An extra death benefit amount that is paid
out in addition to the face amount of the policy if the insured dies by
accidental means. It cost extra to get this benefit, and usually cannot
exceed $250,000 to $300,000, and cannot exceed more than the face amount
of the policy.
Death Benefit Option:
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. Availability and specifics of these riders vary by
carrier and state.
Most insurance companies calculate age
by using the age you are nearest to. Example: Insured is 45 and it is
January, and the insured's birthday is in March. If the insurance company
was calculating age nearest, the insured would be considered age 46
for the purpose of calculating rates.
The transfer of the ownership rights
of a Life Insurance policy from one person to another.
The extra hazard of death or injury resulting
from participation in aeronautics. It usually does not include fare-paying
passengers in licensed commercial aircraft. This generally will require
paying extra premium or the waiving of certain benefits of coverage.
A procedure for making the effective date
of a policy earlier than the application or issue date. Backdating is
often used to make the age at issue lower than it actually was in order
to get lower premium. State laws often limit to six months the time to
which policies can be backdated.
The person designated to receive the
death benefit when the insured dies.
Policies written for business purposes,
such as key employee, buy-sell, business loan protection, etc.
An agreement among owners in a business
which states the under certain conditions, i.e., disability or death,
the person leaving the business or in case of death, his heirs are legally
obligated to sell their interest to the remaining owners, and the remaining
owners are legally obligated to buy at a price fixed in the Buy-Sell
agreement. The funding vehicles are either disability or life insurance
Term Insurance Rider:
Provides term insurance to the insured's
children. It is a flat premium for all his children and the benefit usually
is not less than $1,000 or more than $10,000.
Assign all or part of a life insurance
policy as security for a loan. If the insured dies the creditor would
receive only the amount due on the loan.
This is the more exact terminology for
what is often called a receipt. It provides that if premium accompanies
an application, the coverage will be in force from the date of application,
or medical examination, if any, whichever is later, provided the insurer
would have issued the coverage at the rate applied on the basis of the
facts revealed on the application, medical examination and other usual
sources of underwriting information. This coverage usually has a limit
until the policy is delivered and all delivery requirements are met. A
life and health insurance policy without a conditional receipt is not
effective or available until it is delivered to the insured and the premium
is paid and all other conditions are met.
A provision in an insurance policy setting
forth the conditions under which or the period of time (usually 2-4 years)
during which the insurer may contest or void the policy. After that time
has lapsed, normally two years, the policy cannot be contested. Example:
Material misrepresentation in the application. The suicide exclusion on
life policies also may apply during the same period..
A person or persons named to receive
policy benefits if the primary beneficiary is deceased at the time the
benefits become payable.
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.
Insurance on a debtor in favor of a creditor
to pay off the balance due on a loan in the event of the death of the
A form of business life insurance in
which each party purchases life insurance on each other.
A form of life insurance that provides
a death benefit which declines throughout the term of the contract,
reaching zero at the end of the term. Almost never sold any more because
level term insurance is so much less expensive.
The actual placing of a life insurance
policy in the hands of an insured.
Payment of twice the basic benefit in
the event of loss resulting from specified causes or under specified
A buy-sell agreement in which the company
agrees to purchase the interest of a deceased or disabled partner.
The medical and other information needed
for the underwriting of an insurance policy.
The medical examination of an applicant
for Life Insurance.
A physician, nurse, or para-med appointed
by the medical director of a life insurance company to examine applicants.
The termination of a term life insurance
policy at the end of its period of coverage.
The first page of a life insurance policy.
The amount of insurance provided by the
terms of an insurance contract, usually found on the face of the policy.
In a life insurance policy, the death benefit.
A benefit, the dollar amount of which
does not vary.
A period of time(usually 10, 20, or 30
days, depending on the state) during which a policyholder may examine
a newly issued individual life insurance policy, and return it in exchange
for a full refund of premium if not satisfied for any reason.
Acceptability to the insurer of an application
You have an insurable interest in the life
of the insured if upon the death of the insured you would suffer financial
The printed form which serves as the
contract between an insurer and an insured.
The party, who is being insured. In life
insurance, it is the person because of his or her death the insurance
company would pay out a death benefit to a designated beneficiary.
The company that pays out the death benefits
if the insured dies.
A beneficiary that cannot be changed
without his or her consent.
Person (Key Man) Insurance:
Insurance on the life of a key employee
whose death would cause the employer financial loss. The policy is owned
and payable to the employer.
An Insurance policy which has been allowed
to expire because of nonpayment of premiums. In a cash value life insurance
policy such as Whole Life or Universal
Life the policy could expire because the cash surrender value reached
were insufficient to cover cost of insurance payments are being made to
A type of term policy where the face value
remains the same from the effective date until the expiration date, it
would also mean a period of time the premiums would remain level. For
example, the 5, 10, 15, 20, 25 & 30. However, after the level premium
period most policies turn into Annual Renewable Term where the premiums
The average number of years remaining
for a person of a given age to live as shown on the mortality or annuity
table used as a reference.
An agreement that promises the payment
of a stated amount of monetary benefits upon the death of the insured.
Information Bureau (MIB):
A data service that stores coded information
on the health histories of persons who have applied for insurance from
subscribing companies in the past. Most Life insurers subscribe to this
bureau to get more complete underwriting information.
The charge for the element of pure insurance
protection in a life insurance policy.
The first factor considered in life insurance
premium rates. Insurers have an idea of the probability that any person
will die at any particular age; this is the information shown on a mortality
The number of deaths in a group of people,
usually expressed as deaths per thousand.
A table showing the incidence of death
at specified ages.
A life policy covering a mortgagor from
which the benefits are intended to pay off the balance due on a mortgage
upon the death of the insured.
A contract of life insurance underwritten
on the basis of an insured's statement of his health with no medical
Policies applied for and issued but rejected
by the proposed owner and not paid for.
A condition in an occupation that increases
the peril of accident, sickness, or death. It usually will mean higher
All rights, benefits and privileges under
life insurance policies are controlled by their owners. Policy owners
may or may not be the insured but need to have an insurable interest in
the life of the insured at the time of application. Ownership may be assigned
or transferred by written request of current owner.
A term loosely applied to Life Insurance
policy forms other than Group and Term, usually Cash Value Life Insurance,
such as Whole Life Insurance or
There are two calculations to determine
the premium for term insurance. The Policy Fee which is a flat fee added
to each policy and the rate per thousand times the number of thousands
of death benefit.
A premium-paying arrangement by which
the policy owner authorizes the insurer to draft money from his or her
bank account for the payments. This is usually done on a monthly basis.
Any risk considered to be better than the
standard risk on which the premium rate was calculated. Some companies
are now offering degrees of preferred to reduce the premium rates even
more. An extremely healthy person can now get extraordinary low rates.
The price of insurance for a specified
risk for a specified period of time.
The beneficiary named as first in line
to receive proceeds or benefits from a policy when they become due.
Statements contained in an insurance
policy which explain the benefits, conditions and other features of
the insurance contract.
Coverage's issued at a higher rate than
standard because of some health condition, or impairment of the insured.
Term insurance that may be renewed for
another term without evidence of insurability. Level term usually turns
into renewable term with increasing premiums after the level premium
A new policy written to take the place
of one currently in force.
The beneficiary in a life insurance policy
in which the owner reserves the right to revoke or change the beneficiary.
Most policies are written with a revocable beneficiary.
An attachment to a policy that modifies
its conditions by expanding or restricting benefits or excluding certain
conditions from coverage.
A risk that is on a par with those on which
the rate has been based in the areas of health, physical condition, and
lifestyle. An average risk, not subject to additional charge / rate or
restrictions because of health. At one time the best class of risk was
the standard class. As the insurers improved their underwriting skills,
they were able to define those in very good health and offer them better
rates with the new preferred class. Now some insurers have even developed
different levels of preferred.
A formal buy-sell agreement whereby each
stockholder is bound by the agreement to purchase the shares of a deceased
stockholder and the heirs are obligated to sell. This agreement is usually
funded with life insurance.
A formal buy-sell agreement whereby the
corporation is bound by the agreement to purchase the shares of a deceased
stockholder and the heirs are obliged to sell. This agreement is usually
funded with life insurance.
It is the type of life insurance that provides
protection for a specified period of time. It usually has no real cash
value build up.
A technician trained in evaluating risks
and determining rates and coverage. When an application is submitted to
the insurer, it is the underwriter who gathers all the necessary information
to determine whether a person is a preferred risk, a standard risk, or
It is what the underwriter does to determine
the class of risk an applicant will be placed in.
An interest sensitive life insurance policy
that builds cash values. The premium payer has some flexibility as to
amount and frequency of premium payments. It is a matter of considering
3 variables. The assumed interest rate, the cash surrender value and the
premium payment plan. The policy is interest sensitive , and if interest
rates change from the assumed interest, it will effect the other two variables.
If you have a Universal Life Policy, you should have it evaluated to see
if you need to increase premiums based on current interest rates. A fourth
variable that has not been a factor but could be in the future, and the
owner should be aware of, is the cost of insurance variable. Universal
Life policies are usually structured assuming current cost of insurance
rates. The insurance companies reserve the right to change those rates.
Waiver of Premium:
A provision of a life insurance policy
which continues the coverage without further premium payments if the
insured becomes totally disabled.
Life insurance that is kept in force for
a person's whole life as long as the scheduled premiums are maintained.
All Whole Life policies build up cash values. Most Whole Life policies
are guaranteed as long as the scheduled premiums are maintained. The variable
in a whole life policy is the dividend which could vary depending on how
well the insurance company is doing. If the company is doing well and
the policies are not experiencing a higher mortality than projected, premiums
are paid back to the policyholder in the form of dividends. Policyholders
can use the cash from dividends in many ways. The three main uses are:
It can be used to lower or vanish premiums, it can be used to purchase
more insurance or it can be used to pay for term insurance.