life insurance terms

application

a document that provides information for underwriting purposes. After the policy is issued, any unanswered questions are considered waived by the insurer

fair credit reporting act

a federal law that established procedures consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant and properly used

flexible premium

a policy feature that allows the policyholder to vary premium payments in the amount and/ or timing

extension of benefits

a provision that allows coverage to continue beyond the policy's expiration date for employees who are not actively at workday to disability or who have dependents hospitalized on that date. This coverage continues only until the employee return to work or the dependent leaves the hospital

disclosure

an act of identifying the name of the producer, representative or firm, limited insurance representative, or temporary insurance producer on any policy solicitation

intentional injury

an act that is intended to cause injury, Self- inflicted injuries are not covered under accident insurance; intentional injuries inflicted on the insured by another are covered

contract

an agreement between two or more parties enforceable by law

fixed annuity

an annuité that offers fixed payments and guarantees a minimum rate of interest to be credited to the purchasing payment or payments

coercion

an unfair trade practice in which an agent uses physical or mental force with the intent of inducing an applicant to purchase insurance

death benefit

the amount payable upon the death of the person whose life is insured

cash value

the amount to which a policy owner is entitled of the policy is surrendered before maturity

apparent authority

the appearance or the assumptions of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created

express authority

the authority granted to an agent by means of the agent's written contract

indemnify

to restore the insured to the same condition as prior to loss with no intent of loss or gain

guaranteed insurability rider

If a life policy owner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a

The insured age at death

The insured had his wife named as the

straight life

a basic policy that charges a level annual premium for the lifetime of the insured and provides a level, guaranteed death benefit

transfer

a basic principle of insurance under which the risk of financial loss is assigned to another party

primary policy

a basic, fundamental insurance policy which pays first with respect to other outstanding policies

option

a choice of ways of receiving policy dividends, nonforfeiture values, death benefits, or cash values

hazard

a circumstance that increases the likelihood of a loss

renewability clause

a clause that defines the insurance company's and the insured's right to cancel or renew coverage

spendthrift clause

a clause that prevents the debtors of a beneficiary from collecting the benefits before he/ she receives them

universal life

a combination of Annual Renewable Term and a cash account invested in the general fund of the insurance company

total disability

a condition who does not allow a person to perform the duties of any occupation for payment as a result of injury or sickness

unilateral contract

a contract that legally binds only one party to contractual obligations after the premium is paid

valued contract

a contract that pays a stated amount in the event of a loss (disability insurance / life insurance)

waiver of cost

a disability rider, found in Universal Life Insurance, that waives the cost of the insurance but does not waive the cost of premiums necessary to accumulate cash values

misrepresentation

a false statement or lies that can render the contract void

reinsurance

a form of insurance whereby one insurance company (the reinsurer) in consideration of a premium paid to it, agrees to indemnify another insurance company (the ceding company) for part or all of its liabilities from insurance policies it has issued

twisting

a form of misrepresentation in which an agent persuades an insured/ owner to cancel, lapse, or switch policies, even when its to the insured disadvantage

permanent life insurance

a general term used to refer to carious forms of whole life insurance policies that remain in effect to age 100 so long as the premium is paid

risk retention group

a liability company owned by its members, which are exposed to similar liability risks by virtue of being in the same business or industry

single premium whole life (SPWL)

a life insurance policy designed to provide a level death benefit to the insured's age 100 for a one-time, lump sum payment

nonmedical

a life or health insurance policy that is underwritten based on the insured's statement of health rather than a medical examination

warranty

a material stipulation in the policy that if breached may void coverage

retention

a method of dealing with risk by intentionally or unintentionally keeping a portion of it for the insured account; the amount of responsibility assumed but not reinsured by the insurance company

sharing

a method of dealing with risk for a group of individual persons or business with the same or similar exposure to loss who share the losses that occur within that group

policy loan

a nonforfeiture value in which an insurer loans a part or all of the cash value of the policy assigned as security for the loan to the policyowner

premium

a periodic payment to the insurance company to keep the policy in force

underwriter

a person who evaluated and classifies risk to accept or reject them on behalf of the insurer

terminally ILL

a person who is expected die within a short period of time due to a specific illness or sickness

paid-up insurance

a policy on which all premiums have been paid but which has not matured due either to death or endowment

level premium

a policy premium that remains the same over the period of time premiums are paid

law of large numbers

a principle stating that the larger the number of similar exposure units considered, the more closely the losses reported will equal the underlying of loss

physical exam and autopsy

a provision that allows an insurer, at its own expense, to have an insured physically examined when a claim is pending or to have an autopsy performed where not prohibited by law

investigative consumer reports

a report similar to consumer report, but one that also provides information on the consumer's character, reputation and habits

qualified plan

a retirement plan that meets the IRS guidelines for receiving favorable tax treatment

living benefits rider

a rider attached to a life insurance policy that provides LTC benefits for the terminally ill by using available life insurance benefits

market value adjusted annuity

a single premium deferred annuity that allows a contract owner to lock in a guaranteed interest rate over a specified maturity period

reciprocity

a situation in which two parties provide the same help or advantages to each other (for example, Producer A living in State A can transact business as a nonresident in State B if State B's resident producers can transact business in State A)

credit life insurance

a special type of coverage written to pay off the balance of a loan in the e vent of the death of the debtor

certificate

a statement or booklet that confirms that a policy has been written and that describes the coverage in general

attending physician's statement (APS)

a statement usually obtained from the applicant's doctor

mortality table

a table showing the probability of death at specified ages

nonrenewal

a termination of a policy by an insurer on the anniversary or renewal date

conditional contract

a type of an agreement in which both parties must perform certain duties and follow rules of conduct to make the contract

hazard, physical

a type of hazard that arises from the physical characteristics of an individual, such as a physical disability due to either current circumstance or a condition present at birth

decreasing term

a type of life insurance that features a level premium and a death benefit that decreases each year over the duration of the policy

limited- pay whole life

a variation of whole life insurance that charges a level annual premium and provides a level, guaranteed death benefit to the insured's age 100 and will endow for the face amount if the insured lives to age 100. Limited-pay life is designed so that the premiums for coverage will be completely paid- up well before age 100

consumer report

a written and/ or oral statement regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources

surrender

an act of giving up a life policy, in which the insurer will pay the insured the cash value the policy had built up

substandard risk

an applicant or insured who has a higher than normal probability of loss, and who may be subject to an increased premium

standard risk

an applicant or insured who is considered to have an average probability of a loss based on health, vocation and lifestyle

risk, standard

an applicant or insured, who is considered to have an average probability of a loss based ob health, vocation and lifestyle

life settlement

an arrangement that allows th policy owner sell their existing life insurance policy to a third party for compensation

insurer

an entity that indemnifies against losses, provides benefits, or renders services (also known as "company" or "insurance company")

controlled business

an entity that obtains and possesses a license solely for the purpose of writing business on the owner, immediate family, relatives, employer or employees

overinsurance

an excessive amount of insurance that would result in overpayment to the insured in the event of a loss

reciprocal exchange

an incorporated group of individuals who mutually insure one another, each separately assuming a share of each risk

administrator

an individual appointed by a court as a fiduciary to settle the financial affairs and estate of a deceased person

medical information bureau (MIB)

an information database that stores the health histories of individuals who have applied for insurance in the past. Most insurance companies subscribe to this database for underwriting purposes

preferred risk

an insurance classification for applicants who have a lower expectation of incurring loss, and who, therefore, are covered at a reduced rate

non authorized (non admitted)

an insurance company that has not applied for, or has applied and been denied a Cerfiticate of Authority and may not transact insurance in a particular state

foreign insurer

an insurance company that is incorporated in another state

exclusions

causes of loss, exposures, conditions, etc. listed in the policy for which the benefits will not be paid

settlement options

choices available to the insured/ owner for distribution of insurance proceeds

stock companies

companies owned by the stockholders whose investments provide the capital necessary to establish and operate the insurance company

waiver of Premium

continuation of life insurance coverage if the insured becomes totally disabled and is unable to pay the premiums

producer

insurance agent or broker

private insurance

insurance furnished by nongovernmental insuring organizations

mutual companies

insurance organizations that have no capital stock, but are owned by the policyholders

nonparticipating policies (Non-par)

insurance that does not pay dividends

whole life insurance

insurance that is kept in force for a person's entire life an pays a benefit upon the person's death, whenever that may be

participating policies (Par)

insurance that pay dividends to policyholders

excess insurance

insurance that pays over and loves or in addition to basic policy limits

term insurance

insurance that provides protection for a specific period of time

pure protection

insurance whereby premiums are paid for protection in the event of death or disability, not for cash value accumulation

renewable term

insurance which can, at the election of the policy owner, be renewed at the end of a term without evidence of insurability

domicile of insurer

insurer's location of incorporation and the legal ability to write business in that state

fraud

intentional misrepresentation or deceit with the intent to induce a person to part with something of value

reduction

lessening the possibility or severity of a loss

group life

life insurance provided for members of a group

Lloyd's Associations

organizations that provide support facilities for underwriters or groups of individuals that accept insurance risk

standard provisions

requirements approved by state law that must appear in all insurance policies

liquidation

selling assets as a method of raising capital

lump sum

settlement methods that pays the beneficiary the entire proceeds of a life insurance policy in one payment rather than in installments

representations

statements made by the applicant on the insurance application that are believed to be true, but are not guaranteed to be true

lapse

termination of a policy because the premium has not been paid by the end of the grace period

pro rate cancellation

termination of an insurance policy, with an adjustment of the premium charge in proportion to the exact coverage that has been in force

loan value

the amount of money an insured can borrow using the cash value of his/her life insurance policy as collateral

proceeds

the amount payable by the insurance company, usually in at the insured's death or when the policy matures

peril

the cause of a possible loss

maturity date

the date when the face amount of the life insurance becomes payable

utmost good faith

the fair and equal bargaining by both parties in forming the contract, where the applicant must make full disclosure of risk to the company, and the insurance company must be fair in underwriting the risk

principal amount

the full face value of a policy

superintendent

the head of the state department of insurance (in some states, known as Commissioner or Director)

issue age

the individual's age when a policy is issued

mode of payment

the method of premium payment, whether annually, semiannually; quarterly, or monthly

policyholder

the person who has possession of the policy, usually the insured

policyowner

the person who is entitled to exercise the rights and privileges in the policy. This person may or may not be the insured

primary beneficiary

the person who is named as first to receive benefits from a policy

secondary beneficiary

the person who is named to receive benefits upon the death of the insured if the (primary) first-named beneficiary is no longer alive or does not collect all the benefits due to his/ her own death

unearned premium

the portion of premium for which policy protection has not yet been given

underwriting

the process or reviewing, accepting or rejecting applications for insurance

Loss

the reduction, decrease, or disappearance of value of the person or property insured in a policy, by a peril insured against

persistency

the tendency or likelihood of insurance polices not lapsing or being replaced with insurance from another insurer

rescission

the termination of an insurance contract due either to material misrepresentation by the insured or by fraud, misrepresentation, or duress on the part of the agent/ insurer

risk, pure

the uncertainty or chance of a loss occurring in a situation that can only result in a loss or no change

risk, speculative

the uncertainty or chance of a loss occurring in a situation that involves the opportunity for either loss or gain

adjuster

A representative of an insurance company who investigates and acts in the behalf of the company to obtain agreements fir the amount of the insurance claim

buyer's guide

a booklet that describes insurance policies and concepts, and provides general information to help an applicant make an informed decision

aleatory

a contract in which participating parties exchange unequal amounts. Insurance contracts are aleatory in that the amount the insured will pay in premiums to the amount the insurer will pay in the event of of loss

annuity

a contract that provides income for a specified period of years, or for life

convertible

a policy that may be exchanged for another type of policy by contractual provision, at the option of the policyowner, and without evidence of insurability (i.e. term life changed to a form of permanent life).

commingling

a practice in which a person in a fiduciary capacity illegally mixes his/ her personal funds he/ she is holing in a trust

coinsurance clause

a provision that states that the insurer and the insured will share the losses covered by the policy in a proportion agreed upon in advance

agent

an individual who is licensed to sell, negotiate, or effect insurance contracts on behalf of the insurer

broker

an individual who represents an insured in the process of purchasing and negotiating a contract of insurance

authorized (Admitted) insurer

an insurance company authorized and license to transact business in a particular state

admitted (authorized) insurer

an insurance company authorized and licensed to transact business in a particular state

domestic insurer

an insurance company that conducts business in the state of incorporation

alien insurer

an insurance company that is incorporated outside the United States

accidental death insurance

an insurance policy that provides payment if the insured's death is the result of an accident

adjustable life

life insurance that permits changes in the face amount, premium amount, period of protection, and the duration of the premium payment period

fraternal benefit societies

life or health insurance companies formed to provide insurance for members of an affiliated lodge, religious organization, or fraternal organization with a representative form of government

grace period

period of time after the premium due date during which premiums may still be paid, and the policy and its riders remain in force

accelerated benefits

riders attached to life insurance policies that allow death benefits to be used to cover nursing or convalescent home expenses

agents authority

special powers granted to an agent by his or her agency contract

insurability

the acceptability of an applicant who meets an insurance company's underwriting requirements for insurance

commissioner

the chief executive and administrative officer of a state insurance department (in some states, known as Director or Superintendent

commission

the payment made by insurance to agents or brokers for the sale and service of policies

adverse selection

the tendency of risks with higher probability of loss to purchase and maintain insurance more often than the risks who present lower probability

accumulation period

the time before an annuitant's retirement during which the annuitant is making payments or investments in an annuity

assignment

the transfer of ownership rights of a life insurance policy from one person to another

concealment

the withholding of known facts that, if material, can void a contract

endow

to reach the maturity date or time at which the face amount equals cash values

adhesion

a contract offered on a "take-it-or leave-it" basis by an insurer, in which the insured's only option is to either accept or reject the contract. Any ambiguities in the contract will be settled in favor of the insured

contributory

a group insurance plan that requires the employees to pay part of the premium

payor benefit

a rider found in juvenile policies which waives the premiums if the person paying them (often the parent) is disabled or dies while the child is still a minor

joint life

a single policy that is designed to insure two or more lives

nonresident agent

an agent licensed in a state in which he or she is not a resident

fiduciary

an agent/ broker who handles insurer's funds in a trust capacity

personal contract

an agreement between an insurance company and an individual that states that insurance polices cover the individual's insurable interest

risk, substandard

an applicant or insured who has a higher than normal probability of loss, and who may be subject to an increased premium

nonadmitted (nonauthorized)

an insurance company that has not applied for, or has applied and been denied a Certificate of Authority and may not transact insurance in a particular state

noncancellable

an insurance contract that the insured has a right to continue in force by payment of premiums that remain the dame for a substantial period of time

rate service organization

an organization that is formed by, or on behalf of, a group of insurers to develop rates for those insurers, and to file the rates with the insurance department on behalf of its members. They may also act as a collection point for actuarial data

speculative risk

an uncertainty or chance of a loss occurring in a situation that involved the opportunity for with loss or gain

rebating

any inducement offered in the sale of insurance products that is not specified in the policy

juvenile life

any life insurance written on the life of a minor

rider

any supplemental agreement attached to and made a part of the policy indicating the policy expansion by additional coverage, or a waiver of a coverage or condition

life expectancy

average number of years remaining for a person of a given age to live, as shown on the mortality table

insured

the person or organization that is protected by insurance; the party is to be indemnified

beneficiary

the person who receives the proceeds from the policy when the insured dies

actual cash valve (ACV)

the required amount to pay damages or for property loss. This amount is calculated based on the property's current replacement value minus depreciation

waiver

the voluntary abandonment of a known or legal right or advantage

nonforfeiture values

those guaranteed values in a life insurance policy that cannot be taken from the insured, even if he or she ceases to pay premiums

waiting period

time between the beginning of a disability and the start of disability insurance benefits

rollover

withdrawing the money from a qualified plan and placing it into another qualified plan

insurance

a contract whereby one party (insurer) agrees to indemnify or guarantee another party (insured) against a loss by a specified future contingency or peril in return for payment of a premium

agency

an insurance sales office or company

annual statements

a detailed financial report that an insurance company must submit every year to the insurance department of state(S) in which it conducts business

avoidance

a method of dealing with risky by deliberately keeping away from it (e.g. if a person wanted to avoid the risk of being killed in an airplane crash, he or she might choose to never fly in a plane).

free look

a period of time, usually required by law, during which a policy owner may inspect a newly issued individual life or health insurance policy for a stated number of days and surrender it in exchange for a full refund of premium if not satisfied for any reason

dependent

a person who relies on another for support and maintenance

endorsement

a form changing the provisions of and attached to the life insurance policy ( also known as a rider)

insuring clause

a general statement that identifies the basic agreement between the insurance company and the insured, usually located on the first page of the policy

defamation

an unfair trade practice in which one agent or insurer makes an injurious statement about another with the intent of harming the person's pr company's reputation

implied authority

authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal

countersignature

the act of signing an insurance policy by a licensed resident agent

employee retirement income security act (ERISA)

the act that stipulates federal standards for private pension plans

attained age

the age if the insurer at a determined date

earned premium

the amount of the premium for which the policy protection has been given

director

the chief executive and administrative officer of the insurance department ( in some states, known as commissioner or superintendent)

expiration

the date specified in the policy as the date of termination

effective date

the date when an insurance policy begins (also known as the inception date)

certificate of authority

a document that authorizes a company to start conducting business and specifies the kind(s) of insurance a company can transact. It is illegal for an insurance company to transact insurance without this certificate

agent appointment

the authorization of an agent to act for or represent an insurer

consideration

the binding force in a contract that requires something of value to be exchanges for the transfer of risk. The consideration on the part if the insured is the representations made in the application and the payment id premium; the consideration on the part of the insurer is the promise to pay in the event of loss

hazard, morale

the effect a person's indifference concerning loss has on the risk to be insured

hazard, moral

the effects of a person's reputation, character, living habits, etc. on his/ her insurability

face

the first page of the policy

coverage

the inclusion of clauses of loss (perils) which are covered within a scope of a policy

birthday rule

the method of determining primary coverage for a dependent child, under which the plan of the parent whose birthday occurs first in the calendar year is designated as primary

accidental death benefits

a policy rider that states that the cause of death will be analyzed to determine if it complies with the policy description of accidental death

insurable interest

a financial interest in the life of another person; a possibility of losing something of value if the insured should die. In life insurance, insurable interest must exist at the time of policy application or policy issue

basic illustration

a ledger or proposal used in the sale of a life insurance policy that shows both guaranteed and non guaranteed elements

but sell agreement

a legal contract that determines what will be done with a business in the event that an owner dies or becomes disabled

certificate of insurance

a legal document that indicates that an insurance policy has been issued, and that states both the amounts and types of insurance provided

estoppel

a legal impediment to denying a fact or restoring a right that has been previously waived

insolvent organization

a member organization which is unable to pay its contractual obligations and is placed under a final order of liquidation or rehabilitation by a court of competent jurisdiction

applicant

a person making application for, or offering himself, herself or another to be insured under an insurance contracted

claims

a request for payment of the benefits provided by an insurance contract