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Accelerated Benefits Rider
- A life insurance rider that allows for the early payment of some portion
of the policy's face amount should the insured suffer from a terminal
illness or injury.
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Accidental Death and Dismemberment
- Insurance providing payment if the insured's death results from an
accident or if the insured accidentally severs a limb above the wrist
or ankle joints or totally and irreversibly loses his or her eyesight.
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Accidental Death Benefit Rider
- A life insurance policy rider providing for payment of an additional
benefit related to the face amount of the base policy when death occurs
by accidental means.
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Annually Renewable Term
- A form of renewable term insurance that provides coverage for one
year and allows the policy owner to renew his or her coverage each year,
without evidence of insurability. Also called Yearly Renewable Term (YRT).
- Annuitize
- The accumulated value of the annuity
is converted into a guaranteed stream of income.
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Application
- Form supplied by the insurance company, usually filled in by the agent
and medical examiner (if applicable) on the basis of information received
from the applicant. It is signed by the applicant and is part of the
insurance policy if it is issued. It gives information to the home office
underwriting department so it may consider whether an insurance policy
will be issued and at what premium rate.
- Back Dating
- The practice of making a policy effective at an earlier date than
the present.
- Beneficiary
- Person to whom the proceeds of a life policy are payable when the
insured dies. The various types of beneficiaries are: primary beneficiaries
(those first entitled to proceeds); secondary beneficiaries (those entitled
to proceeds if no primary beneficiary is living when the insured dies);
and tertiary beneficiaries (those entitled to proceeds if no primary
or secondary beneficiaries are alive when the insured dies).
- Best's Insurance Report
- A guide, published by A.M. Best, Inc., that rates insurers' financial
integrity and managerial and operational strengths.
- Business Continuation Plans
- Arrangements between business owners that provide that the shares owned
by any one of them who dies shall be sold to and purchased by the other
co-owners or by the business.
- Buy-Sell Agreements
- Agreement that a deceased business owner's interest will be sold and
purchased at a predetermined price or at a price according to a predetermined
formula.
- Cash Value
- The equity amount or "savings" accumulation in a whole life policy.
- Concealment
- Failure of the insured to disclose to the company a fact material to
the acceptance of the risk at the time application is made.
- Conditional Receipt
- Given to policy owners when they pay a premium at time of application.
Such receipts bind the insurance company if the risk is approved as
applied for, subject to any other conditions stated on the receipt.
- Contingent Beneficiary
- Person or persons named to receive proceeds in case the original beneficiary
is not alive. Also referred to as secondary or tertiary beneficiary.
- Conversion Privilege
- Allows the policy-owner, before an original insurance policy expires,
to elect to have a new policy issued that will continue the insurance
coverage. Conversion may be effected at attained age (premiums based
on the age attained at time of conversion) or at original age (premiums
based on age at time of original issue).
- Convertible Term
- Contract that may be converted to a permanent form of insurance without
medical examination.
- Cross-Purchase Plan
- An agreement that provides that upon a business owner's death, surviving
owners will purchase the deceased's interest, often with funds from
life insurance.
- Decreasing Term Insurance
- Term life insurance on which the face value slowly decreases in scheduled
steps from the date the policy comes into force to the date the policy
expires, while the premium remains level. The intervals between decreases
are usually monthly or annually.
- Disability Income Rider
- A type of health insurance coverage, it provides for the payment of
regular, periodic income should the insured become disabled from illness
or injury.
- Double Indemnity
- A provision in a life insurance policy, subject to specified conditions
and exclusions, under the terms of which double the face amount of the
policy is payable if the death of the insured is the result of an accident.
In general, the conditions are that the insured's death occurs prior
to a specified age and results from bodily injury effected solely through
external, violent and accidental means independently and exclusively
of all other cause, within 60 or 90 days after such injury.
- Evidence of Insurability
- Any statement or proof of a person's physical condition, occupation,
etc., affecting acceptance of the applicant for insurance.
- Exclusions
- Specified hazards listed in a policy for which benefits will not be paid.
- Face Amount
- Commonly used to refer to the principal sum involved in the contract.
The actual amount payable may be decreased by loans or increased by
additional benefits payable under specified conditions or stated in
a rider.
- Free Look
- Provision required in most states whereby policy owners have either
10 or 20 days to examine their new policies at no obligation.
- Grace Period
- Period of time after the due date of a premium during which the policy
remains in force without penalty.
- Guaranteed Insurability (Guaranteed Issue)
- Arrangement, usually provided by rider, whereby additional insurance
may be purchased at various times without evidence of insurability.
- Guaranty Association
- Established by each state to support insurers and protect consumers
in the case of insurer insolvency, guaranty associations are funded
by insurers through assessments.
- Incontestable Clause
- Provides that, for certain reasons such as misstatements on the application,
the company may void a life policy after it has been in force during
the insured's lifetime, usually one or two years after issue.
- Increasing Term Insurance
- Term life insurance in which the death benefit increases periodically
over the policy's term. Usually purchased as a cost of living rider
to a whole life policy.
- Independent Agency System
- A system for marketing, selling and distributing insurance in which
independent brokers are not affiliated with any one insurer but represent
any number of insurers.
- Inspection Report
- Report of an investigator providing facts required for a proper decision
on applications for new insurance and reinstatements.
- Insurability
- All conditions pertaining to individuals that affect their health, susceptibility
to injury and life expectancy; an individual's risk profile.
- Insurable Interest
- Requirement of insurance contracts that loss must be sustained by the
applicant upon the death of another and it must be sufficient to warrant
compensation.
- Insurance
- Social device for minimizing risk of uncertainty regarding loss by spreading
the risk over a large enough number of similar exposures to predict
the individual chance of loss.
- Insurer
- Party that provides insurance coverage, typically through a contract
of insurance.
- Key Employee Insurance
- Protection of a business against financial loss caused by the death
or disablement of a vital member of the company, usually individuals
possessing special managerial or technical skill or expertise. Also
called key executive insurance.
- Lapse
- Termination of a policy upon the policy owner's failure to pay the premium
within the grace period.
- Level Term Insurance
- Term coverage on which the face value and premiums remain unchanged
from the date the policy comes into force to the date the policy expires.
- Medical Examination
- Usually conducted by a licensed physician; the medical report is part
of the application, becomes part of the policy contract and is attached
to the policy. A "non-medical" is a short-form medical report filled
out by the agent. Various company rules, such as amount of insurance
applied for or already in force; applicant's age, sex, past physical
history; data revealed by inspection report, etc., determine whether
the examination will be "medical" or "non-medical."
- Medical
- A document completed by a physician or another approved examiner and
submitted to an insurer to supply medical evidence of insurability (or
lack of insurability) or in relation to a claim.
- Misrepresentation
- Act of making, issuing, circulating or causing to be issued or circulated
an estimate, an illustration, a circular or a statement of any kind
that does not represent the correct policy terms, dividends or share
of surplus or the name or title for any policy or class of policies
that does not in fact reflect its true nature.
- Mortality
- The relative incidence of death within a given group.
- Mortgage Insurance
- A basic use for life insurance, so-called because many family heads
purchase insurance for specifically paying off any mortgage balance
outstanding at their death. The insurance generally is made payable
to a family beneficiary instead of to the mortgage holder.
- Non-Medical Insurance
- Issued on a regular basis without requiring a regular medical examination.
In passing on the risk, the company relies on the applicant's answers
to questions regarding his or her physical condition and on personal
references or inspection reports.
- Offer and Acceptance
- The offer may be made by the applicant by signing the application, paying
the first premium and, if necessary, submitting to physical examination.
Policy issuance, as applied for, constitutes acceptance by the company.
Or the offer may be made by the company when no premium payment is submitted
with the application. Premium payment on the offered policy then constitutes
acceptance by the applicant.
- Other Insured Rider
- A term rider covering a family member other than the insured that is
attached to the base policy covering the insured.
- Preferred Risk
- A risk whose physical condition, occupation, mode of living and other
characteristics indicate a prospect for longevity superior to that of
the average longevity of unimpaired lives of the same age. (See standard
risk.)
- Premium
- The periodic payment required to keep and insurance policy in force.
- Primary Beneficiary
- In life insurance, the beneficiary designated by the insured as the
first to receive policy benefits.
- Proceeds
- Net amount of money payable by the company at the insured's death or
at policy maturity.
- Rate-Up in Age
- System of rating substandard risks that involves assuming the insured
to be older than he or she really is and charging a correspondingly
higher premium.
- Rebating
- Returning part of the commission or giving anything else of value to
the insured as an inducement to buy the policy. It is illegal and cause
for license revocation in most states. In some states, it is an offense
by both the agent and the person receiving the rebate.
- Re-entry Option
- An option in a renewable term life policy under which the policyowner
is guaranteed, at the end of the term, to be able to renew his or her
coverage without evidence of insurability, at a premium rate specified
in the policy.
- Reinstatement
- Putting a lapsed policy back in force by producing satisfactory evidence
of insurability and paying any past-due premiums required.
- Renewable Term
- Some term policies provide that they may be renewed on the same plan
for one or more years without medical examination but with rates based
on the insured's attained age.
- Replacement
- Act of replacing one life insurance policy with another; may be done
legally under certain conditions. (See twisting.)
- Representation
- Statements made by applicants on their applications for insurance that
they represent as being substantially true to the best of their knowledge
and belief but that are not warranted as exact in every detail.
- Rider
- Strictly speaking, a rider adds something to a policy. However, the
term is used loosely to refer to any supplemental agreement attached
to and made a part of the policy, whether the policy's conditions are
expanded and additional coverages added, or a coverage or condition
is waived.
- Risk Selection
- The method a home office underwriter uses to choose applicants that
the insurance company will accept. The underwriter must determine whether
risks are standard, substandard or preferred and set the premium rates
accordingly.
- Salary Continuation Plan
- An arrangement whereby an income, usually related to an employee's salary,
is continued upon his or her death; often paid to the employee's beneficiary.
- Secondary Beneficiary
- An alternate beneficiary designated to receive payment, usually in the
event the original beneficiary predeceases the insured.
- Section 1035 Exchanges
- Certain life insurance policy or annuity exchanges that are considered,
according to Internal Revenue Code section 1035, to be tax-free.
- Standard Risk
- Person who, according to a company's underwriting standards, is entitled
to insurance protection without extra rating or special restrictions.
- Stock Redemption Plan
- An agreement under which a closely held corporation purchases a deceased
stockholder's interest.
- Sub-Standard Risk
- Person who is considered an under-average or impaired insurance risk
because of physical condition, family or personal history of disease,
occupation, residence in unhealthy climate or dangerous habits.
- Suicide Clause
- Most life insurance policies provide that if the insured commits suicide
within a specified period, usually two years, after the issue date,
the company's liability will be limited to a return of premiums paid.
- Term Insurance
- Protection during limited number of years; expiring without value if
the insured survives the stated period, which may be one or more years
but usually is five to twenty years, because such periods usually cover
the needs for temporary protection.
- Term of Policy
- Period for which the policy runs. In life insurance, this is to the
end of the term period for term insurance.
- Tertiary Beneficiary
- In life insurance, a beneficiary designated as third in line to receive
the proceeds or benefits if the primary and secondary beneficiaries
do not survive the insured.
- Third-Party Owner
- A policyowner who is not the prospective insured.
- Twisting
- Practice of inducing a policyowner in one company to lapse, forfeit
or surrender a life insurance policy for the purpose of taking out a
policy in another company. Generally classified as a misdemeanor, subject
to fine, revocation of license and sometimes imprisonment.
- Underwriter
- Company receiving premiums and accepting responsibility for fulfilling
the policy contract. Also, company employee who decides whether the
company should assume a particular risk; or the agent who sells the
policy.
- Uniform Simultaneous Death Act
- Model law that states when an insured and beneficiary die at the same
time, it is presumed that the insured survived the beneficiary.
- Unilateral
- A distinguishing characteristic of a life insurance contract in that
it is only the insurance company that pledges anything. The policyowner
does not even promise to pay premiums; therefore, it is really a one-sided
contract favoring the policyowner.
- Uninsurable Risk
- One not acceptable for insurance due to excessive risk.
- Universal Life
- Flexible premium, two-part contract containing renewable term insurance
and a cash value account that generally earns interest at a higher rate
than a traditional policy. The interest rate varies. Premiums are deposited
in the cash value accounts after the company deducts its fee and a monthly
cost for the term coverage.
- Waiver of Premium
- Rider or provision included in most life insurance policies exempting
the insured from paying premiums after he or she has been disabled for
a specified period of time, usually six months.
- Yearly Renewable Term (YRT)
- (See Annually Renewable Term)
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