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Life Insurance Glossary
Glossary of Life Insurance terms and definitions
62
Insurance
Professional
04/12/2021

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Term
Accelerated Benefits
Definition

Riders attached to life insurance policies

 

allow death benefits to be used to cover nursing or convalescent home expenses

Term
Accidental Death Benefits
Definition
policy rider that states that the cause of death will be analyzed to determine if it complies with the policy description of accidental death
Term
Accidental Death Insurance
Definition

insurance policy

 

provides payment if the insured's death is the result of an accident

Term
Accumulation Period
Definition

time before an annuitant's retirement

 

annuitant is making payments or investing in an annuity

Term

Actual Cash Value

(ACV)

Definition

The required amount to pay damages or for property loss.

 

amount is calculated based on the property's current replacement value minus depreciation.

Term
Actuary
Definition

A person trained in the technical aspects of insurance and related fields, particularly in the mathematics of insurance.

 

A person who, on behalf of the company, determines the maximum probability of loss.

Term
Contract of Adhesion
Definition

Contract offered on a "take it or leave it" basis by an insurer.

Insured's only option is whether to accept or reject.

 

Any disambiguities will be settled in favor of the insured, because the insurer draws up the contract.

Term
Adjustable Life Insurance
Definition

Life insurance which permits changes in the:

-face amount

-premium amount

-period of protection

-duration of the premium payment period

 

Term
Adjuster
Definition
representative of insurance company who investigates and acts on behalf of the company to obtain agreements for the amount of the insurance claim.
Term
Administrator
Definition
An individual appointed by the courtas a fiduciary to settle the financial affairs and estate of a deceased person.
Term
Admitted (Authorized) Insurer
Definition
insurance company authorized and licensed to contract business in a particular state.
Term
Adult Day Care
Definition

A program for impaired adults

 

attempts to meet their health, social, and functional needs in a setting away from their home

Term
Adverse Selection
Definition
tendency of risks with a higher probability of loss to purchase and maintain insurance more often than the risks with a lower probability of loss.
Term
Agency
Definition
insurance sales office or company
Term
Agent
Definition
individual who is licensed to sell, negotiate, or effect insurance contracts on behalf of the insurer.
Term
Agent's Authority
Definition
special powers granted to an agent by his/her agency contract
Term
Aleatory Contract
Definition

Contract in which participating parties exchange unequal amounts.

 

Insurance contracts are aleatory in that the amount the insured will pay in premiums is unequal to the amount that the insurer will pay in the event of a loss.

Term
Alien Insurer
Definition
insurance company that is incorporated outside of the U.S.
Term
Ancillary
Definition

Additional, miscellaneous services provided by a hospital.

 

examples: xrays, anesthesia, lab work

 

is not: hospital room and board expenses

Term
Annual Statement
Definition
detailed financial report that an insurance company must submit every year to the insurance department of state(s) in which it conducts business
Term
Annuity
Definition
contract that provides income for a specified period of years, or for life
Term
Apparent Authority
Definition

appearance or assumption of authority

based on principal's:

-actions

-words

-deeds

-circumstances the principal created

Term
Applicant
Definition
a person making application for, or offering him/herself or another to be insured under an insurance contract
Term
Application
Definition

a document that provides information for underwriting purposes.

 

After the policy is issued, any unanswered questions are considered waived by the insurer

Term
Assignment
Definition
the transfer of ownership rights of a life insurance policy from one person to another
Term
Attained Age
Definition
the age of the insured at a determined date
Term

Attending Physician's Statement

(APS)

Definition
a statement usually obtained from the applicants doctor
Term
Avoidance
Definition

a method of dealing with risk by deliberately keeping away from it

 

example:

avoid crashing in a plane by not flying in planes

Term
Back-End Load
Definition
a fee charged at the time of a sale, transfer, or withdrawal from from an annuity or life insurance policy.
Term
Basic Illustration
Definition
A ledger or proposal in the sale of a life insurance policy that shows both guarunteed and non-guarunteed elements.
Term
Beneficiary
Definition
the person who receives the proceeds from the policy when the loss occurs
Term

Binder

(Binding Receipt)

Definition
A temporary contract that puts an insurance policy into force before the premium has been paid
Term
Birthday Rule
Definition
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.
Term
Broker
Definition
an individual who represents an insured in the process of purchasing and negotiating a contract of insurance.
Term
Buy-Sell Agreement
Definition

legal contract

 

 determines what will be done with a business in the event that an owner dies or becomes disabled

Term
Buyer's guide
Definition

booklet that describes insurance policies and concepts,

and provides general information to help an applicant make an informed decision

Term
Cash Value
Definition
the amount to which a policyholder is entitled if the policy is surrendered before maturity
Term
Certificate
Definition
a statement or booklet that confirms that a policy has been written and describes the coverage in general
Term
Basic Medical Expense Insurance
Definition

coverage for dr. visits, xrays, lab tests, and emergency room visits,

 

benefits are limited to specific dollar amounts

Term
Benefit period
Definition
the length of time over which the insurance benefits will be paid for each illness, disability, or hospital stay
Term
Blanket Medical Insurance
Definition
A policy that provides benefits for all medical costs, including dr. visits, hospitalization, and drugs
Term
Boycott
Definition
unfair trade practice in which one person refuses to do business with another until certain conditions are met
Term
Cafeteria Plan
Definition
a selection of health care benefits from which an employee may choose the ones that are necessary.
Term
capital amount
Definition
a percentage of the principal amount of a policy paid to the insured if he/she suffered the loss of an appendage.
Term
carriers
Definition
organizations that process claims and pay benefits in an insurance policy
Term
cease and desist order
Definition
a demand of a person to stop commtting an action that is in violation of a provision
Term
certificate of authority
Definition

a document that authorizes a company to start conducting business and specifies the kinds of insurance a company can contract.

 

It is illegal for an insurance company to transact insurance without this certificate

Term
Claim
Definition
a request for payment of the benefits provided by an insurance contract
Term
Coercion
Definition
an unfair trade practice in which an insurer uses a physical or mental force to persuade an applicant to buy insurance.
Term
Coinsurance
Definition
an agreement between insurer and insured in which both parties are expected to pay a certain portion of the potential loss and other expenses
Term
coinsurance clause
Definition
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
Term
Commingling
Definition
a practice in which a person in a fiduciary capacity illegally mixes his/her personal funds with the funds he/she is holding in trust
Term
Commission
Definition
the payment made by insurers to agents or brokers for the sale and service of policies
Term

Commissioner

(Superintendent, Director)

Definition
the chief executive and administrative officer of a state insurance department
Term
Comprehensive Policy
Definition

a plan that provides a package of health care services, including:

-preventive care

-routine physicals

-immunization

-outpatient services

-hospitalization

Term
Comprehensive Major Medical
Definition

A combination of basic coverage and major medical coverage that features:

-low dedcutibles

-high maximum benefits

-coinsurance

Term
concealment
Definition

withholding of known facts

 

which, if material, can void a contract

Term
Conditional Contract
Definition
a type of an agreement in which both parties must perform certain duties and follow rules of conduct to make the contract enforceable
Term
Consideration
Definition

the binding force in a contract that requires something of value to be exchanged for the transfer of risk.

The consdieration on the part of the insured is the representations in the application and the payment of premiums.

The consideration on the part of the insurer is the promise to pay in the event of loss.

Term
Consideration Clause
Definition
part of the insurance contract that states that both parties must give something of value for the transfer of risk, and specifies the conditions of the exchange
Term

Consolidated Omnibus Budget Reconciliation Act

(COBRA) of 1986

Definition

The law that provides for the continuation of group health care benefits for the insured for up to 18 mo. if he/she terminates employment or is no longer eligible

 

and for insured's dependents for up to 36 mo. in cases of loss of eligibility due to death of insured, divorce, or attainment of the limiting age

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