Insurance Terms and Definitions Matching Quiz

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Questions and Answers

Match the insurance terms with their definitions:

Term Insurance = Insurance during the initial years, transitioning to Whole Life later Policy Loan Provision = Conditions for borrowing from the policy's cash value Participating Company = Returns unused premium as policy dividends Payor Rider = Covers juvenile policy premiums if owner dies or becomes disabled

Match the types of retirement plans with their characteristics:

Non-qualified Retirement Plan = Does not qualify for special tax treatment by the IRS Continuous Premium = Paid throughout the duration of the policy Limited Pay = Paid for over a specified period with no further payments required Single Premium = Paid in one lump-sum with no further payments required

Match the nonforfeiture options with their descriptions:

Cash = Immediate payment upon surrender of the policy Reduced Paid-Up Insurance = Lower coverage for the same premium amount Extended Term Insurance = Coverage for a specified period after surrender Policy Owner = Person with rights contained in the insurance policy

Match the following insurance terms with their descriptions:

<p>Cash Nonforfeiture Option = Lump-sum payment of current cash value upon policy surrender Cash Settlement Option = Lump-sum payment of entire policy proceeds upon maturity Commissioner = Public official regulating the state's insurance industry Conditional Receipt = Coverage starts if the insured is found insurable on specific dates</p> Signup and view all the answers

Match the payment methods to their characteristics:

<p>Continuous Premium = Requires the smallest payment amounts Limited Pay = Payments required for a predetermined period Single Premium = Requires the largest payment amount Whole Life = Insurance that builds cash value over time</p> Signup and view all the answers

Match the following insurance definitions with their terms:

<p>Cash Value = Equity amount legally available to the policyowner Consideration = Value exchanged for the transfer of risk in a contract Contingent Beneficiary = Alternate beneficiary if primary dies before insured Contributory Plan = Group insurance plan with employee premium contributions</p> Signup and view all the answers

Match insurance terms with their explanations:

<p>Peril = The cause of a loss, such as fire Policy Owner = The individual named in the insurance contract with rights Whole Life = Coverage that lasts for the insured's lifetime Cash Value = Surrender value of a life insurance policy</p> Signup and view all the answers

Match the terms with the correct policy features:

<p>Extended Term = Provides coverage for a specified duration post-surrender Reduced Paid-Up Insurance = Maintains coverage but reduces the death benefit Nonforfeiture Options = Choices available for recovering policy's cash value Participating Company = Company that pays dividends to policyholders</p> Signup and view all the answers

Match the following types of plans with their characteristics:

<p>Noncontributory Plan = Employer pays all premiums for the policy Conditional = Certain conditions must be met in order for payout Cash Settlement Option = Beneficiary receives policy proceeds upon maturity Cash Nonforfeiture Option = Policy cannot be reinstated after surrender</p> Signup and view all the answers

Match the following insurance concepts with their implications:

<p>Conditional Receipt = Insurer agrees to start coverage under specific conditions Consideration = Insured's actions provide value for risk transfer Cash Value = Accumulates throughout the policy duration Contingent Beneficiary = Receives benefits if primary beneficiary is not available</p> Signup and view all the answers

Match the types of insurance with their definitions:

<p>Term Insurance = Coverage for a set number of years Whole Life = Permanent insurance that accumulates cash value Universal Life = Flexible premium payments and death benefits Variable Life = Policy with an investment component and cash value</p> Signup and view all the answers

Match the following definitions with their corresponding terms:

<p>Cash Nonforfeiture Option = Received by policyowner upon surrender Cash Settlement Option = Paid to the beneficiary at policy maturity Commissioner = Enforces insurance laws in the state Contributory Plan = Requires employee contribution for coverage</p> Signup and view all the answers

Match the policy options with their benefits:

<p>Cash Surrender = Immediate cash upon policy cancellation Reduced Paid-Up = Provides lower coverage without ongoing premiums Extended Term = Keeps coverage for a finite period post-surrender Participating Dividend = Return of unused premium as cash or reduction of future premiums</p> Signup and view all the answers

Match the following insurance terms with their respective roles:

<p>Cash Value = Living benefit accumulating over time Contingent Beneficiary = Receives proceeds if primary beneficiary is deceased Noncontributory Plan = Employer funds the entire insurance premium Consideration = Essential element in contract for risk transfer</p> Signup and view all the answers

Match the following insurance processes with their descriptions:

<p>Conditional = Payout requires specific conditions to be met Conditional Receipt = Starts coverage based on insurance screening results Cash Nonforfeiture Option = Ineligibility for policy reinstatement post-surrender Cash Settlement Option = Lump payment upon policy maturity</p> Signup and view all the answers

Match the following terms with their significance in insurance:

<p>Cash Value = Represents the policy's savings element Consideration = Reflects the mutual agreement between insurer and insured Contributory Plan = Implies shared financial responsibility in a group plan Commissioner = Key figure in regulating insurance practices in the state</p> Signup and view all the answers

Match the following settlement options with their characteristics:

<p>Fixed Amount Settlement Option = Periodic payments of a set dollar amount Fixed Period Settlement Option = Income from policy proceeds for a stated time Financial Needs Approach = Determines life insurance needs based on family needs Separate Account = Contains investments with no guaranteed rate of return</p> Signup and view all the answers

Match the following financial provisions with their definitions:

<p>Life Annuity = Guarantees income for the lifetime of the annuitant Beneficiary = Receives payments upon policy maturity Policyowner = Person who holds the insurance policy rights Insurance Policy Maturity = Point at which benefits start for the beneficiary</p> Signup and view all the answers

Match the following insurance review terms with their purposes:

<p>Fair Credit Reporting Act = Establishes consumer credit access guidelines Financial Needs Approach = Focus on surviving family needs for life insurance Free Look Provision = Allows refund of newly issued policy during review Fixed Amount Settlement Option = Ensures set dollar payments post-policy maturity</p> Signup and view all the answers

Match the following terms related to insurance accounts with their features:

<p>General Account = Guaranteed funds of the insurance company Separate Account = Investments regulated by the SEC and NASD Fixed Period Settlement Option = Provides payments for a determined time span Fixed Amount Annuity = Ensures fixed periodic payments during life</p> Signup and view all the answers

Match the following policies or options with their details:

<p>Free Look Provision = Policy can be returned for a full refund within set days Fixed Amount Annuity = Regular intervals of fixed dollar payments Fixed Period Settlement Option = Income for a specified period after policy maturity Needs Analysis Worksheets = Tools to calculate life insurance necessity</p> Signup and view all the answers

Match the following consumer protection laws with their functions:

<p>Fair Credit Reporting Act = Regulates company access to consumer credit Free Look Provision = Consumer right to change their mind about a policy Financial Needs Approach = Calculates insurance needs based on familial situation Refund Provision = Another name for policy return clause during free look</p> Signup and view all the answers

Match the insurance terms with their features:

<p>Reduced Paid-up Insurance = Nonforfeiture option allowing purchase of insurance with cash value Reinsurance = Sharing of risk between insurance companies Renewable Term = Term insurance allowing continuation without proof of insurability Replacement = Exchange of one policy for another under regulations</p> Signup and view all the answers

Match the terms with their characteristics:

<p>Proof of Insurability = Used to evaluate acceptance of risk by the insurance company Qualified Retirement Plan = Must be in writing and nondiscriminatory Reinstatement Clause = States conditions and steps for policy restoration Reinsurance = One company sells risk to another company</p> Signup and view all the answers

Match the definitions with the correct terms:

<p>Proof of Insurability = Evidence of a person's mental and physical health Qualified Retirement Plan = Must benefit employees exclusively Rebating = Inducement linked to insurance purchases Reduced Paid-up Insurance = Policy with no further premium payments needed</p> Signup and view all the answers

Match the concepts with their applications:

<p>Reinstatement Clause = Details conditions for policy reinstatement Reinsurance = Requires sharing of risk among insurers Renewable Term = Allows policy continuation based on age Replacement = Must comply with regulations for policy exchanges</p> Signup and view all the answers

Match each insurance terminology with its context:

<p>Proof of Insurability = Factors in determining insurance risk acceptance Qualified Retirement Plan = Provides tax advantages under specific rules Rebating = Not allowed as an inducement mechanism Reduced Paid-up Insurance = Cash value funding for new policy acquisition</p> Signup and view all the answers

Match the descriptions with the corresponding insurance terms:

<p>Proof of Insurability = Includes health and character evidence Qualified Retirement Plan = Designed for employees’ benefit and compliance Renewable Term = Terminates unless renewed without further proof Replacement = Involves switching life insurance policies</p> Signup and view all the answers

Match the terms with their roles in insurance:

<p>Reinsurance = Mitigates risk by sharing Reinstatement Clause = Restoration procedures and timeline Reduced Paid-up Insurance = Ensures continued coverage without payments Renewable Term = Facilitates policy continuation at adjusted rates</p> Signup and view all the answers

Match the following types of life insurance with their descriptions:

<p>Variable Life Insurance (VL) = Minimum death benefit is guaranteed but could increase if the investments do well. Whole Life Insurance = Type of insurance where level coverage lasts until death or age 100. Variable Universal Life Insurance (VUL) = Combines flexibility with the investment of cash values in separate accounts. Waiver of Premium Rider = Optional rider that requires the insurer to assume payment of premiums during total disability.</p> Signup and view all the answers

Match the following terms used in life insurance with their meanings:

<p>Warranty = Statements made that are guaranteed to be absolutely true. Variable Life Insurance (VL) = Insurance policy that may allow death benefit to increase with good investments. Whole Life Insurance = Matures and pays out either the face amount or the cash value at death or age 100. Waiver of Premium Rider = Rider that takes effect after six months of total disability of the insured.</p> Signup and view all the answers

Match the following insurance products with their main features:

<p>Variable Life Insurance (VL) = Investment component with a guaranteed minimum death benefit. Variable Universal Life Insurance (VUL) = Flexibility and investment options through separate accounts. Whole Life Insurance = Also known as ordinary life or permanent insurance. Waiver of Premium Rider = Ensures premium payments are covered during total disability.</p> Signup and view all the answers

Match the following life insurance features with their relevant policies:

<p>Variable Life Insurance (VL) = Investment may change death benefit. Whole Life Insurance = Fixed coverage until maturity. Variable Universal Life Insurance (VUL) = Investment in separate account option. Waiver of Premium Rider = Coverage during insured's total disability.</p> Signup and view all the answers

Match the following descriptions with the associated life insurance terms:

<p>Waiver of Premium Rider = Insurer pays premiums if insured is disabled. Warranty = Insurer's statements must be guaranteed true. Variable Universal Life Insurance (VUL) = Combines investment and flexibility. Whole Life Insurance = Provides cash value or face amount at maturity.</p> Signup and view all the answers

Match the following insurance concepts with their descriptions:

<p>Underwriting = The process of evaluating and classifying risks Uniform Simultaneous Death Act = Benefits payable as if the insured outlived the beneficiary Unilateral = A one-sided promise in which only one party promises something Universal Life Insurance (UL) = An interest sensitive flexible premium life insurance policy</p> Signup and view all the answers

Match the following annuity types with their characteristics:

<p>Variable Annuity = The value varies based on investment performance Whole Life Insurance = Fixed premiums with cash value in separate accounts Universal Life Insurance (UL) = Develops cash value with two death benefit options Tax Sheltered Annuity (403B) = Contributions made through a salary reduction program</p> Signup and view all the answers

Match each term with its relevant insurance practice:

<p>Twisting = Misleading clients to switch policies Third Party Ownership = When the policy purchaser is not the insured Underwriting = Acceptance or rejection of risks by an insurer Uniform Simultaneous Death Act = Applies when insured and beneficiary die together</p> Signup and view all the answers

Match the following terms with their meanings in life insurance:

<p>Unilateral = An enforceable promise made by the insurance company Tax Sheltered Annuity (403B) = Retirement plan for non-profits, salary reduction Variable Annuity = Annuity units vary with investment performance Whole Life Insurance = Insurance with fixed premiums and cash value</p> Signup and view all the answers

Match these concepts to their appropriate descriptions:

<p>Stock Insurer = Company managed by a board elected by stockholders Whole Life Insurance = Type of insurance with guaranteed cash value Third Party Ownership = Ownership where policy is purchased by someone else Variable Annuity = Annuity fluctuating based on market performance</p> Signup and view all the answers

Match the following insurance-related terms with their explanations:

<p>Underwriting = Evaluating risks before acceptance Unilateral = Only the insurer has a promise to pay Uniform Simultaneous Death Act = Law affecting benefits when parties die together Twisting = Bad practice of misleading clients for new policies</p> Signup and view all the answers

Flashcards

Cash Value

The amount of money an insurance policyholder can withdraw from their policy. It builds up over time and can be used for various purposes.

Cash Settlement Option

The amount of money the beneficiary receives when the policy matures. It's the full amount of the policy's proceeds paid out in a lump sum.

Cash Nonforfeiture Option

A payment received immediately by the policyholder when they surrender their policy. The amount received is the current cash value of the policy.

Contributory Plan

A type of insurance premium payment plan where employees contribute a portion of the premium cost.

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Noncontributory Plan

A group insurance plan where the employer pays the entirety of the insurance premiums.

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Conditional Receipt

An agreement between the insurance company and the applicant, stating that the applicant is covered from the application date or the medical exam date (whichever is later), if the applicant is ultimately found insurable.

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Consideration

Something of value exchanged for the transfer of risk. For the insured, it's premium payments and truthful statements on the application. For the insurer, it's the promises in the contract.

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Contingent Beneficiary

The person designated to receive the policy benefits if the primary beneficiary dies before the insured.

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Fair Credit Reporting Act

A federal law that sets guidelines for consumer credit reporting. It outlines how companies can access and use credit reports, what disclosures must be made, and what notifications are required.

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Financial Needs Approach

This approach determines the amount of life insurance needed based on the financial needs of the surviving family, regardless of the insured's income.

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Fixed Amount Annuity

A type of annuity that provides a fixed dollar payment at regular intervals for the lifetime of the annuitant.

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Fixed Amount Settlement Option

A settlement option where the beneficiary receives fixed dollar payments from the policy proceeds at regular intervals upon policy maturity.

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Fixed Period Settlement Option

A settlement option where the beneficiary receives income from the policy proceeds for a specified period of time after policy maturity.

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Free Look Provision

A policy provision that allows the policyowner to review the newly issued policy for a specified period (usually 10 days). The policyowner can return the policy for any reason and receive a full refund.

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General Account

The portion of an insurance company's assets that hold regulated or guaranteed funds. These funds offer a stable, guaranteed rate of return.

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Separate Account

The portion of an insurance company's assets that contain investments with no guaranteed rate of return. They are regulated by the Securities and Exchange Commission (SEC) and National Association of Securities Dealers (NASD).

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Variable Life Insurance (VL)

A type of life insurance with a guaranteed minimum death benefit that can increase based on investment performance.

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Variable Universal Life Insurance (VUL)

Combines the flexibility of Universal Life with the investment features of Variable Life, allowing cash values to be invested in separate accounts.

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Waiver of Premium Rider

A rider that guarantees premium payments will be waived if the insured becomes disabled for at least six months.

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Warranty

Statements made by the insured that are guaranteed to be absolutely true, such as health history.

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Whole Life Insurance

A permanent life insurance policy providing level coverage until death or age 100, with a guaranteed cash value that matures and pays out at the end.

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Proof of Insurability

Information about a person's health, character, occupation, and habits used by an insurer to decide if they should accept the person's risk.

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Qualified Retirement Plan

A retirement plan that meets specific federal requirements and qualifies for tax benefits. These plans must be for employees, in writing, non-discriminatory, and either defined benefits or contributions, and permanent.

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Rebating

Anything of value given by an insurance agent to a client to incentivize buying insurance.

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Reduced Paid-up Insurance

A nonforfeiture option where the policy's cash value is used to purchase a new policy with a single premium payment. The new policy will have a smaller face amount than the original, but no further premiums will be needed.

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Reinstatement Clause

A clause in a policy outlining how it can be restored to its original condition after it lapsed. It specifies the conditions, timeframe, and steps for reinstatement.

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Reinsurance

The process where one insurance company transfers part of its risk to another insurance company.

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Renewable Term

Term insurance that allows the policyholder to renew the policy for another term at the end of the current term without requiring proof of insurability. Premiums are based on the new attained age.

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Replacement

The exchange of one insurance policy for another. Specific regulations must be followed during this process.

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Policy Loan Provision

An insurance policy's cash value can be borrowed against by the policyholder. This provision clarifies the terms of the loan.

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Nonforfeiture Options

Allows policyholders to choose how they receive the cash value upon surrender of the policy. Options include a lump sum, reduced paid-up insurance, or extended term insurance.

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Peril

The cause of a loss covered by an insurance policy. For example, fire is a peril for a fire insurance policy.

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Limited Pay Policy

A type of insurance where the policyholder pays the premiums for a specific period, after which no further payments are needed. Example: '20-Pay Life' policy.

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Single Premium Policy

A type of insurance where the policyholder makes one large upfront payment, covering the policy for its entire duration. No further premiums are needed.

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Continuous Premium Policy

An insurance policy where the premium payments continue throughout the duration of the policy. This option requires smaller payment amounts but builds cash value more slowly.

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Non-qualified Retirement Plan

A retirement plan that doesn't qualify for special tax treatment from the IRS. Commonly known as a 'Mutual Company'.

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Participating Company

An insurance company that returns unused premium in the form of a dividend to the policyholders. It's essentially a way to share profits.

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Tax Sheltered Annuity (403B)

A qualified retirement program for employees of non-profit organizations. Contributions are made through a salary reduction program.

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Underwriting

The process by which an insurer evaluates, classifies, and ultimately either accepts or rejects risks.

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Third Party Ownership

When a person(s) other than the insured purchases the insurance policy.

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Uniform Simultaneous Death Act

It directs that in life insurance, if the insured and the primary beneficiary die at the same time, the policy benefits are payable as if the insured outlived the beneficiary.

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Stock Insurer

An insurance company publicly owned and controlled by its stockholders who elect a board of directors to manage it.

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Twisting

Knowingly making misleading statements or making fraudulent comparisons in order to induce a client to drop a policy with an existing insurer and start a new one with a different company.

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Unilateral

One-sided promise. Only one party makes a legally enforceable promise. The insurance company promises to pay the policy proceeds at some future date or event.

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Universal Life Insurance (UL)

An "interest-sensitive" flexible premium life insurance policy. A combination of ART and cash value. Has two death benefit options (A & B) and develops cash value. The product is invested in a separate account and has no guaranteed rate of growth.

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Study Notes

Insurance Terminology

  • 401 K Plan: A qualified retirement plan where employees contribute pre-tax dollars.
  • Absolute Assignment v. Collateral Assignment: Absolute is permanent and irrevocable transfer of rights/benefits. Collateral is temporary/revocable transfer of benefits.
  • Accelerated Death Benefit: Partial/full payment of death benefit before death if the insured is terminally ill.
  • Accidental Death Benefit: Extra insurance benefit paid if death results from an accident within 90 days.
  • Accumulate at Interest: Policyowner keeps dividends with insurer to earn interest.
  • Adhesion: Ambiguity in insurance contracts is settled in the insured's favor.
  • Adverse Selection: Less favorable risks are more likely to seek/maintain insurance than favorable risks.
  • Agency Agreement or Agency Contract: Legal document between agent and insurance company detailing rights and responsibilities.
  • Agent Authorities:
  • Expressed: Authority specifically granted in writing.
  • Apparent: Authority reasonably assumed by the public.
  • Implied: Necessary authority not expressed.
  • Agent/Producer: Individual who sells/aids in selling insurance. Legally represents the company.
  • Agent's Report: Report submitted to insurer about the proposed insured's risks.
  • Aleatory: Unequal exchange of value; one party may gain more than the other.
  • Annual Renewable Term: Term life insurance allowing renewal without proof of insurability; premiums increase each renewal.
  • Annuitant: Person who buys an annuity; may or may not be the policyowner.
  • Annuity: Contract guaranteeing income payments for a specified time/life; designed to prevent outliving savings.
  • Appointment: Authorization of an agent/producer by the insurer to represent the company.
  • Blackout Period: Time period between youngest child turning 16 and widow/er reaching retirement age when no Social Security Survivor Benefits are paid.
  • Buy-Sell Agreement: Business use of life insurance where partners buy insurance on each other for purchase of deceased partner's share.
  • Cash Nonforfeiture Option: Policyowner receives a lump-sum payment of the policy's cash value upon surrender.
  • Cash Settlement Option: Beneficiary receives a lump-sum payment of policy proceeds upon policy maturity.
  • Cash Value: Equity portion of an insurance policy available to policyowner; also known as living benefit or policy savings.
  • Commissioner: Public official responsible for regulating the insurance industry.
  • Conditional: Policy payout contingent on meeting certain conditions.
  • Conditional Receipt: Interim insuring agreement; coverage starts on the later of the application or medical exam date if the insured is insurable.
  • Consideration: Something of value exchanged in a contract.
  • Contingent Beneficiary: Alternate beneficiary to receive policy proceeds if primary beneficiary dies before insured.
  • Contributory Plan v. Noncontributory Plan:
  • Contributory: Employees contribute to premiums.
  • Noncontributory: Employer pays all premiums.
  • Convertible Term: Term insurance convertible to permanent insurance without proof of insurability.
  • Decreasing Term: Term life insurance with a decreasing face amount over time.
  • Dividends: Distributions paid by insurance companies; taxable for stock insurers and non-taxable for mutual insurers.
  • Equity Indexed Annuity: Annuity with guaranteed minimum interest rate, allowing investments in an index like the S&P 500.
  • Estoppel: Legally preventing someone from asserting a previously waived right.
  • Extended Term Insurance: Non-forfeiture option utilising cash value for a single premium on a similar term insurance policy.
  • Face Amount: Amount payable upon insured's death; also called face value, death benefit, policy proceeds.
  • Facultative Reinsurance v. Treaty Reinsurance:
  • Facultative: Risk transfer on a policy-by-policy basis.
  • Treaty: Risk transfer under a blanket agreement.
  • Fair Credit Reporting Act: Federal law protecting consumers' credit history.
  • Financial Needs Approach: Determining insurance needs based on surviving family's needs, disregarding insured's earnings.
  • Fixed Amount Annuity: Life annuity guaranteeing a fixed dollar payment for life.
  • Fixed Amount Settlement Option: Beneficiary receives periodic payments of a fixed dollar amount.
  • Fixed Period Settlement Option: Beneficiary receives income from policy proceeds for a specific time.
  • Free Look Provision: Period for returning a newly issued policy for a full refund.
  • General Account v. Separate Account:
  • General: Regulated, guaranteed funds.
  • Separate: Investments with no guaranteed return.
  • Grace Period: Period after premium due date where the policy remains in force without premium payment.
  • Graded Premium Policy: Policy with premiums increasing for a period and then leveling off.
  • Group Insurance: Policy covering multiple people with common interest.
  • Guaranteed Insurability Rider: Option to purchase additional coverage at specific times without proof of insurability.
  • Guaranty Association: Associations protecting consumers from impaired or insolvent companies.
  • Hazard: Anything increasing the likelihood of loss.
  • Human Life Value Approach: Determining insurance needs based on the worker's annual earnings, less taxes and expenses.
  • Immediate Annuity v. Deferred Annuity:
  • Immediate: First payout within 12 months.
  • Deferred: First payout after 12 months.
  • Incontestable Clause: Clause limiting time for contesting an insurance policy based on misrepresentation.
  • Indemnify: To restore someone to their financial state before a loss.
  • Individual Retirement Account (IRA): Qualified retirement plan for individuals with earned income.
  • Insurable Interest: Financial interest in the life of another person; potential financial loss with death.
  • Insurer/Principal: Insurance company that underwrites and assumes the risk.
  • Insuring Clause: Heart of the policy; outlines the company's promise to the policy owner and the policy limits.
  • Interest Settlement Option: Beneficiary receives periodic interest payments from investment of policy proceeds.
  • Joint and Survivor Annuity: Annuity making payments to multiple annuitants for their lifetimes.
  • Keogh Plan (HR10): Qualified retirement plan for self-employed persons.
  • Lapsed Policy: Insurance policy no longer in effect due to unpaid premiums.
  • Law of Agency: Agent's actions within authority become the insurer's.
  • Law of Large Numbers: Larger groups of similar risks result in more predictable outcomes.
  • Level Term Insurance: Term insurance with a fixed face value for its duration.
  • License: Documentation from the insurance department for individuals to work in insurance.
  • Life Annuity with Period Certain: Annuity guaranteeing income payments for a specified term/life.
  • Life Annuity/Straight Life Annuity: Annuity making payment for life.
  • Life Income Settlement Option: Insurance policy proceeds used to purchase a life annuity.
  • Medical Information Bureau: Organisation collecting and sharing information for insurance purposes.
  • Modified Endowment Contract (MEC): Cash value policy that loses tax advantages due to rapid cash value accumulation.
  • Modified Life Policy: Whole life insurance with reduced initial premiums increasing later.
  • Nonforfeiture Options: Choices to recover cash value from insurance upon surrender.
  • Non-qualified Retirement Plan: Retirement plan without special IRS tax treatment.
  • Participating Company: Mutual company returning unused premiums as dividends to policyholders.
  • Payor Rider: Optional rider paying premiums if policyowner dies or becomes disabled.
  • Peril: Cause of a loss (e.g., fire).
  • Policy Loan Provision: Conditions for policyowners borrowing from policy cash value.
  • Policy Owner: Person with rights outlined in the policy; may or may not be insured.
  • Policy Payment Methods:
  • Continuous Premium: Continuous payments with gradual cash value growth.
  • Limited Pay: Payments for a specific period.
  • Single Premium: One lump-sum payment.
  • Proof of Insurability: Statement about insured's health, character, and occupation.
  • Qualified Retirement Plan: Retirement plan qualifying for special tax treatment.
  • Rebating: Offering something of value to induce insurance purchase.
  • Reduced Paid-up Insurance: Non-forfeiture option converting funds to reduced policy coverage with no more premium payments.
  • Reinstatement Clause: Clause specifying conditions, period of time, and steps for restoring a lapsed policy.
  • Reinsurance: Sharing of risk between insurance companies.
  • Renewable Term: Term insurance allowing renewal without proof of insurability.
  • Replacement: Exchanging one policy for another, subject to regulations.
  • Representations: Statements in an application truthfully reflecting applicant's/insured's knowledge.
  • Revocable Beneficiary v. Irrevocable Beneficiary:
  • Revocable: Beneficiary whose designation can change, subject to policy owner's requests.
  • Irrevocable: Beneficiary whose designation cannot change.
  • Riders: Supplementary coverage options.
  • Risk Classifications:
  • Standard: Average risk.
  • Substandard: Higher risk requiring special conditions.
  • Preferred: Lower risk.
  • Roth IRA: Non-deductible retirement account with tax-free growth after five years.
  • Settlement Options: Five ways to receive policy proceeds.
  • Speculative Risk: Possibility of loss or gain.
  • Spendthrift Clause: Protecting policy benefits from policyowner's creditors.
  • Stock Insurer: Insurer owned and controlled by stockholders, electing a board of directors.
  • Tax Sheltered Annuity (403B): Retirement program for non-profit employees.
  • Third Party Ownership: Purchase of insurance policy by other persons than the insured.
  • Twisting: Misleading others to switch insurance policies by falsely comparing plans.
  • Underwriting: Analyzing, classifying, and accepting/rejecting insurance risks.
  • Uniform Simultaneous Death Act: Guidelines in cases of simultaneous death of insured and the beneficiary.
  • Unilateral: One party making a promise.
  • Universal Life Insurance (UL): Flexible premium life insurance combining aspects of term and cash value.
  • Variable Annuity: Investment-based annuity with varied returns, determined by separate account investments.
  • Variable Life Insurance (VL): Whole-life insurance with a minimum death benefit; investments in separate accounts influence the value.
  • Variable Universal Life Insurance (VUL): Combines universal life flexibility with variable life investments.
  • Waiver of Premium Rider: Rider paying premiums if insured becomes disabled.
  • Warranty: Guaranteed statements in an insurance policy.
  • Whole Life Insurance: Level coverage providing protection throughout life until death/100-year maturity, with a payout of the face amount/cash value.

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