Licensing Exam Prep Health Insurance Lesson Key Points Review

Vocabulary flashcards covering fundamental health insurance terminology, policy provisions, riders, medical expense plans, disability insurance, senior products, underwriting, and tax rules from the WebCE review.

Pure Risk

The type of risk involving only the chance of loss or no loss, which is the only type of risk that is insurable.

Loss

An unplanned reduction in economic value.

Peril

The specific cause of a loss, such as death in life insurance or illness, accidental injury, and disability in health insurance.

Hazard

A condition that increases the chance of a peril occurring.

Law of Large Numbers

A mathematical principle of probability underlying insurance operations and risk forecasting.

Mutual Company

An insurance provider owned by policyowners that issues participating policies paying policy dividends to its policyowners.

Stock Company

An insurance provider owned by stockholders that pays stock dividends to stockholders and does not issue participating policies.

Home Service Company

An insurance provider that issues industrial life insurance in relatively small face amounts.

Ordinary Life Insurance

Life insurance issued in face amounts greater than $25,000$.

Express Authority

Producer authority explicitly defined and written in the contract with the insurer.

Implied Authority

Producer authority that is unwritten but understood to be part of the job to perform express duties.

Apparent Authority

Authority that a producer allows to exist through actions or statements, perceived by the public but not approved by the insurer.

Life Insurance Surrender Cost Index

A cost index used to evaluate life insurance policy cost assuming future cash value withdrawal.

Life Insurance Net Payment Cost Index

A cost index used to evaluate life insurance policy cost assuming no cash value withdrawal.

Buyer's Guide

A required disclosure document explaining the general features, benefits, and conditions of the type of insurance being considered.

Policy Summary

A required disclosure document providing detailed information about the specific policy being purchased.

Contract of Adhesion

A contract drafted by one party (the insurer) in which any ambiguities are interpreted to the benefit of the policyowner.

Indemnity Contract

An insurance contract that reimburses actual loss incurred, typical in health and property insurance.

Valued Contract

An insurance contract that pays a stated policy face amount regardless of actual financial loss, typical in life insurance.

Representations

Truthful statements made by an applicant on an insurance application to the best of their knowledge.

Field Underwriting

The initial evaluation process conducted by an agent, including completing the application, writing the agent's report, and scheduling medical exams.

Conditional Receipt

A premium receipt providing coverage starting from the application date or medical exam date, provided the applicant is found insurable as applied for.

Binding Receipt

A receipt (also called a Temporary Insurance Agreement) providing immediate temporary coverage upon premium payment regardless of insurability.

Statement of Continued Good Health

A document signed by the applicant upon policy delivery confirming health conditions have not changed, required when initial premium was not collected with application.

Time Limit on Certain Defenses

A required NAIC provision stating that statements on the application cannot be used to void the policy or deny claims after usually 2 years.

Grace Period Provision

A required policy provision allowing an extra 7, 10, or 31 days after the due date to pay an overdue premium before the policy lapses.

Reinstatement Provision

A required policy provision specifying conditions to restore a lapsed policy, where approval is automatic if the insurer does not act within 45 days.

Legal Actions Provision

A required provision stating an insured must wait at least 60 days after submitting proof of loss before filing a lawsuit against the insurer, and no later than 3 years after claim decision.

Relation-of-Earnings to Insurance

An optional NAIC provision limiting total disability insurance coverage so that benefit payments do not exceed actual earnings.

Conformity with State Statutes

An optional NAIC provision ensuring that any policy provision in conflict with state law is automatically amended to conform to state statutes.

Free Look Period

A provision (Right to Examine) allowing policyowners a set timeframe (typically 10 days; 30 days for LTC and Medicare Supplement) to review and return a policy for a full refund.

Probationary Period

A specified period after policy issue when illness losses are not covered, designed to exclude pre-existing conditions, while accident losses are covered immediately.

Elimination Period

A waiting period after the onset of disability before benefits begin, functioning like a deductible to reduce premiums.

Noncancellable Policy

A renewability provision where the insurer cannot cancel coverage, change premium rates, or alter policy terms up to a specified age.

Guaranteed Renewable Policy

A renewability provision guaranteeing the right to renew the policy to a specified age, though the insurer may adjust premiums by class.

Own Occupation Definition

A disability policy definition classifying an insured as totally disabled if unable to perform the duties of their regular occupation.

Any Occupation Definition

A disability policy definition classifying an insured as totally disabled only if unable to perform duties of any occupation for which suited by education, training, or experience.

Presumptive Total Disability

A policy condition where total disability is automatically presumed for severe, permanent losses (such as blindness) without requiring ongoing proof.

Residual Disability

A disability benefit compensating for reduced income when working part-time following a disability, without requiring an initial period of total disability.

Recurrent Disability

A provision stating that if a disability recurs within a set period from the same cause, it waives a new elimination period but continues the same benefit period.

Cost-of-Living Adjustment (COLA) Rider

A disability income rider that increases benefit payments during disability based on Consumer Price Index changes to combat inflation.

Social Insurance Supplement (SIS)

A rider paying additional monthly benefits during the Social Security 5-month waiting period or when Social Security benefits are denied.

Future Increase Option Rider

A rider granting the right to purchase specified additional amounts of DI insurance at future dates without evidence of insurability.

Short-Term Disability (STD)

Group disability insurance with benefit periods under 2 years, typically covering nonoccupational disabilities only.

Long-Term Disability (LTD)

Group disability insurance with benefit periods of 2 years or greater, covering both occupational and nonoccupational disabilities.

Key Person DI Policy

A policy owned by a business covering a key employee, paying benefits directly to the business for any purpose.

Disability Buy-Out Policy

A business policy funding a buy-sell agreement during an owner's total disability, with a long elimination period (24+ months) and lump-sum benefit payout.

Business Overhead Expense (BOE) Policy

A business policy covering actual scheduled operational expenses during an owner's disability, featuring a brief elimination period.

First-Dollar Coverage

A feature of Basic Medical Insurance where covered medical expenses are paid starting from the first dollar without deductibles or coinsurance.

Stop Loss Limit

A major medical feature limiting the maximum out-of-pocket coinsurance expense an insured must pay during a policy year.

Capitation

A fixed per-participant fee paid by an HMO to a participating primary care health care provider regardless of usage.

Primary Care Physician (PCP)

The designated gatekeeper physician in an HMO who manages patient care and authorizes specialist referrals.

Health Savings Account (HSA)

A tax-favored account paired with a High-Deductible Health Plan allowing tax-deductible contributions, tax-free growth, and tax-free distributions for qualified medical expenses.

Medicare Part A

Medicare Hospital Insurance covering inpatient hospital, skilled nursing home, post-hospital home health, and hospice care.

Medicare Part B

Medicare Medical Insurance covering physicians' services, outpatient hospital care, physical therapy, and ambulance services.

Medicare Part C

Medicare Advantage, a managed care alternative to Original Medicare (Parts A and B) provided through private insurers.

Medicare Part D

Prescription drug coverage under Medicare offered through private insurance plans.

Medicare Supplement Policy

Private commercial insurance (Medigap) designed to fill gaps in Original Medicare (Parts A and B) coverage.

Skilled Nursing Care

Daily 24-hour medical care delivered by or under the direct supervision of licensed medical personnel.

Custodial Care

Non-medical care assisting with personal activities of daily living, which can be provided by non-licensed personnel.

Respite Care

A long-term care policy benefit providing short-term, temporary relief for an unpaid primary family caregiver.

Contributory Plan

A group insurance plan where employees share in premium costs, requiring at least 75% participation of eligible employees.

Non-Contributory Plan

A group insurance plan where the employer pays 100% of the premium, requiring 100% participation of eligible employees.

Subrogation

The legal process by which an insurance company pursues recovery against a third party responsible for an insured's loss.

COBRA

A federal law permitting terminated employees to temporarily continue group coverage at their own expense (paying up to 102% of premium).

Medical Information Bureau (MIB)

A non-profit central clearinghouse that collects coded medical data on applicants for member insurers to prevent adverse selection.

Morbidity Charge

A primary health insurance premium factor representing the expected incidence and average severity of sickness or injury in a group.

Experience Rating

A group underwriting rating method focusing on the specific claims experience and makeup of the individual group.

Community Rating

A group underwriting rating method focusing on the claims experience of a geographical region or similar groups.

Section 125 Cafeteria Plan

An employer benefit plan allowing employees to make pre-tax contributions for insurance premiums and unreimbursed medical expenses.