Coming to Terms: Essential Insurance Terms to Help You Understand Your Coverage

Insurance Terms

As an average insurance policyholder, it can be overwhelming to try and understand absolutely everything about your life, car, health, or home insurance—especially if you are new to insurance in general. This is why many policyholders merely nod their heads and take the insurance agent’s word for it instead of asking questions. If you are looking at an insurance policy’s paperwork or shopping around for quotes, you’ll probably be confused with some of the vocabulary because not every agency will take the time to explain these terms to you.

The insurance industry has its own unique jargon and few understand what all the terms actually mean. Read ahead for a little explanation of some confusing terms that agents tend to throw around, so that when it is discussed you can truly nod your head in agreement, or better yet—ask some questions.

Life Insurance

Incontestability: A provision that enforces a strict time limit of up to a maximum of two years (three years in some states) on a life insurer’s ability to not pay out a claim due to either the policyholder’s suicide or a misrepresentation on his or her application.

Indexed Life Insurance: A type of whole life insurance that provides for the policy’s face amount and premium rate to rise each year in accordance to increases in the Consumer Price Index (CPI). Read More


4 Reasons To Have Critical Illness Insurance

Critical Illness InsuranceThese days, people are growing accustomed to a consumer-driven health insurance marketplace. Consumers are also becoming more aware of all the supplemental insurance policy options being offered by employers and agents – allowing individuals and families to customize benefits based on their needs.

There are non-traditional options, like travel and pet insurance, which could be a smart choice for many Americans. And, traditional supplemental policies, such as cancer and critical illness insurance, that can fill the benefit gaps in health coverage and financially protect people when a worst case medical scenario happens.

But, with more insurance options for consumers comes more questions. Take for example, the common question people have about critical illness insurance coverage for serious conditions such as a heart attack, stroke or cancer … “Is it worth the money?”

Of course, to be transparent, as the President of CancerInsurance.com, I would say, “Yes, yes it is.”

And, here are four reasons why it’s important to consider (at the very least) having a critical illness insurance plan that provides a lump-sum cash payout for a policyholder to use however they choose: Read More


5 Reasons to Have Disability Insurance

Reasons-for-Disability-Insurance

A common question regarding disability insurance is, “Is there any reason I should buy an individual disability insurance policy?” While the reasoning is not always so straightforward, the answer is, yes, individual disability insurance is a vital component of one’s overall insurance protection.

In most cases, employees are provided with group disability insurance through their employer; however, such plans do not provide for full income loss replacement. Employer group policies typically replace only 60% of an individual’s pre-disability salary, often leaving the employee in need of additional coverage.

The Basics – What Is Disability Insurance?

Disability insurance, also known as DI or disability income insurance provides income replacement in the event that an insured becomes disabled.  Disability insurance includes a variety of different benefits to best meet the needs of sick or injured individuals. Most plans include paid sick leave, short-term disability benefits and long-term disability benefits. Research suggests that a disabling work-related accident occurs on average, once every second – a statistic that proves the worth of having a separate disability insurance plan.

5 Reasons to Have Disability Insurance

No one enjoys paying more for anything than they already have to, especially when it comes to insurance. However, in regards to disability insurance, it really does make sense to take out a separate disability insurance plan. The following five reasons illustrate the importance and benefit of disability insurance: Read More


Four Takeaways to Tackle the California Insurance Licensing Exam

Since November 2012 the California Department of Insurance (CDI) has required that California residents looking to applying for licensing must first pass the license examination before submitting an application. PSI Services is the testing vendor that the CDI uses to administer state-based regulatory licensure exams.

For anyone looking to obtain their California insurance license, you will have to take the California Insurance Exam. The number of questions and time given for the exam depend on the type of insurance that you want to specialize in. However, there are many resources available to ensure that you are at your peak performance when your test day arrives. Below are four tips to use in order to prepare yourself.

1. Talk to Licensed Agents

Before sitting for your exam, talk to licensed agents who have already taken the test. Talk to them about what to expect, and what the atmosphere is like in the room. Simply just knowing what your surroundings will be like once you’re in the test center can keep you from being nervous or distracted. Read More


Selling Insurance in the 21st Century

What can you expect as a new insurance agent?

So you’ve decided to take the plunge into the world of insurance.  Nice work.  You now have one of the most challenging, frustrating, but at the same time rewarding career opportunities in front of you.  And the timing couldn’t be better.

Whether you plan to sell life insurance, health insurance or all of the above, major legislative changes are leaving clients confused and many of them will turn to you with questions.  By becoming an insurance agent, you are joining an elite group of advisors who will be on the front lines when it comes to helping clients navigate their insurance choices, be it health, life or retirement planning.  Are you ready?

When I sit down with newly licensed insurance agents or people thinking about getting into the business, I don’t sugarcoat anything.  I tell them exactly what they can expect.  But what I also tell them is that with the right approach to helping your clients, and the right motivation, you’ll find your career in the insurance industry to be one of the most gratifying decisions you’ll ever make. Read More


Determining Penalties for Employers Not Offering Affordable Health Insurance Coverage in 2014

The employer mandate provision of the Patient Protection and Affordable Care Act will begin in 2014. The mandate states that a business with 50 or more full-time employees or full-time equivalents may face penalties if the health insurance coverage that is offered to its employees does not meet minimum standards outlined in the Act.

Below is a flow chart that will help to clarify what requirements an employer must follow in offering affordable health insurance coverage to their employees in order to prevent from a penalty.

PPACA_Employer_Penalty

Source: Kaiser Health Reform Read More


The Insurance Agent

Life and health insurance is commonly transacted through insurance Producers known either as insurance agents or insurance brokers.  An insurance Agent is authorized by and on behalf of an insurance company to transact life and health insurance.  The insurance company is often referred to as the Principal or Insurer.

An insurance Broker works on behalf of, and is compensated by, the client to transact insurance with, but not on behalf of, an insurance company.  Life and health insurance can be transacted through both agents and brokers, though most states only allow for the licensure of insurance agents, while brokers are more common with property and casualty insurance.

Passing an insurance licensing exam and obtaining an insurance license are the first steps into the insurance industry.  The next step an insurance agent must take is to obtain ‘express authority’ by contracting with each insurance company the agent intends to sell insurance on behalf of and becoming ‘appointed’ by those insurance companies.

 

Producer Appointments

An Appointment is a legal contract between an insurance company and a licensed agent by which the insurance company gives an agent the Express Authority to conduct insurance business on behalf of the insurer in exchange for compensation, referred to as Commission.

An agency contract defines the terms in which both the agent and insurance company will interact with each other as well as to the industry.

This generally includes the advertising and solicitation guidelines for the company, medical underwriting guidelines to help ensure correct application submission from the field, commission structure for the agent and any other specific regulations of the company, as well as the rights of the agent, under the contract.

In addition to the ‘express authority’ given to an agent through the company’s contract, marketing and selling insurance products, as well as maintaining clients is often performed on a ‘presumed authority’ basis.  Two types of presumed authority are ‘implied’ and ‘apparent’ authority.

 

Types of Agent Authority

1.  Express Authority – Defined as the contractual agreement between an insurance company and an agent to market and sell the insurer’s products.  An agent’s express authority is clearly defined in words through the company’s contract, or appointment, with the agent.

2.  Implied Authority – Defined as the general Read More


Deductibles, Coinsurance & Out-of-Pocket Limits in a Health Policy

A question that our online insurance school often receives is how to figure out a health insurance policy’s ‘out-of-pocket limit’, or maximum financial limit that an insured must meet in a calendar year based on incurred medical expenses. Before we can understand how to calculate a policy’s out-of-pocket limit, we must first review some key terms used in the insurance industry, namely: deductible, coinsurance, and stop-loss.

How do you calculate a health insurance policy’s out-of-pocket limit?

Deductible – The amount of expense that the insured must pay before benefits are covered by the insurance company.  This amount is covered 100% by the insured and is usually based on a calendar year medical expense basis, meaning that each new calendar year (January 1st – December 31st) the insured is responsible for satisfying a new deductible if medical expenses occur within the year.  This amount varies based on the policy chosen by the insured with common deductible amounts of $500, $1000, $2500, $5000, up to a less common $10,000 deductible.  The higher the deductible of a policy, the lower the monthly premium, so consumers choose a deductible amount within their monthly budget.

Coinsurance – The percentage of additional medical expenses that the insured meets in addition to the deductible.  The insurer and the insured split medical costs, typically with the insurer covering 80% of the cost while the insured covers 20%, also known as 80/20 coinsurance.  Some policies have a 100/0, 90/10, or 70/30 split where the insurance company is always responsible for the higher percentage amount.  A reputable major medical insurance policy will also include a ‘stop-loss’ (defined below), that limits the dollar amount of coinsurance that an insured must pay in a given year. Read More


National Association of Insurance Commissioners (NAIC)

Outside of federal and state legislature, insurance companies also abide by non-governmental associations that unify the states and help protect consumers.  Industry associations such as the National Association of Insurance Commissioners impose major influence on insurance companies to maintain common industry standards.

Industry Regulation

A major form of self-regulation, the National Association of State Commissioners (NAIC), is widely recognized as a major influence in the insurance industry.  NAIC is not a federal or state legislative body, nor does it regulate insurance law, even though its members are the insurance commissioners (i.e., the chief insurance regulators) of each state in the U.S.

Founded in 1871, the National Association of Insurance Commissioners was created as a non-governmental organization that has since created and maintained a uniform set of laws for states to follow in an attempt to standardize multiple-state insurance laws.  Though it has created a set of ‘by-laws’ to help centralize the state-run insurance industry, NAIC, itself, does not actually regulate insurance law.  The states regulate their respective insurance laws as well as abide by any relevant federal laws. Read More