Insurance Concepts Overview

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Questions and Answers

What term describes the proportion of individuals in each age group who die within a year?

Life expectancy

Survival rate

Death rate (correct)

Mortality rate

How does a decreasing term insurance policy adjust its face value?

It fluctuates based on investment performance.

It increases gradually over time.

It decreases in scheduled steps. (correct)

It remains constant throughout the policy term.

Which type of plan allows for the postponement of an annuity's commencement?

Deferred annuity (correct)

Flexible annuity

Standard annuity

Immediate annuity

What does a defined benefit plan base its retirement benefits on?

A specific benefit formula Signup and view all the answers

In a defined contribution plan, what determines the annual contributions?

A formula set in the plan Signup and view all the answers

What is the purpose of a disability buy-sell agreement?

To ensure business continuity if an owner becomes disabled Signup and view all the answers

What does dental insurance typically cover?

Oral surgeries and preventive maintenance Signup and view all the answers

During which period does the dependency period last?

Until the youngest child reaches maturity Signup and view all the answers

What does the entire contract provision signify in an insurance policy?

It combines both the application and the policy as the complete agreement. Signup and view all the answers

What is the primary purpose of an entity plan?

To ensure that surviving owners proportionately increase their interests. Signup and view all the answers

Which best describes an equity indexed annuity?

A fixed deferred annuity with a minimum interest rate and an element tied to equities market performance. Signup and view all the answers

What does errors and omissions insurance specifically protect against?

Liability claims resulting from professional services rendered or unrendered. Signup and view all the answers

What does the exclusion ratio in an annuity determine?

The percentage of annuity income that is exempt from federal income tax. Signup and view all the answers

Which of the following best defines estoppel in a legal context?

An action preventing one party from denying facts due to the other party's reliance on their representations. Signup and view all the answers

Who is an examiner in the insurance context?

A person authorized to conduct medical exams for insurance applicants. Signup and view all the answers

What is the primary limitation of an exclusion rider in health insurance?

It restricts coverage for all future claims related to a known preexisting condition. Signup and view all the answers

What does the term 'loading' refer to in insurance?

An additional charge to cover operating expenses Signup and view all the answers

Which policy provides benefits for extended care confinement?

Long-term care policy Signup and view all the answers

What distinguishes a major medical expense policy from other health insurance policies?

It covers a broad range of medical services with high benefits Signup and view all the answers

What is the purpose of mandatory second opinion clauses in health policies?

To control costs before non-life-threatening surgeries Signup and view all the answers

What does a master contract contain in the context of a group insurance plan?

All the insuring clauses defining employee benefits Signup and view all the answers

What does the maturity value of an insurance policy refer to?

The face amount payable at the end of an endowment period Signup and view all the answers

What is an approval receipt?

A type of conditional receipt that provides coverage effective as of the application approval date. Signup and view all the answers

What characterizes an assessment mutual insurer?

Each member is assessed an individual portion of losses that occur. Signup and view all the answers

How is loan value of a life insurance policy defined?

The amount that can be borrowed using the policy as collateral Signup and view all the answers

What is the primary function of managed care in health services?

To establish a network of preferred providers Signup and view all the answers

What does an assignment provision in health contracts do?

Allows health benefit payments to be made directly to providers. Signup and view all the answers

What is meant by 'attained age' in insurance terms?

The current age of an insured with respect to the insurance policy. Signup and view all the answers

What does the automatic premium loan provision do?

Automatically pays any premium in default at the end of the grace period. Signup and view all the answers

What is Average Indexed Monthly Earnings (AIME) used for?

Calculating the primary insurance amount for Social Security benefits. Signup and view all the answers

What does an aviation exclusion in an insurance policy typically do?

Excludes coverage for deaths or disabilities caused by aviation activities. Signup and view all the answers

What is the primary benefit of a basic medical expense policy?

Provides 'first dollar' benefits for specified limited health care expenses. Signup and view all the answers

What does a revocable beneficiary designation allow the policyowner to do?

Surrender the policy without the beneficiary's consent Signup and view all the answers

What does the term 'risk selection' refer to in insurance?

The method used by underwriters to choose applicants Signup and view all the answers

What is the primary purpose of a rider in an insurance policy?

To add extra benefits or coverage to the policy Signup and view all the answers

Which of the following best describes a residual disability benefit?

Payment based on the proportion of income lost Signup and view all the answers

What is the main function of a reserve in an insurance company?

To cover future claims made by policyholders Signup and view all the answers

How does risk pooling function in insurance?

Distributes the losses of few among many contributors Signup and view all the answers

What does the term 'salary continuation plan' refer to?

Continued income after retirement or disability Signup and view all the answers

Which of the following defines 'rollover IRA'?

An account established with funds from a previous IRA or qualified plan Signup and view all the answers

Study Notes

Insurance Concepts and Terms

Approval Receipt: A conditional receipt indicating coverage starts on the application approval date, prior to policy delivery.
Assessment Mutual Insurer: Insurers where members are assessed individual shares of losses; lacks advance premium payment.
Assignee: Entity to whom policy rights are transferred through assignment.
Assignment Provision (Health Contracts): Permits policy owners to assign benefit payments directly to healthcare providers.
Assignor: The individual or entity transferring rights under an insurance policy.
Attained Age: The age of the insured as it pertains to insurance calculations.
Authority: Actions an agent is permitted to perform on behalf of an insurer, defined in their contract.
Authorized Company: Insurance company legally allowed to operate in specific states.
Automatic Premium Loan Provision: Allows an insurer to cover defaulted premiums automatically using a policy loan.

Health and Life Insurance Policies

Average Indexed Monthly Earnings (AIME): Calculated figure used for determining Social Security benefits.
Average Monthly Wage (AMW): Historical average wage base for computing Social Security benefits.
Aviation Exclusion: Policy exclusion for deaths or disabilities resulting from non-fare-paying aviation activities.
Backdating: Policy practice making coverage effective earlier than the current date.
Basic Medical Expense Policy: Provides initial benefits for limited health care services with low coverage limits.
Death Rate: Mortality statistic indicating the proportion of deaths per age group within a year.
Debit Insurer: Often referred to as a home service insurer; focuses on providing insurance directly to consumers.
Decreasing Term Insurance: Term life policy where the face value decreases while premiums remain stable.

Insurance Provisions and Plans

Deductible: The amount an insured must pay before benefits kick in.
Deferred Annuity: Postpones annuity payment until a specified future date.
Defined Benefit Plan: Pension plan where benefits are calculated based on a specific formula.
Defined Contribution Plan: Retirement plan where contributions are determined by a set formula affecting eventual benefits.
Delayed Disability Provision: Allows time after an accident for a disability to manifest and still qualify for benefits.
Dental Insurance: Group health insurance covering dental maintenance and procedures.
Dependency Period: Time frame post-breadwinner's death until the youngest child reaches maturity.
Disability Buy-Sell Agreement: Business co-owners' agreement ensuring shared ownership transfer in case of disability.
Entire Contract Provision: Clause ensuring the policy and application encompass the entire agreement.

Investment and Liability Coverage

Equity Indexed Annuity: A fixed annuity with guaranteed minimum interest and additional gains based on equity market performance.
Errors and Omissions Insurance: Liability insurance for insurance producers against claims of inadequate service.
Exclusion Ratio: Used to calculate tax-exempt portions of annuity income.
Exclusion Rider: Waives liability for claims related to pre-existing conditions.
Long-Term Care Policy: Health insurance covering extended care for individuals needing assistance with daily activities.
Lump Sum Payment: A complete payment method for insurance proceeds unless otherwise opted by the policy owner.

Employee, Retirement and Tax Plans

Major Medical Expense Policy: Health insurance offering comprehensive benefits with deductibles and coinsurance.
Managed Care: Healthcare systems with selected providers and cost-control measures.
Master Contract: Issued to employers under group insurance, outlining employee benefits.
Maturity Value: Benefits payable at policy maturity, equivalent to the policy face amount.
Revocable Beneficiary: A beneficiary whose designation can be altered by the policy owner at any time.
Risk Pooling: Principle where many contribute to cover losses experienced by a few.

Retirement Accounts and Employee Benefits

Rollover IRA: A retirement account created by transferring funds from an existing IRA or retirement plan.
Savings Incentive Match Plan for Employees (SIMPLE): A retirement savings plan targeted at small employers.
Salary Continuation Plan: Provides continued income based on the employee's salary during retirement or disability.
Salary Reduction: A retirement plan option allowing employees to defer pretax income to reduce taxable income.

General Concepts in Insurance

Exclusion: Specific hazards listed in a policy that are not covered for benefits.
Estoppel: Legal principle preventing denial of actions that have caused other parties to act detrimentally.

This overview encapsulates key terms and concepts in insurance, guiding understanding and retention of the intricacies involved in various policies, provisions, and insurance practices.

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Description

This quiz covers fundamental concepts in insurance, including conditional receipts, mutual insurers, and the role of assignees in policy rights. Test your knowledge on these essential topics and enhance your understanding of insurance processes.