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absolute assignment
Policy assignment under which
the assignee (person to whom the policy is assigned)
receives full control over the policy and also full rights
to its benefits. Generally, when a policy is assigned to
secure a debt, the owner retains all rights in the policy
in excess of the debt, even though the assignment is
absolute in form. (See assignment) 119
accelerated benefits rider
A life insurance rider that
allows for the early payment of some portion of the
policy’s face amount should the insured suffer from a
terminal illness or injury. 120
acceptance
acceptance (See offer and acceptance) 34
accidental bodily injury provision
Disability income
or accident policy provision that requires that the
injury be accidental in order for benefits to be payable.
3 1 1
accidental death and dismemberment (AD&D)

Insurance providing payment if the insured's death
results from an accident, if the insured accidentally
severs a limb above the wrist or ankle joints, or totally
and irreversibly loses eyesight. 319-321

accidental death benefit rider
A life insurance
policy rider providing for payment of an additional
benefit when death occurs by accidental means. 129
accidental dismemberment
Often defined as “the
severance of limbs at or above the wrists or ankle
joints, or the entire irrevocable loss of sight.” Loss of
use in itself may or not be considered dismemberment.
320
accidental means provision
Unforeseen, unex- ‘
pected, unintended cause of an accident. Requirement
of an accident-based policy that the cause of the
mishap must be accidental for any claim to be payable.
3 1 1
accident and health insurance
Insurance under
which benefits are payable in case of disease, acciden— '
tal injury, or accidental death. Also called health insur-
ance, personal health insurance, and sickness and accident
insurance. 322

accumulation unit
Premiums an annuitant pays into
a variable annuity are credited as accumulation units.
At the end of the accumulation period, accumulation l
units are converted to annuin‘ units. 213
acquired immune deficiency syndrome (AIDS)

A life-threatening condition brought on by the human
immunodeficiency virus; insurers must adhere to strict
underwriting and claims guidelines in regard to AIDS
risks and AIDS-related conditions. 161, 330
acute illness
A serious condition, such as pneumonia,
from which the body can fully recover with proper
medical attention. 341
adhesion
A life insurance policy is a contract of adhe-
sion because buyers must adhere to the terms of the
contract already in existence. They have no opportu-
nity to negotiate terms, rates, values, and so on. 36
adjustable life insurance
Combines features of both
term and whole life coverage with the length of
coverage and amount of accumulated cash value as
the adjustable factors. Premiums may be increased or
decreased to fit the specific needs. Such adjustments
are not retroactive and apply only to the future. 99

administrative-services-only (A50) plan

Arrangement under which an insurance company or
an independent organization, for a fee, handles the
administration of claims, benefits, and other adminis-
trative functions for a self-insured group. 290
admitted insurer
An insurance company that has met
the legal and financial requirements for operation
within a given state. 405
adult day care
Type of care (usually custodial)
designed for individuals who require assistance with
various activities of daily living, while their primary
caregivers are absent. Offered in care centers. 346
adverse selection
Selection “against the company.”
Tendency of less favorable insurance risks to seek or
continue insurance to a greater extent than others.
Also, tendency of policyowners to take advantage of
favorable options in insurance contracts. 351, 377,
378

Advertising Code
Rules established by the National
Association of Insurance Commissioners (NAIC) to
regulate insurance advertising. 26

agency
Situation wherein one party (an agent) has the
power to act for another (the principal) in dealing
with third patties. 40
agent
Anyone not a duly licensed broker who solicits
insurance or aids in placing risks, delivering policies,
or collecting premiums on behaif of an insurance
company. 40
agent's report
The section of an insurance application
where the agent reports personal observations about
the applicant. 174
aleatory
Feature of insurance contracts in that there
is an element of chance for both parties and that the
dollar given by the policyholder (premiums) and the
insurer (benefits) may not be equal. 35
alien insurer
Company incorporated or organized under
the laws of any foreign nation, providence, or terri-
tory. Z3, 410

ambulatory surgery
Surgery performed on an outpa-
tient basis. 370
amount at risk
Difference between the face amount of
the policy and the reserve or policy value at a given
time. In other words, the dollar amount over what
the policyowner has contributed of cash value toward
payment of the policyowner’s own claim. Because the
cash value increases every year, the net amount at risk
naturally decreases until it finally reaches zero when
the cash value or reserve become the face amount.
454
annually renewable term (ART)
A form of renew-
able term insurance that provides coverage for one
year and allows the policyowner to renew coverage
each year without evidence of insurability. Also called
yearly renewable term (YRT). 87
annuitant
One to whom an annuity is payable, or a
person upon the continuance of whose life further
payment depends. Z04
annuity
A contract that provides a stipulated sum pay-
able at certain regular intervals during the lifetime of
one or more persons, or payable for a specified period
only, 204
annuity unit
The number of annuity units denotes
the share of the funds an annuitant will receive from
a variable annuity account after the accumulation
period ends and benefits begin. A formula is used to
convert accumulation units to annuity units. 213
any occupation
A definition of total disability that
requires that for disability income benefits to be pay-
able, the insured must be unable to perform any job
for which the insured is “reasonably suited by reason
of education, training, or experience.” 309
apparent authority
The authority an agent appears to
have, based on the principal’s (the insurer’s) actions,
words, deeds, or because of circumstances the princi-
pal (the insurer) created. 41
application
Form supplied by the insurance company,
usually filled 1n by the agent and medical examiner (if
applicable‘ on the basis of information received from
the applicant. It is signed by the applicant and is part
of the insurance policy if it is issued. It gives informa-
tion to the home office underwriting department, so
it may consider Whether an insurance policy will be
issued and, if so, in what classification and at what
premium rate. 173
appointment
The authorization or certification of an
agent to act for or represent an insurance company.
20
approval receipt
Rarely used today, a type of condi-
tional receipt that provides that coverage is effective
as of the date the application is approved (before the
policy is delivered). 181
assessment mutual insurer
An insurance company
characterized by member-insureds who are assessed
an individual portion of each loss that occurs. No
premium payment is payable in advance. 16

assignee
Person (including corporation, partnership, or
other organization) to whom a right or rights under a
policy are transferred by means of an assignment. 119
assignment provision (health contracts)

Commercial health policy provision that allows the
policyowner to assign benefit payments from the
insurer directly to the health care provider. Z79

assignment
Signed transfer of benefits of a policy by
an insured to another party. The company does not
guarantee the validity of an assignment. 119, 446

assignor
Person (including corporation, partnership, or
other organization or entity) who transfers a tight or
rights under an insurance policy to another by means
of an assignment. 119

attained age
With reference to an insured, the current
insurance age. 8?
authority
The actions and deeds an agent is authorized
to conduct on behalf of an insurance company, as
specified in the agent's contract. 41

authorized company
Company duly authorized by the
insurance department to operate in the state. Z3
automatic premium loan provision
Authorizes
insurer to automatically pay any premium in default at
the end of the grace period and charge the amount so
paid against the life insurance policy as a policy loan.
12 1
average indexed monthly earnings (AIME)
The basis used for calculating the primary insurance amount (PIA) for Social Security benefits. Z2?

average monthly wage (AMW)
The average Wage
base for computing virtually all Social Security ben-
efits prior to 1979. Z27
aviation exclusion
Either attached by rider or included
in standard policy language excepting from coverage
certain deaths or disabilities due to aviation, such as
“other than a fare-paying passenger." 122
backdating
The practice of making a policy effective at
an earlier date than the present. 183
basic medical expense policy

 Health insurance
policy that provides “first dollar" benefits for speci-
fied (and limited) health care, such as hospitalization,
surgery, or physician services. Characterized by limited
benefit periods and relatively low coverage limits. Z99
beneficiary
Person to whom the proceeds of a life or
accident policy are payable when the insured dies.
The various types of beneficiaries are primary ben-
eficiaries (those first entitled to proceeds), secondary
beneficiaries (those entitled to proceeds if no primary
beneficiary is living when the insured dies), and
tertiary beneficiaries (those entitled to proceeds if no
primary or secondary beneficiaries are alive when the
insured dies). 135, 445
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