Glossary Of Life Insurance Terms

Dependent Rider

A rider that may be added to a life insurance policy specifically to provide coverage for dependents of the primary insured.

Grace Period

A specified period of time after a premium payment is due, during which the protection of the policy continues even though the payment for the renewal premium has not as yet been recieved.

Estate Tax

A tax payable to the federal government and in some cases State Governments on the death of an individual.

Decreasing Term Insurance

A temporary protection by reducing the face amount each year.

Contributory Plan

A term applied to a group insurance plan under which both the employee and the employer contribute to a premium payment.

Endowment

A whole life policy that, following a _____ period, pays a stated amount to the insured. If the insured dies during this period, the face amount of the policy is paid to the primary beneficiary.

Evidence of Insurability

Any statement or proof of a person's health history and current health status that qualifies that person for coverage.

Credit Life Insurance

Life insurance designed to pay the balance of a loan if the insured dies before the loan has been repaid in full.

Guaranty Fund

Each state has a life and health insurance quaranty fund that is designed to protect policy owners against the insolvency of an insurer.

Concealment

Failure by an applicant to disclose in his or her application a material fact that is relevant to the acceptance or the declination of an application for insurance coverage.

Domestic Insurer

Insurer conducting business in the state in which it was formed, organized or chartered.

Authorized Insurer

Insurer that possesses a certificate of authority in a particular state. certificate "authorizes the insurer to transact insurance business in a particular state"

Inspection Report

A report that contains general information regarding the health, habits, finances and reputation of an applicant.

Attending Physician Statements

"APS" - used when the application or medical examiners report reveals conditions or situations, past or present, about which more info is desired.

Individual Retirement Account

A retirement type plan that allows individuals to receive tax deferral of interest while providing some with tax deductibility of contibutions.

Disclosure Statement

A comparison form required by various state regulator agencies to be given every policy owner when replacing an existing policy with another.

Death Claim

A completed form that proves the insured's death.

Annuity

A contract between an insurer and owner affording periodic income payments for a fixed period of time or during the lifetime of the annuitant.

Certificate of Insurance

A document containing information regarding the master policy of a group indicating that an employee has coverage.

Defined Benefit Plan

A employee benefit retirement plan that uses a definite formula to determine the exact benefit amount.

Fair Credit Reporting Act

A federal law passed in 1970 that provides an insurer with the right to receive additional information with regard to applicants for insurance coverage.

Annuity Surrender Charge

A fee charged by the insurance company for a partial or full withdrawal of funds made during a specified period after the annuity is funded.

Accidental Death and Dismemberment Insurance

A form of insurance affording benefits in the event of accidental dealth; the accidental loss of sight, speech or hearing; loss of use of limbs; or loss of member such as an arm or leg.

Conditional Receipt

A form, normally required to be signed by the agent and given to the prospective owner at the time a new application is completed.

Cash refund Annuity

A life annuity contract which provides that upon the death of the annuitant, a beneficiary will recieve a lump sum payment that represents the difference between the amount the annuitant paid to the insurer and the total income payments received by the annuitant.

Accidental Death Benefit

A lump sum payment for loss of life due to an accident that was the direct cause of death. The cause of the death must be accidental for a benefit to be payable under the policy.

Extended Term Insurance

A non-forfeiture option available when a policy is surrendered in which the same face amount of the policy is continued in force for a specified additional period of time.

Buyers Guide

A pamphlet that describes and compares various forms of life or health insurance.

Actuary

A person who calculates policy rates, reserves and divdends and makes other applicable statistical studies and reports.

Contingent Beneficiary

A person who is entitled to a death benefit only.

Deferred Compensation

A plan that allows selected individuals to defer the receipt of income in accordance with a written agreement with their employer.

Family Policy

A policy covering the entire family.

Family income policy

A policy that combines a whole life policy with a decreasing term rider in order to provide a death benefit together with monthly income payments to the beneficiary.

Individual Insurance

A policy which affords protection to a policholder.

Automatic Premium Loan

A provision in a life insurance policy that states that if the policy owner fails to pay a premium by the end of the grace period, the amount of the premium due will be loaned from the policy's cash value.

Facility of Payment Clause

A provision in a policy that permits the insurer to pay insurance proceeds to persons other than the insured, the designated beneficiary or the estate of the insured in order to pay burial expenses.

Incontestable Clause

A provision of life insurance policies that states once the policy has been in force for two years, during the lifetime of the insured, the insurance company may not challenge the validity of the policy.

Dividend

A refund of part of the premium under a participating policy or a share of surplus funds.

Free-Look Period

All life insurance policies must include at least ten day ________ in a life insurance contract.

Buy-Sell Agreement

An agreement between partners in a business or between an owner and a key employee.

Fixed Annuity

An annuity contract that pays a predetermined amount of income every month to an annuitant.

Annuity Certain

An annuity that provides a benefit payment payable for specified length of time regardless of wheather the annuitant lives or dies.

Deferred Annuity

An annuity where income payments commence more than one year after the payment of the first premium to the insurer, usually at retirement.

Executor

An individual named in a will and approved by a probate court to carry out the provisions of the will.

Assignee

An individual to whom the rights under a life insurance contract are transferred.

Consultant

An individual who provides advice and consultation for a fee.

Accident

An unforeseen, unintended, unexpected event, or foruitous event that causes death, injury or damage.

Exclusions

Another name for exceptions.

Face Amount

Another name for the death benefit of a policy.

Defined Contribution Plan

Benefits are based slowly upon the contributions made to the participants account.

Cross-Purchase Plan

Buy-sell plan where each partner buys a policy covering each of the other partners in order to have sufficient funds available to buy out the deceased partner's interest upon his or her death.

Indexed Contracts

Contracts where the policyholder can share in a percentage of the growth of an indexed investment.

Binding Receipt

Insurance becomes effective on the date of the receipt and continues for a specified period of time or until the insurer declines the application.

Corridor

In Universal Life Insurance, a level of pure insurance must be maintained more than the accumulated cash value.

Ceding Company

In a reinsurance transaction, this is the insurer that transfers risk to another insurer called the reinsurance company.

Backdating

Making the effective date of a policy earlier than the application date.

Common Disaster Clause

Method of payment of the proceeds of the policy by the insurer if the insured and the named beneficiary die simultaneously in the same accident.

Address Change

Most states require that a producer notify the applicable regulatory department of any residence or business address change.

Conversion Period

Permits policy owner the right to change coverage from term to whole life without demonstrating insurability if effected during a 31 day period.

Convertibility

Policy owner is capable of exchanging an exsiting policy for other policies offered by the insurance company.

Experience Rating in Group Insurance

Premium is computed on the basis of past losses and expenses incurred by the insurer in the settlement of claims and other expenses involving a particular group.

Fiduciary Responsibility

Producers possess this responsibilty since they handle the monies of the public. A producer must account for all premiums collected or they have failed to uphold this duty.

Exceptions

Provisions in a policy that elimaninate coverage for specified causes of death.

Consideration

Requirement for a valid contract. "Promise to pay"

Continuing Education

Requires producers and other insurance professionals to maintain competency by satisfying specific requirements on a regular basis in order to hold an insurance licence.

Assignment

The act of transferring ownership rights of a life insurance policy by the owner to a third party.

Attained Age

The age that a person or an insured has attained on a given date.

Cash Surrender Value

The amount that is available in cash upon the surrender of a policy by the owner before or after the policy matures.

Death Benefit

The amount that is paid upon the death of the insured. "Face Amount"

Express Authority

The authority granted to a producer by an insurer as identified in the agency agreement to which both parties agreed.

Age Change

The date halfway between birthdays when the age of the applicant changes to the next higher age. With some insurers, the age is based upon the applicant's age at his nearest birthday.

Claim

The demand to an insurer for the payment of benefits under a policy.

Discount Value

The difference between an amount due in the future and its present value computed at a specific rate of interest.

Cash Value

The equity portion of a whole life policy that increases with each subsequent premium payment.

Annuitant

The individual whose life the annuity is based. If the annuity is paid out for a lifetime, the annuitant's age is used to determine the payments.

Guideline Premium

The maximum premium that can be paid into Universal Life Policies and still have the benefit qualify as life insurance under federal tax laws.

Annuitization

The period for which annuity benefits are paid.

Beneficiary

The person designated to recieve policy proceeds in the event of the insured's death.

Application

The statement of information given when a person applies for life, health, or disability.

Adverse Selection

The tendency of a dispropotionate number of poor risks to seek or buy insurance or maintain existing insurance in force. Sound underwriting reduces adverse selection.

Hazard

This is a condition present that increases the chance of a possible loss.

Exclusion Ratio

This is a formula used to determine what portion of a periodic annuity payment is taxable.

Estoppel

This is a legal principle that protects an insured if the insurer or its producers make an error and later the insurer attempts to deny a claim.

Fixed Period

This is a settlement option under a life insurance policy that pays the beneficiary an amount of monthly income for a specified period of time rather than a lump sum settlement.

Commingling

This is a term that means that a producer is combining premiums collected with personal funds. *Not legal.

Equity Indexed Annuity

This is a type if fixed or non-variable annuity. The contract pays a guaranteed minimum interest rate and account assets are tied to an index such as Standard and Poors.

Immediate Annuity

This is a type of annuity contract that pays monthly income commencing one, three, six, or twelve months after purchase.

Foreign Insurer

This is an insurer conducting business in a state other than the state in which it was organized or chartered.

Alien Insurer

This is an insurer organized under the laws of a country other than the U.S.

Fraternal Association

This is an organization that markets life and health insurance product solely to its members.

Implied Authority

This is authority granted to a producer by an insurer that is not specifically identified in the agency agreement.

Certificateholder

This is covered employee in a group life or health plan. The employer recieves the master policy and each employee receives a certicate or a booklet describing their group benefits.

Certificate of Authority

This is the name of the license to transact insurance business that is issued to an insurance company.

Accumulation Period

This is the pay in period of an annuity during which the contract owner recieves tax deferral. During the accumulation period the contract owner is referred to as the policyowner. Once this period ends, the annuity phase or the income phase commences.

Accelerated Benefits Rider

This rider may be added to a life insurance policy that allows the policy owner to recieve percentage of the death benefit while the insured is still alive when a terminal illness has been diagnosed. Whatever amount is paid to the owner is subtraced from the face amount when death occurs and the remainder is paid to the beneficiary,

Family Maintenance Policy

This type of policy combines whole life insurance and a level term rider. It provides payment of a monthly income during a stated period of years once the insured dies.

Increasing Term Insurance Rider

This type of rider is characterized by an increasing amount of term life coverage each year.

Additional Premium

Used in universal life policies. Will be paid into the policy account in an amount above the target premium.

Age Based Penalty

When an individual prematurely withdraws funds prior to age 59 1/2 from an annuity, a modified endowment contract or a qualified plan, he or she will be assessed a 10% penalty.

Defamation

Where a producer or insurer makes false and maliciously critical statements regarding the financial condition of a competing insurer.