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.
Accidental Death Benefit Rider: A life insurance policy rider
providing for payment of an additional cash benefit related to the
face amount of the base policy when death occurs by accidental means.
Accidental Death Insurance: Insurance providing payment if the
insured's death results from an accident.
Agent: An authorized representative of an insurance company who
sells and services insurance contracts.
Annually Renewable Term: A form of renewable term insurance
that provides coverage for one year and allows the policy owner to
renew his or her coverage each year, without evidence of insurability.
Also called yearly renewable term.
Assignment Assignment: The transfer of the ownership rights of
a Life Insurance policy from one person to another.
Attained Age: Your current age. Your attained age is one of the
factors life insurance companies use to determine your premiums. The
older you are, the greater chance you'll die while you are covered -
so the higher your premium.
Backdating: A procedure for making the effective date of a
policy earlier than the application date. Backdating is often used to
make the age of the consumer at issue lower than it actually was in
order to get lower premium. State laws often limit to six months the
time to which policies can be backdated.
Beneficiary: The person designated to receive the death benefit
when the insured dies.
Binder: A temporary insurance policy that expires at the end of
a specific time period or when the permanent policy is written. A
binder is given to an applicant for insurance during the time the
complete policy paperwork is being completed.
Cash Benefits: Money that is paid to the insured upon
settlement of a covered claim. Often found with Hospital Income
Programs, "cash benefits" are paid directly to the insured rather than
the doctor or the hospital directly.
Cash Value: The equity amount or "savings" accumulation in a
whole life policy. Claim Notification to an insurance company that
payment of an amount is due under the terms of the policy.
Conditional Receipt: Given to policy owners when they pay a
premium at time of application. Such receipts bind the insurance
company if the risk is approved as applied for, subject to any other
conditions stated on the receipt.
Contestable Clause: A provision in an insurance policy setting
forth the conditions under which or the period of time during which
the insurer may contest or void the policy. After that time has
lapsed, normally two years, the policy cannot be contested. Example:
Contingent Beneficiary: Person or persons named to receive
proceeds in case the original beneficiary is not alive. Also referred
to as secondary or tertiary beneficiary.
Coverage: Another word for insurance. Insurance companies use
the term coverage to mean
either the dollar amounts of insurance purchased ($200,000 of
liability coverage), or the type of loss covered (coverage for theft).
Conversion Privilege: Allows the policy owner, before an
original insurance policy expires, to elect to have a new policy
issued that will continue the insurance coverage. Conversion may be
effected at attained age (premiums based on the age attained at time
of conversion) or at original age (premiums based on ageat time of
Convertible Term: A policy that may be changed to another form
by contractual provision and without evidence of insurability. Most
term policies are convertible into permanent insurance.
Cross-Purchase Plan: An agreement that provides that upon a
business owner's death, surviving owners will purchase the deceased's
interest, often with funds from life insurance.
Death Benefit: The amount of money paid to the beneficiary when
the insured person dies.
Decreasing Term Insurance: Term life insurance on which the
face value slowly decreases in scheduled steps from the date the
policy comes into force to the date the policy expires, while the
premium remains level. The intervals between decreases are usually
monthly or annually.
Double Indemnity: Payment of twice the basic benefit in the
event of loss resulting from specified causes or under specified
Evidence of Insurability: Any statement or proof of a person's
physical condition, occupation, etc., affecting acceptance of the
applicant for insurance.
Exclusions: Specified hazards listed in a policy for which
benefits will not be paid.
Expiry: The termination of a term life insurance policy at the
end of its period of coverage.
Face Amount: The amount of insurance provided by the terms of
an insurance contract, usually found on the first page of the policy.
In a life insurance policy, the death benefit.
Final Expenses: Expenses incurred at the time of a person's
death. These include funeral costs, court expenses associated with
probating his or her will, current bills or debt, and taxes. Depending
on their circumstances, the survivors may also want to pay the
outstanding balances of mortgage and loans.
First To Die Insurance: Insurance policy whose death benefit is
paid to the surviving insured upon the death of one of the insured's.
There is no longer a benefit once the benefit is paid, however, the
surviving insured usually has the option of purchasing a policy of the
same amount without providing evidence of insurability.
Fixed Benefit: A death benefit, the dollar amount of which does
Free Look: Provision required in most states whereby policy
owners have up to 20 days to
examine their new policies at no obligation.
Funeral Expenses: Expenses incurred for a funeral and burial.
These can include casket, vault, grave plot, headstone and funeral
Grace Period: Period of time after the due date of a premium
during which the policy remains
in force without penalty.
Graded Premium Policy: A type of whole life policy designed for
people who want more life coverage than they can currently afford.
They pay a lower premium rate that increases gradually over the first
three to five years and then remains constant over the life of the
Guaranteed Term: A form of renewable term insurance that
remains in force as long as the premiums are paid on time. With
guaranteed term insurance, the insurance company cannot terminate the
policy during the term.
Guaranteed Insurability (Guaranteed Issue): Arrangement,
usually provided by rider, whereby additional insurance may be
purchased at various times without evidence of insurability.
Incontestable Clause: A clause in a policy providing that a
policy has been in effect for a given length of time (two or three
years), the insurer shall not be able to contest the statements
contained in the application. In life policies, if an insured lied as
to the condition of his health at the time the policy was taken out,
that lie could not be used to contest payment under the policy if
death occurred after the time limit stated in the incontestable
In Force: Insurance on which the premiums are being paid or
have been fully paid.
Insurability: All conditions pertaining to individuals that
affect their health, susceptibility to injury and life expectancy; an
individual's risk profile.
Insurable Interest: Requirement of insurance contracts that
loss must be sustained by the applicant upon the death of another and
it must be sufficient to warrant compensation.
Insurance: A formal social device for reducing risk by
transferring the risks of several
individual entities to an insurer. The insurer agrees, for a
consideration, to pay for the loss in the amount specified in the
Insurance Policy: The printed form which serves as the contract
between an insurer and an
Insured: The party who is being insured. In life insurance, it
is the person because of his or her death the insurance company would
pay out a death benefit to a designated beneficiary.
Insurer: Party that provides insurance coverage, typically
through a contract of insurance.
Irrevocable Beneficiary: A beneficiary that cannot be changed
without that beneficiary's consent.
Increasing Term Insurance: Term life insurance in which the
death benefit increases periodically over the policy's term. Usually
purchased as a cost of living rider to a whole life policy.
Lapse: Termination of a policy upon the policy owner's failure
to pay the premium within the
Level Term Insurance: Term coverage on which the face value and
premiums remain unchanged from the date the policy comes into force to
the date the policy expires.
Life Expectancy: The average number of years remaining for a
person of a given age to live as shown on the mortality or annuity
table used as a reference.
Life Insurance: An agreement that guarantees the payment of a
stated amount of monetary benefits upon the death of the insured.
Limited Pay Policy: A type of whole life insurance designed to
let the policyholder pay higher premiums over a specific period such
as 10 or 20 years and then not pay any premiums for the rest of his or
Medical: A document completed by a physician or another
approved examiner and submitted to an insurer to supply medical
evidence of insurability (or lack of insurability) or in relation to a
Medical Expenses: Reasonable charges for medical, surgical,
x-ray, dental, ambulance, hospital, professional nursing, prosthetic
devices, and funeral expenses. (The insurance company defines what is
Misrepresentation: Act of making, issuing, circulating or
causing to be issued or circulated an estimate, an illustration, a
circular or a statement of any kind that does not represent the
correct policy terms, dividends or share of surplus or the name or
title for any policy or class of policies that does not in fact
reflect its true nature.
Modified Premium Policy: (See Graded Premium Policy)
Mortality Charge: The charge for the element of pure insurance
protection in a life insurance policy.
Mortality Cost: The first factor considered in life insurance
premium rates. Insurers have an idea of the probability that any
person will die at any particular age; this is the information shown
on a mortality table.
Mortality Rate: The number of deaths in a group of people,
usually expressed as deaths per thousand.
Mortality Table: A table showing the incidence of death at
Non medical Insurance: A contract of life insurance
underwritten on the basis of an insured's statement of his health with
no medical examination required.
Occupational Hazard: A condition in an occupation that
increases the peril of accident, sickness, or death. It usually will
mean higher premiums.
Offer and Acceptance: The offer may be made by the applicant
signing the application, paying the first premium and, if necessary,
submitting to physical examination. Policy issuance, as applied for,
constitutes acceptance by the company. Or the offer may be made by the
company when no premium payment is submitted with the application.
Premium payment on the offered policy then constitutes acceptance by
Original Age: The age you were when you bought the policy.
Other Insured Rider: A term rider covering a family member
other than the insured that is attached to the base policy covering
Ownership: All rights, benefits and privileges under life
insurance policies are controlled by
their owners. Policy owners may or may not be the insured. Ownership
may be assigned or
transferred by written request of current owner.
Para-Med (Paramedical) Examination: The medical examination of
an applicant for Life Insurance.
Para-Med (Paramedical): A physician, nurse, or para-med
appointed by the medical director of a life insurance company to
Permanent Life Insurance: A term loosely applied to life
insurance policy forms other than
Group and Term, usually Cash Value Life Insurance, such as Whole Life
Policy: The printed document issued to the policyholder by the
company stating the terms of
the insurance contract.
Policy Holder: The person who owns a life insurance policy.
This is usually the insured person, but it may also be a relative of
the insured, a partnership or a corporation.
Preferred Risk: A risk whose physical condition, occupation,
mode of living and other characteristics indicate a prospect for
longevity superior to that of the average longevity of unimpaired
lives of the same age.
Premium: The periodic payment required to keep an insurance
policy in force.
Premium Flexibility: The policy holder's right to vary the
amount of premium paid each
month towards a universal life policy.
Primary Beneficiary: In life insurance, the beneficiary
designated by the insured as the first to receive policy benefits.
Primary Policy: The insurance policy that pays first when you
have a loss that's covered by
more than one policy.
Probate Costs: The legal fees and other costs incurred in the
probate process, which is the legal processing of your will. Assets
that you leave to other people through your will cannot be distributed
until the will is probated.
Provisions: Statements contained in an insurance policy which
explain the benefits, conditions and other features of the insurance
Rate: Coverage's issued at a higher rate than standard because
of some health condition, or impairment of the insured.
Re-entry Option: An option in a renewable term life policy
under which the policy owner is guaranteed, at the end of the term, to
be able to renew his or her coverage without evidence of insurability,
at a premium rate specified in the policy.
Reinstatement: Putting a lapsed policy back in force by
producing satisfactory evidence of insurability and paying any
past-due premiums required.
Renewable: Term/Annual Renewable Term Term insurance that may
be renewed for another term without evidence of insurability. Level
term usually turns into renewable term with increasing premiums after
the level premium period.
Replacement: A new policy written to take the place of one
currently in force.
Representation: Statements made by applicants on their
applications for insurance that they represent as being substantially
true to the best of their knowledge and belief but that are not
warranted as exact in every detail.
Revocable Beneficiary: The beneficiary in a life insurance
policy in which the owner reserves
the right to revoke or change the beneficiary. Most policies are
written with a revocable
Rider: An attachment to a policy that modifies its conditions
by expanding or restricting benefits or excluding certain conditions
Risk: The chance of injury, damage, or loss.
Risk Selection: The method a home office underwriter uses to
choose applicants that the insurance company will accept. The
underwriter must determine whether risks are standard, substandard or
preferred and set the premium rates accordingly.
Secondary Beneficiary: An alternate beneficiary designated to
receive payment, usually in the event the original beneficiary
predeceases the insured.
Single Premium Policy: A whole life policy for people who want
to buy a policy for a one-time lump sum, and then be covered for the
rest of their lives without paying any additional premiums.
Standard Risk: Person who, according to a company's
underwriting standards, is entitled to insurance protection without
extra rating or special restrictions.
Substandard Risk: Person who is considered an under-average or
impaired insurance risk because of physical condition, family or
personal history of disease, occupation, residence in unhealthy
climate or dangerous habits.
Term Insurance: Protection during limited number of years;
expiring without value if the
insured survives the stated period, which may be one or more years but
usually is five to twenty years, because such periods usually cover
the needs for temporary protection.
Term: Period for which the policy runs. In life insurance, this
is to the end of the term period for term insurance.
Tertiary Beneficiary: In life insurance, a beneficiary
designated as third in line to receive the proceeds or benefits if the
primary and secondary beneficiaries do not survive the insured.
Third-Party Owner: A policy owner who is not the prospective
insured. The policy owner and the insured may be, and often are the
same person. If for example, you apply for and are issued an insurance
policy on your life, then you are both the policy owner and the
insured and may be
known as the policy owner-insured. If, however, your mother applies
for and is issued a policy on
your life, then she is the policy owner and you are the insured.
Underwriter: Company receiving premiums and accepting
responsibility for fulfilling the policy contract. Also, company
employee who decides whether the company should assume a particular
risk; or the agent who sells the policy.
Uninsurable Risk: A person who is not acceptable for insurance
due to excessive risk.
Universal Life: An interest-sensitive life insurance policy
that builds cash values. The premium payer has control over how the
policy is structured. He has the flexibility to eliminate the premiums
(essentially pay up the policy and pay no more premiums) or have the
premiums continue for life. It is a matter of juggling three
variables: the assumed interest rate, the cash value and the premium
payment plan. The policy is interest-sensitive, and if interest rates
change from the assumed interest, it will affect the other two
variables. In the past, many Universal Life Policies were structured
assuming a higher interest rate then was actually received, therefore,
most of them have under performed. If you have a Universal Life
Policy, you should have it evaluated to see if it needs
to have the premiums adjusted to get it back on track. A fourth
variable that has not been a factor but could be in the future, and
the owner should be aware of, is the Mortality variable. Universal
Life policies are usually structured assuming current mortality rates.
The insurance companies
reserve the right to change those rates.
Variable Life: Life insurance under which the benefits relate
to the value of assets behind the contract at the time the benefit is
paid. The assets fluctuate according to the investment experience of
funds managed by the life insurance company. Premium payments may be
fixed as to timing and amount (scheduled premium variable life) or
subject to change by the policy holder (flexible premium variable
Waiver of Premium: Rider or provision included in most life
insurance policies exempting the insured from paying premiums after he
or she has been disabled for a specified period of time, usually six
Whole Life Insurance: Life insurance that is kept in force for
a person's whole life as long as the scheduled premiums are
maintained. All Whole Life policies build up cash values. Most Whole
Life policies are guaranteed as long as the scheduled premiums are
maintained. The variable in a Whole life Policy is the dividend which
could vary depending on how well the insurance is doing. If the
company is doing well and the policies are not experiencing a higher
mortality than projected, premiums are paid back to the policy holder
in the form of dividends. Policyholders can use the cash from
dividends in many ways. The three main uses are: it can be used to
lower or vanish premiums, it can be used to purchase more insurance or
it can be used to pay for term insurance.