related insurance laws
Certificate of Authority
an insurance company must apply to Commissioner or a Certificate other wise may not conduct business.
Controlled Business
25% of business is made up of family, partners, employees
Shared Commissions
Renewal or other deferred commissions may be paid to a person for selling, soliciting, or negotiating insurance.
Misrepresentation
Misleadingly representing or fraudulently comparing policies; misrepresenting a policy's terms, benefits, dividends or share on proposed or similar polices
False Information & Advertising
Presenting any information or advertisement that is false or misleading about any person in the conduct of his/her insurance business
Defamation
making any false statement maliciously critical of, or derogatory to, any insurer's financial condition with the intent to injure someone in the insurance business
Boycott, Coercion, or Intimidation
Entering into action resulting in an unreasonable restraint of, or monopoly in , the insurance business.
False Financial Statement/False Entries
Knowingly filing, delivering, or placing before the public any false material statement about an insurer's financial condition.
Unfair Discrimination
Allowing individuals of the same class and equal life expectance or individuals of the same class and hazard to be charged different rates for same coverage
Rebating
offering any rebate, premium discount, advantage, or valuable consideration not specified in the policy.
Examination of Books and Records
Department must examine every insurer licensed in LA at least once every 5 years
Defrauding
Knowingly, and with intent to defraud, making or presenting a written statement supporting, opposing, or attached to an application that does either of the following: Contains materially false info. applies to a claim that contains materially false info
Louisiana Life and Health Insurance Guaranty Association
protects policy owners, insured's, and beneficiaries of life or health policies or annuity contracts when insurers fail to perform contractual obligations due to financial impairment or insolvency
Group Conversion on Terminations of Policy
if the group policy terminates, every individual insured for at least 5 years is entitled to an individual life policy from the same insurer, which must provide coverage not exceeding the lesser of: amount of insurance ceasing bc of termination or $2000
Death Pending Conversion
if a person insured under group plan dies during the conversion period, the coverage to which he/she is entitled must be paid as a claim under the group policy, whether or not he/she applied for an individual policy or paid the first premium
Grace Period
grace period for individual life policies is either 30 days or 1 month, at the insurer's option
Incontestability Period
an individual life policy is incontestable after it has been in force during the lifetime of the insured for 2 years from the date issue, except for nonpayment of premiums
Free-Look Period Life
the period of 10 days where policy owner can review policy, 20 days in the case of replacement transaction
Backdating
an individual life policy may be backdated by up to 6 months to conserve age
Settlement of Death Benefit
an insurer must settle death claims under policies issued or delivered in LA within 60 days after receiving proof of the insured's death.
Interest on Life Insurance Proceeds
Interest on Proceeds of a policy begins to accrue 20 days after the insurer receives proof of the insured's death. Interest paid shall be the same rate paid on deposits with the insurer. Does Not Apply to Accidental Death
Accelerated (living) Benefit Provision/Rider
policy may provide payment when one or more of following happens: A)Medical Condition that limits insured's lifespan, Life-support, B) insured is confined to an eligible health care facility
Payment is in lump sum
Continuation of Coverage(surviving Spouse Group)
A group, Blanket, or franchise insurance policy providing hospital, nursing, medical or surgical expense coverage must allow an insured's spouse at least 50 years of age and covered by group plan to continue coverage after insured dies. Survivor must noti
Louisiana Health Insurance Association
a nonprofit governmental entity that provides health insurance to LA residents who are otherwise unable to obtain coverage in the private insurance market.
Appointing a producer
To appoint a producer as its agent, the appointing insurer shall file with the Commissioner a notice of appointment within 15 days from the date the agency contract is executed.
Consumer Privacy information
in accordance with consumer privacy information standards, a licensee must provide a clear and conspicuous notice to customers that accurately reflects its privacy policies not less than annually during the continuation of the customer relationship
Incontestable
an individual life policy is incontestable after it has been in force during the lifetime of the insured for 2 years, except for nonpayment of premium
Death Claim Settlement
all life insurance death claims must be settle within 60 days of the insurer receiving proof of death to avoid any accrual of interest in addition to the policy amount
Insurance Companies
Manufacture and sell insurance coverage in the form of insurance policies or contracts of insurance.
Insurance Agencies
captive or independent organizations that recruit, contract with, train, and support insurance producers.
National Association of Insurance Commissioners (NAIC)
consists of all state and territorial insurance commissioners or regulators.
Provides resources, research, legislative and regulatory recommendations and interpretations for state insurance regulators.
Federal Insurance Office (FIO)
established by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
It monitors the insurance industry and identifies issues and gaps in the state regulation of insurers.
Insurance Regulation at the State Level
Legislative branch writes and passes state insurance laws, or statutes, to protect the insuring public. Judicial branch is responsible for interpreting and determining the constitutionality of the statures. Executive branch is to enforce the existing stat
Insurance Regulation at the Federal Level
in aftermath of Supreme Court decision in U.S. vs South-Eastern Underwriters the McCaran-Ferguson Act of 1945 established that the federal government will not regulate the business of insurance in areas which the states have historically had the authority
Stock Insurance Company
owned by stockholders or shareholders. directors and officers, which are elected by stockholders, put in place a management team to carry out the company's mission. May receive a TAXABLE dividend as a return
Mutual Insurance Company
owned by policyholders. A Board of Trustees or Directors is elected by policyholders. Directors and Officers put in place a management team to carry out the company's mission. May receive NON-taxable dividends as a return
Reciprocal Insurance Company
a group-owned insurer whose main activity is risk sharing. An Unincorporated, and is formed by individuals, firms, and business corporations that exchange insurance on one another.
Lloyd's of London
is not an insurance company, but consists of groups of underwriters called Syndicates, each of which specializes in insuring a particular type of risk. Provides a meeting place and clerical services for syndicate members who actually transact the business
Fraternal Benefit Societies
Primarily social organizations that engage in charitable and benevolent activities that can provide life and health insurance to their members. Membership is typically members of a given faith, lodge, order, or society. they usually organized on a non-pro
Risk Retention Groups (RRG)
group-owned insurers that primarily assume and spread the liability-related risks of its members. Owned by their policyholders, and are licensed in at least one state.
Must be made up of a large homogeneous or similar units.
Self-Insurers
assume all of the financial risk faced without transferring that risk to an insurer.
Residual Markets
A Last resort private coverage source for businesses and individuals who have been rejected by the voluntary insurance market. Coverage is written as Workers' Compensation, personal auto liability or property insurance on real property.
Joint Underwriting Association/ Joint Reinsurance Pool
requires insurers writing specific coverage lines in a given state to assume their share of profits/losses of the total voluntary market premiums written in that state.
Risk Sharing Plan
insurers agree to apportion among themselves those risks that are unable to obtain insurance through normal channels
Reinsurance companies
insurance companies that operate to accept all or a portion of the financial risk of loss from the primary insurance company. Risk of loss is shared with one or more insurance companies. All obligations are on the original company and consumers have no di
Treaty
reinsurance agreement that automatically accepts all new risks presented by the ceding insurer (the company seeking or requesting the reinsurance from the reinsurer)
Facultative
reinsurance agreement that allows the reinsurance company an opportunity to reject coverage for individual risks, or price them higher due to their substandard (higher risk) nature.
Financial Rating Services
evaluate and rate the claims paying ability and financial stability of insurance companies. these firms assign letter ratings that indicate the financial strength of each company which may be based on both public and nonpublic data.
domicile
refers to the jurisdiction where an insurer is formed or incorporated.
Domestic Insurer
insurer organized under the laws of this state, whether or not it is admitted to do business in tis state.
Foreign Insurer
insurer organized under the laws of any other state, possession, territory, or the District of Columbia of the United States, whether or not it is admitted to do business in this state
Alien Insurer
insurer organized under the laws of any jurisdiction outside the United States, whether or not it is admitted to do business in this state
Admitted insurer
is authorized by this State's Commissioner of Insurance to do business in this state and has received a Certificate of Authority to do business
Non-Admitted Insurer
has either applied for authorization to do business in this State and was declined or they have not applied. They can not do business in this State
Surplus Lines Insurance
finds coverage when insurance cannot be obtained from admitted insurers. however it cannot be utilized solely to receive lower cost coverage than would be available from an admitted carrier
Executives
oversee the operation of the business
Actuarial Department
gather and interpret statistical information used in rate making.
Underwriting Department
responsible for the selection of risks to insure and rating that determines policy premiums
Law of Agency
relationship of a person who acts on behalf of another person, company, or government, known as the principal. responsible for the acts of the agent, and the agent's acts bind the principal.
Express Authority
Authority that is written into the producer's contract.
Implied Authority
Authority the public assumes the producer has.
Apparent Authority
Authority created when the producer exceeds the authority expressed in the agency contract.
Fair Credit Reporting Act (15 USC 1681-1681d)
protects consumer privacy and protects the public from overly intrusive information collection practices. Ensures data collected is confidential, accurate, relevant, and used for a proper and specific purpose.
Speculative Risk
Situations where there is a chance for loss, gain, or neither loss or gain to occur. ( gambling, investing)
Pure Risk
Situations where there is no chance for gain; the only outcome is for nothing o occur or for a loss to occur. The ONLY Risk that can be insured.
Physical Hazard
physical condition that increases the likelihood or probability of loss; use, condition, or occupancy of property. May often be seen, heard, felt, tasted, or smelled.
Moral Hazard
Dishonest tendencies that increase the probability of a loss; certain characteristics and behaviors of people. Most closely related to some form of lying, cheating, or stealing.
Morale Hazard
An attitude of indifference toward the risk of loss that increases the probability of a loss occurring. ( driving too fast, not wearing a seat belt, ignoring stop signs
Adverse Selection
imbalance created when risks that are hard to insure are the only risk seeking insurance within a specific marketplace. ( those living earthquake-prone areas)
Sharing Risk
*investments by a large number of people may be pooled by use of a corporation or partnership.
*Pooling or spreading the risk among a large number of persons or entities.
Transfer Risk
*Transferring the risk from one party to another, such as from a consumer to an insurance company.
*Transfer the uncertainty of a loss via contract
Avoidance Risk
*Elimination of the risk.
*Avoid the activity that gives rise to the chance of loss.
*After potential areas of hazards have been identified, it may be found that some exposure to risk can be eliminated, but it is impossible to avoid all risk.
* risk may b
Risk Reduction
*Minimizing the chance of loss, but not preventing the risk. (sprinkler system, burglar alarms, pollution controls)
Risk Retention
*Assume the responsibility of loss.
*Self-insure the entire loss or a portion of the loss. Choosing deductibles is a method of risk retention.
*may be economically practical for an insured to not insure each exposure to loss and, instead insure only those
Insurable Risks
Must include: large number of homogeneous units , chance of losses must be calculable., loss must be measurable, premium must be affordable, loss must be accidental in mature, catastrophic perils are not covered.
Principal of Indemnity
insured is intended to be restored to the same financial or economic condition that existed prior to the loss, depending on the amount and type of insurance purchased. Insured should not profit from an insurance transaction, but be made "whole again
Four Elements of a Legal Contract
*Competent Parties
*Legal Purpose-all parties to a contract must enter if for legal purpose
*Agreement- one party must make and communicate an offer to other party
*Consideration- something of value is exchanged by each of the parties to the contract
Indemnity Contract
Pays a specified dollar amount as stated in the contract up to the amount of the actual loss. Are considered reimbursement plans
Parol Evidence Rule
A written contract may not be altered without the written consent of both parties.
Valued contract
A contract that pays a specified amount regardless of the actual loss. A life insurance contract is an example of a valued contract. it has a face value that provides a death benefit in the event of a loss.
Subrogation
Occurs when a claim is paid by the insurer who has the contract and the right to take legal action against a negligent third party who may have caused the loss. Life policies have no right of subrogation.
Contract of Adhesion
One Party writes the contract, without input from the other party. One party (insurer) prepares the contract and presents it to the other party (applicant) on a "take it or leave it" basis, without negotiation.
Aleatory Contract
the exchange of value is unequal. Insured's premium payment is less than the potential benefit to be received in the event of a loss. Insurer's payment in the event of a loss may be much greater, or much less that the insured's premium payment.
Personal Contract
Contract between the insurance company and an individual. Are specific to the person insured at the time the contract is formed. Owner and insured cannot be changed without consent of the insurance company.
Unilateral Contract
Only one party is legally bound to the contractual obligations after the premium is paid to the insurer. Only the insurer makes a promise of future performance, and only the insurer can be charged with breach of contract.
Conditional Contract
Both parties must perform certain duties and follow rules of conduct to make the contract enforceable. insurer must pay claims if the insured has complied with all the policy's terms and conditions.
Utmost Good Faith
Both Parties bargain in good faith when forming and entering into the contract. The two parties rely upon the statements and promises of the other assume no attempt to conceal or deceive has been made.
Representations
Statements made by the applicant on the application are considered representations and not Warranties.
Misrepresentations
a false statement contained in the application; usually does not void coverage or the policy, if it is immaterial.
Warranties
Statements in the application or stipulations in the policy that are guaranteed true in all respects. if later discovered untrue or breached coverage is voided.
concealment
willful holding back or secretion of material facts pertinent to the issuance of insurance. May result in denial of coverage and may void the policy.
Fraud
Intentional deception of the truth in order to induce another to part with something of value or to surrender a legal right.
Waiver
Voluntary surrender of a known right, claim or privilege.
Estoppel
Judicial denial of a contractual right based on prior actions contrary to what the contract requires.
Underwriting Factors
*Age
*Gender
*Tobacco Use
*Medical history and Pre-existing conditions
*Hazard hobbies and occupations
Beneficiary
one or more "parties" named in the policy to receive the policy proceeds, or death benefits, if the insured dies while the contract is in force.
Third-Party Ownership
Policy owned by a person other than the insured.
Attained Age
insured's age at any point in time, typically used at renewal or conversion.
Required Signatures
Both the producer and the applicant/insured must sign the application.
Standard Risks
Individuals who have the same health, habits, sex/gender, and occupational characteristics as those reflected in the mortality table. AVERAGE life expectancy.
Preferred Risks
Individuals who meet certain requirements and qualify for lower premiums b/c of ideal health, height and weight. LONGER THAN AVRAGE life expectancy.
Substandard Risks
Individuals who are not acceptable at standard rates b/c of poor health, bad habits or occupational hazards. Issued "RATED Policies" (surcharges)
Graded (Lien) Plan
Initially, only the premium would be refunded in case of death. Benefit increases over time with full face amount eventually payable.
Rated-up Age
Rates an insured at older than actual age.
Flat Rate
constant dollar amount added to the standard rate per $1000 of coverage.
Mortality
Tables that are used to give the company a basic estimate of how much money it will need to pay for death claims each year. Using this a life insurer can determine the average life expectancy for each age group, based on the year of birth.
Interest
Insurance premiums are paid in advance and insurance companies invest these premiums and assume a certain rate of interest will be earned. earned interest reduces the amount of premium paid.
Expense
amount charged to cover each policy's share of expenses of operation(salaries, commission, and cost of doing business) is called expense loading. this can vary from company to company based on its operations and efficiency.
Net Premium
takes into account interest and mortality factors only.
Mortality - Interest = Net Premium
Gross Premium
Additional charges (expenses) are added to the net premium rate to enable an insurer to meet all costs under the contract.
Net Premium + Expenses = Gross Premium
Survivor Protection
Providing funds for surviving spouses and dependents.
Estate Creation
Life insurance proceeds paid in a lump sum provide financial assets to create an immediate estate the insured can pass on to survivors
Estate Conservation
Provides money to pay any estate taxes or loans which must be satisfied upon the death of the estate owner ( the insured) preserving the insured's estate.
Cash Accumulation
an amount of cash accessible to the policyowner from within permanent life insurance policies.
liquidity
Immediate funds available upon death to pay creditors, taxes and final expenses as well as cash values available for policy loans, withdrawals, and full surrenders.
Pre-need Plan
a type of coverage with a small face amount, typically purchased to pa the burial expenses of the insured.
Viatical Settlements
A terminally ill insured/owner selling his/her policy to a third party for less than the death benefit but more than the cash value in order to obtain funds when no other sources are readily available.
Group Life Policy
insurance plan normally owned by an employer, creditor or association, under which coverage is provided for the employees, debtors or members.
Industrial (Home Service)
Synonymous with debit life insurance and makes up only about .03% of the life insurance today. These small policies, normally $250 to $1000 were originally sold to pay funeral expenses.
Permanent Life Insurance
a policy that remains in force to age 100 or beyond. the premium is always higher than that on a term policy at issuance when the amount of coverage and underwriting factors are equal. this policy provides for living benefits for the policy owner or insur
Term Life policy
Lowest of initial premium outlay and designed for someone with a large insurance need but with limited cash flow. this coverage is often referred to as temporary, as it is usually written to cover a short time period. does not build cash value and the ben
Participation Life Policy
a class of policy marketed by a mutually owned company. the word participating means a dividend may be paid to the policy owner when they are declared by the board of directors.
Nonparticipating Life Policy
a policy marketed by a stock insurer. Stockholders would receive any profit in the form of dividends, and are treated as ordinary income for tax purposes.
Fixed Life policy
the policy has a fixed amount of coverage, benefits and premium. without riders, future inflationary trends will cause the purchasing power of the policy's benefits to be reduced.
Flexible life policy
Universal and Variable Universal Life Policies have given the policy owner more flexibility in terms of premiums, investment objectives and other policy benefits. these assist the insured during inflationary periods with the changing needs of the policy o
Variable Life Policy
policy introduced in the 1970s that uses separate accounts for the cash value accumulation. the separate accounts are similar in nature to mutual funds, and securities and life insurance license are required to sell this policy. the policy owner takes on
Cash Value
Money accumulated in a permanent whole life policy that is considered a living benefit which the policy owner may borrow against or receive if the policy is surrendered before the insured dies.
Face Amount
the death benefit amount payable or coverage provided on a life insurance policy. this is also referred to as the limit of liability.
Endow (mature)
the point at which the policy's cash value in a whole life policy accumulates to equal the face amount and the proceeds are paid to the policy owner.
Rider
An added benefit attached to the policy that supplements existing coverage. is usually added at the time of application and typically requires a small increase in premium
Level policy
the death benefit remains level and the premiums remain level during the policy term
Decreasing Policy
the death benefit decreases, but premiums remain level for the policy term. often sold as mortgage protection with the amount of insurance decreasing as the balance of the mortgage decreases.
Credit Life Insurance
a special form of decreasing term. credit life automatically names the creditor as the beneficiary. policy cannot be written for more than the outstanding debt, since that is the limit of the creditor's insurable interest.
Increasing Policy
the death benefit increases over the life of the policy while the premiums remain level. normally written as a rider to provide cost of living or return of premium benefits.
annually Renewable Term
the simplest form of term life insurance is for one year. the death benefit remains level and the premium increases yearly as the policy renews up to a specified age.
Re-Entry Term Option
term policies with the option will allow the insured, upon the end of the original term, to renew based on attained age and may qualify at a discounted rate by proving evidence of insurability.
Renewable Policy
a benefit that will renew the contract on the renewal date without evidence of insurability. the policy may be a 1, 5, 10, or 20 year renewable contract up to a specified age, with premiums increasing at the beginning of each renewal period.
Convertible Policy
The right to convert the existing term policy to a permanent policy without evidence of insurability during the conversion period specified in the contract. the premium can be based upon attained age or issue age. the premiums will be higher than the orig
Ordinary Whole Life
Provides insurance protection to age 100, cash value accumulation to age 100, and fixed level premium payments. premium payments may be structured as Straight Life or Limited
Straight Life or Continuous Premium
premium is level and payable to age 100 or death of the insured, whichever come first. the face amount remains level throughout the life of the policy. this policy has the highest total premium outlay.
Limited Payment
Premium payments are for a specified time (20-pay life or 30-pay life) or to a specified age (life paid up at 65). the face amount remains level and cash value continues to earn interest and mature at age 100. Annual premium is higher than Straight life b
Single Premium
the entire premium is paid in a lump sum at the time of purchase and creates immediate cash value. the face amount remains level and cash value continues to earn interest and mature at age 100. has the lowest premium outlay.
Indeterminate Premium
like a non-participating whole life plan of insurance, except that it provides for adjustable premiums. the company will charge a "current" premium based on its current estimate of investment earnings, mortality, and expense costs.
Modified Premium
Provides a level death benefit and requires that premiums be paid for the life of the policy. the premiums do not remain level. starts with a premium lower than ordinary whole life for the initial 5 years then increase and remain level for remainder of po
Adjustable Life
type of permanent life insurance that combines features of term and whole life coverage, giving policy owners the option to change the characteristics of their policies. is Most appropriate for those whose income is expected to fluctuate from year to year
Current Assumption or Interest-Sensitive Whole Life
A form of whole life in which the insurance company can change the premiums or interest rate being credited to the account based on current money market rates. Interest rate changes affect the policy premiums. Has a Guaranteed minimum death benefit, but m
Indexed Universal Life (Equity Indexed)
Gives policy owners the opportunity to decide the percentage of cash value that is invested in traditional fixed income securities. the remainder of cash value is invested in an equity index account linked to a stipulated stock index, typically the S & P
Universal Life (Flexible Premium Adjustable Life Ins.)
Features insurance protection and a savings element that grows on a tax-deferred basis. Is an "unbundled policy" meaning the individual elements of the policy and premium are credited to the account separately after the premium is paid.
*Adjustable Face a
Death Benefit Option A
Pays the face amount of the policy and provides a level death benefit. as the cash value increases, the company's risk decreases.
Death Benefit Option B
pays Face amount stated in the contract which is level term, plus any cash values accumulated over the years. this provides an increasing death benefit. the Mortality charge for Option B is greater than Option A.
Variable Life
a Policy with certain benefits that will vary based on market conditions.
*Fixed Premium
*Both General Account & Separate Account
- General account is fixed and guaranteed benefit
-Separate account is invested in equity securities as offered by company.
Variable Universal Life
the policy provides flexible premiums and adjustable death benefits. Options A and B are available. However is does not have a general account, only a separate account. premiums are credited to the separate account and there is no guaranteed minimum benef
Joint Life (First to Die)
Whole life policy that is written to cover 2 or more lives. death benefit is paid upon the first insured to die. Once payment is made, the policy no longer exists.
Joint Survivorship Life (Last to die)
Whole Life policy written to cover 2 or more lives, and the death benefit is not paid until the last insured dies. Premiums are based upon a joint issue age which is obtained by an average of both insured's' ages resulting in a lower premium than two sepa
Return of premium term
this policy provides for a full refund of premiums if the insured is still living at the end of the term. these policies charge a higher premium than level term insurance.
Jumping Juvenile Policy
this policy provides an automatic increase in the face amount at a given age (usually 21 to 25) without evidence of insurability. the premium remains level for the life of the policy and usual increase in face amount is 5 times the issue amount.
Waiver of Premium Rider
if the insured becomes totally disabled, the insurer will waive premiums for the duration of the disability or the end of the policy, whoever occurs first. To qualify the insured must be disabled for a waiting period of 3-6 months.
Payor Benefit (Waiver of Payors Premium)
if the payor (policy owner) dies or becomes disabled and is unable to make the premium payments, the insurer will waive the premiums payments for a specified period of time.
Disability Income Benefit
in the event of total disability and after an initial waiting period (such as 6 months) premiums are waived and the insured is paid a monthly income. income is typically limited to a %, usually 1% of the face value. Benefit paid does not reduce the death
Waiver of Cost of Insurance
a rider that waives the deduction of the monthly cost of insurance and expense charges associated with a UL while the insured is totally disabled, usually after 6 months of continuous disability. Disability must occur prior to a stipulated age.
Spouse (other insured) Rider
this type of rider will provide level term coverage on the life of the insured's spouse. Will also provide a conversion provision permitting the spouse to convert to permanent coverage without evidence of insurability prior to the termination of the rider
Child rider
provides level term coverage on the life of all of the insured's children. is usually offered at one premium rate and may cover newborns after 14 days of life and adopted children who can be added to the coverage without increasing the premium. the childr
Family rider
This is the combination of writing both the spouse and child rider on one policy. Usually sold in units of protection, such as $5000 on the main wage earner, $1500 on the spouse and $1000 on each child
Nonfamily Rider
Provides coverage on an additional insured, other than a spouse or child such as a business partner.
Accidental Death Benefit (Double or Triple Indemnity)
in the event of a claim, the policy normally pays double or triple the face amount if death was a result of an accident. the benefit is payable only if death occurs before a specific age and within 90 days of the accident. Does not add additional values a
Accidental Death and Dismemberment
provides a benefit in addition to the base of the policy. the rider pays 100% of the amount of the rider, known as the principal sum, upon accidental death. if insured suffers an accidental dismemberment loss, rider pays 50% of the amount, known as capita
Guaranteed Insurability
allows the insured to purchase stated amount of additional insurance every 3 years based on certain ages(specifically 25, 28, 31, 34, 37, and 40) events, or specified dates without evidence of insurability up to a maximum age, usually 40. Rider drops at a
Return of Premium Rider
uses increasing term insurance to provide coverage equal to the amount of premiums paid. if the insured dies within the term, the beneficiary would receive the face amount of the policy plus the benefit of the rider equaling the total amount of premiums p
Return of Cash Value
Increasing Term insurance equal to the Cash Value. However, does not relieve the obligation to pay loans from the claim proceeds at time of death
Cost of living
Enables the insured to purchase more insurance each year to help offset increasing insurance nees due to inflation. amount that can be purchased is based on increases in the cost of living index.
Living Needs Rider
Allows the early payments of a portion of the face amount before death, should the insured become terminally ill, usually 12-24 months life expectancy. Typically amount equals 50% -90% of the policy's face amount. Rider normally provided without a premium
Long-Term Care Rider
Provides up to 100% of the policy benefits if the insured qualifies for long-term care benefits as defined in the rider, such as inability to perform 2 out of 6 activities of daily living. Benefits are paid income tax free after the insured meets the qual
Viatical Settlement
Agreement between a third party and a life insurance policy owner insuring the life of an individual with a life-threatening or terminal illness. the firm purchases the policy 60 to 80% of the face amount. insured is provided with a tax exempt discounted
Life Settlement
Similar to viatical settlement in that it is the sale of an existing life insurance policy to a third party for more than its cash surrender value, but less than its death benefits. there are no requirement for the insured to be terminally ill in order fo
Entire Contract Clause
this provision describes the parts of the life insurance contract. Policy, riders, amendments, and a copy of the application.
incontestability clause
within the first 2 years of a policy, the insurer may contest a claim and void the contract upon proof of a material misstatement or fraud.
insuring clause (proof of death)
is found on the first page of the policy and is considered the most important clause in the policy. identifies the parties to the contract and the perils or conditions in which it will pay
consideration clause
specifies the amount and frequency of premium paid by the owner as something of value provided in exchange for the company's promise to pay.
suicide clause
if the insured commits suicide, while sane or insane, within typically 2 years from the issue date, the insurer's liability is limited to a refund of premium. if commits suicide after the expiration date the insurer must pay out the death benefit to the n
owner's rights
policy owner retains all rights in the policy. unless the insured is also the policy owner, the insured does not have rights.
Assignment
the transfer of ownership. two types:
absolute assignment (permanent)- the original owner will name a new owner of the policy
collateral assignment (temporary)- the rights of owner will be subject to the assignment.
misstatement of age or gender
if the age and gender of the insured have been misstated in a policy, all benefits under the policy will be provided based upon the insured's correct age and gender according to the premium scale in effect at the time of the issuance
Exclusions
Aviation, status clause (military status), results clause (war clause), hazardous occupation, hazardous hobbies, suicide.
mode of premium
addresses the frequency of premium payments (monthly, quarterly, semiannually, or annually), and to whom the premiums are payable. the more frequent the payment, the greater the cost.
Automatic premium loans (APL)
this provision must be elected by the policyowner and can be cancelled at any time. enables the insurer to automatically borrow against the cash value to cover a premium payment to prevent the contract from lapsing unintentionally.
policy loans provision
a policy loan may be made in a cash value policy once there is sufficient cash value to borrow against. most policies cash value must be made available to borrow against after 3 years.
Partial withdrawals
is permitted in a Universal or a Variable Universal Life policy and considered a partial surrender of the policy. paid from the policy value and either reduces the amount of the death benefit.
Revocable Beneficiary
the policyowner may change at any time. does not have a vested interest in the policy.
Irrevocable Beneficiary
the policyowner may not change unless the beneficiary does or provides written consent of change.
Primary Beneficiary
the first in line to receive the death benefit upon the death of the insured.
Contingent or Secondary Beneficiary
receives the death benefit only if there is no primary alive following the death of the insured.
Tertiary Beneficiary
receives policy proceeds if both primary and contingent predecease the insured.
Individual/named beneficiary designation
this designation is very specific. and individual is specified by name. this prevents probate proceedings.
Class or classification beneficiary designation
this designation is used in instances where each beneficiary is not directly identified by name. the wording of the class designation must be specific and carefully worded to remove any doubt of the owner's intentions. "any children of this marriage" or
Per Capita designation
this designation will pay to surviving beneficiaries equally if a named beneficiary predeceases the insured.
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Per Stripes Designation
this designation will pay a deceased beneficiary's share to the heirs of the beneficiary who predecease the insured.
Estate beneficiary
estate may be the tertiary beneficiary in case the insured outlives all other beneficiaries. the death benefit increases the estate value and may have tax implications.
Trust beneficiary
when a recipient is not to have direct access to the death benefits, such as in the case of minor children, and the proceeds are to be distributed as per the insured's directions set forth in a trust. may also be used tin estate tax planning strategies wh
Minor beneficiary
if minor has been named as beneficiaries, but no trust has been established, the funds are placed in a settlement option (held with interest), with the insurer acting as trustee. the guardian may receive payments for the benefit of the child, until the ch
creditor beneficiary
designated by assignment or named at application to cover indebtedness.
common disaster clause
provides that if an insured and primary beneficiary are in the same accident, the primary must survive the insured by a specific number of days (90) or the insurance company will assume the insured dies last. designed to pay the benefits to either the con
Spendthrift trust clause
denies the beneficiary the right to assign his/her interest in the policy proceeds. purpose is to prevent creditors of a beneficiary from claiming any benefits payable to the beneficiary before they are actually received. does not protect the beneficiary
change of insured
rider found in corporate owned life insurance when an executive moves to another company or retires. allows the owner to exchange the insured covered by the policy for a new insured in which the owner has an insurable interest or to exchange the policy fo
facility of payment clause
this provision allows the insurer to pay a relative or anyone it deems entitled to the benefits in the absence of a properly designated beneficiary or in cases of no living beneficiaries. this can alleviate any lawsuits and can be used to reimburse someon
Interest Only Settlement
death benefit proceeds may be left with the insurer while interest payment are paid at least annually or more frequently. principal amount does not decrease, and the interest generated is taxed a ordinary income when paid to the beneficiary. this method o
Fixed Amount Settlement
payments are for a specified dollar amount paid monthly until the benefits, along with interest, are exhausted. only the interest portion of the benefit is taxable.
Fixed Period Settlement
Payments are guaranteed for a specifies period of time, such as 10 or 20 years after which time payments will cease. the proceeds and interest are used to may the payments. the interest will increase the amount of each payment, and the interest is taxable
Life income option
allows the insurer to use the death benefit to purchase an annuity on behalf of the beneficiary.
Straight Life (Pure or Life Income Only)
payments are guaranteed for the lifetime of the recipient. upon death, payments will cease. dollar amount of each payment will depend upon the age and gender of the recipient. (Single Life Option)
Life Income Period Certain
Payments are guaranteed for the lifetime of the recipient or a specified period of time, whichever is longer. if recipient dies prior to the end of period certain, the payments continue to another person until the end of period.
Life refund
Payments are made for the lifetime of the recipient. Upon death, if a recipient has not received an amount equal to the total death benefit, the balance is refunded to the beneficiary either in a lump sum or in installments
Joint and Survivor Income Option
Payment are guaranteed for the lifetime of 2 or more recipients. upon death of the first, payment continues to the survivor until death. survivor's payments may be full 100% 2/3 or 1/2 of the original payments
Joint Life Income Option
payments are guaranteed to 2 or more recipients until the fir dies, then all payments cease.
Nonforfeiture Options (Guaranteed Values)
these options are found in polices that accumulate cash value and protect the policyowner against total loss of benefits if the policy should lapse due to nonpayment of premium or is intentionally cancelled.
Cash Surrender Option
upon surrendering the policy back to the insurer, the policy owner will receive the cash surrender value stated in the policy less any outstanding loans and accrued interest. any amount that exceeds the premiums paid into the policy will be taxable as ord
Reduced Paid Up Option
Present cash value is used to buy a single premium, permanent paid up policy of a reduced face amount. this option probides the longest period of coverage provided by a nonforfeiture option. coverage, although reduced in face value, will continue to age 1
Extended Term Option
present cash value is used to buy a single premium term policy of the same face amount for as long a period as it will buy, expressed as a combination of years and days. Provides the largest death benefit and is sometimes referred to as the Automatic Opti
Dividend Options
Dividends represent the favorable experience of the insurer and result from excess investment earnings, favorable mortality and expense savings. Available on participating policies issued by mutual insurers and paid annually
Cash dividend option
policyowner receives the declared dividends in the form of a check on or near each policy anniversary.
Premium Reduction dividend option
dividends are applied towards the next premium due. the same could be accomplished if the policyowner received the dividends in cash and remitted the full premium. if the declared dividends equal or exceed the premium, the premium payment may be suspended
Accumulate at Interest dividend option
the dividends are retained by the insurer and the interest rate paid the policyowner is compounded annually.
Paid Up Additions Dividend Option
Purchases single premium, additional permanent benefits at the insured's attained age. additional insurance is paid out in addition to the face amount if the insured dies. while insured is living it generates cash value and dividends as if the paid up add
1 year term dividend option
purchases a single premium, 1 year term benefit. premiums are calculated at the insured's attained age; also referred to as the fifth dividend option.
Paid up dividend option
pays off the policy more quickly than scheduled. if the company's overall performance declines, premiums may have to be resumed.
Annuity
used primarily to provide a steady stream of income to an individual typically upon retirement. designed to protect against outliving an individual's retirement income by providing lifetime income. Primary functions is to liquidate an estate, or to pay be
Control of the Contract
Owner- individual who controls the contract and is responsible for payments.
Annuitant- the individual whose life the contract is based upon.
Beneficiary- the individual named in the contract to potentially receive benefits.
Insurance aspects of Annuity
are insurance products based on a mortality table. if a life contingency settlement option is chosen, the insurance company guarantees to provide an income benefit payment as long as the annuitant lives.
Death Benefits of Annuity
if annuitant dies prior to annuitizing the contract the policy has a named beneficiary the insurer pays out an amount equal to premiums paid or the account value, whichever is greater.
Single Premium Annuity
lump sum payment is made into annuity
Periodic Premium Annuity
Continuous premiums paid into the contract. most common example is flexible premium
Flexible Premium annuity
Flexible contributions may be made as often and in whatever amount the contract owner desires. however, most insurers set a minimum and maximum dollar amount they will accept
Immediate Annuity
does not have an accumulation period and is used to generate immediate income within a year of the issue date.
Deferred Annuity
will pay periodic benefits starting at some specified time in the future; benefits begin more than 1 year from the issue date. Normally purchased to defer taxes on any contract earnings.
Tax Deferred Growth
since an annuity is an insurance contract, the accumulation value grows tax deferred. allow for the naming of a beneficiary to receive any policy value if the annuitant dies prior to annuitizing. withdrawals prior to 59 1/2 are subject to income tax and g
Tax Penalty on Annuities
to discourage the use of annuities as short term tax shelters, a 10% penalty tax is levied against any premature withdrawals prior to 59 1/2 years of age. does not apply if premature distributions occur due to death or disability of owner.
Surrender Charges of Annuities
When a contract is fully surrendered, any surrender charges will lessen the contract payout. Also referred to as BACK-END LOAD. Surrender charges diminish over a stated number of years, set by insurer, until they disappear.
Bailout Provision (Escape Clause)
During the accumulation period, some contracts also offer a "bailout" provision that allows the owner to withdraw money from the annuity without surrender charges if the crediting rate falls by more than a specific amount. this will enable the policy owne
Waiver on annuity
Annuity surrender charges are generally waived if the annuitant is hospitalized for an extended period, placed in a nursing facility for a least 30 days, become disabled, or dies.
Annuity Benefit Payments
Once a contract is annuitized, the insurance company takes ownership of funds in the account. In return, the annuitant is entitled to a guaranteed income stream based on the terms of annuitization. the annuitant may be able to name a beneficiary. income i
Life Income (Pure or Straight Life) Annuity Payment
Annuity is payable for as long as the annuitant lives, and upon death all payments cease. Provides the HIGHEST monthly income than any other option.
Life Income Period Certain Annuity Payment
Annuity is payable for life, or for a specified period of time, whichever is longer. if the annuitant lives beyond the stated period, benefits continue for life of the annuitant. if dies prior to end of period a beneficiary receives the balance of the pay
Life Income with Refund (Installment or Cash Refund)
Annuity is payable for the lifetime of annuitant. upon death, if annuitant has not received amount equal to total of all payments, the balance is refunded to the beneficiary as a lump sum, cash refund, or in installments, sometimes referred to as the Inst
Life Income Joint & Survivor Annuity Payment
Annuity is payable to 2 annuitants while both are living. Upon death of the first, survivor benefits continue, either paying the full amount or reduced to 2/3 or 1/2 for the survivor's income until the survivor dies.
Joint Life Annuity Payment
Annuity is payable to 2 or more named annuitants while both are living. upon death of the first, the benefits stop.
Annuity Certain
Annuity benefit payments are received for a specified period of time or a specified amount of periodic income. if annuitant dies with time remaining or balance is left in account, the named beneficiary receives the balance of the payments.
Fixed (Guaranteed) Annuity
During the accumulation period, the insurer guarantees a minimum fixed interest rate. At annuitization benefits are paid as a minimum level fixed amount. Fixed amount purchasing power decreases as the cost of living increases. Actual rate of interest crea
Indexed (Equity Indexed) Annuity
Product with interest rates that are linked to the positive performance of a stock market related (equity) index, such as the Standard & Poor's 500 Index. Contract owner enjoys safety of principal and some guaranteed minimum returns. Typically have a fixe
Market Value Adjustment (Adjusted) Annuity
Features fixed interest rate guarantees combined with an interest rate adjustment factor that can cause the surrender value to fluctuate in response to market conditions. Upon withdrawal, theMVA will add or deduct an amount from annuity or the withdrawal
Variable annuity
are regulated by the SEC, FINRA, and State insurance department. Annuity payments and cash values fluctuate according to the investment experience of the separate account the contract owner has designated. Payments are based on "units" rather than dollars
Qualified Vs. Nonqualified Annuities
Qualified annuity - funded with pre-tax dollars, entire distribution is subject to ordinary income taxes.
Nonqualified Annuity- funded with after-tax dollars, all distributions only the earnings are taxable as ordinary income
Purchase Other Insurance
Annuities can be used as a funding vehicle for insurance premiums for which the consumer may have a need. if annuity has large amount of tax deferred earnings then, upon death, the beneficiary will receive the payout and be responsible for paying income t
Education Funding
An annuity can provide funds to help offset the costs of a college education. Using a systematic withdrawal or a settlement option will provide for and income stream to help meet or offset some of the expenses incurred.
Retirement Fund Accumulation
A deferred annuity that is held outside an IRA allows for the accumulation of earnings on a tax deferred basis. Earnings may come from current or guaranteed interest credits, excess interest credits linked to performance of a stock index, or from separate
Retirement Income
the funds accumulated inside an annuity can be used to fund all or part of a consumer's retirement income. Accumulated funds can be used to purchase a settlement option which can provide for a lifetime income stream or an income stream that can end prior
Long term Care Benefits
Today's annuities may offer riders which will help offset some of the costs associated with providing long term care. as with most riders there is an additional cost associated. Few companies offer a combination deferred annuity and long term care policy
Lump Sum Structured Settlements
Lump Sum payments from lawsuits, lottery winnings, or an inheritance can be used to purchase a structured settlement in the form of an annuity. annuity can then be used to provide guaranteed lifetime income to the annuitant.
Employer Sponsored Qualified Retirement Plans
*referred to as Group Annuity.
*used to provide pensions for employees, funding nonqualified deferred compensation plans or qualified retirement plans.
*lose the tax-deferral aspect
Group Insurance Plans
the insurer issues a Master Policy to the plan sponsor and each participant receives a Certificate of Insurance covering the participant; and if offered, his/her spouse and dependents. Participants in the plan do not have personal control of the policy. T
Contributory Group Plan
Employees must contribute to the premium payments and at least 75% of all eligible employees must participate.
Noncontributory Group Plan
Employer pays the entire premium with a mandatory 100% of the eligible employees participating.
Group Conversion
there is a period of 31 days in which the employee may, upon termination and without evidence, convert his/her group life insurance benefit to an individual permanent policy. the premium will be at a higher than normal rate.
Franchise (Wholesale) Group Plan
This Group plan does not issue a Master Policy since underwriting is on an individual basis and individual policies are issued. Evidence of insurability may be required. Employer may be the premium payor OR the premium cost may be shared.
Credit Life Insurance
is either a form of individual coverage on the life of a debtor, or group insurance issued to a creditor providing coverage on debtors for the benefit of creditors. Both are form of Decreasing Term and amount of insurance reduces as amount of obligation r
Industrial (home service)
Individual polices are issued to low income workers without medical examination requirement. the premiums are collected weekly or monthly. Normally have a face amount of $1000 or less and are written to reduce funeral cost.
Buy-Sell Agreement
this agreement contractually establishes a price wit the intent to purchase, at a predetermined value, the assets of a business should one of the contract participants predecease the others. May be used with a sole proprietorship, a partnership or with st
Cross Purchase Plan
Used when the partners of a business purchase life insurance on each other. at the death of one of the partners, policy proceeds are used to purchase that person's interest in the business from his/her heirs.
Entity Plan
A business entity enters into an agreement in which it is obligated to purchase the deceased owner's interest. entity typically buys life insurance on each of the owners. Entity would then name itself as the beneficiary on each policy.
Stock Redemption Agreement
Agreement between the shareholders and a close corporation. Each Shareholder agrees to sell their shares upon death to the corporation according to the price, terms and circumstances specified in the agreement. this type of buyout is structured so the cor
Key Person Life Policy
Provides the necessary funds to recruit, hire, and train a replacement employee, restore lost profits, and reassure customers that the business operations will continue. Either term or permanent coverage can be used to fund the plan
Third Party Ownership
a policy owned by one person insuring the life of another person. the three parties involved are the policyowner, insured and insurer. Examples: husband buying policy on a wife, parent on their child, business buying on a key employee
Social Security Funding
Is provided by both employee and employer through the Federal Insurance Contributions Act tax. the employer withholds the employee's tax and pays it along with the employer's portion. Based on one's taxable income and number of years in the workforce, eac
Fully Insured
Requires an individual to have earned a minimum of 40 Quarter credits, or approximately 10 years of employment. Benefits that may be received monthly are: Retirement starting at age 62, Spousal retirement at age 62, widows and widowers can begin receiving
Currently Insured
A worker must earn at least 6 quarter credits during the full 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or is entitled to retirement benefits.
SS Retirement Benefit
a retired worker is eligible to receive monthly income equal to his/her PIA. Full retirement age varies based on year of birth but is up to age 67. Covered workers may begin benefits as early as 62, however benefits will be permanently reduced. Benefits a
SS Death Benefits
A One time lump sum payment of $255 in total may be made after the taxpayer's death. benefit is only payable to a surviving spouse or minor children.
SS Survivor Benefits
Benefit is payable to eligible dependents of a fully insured deceased worker. A surviving spouse with a dependent child under age 16 is entitled to monthly income until the youngest child reaches 16. An Unmarried surviving spouse may received at age 60. S
Modified Endowment Contracts (MECs)
Prior to 1988, individuals could place large sums of money into a cash value policy and the cash would grow tax deferred until the insured died, at which point a death benefit was paid income tax free. Or if they needed cash, they could take a tax free li
7-Pay Test
a limitation on the total amount that can be paid into a policy in the first 7 years. It compares premiums paid for the policy during the first 7 years with the net level premiums that would have been paid on a 7-year whole life policy providing the same
Taxation
if a contract is deemed to be a MEC, then any funds that are distributed are subject to a "last in, first out" tax treatment, rather than the normal "first in, first out" tax treatment.
MEC Penalties
all cash value transactions are SUBJECT TO TAXATION and penalty. Funds are subject to a 10% penalty on gains withdrawn prior to a 59 1/2. this is considered a premature distribution. Distributions made after 59 1/2 and ones paid out due to death are not s
Transfer for Value Rule
was passed by Congress to discourage business transfers of ownership between parties looking to take advantage of the tax free status of life insurance death benefits. If policy is transferred to a new owner in return for any kind of material consideratio
Section 1035 Exchanges
Allows for the exchange of an existing insurance policy or contract for another without incurring any tax liability on the interest and /or investment gains in the current contract. Can be useful if another insurance policy has features and benefits that
Coinsurance
the cost sharing between the insurer and the insured stated as a percentage of the claim amount, payable after the deductible has been met
Copayment
stated dollar amount that applies per claim in addition to any other cost sharing
deductible
initial amount payable by the insured before insurance benefits apply
morbidity table
table showing the mathematical probability of a loss due to a sickness or injury. used to help determine premiums for accident and health insurance. comparable to the mortality table used for life insurance rating.
Disability Income
Contract that pays weekly or monthly benefits due to injury or sickness if an insured is unable to perform the duties of their job. benefit is either a percentage of the insured's past earnings or a flat dollar amount
Medical Expense
contract that covers the various expenses which an insured may incur due to an accident or sickness
Long-term Care Expense
Product designed to provide coverage for personal care services in a setting other than a acute care unit of a hospital, such as a nursing home or even one's own home.
Accidental Death and Dismemberment Health
Pays the principal sum upon accidental death, loss of sight, or loss of 2 limbs. it pays the capital sum per policy schedule for loss of vision in 1 eye or loss of 1 limb. may be a stand alone policy or added as a rider to a disability income, medical exp
Home Health Care
Benefits for limited nursing services, home health aide, light housekeeping, and related expenses may be available in both medical expense insurance and long-term care insurance.
Individual Health
purchased by and individual and is not dependent upon an employer.Some require proof of insurability; and rates apply based on underwriting factors used by the insurance company. Tend to be more costly and have higher deductibles.
Group Health
are available to employees and dependents. Group underwriting factors determine the premiums. employer makes all decisions regarding the coverage and proof of insurability is not typically required .
Private Insurers
are commercial companies, such as stock and mutual insurers that sell to general public.
Government Insurers
plans provided by government include Social Security Disability, Medicare, Medicaid, and TRICARE for Military personnel
Field Underwriting
very important due to the risk of moral hazard. it is the initial step of the total process of insuring a health risk. includes the producer's initial personal contact with the applicant and the determination of insurability while assisting the applicant
Health Underwriting Factors
*Age
*Gender
*Tobacco Use
*Occupation and Hobbies
*Physical condition
*Moral Hazard/financial Hazard
*health history
*foreign travel/residence
*other insurance
*plan applied for
Health Application
Part 1-General: contains general questions gender, marital status exc.
Part 2-Medical: Medical background, present health, any medical visits
Medical Examination
records of an examination conducted by a medical professional regarding the applicant's present health. usually requested by the insurer after determining if the amount of coverage, age of applicant or health history warrant the examination. Performed at
Attending Physician Statement
used incases in which the individual application and/or medical reports reveal conditions of which more information is required. this statement is completed by the applicant's personal physician treating a specific condition. applicant must sign a written
Medical Information Bureau
its primary purpose is to collect adverse medical information about an applicant's health and act as an information exchange. A member owned corporation that operates on a not for profit basis. the underwriting services are used exclusively by MIB member
Inspection Report
a general report of the applicant's finances, character, morals, work, hobbies, and other habits. sometimes referred to as a Consumer Investigative Report. Can be completed by the insurer or a third party provider. applicant must be made aware of any info
Agent's Report
A personal statement submitted by the producer to the insurer regarding any personal knowledge of the applicant, including information observed during the application process. information remains confidential between the producer and the insurer, and it d
Individual Selection Criteria
insurer uses all of the information collected by the field underwriter and other sources, to determine the acceptability of an individual. it is ultimately the home office underwriter's responsibility to determine if this individual meets all the underwri
Nonmedical Application
a policy requested when the applicant's age, medical history or amount of coverage does not require a medical examination for underwriting. health questions on the application are asked by the producer and are the only medical information required.
Issued as Preferred Risk
a lower rate will be used if the insured meets the insurance company's qualifications as a preferred risk (lower than average risk)
Issued as a Standard Risk
The coverage requested at the rate that was quoted. some insurance may only be issued with standard rates. premium rate-up would still be permitted for tobacco users.
Issued as a Substandard Risk
Issued Rate-up: issue the coverage as a higher rate.
issued with exclusions: may be temporary or permanent; limits the insurer's obligation to pay
Conditional Approval
the premium paid by the applicant is the Offer and the policy issued by the insurer is the Acceptance. insurer will send the policy to the producer for delivery, but coverage is in effect as of the date of application if it is accompanied by premium, or t
Indemnity Health Plan
the insured can choose any doctor or hospital without referrals or a primary care physician. the plan requires the insured to pay up front for services, and the submit a claim for reimbursement. Generally marketed through commercial insurers.
Service Health Plan
the plan pays benefits directly to the providers of health care rather than as a reimbursement to the subscriber. plan participants are called subscribers and pay a premium or subscription fee. Providers include Blue Cross and Blue Shield, Health Maintena
Self-Insured Health Plan
a plan offered through employers, associations, or unions who pay claims out of their own funds instead of funding claims through an insurer.
Blanket Payment
maximum dollar limit set, with no itemizing of costs, used for groups covered under a blanket policy for a specified period or event
Scheduled Payment
a health plan with limits as to what will be paid for covered expenses. Most associated with covering day to day losses based on a specifies or flat dollar amount. Not designed to cover catastrophic losses and have limited annual benefits.
Cash or Indemnity Payment
pays a specified daily amount up to the stated maximum number of days, or even lifetime. benefits often double or ripple while an insured is confined in an intensive care unit.
Fee-for-Service
provides a separate payment to a healthcare provider for each medical service received by a patient.
Prepaid Payment
medical benefits are provided to a subscriber in exchange for predetermined monthly premiums paid in advance
Usual, Customary, Reasonable
benefits are not scheduled, but are based on the average fee charged by all providers in a given geographical area. many insures pay the amount and the valance of any overages or costs of any disallowed services are the insured's responsibility.
Lifetime Limit
the maximum a policy will pay for covered losses during the lifetime of an insured.
Annual Limit
the maximum a policy will pay for covered losses per year
Per-Cause
the maximum a policy will pay for covered losses per claim
Blue Cross and Blue Shield Associations
Prepaid plans, with plan subscribers paying a set fee, usually monthly, for the services of doctors and hospitals at a predetermined price. Blue Cross is a HOSPITAL service plan with contractual agreement with the hospital. Blue Shield is a PHYSICIAN serv
Health Maintenance Organizations (HMOs)
Regarded as a managed health care system providing a comprehensive array of medical services on a prepaid basis, which means little or no Out of pocket expenses. All subscribers must live within a specific geographic region called the service area. Typica
Group Model HMO
HMO contracts with an independent medical group to provide a variety of medical services to subscribers. under the agreement the HMO pays a capitation fee to the medical group entity directly. Medical group will then pay the individual physicians who rema
Staff Model HMO
Contracting physicians are paid employees working on the staff of the HMO. they generally operate in a clinic setting at eh HMO's physical facilities. as hospital services are required, staff dr.s and HMO administrators arrange for these services. Staff m
Independent Practice Association Model
Gives HMO members the maximum freedom of choice of physicians and locations b/c the HMO is allowed to contract with a network of independent physicians who are part of an independent practice association. Payment to physicians is by capitation or on a fee
Preferred Provider Organization (PPOs)
are an arrangement under which a selected group of independent hospitals and medical practitioners become preferred providers in a geographic area. The providers perform services to subscribers and charge a discounted fee-for-service negotiated in advance
Exclusive Provider Organization (EPO)
A type of PPO that REQUIRES a subscriber to seek treatment from a network provider. Unlike HMO, use of a primary care physician and referral to a specialist are not required and the provider is paid a negotiated fee-for-service.
Point of Service (POS)
These plans combine PPO and HMO benefits. Members can choose which part of the plan to use. if the subscriber stays in network benefits are paid as an HMO.
Basic Health Insurance Policy
Traditionally cover an insured for nonsurgical doctor visit while in the hospital, the charges for room and board while hospitalized, and can be expanded to include payment for office visits, diagnostic x-rays, lab charges, and the cost of the operation r
Basic medical expense
pays for office visits, diagnostic x-rays, laboratory charges, ambulance, and nursing expenses when not hospitalized. some plans may include coverage for prescription drugs
Basic Hospital Expense
Pays for hospital room and board with a daily limit of coverage. Miscellaneous hospital expense may also be provided up to a specifies limit per day for inpatient x-rays, lab work, operating room expense, medication, and cost of the anesthesia
Basic Surgical Expense
Pays surgeon and anesthesiologist fees for the cost of a surgical procedure. usually provide based on a surgical schedule to specify benefit limits for each surgical procedure. if surgery is not listed in policy the company will pay based on coverage of c
Major Medical Policy
Provide benefits for potentially catastrophic and/or prolonged injury of illness. include a lifetime limit that does not include the out of pocket expenses. Hospice and Home Health Care are not normally covered.
Stop-loss Provision
maximum dollar limit set on the coinsurance to limit the out of pocket expense that an insured can incur in a policy year. may or may not include deductible.
common Accident Deductible
if several family members are injured in the same accident, only one deductible is applied.
Carryover Provision
Expenses that did not satisfy the previous year's deductible and were incurred in the last 3 months of that year are used towards satisfying the current year's deductible.
Supplemental Major Medical Policy
this plan provides for Major Medical coverage designed to supplement a Basic Plan. it is written to pay benefits once the basic plan benefits are exhausted. Basic plan provides first dollar coverage. once basic plan benefits are exhausted., a Corridor Ded
Comprehensive Major Medical Policy
Coverage combines the features of the Basic and Major Policy into a single policy. Benefits provide for reimbursement of coverage expenses on a "usual, customary, and reasonable" basis. insured has the freedom to choose any hospital, physician, or surgeon
Newborn Infant Coverage
All individual and group health insurance policies, written on an expense-incurred basis, providing coverage for dependents of the insured must provide coverage for the insured's newborn child from the moment of birth. Adopted children are covered at the
Dependent Child Coverage
Federal law requires that every policy providing coverage for a dependent child extends coverage up to age 26. this includes natural children, adopted children, married or unmarried, even if eligible for other insurance.
Mental Illness and Substance Abuse
coverage for metal illness and substance abuse will be subject to the same deductibles and coinsurance factors as those that apply to any physical illness. it is provided on an inpatient and outpatient basis and includes the treatment of alcohol abuse and
Prescription Drug
is most often found in a group helath insurance policy and some may integrate benefits with a medical plan or provide benefits for an additional cost. This benefit may be written requiring a small copayment, a flat amount, or an out of pocket percentage f
Maternity Benefits
Medical plans will usually cover the "complications of pregnancy" as an illness, but normal birthing costs may be limited or excluded. typically provide 96 hours of inpatient care following a caesarean section birth. Normal birth inpatient care is 48 hour
Vision Care
This provides for 1 routine annual examination. it may provide payment for the cost of lenses, frames, contact lenses, but not the cost to replace frames or lenses that are lost or broken. it does pay for sunglasses or safety glasses. does not pay for med
Hearing Care
Most insurance plans do not cover cost of hearing aids. some plans and supplemental programs do provide hearing aid coverage. few health insurance plans allow you, for an extra premium, to add additional hearing coverage.
Limited Policies
limited health exposures are generally covered by these policies that specify the exposure to be covered and the amount of the corresponding benefit, such as prescription drugs, vision care, etc. State law requires that the agent/insurer make special note
Limited Accident
Provides benefits for accidental injuries associated with specific events, such as traveling out of the country or on a common carrier.
Critical Illness Limited plan
provides specific benefits for a specifies sickness, such as Cancer Plans and Heart Disease Plans.
Credit Disability Insurance
Covers a debtor, with the creditor receiving benefits to pay the debt if the debtor becomes disabled as defined in the policy. it is commonly sold as group plan, however, individual contracts may be written
Dental Insurance
Offered by an insurer must state the benefits, the exclusions, and any limitations in coverage. Plans are normally written stating an annual maximum dollar benefit, not the number of appointments or the number of teeth repaired. Contracts may be written o
Endodontic
services covering dental pulp care and root canals
Orthodontics
services for teeth alignment and other irregularities of the teeth
Periodontics
Services for the treatment of gum problems and disease
Prosthodontics
services provide bridgework and dentures
restorative care
services to restore the functional use of natural teeth
Oral Surgery
Surgical treatment of diseases, injuries and jaw defects
Scheduled Plan
Benefits are paid based on a schedule of procedures. benefit maximums are commonly paid on an amount lower than the usual, customary, and reasonable dental charges.
nonscheduled Plan
Benefits are paid based on a usual, reasonable, and customary basis. dentures are a major dental expense and would be paid using this benefit provision.
Combination Plans
combines the benefits of both the Basic and Comprehensive plans. Some procedures are paid based on a schedule while others are paid on a usual, customary, and reasonable basis.
Predetermination of Benefits
although this procedure is normally not mandatory, it does allow both the patient and dentist to know what will be covered before treatment. this enables the insurer to maintain some control over unnecessary or more expensive than necessary procedures and
Referral Plans
Dental referral plans are not insurance and are of limited value. may or may not be associated with a group or individual health insurance plan and may charge monthly fees. Referrals plans only offer consumers a list of dentists willing to accept reduced
Disability Income Insurance
sometimes referred to as the "forgotten Need" many workers think they have coverage through Worker's compensation insurance without realizing it does not provide coverage for disabilities which occur outside of work. Social Security does provide disabilit
Disability Income (Indemnity) Policy
Pays an income benefit when the insured is unable to work due to illness or injury. Benefits are paid weekly or monthly and determined as a flat benefit or a percentage of the insured's current earnings, normally 60%-70%. the full income is not paid in or
Pure Loss of Income Policy
Under this policy the insured will receive benefits if loss of income is due to a covered accident or sickness, even if the insured is able to work full-time doing all the same duties as before the loss occurred.
Probationary Period of Disability income
may be included in some polices to protect the insurer from immediate claims. may be 15-30 day waiting period before losses due to a pre-existing condition. usually does not apply to losses due to an accident
Elimination Period (waiting period)
the time period an individual must be disabled before benefits become payable. usually longer than for an injury due to an accident.
Benefit Period
the time period the insured is eligible to receive payments after the elimination period has been met. may be written for a specified number of years (2,5, or 10years) to age 65 or for life. can be purchased with a short or long benefit period.
Total Disability Own Occupation
some policies require the insured's inability to perform the main duties of his/her own occupation. the own occupation definition often applies for the first 2 years of a disability, then changes to any occupation. the least restrictive and is easier to q
Total Disability any Occupation
Some policies are stricter and require the insured to be unable to perform the duties of any occupation for which he/she is reasonably suited by education, training, and experience. more restrictive and harder to qualify for benefits.
Permanent Disability
a total disability that reduces or eliminates the insured's ability to work again
Temporary Disability
an insured is able to continue to work at reduced efficiency or reduced hours, but is expected to fully recover.
Partial Disability
Disability resulting in an inability to perform 1 or more of the regular duties of the occupation. the benefit usually pays up to 50% of a total disability benefit for 3 to 6 months
Residual Disability
Provides benefits for loss of income after the insured returns to work usually following a total disability. benefits are based on the reduction of earnings as a result of the disability.
Recurrent disability
when a second disability is suffered due to the same cause within a certain period of time (usually 6 months) the elimination period will not apply and the disability will be considered continuous.
Presumptive Disability
loss is presumed to be total and permanent due to the loss of sight, hearing, speech, or the loss of 2 limbs. benefits paid are usually paid in a LUMP SUM.
Transplant Donor Benefit
when an insured is totally disabled b/c of the transplant of an organ to another individual, the insurer will deem the insured to be disabled as a result of sickness.
Age Discrimination in Employment Act
affects both the short and long term group disability benefits for the people employed after age 65. this in turn will have some effect on premium determination by the insurer when underwriting a particular group.
Short-term Disability
characterized by maximum benefits for periods of rather short duration, such as 13, 26, or 52 weeks. Often benefit periods are coordinated with the employer's "sick pay plan". will not pay benefits for disabilities lasting longer than 2 years. elimination
Long-Term Disability
Coverage is often characterized by benefit period of 2 years, 5 years to age 65 or lifetime. elimination period will most commonly be either 30, 60, 90 or 180 days. it may be possible to obtain a LTD policy with a 2 year elimination period, to be used in
Business Overhead Expense
provides the funds to cover the overhead expenses of a business when the owner becomes disabled. the benefits include expenses such as office rent, utilities, and employee labor. however owner cannot collect for loss of income under this policy.
Key Employee disability Insurance
Pays benefit to the business when a key employee becomes disabled by helping pay for a replacement, train a new employee, or replace loss of revenue due to the disabled employee's lack of ability to work.
Buy-Sell Agreement or Disability Buyout
pays lump sum enabling a partnership or business to buy out the totally disabled principle's interest in the business. a cross-purchase plan requires each partner to purchase a separate disability policy on each of the other partner. an entity plan provid
disability Reducing term
Helps a small business that has long-term commitments requiring monthly or other regular payments meet their obligations. amount of coverage remains the same monthly, but the benefit period reduces as the debt reduces.
Cost of Living Rider
Automatically increases monthly benefits after the onset of a disability, as the consumer Price Index increases. an adjustment in benefits is made on each policy anniversary while the disability continues and protects the insured against inflation.
Guaranteed Purchase Option Rider
Guarantees that on specified dates, ages, or occurrences, such as marriage, birth of a child, etc., the insured may purchase additional monthly benefits, if income justifies it, without proof o insurability. rates are based on attained age. some insurers
Impairment rider
eliminates coverage for pre-existing conditions, such as back injuries. attaching this rider excludes coverage for a condition that would otherwise be covered. the use of this rider may make insurance obtainable for an otherwise uninsurable person.
Cash Value Rider
This form of return of premium begins building value equal to the percentage of premiums paid for a disability policy. the value start building around the third year and build to 100% at age 65, which can be returned to the insured at that time, less any
Lifetime Benefit Rider
Extends the benefits for life if total disability begins before a specified age. if disability begins when the insured is older than the age specified, the rider is not in effect.
Annual Renewable Term
Some Companies will allow an insured to add a life insurance rider to disability income policy in the form of annual renewable term this provides additional death benefits if the insured dies due to disability.
Rehabilitation Benefits
Paid while the insured is totally disabled and receiving benefits, if the insured elects to participate in some form of vocational rehabilitation approved by the insurer. total disability benefits will be continued as long as the insured is actively parti
Non-Disabling Injury rider
Does not pay disability income, but pays the medical expenses that are related to an injury that does not result in total disability. it is a limited form of medical expense coverage added to a disability income policy.
Hospital Confinement Rider
Waives the elimination period if insured is hospitalized during the period of elimination, but only pays when being treated as an inpatient
Additional Monthly Benefit rider
Many insurance companies offer a short term additional benefit in the form of a rider. normally covers the first 6 to 12 months of a disability.some reger to rider as a SS Rider as it pays benefits while the insured is awaiting SS Benefits. not related to
Social Security disability insurance
the qualification for benefits is contingent upon the employee having the proper insured status either fully insured disability insured or currently insured and satisfying the waiting.
disability
to collect Social Security disability benefits and employee must be unable to engage in any substantial gainful activity due to a medically determine physical or mental condition that has lasted or is expected to last at least 12 months or result in an ea
Social Security Disability waiting period
benefits start with the 6th full calendar month of disability and they're not retroactive to the date of disablement. in no event are benefits retroactive prior to the date of application or disability determination. to be considered a full month of disab
disability income benefits
based on the employee's average indexed monthly earnings on which Social Security taxes have been paid. this is referred to as primary Insurance amount. benefits cease when employee reaches social security definition of full retirement age dies or is no l
Social Insurance Supplement Rider
Pays in addition to regular disability polices until Worker's Compensation or Social Security payments begin. it is also designed to provide benefits if SS is declined.
workers compensation
benefits of primary to either individual or group disability income benefits. The individual or group benefit will be reduced dollar-for-dollar by the amount of workers compensation. so that the total disability income benefits payable from all sources co
Social Security disability income limitation
benefits are secondary to workers compensation in any other public insurance benefits. If the total of SSDI workers compensation and other public disability benefits exceeds 80% of the workers pre disability earnings the SSDI benefit will be reduced dolla
Medicare
federal health insurance program that was originally designed to provide hospital and medical insurance primarily for people aged 65 or over. The program has been expanded to provide coverage to persons of any age who have been diagnosed with chronic or p
Medicare part A
Hospital Insurance provided by the federal government
Medicare Part B
medical insurance and outpatient expenses provided by the federal government
Medicare Part C
Medicare Advantage plan combines part A and Part B into a managed care plan offered by private insurance providers
Medicare Part D
prescription drug coverage offered by private insurance providers
initial enrollment period
last 7 months and begins 3 months before the month of an individual's 65th birthday and ends 3 months after the month following when the individual turned age 65. the actual month of Eligibility is the month of the individuals birthday
General enrollment period
provides a makeup. From January 1st to March 31st each year for those who did not enroll in Medicare Part B when they first became eligible. for individuals in Rolling during the general enrollment period coverage begins on July 1st
Medicare open enrollment
occurs every year from October 15th to December 7th and provides all individuals the chance to make changes to their Medicare coverage if needed
special enrollment period
begins when a person past age 65 who is covered by an employer-sponsored Group Health Plan is no longer covered by the plan. this. Last 8 months and allows an individual the opportunity to enroll in Medicare Part B without incurring a penalty for failure
part A inpatient hospitalization
provides coverage for up to 90 days per benefit period. Medicare will pay 100% of cover charges for Days 1 through 60. the insured will be responsible for a specified daily co-payment for days 61 through 90 and Medicare will pay the balance. if insured is
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part a mental health care
will cover inpatient mental health care on the same basis as inpatient hospital care
part a skilled nursing care
provides limited benefits for skilled nursing care following three days of hospitalization. The first 20 days are covered 100% days 21 through 100 are covered except for a daily co-payment. After 100 days there is no additional benefit from Medicare in th
part a home health care
medically necessary care following the release from the hospital including home health aide Services nurses visits and medical supplies are covered
part a hospice care
pain relief and support services provided to a terminally ill and their family members is covered
part a blood
there is a deductible amounting to the first 3 pints of blood administered per calendar year. After the deductible is met part a will cover the cost of inpatient blood transfusions for the remainder of the year
Part B medical expenses
covers Physicians and surgeons services and medically necessary outpatient medical and surgical services and supplies. Additional coverages include physical occupational and our speech therapy diagnostics test certain durable medical equipment in medicall
Part B preventive care
a one-time welcome to Medicare preventive visit is covered along with yearly Wellness visits. In addition Part B will cover vaccines and preventive screenings for cancer and several other conditions
Part B laboratory services
blood test biopsies urine analysis in other labs on an outpatient basis
Part B Home Health Care
medically necessary skilled Care home health aide services medical supplies for those who are homebound in their personal residence but who have not had qualify hospitalization
Part B mental health care
will cover Mental Health Services on an outpatient basis when provided by a healthcare provider who accepts Medicare payment. an additional co-payment Arco Insurance may be required if services are provided in a hospital outpatient clinic or Department
Part B outpatient hospital treatment
reasonable and necessary services for the Diagnostics or treatment of an illness or injury on an emergency basis
Part B blood
the cost of 3 pints of blood per year is excluded from coverage under both part A and Part B. after the first 3 pints of blood Part B will cover the cost of blood transfusions on an outpatient basis since part A covers blood transfusions in the hospital a
appeal
if an insured disagrees with a decision on the amount of Medicaid will pay on a claim he she has the right to appeal the decision
certification of providers
hospitals and other providers of healthcare that wish to participate in the Medicare program must be licensed by the state and certified by Medicare. Medicare will not pay for any services rendered by provider that is not certified
durable medical equipment
certain medical equipment like a walker wheelchair or hospital bed that's ordered by doctor for use in the home
excess charge
if one has Medicare and the amount of doctor or other health care provider is legally permitted to charge is higher than the medicare-approved amount the difference is called the excess charge
limited charge
in original Medicare the highest amount that can be charged for a covered service by doctors and other Healthcare suppliers who don't accept the assignment
medicare-approved amount
in original Medicare this is the amount a doctor or supplier that accepts assignment can be paid. it may be less than the actual amount a doctor or supplier charges. Medicare pays part of this amount in the recipient is responsible for the difference
Medicare summary notice
I noticed you get after the doctor or provider files a claim for part A or Part B services in original Medicare. it explains what the doctor a provider billed for the Medicare approved amount how much Medicare paid and what the patient must pay
non-participating provider
a provider who does not accept assignment
participating provider
a provider who agrees to accept assignment in charges the Medicare approved charges
Medicare Supplement Insurance
often referred to as Medigap, are private insurance plans that are designed to supplement Medicare coverage and fill in the gaps in Original Medicare. Pay all or some of the Medicare deductibles, copayments, and coinsurance.
Guaranteed Issue
if applied for during the open enrollment period Medicare Supplement is guaranteed issued
Permitted Compensation
agent selling Medicare Supplement is limited to the commission paid on the policy. first year cannot exceed 200% of the renewal commission in the 2nd year.
Medicare Select
is the managed health care version of the traditional Medicare supplement policy that has been offered through indemnity insurers. must cover the same benefits as any non-Select Medigap plan if the plan's network for care is used.
Medicaid
Provides increased assistance to those with a financial and medical need. Depending on the state eligibility is based on income of 133% to 138% of the federal poverty level and is adjusted for household size.
Medicaid Eligibility
65 years of age or older
blind or disabled
receiving temporary assistance to needy families program
medically needy or medically indigent refugees
pregnant women
person in skilled nursing or intermediate care facilities
children under 21
individuals needi
Medicaid Benefits
pays for hospital care, outpatient care, certain nursing facilities, doctors, laboratory and x-ray services, prescriptions, long-term Care, and some home health care after current assets are exhausted.
Benefit Triggers
a physician Certification stating the patient is chronically ill and in need of long-term care is required.
Activities of Daily Living
include Bathing, Continence, dressing, eating, toileting, and transferring. if insured can not perform 2 or more then LTC is triggered.
Cognitive Impairment
involves the loss of memory and deductive or abstract reasoning due to an organic mental illness, including Alzheimer's disease and senile dementia. Also includes impairment due to traumatic brain injury, such as a stroke or blunt-force trauma.
LTC Skilled Nursing Care
Continuous 24-hour care provided by or under the supervision of a registered nurse
includes specialized services such as feeding tubes, IV therapy and wound care
Provided in a licensed facility, such as a nursing home.
LTC Intermediate Care
Daily, but no 24-hour care, provided by or under the care of a licensed medical pro.
Includes care designed to assist with daily medical needs such as dispensing meds.
Considered "in between" care to help patients requiring less than skilled care.
Usually
LTC Custodial Care
Nonmedical care to provide assistance with activities with activities of daily living such as bathing.
Does not require the caregiver to be a licensed medical professional
May be provided in a licensed facility or in one's own home.
Comprehensive LTC Coverages
policy includes coverage for institutional, home and community based care. Home Health Care, Hospice Care, assisted Living, Adult Day Care, Respite Care.
Mandatory Uniform Provisions
were developed by the NAIC and must, by law, be included in every individual accident and health insurance policy. There are 12 Mandatory Provisions: Entire Contract Clause, Time Limit on Certain Defenses, Grace Period, Reinstatement, Notice of Claim, Cla
Mandatory Second Surgical Opinion
this requirement may be included in policies that offer surgical expense benefits, requiring the insured to consult a physician, other than the attending physician, to determine the necessity of surgery and/or alternate methods of treatment. if insured fa
Multiple Indemnity Rider
provides additional benefits to a health insurance policy for losses due to an accident. this rider can be written as Double or Triple to provide double or triple the face amount if a death or dismemberment occur within 90 days of an accident.
Multiple Employer Trusts
entities formed by unrelated businesses in the same or related industrial classification. trust is organized under a third-party administrator or sponsor and allows for small to medium-sized employers to combine their employees into a single, larger group
Muti-Employer Welfare Associations
generally formed by larger employers for the purpose of obtaining more favorable rates for life and health insurance. primarily consist of employers who self-fund their employees' health insurance benefits. employer assumes responsibility for providing pa
Labor Unions
the Taft-Hartley Act was an amendment to the National Labor Relations Act. Among the provisions of the Act, labor unions were permitted, under certain conditions, to establish primarily employer-funded trusts for the provision of health and welfare benefi
Associations
Must have a minimum number of members (usually 100) and be organized for a purpose other than buying insurance. Examples: Teachers, associations, trade associations, professional associations, and alumni associations.
Risk Pools
High-risk pools are private, self-funded health insurance plans organized by a state to serve high-risk individuals who meet enrollment criteria and do not have access to group insurance.
Experience rating
determined by examining the history of claims a particular group experiences. insurers uses past experience to predict future cost.
Community rating
determines premiums by examining a particular geographic region of all insureds in a group
Administrative Capability
group health plans handle many of the administrative issues on behalf of the sponsor, such as updating enrollments and adding new members. since many of these abilities can be handled online, the cost of administration in a group plan is less than that of
No Loss-No Gain
Requires that when group health insurance is being replaced, ongoing claims under the former policy must continue to be paid under the new policy, overriding any pre-existing conditions exclusion and establishing mandatory risk transfer.
COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985)
this ACT states employers with 20 or more employees must provide a health coverage continuation option to all covered employees and dependents up to 18 months in the event of: Termination of employee, Reduction of hours for employee, Coverage may continue
HIPAA (Health Insurance Portability and Accountability Act of 1996)
was designed to provide coverage for people with pre-existing conditions. allows for portability of coverage when transferring to a new job.
business group of one
and individual, sole proprietor, or a single full-time employee of an S Corporation, C Corporation, Limited Liability Company, or partnership who has carried on business activities for at least one year prior to the application date. Also the business mus
Small Employer
any person, firm, corporation, partnership, or association that is actively engaged in business and has 50 employees or less.
Eligible Employee
an employee who has a regular work week (30 hours). it does not include an employee who works on a temporary or substitute basis. waiting period for eligibility cannot exceed 90 days.
Worksite Plans
These plans are voluntary benefit plans offered by insurance companies and premiums are withheld as payroll deductions by the employer. allow employees to pick and choose among various types of insurance coverage's to supplement other employer-sponsored b
Civil Rights/Pregnancy Discrimination act
involves treating a woman less favorably on the basis of pregnancy childbirth, or related medical conditions. Applies to groups with 15 or more employees and Prohibits an employer from discriminating in its employment practices against a woman b/c of any
Patient Protection and Affordable Care Act
commonly referred to now and the Affordable Care Act was signed into law on March 23-2010. consists of a combination of measures to control healthcare cost, and an expansion of coverage through public and private insurance which includes broader Medicaid
Essential Health Benefits Package
Ambulatory Patient services
Behavioral health treatment
Emergency Services
Hospitalization
Laboratory services
Maternity
Mental Health services
Newborn Care
Pediatric Services
Prescription drugs
Preventive management
Rehab
Essential Health Bronze Plan
Covers 60% of the benefits cost of plan
Essential Health Silver Plan
Covers 70% of the benefit cost of the plan
Essential Health Gold Plan
Covers 80% of the benefit cost of the plan
Essential Health Platinum Plan
Covers 90% of the benefit cost of the plan
Consumer- Driven Health Plans
allow individuals to use a 3-tiered approach to funding the costs of medical services and treatment. the various plans help individuals control benefit costs by allowing them to decide how their health plan funds are used.
Tier 1 Consumer Driven plan
Pretax account, such as a Health Savings Account, Archer Savings Account, Health Reimbursement Account, and Flexible Spending Account.
Tier 2 Consumer Driven Plan
the amount the individual chooses to pay, out of pocket after the funds in the pretax account have been exhausted and before the health insurance plan's deductible is met.
Tier 3 Consumer Driven Plan
A high deductible health plan, which is a health insurance plan that has been designed to coordinate with pretax accounts to help consumers manage their spending for health care and insurance.
High Deductible Health Plan
similar to other health insurance plans, however they contain restrictions pertaining to the individual and family deductibles, as well as annual out of pocket limits.
Health Savings Accounts
available to any employer or individual for an account beneficiary (taxpayer, spouse and dependent) who has high deductible health insurance coverage. funded with pretax income, grow tax-deferred, and may be used tax-free to pay for unreimbursed qualified
Medical Savings Account
similar to HSA, however they have different contribution limits, minimum annual deductibles, and maximum out of pocket limits. designed specifically for small businesses and self-employed individuals who cannot establish HRAs or FSAs. purchased by employe
Health Reimbursement Arrangements
type of Health insurance plan that reimburses employers for qualified medical expenses. plans are entirely employer-funded and there is no limit on the amount an employer can contribute. Employees are not allowed to contribute so contributions may not be
Flexible Spending Accounts
an employer-established plan that permits the employee to defer up to $2550 on a pre-tax basis into a specifically designated account from which the employee may withdraw funds to pay for unreimbursed medical expenses such as eyeglasses, elective cosmetic
TRICARE( The Uniformed Services Health Program)
primarily for active duty and retired members of the U.S. military and their dependents. three plans now available, depending on the member's service status, such as active duty, Reserves, or retired. Plans are Standard, Prime and TRICARE For Life. as lon
Standard TRICARE
requires no premiums on the member's part but does require a $12 co-pay for office visits and a 25% co-pay for procedures.
Prime TRICARE
requires a premium, but has no out of pocket expenses for tests, operations, etc., as long as primary care manager or a TRICARE approved referral is used. there is a $12 co-pay for office visits and an $11 per day charge for hospitalization.
TRICARE For Life
serves as a second insurer for those on Medicare, Parts a and B. Medicare will be the primary payor and TFL will be secondary. there are no enrollment fees but the member must pay his own Medicare part B premiums.