Terms

Guaranteed Insurability Option:

Allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability.

Moral Hazard:

An individual's tendency to be dishonest.

Cost of Living Rider:

Annually adjusts the policy's face value in accordance with the national rate of inflation or deflation.

Fixed Period Installment:

Beneficiary's choice, in a life insurance policy or annuity, for receiving income payments for a given period of time. The number of payments are fixed by the payee; the benefit amount is determined by the death proceeds. Not a dividend option.

Cross Purchase Plan:

Each company share holder agrees in advance to buy the shares of the withdrawing shareholder while the withdrawing shareholder agrees to sell his/her shares to the remaining shareholders.

Conditional Contract:

Formed on the basis that certain conditions are met.

Premium Mode:

Frequency and amount of premium payment. The less often the premium is made, the lower it is. For example, annual premiums are lower than semi-annual premiums.

Morale Hazard:

Increase in the hazards presented by a risk arising from the indifference of the person insured to loss because of the existence of insurance.

Ordinary Life:

Insurance policy with a face amount of $1,000 or more, premiums are made annually, semi annually, quarterly, or monthly. Provides WHOLE LIFE insurance.

Pure Risk:

Risk that can only result in a loss. Only type of risk insurance companies are willing to accept.

Peril:

The cause of a loss.

Hazard:

A circumstance that might result in a loss or increase it's severity.

Non-Forfeiture:

A clause in an insurance policy that allows for the insured to receive all or a portion of the benefits or a partial refund on the premiums paid if the insured misses premium payments, causing the policy to lapse.

Needs Approach:

Attempting to determine how much insurance an individual would require based upon their financial needs and objectives.

Fraud:

Deceptive act practiced for an unlawful gain.

Misrepresentation:

Importance is determined by the materiality of a given concealment.

Concealment:

The withholding of fact by an applicant for insurance that effects an insurance risk or loss.

Mortality Table:

Used by life insurance companies to help predict the life expectancy and the death rates for specific groups of individuals.

Free Look Period:

10 days to review, make changes, or cancel policy. 30 days for insured ages 60 or older.

Fixed Amount Annuity:

Choice of beneficiary in which the death benefit of a life insurance policy is retained by the company to be paid as a series of installments of fixed dollar amounts per installment until the death benefit and interest are exhausted.

Reinsurance:

Contract made between an insurance company and a third party to protect the insurance company from losses.

Morbidity Table:

Predicts the likelihood that an insured will contract any number of specific diseases.