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 and secondary beneficiaries, those entitled to
proceeds if no primary beneficiary is living when the insured dies.
Best's
Insurance Report
A guide, published by A.M. Best, Inc., that rates insurers' financial integrity.
Cash
Surrender Value
The amount that is available in cash for loans and that may be available
for withdrawals. Accessing Cash Surrender Value will reduce the death benefit
and may increase the risk of lapse.
Conditional
Receipt
Given to policy owners when they pay a premium at time of application. Interim
coverage during the underwriting process is provided subject to terms and
conditions of the receipt.
Contingent
Beneficiary
Person or persons named to receive proceeds in case the original beneficiary
is not alive.
Conversion
Privilege
Allows the policyowner, before an original insurance policy expires, to elect
to have a new policy issued for the same insurance coverage. Normally a term
policy is converted to a whole life policy.
Convertible
Term Insurance
Term insurance which can be converted, at the option of the policy-owner
and without evidence of insurability, for a permanent insurance policy.
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, that provides for the payment of regular,
periodic income should the insured become disabled from illness or injury.
Dividend
A return of part of the premium on participating insurance that is based
on the insurer's investment, mortality, and expense experience. Dividends
are not guaranteed.
Face
Amount
The amount stated on the face of the policy that will be paid in case of
death. It does not include additional amounts payable under accidental death
or other special provisions or acquired through the application of policy
dividends.
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.
Insurability
Acceptability to the company of an insurance applicant.
Insurance
Company Ratings
There are three major insurance industry ratings services; A.M. Best, Standard
& Poor's and Moody's.
Insured
The person on whose life the policy is issued.
Level
Premium
Life insurance for which the premium remains the same from year to year.
The premium is normally more than the actual cost of protection during the
earlier years of the policy and less than the actual cost in the later years.
The building of a reserve is a natural result of level premiums. The payments
in the early years, together with the interest that is to be earned, serves
to balance out the underpayment of the later years.
Loan
A loan made by a life insurance company to a policyowner on the security
of the cash value of a policy.
Medical
Examination
Usually conducted by a licensed para-med or an M.D. if the coverage amount
is large and/or the insured is older. 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 or conducted verbally
on the phone.
Paid-up
Insurance
Insurance that will remain in force with no need to pay additional premiums.
Participating
Policy
A life insurance policy that is eligible for the payment of dividends by
the insurer.
Permanent
Life Insurance
Any form of life insurance except term; generally insurance that builds up
a cash value, such as whole life.
Policyowner
The person who owns a life insurance policy. This is usually the insured
person, but it may also be a relative of the insured, a partnership or a
corporation.
Preferred
Risk
A client 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.
Premium
The periodic payment required to buy and keep an 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.
Renewable
Term Insurance
Term insurance which can be renewed at the end of the term, at the option
of the policyowner and without evidence of insurability, for a limited number
of successive terms. The rates generally increase at each renewal as the
age of the insured increases.
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.
Secondary
Beneficiary
An alternate beneficiary designated to receive payment, usually in the event
the original beneficiary predeceases the insured.
Smoker
Ratings
Insurers will give a lower premium rate to buyers who do not smoke or use
tobacco. If you smoked in the past, most carriers will consider you a non-smoker
if you have not smoked for one year prior to applying for coverage.
Standard
Risk
Person who, according to a company's underwriting standards, is entitled
to insurance protection without extra rating or special restrictions.
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. The usual periods are 5, 10, 15, 20,
30 and to age 100. Does not build up cash value and is the least expensive.
Term
of Policy
Period for which the policy runs.
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.
Uninsurable
Risk
One not acceptable for insurance due to excessive risk.
Universal
Life Insurance
A flexible premium life insurance policy under which the policyowner may
change the death benefit and vary the amount or timing of premium payments.
Premiums (less expense charges) are credited to a policy account from which
mortality charges are deducted and to which interest is credited at rates
which may change from time to time. The owner may select the investments
in which the premiums are to be invested.
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. Not available at older ages.
Whole
Life Insurance
A basic type of permanent life insurance which can provide life-time protection
at a level premium. Premiums must generally be paid for as long as the policy
is in force.
