Insurance Concepts & Regulations – Vocabulary Review

Comprehensive vocabulary flashcards covering key insurance concepts, regulations, policy provisions, health plans, disability terms, Medicare, taxation, and regulatory practices.

Risk

The chance or uncertainty of loss.

Peril

The cause of a loss.

Hazard

A condition (physical, moral, or morale) that increases the chance of loss.

Loss

A reduction in value due to a covered peril.

Indemnity

Restoring the insured to the original financial position without profit.

Law of Large Numbers

Principle that larger groups make future losses more predictable.

Adverse Selection

Tendency of higher-risk people to seek insurance more often than lower-risk people.

Stock Insurer

Insurance company owned by shareholders that issues non-participating policies.

Mutual Insurer

Insurance company owned by policyholders that issues participating policies.

Fraternal Benefit Society

Non-profit insurer providing benefits to members of a fraternal order.

Risk Retention Group (RRG)

Liability insurer owned by policyholders in similar industries.

Domestic Insurer

Company incorporated in the same state where it operates.

Foreign Insurer

Company incorporated in a different U.S. state.

Alien Insurer

Company incorporated outside the United States.

Certificate of Authority

State license permitting an insurer to conduct business.

Admitted Insurer

Insurer that holds a certificate of authority.

Non-Admitted Insurer

Insurer without a certificate of authority; sells surplus-lines coverage.

Express Authority

Authority explicitly granted in writing to a producer.

Implied Authority

Authority assumed necessary to carry out express authority.

Apparent Authority

Authority others believe a producer has based on actions or circumstances.

Contract of Adhesion

Insurance contract prepared by the insurer; insured must accept as-is.

Aleatory Contract

Contract where the value exchanged is unequal (small premium for large benefit).

Personal Contract

Agreement between insurer and insured that is non-transferable.

Conditional Contract

Contract enforceable only when certain conditions are met.

Waiver

Intentional relinquishment of a known right.

Estoppel

Legal bar preventing a party from reasserting a waived right.

Accident & Health Insurance

Insurance covering injury and sickness.

Accidental Injury

Unintended, unforeseen event causing injury.

Accidental Results

Only the injury must be unintended.

Accidental Means

Both the cause and the injury must be unintended (more restrictive).

Deductible

Amount the insured pays before benefits apply.

Coinsurance

Cost-sharing between insurer and insured, expressed as a percentage.

Copayment

Flat dollar amount the insured pays per service.

Pre-existing Condition

Medical condition existing before policy’s effective date.

Morbidity Table

Statistical table predicting likelihood of sickness or injury for premium setting.

Probationary Period

Waiting period after policy begins before certain coverages apply.

Sickness

Illness contracted after the probationary period.

Subrogation

Insurer’s right to recover claim costs from a responsible third party.

Indemnity Plan

Plan allowing any provider; insured is reimbursed after care.

Service Plan

Plan that pays benefits directly to healthcare providers.

Health Maintenance Organization (HMO)

Prepaid plan requiring a primary care physician and referrals for services.

Preferred Provider Organization (PPO)

Network plan allowing out-of-network care without referrals.

Point of Service (POS) Plan

Hybrid plan combining HMO gatekeeping with PPO flexibility.

Lifetime Limit

Maximum benefit payable over the life of a policy.

Annual Limit

Maximum benefit payable in one policy year.

Per-Cause Limit

Maximum payable for each separate incident.

Own Occupation

Disability definition based on inability to perform one’s own job.

Any Occupation

Disability definition based on inability to perform any reasonable job.

Presumptive Disability

Automatic disability benefits for severe losses (e.g., blindness).

Elimination Period

Waiting period before disability benefits begin.

Benefit Period

Length of time disability benefits are payable.

Residual Disability

Partial benefits when insured returns to work part-time or earns less.

Key Person Disability Insurance

Policy that compensates a business for the loss of a key employee’s services.

Business Overhead Expense Insurance

Covers business operating costs during the owner’s disability.

Medicare Part A

Coverage for inpatient hospital care.

Medicare Part B

Coverage for physician services and outpatient care.

Medicare Part C (Medicare Advantage)

Private plans providing Parts A and B benefits.

Medicare Part D

Coverage for prescription drugs.

Medigap (Medicare Supplement)

Private insurance that fills coverage gaps in Original Medicare.

Entire Contract Clause

States that policy and application together form the complete contract.

Time Limit on Certain Defenses

Limits period (e.g., 2 years) for voiding a policy for misrepresentation.

Grace Period

Time after premium due date before policy lapses.

Reinstatement Clause

Conditions under which a lapsed policy may be reactivated.

Notice of Claim

Requirement to notify insurer within a specified time after a loss.

Proof of Loss

Written evidence of loss required within a set timeframe.

Legal Actions Clause

Sets time limits for bringing legal action after a claim.

Change of Occupation Clause

Allows benefit adjustment based on the insured’s new occupation.

Misstatement of Age Clause

Adjusts benefits or premiums if age was misstated.

Noncancelable Policy

Policy that cannot be canceled and whose premiums cannot increase.

Guaranteed Renewable Policy

Policy that cannot be canceled, though premiums can rise by class.

Conditionally Renewable Policy

Policy renewable only under stated conditions.

Master Policy

Group policy issued to the employer or plan sponsor.

Certificate of Insurance

Document given to group members outlining their coverage.

Contributory Plan

Group plan where employees share premium cost; often requires 75% participation.

Noncontributory Plan

Employer pays full premium; requires 100% employee participation.

Coordination of Benefits (COB)

Procedure preventing over-insurance when multiple plans cover a loss.

COBRA

Law allowing continued group health coverage after employment ends.

HIPAA

Federal law providing portability and limits on pre-existing condition exclusions.

Affordable Care Act (ACA)

2010 law mandating essential health benefits and prohibiting pre-existing exclusions.

Essential Health Benefits (EHB)

Core benefits that ACA-compliant plans must cover.

Advanced Premium Tax Credit

Income-based subsidy that reduces ACA plan premiums.

Mental Health Parity Act

Law requiring mental health benefits equal to physical health benefits.

Tax Treatment of Health Insurance

Individual premiums usually not deductible; employer-paid premiums deductible as a business expense.

Producer

Licensed person who sells, solicits, or negotiates insurance.

Business Entity

Company licensed as a producer; must designate a responsible producer.

Nonresident Producer

Out-of-state producer holding a license in their home state and another jurisdiction.

Temporary License

Up to 180-day license to service business of a deceased or disabled producer.

Special Broker

Broker licensed to place insurance with non-admitted (surplus-lines) carriers.

Adviser

Individual licensed to give insurance advice for a fee.

Public Insurance Adjuster

Licensed professional who adjusts claims on behalf of insureds.

Reinsurance Intermediary

Broker or manager that arranges or administers reinsurance for insurers.

Life Settlement Broker

Person who negotiates life settlement contracts between policyowners and providers.

Commissioner of Insurance

State official who regulates and enforces insurance laws.

Assumed Name

Business name differing from legal name that must be disclosed to regulators.

Continuing Education (CE)

Educational credits required to maintain an insurance license.

Cease and Desist Order

Regulatory order to stop unfair or deceptive practices.

Fraud

Knowingly obtaining premiums or benefits through false representations.

Misrepresentation

False or misleading statements about a policy.

Twisting

Misrepresentation aimed at replacing a policy with another carrier.

Defamation

False statements intended to harm another insurer’s reputation.