Insurance Key Terms and Definitions

These flashcards cover essential vocabulary and concepts related to insurance, providing definitions for key terms essential for understanding insurance policies and processes.

Adverse Selection

The tendency of a disproportionate number of poor risks to seek or buy insurance or maintain existing insurance, leading to selection against the insurance company.

Applicant

The person completing an application with an insurance company for an insurance policy, often the proposed insured.

Application

The statement of information provided by a person applying for life, health, or disability insurance, used by underwriters to determine qualification for coverage.

Attending Physician Statement (APS)

A statement used to obtain more information about the applicant's medical conditions when needed.

Backdating

The practice of making the effective date of a policy earlier than the application date, typically to obtain a lower premium.

Binding Receipt

Receipt provided upon acceptance of an insurance application and initial premium, making coverage effective on the receipt date.

Buyer's Guide

A pamphlet that describes and compares insurance products, provided to consumers by producers to facilitate informed decision-making.

Conditional Receipt

A receipt issued under specific conditions that grants limited coverage before the policy is finalized.

Consumer Report

A detailed background investigation about an applicant's character and lifestyle that may include interviews and credit information.

Credit Report

A summary of an applicant’s credit history that assesses creditworthiness, obtained from major credit bureaus.

Declined Risk

An individual whose application for insurance coverage has been rejected.

Disclosure Form

A form provided to policy owners when replacing an existing policy to comply with regulatory requirements.

Evidence of Insurability

A statement or proof of an individual's health history and current health status required for coverage qualification.

Fair Credit Reporting Act

A federal law that allows insurers to conduct consumer reports on applicants and mandates informing applicants about it.

Field Underwriter

The agent or producer who assists in completing an insurance application.

Free-Look Period

The period during which a policy owner can return an insurance policy for a full premium refund, typically ranging from 10 to 30 days.

Insurable Interest

The financial or emotional relationship that justifies one party owning a life insurance policy on another.

Medical Information Bureau

An organization that collects medical data on life and health insurance applicants for member insurance companies.

Policy Summary

A document summarizing the key terms, conditions, coverage limitations, and premiums of an insurance policy.

Preferred Risk

An applicant whose risk is lower than that of a standard applicant, typically due to better physical condition.

Proposed Insured

The person requesting that her life be insured, often also the applicant.

Rated Policy

A policy that incurs an additional charge to the standard premium due to a higher-than-average risk classification.

Representations

Statements made by an applicant on an application that are considered accurate to the best of their knowledge.

Risk Classification

The categorization of risk based on an applicant's likelihood of injury, illness, or death.

Standard Risk

An individual categorized as average risk and insurable at standard rates according to underwriting standards.

Substandard Risk (Impaired Risk)

An applicant whose physical condition does not meet usual standards, often resulting in a higher premium.

Underwriter

A person who assesses and classifies the risk of a proposed insured to decide on insurance coverage.

Underwriting

The analysis process of information pertaining to an insurance applicant to determine policy issuance.

Warranties

Statements in an insurance application that are absolutely true, where a breach may void the policy.