Life Insurance

Front 1

Premium

Back 1

The money a policy owner pays to an insurer for the protection that is provided by an insurance policy

Front 2

Evidence of Insurability (E of I)

Back 2

Any statement or proof of an insured's physical condition and/or other factual information affecting his acceptance for insurance

(E.g. application; physical exam; blood; urine; saliva)

Front 3

Applicant

Back 3

Person who applies for a policy on own life or on life of another

Front 4

Policy owner (Policyholder)

Back 4

Individual who exercises ownership rights (typically, but not exclusively, the applicant)

Front 5

Insured

Back 5

Subject of the policy; death triggers death benefit (consent & E of I required)

Front 6

Beneficiary

Back 6

Receives death benefit upon death or insured (consent not required)

Front 7

Life Insurance Application

Back 7

Most important evidence of insurability

3 sections: 1) general information; 2) health information; 3) agent's report/statement

Front 8

Key Person Insurance

Back 8

Life insurance purchased by a business on the life of a key employee whose death would have adverse effects on the company

Uses:

-recruit and train replacement;

-replace lost profits;

-assure potential creditors

(**note: not an actual type of insurance, just a business use of insurance)

Front 9

Buy-Sell Insurance

Back 9

Life insurance purchased to fund a Buy-Sell agreement (living partner required to buy deceased partner's estate in the business)

(**note: not an actual type of insurance, but a business use of insurance)

Front 10

Split Dollar Life Insurance

Back 10

A method of paying for an employee's insurance coverage in which the employer/employee 'split' the premium, cash values and death benefits for a life policy, usually a permanent type of life policy

-used to retain key employees

-guaranteed to receive contribution back

((**note: not a type of insurance but a business use of insurance))

Front 11

Measure of Liability

Back 11

The amount the insurer is obligated to pay upon the insured's death

Formula: face amount - outstanding policy loans - loan interest = Measure of Liability

Hint 11

Also known as 'Limit of Liability' or 'Net Death Benefit'

Front 12

Insurable Interest Regarding Life Insurance

Back 12

Required (only) at the time of application for Life Insurance App.; updates not needed

Hint 12

Rule pertaining to life insurance

Front 13

Human Life Value Approach

Back 13

Amount of life insurance is estimated based on contribution to household (I.e. income, projected pay raises, household services, employment benefits)

Front 14

Needs Approach

Back 14

Based on needs that will no longer be met or occur due to loss (I.e. funeral expenses, legal fees/taxes, business buyout, probate fees, medical expenses, emergency funds, mortgage/rent, credit cards/loans, education costs)

Front 15

Mortality

Back 15

The death rate in a given population

Front 16

Mortality Table

Back 16

Helps predict most accurate premium rates based on historical experience and future projections; deaths by age and sex.

Front 17

"Life Insurance Creates an Immediate Estate"

Back 17

All assets pass to heirs when you pass; however, many people have a negative estate (debt). Life insurance creates an "Immediate Estate" because it brings immediate value to your passing based on the policy taken.

Front 18

Intestate

Back 18

When a person dies w/o having created a will to direct the disposition of his assets (estate)

Front 19

Avoidance

Back 19

Not performing an activity that could carry risk (e.g. Not flying in a plane)

Hint 19

1 of 4 Risk Management Methods

Front 20

Reduction

Back 20

Methods that reduce that severity of loss or likelihood of loss from occurring (e.g. installing sprinklers)

Hint 20

1 of 4 Risk Management Methods

Front 21

Retention

Back 21

Assuming all or part of a risk (I.e. self-insure). Visit strategy for small roaks where the cost of insuring would be greater than the total losses sustained

Hint 21

1 of 4 Risk Management Methods

Front 22

Transfer

Back 22

Purchasing insurance policy so that financial impact of loss is transferred to insurance company

Hint 22

1 of 4 Risk Management Methods

Front 23

Term Life Insurance

Back 23

Life insurance that covers a limited term; may or may not be renewable. No cash value. Helpful for small premium and large benefit.

Hint 23

Most basic kind of life insurance

Front 24

Face Amount

Back 24

Amount if insurance provided by a life policy.

Hint 24

Death Benefit

Front 25

Renewable Term Policy

Back 25

Type of term life policy that gives the policyowner the option to renew the policy at the end of its term for another term without E of I

Front 26

Increasing Term Policy

Back 26

Face amount increases systematically but premiums stay level

Hint 26

Works well for young, growing families

Front 27

Decreasing Term Policy

Back 27

Face amount decreases systematically; premiums decrease with face amount

Hint 27

Associated with mortgage insurance

Front 28

Whole Life Insurance

Back 28

Covers the entire life-span of an individual without need for renewal or varying premiums; charges more in youth to cover would-be fluctuations in late ages

Face amount, cash value, and level premium are guaranteed

**AKA: permanent life and ordinary life

Hint 28

Cash Value = Face Amount @ age 100

Front 29

Policy Loan

Back 29

An advance of money available to the policyowner from a policy's cash value; interest will be charged. Policyowner does not have to be approved for loan and there's no fixed time for repayment. Anything owned will be deducted from Measure of Liability. Will not allow full cash value for loan

Front 30

Term Conversion Provision

Back 30

Provision in most term policies that allows owner to cover to a permanent plan of insurance without evidence of insurability (E of I)

Premium will be based on age at time of conversion

Front 31

Modified Whole Life Policy

Back 31

Premiums increase somewhere between year 3-5

Front 32

Graded Premium Whole Life

Back 32

Premiums increase annually for 5-10 years

Premium remains level agree a series of increases

Front 33

Continuous Premium Whole Life Policy

Back 33

Premiums payable through agree 100

Front 34

Limited Whole Life Policy

Back 34

Premiums payable for survivors number of years or until a specified age

Front 35

Joint Life (First-to-Die) Policy

Back 35

Pays out at first death; can also provide income for surviving spouse

Benefit: less expensive than two separate policies

Front 36

Survivorship Life (Second- or Last-to-Die) Policy

Back 36

Pays out at second death; typically for those with a large estate to cover estate taxes; still less expensive than two separate policies

Front 37

Endowments

Back 37

Work like continuous premium whole life policies, except that maturity age is less than 100; can provide death benefit or be used for retirement funds

Hint 37

Not as popular anymore due to changes in tax laws

Front 38

Universal Life Policy

Back 38

Like a functional savings account; charged a premium expense (a % which is only paid when premium is paid) for the account and a monthly fee (roughly $5, always paid) and the rest of premium goes towards account value which collects interest (either based on current interest rates or a guaranteed rate)

Additionally, there's a "cost of mortality (insurance)" which is essentially the fluctuation of premium charges

*unique: can make withdrawals from account with no need to repay, just deducted from death benefit

Front 39

Fixed Product

Back 39

Product in which premiums are invested and backed by the insurer's General Account

Front 40

General Account

Back 40

Investment account used for insurer's 'fixed' products; very conservative and highly regulated

Front 41

Separate Accounts

Back 41

Contains various 'mutual fund-like' accounts called sub-accounts used to provide investment choices for insurer's variable products

Front 42

Equity Index

Back 42

Essentially an imaginary portfolio of stocks (equities) that represents the general price movement of the stocks that make up the portfolio; typically indicates the health of the stock market

Front 43

Equity Indexed UL

Back 43

Like an UL or VUL except the interest/backing is based on the Equity Index

Front 44

Riders (Endorsements)

Back 44

Addition to life policy that provides some additional feature or coverage (requires additional premium)

Front 45

Waiver of Premium

Back 45

Waives policy premium if injured/disabled; eliminate short-term disability coverage; available on term and whole life

Front 46

Waiver of Monthly Deduction

Back 46

Waives monthly deduction of insured is disabled for UL

Hint 46

UL WP

Front 47

Term Riders

Back 47

A term insurrant added to a base Rider (spouse, children [CTR], etc)

Front 48

Payor Coverage

Back 48

Available on juvenile policies; waives premiums for payor if payor dies or is disabled; premiums waived untim insured is 21

Front 49

Disability Income Rider

Back 49

Pays monthly benefit while insured is disabled

Front 50

Accidental Death (AD)

Back 50

Pays additional death benefit if death is the result of an accident; death must occur w/in a certain time frame after accident and not a result from a hobby

Front 51

Accidental Death & Dismemberment

Back 51

Covers AD and Dismemberment; schedule lists amounts paid; benefits paid usually in a lump sum

Front 52

Principal Sum

Back 52

100% of AD&D coverage amount (whole amount paid out)

Front 53

Capital Sum

Back 53

Less than 100% of AD&D coverage amount

Front 54

Cost of Living Rider (COLA)

Back 54

Automatically increases face amount with increases in Consumer Price Index (CPI) without requiring E of I

Front 55

Guaranteed Insurability Rider

Back 55

Asked additional insurance to be purchased without E of I at specified ages of insured and after 'qualifying events'

Front 56

Living Benefits

Back 56

Any method which allows policy owner to benefit from policy while insured is still living

Hint 56

E.g. policy loans, withdrawals, long term care benefits

Front 57

Accelerated Death Benefit

Back 57

Pays out up to 70% when insured becomes terminally ill/critically ill; death benefit is reduced as a result

Front 58

Long Term Care Rider

Back 58

Conceptually similar to the ADB; pays a % of face amount for insured's LTC expenses

Front 59

Return of Premium (RoP) Rider

Back 59

Rider on a term Policy returns part or all of the premiums paid in if insured is still living at the end of the policy's term; ineffective if you don't pay your premiums

Front 60

No Lapse Guarantee Rider

Back 60

Rider available on a UL policy that guaranteed policy will remain in force for a guaranteed period even if cash value drops to zero

Front 61

Family Life Policy

Back 61

Combines Whole Life with Term Riders to cover ALL family members in a single packaged policy

Front 62

Family Maintenance Policy

Back 62

Combines Whole Life with Level Term Rider to cover breadwinner; provides monthly income; whole life policy pays death benefit after monthly income terminates

Front 63

Family Income Policy

Back 63

Combines Whole Life with Decreasing Term to cover breadwinner; pays out monthly income for specified amount of time; whole life policy pays death benefit after monthly income terminates

Front 64

Family Term Rider

Back 64

Combines level term coverage in spouse and children into single rider

Front 65

Indexed Life Policy

Back 65

Whole life; face amount increases with CPI; decreases don't affect policy

Front 66

Jumping Juvenile

Back 66

While live policy issued on a juvenile (age 16 or under); face amount jumps 5x at age 21

Front 67

Deposit Term

Back 67

Packaged policy made up of single premium endowment and a 10 year level renewable term Rider

Front 68

Industrial Life Policy

Back 68

While life with face amount under $1k; premiums collected weekly by home service agents; often non-medical insurance

Front 69

Beneficiaries

Back 69

Recipient (s) of death benefits. Can be an individual or a group; 3 classes: 1) primary; 2) contingent (successor); 3) tertiary (final)

Front 70

Settlement Options

Back 70

How beneficiaries will receive death benefit

Front 71

Interest Only

Back 71

Policy proceeds kept in an account with insurer and periodic interest payments (monthly, quarterly, semi-annually, annually) made to beneficiary

Front 72

Fixed Amount

Back 72

Fixed amounts oasis to beneficiary at survived intervals until the principal and interest are depleted

Front 73

Fixed Period

Back 73

Installments area paid to the beneficiary over a fixed number of years. Amount of installments is based on amount of policy proceeds, interest, and length of the period chosen.

Front 74

Lump Sum

Back 74

Policy proceeds paid out in one lump sum; default if no other option chosen by insurer or beneficiary

Front 75

Life Income

Back 75

Insurer retains principal death benefit in exchange for a lifetime income paid to the beginning. Amount of income payments depends on several factors, including principal amount, age and sex of beneficiary and prevailing interest rates

Front 76

IFFLL Tower

Back 76

Acronym for settlement options:

Interest only

Fixed amount

Fixed period

Lump sum

Life income

Front 77

Nonforfeiture Options

Back 77

Legally required options for using the cash value of whole life policies

3: "REC"

Reduced paid-up

Extended term

Cash surrender

Front 78

Reduced Paid-Up

Back 78

Cash value used as a single premium payment to fully pay up policy with reduced face amount

Hint 78

A nonforfeiture option

Front 79

Extended Term

Back 79

Cash value of whole life value is used as a single premium to cut term insurance with the same death benefit as the whole life policy

Hint 79

Nonforfeiture option

Front 80

Cash Surrender

Back 80

Policy terminated and cash value paid to policyowner

Hint 80

Nonforfeiture option

Front 81

Common Disaster Clause

Back 81

Provision that states when it is impossible to determine who died first because of a common accident, the insured with be presumed to have survived the primary beneficiary; protects the contingent beneficiary

Front 82

Survivorship Clause

Back 82

Specifies an amount of time by which a beneficiary must outbid the insured in order to recurve lunch proceeds (death benefit)

Front 83

Spendthrift

Back 83

Someone who adorbs money recklessly or wastefully

Front 84

Spendthrift Clause

Back 84

Provision that protects the policy proceeds from creditors of the beneficiary

Front 85

Grace Period (Life)

Back 85

Contractual provision that continues coverage under life policy up to 60 days after due date when premium is NOT paid

Front 86

Automatic Premium Loan (APL)

Back 86

"Any premium not paid by the end of its grace period will be paid by charging it as a policy loan if you requested it in writing and the maximum loan value is sufficient to cover the premium"

Front 87

Reinstatement Provision

Back 87

Spells out the requirements that must be satisfied for insurer to consider reinstating a lapsed policy

Allowed within 5 years of Lapse

Overdue premiums + interest

Outstanding loan paid or reinstated

E of I acceptance to insurer

Front 88

Entire Contract Provision

Back 88

Statee that a copy of the application must be made last of the policy for it to be valid

Front 89

Incontestability Clause

Back 89

Waives the issuance company's rights to dispute the validity of the contract after it has been in force for 2 years; protects the beneficiary

Front 90

Suicide Clause

Back 90

Limits insurance company's liability to a refund of a premium if the insured commits suicide within 2 years of the policy's effective date; protects the beneficiary

Front 91

Facility of Payments Provision

Back 91

Provision that says if no beneficiaries are living when the insured dies, then the death benefit will be issued to the owner is owner's estate if not living

Front 92

Misstatement of Age/Sex

Back 92

Provision that says if the insured's age or sex is different from what was on the application, an adjustment will be made to the coverage based on the correct age or sex

Front 93

Absolute Assignment

Back 93

Transfer of all ownership rights; permanent in nature

Front 94

Collateral Assignment

Back 94

Partial transfer of ownership rights; temporary in nature; most often used with bank loans (life policy used as collateral)

Front 95

Assignment Provision

Back 95

"You may assign this policy or any interest in it. We will recognize an assignment only if it is in writing and filed with us."

Front 96

Viatical Settlement

Back 96

Contractual agreement that provides a terminally ill person immediate cash in exchange for his ownership rights in a life policy

Front 97

Insuring Clause

Back 97

Basic promise to pay policy proceeds upon insured's death

Front 98

Facility of Payments Provision

Back 98

Explains who will receive the policy's death benefit if no beneficiary has been chosen by the owner or there are no beneficiaries at the time of the insured's death

Front 99

Life Settlement

Back 99

Contact in which policyowner assigns ownership to provider in exchange for an amount that is less than policy's death benefit, but more than it's cash surrender value

Front 100

Life Settlement Brokers

Back 100

A person who acts on behalf of an owner of a life policy to negotiate a life settlement contract between the owner and a life settlement provider; represents the owner, not the provier; only needs 1 yr life agent experience or if less than you need 15 hrs of education

Front 101

Fair Credit Reporting Act

Back 101

Designed to promote accuracy and ensure privacy of the information used in consumer reports

Front 102

Attending Physician's Statement

Back 102

Statement/medical records isof the doctor who treated the applicant for a particular illness or disease; applicant must sign consent form to authorize release

Front 103

Medical Information Bureau (MIB)

Back 103

Database where member insured report adverse medical conditions to share with other member insurer's; cannot be used along to decline application

Front 104

HIV/AIDS Testing

Back 104

Marital status and suspected sexual orientation cannot be used; amt/age can be used; HIV consent form meaning of test results; notification procedures; who may receive results

Front 105

Risk Classification

Back 105

3 types: preferred, standard, substandard

Front 106

Preferred Risk

Back 106

Lower risk; lower premium

Front 107

Standard

Back 107

Average risk; average premium

Front 108

Substandard

Back 108

Higher risk; higher premium

Front 109

Non- Medical Application

Back 109

Life insurance application in which the proposed insured night not be required to undergo a medical exam; insurer always reserves the right to require a medical exam if it feels one is necessary

Front 110

Mode

Back 110

Frequency of premium payments; the higher the frequency, the higher the premium; annually, semi-annually, quarterly, monthly

Front 111

Policy Dividend

Back 111

Non-guaranteed return of premium paid to a policyowner out of an insurance company's surplus

Front 112

Earned Surplus

Back 112

Earnings not paid out as dividends, but reinvested in the business, also called retained earnings

Front 113

Life Policy Illustration

Back 113

A presentation or depiction that includes both guaranteed and nonguaranteed elements of a life policy over a period of years into the future

Front 114

Guaranteed Values

Back 114

The premiums, benefits, values, credits or charges that are guaranteed at issue

Front 115

Non-Guaranteed Values

Back 115

The premiums, benefits, values, credits or charges that are NOT guaranteed or not determined at issue

Front 116

Summary Status Report

Back 116

Must be sent annually by insurer to policyowners of policy types for which the insurer has designated that illustrations will be used for marketing purposes

Front 117

Preprinted

Back 117

Illustrations are those prepared using some sort of illustration software

Front 118

Non-Preprinted

Back 118

Illustrations are those prepared manually by agent

Front 119

Supplemental Illustration

Back 119

An illustration furnished in addition to a basic illustration, but may only depict a scale of non-guaranteed elements that is permitted in a basic illustration

Front 120

Binding Receipt

Back 120

Provides immediate coverage for started period; coverage applies even if underwriter devices the application

Front 121

Conditional Receipt

Back 121

Provides coverage from date of app only is application is ultimately approved by the underwriter

Front 122

Binder

Back 122

Written agreement issued by F&C insurer providing temporary coverage (90 days or less) while an application is being underwritten

Front 123

Nonforfeiture Options

Back 123

Legally required options for using the cash value of whole life policies;

3 types: reduced paid-up, extended term, cash surrender

Front 124

Reduced Paid-Up

Back 124

Cash value used as a single premium payment to fully pay up policy with a reduced face amount

Front 125

Extended Term

Back 125

Cash value used as a single premium to buy term insurance with the same death benefit as the whole life policy

Front 126

Cash Surrender

Back 126

Policy terminated and cash value paid to policyowner

Front 127

Common Disaster Clause

Back 127

Provision that states when it is impossible to determine who died first because of a common accident, the insured will be presumed to have survived the primary beneficiary

Hint 127

Protects the contingent beneficiary

Front 128

Survivorship Clause

Back 128

Provision that specifies an amount of time by which a beneficiary must outlive the insured in order to receive death policy proceeds (death benefit)

Front 129

Spendthrift

Back 129

A person who spend money recklessly or wastefully

Front 130

Spendthrift Clause

Back 130

Provision that protects the policy proceeds from creditors of the beneficiary

Front 131

Grace Period (Life)

Back 131

Contacted provision that continues coverage under life policy up to 60 days after premium due date when premium is NOT paid

Front 132

Automatic Premium Loan (APL)

Back 132

Advanced permission to make a policy loan to pay the premium so the policy does not lapse;

"Any premium not paid by the end of its grace period will be paid by charging it as a policy loan is you requested it in writing and the maximum loan value is sufficient to cover the premium"

Front 133

Reinstatement Provision

Back 133

Spells out the requirements that must be satisfied for insurer to consider reinstating a lapsed policy;

-w/in 5 years of Lapse

-overdue premiums + interest must be paid

-outstanding loan paid or reinstated

-E of I excepted to insurer

Front 134

Entire Contract Provision

Back 134

Says that s copy of the application must be made part of the policy for it to be valid

Front 135

Incontestability Clause

Back 135

Waives the insurance company's rights to dispute the validity of the contract after it has been in force for 2 years

Front 136

Suicide Clause

Back 136

Limits insurance company's liability to a refund of premium if the insured commits suicide within 2 years of the policy's effective date

Front 137

Facility of Payments Provision

Back 137

Provision that says if no beneficiaries are moving when the invested dies, then the death benefit will be paid to the owner or owner's estate if not living

Front 138

Misstatement of Age or Sex

Back 138

Provision that says if the insured's age or sex is different from what was on the application, an adjustment will be made to the coverage based on the correct and or sex

Front 139

Absolute Assignment

Back 139

-Transfer of all ownership rights

-permanent in nature

Front 140

Collateral Assignment

Back 140

-Partial transfer of ownership rights

-Temporary in nature

-Life policy can be used as collateral for a loan; most often used for bank loans

Front 141

Assignment Provision

Back 141

"Though may assign this policy or any interest in it. We will recognize an assignment only if it is in editing and filed with us."

Front 142

Viatical Settlement

Back 142

Contractual agreement that provides a terminally ill person immediate cash in exchange for his ownership rights in a policy

Front 143

Life Settlement

Back 143

Contract in which policyowner assigns ownership to provider in exchange for an amount that is less than policy's death benefit, but more than its cash surrender value

Front 144

Life Settlement Brokers

Back 144

A person who acts on behalf of an owner of a life policy to negotiate a life settlement contract between the owner and a life settlement provider

-represents owner, not provider

-opposed fiduciary duty to owner

-paid a fee, commission or other valuable consideration by owner

Front 145

Stranger-Originated Life Insurance (StOLI)

Back 145

Involved transfer to 3rd party in exchange for money ($) whereby the individual sender as induced to by a new policy in order to sell it to 3rd party

Front 146

Underwriting Tools

Back 146

Consumer Reports

Attending Physician's Statements (APS)

MIN Reports

Front 147

Fair Credit Reporting Act (FCRA)

Back 147

Designed to promote accuracy and ensure privacy of the information used in consumer reports

Front 148

Consumer Reports

Back 148

Can be used by underwriters to learn about the person applying for insurance

Front 149

Attending Physician's Statements (APS)

Back 149

Statement/medical records of the doctor who treated the applicant for a particular illness or disease

Applicant MUST sign consent form to authorize release

Front 150

Medical Information Bureau (MIB)

Back 150

Database where member insurers report adverse medical conditions to share with other member insurers

Front 151

Risk Classification

Back 151

3 classes:

Preferred-lower risk/premium

Standard-average risk/premium

Sub-standard-higher risk/premium

Front 152

Non-Medical Application

Back 152

Life insurance application in which the proposed insured might not be required to undergo a medical exam.

*the insurer always reserves the right to require a medical exam if it feels one is necessary

Front 153

Life Premium Components

Back 153

Premiums = Mortality - Investment Income + Expenses + Reinsurance

Hint 153

P = M-I+E+R (P=MIXR)

Front 154

Payment Modes

Back 154

Frequency of premium payments (the higher the frequency, the higher the premium);

Anually, semi-annually, quarterly, monthly

Front 155

Policy Dividends

Back 155

Non-guaranteed return if premium paid to a policyowner out of an insurance company's surplus

*penalties for guaranteeing dividends: misdemeanor offense w/ up to 1 year in jail

Front 156

One Year Term

Back 156

Dividend used to purchase 1 year term Policy

Hint 156

A dividend option

Front 157

Cash Option

Back 157

Dividend paid out in cash to policyowner

Hint 157

Dividend option

Front 158

Reduced Premium

Back 158

Dividend applied to current premium in order to reduce it

Front 159

Accumulate at Interest

Back 159

Dividend retained by insurer in a special account that earns interest (like a savings account)

Hint 159

Dividend option

Front 160

Paid-Up Additions

Back 160

Dividend used as single premium to purchase paid-up whole life insurance

Hint 160

Dividend option

Front 161

Par v. Non-Par

Back 161

Par = Participating; eligible for dividends

Non-Par = Non-Participating; not eligible for dividends

Front 162

Earned Surplus

Back 162

Earnings not paid it as dividend, but reinvested in the business.

Hint 162

AKA: retained earnings

Front 163

Life Policy Illustration

Back 163

A presentation or depiction that includes both guaranteed and nonguaranteed elements if a life policy over a period of years into the future.

Rules:

-ensure illustrations do not mislead consumer

-ensure illustrations are understandable by prescribing standard formats to be followed

-ensure certain required disclosures are specified

Front 164

Binding Receipts

Back 164

Initial premium must be paid; offices immediate coverage for stated period, which applies even if underwriter declines the application

Front 165

Conditional Receipts

Back 165

Initial premium must be paid; provides coverage from date of app only if application is ultimately approved by the underwriter

Front 166

Binders

Back 166

When agreement issued by F&C insurer providing temporary coverage (90 days or less) while an application is being underwritten;

NOT used in Life and Disability insurance

Front 167

Frequency

Back 167

Number of times losses occur over a specified amount of time

Hint 167

"How Many?"

Front 168

Severity

Back 168

Dollar amount of loss

Hint 168

"How much?"

Front 169

Exposure Unit

Back 169

Fixed unit of insurance coverage (usually $100 or $1000) used for pricing

Front 170

Rate

Back 170

Price of insurance for each exposure unit

Front 171

Premium

Back 171

= # of exposure units x rate

Front 172

Renewal

Back 172

Continuation of a policy beyond its original term

Front 173

Nonrenewal

Back 173

Not renewing a policy for another term once it reaches the end of its term

Front 174

Cancellation

Back 174

Termination of a policy during its term; can be instituted by insured or insurer

Front 175

Earned Premium

Back 175

Portion of premium that represents coverage already provided and that belongs to insurer

Front 176

Unearned Premium

Back 176

Portion if premium that represents the unexpired part of the policy period; must be refunded w/in 25 days after insurer receives notice of cancellation

Front 177

Pro-Rata

Back 177

100% of the unearned premium

Front 178

Short Rate

Back 178

Less than 100% of unearned premium; penalizes policyowner for early termination

Front 179

Lapse

Back 179

Termination of a policy due to nonpayment of premium

Front 180

Effective Data Disclosure

Back 180

At time of app, agent must provide insured/apparent with:

-effective date of coverage (if known)

-circumstances under which coverage with be effective

Front 181

Pre-Selection

Back 181

Agent only collects information requested on the application; must not withhold any pertinent information from underwriter

Front 182

Post-Selection

Back 182

Underwriter uses information on application; may use urged underwriting tools (MIB, Mexican exams, APS, questionnaires, insurrection reports, etc.) To evaluate and classify risk