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.