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