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382 Cards in this Set

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401K Plan

In the US, a type of savings plan that allows employees to make contributions on a pre-tax basis

absolute assignment

an assignment of a life insurance policy under which the policy owner transfers all of his/her policy ownership rights to the assignee

accelerated death benefit

a supplemental life insurance policy benefit which provides that a policyowner may elect to receive all or part of the policy's death benefit before the insured's death if certain conditions are met. Also known as a living benefit

acceptance

the offer's unqualified agreement to be bound to the terms of the offer

accidental death and dismemberment (AD&D) benefit

a supplemental life insurance policy benefit that provides an accidental death benefit and provides a dismemberment benefit payable if an accident causes the insured to lose any two limbs or sight in both eyes

accidental death benefit

a supplemental life insurance policy benefit that provides a death benefit in addition to the policy's basic death benefit if the insured dies as a result of an accident

accumulated value

during a deferred annuity's accumulation period, the amount paid for the deferred annuity, plus the investment earnings, minus the amount of any withdrawals and fees. Also known as accumulation value or income value

accumulation at interest dividend option

a policy dividend option under which the policy dividends are left on deposit with the insurer to accumulate at interest

accumulation period

the period between the contract owner's purchase of a deferred annuity and the beginning of the payout period

actively-at-work provision

a group insurance policy provision which states that, in order to be eligible for coverage, an employee must be actively at work - rather than ill on leave - on the day the insurance coverage is to take effect

activities of daily living (ADLs)

the activities of eating, bathing, dressing, continence, toiling, or transferring into or out of a bed, chair, or wheelchair

actuarial assumptions

the assumed values used in the financial design of a product

actuary

an expert in financial risk management and the mathematics and modeling of insurance, annuities, and financial instruments

additional term insurance dividend option

a policy dividend option under which the insurer uses each policy dividend to purchase one-year term insurance of the insured's life

administrative services only (ASO) contract

a contract under which an insurer or other organization agrees to provide some or all administrative services for a self-insured group health insurance plan

aggregate stop-loss insurance

stop-loss insurance under which the stop-loss insurer begins to reimburse the employer for claims when the employer's total claims exceed a stated dollar amount within a stated period of time

aleatory contract

a contract under which one party provides something of value to another party in exchange for a conditional promise

allowable expenses

those reasonable and customary expenses than an insured incurred and that are covered under the insured's group medical expense plans

annual statement

an accounting report which every US insurer prepares each calendar year and files with the insurance department in each state in which it operates

annuitant

the person whose lifetime is used to determine the amount of benefits payable under an annuity contract

annuity

a series of periodic payments

annuity contract

a contract under which an insurer promises to make a series of periodic payments to a named individual in exchange for a premium or series of premiums

annuity period

the time span between each of the payments in the series of periodic annuity payments

anti-selection

the tendency of individuals who believe they have a greater-than-average likelihood of loss to seek insurance protection to a greater extent than do other individuals. Also known as adverse selection or selection against the insurer

applicant

the person or business that applies for an insurance policy

asset

an item of value that a company owns. Examples of assets include cash, buildings, and investments

assignee

the party to whom life insurance property rights are transferred

assignment

an agreement under which an insurance policy owner transfers some or all of his ownership rights in the policy to another party

assignment provision

a life insurance policy provision which describes the roles of the insurer and the policy owner when the policy is assigned

assignor

the policy owner who makes an assignment of a life insurance policy

attachment point

For stop-loss insurance, the total dollar amount of claimsthat the employer must pay within a stated period of time before the stop-lossinsurer begins to reimburse the employer. Sometimes referred to as the aggregate deductible.

attained age

The age an insured has reached (attained) on a specified date

attained age conversion

A conversion of a term life insurance policy to a cashvalue life insurance policy in which the premium rate for the cash value policyis based on the insured’s age at the time the policy is converted

automatic dividend option

A specified policy dividend option that the insurerwill apply if a policyowner does not choose an option

automatic nonforfeiture benefit

A specific nonforfeiture benefit that becomeseffective automatically when a renewal premium for a cash value life insurancepolicy is not paid by the end of the grace period and the policyowner has notelected another nonforfeiture option

automatic premium loan (APL) option

A cash value life insurance policy nonforfeiture option under which the insurer will automatically pay an overdue premium for the policyowner by making a loan against the policy’s cash value aslong as the cash value equals or exceeds the amount of the premium due

back-end sales charge

An amount charged to an annuity contract owner whenshe withdraws money from an contract. Also known as a surrender charge

bargaining contract

A contract in which both parties, as equals, set the termsand conditions of the contract

basic medical expense coverage

Medical expense insurance coverage provid-ing separate benefits for each type of covered medical care cost. Basic coverage typically provides benefits for hospital, surgical, and physicians’ expenses

beneficiary

The person or party the policyowner names to receive the life insurance policy benefit

benefit formula

A formula that describes the calculation of the a plan’s financialobligation to participants in a retirement plan

benefit period

The time during which the insurer agrees to pay income benefitsto the insured under a disability income or long-term care insurance policy

benefit schedule

A schedule included in a group life insurance policy that definesthe amount of life insurance the policy provides for each insured

benefit trigger

A long-term care insurance policy requirement specifyingthe conditions that establish an insured’s eligibility to receive long-term carebenefits

bilateral contract

A contract in which both parties make legally enforceablepromises when they enter into the contract

blended rating

A method of setting group insurance premium rates under whichthe insurer uses a combination of manual rating and experience rating

block of policies

A group of policies issued to insureds who are all the same age,the same sex, and in the same risk classification

board of directors

A group of individuals who are responsible for overseeing themanagement of a corporation

business continuation insurance plan

An insurance plan designed to enable abusiness owner (or owners) to provide for the business’ continued operation ifthe owner or another key person dies

buy-sell agreement

An agreement in which (1) one party agrees to purchase thefinancial interest that a second party has in a business following the secondparty’s death and (2) the second party agrees to direct his estate to sell his inter-est in the business to the purchasing party

calendar-year deductible

A deductible that applies to the total of all allowableexpenses an insured incurs during a given calendar year

capital

An amount of money that a company’s owners invested in the company,usually through the purchase of company stock

cash dividend option

A policy dividend option under which the insurance company sends the policyowner a check in the amount of the policy dividend thatwas declared

cash payment nonforfeiture option

A cash value life insurance policy nonforfeiture option under which the policyowner discontinues premium payments andreceives the policy’s cash surrender value in a lump-sum payment

cash surrender value

The amount of the cash value that a policyowner is entitledto receive upon surrender of the policy. Also known as the surrender value orsurrender benefit

cash value life insurance

Life insurance that provides insurance coveragethroughout the insured’s lifetime and provides a savings element, known as thecash value. Sometimes referred to as permanent life insurance

certificate holder

An individual who is insured under a group insurance plan and who has received a certificate of insurance

certificate of authority

A document that grants an insurer the right to conduct aninsurance business and sell insurance products in the jurisdiction that grants thecertificate. Also known as a license

certificate of insurance

A document that describes the coverage that the groupinsurance contract provides and a group insured’s rights under the contract

children's insurance rider

A supplemental life insurance policy benefit that provides term life insurance coverage on the insured’s children

claim

A request for payment under the terms of an insurance policy

claim costs

The costs the insurer predicts that it will incur to provide the policy benefits promised under a health insurance policy

class designation

A beneficiary designation that identifies a certain group of persons, rather than naming each person

closed contract

A contract for which only those terms and conditions that areprinted in—or attached to—the contract are considered to be part of the con-tract

cognitive impairment

A reduction in a person’s ability to think, reason, or remember

coinsurance

An expense participation requirement imposed by many medicalexpense plans; the requirement, generally, is a specified percentage of all allowable expenses that remain after the insured has paid the deductible and thatmust be paid by the insured

collateral assignment

A temporary assignment of the monetary value of a lifeinsurance policy as collateral—or security—for a loan

commutative contract

A contract under which the parties specify in advance thevalues that they will exchange. Moreover, the parties generally exchange itemsor services that they think are of relatively equal value

compounding

Calculating an interest amount on both the principal and theaccrued interest

compound interest

Interest on both the principal and the accrued interest

comprehensive major medical policy

A medical expense insurance policy thatcombines the coverages provided by both a supplemental major medical policyand an underlying basic medical expense policy

conditional promise

A promise to perform a stated act if a specified, uncertainevent occurs. If the event does not occur, the promise will not be performed

consideration

A requirement for the formation of a valid informal contract thatis met when each party gives or promises something that is of value to the otherparty

consolidation

As it relates to the financial services industry, the combination offinancial services institutions within or across sectors

contingent beneficiary

The party named to receive the policy proceeds if theprimary beneficiary should die before the insured. Sometimes referred to as asecondary beneficiary or successor beneficiary

contingent payee

(1) The person or party who will receive any life insurance pro-ceeds still payable at the time of the payee’s death. Also known as the successorpayee. (2) The person or other entity who will receive any remaining annuitypayments upon the death of the payee

continuous-premium whole life policy

A whole life insurance policy underwhich premiums are payable until the death of the insured. Sometimes referredto as a straight life insurance policy or an ordinary life insurance policy

contract

A legally enforceable agreement between two or more parties

contract of adhesion

A contract that one party prepares and that the other partymust accept or reject as a whole, generally without any bargaining between theparties to the agreement

contract of indemnity

An insurance policy under which the amount of the policybenefit payable for a covered loss is based on the actual amount of financial lossthat results from the covered event, as determined at the time of the event

contract owner

The person or other entity who owns and exercises all the rightsand privileges of an annuity contract

contractual capacity

The legal capacity to make a contract

contributory plan

A group insurance plan under which insured group membersmust pay part or all of the premium for their coverage

convergence

The movement toward a single financial institution being able toserve a customer’s banking, insurance, and securities needs

conversion privilege

Principles of Insurance (1) A term life insurance policy provision that allows thepolicyowner to change (convert) the policy to a cash value policy without providing evidence that the insured is an insurable risk. (2) A group life insurance policy provision that allows a group insured whose coverage terminatesfor certain reasons to convert her group life insurance coverage to an individuallife insurance policy, usually without presenting evidence of her insurability

conversion provision

A group medical expense insurance policy provision thatgives an insured group member who is leaving the group a limited right topurchase an individual medical expense policy without presenting evidence ofinsurability

convertible term insurance policy

A term life insurance policy that gives thepolicyowner the right to convert the term policy to a cash value life insurancepolicy

coordination of benefits (COB) provision

A group medical expense insurancepolicy that is designed to prevent a group insured who is covered under morethan one group medical expense policy from receiving benefit amounts thatare greater than the amount of medical expenses the insured actually incurred

copayment

A specified, fixed amount paid by a managed care plan member to anetwork provider when she receives services from the provider

corporation

A legal entity that is created by the authority of a governmental unit,through a process known as incorporation, and is separate and distinct from thepeople who own it

cost of benefits

The value of all benefits under a product. Sometimes referred toas the cost of insurance

cost-of-living adjustment (COLA) benefit

A disability income insurance benefitthat provides for periodic increases in the disability income benefit amount thatthe insurer will pay to a disabled insured; these increases usually correspond toincreases in the cost of living

credit life insurance

A type of term life insurance designed to pay the balancedue on a loan if the borrower dies before the loan is repaid

daily benefit amount

Under a long-term care insurance policy, the maximumamount the insurer will pay for each day of an insured’s long-term care at a carefacility or in the patient’s home

death benefit

An amount of money payable to a beneficiary designated by adeferred annuity contract owner if the contract owner dies before the annuitypayments begin. Also known as a survivor benefit

declined risk

A proposed insured who is considered to present a risk that is toogreat for the insurer to cover

decreasing term life insurance

Term life insurance that provides a policy benefitthat decreases in amount over the term of coverage

deductible

A flat dollar amount of eligible medical expenses that the insured mustpay before the insurer begins making any benefit payments under a medicalexpense insurance policy

deferred annuity

An annuity under which periodic income payments are scheduled to begin more than one annuity period after the date on which the annuitywas purchased

defined benefit formula

A retirement plan benefit formula that specifies theamount of retirement benefit a plan sponsor promises to provide to each planparticipant

defined benefit plan

A retirement plan structured according to a defined benefitformula

defined contribution formula

A retirement plan benefit formula that specifiesthe level of contributions that the plan sponsor promises to make to the plan

defined contribution plan

A retirement plan structured according to a definedcontribution formula

dental expense coverage

Medical expense insurance coverage that provides benefits for routine dental examinations, preventive dental work, and dental procedures needed to treat tooth decay and diseases of the teeth and jaw

direct writer

In a reinsurance transaction, the insurance company that purchasesreinsurance to transfer all or part of the risks on insurance policies the companyissued

disability buyout coverage

Disability income insurance coverage that providesbenefits designed to fund the buyout of a partner’s or owner’s interest in a business should he become disabled

disability income benefit

A supplemental life insurance policy benefit that provides a monthly income benefit to the policyowner-insured if she becomestotally disabled while the policy is in force

disability income coverage

Health insurance coverage that provides incomereplacement benefits to an insured who is unable to work because of sicknessor injury

dividend options

Specified methods by which the owner of a participating lifeinsurance policy or participating annuity may receive policy dividends

divisible surplus

A portion of an insurance company’s surplus set aside specifically for distribution to owners of participating policies

domicile

The jurisdiction in which a company incorporates

dread disease (DD) benefit

An accelerated death benefit under which the insureragrees to pay a portion of the policy’s face amount to the policyowner if theinsured suffers from one of a number of specified diseases. Also known as acritical illness benefit

eligibility period

A specified period of time, usually 31 days, during which a newgroup member may first enroll for group insurance coverage. Also known as anenrollment period

elimination period

The specific amount of time that the insured must be disabledbefore becoming eligible to receive disability income benefits or the specificamount of time the insured must be receiving long-term care before becomingeligible to receive long-term care benefits

endowment insurance

Insurance that provides a policy benefit payable eitherwhen the insured dies or on a stated date if the insured is still alive on that date

entire contract provision

An insurance and annuity policy provision that definesthe documents that constitute the contract between the insurance company andthe policyowner

equity-indexed annuity (EIA)

A type of annuity that offers certain principal andearnings guarantees, but also offers the possibility of additional earnings bylinking the contract to a published index

estate

The accumulated assets that an individual owns when he dies

estate plan

A plan that considers the amount of assets and debts that a person islikely to have when she dies and how best to preserve those assets so that theycan be distributed as she desires

evidence of insurability

Proof that a given person is an insurable risk

exclusion

An insurance policy provision that describes circumstances underwhich the insurer will not pay the policy proceeds following an otherwise cov-ered loss

experience rating

A method of setting group insurance premium rates underwhich the insurer considers the particular group’s prior claims and expenseexperience

extended term insurance nonforfeiture option

A cash value life insurance policy nonforfeiture option under which the policyowner discontinues paying pre-miums and uses the policy’s net cash surrender value to purchase term insur-ance for the full coverage amount provided under the original policy, for as longa term as the net cash surrender value can provide

face amount

The amount of the policy benefit that is payable if the insured dieswhile the policy is in force

family income coverage

A plan of decreasing term life insurance that providesto the beneficiary a stated monthly income benefit amount if the insured diesduring the term of coverage

family income policy

A cash value life insurance policy with a family incomecoverage rider

family policy

A whole life insurance policy that includes term life insurance coverage on the primary insured’s spouse and children

federal system

A system of government in which a federal government and anumber of lower level governments share governmental powers

financial design

A set of values for the numerous elements of a life insuranceproduct

financial institution

A business that owns primarily financial assets, such asstocks and bonds, rather than fixed assets, such as equipment and raw materials

financial intermediary

An organization that collects funds from one group ofpeople, businesses, and governments, known as suppliers, and channels themto another group, known as users

financial model

A computer-based mathematical model that approximates theoperation of real-world financial processes

financial services industry

The industry that is made up of various kinds offinancial institutions that help people, businesses, and governments save, borrow, invest, and otherwise manage money

first-dollar coverage

Medical expense coverage under which the insurer beginsto reimburse the insured for eligible medical expenses without first requiring anout-of-pocket contribution from the insured

fixed amount annuity

An annuity that guarantees the payment of periodic incomepayments of a specified minimum dollar amount for as long a period as theannuity’s accumulated value will provide, regardless of whether the annuitantlives or dies

fixed amount option

(1) A life insurance policy settlement option under whichthe insurance company pays equal installments of a stated amount until the policy proceeds, plus the interest earned, are exhausted. (2) An annuity contractpayout option under which the insurer provides periodic income payments of atleast a specified minimum amount for as long a period as the annuity’s accumulated value will provide, regardless of whether the annuitant lives or dies

fixed annuity

An annuity contract under which the insurer guarantees the minimum interest rate that will be applied to the annuity’s accumulated value during the accumulation period and the minimum amount of the periodic incomepayments that will be made during the payout period

fixed period option

(1) A life insurance policy settlement option under which theinsurance company agrees to pay policy proceeds in equal installments to thepayee for a specified period of time. (2) An annuity contract payout optionunder which the insurer makes annuity payments for a specified period of time

fixed premium universal life insurance policy

A universal life insurance policythat requires a series of scheduled premium payments of a specified amount fora specified length of time (typically 8 to 10 years) or until the insured’s death,whichever comes first

fixed subaccount

A subaccount that guarantees payment of a fixed rate of interestfor a specified period of time

flexible-premium annuity

An annuity that is purchased by the payment of periodic premiums that can vary between a set minimum amount and a set maximum amount

flexible premium universal life insurance policy

A universal life insurance policy that allows the policyowner to alter the amount and frequency of premiumpayments, within specified limits

formal contract

A contract that is enforceable because the parties met certainformalities concerning the form of the agreement

fraternal benefit society

A nonprofit organization that is operated solely for thebenefit of its members and that provides social, as well as insurance, benefits toits members

fraudulent misrepresentation

A misrepresentation that was made with the intentto induce the other party to enter into a contract and that did induce the innocentparty to enter into the contract

free-look provision

An insurance and annuity policy provision that gives thepolicyowner a stated period of time—usually at least 10 days—after the policyis delivered in which to examine the policy

front-end sales charge

An amount charged to an annuity contract owner at thetime she pays for the annuity. The front-end charge compensates the insurer forsales commissions and other expenses associated with acquiring the business

fully insured plan

A group health insurance plan under which the group policyholder makes periodic premium payments to an insurance company, and theinsurance company bears the responsibility for all claim payments

fully self-insured plan

A group insurance plan under which the group policyholder—usually an employer—takes complete responsibility for all claim payments and related expenses

funding mechanism

The way in which a group insurance plan’s claim costs and administrative expenses are paid

funding vehicle

An arrangement for investing a retirement plan’s assets asthose assets are accumulated

future purchase option benefit

A disability income benefit that grants theinsured the right to increase the benefit amount in accordance with increases inthe insured’s earnings

general account

An undivided investment account in which an insurer maintainsfunds that support its contractual obligations to pay benefits under its guaran-teed insurance products, such as whole life insurance and other nonvariableproducts

grace period

A specified length of time within which a renewal premium that isdue may be paid

grace period provision

An insurance policy provision that specifies a length oftime following each renewal premium due date within which the premium maybe paid without loss of coverage

graded-premium policy

A whole life insurance policy that calls for three ormore levels of annual premium payment amounts, increasing at specified pointsin time—such as every three years—until reaching the amount to be paid as alevel premium for the rest of the life of the policy

group creditor life insurance

Group life insurance issued to a creditor, such as abank, to insure the lives of the creditor’s current and future debtors

group insurance

A method of providing life or health insurance coverage for agroup of people under one insurance contract

group insurance policy

A policy that is issued to insure the lives or health of aspecific group of people, such as a group of employees

group insured

An individual covered by a group insurance policy

guaranteed insurability (GI) benefit

A supplemental life insurance policy benefit that gives the policyowner the right to purchase additional insurance ofthe same type as the basic life insurance policy—for an additional premiumamount—on specified option dates (typically every three years) during the lifeof the policy without supplying evidence of the insured’s insurability

guaranteed minimum accumulation benefit (GMAB)

A variable annuity contract feature which guarantees that the accumulated value will be at least a min-imum amount if the contract remains in force for a specified period of time—typically 7 to 10 years

guaranteed minimum death benefit (GMDB)

A variable annuity contract feature which guarantees that, if the annuitant dies before periodic income payments begin, the beneficiary will receive at least a stated amount, regardless ofthe contract’s accumulated value at that time

guaranteed minimum income benefit (GMIB)

A variable annuity contract feature that guarantees a minimum periodic income payment regardless of theannuity’s investment performance if the contract remains in force for a specified period of time—typically 7 to 10 years

guaranteed minimum withdrawal benefit (GMWB)

A variable annuity contract feature which guarantees that up to a certain percentage of the amountpaid into the contract will be available for withdrawals annually during theaccumulation period, even if subaccount investments perform poorly

health maintenance organization (HMO)

A health care financing and delivery system that provides comprehensive health care services to plan members,often referred to as subscribers, in a particular geographic area

immediate annuity

An annuity that provides periodic income payments that generally are scheduled to begin one annuity period after the date the contract isissued

incontestability provision

An insurance and annuity policy provision thatdescribes the time limit within which the insurer has the right to avoid the contract on the ground of material misrepresentation in the application

increasing term life insurance

Term life insurance that provides a death benefitthat starts at one amount and increases by some specified amount or percentageat stated intervals over the policy term

indemnity benefits

Contractual benefits that are provided under insurance policies based on the actual amount of the insured’s financial loss

indemnity method

A method of determining the amount of benefit payable undera long-term care insurance policy under which the insurer pays the insured thedaily benefit amount regardless of the actual expenses for long-term care of theinsured

individual deductible

For stop-loss insurance, the dollar amount of claims thatan employer must pay for any individual in a stated period of time before thestop-loss insurer reimburses the employer for any excess amount

individual retirement annuity

An individual deferred annuity that qualifies forfavorable federal income tax treatment because it meets the requirements specified in the federal tax laws for individual retirement arrangements

individual retirement arrangement (IRA)

A tax-deferred savings arrangementthat an individual establishes and that meets certain requirements specified inthe U.S. federal tax laws

individual stop-loss coverage

Stop-loss insurance under which insurer reim-burses the employer for all claims paid for any individual that exceed astated amount in a stated period of time.

inflation protection provision

A long-term care insurance policy provision thateither automatically increases the benefit amount each year by a specified percentage or allows the insured to opt for a higher daily benefit amount at specified intervals during the lifetime of the policy without having to show evidenceof insurability

informal contract

A contract that is enforceable because the parties to thecontract met requirements concerning the substance of the agreement ratherthan requirements concerning the form of the agreement

insurable interest

The interest an insurance policyowner has in the risk that isinsured. A policyowner has an insurable interest if he is likely to suffer a genu-ine loss or detriment should the event insured against occur

insurance commissioner

The individual who is responsible for directing theoperations of the state insurance department

insurer-administered group plan

A group insurance plan for which the insureris responsible for handling the administrative and recordkeeping aspects of theplan

intangible property

Property that represents ownership of a legal right, such asa contractual right

interest option

A life insurance policy settlement option under which the insurance company invests the policy proceeds and periodically pays interest onthose proceeds to the payee

investment earnings

The money an insurer earns from investing the funds itreceives from customers

investment management fee

A fee charged the owner of a variable annuity whichcovers the costs of managing and operating the investment funds underlying thevariable subaccounts

joint and survivor life annuity

A life annuity that provides periodic income pay-ments to two or more annuitants, and those payments continue until both or allof the annuitants die

joint mortgage life insurance

A variation of mortgage life insurance that pro-vides the same benefit as a mortgage life insurance policy except the joint policyinsures the lives of two people

joint whole life insurance

A plan of whole life insurance that has the same features and benefits as individual whole life insurance, except that it insures twopeople under the same policy

juvenile insurance policy

An insurance policy that is issued on the life of a childbut owned and paid for by an adult, usually the child’s parent or legal guardian

key person

Any person or employee whose continued participation in a businessis vital to the success of the business and whose death would cause the businessto incur a significant financial loss

key person disability coverage

Disability income coveragee that provides ben-efit payments to a business if an insured key person becomes disabled

key person life insurance

Individual life insurance that a business purchases onthe life of a key person

lapse rate

The percentage of a specified group of policies in force at the beginning of a specified period, such as a year, that are terminated by the end of thatperiod for reasons other than the death of the insured

last survivor life insurance

A variation of joint whole life insurance under whichthe policy benefit is paid only after both people insured by the policy have died

law of large numbers

A mathematical theory which states that, typically, themore times we observe a particular event, the more likely that our observedresults will approximate the true probability that the event will occur

legal actions provision

A health insurance policy provision that limits the timeduring which a claimant who disagrees with the insurer’s claim decision has theright to sue the insurer to collect the amount the claimant believes she is owedunder the policy

legal reserve system

The system insurers use to set financial values for life insurance products

level premium system

A life insurance premium system that allows a policyowner to pay the same premium amount each year a policy is in force

level premium term life insurance

Term life insurance that provides a policybenefit that remains the same over the term of the policy

liability

A company’s debt or future obligation

life annuity

An annuity that provides periodic income payments for at least thelifetime of a named individual

life annuity with period certain

A life annuity which guarantees that the insurerwill make periodic income payments throughout the annuitant’s life and guarantees that the payments will be made for at least a certain period, even if theannuitant dies before the end of that period

life income option

A life insurance policy settlement option under which theinsurance company agrees to pay the policy proceeds in periodic installmentsover the payee’s lifetime

life insurance

Insurance that pays a benefit upon the death of a named person

life with refund annuity

A life annuity that provides periodic income paymentsthroughout the lifetime of the annuitant and guarantees that at least the purchaseprice of the annuity will be paid out

limited-payment whole life policy

A whole life insurance policy for which pre-miums are payable only for a stated period of time or until the insured’s death,whichever occurs first

long-term care (LTC) coverage

Health insurance that provides benefits for med-ical and other services to insureds who need care for an extended period in theirown homes or in a qualified facility

long-term care (LTC) insurance benefit

An accelerated death benefit underwhich the insurer agrees to pay a monthly benefit to a policyowner if the insuredrequires constant care for a medical condition

long-term group disability income coverage

Group disability income coveragethat provides a maximum benefit period of more than one year

long-term individual disability income coverage

Individual disability incomecoverage that provides a maximum benefit period of five years or more

loss ratio

The ratio of benefits an insurer paid out for a block of policies to thepremiums the insurer received for those policies

lump-sum distribution

The distribution of the accumulated value of an annuityin a single payment

major medical expense coverage

Medical expense insurance coverage thatprovides substantial benefits for (1) basic hospital, surgical, and physicians’expenses, (2) additional medical services related to illness or injuries, and(3) preventive care

managed care

A method of integrating the financing and delivery of health careservices within a system that manages the access to health care services and thecost of those services

managed care plan

An arrangement that integrates the financing and management of health care with the delivery of health care services to a group of individuals who have enrolled in the plan

manual rating

A method of establishing group insurance premium rates that arebased on the experience of a broad class of groups rather than on a particulargroup’s claims and expense experience

market conduct law

A law that regulates how insurance companies conductbusiness

market value adjusted (MVA) annuity

An annuity that offers multiple guar-antee periods and multiple fixed interest rates

master group insurance contract

An insurance contract that insures a numberof people

material misrepresentation

A misrepresentation that is relevant to an insurancecompany’s evaluation of the proposed insured

maturity date

(1) The date on which the insurer will pay an endowment policy’sface amount to the policyowner if the insured is still living. (2) The date onwhich the insurer begins to make the periodic income payments under an annuity contract

maximum out-of-pocket provision

A major medical expense insurance policyprovision which states that the policy will cover 100 percent of allowable medical expenses after the insured has paid a specified amount out-of-pocket tosatisfy deductible and coinsurance requirements

McCarran-Ferguson Act

A U.S. federal law under which the U.S. Congress leftinsurance regulation to the state governments, as long as Congress determinesthat regulation to be adequate

Medicaid

In the United States, a joint federal and state program that providesbasic medical expense and nursing home coverage to low-income individualsand to certain aged and disabled individuals

medical expense coverage

A type of health nsurance coverage that provides benefits to pay for the treatment of an insured’s illnesses and injuries

Medicare

In the United States, a federal government program that provides medical expense benefits to persons age 65 and older and persons with certain disabilities

misstatement of age or sex provision

A life insurance or annuity policy provi-sion that describes the action the insurer will take to adjust the amount of thepolicy benefit in the event that the age or sex of the insured is incorrectly stated

modified coverage policy

A whole life insurance policy under which the amountof insurance provided decreases by specific percentages or amounts either whenthe insured reaches certain stated ages or at the end of stated time periods

modified-premium whole life policy

A whole life insurance policy for which theannual premium amount changes after a specified initial period (typically 5 or10 years)

moral hazard

A characteristic that exists when the reputation, financial position, or criminal record of an applicant or a proposed insured indicates that theperson may act dishonestly in the insurance transaction

morbidity rate

The rate at which sickness and accidents occur among a givengroup of people

morbidity tables

Charts that show the incidence of sickness and accidents, byage, occurring among a given group of people

mortality and expense risk (M&E) charge

A fee charged the owner of a variable annuity which covers various risks and expenses assumed by the insurer,including the risk involved in providing the annuity death benefit and certainother guarantees

mortality experience table

A type of mortality table that is compiled from acompany’s own records, reflecting its insureds’ actual mortality

mortality rate

The rate at which death occurs among a specified group of peopleduring a specified period, typically one year

mortality tables

Charts that indicate the number of people in a large group whoare likely to die at certain ages

mortgage life insurance

A plan of decreasing term insurance designed to provide a benefit amount that corresponds to the decreasing amount owed on amortgage loan

mutual assent

A meeting of the minds about the terms of an agreement

mutual insurance company

An insurance company that is owned by its policyowners

National Association of Insurance Commissioners (NAIC)

In the United States,a nongovernmental association of the insurance commissioners of all the stateswhose primary function is to promote uniformity of state insurance regulationby developing model laws and regulations as guidelines for the states

net cash surrender value

The amount the owner of a cash value life insurancepolicy actually receives—after the insurer makes any additions or subtractionsto the cash surrender value—upon surrendering the policy

network

A group of physicians, hospitals, and ancillary services providers that aspecific managed care plan has contracted with to deliver health care servicesto plan members

noncontributory plan

A group insurance plan under which insured group members are not required to pay any part of the group insurance premium

non duplication of benefits provision

A coordination of benefits provision that, ifincluded in a secondary provider’s plan, limits the amount payable by the secondary plan to the difference, if any, between the amount paid by the primaryplan and the amount that would have been payable by the secondary plan hadthat plan been the primary plan

nonforfeiture provision

A cash value life insurance policy provision that setsforth the options available to the owner of a cash value policy if the policy lapsesor if the policyowner decides to surrender—or terminate—the policy

nonparticipating policy

A type of insurance policy in which the policyownerdoes not share in the insurer’s surplus

offer

A proposal to enter into a binding contract with another party

open contract

A contract that identifies the documents that constitute the contract between the parties, but all the enumerated documents are not necessarilyattached to the contract

open enrollment period

A period of time—typically a specified 30 or 31 daysper year—during which eligible people who did not join a group insuranceplan at the first opportunity subsequently may join the plan without providingevidence of insurability

operating expenses

The expenses that arise in the normal course of an insurer’soperations

original age conversion

A conversion of a term life insurance policy to a cashvalue life insurance policy in which the premium rate for the cash value policyis based on the insured’s age when the original term policy was issued

overinsurance provision

An individual health insurance provision which statesthat the benefits payable under the policy will be reduced if the insured is over-insured

overinsured person

A person who is entitled to receive either (1) more in medical expense benefits than the actual costs incurred for treatment or (2) a greaterincome amount during disability than the amount that would have been earnedfrom working

owners' equity

The owners’ financial interest in a company, which is the difference between the amount of the company’s assets and the amount of its liabilities

ownership of property

The sum of all the legal rights that exist in a piece ofproperty

paid-up additional insurance dividend option

A policy dividend option underwhich the insurer uses any declared policy dividend to purchase paid-up additional insurance on the insured’s life

paid-up additions option benefit

A supplemental life insurance policy bene-fit that allows the owner of a whole life insurance policy to purchase single premium paid-up additions to the policy on stated dates in the future withoutproviding evidence of the insured’s insurability

paid-up policy

A life insurance policy that requires no further premium payments but continues to provide coverage

partial disability

A disability that prevents the insured either from performingsome of the duties of his usual occupation or from engaging in that occupationon a full-time basis

participating policy

A type of insurance policy under which the policyownershares in the insurance company’s divisible surplus

payout annuity

An annuity in the payout period

payout options

The choices an annuity contract owner has as to how the insurerwill distribute the funds in an annuity during the payout period

payout options provision

An annuity contract provision that lists and describeseach of the payout options from which the contract owner may select

payout period

The period during which the insurer makes periodic income payments under an annuity contract

pension

A lifetime monthly income benefit that begins at retirement

period certain

The stated period over which the insurer will make periodicincome payments for a period certain annuity

period certain annuity

An annuity that is payable for a stated period of time,regardless of whether the annuitant lives or dies

periodic fee

An amount charged the owner of an annuity contract at predetermined intervals—for example, every year or every month. A periodic fee typically compensates the insurer for its administrative expenses

personal property

All property other than real property

personal risk

The risk of economic loss associated with death, poor health, injury, and outliving one’s economic resources

physical examination provision

A disability insurance policy provision whichstates that the insurer has the right to have an insured who has submitted a claimexamined by a physician of the insurer’s choice, at the insurer’s expense

plan administrator

The party that is responsible for the administrative aspects ofa retirement plan’s operation

plan document

A detailed legal agreement that establishes the existence of anemployer-sponsored retirement plan and specifies the rights and obligations ofvarious parties to the plan

point-of-service (POS) plan

A managed care plan that combines features ofHMOs and PPOs; plan members who need medical care choose, at the point ofservice, whether to seek care in-network or out-of-network

policy benefit

A specific amount of money an insurer agrees to pay under aninsurance policy when a specific loss occurs

policy dividend

A life insurance policyowner’s or annuity contract owner’s shareof the divisible surplus

policy loan

A loan a policyowner receives from an insurer using the cash value ofa life insurance policy as security

policy loan provision

A cash value life insurance provision that specifies theterms on which the policyowner can obtain a loan against the policy’s cashvalue

policy loan repayment dividend option

A policy dividend option under whichthe insurer applies policy dividends toward the repayment of an outstandingpolicy loan

policy reserves

Liabilities that represent the amount an insurer estimates it needsto pay future benefits

policy rider

An amendment to an insurance policy that becomes part of the insurance contract and either expands or limits the benefits payable under the contract

policy withdrawal provision

A universal life insurance policy provision thatpermits the policyowner to reduce the amount of the policy’s cash value bywithdrawing up to the amount of the cash value in cash

portability provision

A provision in a group insurance policy that allows a groupinsured whose coverage terminates for certain reasons to continue her coverage under the group plan, typically without presenting evidence of insurability

portable coverage

Group insurance coverage that can be continued if an insuredemployee leaves the group

preference beneficiary clause

A policy provision included in some life insurancepolicies which states that if the policyowner does not name a beneficiary, thenthe insurer will pay the policy proceeds in a stated order of preference

preferred premium rate

A lower-than-standard premium rate charged insuredswho are classified as preferred risks

preferred provider organization (PPO)

A health care benefit arrangement thatprovides incentives for plan members to use network providers, but also provides at least some coverage for services rendered by non-network providers

preferred risk

A proposed insured who presents a significantly lower-than-average likelihood of loss

premium reduction dividend option

A policy dividend option under which theinsurer applies policy dividends toward the payment of renewal premiums

prescription drug coverage

Medical expense insurance coverage that providesbenefits for the purchase of drugs and medicines that are prescribed by a physician and are not available over-the-counter

presumptive disability

A stated condition that, if present, automatically causesthe insured to be considered totally disabled

primary care provider (PCP)

In a managed care plan, a network member whocoordinates plan members’ medical care and treatment

principal

The sum of money originally invested, loaned, or borrowed

profit sharing plan

A retirement savings plan that is funded primarily by cashcontributions payable from the employer’s profits

property/casualty (P&C) insurance company

An insurer that issues and sellsinsurance policies that cover property damage risk and liability risk. Alsoknown as property and liability insurer

pure risk

A risk that involves no possibility of gain; either a loss occurs or noloss occurs

rate of return

The investment earnings expressed as a percentage relative to theprincipal

real property

Land and whatever is growing on or attached to the land

reduced paid-up insurance nonforfeiture option

A cash value life insurancepolicy nonforfeiture option under which the policyowner discontinues payingpremiums and uses the policy’s net cash surrender value as a net single premiumto purchase paid-up life insurance of the same plan as the original policy

reimbursement method

A method of determining the amount of benefits payable under a long-term care insurance policy under which the insurer pays theinsured the amount of covered LTC expenses per day up to the stated maximumdaily benefit amount

reinstatement

The process by which an insurer puts back into force a life insurance policy that either has been terminated because of nonpayment of renewalpremiums or has been continued under the extended term or reduced paid-upinsurance nonforfeiture option

reinstatement provision

An individual life insurance policy provision thatdescribes the conditions that the policyowner must meet to put back into force alife insurance policy that either has been terminated because of nonpayment ofrenewal premiums or has been continued under the extended term or reducedpaid-up insurance nonforfeiture option

reinsurance

Insurance that one insurance company, known as the direct writeror ceding company, purchases from another insurance company, known as thereinsurer or assuming company, to transfer all or part of the risk on insurancepolicies that the direct writer issued

reinsurer

An insurance company that accepts risks transferred from anotherinsurer in a reinsurance transaction

renewable term insurance policy

A term life insurance policy that gives thepolicyowner the option to continue the coverage at the end of the specified termwithout presenting evidence of insurability

renewal premium

An insurance policy premium payable after the initial premium

renewal provision

The provision in a renewable term insurance policy that givesthe insured the right to continue coverage without presenting evidence of insur-ability

return of premium (ROP) term insurance

A form of term life insurance thatprovides a death benefit if the insured dies during the policy term and promisesa return of premiums if the insured does not die during the policy term

revocable beneficiary

A life insurance beneficiary who has no right to the policyproceeds during the insured’s lifetime because the policyowner has the unrestricted right to change the designation during the life of the insured

right of revocation

The life insurance policyowner’s right to change the beneficiary designation

risk

The chance or possibility of an unexpected result, either a gain or a loss

risk class

A grouping of insureds who represent a similar level of risk to the insurer

risk management

The process by which individuals and businesses identify andassess the risks they face and take measures to eliminate or reduce their expo-sure to those risks

Roth IRA

An IRA in which contributions are not tax-deductible, but qualifiedwithdrawals are tax-free

salary continuation plan

A fully self-insured group short-term disability incomeplan that typically provides 100 percent of the insured employee’s salary, beginning on the first day of the employee’s absence resulting from illness or injuryand continuing for a specified period

savings plan

A retirement plan to which a plan sponsor may make contributionson behalf of a plan participant if the participant makes contributions to the plan

second insured rider

A supplemental life insurance policy benefit that providesterm insurance coverage on the life of a person other than the policy’s insured

security

A certificate that represents either an ownership interest in a business(for example, a share of stock) or a debt owed by a business, government, oragency (for example, a bond)

self-administered group plan

A group insurance plan for which the grouppolicyholder is responsible for handling the administrative and recordkeepingaspects of the plan

self-insurance

A risk-management technique by which a person or businessaccepts financial responsibility for losses associated with specific risks

separate account

An investment account the insurer maintains separately fromits general account to isolate and help manage the funds placed in its variableproducts

service fee

A one-time fee charged an annuity contract owner for specific services

settlement option

Alternative methods that the owner or beneficiary of a lifeinsurance plicy can elect for receiving payment of the policy proceeds

settlement options provision

A life insurance policy provision that grants a policyowner or a beneficiary several choices as to how the insurance company willdistribute the proceeds of a life insurance policy

short-term group disability income coverage

Group disability income cover-age that provides a maximum benefit period of one year or less; such coveragecommonly specifies a maximum benefit period of 13, 26, or 39 weeks

short-term individual disability income coverage

Individual disability incomeinsurance coverage that provides a maximum benefit period ranging from one tofive years

simple interest

Interest on the original principal only

simultaneous death act

A law in many jurisdictions that governs how insurancecompanies are to evaluate common-disaster situations

single-premium deferred annuity (SPDA) contract

A deferred annuity thatis purchased with a lump-sum premium payment and provides periodicincome payments that begin more than one annuity period after the annuity ispurchased

single-premium immediate annuity (SPIA) contract

An immediate annuitythat is purchased with a lump-sum premium payment and provides periodicincome payments that begin one annuity period after the annuity is purchased

social insurance program

A welfare plan that is established by law and administered by a government and that provides the population with income security

Social Security

In the United States, a federal program that provides specifiedbenefits, including monthly retirement income benefits, to people who havecontributed to the plan during their income-earning years

sole proprietorship

A business that is owned and operated by one person

solvent

A term used to describe an insurance company that is able to meet its debts and to pay policy benefits when they come due

speculative risk

A risk that involves three possible outcomes: loss, gain, or nochange

spouse and children's insurance rider

A supplemental life insurance policybenefit offered by some insurers that provides term life insurance coverage onthe insured’s spouse and children

spouse insurance rider

A supplemental life insurance policy benefit that provides term life insurance coverage on the insured’s spouse

standard premium rate

A premium rate charged insureds who are classified asstandard risks

standard risk

A proposed insured who has a likelihood of loss that is not significantly greater than average

state insurance code

A set of laws in each state that regulate insurance in thatstate

state insurance department

An administrative agency in each state that isresponsible for making sure that companies operating in the state comply withapplicable regulatory requirements

stock bonus plan

A retirement plan into which a plan sponsor that is a stockcompany makes contributions on behalf of plan participants in the form of thecorporation’s stock

stock corporation

A corporation whose ownership is divided into units known asshares or shares of stock

stockholder dividend

A portion of a corporation’s earnings paid to the owners ofits stock

stock insurance company

An insurance company that is owned by the people andorganizations that own shares of the company’s stock

stop-loss insurance

Insurance purchased by an employer that self-insures a grouphealth insurance plan which enables the employer to place a maximum dollarlimit on its liability for paying health insurance claims

straight life annuity

A life annuity which provides periodic income payments foronly as long as the annuitant lives

subaccount

One of several alternative pools of investments to which the owner ofa variable life insurance policy or variable annuity allocates the premiums shehas paid and the cash values that have accumulated under her policy

substandard premium rate

A higher-than-standard premium rate chargedinsureds who are classified as substandard risks

substandard risk

A proposed insured who has a significantly greater-than-average likelihood of loss but is still found to be insurable

suicide exclusion provision

A life insurance policy provision which states thatpolicy proceeds will not be paid if the insured dies as the result of suicide asdefined by the policy within a specified period following the date of policyissue

supplemental major medical policy

An insurance policy issued in conjunctionwith an underlying basic medical expense insurance policy to provide benefitsfor expenses that exceed the benefit levels of the underlying basic plan and,often, for expenses that are not covered by the underlying plan

surplus

For an insurer, the amount by which the company’s assets exceed itsliabilities and capital

surrender charge

Principles of Insurance (1) A specific charge imposed if the owner of a cash valueinsurance policy surrenders the policy for its cash surrender value. (2) A feetypically imposed if a deferred annuity contract is surrendered within a statednumber of years after it was purchased

surrender value

The accumulated value of a deferred annuity less any surrendercharges included in the contract

survivorship clause

A policy provision included in some life insurance policieswhich states that the beneficiary must survive the insured by a specified period,usually 30 or 60 days, to be entitled to receive the policy proceeds

tangible property

Property that has physical form, such as automobiles, jewelry,or clothing

terminal illness (TI) benefit

A supplemental life insurance policy benefit underwhich the insurer pays a portion of the policy’s death benefit to a policyowner-insured who suffers from a terminal illness and has a physician-certified lifeexpectancy of less than a stated time, generally 12 or 24 months

term life insurance

Life insurance that provides a death benefit only if theinsured dies during the period specified in the policy

third-party administrator (TPA)

An organization other than an insurancecompany that provides administrative services to the sponsors of group benefitplans

third-party policy

A policy purchased by one person or business on the life ofanother person

total disability

A disability that meets the requirements of a disability benefitprovision in an insurance policy or policy rider and that qualifies a coveredperson to receive disability income benefits

traditional IRA

An IRA in which contributions may be tax-deductible and investment earnings are tax-deferred until the funds are withdrawn

underwriter

An insurance company employee who is responsible for evaluatingproposed risks

underwriting

The process of identifying and classifying the degree of risk represented by a proposed insured

underwriting guidelines

The general rules that an insurer uses when assigningproposed insureds to an appropriate risk class

unilateral contract

A contract in which only one of the parties makes a legallyenforceable promise when entering into the contract

universal life (UL) insurance

A form of cash value life insurance that is char-acterized by its flexible premiums, its flexible face amount and death benefitamount, and its separation of the three primary policy elements

usual, customary, and reasonable (UCR) fee

The amount that medical care providers within a particular geographic region commonly charge for a particularmedical service

valued contract

An insurance policy that specifies the amount of policy benefitthat will be payable when a covered loss occurs, regardless of the actual amountof loss that was incurred

variable annuity

An annuity under which the amount of the accumulated valueand the amount of the periodic income payments fluctuate in accordance withthe performance of one or more specified investment funds

variable life (VL) insurance

A form of cash value life insurance in which pre-miums are fixed, but the death benefit and other values may vary, reflecting theperformance of investment subaccounts that the policyowner selects

variable universal life (VUL) insurance

Cash value life insurance that combines the premium and death benefit flexibility of universal life insurancewith the investment flexibility and risk of variable life insurance

vested interest

A property right that has taken effect and cannot be altered orchanged without the consent of the person who owns the right

vesting

A retirement plan’s right to receive partial or full benefits under the planeven if he terminates employment prior to retirement

vision care coverage

Medical expense coverage that provides the insured withbenefits for expenses incurred in obtaining eye examinations and correctivelenses

voidable contract

A contract under which one party has the right to avoid hisobligations under the contract

waiver of premium for disability (WP) benefit

A supplemental life insurancepolicy benefit under which the insurer promises to give up— to waive—its rightto collect premiums that become due while the insured is totally disabled

waiver of premium for payor benefit

A supplemental life insurance policy benefit which provides that the insurance company will waive its right to collect apolicy’s renewal premiums if the policyowner dies or becomes totally disabled

whole life insurance

A type of cash value life insurance that provides lifetimeinsurance coverage usually at a level premium rate that does not increase as theinsured ages

withdrawal charge

A charge imposed on the owner of a deferred annuity whenthe owner withdraws more than a stated percentage of the annuity contract’saccumulated value in one year

withdrawal provision

A deferred annuity contract provision that gives the contract owner the right to withdraw all or part of the contract’s accumulated valueduring the accumulation period

yearly renewable term (YRT) insurance

A plan of term life insurance that pro-vides coverage for one year and is renewable for a stated number of years