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Accidental Death Benefit.
An extra benefit which generally equals the face of the contract or
principal sum, payable in addition to other benefits in the event of death
as the result of an accident. See also Double Indemnity and Multiple
Indemnity. (LI,H)
Accumulation Value.
A term used in Universal Life policies to describe the total of all
premiums paid and interest credited to the account before deductions for
any expenses, loans or surrenders.
Beneficiary
The person(s) named in the policy to receive the life insurance proceeds
upon the death of the insured.
Cash (Surrender) Value
The amount that is available in cash for loans and that may be available
for withdrawals in a whole life insurance, universal life insurance or
survivorship life insurance policy. Accessing Cash Surrender Value may
reduce the death benefit and may increase the risk of lapse.
Conversion Privilege.
This is the right of an individual to convert a Group Health or Life policy
to an individual policy should the individual cease to be a member of the
group. Usually this can be done without a physical examination.
Convertible.
A policy that may be changed to another form by contractual provision and
without evidence of insurability. Most Term policies are convertible into
permanent insurance.
Coordination of Benefits
A group policy provision which helps determine the primary carrier in
situations where an insured is covered by more than one policy. This
provision prevents an insured from receiving claims overpayments.
Contestability, Contestable Clause
In an insurance there is a clause which explains the conditions under which
the insurer may contest or void the life insurance policy. This
contestability is for a limited period of time which in most states is two
years. After that period of time the insurance company can not contest the
policy.
Convertible Term Insurance
Term insurance which can be exchanged (converted), at the option of the
policy owner and without evidence of insurability, for a whole life
insurance policy or universal life insurance policy.
Dependent Coverage.
Insurance coverage on the head of a family which is extended to his or her
dependents, including only the lawful spouse and unmarried children who are
not yet employed on a full-time basis. "Children" may be step, foster, and
adopted, as well as natural. Certain age restrictions on children usually
apply.
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.
Grace Period
Life insurance premiums are due on a certain date, if you are late in
paying, policies allow a period of time where you can still pay your
premium and not lose your polcy. This is the grace period. Most policies
allow a grace period of 30 days from the due date. After the grace period,
if the premium is not paid, the policy can lapse i.e. be terminated by the
insurance company.
Insurability
Acceptability to the company of an applicant for insurance.
Insurable Interest
See owner of an insurance policy.
Insured or Insured Life
The person on whose life the policy is issued.
Key person life insurance
When one has a key person in a business without whom the business would
suffer financially, key person life insurance is often purchased which
helps to reimburse the company for the business loss incurred by the death
of this person.
Level Premium (Life Insurance)
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.
Life Expectancy
The average number of years remaining for an individual to live shown at
each age based on long term studies by insurance companies. These
statistics as shown on charts called mortality tables..
Life Insurance
A contract between an owner (often the insured person) and a life insurance
company that guarantees the payment of a stated amount of money on the
death of the insured.
Loan (Policy Loan)
A loan made by a life insurance company from its general funds to a policy
owner on the security of the cash value of a policy.
Mutual life insurance company
A life insurance company owned by the policyholders. Policyholders of a
mutual life insurance company may participate in the “divisible surplus” of
the life insurance company as owners. They can receive dividends, most
commonly on whole life policies, which can enhance the cash value, increase
the insurance amount or lower premiums.
Owner of a life insurance policy
A life insurance policy can be owned by the insured person or an
individual, a company or a trust with an insurable interest in the insured
person. Insurable interest means there would be a financial loss by the
owner in the event of the death of the insured person.
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 (see also Dividend.)
Permanent Life Insurance
Any form of life insurance except term; generally insurance that builds up
a cash value, such as whole life. Universal life and whole life are types
of permanent life insurance.
Policy Owner
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.
Premiums
Payments to the insurance company to buy a policy and to keep it in force.
Renewable Term Insurance
Term insurance which can be renewed at the end of the term, at the option
of the policy owner 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.
Return of premium life insurance
Also known as return of premium term life insurance, this is term life
insurance for a period of time where one receives a guaranteed return of
premiums paid if you keep the policy for the term period. For example, 20
year return of premium term would guarantee a return of premium paid after
you paid 20 years of premium. Most of these policies also give a partial
return of premium if you keep the policy for a great part of the years. For
more information on return of premium life insurance, click here.
Second to die life insurance
Life insurance that pays the benefit after two people die. See survivorship
life insurance in this glossary.
Stock life insurance company
A stock life insurance company is owned by stockholders. Contrast this with
mutual life insurance company.
Standard Provisions.
(1) Provisions prescribed by state law that must appear in all policies
issued in that jurisdiction. (2) Provisions adopted by the NAIC to apply to
group Life Insurance as minimum protection. They are required by law in
most states. (3) Formerly, a set of prescribed provisions regulating the
operating conditions of a Health Insurance policy required by law in most
jurisdictions between about 1912 and 1950. They are now superseded by
uniform provisions for Individual Accident and Health Insurance policies
which contain an NAIC model bill. These have been enacted in virtually all
jurisdictions.
Survivorship life insurance
Life insurance purchased on two individuals, usually man and wife, where
the life insurance benefit is paid after both individuals have died. This
type of life insurance became popular as a solution to paying estate taxes.
The estate tax law allowed a couple to delay paying estate taxes until both
had died. Thus, survivorship life insurance became popular as a less
expensive way for heirs to pay estate taxes. The premiums are less than
buying life insurance on one life. By paying premiums now the theory is
that one can “pre-pay” the estate taxes because of the lump sum that comes
in after the second death. For more information on survivorship life
insurance click here.
Term life Insurance
Term insurance is life insurance coverage for a specified period of time.
This can be at a guaranteed rate or in some cases a guaranteed rate for a
period of time and then a projected rate. Term periods can be for 1 year, 5
years, 10 years, 15, 20 and even 30 years. For example: 30 year level term
would guarantee a level premium for 30 years based on a specified death
benefit. Term life insurance is usually the least expensive form of life
coverage, at least initially. After the initial term period of years,
5,10,15, 20, 30 etc. the policy could terminate or it can renew at a higher
premium. If you are allowed to renew it at a higher premium (based on your
then attained age), it is called renewable term life insurance. To learn
more about term life insurance click here. For instant term life insurance
quotes for you at your age without talking to an agent, click here.
Types of life insurance companies
See the definitions in the glossary for mutual life insurance company and
stock life insurance company
Universal life insurance
Universal life insurance is permanent life insurance with premiums that are
not guaranteed. To a certain degree one can “design” a premium on this type
of policy. Universal life insurance often can be set up with a lower
premium initially than whole life insurance. Premiums and values are based
on projections of assumed interest rates, the cost of insurance (also known
as mortality cost) and the insurance company’s expenses. The actual premium
paid may increase because interest rates may go lower or the projected cost
of insurance may increase. For more information on universal life, click
here
Waiver of premium
This is an extra or add-in (called a rider in insurance lingo) that can be
added to most individual life insurance policies which waives (allows you
to stop paying) the payment after the insured person has been disabled (as
described and defined in the insurance policy) for a specified period of
time, usually six months. At that time, the six months premium paid along
with future premium payments are waived.
Whole life insurance
Life insurance which has a guaranteed level premium for the rest of one’s
life with no increases in premium, with a guaranteed cash value. There is
participating whole life insurance usually issued by a mutual life
insurance company where one participates as an owner of the company and
there is non-participating whole life insurance issued by a stock life
insurance company. To learn more about whole life insurance
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