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Age limits: Ages below and above which an insurance company will not accept
applications or renew policies.
Agent: An authorized representative of an insurance company who sells
and services insurance contracts. See producer, exclusive agent
and independent agent.
Aggregate
indemnity: The maximum amount that may be collected for any
disability, or period of disability, under an insurance policy.
Allocated
benefits: Maximum amount for specific services as itemized
in an insurance contract.
Alternate
delivery system: Health services that are more cost-effective
than inpatient, acute-care hospitals, such as skilled and intermediary
nursing facilities, hospice programs, and in-home services.
Ambulatory
care: Medical services provided on an outpatient (non-hospitalized)
basis. Services may include diagnosis, treatment, surgery, and
rehabilitation.
Amendment: Document changing the provisions of an insurance contract signed
jointly by the insurer and the policyholder.
Annuitant: The person entitled to receive annuity payments or who now receives
them.
Annuities: Annuities are contracts sold by life insurance companies (the
seller must be a licensed insurance entity in your state). In
their simplest form, you pay a sum of money (either a lump sum
or a series of payments) and the insurance company makes periodic
payments to you, beginning on the date in your contract and continuing
for the rest of your life. The earnings on your annuity payments
are not taxable during the accumulation phase of your agreement;
the annuity payments are taxable as income when you receive them
permit you to place your payments in professionally managed funds,
similar to mutual funds, and to control how these payments are
invested during the life of your contract. Unlike mutual funds,
variable annuities have insurance provisions and guarantees to
preserve the value of the principal you pay into the annuity.
They also generally carry higher fees than mutual funds. Annuities
may entail extensive taxation and estate issues, and annuity buyers
should make sure they’re aware of such issues.
Annuity
certain: A contract that provides an income for a specified
number of years, regardless of life or death.
Annuity
consideration: The payment, or one of the regular periodic
payments, an annuitant makes for an annuity.
Application: A statement of information made by someone applying for life insurance.
The information gathered helps the life insurance company assess
whether the risk presented by the applicant is acceptable to underwriters.
Approval: Signifies the legal acceptance of forms by a state when policy
information is filed; Signifies the insurer's acceptance of risks
as set forth in an application for insurance (as originally made
or modified by the insurer); or Signifies the acceptance of a
request from an applicant or policyholder for new insurance, reinstatement
of a terminated policy, a policy loan, or other request.
Assignment: The legal transfer of one person's interest in an insurance policy
to another person.
Automatic
premium loan: A provision in a life insurance policy that
any premium not paid by the end of the grace period (usually 31
days) is automatically paid by a policy loan if there is sufficient
cash value.
AVR: Asset valuation reserve
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 - Person to whom the proceeds of a life policy are payable when
the insured dies. The various types of beneficiaries are: primary
beneficiaries (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).
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.
Buy-Sell
Agreement - An agreement in which one party agrees to purchase
a second party's financial interest in a business following the
second party's death and the second party agrees to direct their
estate to sell that interest to the purchasing party.
Cancer
insurance: A very narrow form of health insurance that covers
the policyholder in the event he or she contracts cancer. Policies
often exclude skin cancer. Some policies won't pay for cancer
treatments until several years after the policy was purchased.
Consumer groups and insurance regulators have said cancer insurance
policies are more expensive than they're worth, since the insurance
companies pay out a rather small percentage of the premiums they
collect.
Cash value: The amount available in cash upon surrender of a policy before
it becomes payable upon death or maturity.
Cede: To reinsure the liabilities associated with insurance policies
by passing a portion of the risk exposure and the related premium
to a reinsurer.
Certificate: A statement issued to individuals insured under a group policy,
setting forth the essential provisions relating to their coverage.
Churning: Whole life policies that are replaced by new ones, often at the
urging of an agent, who gives the impression that the new policy
is cheaper. In many instances, however, the buyer is not told
that the cash value account, sometimes used to pay the new premium,
must accumulate anew. It's not unusual for whole life policies
to have no cash value in their first few policy years.
Claim: Notification to an insurance company that payment of an amount
is due under the terms of the policy. A claim is a demand by a
person or business who is seeking to recover for a loss. A claim
may be made against an individual. A claim may also be made against
an insurance company, when an insured asks the insurance company
to pay for a loss that may be covered by an insurance policy.
Co-insurance: Arrangement by which the insurer and the insured share, in a specific
ratio, payment for losses covered by the policy, after the deductible
is met.
COLI: Corporate owned life insurance
Collateral
assignment: Designating a creditor as the beneficiary of a
life insurance policy as security for a loan.
Combination
plans: Life insurance policies that combine features of term
and whole life policies.
Consideration
clause: Stipulation that states the basis on which an insurer
issues an insurance contract.
Contributory
plan: Group plan under which the insured shares in the cost
of the plan with the policyholder.
Conversion
privilege: Right given to an insured person under a group
insurance contract to change coverage, without evidence of medical
insurability, to an individual policy upon termination of the
group coverage. The conditions under which conversion can be made
are defined in the master policy.
Convertible
term insurance: Term insurance that offers the policyholder
the option of exchanging it for a permanent plan of insurance
without evidence of insurability.
Cost-of-living
rider: An option that permits the policyholder to purchase
increasing term insurance coverage. The death proceeds increase
by a stated amount each year to coincide with an estimated increase
in the cost of living.
Credit
life insurance: Term life insurance issued through a lender
or lending agency to cover payment of a loan, installment purchase
or other obligation, in case of death.
Death Benefit - The amount of money paid to the beneficiary when the insured
person dies.
Declaration
Page - The portion of an insurance policy containing the information
regarding the risk
Declined - Term used for denial of an application by an insurance company,
for an applicant that had a serious health problem and tried to
get insurance.
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.
Disability
Income Rider - A type of health insurance coverage, it provides
for the payment of regular, periodic income should the insured
become disabled from illness or injury.
Dividend - A return of part of the premium on participating insurance that
is based on the insurer's investment, mortality, and expense experience.
Dividends are not guaranteed
Double
Indemnity - Payment of twice the basic benefit in the event
of loss resulting from specified causes or under specified circumstances.
Effective
date: Date when insurance coverage begins.
Eligibility
date: Date when a member of an insured group applies for insurance.
Eligibility
period: Time following the eligibility date (usually 31 days)
during which a member of a group may apply for insurance without
evidence of insurability.
Eligible
employees: Employees who meet the eligibility requirements
for insurance set forth in a group policy.
Elimination
period: Days at the beginning of a period of disability when
no benefits are paid.
Endowment: Life insurance payable to the policyholder if living, on the maturity
date stated in the policy, or to a beneficiary if the insured
dies before that date.
Evidence
of insurability: A statement or proof of physical condition
and/or other factual information affecting a person's eligibility
for insurance. In group insurance, evidence of insurability is
required only in specific situations: when a person fails to enroll
during the open enrollment period; when a person applies for reinstatement
after having previously withdrawn from the plan when receiving
an overall maximum benefit; or when a person applies for excess
amounts of group life or disability insurance.
Exclusions
(exceptions): Conditions or circumstances, listed in the policy,
for which the insurer will not provide benefits. proportional
basis above the insurer's net retention of risk.
Extended
term insurance: A form of insurance available as a non-forfeiture
option. It provides the original amount of insurance for a limited
period of time.
Face page - The first page of a policy.
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.
Fiduciary - A person who occupies a position of special trust and confidence
(for example, in handling or supervising the affairs or funds
of another).
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 not vary.
Free Look - provision required in most states whereby policy owners have
up to 20 days to examine their new policies at no obligation.
Grace period: A period (usually 31 days) following each premium due date, other
than the first due date, during which an overdue premium may be
paid. All provisions of the policy remain in force throughout
this period.
Group annuity: A pension plan providing annuities at retirement to a group of
people under a master contract. It is usually issued to an employer
for the benefit of employees. The individual members of the group
hold certificates as evidence of their annuities.
Group life
insurance: Life insurance that usually does not require medical
examinations, on a group of people under a master policy. It is
typically issued to an employer for the benefit of employees,
or to members of an association, for example, a professional membership
group. The individual members of the group hold certificates as
evidence of their insurance.
Guaranteed
insurability: An option that permits the policyholder to buy
additional stated amounts of life insurance at stated times in
the future without evidence of insurability.
Guaranteed
renewable contract: Contract under which an insured has the
right, commonly up to a certain age, to continue the policy by
the timely payment of premiums. Under renewable contracts, the
insurer reserves the right to change premium rates by policy class.
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.
In Force - Insurance on which the premiums are being paid or have been
fully paid.
Initial
Premium - The first premium that is paid for an insurance
policy and that is part of the consideration the policy owner
gives for the policy.
Insured
Age - Premiums can be charged by: a) Age nearest birthday
and b) Actual Age.
Irrevocable
Beneficiary - A life insurance policy beneficiary whose designation
as beneficiary may not be cancelled by the policy owner unless
the beneficiary consents.
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
Policy -The printed form, which serves as the contract between
an insurer and an insured.
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.
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.
Irrevocable
Beneficiary: - A named beneficiary whose rights to life insurance
policy proceeds cannot be canceled or changed by the policy owner
unless the beneficiary consents.
Key-person
insurance: Insurance designed to protect a business against
the loss of income resulting from the disability or death of an
employee in a significant position.
Lapse -Termination of a policy upon the policy owner's failure to pay
the premium within the grace period.
Lapse Subsidized - This refers to the practice of some life insurance companies
to offer policies, which are lower in price because they have
assumed a high probability that the policies will be cashed in
by their owners for one reason, or another before the death benefit
becomes available. It is a bold and risky offer by the insurance
company because sometimes the purchasers of these policies simply
don't lapse them.
Last To
Die Coverage - This means that there are two or more life
insured on the same policy but the death benefit is paid out on
the last person to die. The cost of this type of coverage is much
less than a first to die policy and it is generally used to protect
estate value for children where there might be substantial capital
gains taxes due upon the death of the last parent. This kind of
policy is also valuable when one of two people covered has health
problems, which would prohibit obtaining individual coverage.
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 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 her life.
Loan (Policy
Loan) - A loan made by a life insurance company from its general
funds to a policy owner on the security of the cash value of a
policy.
Manual
premium rate: Premium for a group developed from the insurer's
standard rate tables; it is the cost usually quoted in an insurer's
underwriting manual.
Master
policy: A policy that is issued to an employer or trustee,
establishing a group insurance plan for designated members of
an eligible group.
Minimum
group: The fewest number of employees permitted under a state
law to constitute a group for insurance purposes; the purpose
of establishing minimums is to maintain a distinction between
individual and group insurance.
Minimum
premium plan: The employer self-funds a fixed percentage (e.g.
90 percent) of the estimated monthly claims, and the insurer covers
the remainder. This self-funded approach avoids payment of a premium
tax required in most states.
Modified
life insurance: A type of whole life policy with a premium
that is relatively low in the first several years but that increases
in later years.
Morbidity: Frequency and severity of sicknesses and accidents in a well-defined
class or classes of persons.
Mutual
life insurance company: A life insurance company owned by
policyholders who share in the company's surplus earnings.
National
Association of Insurance Commissioners (NAIC): on the Web
at http://www.naic.org. National organization of state officials
charged with regulating insurance. It has no official power but
wields significant influence. NAIC was formed to provide national
uniformity in insurance regulations.
Net Cost - Your total payments for a policy less any cash surrender value
in your policy, the profit or loss if you cancelled the policy
at a given date.
Non-cancelable
policy: A policy that can be maintained through timely payment
of the premiums until the policyholder is at least age 50 or,
in the case of a policy issued after age 44, for at least five
years from the date of issue. The insurer may not unilaterally
change any provision of the in-force policy, including premium
rates.
Non-contributory
plan: Group insurance plan under which the employer does not
require employees to share in its cost.
Non-disabling
injury: Any injury that may require medical care but does
not result in the loss of working time or income.
Non-forfeiture
option: One of the choices available if the policyholder discontinues
payments on a policy with a cash value. This may be taken in cash
as extended term insurance or as reduced paid-up insurance.
Non-forfeiture
values: The value of the policy if canceled, either in cash
or in another form of insurance. Also available to the policyholder
if required premium payments are not paid.
Non-occupational
policy: Policy that covers only non-job-related accidents
or sicknesses not covered under any workers' compensation law.
Non-participating
insurance: Insurance on which no dividends are paid.
Non-participating
policy: Policy that does not provide for payment of a dividend.
Non-renewal
clause: Provision in a policy that states the circumstances
under which an insurer may elect not to renew someone's policy.
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 applicant signing the application, paying
the first premium and, if necessary, submitting to physical examination
may make the offer. Policy issuance, as applied for, constitutes
acceptance by the company. Or the company may make the offer when
no premium payment is submitted with the application. Premium
payment on the offered policy then constitutes acceptance by the
applicant.
Original
Age - The age you were when you bought the policy.
Other Insured
Rider - A term rider covering an eligible family member or
business member other than the insured that is attached to the
base policy covering the insured.
Outlay - The actual cash payment you make to the insurance company for
premium payments each year.
Oownership - Their owners control all rights, benefits and privileges under
life insurance policies. 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 examine
applicants.
Paid-up
Insurance - Insurance that will remain in force with no need
to pay additional premiums.
Participating
Policy - A life insurance policy that is eligible for the
payment of dividends by the insurer.
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 Insurance.
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.
Policy
Term - The specified period of coverage provided by a term
insurance policy.
Preauthorized
Check (PAC) System - An automatic premium payment technique
whereby the policy owner authorizes the insurer to generate a
check against the policy owner's bank account to pay each renewal
premium.
Premium - The periodic payment required to keep and insurance policy in
force.
Premium
Flexibility - The policyholder's right to vary the amount
of premium paid each month towards a universal life policy.
Premium
Payment Mode - The frequency at which renewal premiums are
payable.
Proceeds - Net amount of money payable by the company at the insured's
death or at policy maturity.
provisions - Statements contained in an insurance policy which explain the
benefits, conditions and other features of the insurance contract.
Qualified
annuity: An annuity that is sold as part of a tax-qualified
Keogh plan or company pension plan.
Rated - 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 policy4 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.
Re-offered - When a carrier offers insurance to a high risk person, but at
a higher premium than initially quoted.
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.
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 beneficiary.
Rider - Strictly speaking, a rider adds something to a policy. However,
the term is used loosely to refer to any supplemental agreement
attached to and made a part of the policy, whether the policy's
conditions are expanded and additional coverages added, or a coverage
or condition is waived.
Risk - The chance of injury, damage, or loss.
Second-to-die
life insurance: A form of insurance, traditionally used as
an estate planning tool, that pays a death benefit only upon the
death of the insured who survives the longest. Its main purpose
is to pay estate taxes upon the death of the second insured. Because
it is based on joint life expectancy, its premium is less than
the total premiums for individual policies on the same lives.
This type of insurance is available in many forms, including policies
with interest-rate features and flexible premiums.
Self-administration: Maintenance of all records and assumption of responsibility, by
a group policyholder, for those covered under its insurance plan.
Responsibilities include preparing the premium statement for each
payment date and submitting it with a check to the insurer. The
insurance company, in most instances, has the contractual prerogative
to audit the policyholder's records.
Settlement
options: One of several ways, other than immediate payment
in a lump sum, in which the insured or beneficiary may choose
to have policy proceeds paid.
Short-term
disability income insurance: Insurance that provides benefits
only for loss from illness or disease and excludes loss from accident
or injury.
Single-premium
whole life insurance: A whole life policy that provides protection
for the duration of the insured's life in exchange for the payment
of the total premium in one lump sum at the time of application.
Standard
risk: Person who, according to an insurer's underwriting standards,
is entitled to purchase insurance without paying an extra premium
or special restrictions.
State (compulsory)
disability plan: Plan of short-term income replacement required
by some states to cover eligible persons employed within that
state.
State insurance
department: An administrative agency that licenses insurers
to do business in that state and implements state insurance laws
and supervises (within the scope of these laws) the activities
of insurers operating within the state.
Substandard
risk: Persons who cannot meet the health requirements of a
standard health insurance policy.
Supplementary
contract: An agreement between a life insurance company and
a policyholder or beneficiary by which the company retains the
cash sum payable under an insurance policy and makes payments
in accordance with the settlement option chosen.
Surcharge: An additional charge, cost, or tax.
Table - Higher than standard risks to the insurance company.
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 - Term insurance policies are contracts for a fixed period of
time. For example, a 20-year term insurance plan provides coverage
in the event of death for 20-years. However, many plans have options
that allow you to renew or convert your policy to continue coverage
beyond the initial term period.
Term of
Policy - Period for which the policy runs. In life insurance,
this is to the end of the term period for term insurance.
Terminal
Illness (TI) Benefit - An accelerated death benefit provided
by some individual life insurance policies under which the insurer
pays a portion of the policy's death benefit to a policy owner-insured
who suffers from a terminal illness and has a life expectancy
of 12 months or less.
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: The company employee who decides whether or not the company should
assume a particular risk.
Underwriting: The underwriting process evaluates the likelihood an insured event
will occur, determines its likely cost and develops an appropriate
premium for the coverage that is competitive in the marketplace
and remunerative to the insurance company writing the policy.
Underwriting differences account in part for the substantial differences
in insurance premiums for comparable coverage's.
Unearned
premium: That portion of a premium already received by the
insurer for which protection has not yet been provided.
Unearned
premium reserve: A reserve equal to an amount of net premium
written but not yet earned.
Universal
life insurance: Unlike traditional cash-value policies (known
as "whole life"), universal life policy returns were freed from
long-term, fixed-rate contracts and replaced with policies whose
returns were tied to short-term interest rates and periodically
adjusted. In addition, the policyholder can change premiums and
death benefits
Variable
annuity: An annuity contract under which the monthly payments
will vary because they are linked to the values of investments,
such as common stocks. This contrasts with the fixed dollar annuity,
which guarantees a fixed amount monthly.
Variable
life insurance: True investment characteristics were introduced
with these policies, requiring that they be registered with the
U.S. Securities and Exchange Commission. Policy investments are
controlled by the policyholder and may be placed in a broad range
of equity, bond and money-market instruments. Unlike universal
life, premiums and death benefits are fixed in variable life policies.
Waiting
period: The time a person must wait from the date of acceptance
into an eligible class (or from application) to the date the insurance
becomes effective. While similar to elimination periods, waiting
periods are often paid retroactively.
Waiver
(exclusion endorsement): An agreement, attached to the policy
and accepted by the insured, to eliminate a specified preexisting
physical condition or specified hazard.
Waiver
of premium: A provision that sets certain conditions under
which an insurance policy will be kept in full force by the company
without the payment of premiums. It is used most frequently for
those policyholders who become totally and permanently disabled
but may be available in certain other cases.
Whole life
insurance: A plan of insurance for life, with premiums payable
for a person's entire life.
Yearly
Renewable Term (YRT) Insurance - Term life insurance that
gives the policy owner the right to renew the coverage each year,
over a specified period of time.
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