Adhesion - Insurance contract written by insurer that customer accepts or rejects (no negotiation)
Aleatory - Exchange of value is unequal (acceptable in insurance)
Avoidance - Not engaging in a risky activity
Adverse Selection - Rejecting high-risk applicants to protect the insurance company
Consideration - Both sides exchange something of value
Definite - A requirement for insurable risk; must be clearly defined
Elimination Period - Waiting time before benefits start after a loss
Expressed Authority - Explicit, written authority given by the company
Free Look Period - 10 days to cancel life insurance and get full refund
Grace Period - Time to pay a late premium without losing coverage
Implied Authority - Authority that’s reasonable to assume based on job position
Indemnity - Restoring a person to their financial position before the loss
Insurable Interest - Having a financial stake in preventing a loss
Insurable Risk - Risk that meets all requirements to be insured
Law of Large Numbers - When many similar risks are grouped, loss patterns become predictable
Misstatement - False statement on application (benefit is adjusted, not canceled)
Mutual Company - Insurance company owned by policyholders
Pure Risk - Only potential for loss, no chance of gain (insurable)
Reduction - Lowering the chance of a loss occurring
Reinstatement - Reactivating a lapsed policy with back premiums and proof of health
Retention - Accepting/absorbing the risk yourself
Risk - Uncertainty of loss
Speculative Risk - Potential for both loss and gain (not insurable)
Stock Company - Insurance company owned by shareholders
Transfer - Moving risk to an insurance company
Unilateral - Only insurer makes a promise (to pay claims)
Apparent Authority - What customers reasonably believe you can do
Binding - You can authorize coverage to take effect immediately
Competent Parties - Everyone involved must be legally able to make contracts
Consideration - Both sides give something of value
Indemnity Policy - Pays actual loss (limited to actual damage)
Insurable Interest - Financial stake in preventing a loss
Legal Purpose - Contract cannot be for something illegal
Non-Binding - Only take the application; company must approve it
Offer and Acceptance - One party makes offer; other accepts
Reasonable Expectations - Customers interpret confusing language favorably
Uninsurable - Too risky; coverage denied
Utmost Good Faith - Both parties must be honest and fair
Valued Policy - Pays pre-agreed amount regardless of actual loss
Beneficiary - Person who receives death benefit
Entire Contract Clause - All policy terms are in the written document
Grace Period - 31 days to pay late premium (Life Insurance)
Insuring Clause - Company’s promise to pay
Misstatement of Age/Sex - False info on application; benefit is adjusted
Premium Mode - How often you pay (annual, semi-annual, quarterly, monthly)
Reinstatement - Reactivating a lapsed policy
Suicide Exclusion - NO coverage for suicide within 2 years
Claim Form - Document customer fills out to request benefits
Claim Procedures - Process for filing and paying claims
Elimination Period - Waiting time before benefits start after loss
Grace Period - Time to pay late premium without losing coverage
Legal Actions - Customer cannot sue until 90 days after proof of loss
Notice of Claim - Customer must notify company within 20 days
Optional Provisions - Company can choose to add (Change of Occupation, Stacked Benefits)
Probationary Period - Waiting period for sickness claims only (not accidents)
Proof of Loss - Documentation showing the loss happened (due within 90 days)
Reinstatement - Reactivating lapsed policy (must apply within 45 days)
Stacked Benefits - Collecting from multiple policies (not double-dipping)
Certificate of Insurance - Proof debtor has credit insurance (must deliver within 30 days for closed-end)
Closed-End Credit - Loan with definite end date and fixed payment schedule
Credit A&H - Credit Disability Insurance (Accident & Health)
Credit Disability - Insurance covering debtor becoming disabled
Credit Life - Insurance covering death of debtor
Credit Property Insurance - Insurance covering damage/loss of financed property
Credit Unemployment - Insurance covering involuntary job loss
Creditor - The lender (protected by credit insurance)
Debtor - The borrower (whose life/health is insured)
Decreasing Term - Coverage amount decreases as loan balance decreases
GAP Insurance - Covers difference between loan balance and car value if totaled
Gross Coverage - Full amount of original loan
Group Credit Insurance - One master policy covering many debtors
Individual Credit Insurance - Separate policy for each debtor
Involuntary Job Loss - Being laid off (not quitting)
Net Payoff Coverage - Only remaining balance owed
Open-End Credit - No set end date; customer borrows repeatedly
Agent - Person who sells insurance; similar to producer
Appointment - Company’s authorization for you to sell their products
Certificate of Authority - Insurer’s license to do business
Commissioner - Head of DIFS (appointed by Governor for 4 years)
Continuing Education (CE) - 24 hours every 2 years to maintain license
DIFS - Department of Insurance and Financial Services (Michigan regulator)
Direct Response - Customer buys via mail, phone, or internet
Distribution Channels - Methods of selling insurance
Exclusive Agency - Agent works for ONE company only
General Agency - Agency represents multiple insurance companies
Independent Agency - Agent represents multiple insurance companies
Insurance Counselor (LIC) - Advises on insurance; may not sell
License - Official permission to sell insurance
Producer - Licensed person who sells insurance on behalf of companies
Reciprocity - Recognition of out-of-state licenses
Termination - Ending of appointment relationship
Boycott - Preventing business unfairly
Coercion - Threatening to force action
Concealment - Hiding important information
Contingent - Dependent on something happening
Controlled Business - Insurance on your own property, business, or interests
Defamation - False statements damaging someone’s reputation
Discrimination - Refusing/charging based on protected characteristics
Fiduciary - Acting in someone else’s best interest
False Advertising - Lying about insurance terms or coverage
Fraud - Intentional deception with criminal intent
Intimidation - Threatening to cause harm
Misdemeanor - Unethical behavior (not legal violation)
Misrepresentation - False statements about insurance
Moral Hazard - Incentive to cause a loss to profit from insurance
Non-contingent - Not dependent on something happening
Rebating - Offering value not in policy to induce a sale
Twisting - Unethically inducing policy switch through deception
Actuarial Department - Uses statistics and math to calculate rates
Age 70 Protection - Cannot refuse to insure solely due to age 70
Aggregate Limit - Maximum benefits in a 90-day period
Claims Department - Processes and pays claims
Guaranty Association - Protects policyholders if insurer becomes insolvent
Insolvency - Insurance company goes bankrupt
Michigan Life and Health Guaranty Association - Protects policyholders up to $300K benefits and $100K cash value
Underwriting - Process of reviewing applications and deciding to approve/deny
Underwriting Department - Reviews applications and makes approve/deny decisions
APR - Annual Percentage Rate
Fair Credit Reporting Act - Protects consumers regarding credit reports
NAIC Model Act - Model laws that states use as basis for their own laws
Regulation Z - Rules implementing TILA (Truth in Lending Act)
TILA - Truth in Lending Act; requires disclosure of APR and insurance costs
Any Occupation - Can’t do ANY job you’re suited for = disabled (restrictive)
Cease and Desist - Official order to stop illegal activity
Change of Address - Must notify DIFS within 30 days
Felony - Serious criminal charge (prison possible)
Insurance Fraud - Intentional deception with criminal intent
Own Occupation - Can’t do YOUR specific job = disabled (generous)
Probationary Period - Sickness wait only (accidents covered immediately)
Referral Fee - Payment for referring customer
Sliding - Failing to fully disclose all costs/products
Need a term defined? This glossary covers all key terms in the exam. Reference it while studying!