Life & Health Insurance Glossary

Glossary For Life & Health Insurance Licensing Exam

• Accidental Death Benefit Rider

  Pays an additional benefit if death results from an accident, usually within 90 days.

• Accidental Death & Dismemberment (AD&D)

  Provides benefit for accidental death or loss of limbs/eyesight.

• Actuarial Tables

  Statistical tables used to calculate premiums based on mortality/morbidity.

• Adhesion (Contract of Adhesion)

  Insurance contract prepared by insurer; accepted "as is" by insured. Ambiguities go in favor of insured.

• Adverse Selection

  Tendency of high-risk individuals to apply for insurance more often than low-risk individuals.

• Aleatory Contract

  Performance depends on an uncertain event; unequal exchange of value.

• Ambulatory Services

  Outpatient medical services.

• Anti-Money Laundering (AML)

  Federal requirement to report suspicious financial transactions (FINCEN Form 8300).

• Apparent Authority

  Authority the public believes the agent has based on the insurer's actions.

• Assignment

  Transfer of policy ownership rights.

• Beneficiary

  Person/entity receiving death benefit. Includes Primary, Contingent, Revocable, and Irrevocable

• Blackout Period

  Years when Social Security survivor benefits are not paid to a surviving spouse (typically when youngest child ages out).

• Business Continuation Plans

  Insurance used for business succession: Buy-Sell Agreements, Key Person Insurance, Split-Dollar Plans

• Cash Surrender Value

  Amount available when a permanent policy is surrendered; may trigger taxes.

• Cafeteria Plan (Section 125 Plan)

  Employer-sponsored plan allowing employees to choose benefits pre-tax.

• Conditional Receipt

  Provides temporary coverage as long as the applicant is “insurable” according to underwriting rules.

• Consideration

  Something of value exchanged in the contract (premium for insurer's promise).
  . Contributory = employees pay part of premium (75% participation typically required).
  . Noncontributory = employer pays full premium (100% participation required).

• Coordination of Benefits (COB)

  Prevents double payment of claims when multiple health policies are active.

• Death Benefit Options (UL)

  . Option A - Level death benefit
  . Option B - Increasing (includes cash value)

• Defamation

  False or malicious communication about an insurer or producer (illegal in insurance).

• Disability Income Insurance

  Replaces wages when the insured becomes disabled.
  

  Double Indemnity

  Accidental death benefit equal to twice the face amount.

• Evidence of Insurability

  Proof (medical or financial) required during underwriting.

• Extended Term

  Nonforfeiture option: purchase term insurance using full cash value; face amount stays the same.

• Fixed Amount Option

  Settlement option where insurer pays a fixed amount at regular intervals until proceeds are exhausted.

• Fraud

  Intentional misrepresentation intended to deceive. Voids the policy.

• Grace Period

  Typically 30 or 31 days after premium is due; coverage remains in force.

• Group Insurance

  Master contract issued to employer; individual employees receive certificates.

• Guaranty Association

  State-run organization that protects policyholders if an insurer becomes insolvent.

• Health Maintenance Organization (HMO)

  Managed care requiring PCP and referrals; emphasizes preventive care.

• Hospital Indemnity Policies

  Pay a fixed amount per day of hospitalization regardless of actual expenses.

• Human Life Value

  Method of determining life insurance needs based on income and years remaining to work.

• Indemnity

  Reimbursement for actual medical expenses (fee-for-service).

• Incontestability Clause

  After 2 years, the insurer cannot void the policy for misstatements (other than fraud).

• Insurable Interest

  Must exist at time of application (family, financial, business relationships).

• Joint Life Insurance

  Pays at the first death among two insureds.

• Joint and Survivor

  Annuity payments continue to surviving annuitant after first death.

• Key Person Insurance

  Protects a business from financial loss when a key employee dies.

• Lapse

  Policy termination for non-payment of premium.

• Level Premium

  Premiums remain constant over the life of the policy.

• Major Medical Insurance

  Broad coverage for hospital, physician, and surgical expenses with high limits.

• Managed Care

  Cost-control system (HMO, PPO, POS).

• MEC (Modified Endowment Contract)

  Fails the 7-pay test; loans/withdrawals are taxed LIFO and may incur penalties.

• Nonforfeiture Options

  Required in cash-value policies: Cash Surrender, Extended Term, Reduced Paid-Up

• Noncancellable Policy

  Insurer cannot cancel or raise premiums (common in disability policies).

• Occupational vs. Nonoccupational Coverage

  . Occupational = covers work-related injuries
  . Nonoccupational = excludes work-related injuries

• Paid-Up Additions (PUA)

  Dividends purchase miniature whole life policies increasing cash value and death benefit.

• Participating Policy

  Pays dividends (mutual insurers).

• Peril

  Cause of loss (e.g., accident, sickness).

• Preferred Provider Organization (PPO)

  Network plan that allows out-of-network use at higher cost.

• Producer

  Licensed agent or broker.

• Qualifying Event

  Life changes triggering continuation coverage under COBRA (e.g., termination, divorce).

• Qualified Plan

  Retirement plan receiving favorable tax treatment (e.g., 401(k), IRA).

• Reinstatement

  Restoring a lapsed policy by paying overdue premiums + evidence of insurability.

• Renewable Term Insurance

  Term insurance renewed without evidence of insurability.

• Rescission

  Cancellation of a policy due to material misrepresentation.

• Spendthrift Clause

  Prevents creditors from claiming the death benefit before it is paid to beneficiary.

• Social Security Blackout Period

  Time when no survivor benefits are paid to spouse (typically ages 16–60).

• Stop-Loss

  Limit in health insurance where insurer pays 100% beyond a certain amount.

• Temporary Insurance Agreement (Binding Receipt)

  Provides immediate coverage regardless of insurability (rare; not in all states).

• Third-Party Ownership

  Policy owned by someone other than the insured.

• Twisting

  Illegal practice of inducing replacement through misrepresentation.

• Uniform Simultaneous Death Act

  If insured and beneficiary die together, assume beneficiary died first; benefits go to contingent beneficiary.

• Unilateral Contract

  Only the insurer makes a legally enforceable promise.

• Variable Life Insurance

  Permanent life with investment subaccounts; requires securities license.

• Viatical Settlement

  Sale of life policy by a terminally ill person to a third party for cash.

• Waiver of Premium

  Insurer waives premiums if insured becomes disabled.

• Whole Life Insurance

  Permanent, fixed premium, guaranteed cash value.

• Yearly Renewable Term (YRT)

  One-year term coverage; used in decreasing term and some riders.

• Zero-Based Budgeting (Disability Underwriting)

  Evaluation of applicant's complete financial need to determine DI benefit limits.