6_Life Insurance Policies

The title page of the contract, identifying the insured's name, policy number, issue date, limits, premiums, due dates, right to return provision, and the insurer's signature.

policy face

Nonforfeiture value - The policyowner is entitled to the cash value of a whole life policy. A loan may be taken from the cash value and need not be repaid.

policy loan

The benefits payable from an insurance policy or contract.

policy proceeds

Period during which the policy or contract is effective.

policy term

Life insurance used to fund funeral and burial costs. The funeral home is the beneficiary of the policy.

pre-need funeral

Set cost of insurance coverage, paid by the policyholder to the insurer.

premium

People who sell, solicit and negotiate insurance. "Producers" is an all-encompassing term which includes agents and brokers.

producers

A document given to potential buyers of securities that provides a description of the issuer and the stock.

prospectus

A document that must be given to policyowners of variable insurance products which describes the investments, charges on the contract and policy features.

prospectus

Life annuity payout option in which the annuitant receives annuity payments for his entire life; however, once the annuitant dies, annuity payments stop. Synonymous with life only and straight life.

pure life

The Financial Industry Regulatory Authority (FINRA), formerly known as the National Association of Securities Dealers (NASD).

FINRA

Tax Reform Act of 1984. This act restricts the payout of endowment policies.

TAMRA

Coverage provides flexible premiums based on a changing interest rate. Synonymous with interest-sensitive whole life.

current assumption whole life

The amount paid to the beneficiary under an insurance policy upon the death of the insured.

death benefit

Insurance that provides a face amount that decreases to zero over the policy period. Example: mortgage reduction insurance.

decreasing term

The period of time in which the family is most vulnerable to financial instability if the insured dies prematurely.

income period

Term insurance that provides an increasing face amount with level premiums.

increasing term

Policy face amount increases with respect to inflation without requiring the insured to undergo a medical exam or provide proof of insurability.

indexed-linked whole life

Insurance that is issued on the life of one individual, with individual underwriting, rates, and coverage.

individual life insurance

It is sold by debit agents who collect premiums from policyholders on a weekly basis

industrial life insurance

The U.S. Securities and Exchange Commission (SEC), which oversees the operations of FINRA.

SEC

Mix of whole and term insurance. The policyowner can modify the premium, face amount, coverage period, and premium-paying period.

adjustable life

Level term insurance which has a level face amount and increasing premiums.

annual renewable term

The age of the insured upon policy conversion.

attained age

Nonforfeiture option that allows the policyowner to receive the policy's cash value.

cash surrender value

The value of premiums plus interest in a permanent life insurance policy.

cash value

The most common type of whole life insurance sold. Coverage has a level face amount and level premiums payable over the entire life of the insured. Synonymous with straight life and ordinary life.

continuous premium

The person who purchases the annuity, pays the premiums and has all ownership rights.

contract owner

Term life insurance which can be converted to permanent life insurance.

convertible term

Insurance that is issued on the life of the person who has the debt (debtor) and the creditor owns and is the beneficiary of the policy.

credit life insurance

A return of overcharged premium, which is not taxable.

dividends

Combines a whole life policy with a term rider in which dividends are used to buy paid-up coverage. Synonymous with enhanced ordinary life and extra ordinary life.

economatic whole life

An endowment policy is a whole life policy that will pay the face amount under one of two situations: 1.) if the insured is alive at the contract maturity date, or 2.) if the insured dies during the policy period. The policy cash value must equal the face amount by the end of the policy period.

endowment

Combines a whole life policy with a term rider in which dividends are used to buy paid-up coverage. Synonymous with economatic whole life and extra ordinary life.

enhanced ordinary life

Equity indexed universal life works the same way as universal life insurance except the interest rate is tied to a stock market index.

equity indexed universal life

All of the insured's assets and liabilities.

estate

A standard provision for group life and health insurance where the insurer must stipulate what information individuals must provide as evidence of insurability.

evidence of insurability

The insurer's costs which include: acquisition costs, staff salaries, rent, contingency funds, and claims payments.

expenses

Combines a whole life policy with a term rider in which dividends are used to buy paid-up coverage. Synonymous with enhanced ordinary life and economatic whole life.

extra ordinary life

The amount of coverage under a life insurance policy synonymous with face value.

face amount

policies combine whole life and decreasing term. Only the primary breadwinner is insured, not the entire family. Coverage provides income payments to the family if the primary breadwinner dies during the income period. The income period begins when the policy is issued.

family income

Family maintenance policies combine whole life and level term. Only the primary breadwinner is covered, not the entire family. In contrast to family income policies, the income period begins on the date of the primary breadwinner's death.

family maintenance policies

A family policy insures each member of a family. The primary breadwinner is insured with whole life coverage, and the spouse and children are covered with term coverage.

family policy

Joint life policy that pays the face amount upon the death of the first insured.

first-to-do joint life policy

Life insurance that allows the policyowner to buy term and invest the difference. Synonymous with unbundled life insurance and universal life.

flexible premium adjustable life

Life insurance policies with flexible features including: premiums, face amounts, coverage period and premium-paying period.

flexible premium policies

Life insurance policy in which sales and administrative charges were deducted from the first-year premium.

front-end loaded

Coverage has several premium increases that occur annually during each year of the step-rate premium period, which is usually the first five or ten years of the policy. After this period, premiums level off at the higher rate for the remainder of the policy.

graded premium whole life

A health insurance policy providing continuation of coverage of the insured to a specified age subject to payment of premiums and allowing the insurer to increase premium rates by classes of insureds.

guaranteed renewable

A legal agreement made between an insurer and an individual, in which the insurer collects a small amount of money, called a premium, from the insured in exchange for the insurer's promise to pay benefits in the event of covered losses.

insurance policy

The person who is covered under the policy.

insured

Term policies that have premiums which fluctuate between the current rate and the maximum rate.

interdeterminate premium term

Interest earned on invested premiums.

interest earnings

Coverage provides flexible premiums based on a changing interest rate. Synonymous with current assumption whole life.

interest-sensitive whole life

Interim term coverage provides instantaneous coverage and is intended for people who plan on purchasing permanent life insurance coverage within one year.

interim term

The age of the insured upon policy application.

issue age

Joint life insurance policies insure the lives of two or more people.

joint life

Policies that provide life insurance protection on the lives of minors. Example: jumping juvenile.

juvenile policies

Term insurance which has a level face amount and level premiums.

level premium term

Term insurance that provides a level face amount.

level term

It is designed to protect against the risk of premature death.

life insurance

With a limited payment (LP) whole life policy, the insured is covered for his entire life, but premiums are paid for a limited time. The face amount and premiums are level.

limited payment

The group contract, which is issued to and owned by the group entity.

master policy

Policies which use convertible term and whole life to provide permanent protection that has lower premiums during the early policy years.

modified whole life

In life insurance, the rate at which a specific population dies.

mortality

The most common type of whole life insurance sold. Coverage has a level face amount and level premiums payable over the entire life of the insured. Synonymous with straight life and continuous premium.

ordinary life

The age of the insured upon policy application - synonymous with issue age.

original age

Life insurance rider which waives premiums if the premium-payor becomes disabled or dies before the insured child reaches a certain age.

payor rider

Life insurance policies effective for the entire life of the insured, or up to age 100. It is synonymous with whole life insurance.

permanent life insurance

Term insurance that permits the policyowner to renew a term life policy at the end of the policy period by providing evidence of insurability so the insured can obtain a lower premium than the renewal premium that is offered without evidence of insurability

reentry term

Term insurance that allows the policyowner to renew the term policy after the designated term expires without having to prove insurability.

renewable term

It is defined as the possibility of a loss occurring.

risk

Medical expense plan that pays on a first-dollar basis.

scheduled

Legislation requiring policyowners of variable products receive a prospectus. Legislation also defines securities products.

securities act of 1933

Legislation requiring sales representatives have a Series 6 license. Legislation also regulates the duties of sales representatives.

securities act of 1934

The insurer's account used to invest premium dollars for variable life insurance and annuities.

separate account

Securities license permitting a person to transact only mutual funds and variable annuities.

series 6 license

The ways, other than lump-sum, that life insurance policy proceeds are paid out to beneficiaries upon the insured's death or when the policy endows.

settlement options

Premiums paid cannot cause a policy to be paid-up after seven years.

seven-pay test

Insurance policy which allows the insured to pay the entire premium in one lump-sum.

single premium whole life policy

The most common type of whole life insurance sold. Coverage has a level face amount and level premiums payable over the entire life of the insured. Synonymous with continuous premium and ordinary life.

straight life

Joint life policy in which the policy proceeds are paid out upon the death of the second insured. Synonymous with second-to-die joint life policy.

survivorship life policy

The premium in a universal life policy that builds policy cash value.

target premium

Insurance that provides pure death protection since it only pays a death benefit if the insured dies during the policy term. It does not accrue cash value.

term life insurance

Life insurance rider that adds term coverage to an existing life insurance policy.

term rider

Life insurance that allows the policyowner to buy term and invest the difference. Synonymous with unbundled life insurance and flexible premium adjustable life.

universal life

Insurance that is comprised of variable life and variable annuities. They invest premium dollars in securities, which carry more risk due to price fluctuations. A requirement of selling variable products is a securities license and a life insurance producer license.

variable insurance

Policies that earn a fluctuating rate of interest and do not guarantee a certain cash value. Policies have fixed level premiums and a guaranteed minimum death benefit.

variable life insurance

Universal life insurance with a separate account. The variable portion of premiums is invested in the insurer's separate account.

variable universal life

Insurance that provides life insurance protection for the insured's entire life, or until age 100. It provides living benefits. Synonymous with permanent life insurance.

whole life insurance