Insurance Terminology Flashcards

A complete set of vocabulary flashcards covering common insurance policy types, provisions, legal rules, and risk management terms based on the lecture notes.

Nonforfeiture Values

Those guaranteed values in a life insurance policy that cannot be taken from the insured, even if the insured stops paying premiums.

Nonmedical

A life or health insurance policy that is underwritten based on the insured's statement of health rather than a medical examination.

Nonparticipating Policies (Non-par)

Insurance that does not pay dividends.

Nonqualified Plan

A type of benefit plan that may discriminate, is not required to be filed with the IRS, and does not provide a current tax deduction for contributions.

Nonrenewal

A termination of a policy by an insurer on the anniversary or renewal date.

Nonresident Agent

An agent licensed in a state in which the agent is not a resident.

Notice of Claim

A provision that spells out an insured's duty to provide the insurer with reasonable notice in the event of a loss.

COBRA

Continuation of group health care coverage from $18$ to $29$ months for qualified beneficiaries who are disabled at the time of qualification.

Option

A choice of ways of receiving policy dividends, nonforfeiture values, death benefits, or cash values.

Oral Surgery

Operative treatment of the mouth such as extractions of teeth and related surgical treatment.

Orthodontics

A special field in dentistry which involves treatment of natural teeth to prevent and/or correct dental anomalies with braces or appliances.

Out-of-Pocket Costs

Amounts an insured must pay for coinsurance and deductibles before the insurer will pay its portion.

Over Insurance

An excessive amount of insurance that would result in overpayment to the insured in the event of a loss.

Paid-Up Insurance

A policy on which all premiums have been paid but which has not matured due either to death or endowment.

Parol

Legal term that distinguishes oral statements from written statements.

Parol Evidence Rule

A rule that states a contract may not be altered without written consent of both parties; in other words, the contract may not be altered by an oral agreement.

Partial Disability

Ability to perform some, but not all, of the duties of the insured's occupation as a result of injury or sickness.

Participating Policies (Par)

Insurance that pays dividends to policyholders.

Payment of Claims

A provision that specifies to whom claims payments are to be made.

Payor Benefit

A rider found in juvenile policies which waives the premiums if the person paying them (often the parent) is disabled or dies while the child is still a minor.

Peril

The cause of a possible loss.

Periodontics

A specialty of dentistry that involves treatment of the surrounding and supporting tissue of the teeth such as treatment for gum disease.

Permanent Disability

Disability from which the insured does not recover.

Permanent Life Insurance

A general term used to refer to various forms of whole life insurance policies that remain in effect to age $100$ so long as the premium is paid.

Persistency

The tendency or likelihood of insurance policies not lapsing or being replaced with insurance from another insurer.

Personal Contract

An agreement between an insurance company and an individual that states that insurance policies cover the individual's insurable interest.

Physical Exam and Autopsy

A provision that allows an insurer, at its own expense, to have an insured physically examined when a claim is pending or to have an autopsy performed where not prohibited by law.

Policy Loan

A nonforfeiture value in which an insurer loans a part or all of the cash value of the policy assigned as security for the loan to the policyowner.

Policyholder

The person who has possession of the policy, usually the insured.

Policyowner

The person who is entitled to exercise the rights and privileges in the policy. This person may or may not be the insured.

Pre-Existing Condition

A physical condition that existed before the effective date of the policy, usually excluded from coverage.

Preferred Provider Organization (PPO)

An organization of medical professionals and hospitals who provide services to an insurance company's clients for a set fee.

Preferred Risk

An insurance classification for applicants who have a lower expectation of incurring loss, and who, therefore, are covered at a reduced rate.

Premium

A periodic payment to the insurance company to keep the policy in force.

Presumptive Disability

A provision that is found in most disability income policies which specifies the conditions that will automatically qualify the insured for full disability benefits.

Primary Beneficiary

The person who is named as first to receive benefits from a policy.

Primary Policy

A basic, fundamental insurance policy which pays first with respect to other outstanding policies.

Principal Amount

The full face value of a policy.

Private Insurance

Insurance furnished by nongovernmental insuring organizations.

Pro Rata Cancellation

Termination of an insurance policy, with an adjustment of the premium charge in proportion to the exact coverage that has been in force.

Probationary Period

The period of time between the effective date of a health insurance policy and the date coverage for all or certain conditions begins.

Proceeds

The amount payable by the insurance company, usually in at the insured's death or when the policy matures.

Producer

Insurance agent or broker.

Proof of Loss

A claim form that a claimant must submit after a loss occurs.

Prosthodontics

A special area of dentistry that involves the replacement of missing teeth with artificial devices like bridgework or dentures.

Provider

Any group or individual who provides health care services.

Pure Protection

Insurance whereby premiums are paid for protection in the event of death or disability, not for cash value accumulation.

Qualified Plan

A retirement plan that meets the IRS guidelines for receiving favorable tax treatment.

Rate Service Organization

An organization that is formed by, or on behalf of, a group of insurers to develop rates for those insurers, and to file the rates with the insurance department on behalf of its members.

Rebating

Any inducement offered in the sale of insurance products that is not specified in the policy.

Reciprocal Exchange

An unincorporated group of individuals who mutually insure one another, each separately assuming a share of each risk.

Reciprocity

A situation in which two parties provide the same help or advantages to each other (for example, Producer A living in State A can transact business as a nonresident in State B if State B's resident producers can transact business in State A).

Recurrent Disability

A policy provision that specifies the period of time during which the recurrence of an injury or illness will be considered a continuation of a prior period of disability.

Reduction

Lessening the possibility or severity of a loss.

Reinsurance

A form of insurance whereby one insurance company (the reinsurer) agrees to indemnify another insurance company (the ceding company) for part or all of its liabilities.

Renewability Clause

A clause that defines the insurance company's and the insured's right to cancel or renew coverage.

Renewable Term

Insurance which can, at the election of the policyowner, be renewed at the end of a term without evidence of insurability.

Representations

Statements made by the applicant on the insurance application that are believed to be true, but are not guaranteed to be true.

Rescission

The termination of an insurance contract due either to fraud, misrepresentation, or duress on the part of the agent/insurer or the insured.

Reserve

An amount representing actual or potential liabilities kept by an insurer in a separate account to cover debts to policyholders.

Residual Disability

Disability income policy providing benefits for loss of income when a person returns to work after total disability but cannot perform at the same level as before.

Respite Care

Temporary health or medical care provided to give a caregiver a short rest.

Restorative Care

An area of dentistry involving treatments that restore functional use to natural teeth such as fillings or crowns.

Retention

A method of dealing with risk by intentionally or unintentionally keeping a portion of it for the insured's account.

Rider

Any supplemental agreement attached to and made a part of the policy indicating additional coverage or a waiver of a coverage or condition.

Right to Return (Free Look)

A period during which a policyowner may inspect a new policy and surrender it for a full refund of premium if not satisfied.

Risk

Uncertainty as to the outcome of an event when two or more possibilities exist.

Risk Retention Group

A liability insurance company owned by its members, who are exposed to similar liability risks by being in the same business or industry.

Risk, Pure

The uncertainty or chance of a loss occurring in a situation that can only result in a loss or no change.

Risk, Speculative

The uncertainty or chance of a loss occurring in a situation that involves the opportunity for either loss or gain.

Risk, Standard

An applicant or insured who is considered to have an average probability of a loss based on health, vocation and lifestyle.

Risk, Substandard

An applicant or insured who has a higher than normal probability of loss and may be subject to an increased premium.

Rollover

Withdrawing the money from a qualified plan and placing it into another qualified plan.

Secondary Beneficiary

The person named to receive benefits upon the death of the insured if the primary beneficiary is no longer alive.

Service Plans

Insurance plans where the health care services rendered are the benefits instead of monetary benefits.

Settlement Options

Choices available to the insured/owner for distribution of insurance proceeds.

Sharing

A method of dealing with risk where a group of individuals or businesses with similar exposure share the losses that occur within that group.

Short-Rate Cancellation

Canceling the policy with a less than proportionate return of premium.

Short-Term Disability Insurance

A policy that covers disabilities of $13$ to $26$ weeks, and sometimes up to two years.

Sickness

A physical illness, disease, or pregnancy, but not a mental illness.

Single Premium Whole Life (SPWL)

A life insurance policy designed to provide a level death benefit to the insured's age $100$ for a one-time, lump sum payment.

Skilled Nursing Care

Daily nursing care or skilled care performed by or under the supervision of a professional.

Spendthrift Clause

A clause that prevents the debtors of a beneficiary from collecting the benefits before the beneficiary receives them.

Standard Provisions

Requirements approved by state law that must appear in all insurance policies.

Stock Companies

Companies owned by the stockholders whose investments provide the capital necessary to establish and operate the company.

Straight Life

A basic policy that charges a level annual premium for the lifetime of the insured and provides a level, guaranteed death benefit.

Subrogation

The legal process by which an insurance company seeks recovery of the amount paid to the insured from a third party who may have caused the loss.

Superintendent (Commissioner, Director)

The head of the state department of insurance.

Supplemental Illustration

An illustration furnished in addition to a basic illustration that may depict a scale of permitted nonguaranteed elements.

Surrender

The act of giving up a life policy in exchange for the cash value the policy has built up.

Term Insurance

Insurance that provides protection for a specific period of time.

Terminally Ill

A patient who is expected to die within an amount of time specified in the policy.

Total Disability

A condition which does not allow a person to perform the duties of any occupation for payment as a result of injury or sickness.

Transfer

A basic principle of insurance under which the risk of financial loss is assigned to another party.

Twisting

A form of misrepresentation involving persuading an insured to cancel or switch policies to their own disadvantage.

Underwriter

A person who evaluates and classifies risks to accept or reject them on behalf of the insurer.

Underwriting

The process of reviewing, accepting or rejecting applications for insurance.

Unearned Premium

The portion of premium for which policy protection has not yet been given.

Unilateral Contract

A contract that legally binds only one party to contractual obligations after the premium is paid.

Universal Life

A combination of a flexible premium and adjustable life insurance.