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FIL 250 part 3

PAP, life insurance, insurers

QuestionAnswer
Mutual insurer Insurance company owned by the policy owners, who elect the board of directors. The board appoints managing executives, and the company may pay a dividend or give a rate reduction in advance to insureds.
Advance premium mutual Mutual insurer that does not issue assessable policies but charges premiums expected to be sufficient to pay all claims and expenses
assessment mutual Mutual insurer that has the right to collect additional money (above charged premiums) from policy owners for higher than expected losses and expenses
agent Someone who legally represents the insurer, has the authority to act on the insurer’s behalf
broker Often used to help companies find insurance, brokers legally represents the insured. They are still compensated by the insurer who wins the business
Agency building system Including the general agency system and the managerial system, it is used in life insurance by which an insurer builds its own agency force by recruiting, financing, training, and supervising new agents
general agency system Agency building system in which the general agent is an independent businessperson who represents only one insurer and is responsible for hiring, training, and motivating new agents
managerial system Agency building system where branch offices are established and the branch manager is an employee of the company with the responsibility of hiring and training new agents. The expenses of the office are paid by the insurer.
demutualization The conversion of a mutual insurer into a stock insurer
direct response system A method where insurance is sold without the services of an agent; potential customers are solicited by media advertisements
fraternal insurer a type of mutual insurer that provides life and health insurance to members of a social organization
Independent agency system A system in which the agent is an independent businessperson representing several insurers.
Lloyd’s of London World’s leading insurance market that provides services and physical facilities for its members to write specialized lines of insurance
Non-admitted insurer Insurer used only when insurance cannot be obtained from an admitted insurer
Reciprocal exchange an unincorporated mutual in which insurance is exchanged among members and which is managed by an attorney-in-fact
stock insurer An insurance corporation owned by stockholders
Non-building agency system System by which a life insurer sells its products, not by building its own system of agents, but rather through established agents who are already engaged in selling life insurance or similar products
Personal producing general agent An above-average salesperson with a proven sales record who is hired primarily to sell life insurance under a contract that provides commissions
Surplus line broker Specialized broker licensed to place business with a non-admitted insurer
Part A of PAP Liability coverage - if the driver causes bodily injury or property damage
Part B of PAP Medical payments coverage - if the insured or anyone in the insured's car is injured and incurs medical expenses
Part C of PAP Uninsured and Underinsured motorist coverage. If the other driver is at fault but does not have insurance or has low limits
Part D of PAP Coverage for damage to your auto (collision/comprehensive), plus loss of use
Coverage for newly acquired autos 1) Liability requires notification within 14 days for additional vehicles, but no required notification for replacement vehicles (2) If policy has part D, notification is required within 14 days (3) If no part D, new vehicles get 4 days of coverage
split limit of indemnity part A limits are 1. bodily injury per person, 2. bodily injury per accident, and 3. property damage per accident. In Illinois, the limit is 20/40/15
CDW collision damage waiver - offered by rental car companies to protect the car while you drive it
traditional family family with two parents, one works outside the home while the other cares for children in the home
blended family two parents, each with their own children, getting married and living together
sandwiched family two generations of obligations - caring for children and your parents
human life value approach to determine the amount of life insurance needed by an individual. it is based on the present value of all future earnings of a worker
needs approach estimates the amount of life insurance needed by individuals. compares family needs after the death of the individual vs actual resources.
variable life insurance fixed premiums whole life insurance. cash values are not guaranteed, but are tied to investment experience directed by policyholders (often stocks).
universal life insurance flexible premium whole life insurance policy. unbundles insurance and savings components so that policyholder can see cost of insurance and investment performance each period.
limited pay life insurance lifetime death benefit, but policy becomes paid up after a certain, after which insurance remains in force without additional future premiums.
parties in life insurance contracts policyowner - retains all rights, insured life - upon death, benefits are paid, beneficiary - receives proceeds upon death of insured
specific beneficiary vs. class beneficiary specific beneficiaries are identified explicitly (for example - by name) in the policy. Class beneficiaries are members of a group (e.g., "my children")
options for receiving policy dividends cash, reduce next premium, accumulate at interest with insurer, paid-up additions
nonforfeiture options how can the policyholder cancel a whole life policy and receive cash surrender value benefits: 1. cash, 2. reduced paid up insurance, and 3. extended term insurance
accidental death benefit (double indemnity) if insured dies as a result of an accident, the policy pays twice the face value
accelerated death benefits allows terminally ill insureds to collect benefits before death
life settlement selling a life insurance policy to someone else
waiver of premium a provision that states if the insured becomes disabled, the policy becomes paid up and no further premiums are required
guaranteed purchase option allows for the purchase of small additional amounts of insurance at specific times in the future without EOI
evidence of insurability (EOI) when applying for life insurance, the life insurer needs information to ensure you are generally healthy before offering coverage. Common information requested is basic medical stats and perhaps medical/blood tests
incontestability clause the life insurer has 2 years to discover problems with the application. after 2 years, the insurer's ability to deny claims is severely restricted
what are the reasons a life insurer can deny a claim after 2 years? 1) The beneficiary takes out the policy with the intent of murder the insured, 2) the applicant has someone else take the medical exam, or 3)Insurable interest did not exist
second-to-die life insurance the beneficiary does not receive the policy proceeds until the death of both insured lives. example: children receiving policy proceeds only after the death of both parents
paid up life insurance a policy where the cash value is sufficient so that no future premiums are required, yet death benefit protection continues to exist forever
traditional whole life insurance (straight life or ordinary life) permanent, lifetime protection for a level-premium. whole life builds cash value over time and has cash value guarantees over time
term life insurance temporary protection (usually 1-, 5-, 10-, or 20-years) that pays only a death benefit. there are no cash values / savings. most term policies are renewable (though premiums increase each term) and convertible to a whole life policy without EOI
Created by: isufil250