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Insurance

A contract or an individual or entity, receives financial protection or reimbursement against losses from an insurance company

Insured

The individual or entity who receives financial protection under an insurance contract

insurer

The insurance company that provides financial protection or reimbursement against losses

Pure risk

A type of risk where the only possibility is loss or no loss such as death illness, or an accident. This is the category of risk that insurance typically covers.

Speculative risk

A type of risk that involves the possibility of both gain and loss such as gambling this is generally not insurable

Hazard

A condition that increases the likelihood or severity of loss

peril

The specific event that occurs a loss such as a fire flood, heart attack or car crash

Insurable interest

The principal that the insured must suffer a financial loss if the injured event occurs for an example, you have this in your own life, but not in a strangers

utmost good faith

A principal requiring that both insurer and the insured act with honesty and disclose of information truthfully in an insurance contract

Deductible

The amount the insured must pay out-of-pocket for a covered loss

Term life insurance

Provides life insurance coverage for a specific period (e.x. 10, 20 years.) if the intro dies within the term, the death benefit is paid.

Permanent life insurance

Provides coverage for the insureds entire lifetime and includes a cash value component

Disability insurance

Replaces a portion of income if the insurer becomes unable to work due to illness or injury

Accidental death and dismemberment (AD& D)

An insurance policy that pays a benefit if the insurer dies as a result of an accident or suffer specific serious injuries

Moral hazard

Dishonesty or fraud risk

The law of large numbers

The larger the group, the more predictable the losses

Term life provides what type of protection

Pure death protection

When must insure interest exist?

Only at policy issuance

What is whole life insurance?

Permanent coverage with guaranteed cash value

What does variable life policy invest in?

Separate accounts

What do dividends represent?

Return of access premium; not taxable

What is coinsurance?

Shared cost (e.x 80/20)

What is the elimination Period.

Waiting time before disability benefits begin

What is the capital sum in AD&D

Paid for dismemberment

What is a principle sum?

Paid for accidental death

After how long is a whole policy incontestable

Two years

What is reinstatement?

Restoring a lapse policy by repaying premiums and approving insurability

How long is a great period for a life insurance

31 days (typically)

What is maximum rebating gift allowed in Michigan?

$5

How long is a temporary license valid?

180 days

Who issues cease and desist orders

Insurance commissioner

What is the MI guaranteed association, life, death benefit limit?

300,000

What does Medicare part A cover?

Hospitalization

What age are you eligible for Medicare?

65 regardless of Employment

If employer pays DI premium, are benefits taxable

Yes

Are life insurance death benefits, taxable

no, they are not tax-free

Representation

Statement true to applicants knowledge

Warranty

Guaranteed truth(rarely used)

Consideration

Premium + application

Underwriting

Evaluating risk

Morale hazard

Carelessness risk

Physical hazard

Health/physical condition

Risk

Uncertainty of loss

Adverse selection

High risk people seek insurance

Indemnity

Restore nonprofit

Subrogation

insurers right to recover from third-party

Coinsurance

Shared cost

Elimination period

Waiting time for DI benefits ( disability income benefits)

Principal VS capital sum

AD&D: principal= death, capital= loss of limb

Assignable

Life policies can be assigned(determined)

Accelerated benefits

Paid early if terminally ill