insurance transfers
the risk of an loss for an individual or business to an insurance company which spreads out the costs to many individuals
agency contract
a contract that is held between insurer and an agent/producer containing the expressed authority given to the agent/producer, and the duties/responsibilities to the principal, any agent in violation of the agency contract may be held personally liable to
agent
legal representative of a an insurance company that acts for another person or entity known as the principal with regard to contractual arrangements
beneficiary
receives benefits from the insurance
death benefit
the amount paid when a claim is issued against policy of insurance
insurance policy
a contact b/w insured and insurance company that agrees to pay the insured in the event of unforseen events caused by specific events
risk
is the uncertainty or chance of loss occurring only two types of risks exist which are speculative and pure and only one is insurable
pure risk
is the the certainty that loss or no change will occur with no financial gain to be sought only this type of risk is insurable
speculative
the type that may either lead to loss or gain. example gambling. these are NOT insurable
exposure
the unit of measure used to determine the premiums for insurance coverage
hazards
broken into 2 subtypes (physical, moral, morale); conditions that increase the probability of the insured to experience a loss
physical hazard
hazards arising from material, structural, and operational features
moral hazard
hazards to applicants that may lie or provide fraudulent information to insurance companies
morale
hazard derived from complacent (If broken the insurance will fix it ) state of mind
perils
are CAUSES of the loss that are covered in insurance policies
loss
is defined as the reduction , decrease, or disappearance of value of property or person insured in the policy caused by a name peril
Pure Death protection
(Term/temporary protection) if the insured dies during this term, the beneficiary receives the pay out; if policy is cancelled/expires prior to insured death, there is nothing payable at the end; NO cash value; maximum age that coverage is not offered is
3 basic types of Term Coverage
determined by how the face amount or death benefit changes throughout coverage (Level, Increasing, Decreasing) however, premiums usually stay constant the only thing that changes is the death benefit
Level Term Insurance
refers to most common type of temporary protection in which death benefit does not change throughout duration of policy
Annually Renewal Term -ART
the purest form of term insurance, in which death benefit remains level and the policy may be guaranteed to be renewable each year without proof of insurability, but the premium increases annually according to attained age , as the probability of death in
Level Premium Term
provides a level death benefit and a level premium during policy term
Convertible Term
provision provides the policy owner with the right to convert the to a permanent insurance policy without PROOF OF INSURABILITY. The premium will be based on the insured's attained age at time of conversion
Increasing Term
features level premiums and a death benefit that increases each year over the duration of the policy term. The amount of the increase in the death benefit is usually expressed as a specific amount or percentage of the original amount. Often used by insura
Decreasing Term Policy
policy that features a level premium and a death benefit that decreases each year over the duration of the policy. Primarily used when the amount of the needed protection is time sensitive or decreases in time (eg---to insure the payment of a mortgage or
Return of Premium Term-ROP
form of increasing insurance policy that pays an additional death benefit equal to the premiums paid to the beneficiary. It's paid if the death occurs within a specific time or if the insured outlives the policy.
Permanent insurance
general term used to refer to various forms of life insurance that build in cash value and stay in effect until age 100 or the life of the insured as long as the premium is paid; most common is whole life
Whole life insurance
build in cash value in which the policy owner can borrow against. cash value does not accumulate until third year in policy. policyowner pays a level premium over the life of the contract. At age 100, benefit is paid to policy/owner or insured or if perso
3 types of Whole life insurance
straight, limited pay, and single premium
Continuous Premium ( Straight Life) Whole Life Insurance
basic whole life policy in which policyowner pays premium until the insured's death or age 100. has the lowest annual premium
Limited Payment Whole Life insurance
designed so premiums for coverage will be completely paid up well before the age of 100 (eg- 20-pay or LP-65 where its completely paid up at age 20 or 65). For people who don't want to pay premiums after a certain age however willing to pay for slightly h
Single Premium whole life (SPWL)
designed to provide a level death benefit to the insured age 100 for a one time lump sum payment. This policy is completely paid-up after one premium and it generates immediate cash; usually requires a minimum premium
Modified Whole Life
type of whole life insurance that charges a lower premiums (similar to term rates) in the first few policy years, eg 3-5 years and then a higher premium for the remainder of the insureds life. The higher subsequent premium is higher than a straight life p
Adjustable Life
best of both worlds ( perm. and term coverage). Can assume either form; insured usually determines how much coverage is needed and the affordable amount of premium. THen insurer will determine type of insurance needed to meet insured needs. As needs chang
provisions
stipulte the rights and obligations of an insurance contract and are fairly universal from one policy to the next
Riders
modify provision that already exist and to increase or decrease policy benefits and premiums