Alabama Life and Health Insurance Examination Concepts

Vocabulary flashcards covering core life and health insurance concepts, regulatory mandates, policy provisions, and state-specific laws.

Insurance Premium

The money paid to an insurance company for benefits provided in the insurance policy.

Required Provision 4 (Reinstatement)

A health policy provision stating that when an insured applies for reinstatement and receives a conditional receipt, the insurer has within $45$ days of the date of application to approve or deny the request.

Activities of Daily Living (ADLs)

Everyday personal care activities; a Long-Term Care (LTC) insured must be unable to perform a minimum of $2$ ADLs to qualify for policy benefits.

Revocable Beneficiary

A beneficiary designation that the policyowner retains the exclusive right to change at any time without obtaining the beneficiary's consent.

Noncancellable Policy

A health or disability insurance provision guaranteeing that both the coverage and the premium rates cannot be cancelled or altered by the insurer up to age $65$.

Viatical Settlement Agreement

An arrangement where a life insurance policyowner transfers ownership of their policy to a third party in exchange for a percentage of the death benefit.

Medicare Part B

The optional medical insurance portion of federal Medicare that requires eligible participants to pay monthly premium payments.

Change of Occupation Provision

A policy provision allowing the insurer to adjust benefit payouts if an insured moves to a more hazardous occupation and suffers an injury.

Waiver of Premium Rider

A provision that keeps an insurance policy in force without further premium payments when the insured becomes totally and permanently disabled.

Proof of Loss Provision

A claims requirement stating that the claimant must file written proof of loss with the insurance company within $90$ days of the date of loss.

Notice of Claim Provision

A mandatory health policy provision requiring the insured to notify the insurance company in writing within $20$ days of a covered loss.

Foreign Nonadmitted Company

An insurance company that is domiciled in another state and has not received an official license or certificate of authority to do business in Alabama.

Preferred Provider Organization (PPO)

A managed healthcare network arrangement that typically reimburses participating service providers on a negotiated fee-for-service basis.

Keogh Plan

A qualified, tax-sheltered retirement plan designed specifically for self-employed individuals (sole proprietors) and their eligible employees.

Representations

Statements made by an applicant on an insurance application that are believed to be true to the best of their knowledge, rather than guaranteed to be true warranties.

Fixed Period Settlement Option

A death benefit settlement arrangement in which life insurance proceeds and interest are disbursed across a selected number of years, gradually reducing the principal balance to zero.

Expressed Authority

The explicit authority granted to an insurance producer by the insurer, directly written and specified into the agency agreement.

Doctrine of Reasonable Expectations

The legal standard requiring exclusions and conditions in an insurance policy to be conspicuous, plain, and clearly stated so policyowners are not surprised by hidden clauses.

Rebating

The illegal practice of an insurance producer offering a potential client anything of monetary value as an inducement to purchase an insurance policy.

Conditional Receipt

A document provided upon initial premium payment stating that if the policy is approved as applied for, coverage takes effect as of the date of the receipt or application.

Concealment

The intentional withholding of known material facts by an applicant on an insurance application.

Capitation

A payment mechanism used by Health Maintenance Organizations (HMOs) where medical providers receive a fixed monthly fee per enrolled member regardless of services rendered.

Substandard Risk

A risk classification assigned to applicants with higher-than-average exposure to loss, resulting in the highest premium rates.

Defined Benefit Plan

An employer-sponsored qualified retirement plan that promises a predetermined, specified monthly benefit payout to employees upon reaching retirement.

Alabama Life and Disability Insurance Guaranty Association

A statutory organization created to pay claims for insolvent life and health insurers, funded via assessments against admitted insurers in Alabama.

Vesting

An employee's legal nonforfeitable right to ownership of employer-contributed funds in a retirement plan if their employment ends before retirement.

Blackout Period

The interval between when the youngest child reaches age $16$ and the surviving spouse turns age $60$, during which no Social Security survivor benefits are payable.

Medical Information Bureau (MIB)

A nonprofit trade association that maintains medical and health records to assist member insurance companies in underwriting applicants, subject to applicant authorization.

Survivorship Life Policy

A joint life insurance contract covering two or more individuals that pays no benefit upon the first death, paying out the death benefit only after the last surviving insured dies.

Stop-Loss Limit

A major medical policy clause establishing a maximum out-of-pocket dollar limit for the insured, after which the insurer pays $100\%$ of all covered expenses.

Corridor Deductible

The dollar amount an insured is required to pay between the exhaustion of basic first-dollar coverage and the beginning of major medical coverage.

Misstatement of Age Provision

A mandatory policy provision specifying that if the insured's age was incorrectly stated, the death benefit will be adjusted to what the premium paid would have purchased at the true age.

Absolute Assignment

The full and irreversible transfer of all policy ownership rights, title, and interest from the policyowner to another entity or assignee.

Contract of Utmost Good Faith

An insurance contract characterized by an absolute mutual reliance on honesty and truthful disclosures by both the insured and the insurance company.

Any Occupation Definition

A disability standard defining total disability as the complete inability of the insured to perform any occupation for which they are reasonably qualified by education, training, or experience.

Principle of Indemnity

The foundational insurance principle ensuring that an insured is restored to the approximate financial state held prior to a loss, without profiting from the loss.

Speculative Risk

A category of risk that offers both the chance of financial gain or financial loss, such as investing in real estate, which is uninsurable.

Aleatory Contract

A contract in which the monetary values exchanged between the parties are unequal, such as an insurer paying a substantial claim after receiving only one premium.

Extended Term Option

The automatic nonforfeiture option where the policy's cash value is used as a single net premium to buy term insurance for the identical face amount as the original policy.

Principal Sum

The full face amount paid under an Accidental Death & Dismemberment (AD&D) policy for accidental loss of life or the loss of two primary body parts.

Birthday Rule

A coordination of benefits rule specifying that for dependent children covered under two parental health plans, the primary coverage belongs to the parent whose birthday occurs earlier in the year.

Adverse Selection

The tendency for individuals facing higher-than-average likelihood of illness or death to apply for or retain insurance coverage more aggressively than average risks.

Disability Buy-Sell Insurance

A disability policy agreement that pays a lump-sum benefit to buy out the business interest of an owner or partner who becomes totally disabled.

Interest Only Settlement Option

A settlement arrangement where the insurance company holds the policy principal intact and pays recurring interest earnings directly to the beneficiary.

Reduced Paid-Up Option

A nonforfeiture option where accumulated cash value purchases a fully paid-up permanent policy with a reduced face amount, requiring no further premium payments.

Reinsurance

A contractual agreement under which an insurance company cedes a portion of its underwriting risk and coverage liability to another insurance company.