Term
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Definition
| Some companies provide "accelerated benefits," also known as "living benefits." This rider allows you, under certain circumstances, to receive the proceeds of your life insurance policy before you die. Such circumstances include terminal or catastrophic illness, the need for long-term care, or confinement to a nursing home. Ask your agent for information about these and other policy riders. |
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Term
| Accelerated Death Benefits |
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Definition
| This benefit advances up to 50% of the death benefit to an insured, while living, if diagnosed with a terminal condition with 12 months or less to live. |
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Term
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Definition
| The cash accumulation component of an annuity, universal life insurance policy or variable life insurance policy. The accumulation value reflects premiums received, withdrawals made, expenses charged, cost of insurance deducted and interest credited. |
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Term
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Definition
| The phase during which the annuity owner makes payments into the contract and accumulates earnings. |
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Term
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Definition
| A technical expert in life insurance, particularly in mathematics. A person in this job applies the theory of probability to calculate mortality rates, morbidity rates, lapse rates, premium rates, policy reserves, and other values |
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Term
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Definition
| An authorization directing an insurer to make payment directly to a provider of benefits, such as a physician or dentist, rather than to the insured. |
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Term
| Attending Physician´s Statement (APS) |
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Definition
| A written statement from a physician who has treated, or is currently treating, a proposed insured or an insured for one or more conditions. The statement provides the insurance company with information relevant to underwriting a risk or settling a claim. |
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Term
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Definition
| An optional rider in a universal life contract that provides scheduled increases in face amount based on a designated percentage, beginning in a designated policy year. This option must be applied for at the time of issue of the base policy. You will usually be charged an additional premium. |
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Term
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Definition
| The death benefit according to the terms of the original, basic contract of a life insurance policy. The basic death benefit does not include the benefit for any supplementary riders, such as an accidental death benefit (ADB) rider. For policies whose death benefit remains constant, the basic death benefit is equivalent to the face amount. Compare to death benefit and policy proceeds. |
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Term
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Definition
| A buy-sell agreement is a contract that provides for the future sale of your business interest or for your purchase of a co-owner´s interest in the business. Buy-sell agreements are also known as business continuation agreements, stock purchase agreements, and buyout agreements. |
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Term
| cash value/cash surrender value |
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Definition
| The amount that is available in cash for loans and/or withdrawals. Accessing cash surrender value may reduce the death benefit and may increase the risk of lapse. Withdrawals may be subject to surrender charges and could have a permanent effect on the cash value. Loans reduce the cash value and death benefit by the amount of the loan outstanding plus interest. If the policy is surrendered, the cash surrender value is paid to the policy owner. |
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Term
| cash value life insurance |
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Definition
| Policy that generates a savings element. Cash values are critical to a permanent life insurance policy. The size of a cash value buildup differs substantially from company to company. |
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Term
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Definition
| A document given to each person insured by a group insurance plan. This document shows the type and amount of coverage to which the group member is entitled and the beneficiary of the coverage. The certificate may also contain a summary of the contract terms as they affect individual group members. See also master contract. |
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Term
| children´s term insurance rider |
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Definition
| This rider provides term insurance on each covered child, payable if the child dies before the expiration of his or her coverage (the child attaining age 25 or the policy anniversary on which the primary insured is age 65, if earlier). If the primary insured dies while this rider is in force, a supplementary paid-up policy will be issued on each covered child. This rider is convertible between the child´s ages of 21 - 25 for up to 5 times the face amount of the rider without evidence of insurability. Also known as Children´s Insurance Benefit. |
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Term
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Definition
| The period of time (usually two years) during which an insurer may challenge the validity of a life insurance policy. See also incontestable clause. |
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Term
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Definition
| The party designated to receive life insurance policy proceeds if the primary beneficiary should die before the person whose life is insured. Also called the secondary beneficiary or the successor beneficiary. |
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Term
| contributory group insurance |
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Definition
| ny group insurance plan that calls for the insureds to pay a portion of the cost of the group insurance coverage. Contrast to noncontributory group insurance. |
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Term
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Definition
| The period of time during which the owner of a term life insurance policy may convert it to another life insurance policy without evidence of insurability. |
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Term
| convertible term insurance |
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Definition
| A type of term insurance that allows the policyowner to change the term insurance policy to a whole life policy without providing evidence of insurability. The premium rate is normally based on the age of the insured at the time of the conversion. |
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Term
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Definition
| universal life insurance policy contract provision; the "cost of insurance" is the amount deducted monthly from the accumulation value to cover the pure insurance protection provided by the policy. The amount deducted is calculated based on a number of factors such as age, premium class and net amount at risk. |
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Term
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Definition
| Group life insurance made available to group members, usually on an optional and contributory basis, to cover the spouse, children, or other dependents of the group member. It is usually sold in small amounts which are intended to pay funeral expenses. |
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Term
| disability income insurance |
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Definition
| A type of health insurance designed to compensate insured people for a portion of the income they lose because of a disabling injury or illness. Generally, benefits for disability income insurance are provided for the disabled person in the form of monthly payments. Sometimes called loss of time insurance. See also long-term disability income insurance and short-term disability income insurance. |
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Term
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Definition
| 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. |
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Term
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Definition
| Death benefit coverage that pays an additional benefit equal to the basic death benefit of the policy if the insured´s death is accidental. See also accidental death benefit (ADB) rider. |
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Term
| error and omissions (E&O) insurance |
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Definition
Insurance designed to cover claims that result from the negligent acts or mistakes of an agent, including:
his or her vicarious liability stemming from negligent acts or...
mistakes committed by individuals for whom the agent is legally liable. |
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Term
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Definition
| The amount expected to be received by an annuitant under an annuity contract, based on the periodic payment and the annuitant´s life expectancy or the guaranteed number of payments, as calculated when benefits begin. The expected return is utilized to calculate federal income tax of interest received in each annuity payment. |
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Term
| How do you calculate the average of a probability distribution? |
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Definition
As denoted by the above formula, simply take the probability of each possible return outcome and multiply it by the return outcome itself. For example, if you knew a given investment had a 50% chance of earning a 10% return, a 25% chance of earning 20% and a 25% chance of earning -10%, the expected return would be equal to 7.5%:
= (0.5) (0.1) + (0.25) (0.2) + (0.25) (-0.1)
= 0.075
= 7.5%
Although this is what you expect the return to be, there is no guarantee that it will be the actual return. |
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Term
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Definition
| In a life insurance policy whose benefit is not variable, the amount stated as payable at the death of the insured or (in the case of an annuity) at the maturity of the contract. It is generally shown on the first page of the policy. Also called the face value. See also basic death benefit, death benefit, and policy proceeds. |
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Term
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Definition
| The first step in the risk selection process. Field underwriting occurs when an agent gathers pertinent information about the proposed insured and reports that information on the application blank so the home office underwriter can make an underwriting decision. |
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Term
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Definition
| A fixed annuity is a financial product issued by an insurance company. It minimizes tax liability, while allowing tax-deferred growth of assets. At retirement, a fixed annuity can provide a guaranteed income stream, in specified amounts, for a specified period or for life. |
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Term
| flexible premium deferred annuity |
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Definition
| An annuity that allows additional payments after the initial funding with annuitization beginning after a specified number of years. |
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Term
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Definition
| The period of time after delivery of an insurance policy during which the policyowner may review the policy and return it to the company for a full refund of the initial premium. Full coverage is in force during this period. Also called a ten-day free look or free-look provision. |
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Term
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Definition
| An arrangement in which the insureds under a group policy pay the entire cost of their insurance. Contrast with contributory group insurance and noncontributory group insurance. |
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Term
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Definition
| The length of time (usually 31 days) after a premium is due and unpaid during which the policy, including all riders, remains in force. If a premium is paid during the grace period, the premium is considered to have been paid on time. |
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Term
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Definition
| Insurance that provides coverage for several people under one contract, called a master contract. A group cannot be formed just for insurance. |
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Term
| guaranteed insurability rider (GI) |
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Definition
| An amendment to a life insurance policy that gives the policyowner the right to purchase additional insurance of the same type as provided in the original policy. The additional insurance can equal no more than an amount specified in the policy contract and can be purchased at specified premium rates and at specified times without new evidence of insurability. Also called a policy purchase rider. |
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Term
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Definition
| The value of the tasks a family member provides to the rest of the family. The economic value for a non-working spouse would be equal to the cost the family would incur to hire someone to complete the tasks in the absence of the non-working spouse less the cost of that spouse´s personal maintenance. These costs usually include childcare and housekeeping but may also include transportation, the cost of eating out more often, tutoring and the like. |
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Term
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Definition
| This allows you to convert a lump sum of money into an annuity so that you can immediately receive income. Payments generally start about a month after you purchase the annuity. This type of annuity offers financial security in the form of income payments for the rest of your life. In other words, you cannot outlive it. Also called Single Premium Immediate Annuities (SPIAs). |
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Term
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Definition
| A trust usually established by an individual that may not be changed or revoked in the future. The individual setting up the trust is usually referred to as the grantor. The grantor surrenders control over the property by transferring it to the trust. Thereafter, the trust assets are controlled by the trustee of the trust who manages and distributes assets to the trust beneficiaries according to the terms spelled out in the trust document. Since the property that is transferred to the trust is no longer owned or controlled by the grantor, it does not pass through probate and is no longer subject to federal estate taxes. However, the transfer of property to an irrevocable trust may cause gift tax liability. Before you transfer property to an irrevocable trust, you should ensure that you understand the full ramifications of your action by consulting your tax advisor. |
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Term
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Definition
| The insured´s age at the time coverage takes effect. Insurance plans typically define issue age as the age at the insured´s last birthday or the insured´s nearest birthday. |
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Term
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Definition
| Parties that share in any death benefits payable under the life insurance policy or annuity contract. If no beneficiary has been named on the policy, the benefits usually pass directly to the estate of the deceased owner, and thereby fail to avoid probate. |
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Term
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Definition
| Life insurance purchased by a business on the life of a person (usually an employee) whose continued participation in the business is necessary to the firm´s success and whose death or disability would cause financial loss to the company. |
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Term
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Definition
| The theory of probability which specifies that the greater the number of observations made of a particular event, the more likely it will be that the observed results will approximate the results anticipated by the mathematics of probability. |
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Term
| lifetime income with period certain |
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Definition
| The lifetime option provides payments for as long as you live for a Period Certain or Refund options, which provide payments for the longer of your life or some fixed period (generally 5, 10, 15, or 20 years). If you die before the period ends, your beneficiaries receive the remaining payments or a cash refund. |
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Term
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Definition
| A whole life insurance policy where the premiums are paid for a limited period of time such as 20 years or until age 65 rather than for the life of the insured. At the end of the payment period, the policy becomes "paid-up" and guarantees death benefit protection in the face amount for the remainder of the insured´s life without further premiums. |
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Term
| Medical Information Bureau (MIB) |
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Definition
| MIB is organized as a non-stock, not-for-profit membership association of life insurance companies. MIB conducts a confidential interchange of information of underwriting significance among its member life insurance companies. The interchange enables MIB member companies to protect the interests of prospective insurance consumers, policyholders and life insurance companies from consumers who omit or misrepresent material facts on their applications for life, health or disability insurance. If in the underwriting of an application for insurance, an MIB member company develops information which is significant to health or longevity, a brief, coded resume of such information will be submitted to MIB. If the consumer applies to another MIB member insurance company, that company may request a copy of the report from MIB provided it has obtained from the consumer a written authorization naming MIB as an informational source. Under the general rules of the association, an insurance company may not base its underwriting decision solely on information provided by MIB. Each member company must conduct its own underwriting investigation. Access to MIB information is restricted to each member company´s authorized medical, underwriting and claims personnel. Consumers may request disclosure of or correction to their MIB record by contacting the MIB Information Office, P.O. Box 105, Essex Station, Boston, MA 02112, (617) 426-3660. |
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Term
| noncontributory group insurance |
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Definition
| A group insurance plan in which the insureds pay no portion of the premium for their insurance. The group policyholder pays the entire premium. If a group plan is noncontributory, the enrollment of group members is automatic; all eligible group members are covered. Contrast to contributory group insurance. |
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Term
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Definition
| A benefit to a life insurance policyholder that provides the amount of money (cash surrender value), the amount of extended term insurance, or the amount of paid-up insurance available from a life insurance policy to its owner when terminated by that person before the policy matures. |
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Term
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Definition
| A whole life insurance policy where the premiums are paid throughout the life of the insured. Also known as "straight life". |
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Term
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Definition
| An annuity that provides guaranteed payments to an annuitant for a specified period of time. |
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Term
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Definition
| Payments to the insurance company to buy a policy and to keep it in force. |
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Term
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Definition
| A life insurance policy provision that describes the conditions the policyowner must meet in order for the insurer to reinstate the policy if it has terminated because of nonpayment of renewal premiums. |
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Term
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Definition
| A transaction between two insurance companies in which one company purchases insurance from the other to cover part or all of the risks that the first company does not wish to retain in full. See also ceding company and reinsurer. |
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Term
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Definition
| This type of life insurance is essentially a hybrid between term life and whole life. You buy a return of premium policy for a set amount of time — say, 30 years. You make your payments every year, and in the event that you pass away, your heirs are paid the face value of your death benefit. Here´s the part that appeals to a lot of people. Should you outlive your policy, the insurer sends you a tax-free check for the full amount that you´ve spent on premiums over the lifetime of your coverage. There is a downside. Price. In order to guarantee you your premiums at the end of the 30 years, the insurer charges you an additional 50% over the cost of a standard term policy. |
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Term
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Definition
An amendment to an insurance policy that becomes a part of the insurance contract and expands or limits the benefits payable. Also called an endorsement.
accelerated death benefit
accidental death benefit
automatic increase rider
children´s term rider
guaranteed insurability option
other insured rider
primary insured rider
waiver of monthly deduction
waiver of premium |
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Term
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Definition
| A type of life insurance policy that insures two lives. The death benefit is payable at the second death. Generally, this product is used as a funding vehicle for estate taxes payable at the second death when the unlimited marital deduction is utilized. Also referred to as survivorship policies. |
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Term
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Definition
| Life insurance that does not build up cash value and where the premium normally increases as the insured gets older. It always costs much less than whole life policies for everyone except the very advanced in age. There are two types of premiums: level term and annual renewable. Level-term premiums remain constant throughout the life of the policy and can be bought in increments up to 30 years, while premiums for annual renewable increase as you age. Ordinarily, level premiums are higher than renewable premiums in the early years of the policy and lower in the later years. These days the best bargains are to be found in level-term policies of 10 years and more. |
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Term
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Definition
The person who assesses and classifies the potential degree of risk that a proposed insured represents.
The person or organization that guarantees that money will be available to pay for losses that are insured against. In this sense, the insurance company is the underwriter. |
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Term
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Definition
the process of assessing and classifying the potential degree of risk that a proposed insured represents. Also called selection of risks.
Providing guarantees that money will be available to pay for losses that are insured against.
underwriting department |
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Term
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Definition
| A flexible premium life insurance policy under which the policyowner may change the death benefit from time to time (with satisfactory evidence of insurability for increases) 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. |
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Term
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Definition
| A provision in an insurance policy that relieves the insured of paying the premiums while receiving benefits. |
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Term
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Definition
| A life insurance policy provision that limits an insurer´s liability to pay a death benefit if the insured´s death is connected with war or military service. |
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Term
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Definition
| Policies that build cash value and cover a person for as long as he or she lives if premiums continue to be paid. |
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Term
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Definition
| An insurance policy that aims to protect business owners and employees when they are found to be at fault for a specific event such as misjudgment. Typical examples of indemnity insurance include professional insurance policies such as malpractice insurance, and errors and omissions insurance, which indemnify professionals against claims made in the workplace. |
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