Chapter 1: Basic Principles of Life and Health Insurance
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20 Terms
Agent
An individual authorized to solicit, sell, and transact coverage for specific insurance providers under an agent contract.
Broker
A person who represents the insured (client) rather than the insurance company and cannot bind coverage.
Claims Department
The department responsible for processing, investigating, and paying claims.
Insurance
The transfer of risk through the pooling or accumulation of funds.
Insured
The customer who receives insurance protection under an insurance policy.
Insurer
An insurance company that provides coverage and assumes risk.
Mutual Insurance Company
An insurer owned by policyholders that typically issues participating insurance policies with potential dividends.
Nonparticipating Policy
A policy that doesn't provide dividends or voting rights to policy owners.
Participating Policy
A policy that allows policy owners to receive dividends and elect the board of directors.
Producer
An individual licensed to sell, solicit, or transact insurance, including both agents and brokers.
Stock Insurance Company
An insurer owned by stockholders that typically issues nonparticipating policies.
Underwriting Department
The department responsible for reviewing applications, approving or declining coverage, and assigning risk classifications.
Mixed Plan
A plan where a company issues both participating and nonparticipating policies
In order to be characterized as a fraternal benefit society, the organization must have what characteristics
It must be a non-profit organization
It must have a lodge system that includes ritualistic work and must maintain a representative government form with elected officers
It must exist for reasons other than obtaining insurance
Primary insurer/ceding company
Insurance company that transfers its loss exposure (risk) to another insurer
Reinsurer/assuming company
Company assuming the risk
Net retention/net line
Portion of the risk that the ceding insurer retains
Treaty reinsurance
Automatic sharing of the risks assumed based on previously established criteria
Facultative reinsurance
Reinsurance tailored to cover a specific risk or exposure without an ongoing agreement
Risk retention group (RRG)
Created under federal law for liability insurance among similar professionals