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A
Accelerated Benefit: Some companies provide "accelerated death benefits," also known as "living benefits." This feature allows you, under certain circumstances, to receive a portion of 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.
Accident: An unexpected event that causes injury.
Accident Hospital Indemnity Policy (AHIP): Pays a dollar amount for each day an Insured person is in the hospital due to an accident. Usually the benefit is paid directly to the insured to help offset costs incurred from hospital stays. It is often used to pay expenses not covered by major medical insurance. It may also provide accidental death coverage and other benefits such as extended care services.
Accidental Death: Loss of life which results from bodily injury caused by an accident.
Accidental Death Insurance: Coverage for death which results directly from an accident. (Different from life insurance.)
Accrue: The accumulation of dividends and interest held in a policy issued by a participating life insurance company.
Act of God: Certain acts of nature, such as earthquakes, floods or hurricanes, that are beyond human control.
Actuary: A mathematician employed by an insurance company to calculate premiums, reserves, dividends and insurance, pension and annuity rates, using risk factors obtained from experience tables. These tables are based both on the company's history of insurance claims and other industry and general statistical data.
Agent: See "Licensed Insurance Agent."
Aggregate Limit: In Liability Insurance, the maximum amount of coverage under the contract period, regardless of how many accidents occur.
Amendment: An official document that serves as a revision to the original policy.
American Council of Life Insurers (ACLI): Located in Washington, D.C., ACLI is an association of life insurers concerned with issues that affect the life insurance industry on the federal, state, or local level. It lobbies on behalf of the industry, and the information it compiles is available to the public.
Amortization: An accounting procedure that calculates for depreciation by gradually reducing the cost value of an asset through periodic charges to income.
Anniversary: Refers to the date one year (or more) following the effective date of the contract.
Applicant: The person applying for the insurance policy. The applicant is not necessarily the owner or the insured.
Application: A form which may be completed by an individual who is requesting that insurance be issued. The applicant provides personal health information, and the insurance company uses the information to determine the appropriate classification and rate for the proposed insured.
Asset: An item having commercial or exchange value that is owned by an individual, business or institution. Assets owned by life insurance companies are comprised largely of financial instruments and are used to back life and health insurance and annuity obligations. These assets are purchased with premiums and investment earnings.
Assignment: The transfer of benefits or other rights of a life insurance policy to another person or business by a policyowner.
Attained Age: This refers to the insured's age at any given point.
Authorization: Permission from the policyowner which allows release of information to a named party.
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B
Beneficiary: Person(s) designated to receive the benefits of an insurance policy when the insured dies.
Benefit Period: The period of time during which benefits are normally payable for an accidental death or hospital indemnity policy offering daily, weekly or monthly payments.
Benefits: The sum of money specified in an insurance contract to be paid to the beneficiary when a loss occurs.
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C
Cancellable: An insurance contract that may be ended by the insured or the insurer at any time.
Cancellation: The termination of an insurance contract by the insured or the insurer in accordance with the policy provisions.
Carrier: The underwriting insurance company.
Certificate: A document issued to individuals insured under a group insurance policy, setting forth essential provisions relating to their insurance coverage.
Change of Beneficiary Provision: A contract provision that allows the owner of the insurance policy to change the beneficiary whenever desired, unless the beneficiary has been designated as irrevocable. In which case, the beneficiary's written permission would be required before a change could take place. (See Beneficiary and Irrevocable Beneficiary.)
Change of Insured: A provision or rider allowing the owner of a policy to change the insured (with evidence of insurability). This provision may be included in a life contract and may involve additional charges.
Claim: A request for payment of benefits according to the terms of an insurance policy.
Clause: An article or added provision in a life insurance contract such as the Suicide Clause or the Incontestability Clause.
Contestable Period: A period of time during which the insurer can cancel or contest the policy. For life insurance, the contestable period is normally two years.
Contingent Beneficiary: A secondary beneficiary designated by the insured to receive the benefits of the policy if the named primary beneficiary is deceased when the proceeds become payable.
Contract: (See Policy.)Conversion: The change of one policy to another without showing evidence of insurability. (See Term Conversion.)
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D
Date of Issue: The date printed on the policy that indicates when the policy was issued. This date may be different than the policy date, which is the date the policy went into effect.
Death Benefit: The policy proceeds or benefit that is promised to the designated beneficiary of an insurance contract upon the insured individual's death.
Deviated Premium: A reduced premium which is charged the customer for a specified period of time upon initial purchase of an insurance policy.
Disability: The inability to perform the duties of your occupation or any other occupation for which you are reasonably fitted by education, training or experience due to an injury or sickness.
Dismemberment: Complete loss of limb at or above wrist or ankle joint or complete and permanent loss of sight in one or both eyes.
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E
Effective Date: The date the insurance coverage goes into effect. The effective date will be shown on the policy.
Electronic Funds Transfer (EFT): A service that allows customers to have premium payments drawn directly from their bank accounts, eliminating the need to write checks. EFT simplifies record keeping, eliminates postage fees and reduces bank processing charges.
Emergency Treatment Facility: A facility licensed to provide emergency care and staffed by a physician. It can be a clinic, hospital emergency room or similar outpatient emergency facility.
Endorsement: A change made in a life insurance policy as requested by the policyowner and acknowledged by the company, such as a change of beneficiary. Endorsements also include revisions in wording for the purpose of clarifying particular provisions of an insurance contract. (See Rider.)
Enrollment Form: A form completed by an applicant requesting a group insurance product.
Evidence of Insurability: Statements and representations regarding an insured's or prospective insured's state of health and other information that might affect insurance acceptability.
Exclusions: Specific conditions surrounding an accident, illness or death which are not covered by the benefits of a policy. For example, accidents occurring while the insured is under the influence of alcohol are usually not covered. Exclusions are required by law to be disclosed to the consumer prior to the purchase of an insurance policy.
Expected Mortality: The number of deaths which theoretically will occur among a group of people during a given period of time according to the mortality table in use.
Expiration Date: The date on which the insurance policy ceases to protect the policyowner.
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F
Face Amount: The original death benefit on a life insurance policy. The policy face amount is also referred to as the "face value."
Fiduciary: An individual, company, or association holding assets in trust for a beneficiary. The fiduciary has the responsibility of managing the money for the benefit of the beneficiary.
Free Look/Free Review: The amount of time provided the consumer to review the policy after they have applied for or accepted the offer. Policies can be returned for a premium refund anytime within the free-look period. Typical free-look periods range anywhere from 10-60 days.
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G
Grace Period: 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.
Group Insurance: Insurance which is available to all people who qualify on a class basis, regardless of individual considerations.
Guaranteed Issue: Insurance coverage for which there is usually no individual underwriting. All eligible members of a particular group of proposed insureds who apply for the policy and who meet certain conditions are automatically issued a policy.
Guaranteed Renewable: A policy provision in many products which guarantees the policyowner the right to renew coverage at every policy anniversary date. The company does not have the right to cancel coverage except for nonpayment of premiums by the policyowner; however, the company can raise rates if they choose.
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H
Hospital: An institution which is primarily engaged in providing medical, diagnostic and major surgery facilities for medical care and treatment of sick and injured persons on an inpatient basis under supervision of duly licensed physicians and 24-hour nursing service. A hospital does not include a convalescent home, rest home, nursing facility, facility affording custodial or educational care, facility for the aged, drug addicts or alcoholics.
Hospital Confinement: An inpatient stay in a hospital for necessary care and treatment of an injury as prescribed by a physician. It does not include outpatient care and treatment, including outpatient surgery received in a hospital.
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I
Incontestability Clause: A life insurance contract provision which states that after the policy has been in force for a specified period of time (usually two years), the company cannot rescind or deny a claim based on a material misrepresentation in the application.
Indemnify: The agreement to compensate or reimburse for incurred damage or loss.
Indemnity: The company will pay a specified benefit amount for a condition or hospital confinement, regardless of the actual expense.
Insurability: Those qualifications of age, health, occupation, etc., which enable the applicant to meet the requirements of an insurance company for the issuance of insurance.
Insurance: A system whereby individuals and companies who are concerned about the potential for loss pay premiums to an insurance company which, in turn, will reimburse those individuals and companies in the event the loss occurs.
Insured: The person whose life or health is covered by the insurance contract.
Irrevocable Beneficiary: A beneficiary whose interest cannot be cancelled without his or her consent.
Issue Age: Insurance age of insured used to calculate the premium of an insurance policy.
Issue Date: The date the insurance becomes effective. This is the date from which suicide and incontestability periods are calculated.
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L
Lapse: The termination of an insurance policy because of the policyowner's failure to pay the premium by the end of the grace period.
Level Premiums: Premiums which remain the same over the life of the policy.
Licensed Insurance Agent: A person who has satisfied individual state requirements and is then issued a license to solicit insurance products in that state. In order to make an insurance sale, a person must be authorized (licensed) by the state in which they are making the sale.
Life Expectancy: The average number of years of life remaining to a number of people of a given age according to a given mortality table.
Life Insurance: A product which provides protection against the economic loss caused by a person's death. The protection is made possible by spreading the cost of the financial loss over a large group of people who are exposed to the same risk.
Loss: Property damage or bodily injury made to a third party by the insured party, or damage to the insured party's own property by the insured party.
Lump Sum: A single payment from the insurer for the total benefit amount due instead of a series of installment payments. Life insurance face amounts may be paid in lump sum if requested by the beneficiary.
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M
Master Policy: A single insurance contract issued to an employer or other entity that provides group insurance to eligible employees or members, typically by issuing a certificate of insurance to such member.
Maximum Benefit Period: The longest period of time that the insured person can normally collect benefits when a policy offers daily, weekly or monthly benefits. The maximum benefit period varies with the type of coverage.
Medical Examination: A medical history and exam completed by a doctor. Some insurance products may require a medical examination as part of the underwriting.
Morbidity (rate): 1. Sickness, disability or failure of health. 2. The likelihood that a person of a given age will suffer an illness or disability. The premium that a person pays for health insurance is based in part on the morbidity rate for that person's age group.
Mortality rate: The frequency of deaths in proportion to a specific population.
Mortality Table: A table or chart listing the probabilities of death occurring at various ages.
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N
National Association of Insurance Commissioners: An organization of state insurance commissioners which meets to discuss and develop insurance regulations and practices.
Noncancellable: A policy term which signifies that the company cannot cancel coverage unless premiums are not paid.
Nonsmoker Premium Rates: This rate structure recognizes that nonsmokers are more likely to live longer and avoid debilitating illness than smokers. In effect, it provides better pricing for non-smokers.
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O
Occupation Class: Types of occupations that present a similar risk to an insurance company if all other factors are equal. People in the same occupation class will pay the same premium rates for health insurance.
OOC: The acronym used for an Outline of Coverage. An OOC is a brief outline of the policy benefits and exceptions written in language resembling a shortened version of the policy itself and is required by some states to be included with the initial advertising sent to the customer.
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P
Paramedical Exam (Paramed): A medical examination performed by a non-physician medical professional used to determine an applicant's health risk. The health risk is used in determining insurability and premium classification for life and health insurance.
Payor: The person making premium payments on a policy.
Permanent Disability: A disability that will last a lifetime or at least as far into the future as can be foreseen.
Policy: The written document issued by a life insurance company to a policyowner which expresses the insurance contract between the company and the policyowner.
Policyowner (Policyholder): The individual who owns an insurance policy and who has all contractual rights. The policyowner is not necessarily the same person as the insured or the payor.
Premium: The periodic payment required to keep a specific policy in force.
Premium Notice: This is a notice from the insurance company detailing how much premium payment is due and by what date.
Premium Payor: The individual who pays the premiums on a policy.
Primary Beneficiary: The person who, upon the insured's death, has the first right to receive insurance proceeds.
Primary Insured: The person covered by the insurance contract. In a family policy, the primary insured is the person for whom the larger benefit amounts are assigned.
Principal Sum: The benefit amount payable in one sum in the event of loss.
Proof of Loss: Formal documentation by the policyowner to the insurer about any incurred losses. This documentation is needed to assess the loss and is also required before an insurer will compensate the policyowner for the loss.
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R
Reinstatement: The period after the grace period during which the policy can be restored from a lapsed status through submission of acceptable evidence of insurability and unpaid premiums plus interest. The policy must not have been surrendered for its cash value.
Reinsurance: The sharing of claims risk by more than one insurance company. Reinsuring occurs when a company determines that a claims risk is too large to carry and chooses to find a second company willing to accept a part of the business.
Renew: To continue the policy for another period of time. Permanent coverage is generally renewable annually for life. Term insurance coverage may or may not be renewable; if renewable, the renewal period may be much shorter than life.
Replacement: The act of surrendering an insurance policy or part of an insurance policy in order to buy another policy.
Reserve: The amount of money an insurer holds which, with future premiums and an assumed rate of interest, will pay all contractual obligations as they fall due.
Restrictions: Factors affecting what actions can be taken on a policy, such as ownership restriction because of a divorce or tax levy.
Return of Premium (ROP): A provision included in certain policies which provides for a return of the customers' premium payments to them after a specified period of time (usually 10-15 years) in which they retained coverage. Some money-back provisions also include a requirement for the time period that the customer not receive claim payments which exceed a preset amount (usually 20% of the premiums paid).Rider: An addition to an insurance policy that can be offered at the time of the initial product offer or at a later date; it becomes part of the original contract and expands or limits the benefits which are payable.
Risk: In insurance, it is the probability of morbidity or mortality. It also pertains to uncertainty of gains or losses regarding investment performance on the underlying funds of a variable product.
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S
Stock: A certificate of ownership of a corporation representing a share of its capital and surplus.
Surrender: The act of terminating a life insurance policy or annuity.
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T
Term Conversion: Many term policies come with conversion rights guaranteeing that, for a specified period of time, the policy can be converted to a permanent plan for the equivalent amount of coverage, without having to provide additional evidence of insurability. In some cases, the premium on the new policy will be based on the insured's age at the time of the original purchase.
Term Life Insurance: A type of life insurance that only pays benefits if the insured dies during the specified period of time. Term life insurance does not build cash value.
Termination: The cancellation of an insurance policy by the insurance company or the insured.
Total Disability: When a disability begins, it is typically considered a "total disability" if it prevents an insured person from performing the essential duties of his or her regular occupation. Under many insurance policies, the definition of total disability changes at the end of a specified period after the disability begins, usually two years. Therefore, insureds are considered totally disabled only if their disabilities prevent them from working at any occupation for which they are reasonably fitted by education, training or experience.
Trust: A fiduciary relationship with respect to property. It is an arrangement whereby one person has the legal title to property being held for the benefit of someone else who has the equitable title to the property.
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U
Underwriter: An employee of a life insurance company whose job it is to evaluate the insurability and determine the risk classification of persons applying for insurance.
Underwriting: Process which provides an insurance company the opportunity to review and assess customer risk prior to acceptance of the application. May require a potential customer to take a physical exam to satisfy the underwriting requirements.
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W
Waiting Period: (See Elimination Period.)
Waiver of Premium: A provision in some insurance contracts which enables an insurance company to waive the collection of premiums while keeping the policy in force if the policyholder becomes unable to work because of an accident or injury. The waiver of premium for disability remains in effect as long as the insured is disabled.
Whole Life Insurance: Permanent insurance which provides coverage for the life of the insured, provided premiums are paid as specified in the policy. Whole Life insurance will pay a death benefit upon the insured's death or a cash endowment upon policy maturity that is equal to the death benefit.
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