If your policy has an accelerated death benefits provision, it will pay you - under certain conditions - all or part of the policy death benefits while you are still alive. These conditions include proof that the policyholder is terminally ill with a life expectancy of less than 12 months, has a specified life-threatening disease or is in a long-term care facility such as a nursing home. If you have a group term life policy or certificate, the amount of accelerated benefit you may receive is limited by law to: the greatest of $25,000 or 50% of the death benefit. By accepting an accelerated benefit payment, a person could be ruled ineligible for Medicaid or other government benefits. The proceeds also may be taxable.
Accident
An unforeseen, unintended event; something unexpected; fortuitous.
Accidental Death Benefits
If a policy includes an accidental death benefit, the cause of death will be examined to determine whether the Insured´s death meets the policy´s definition of accidental.
Administrative Expense Charge
An amount deducted, usually monthly, from the policy.
Agent
A person who sells insurance policies.
Annuitant
A person who receives the payments from an annuity during his or her lifetime.
Annuity
A contract in which the buyer deposits money with a life insurance company for investment. The contract provides for specific payments to be made at regular intervals for a fixed period or for life.
Annuity Certain
An annuity that provides a benefit amount payable for a specified period of time regardless of whether the annuitant lives or dies.
Annuity Period
The time span between the benefit payments made under an annuity contract.
Application
A form you fill out with information about you that an insurance company will use to decide whether to issue you a policy and how much to charge.
Assignment
The transfer of all or part of a policy owner´s legal title and rights to a policy to another person. It is possible to change this type of transfer at a later date.
Termination of an insurance policy by the company or insured before the renewal date.
Cash Surrender Option
Nonforfeiture option, which specifies that the policy owner can cancel the coverage and receive the entire net cash value in a lump sum.
Cash Value
The amount of money, which the policy owner will receive as a refund if the policy owner cancels the coverage and returns the policy to the company. Also known as cash surrender value.
Claimant
A person who makes an insurance claim.
Conditional Receipt
A premium receipt given to an applicant which makes the insurance effective only if or when a specified condition is met.
Contestable Period
A period of up to 2 years that an insurance company may deny payment of a claim because of suicide or a material misrepresentation on your application.
Contingent Beneficiary
Another party or parties who will receive the proceeds if the primary beneficiary should predecease the person whose life is insured.
Contract
In most cases, the term "contract" refers to an insurance policy. A policy is considered to be a contract between the insurance company and the policyholder.
Conversion Privilege
The right to change (convert) insurance coverage from one type of policy to another. For example, the right to change from an individual term insurance policy to an individual whole life insurance policy.
Credit Life Insurance
This is a special type of coverage usually designed to pay off your loan or charge account balance if you die. Some lenders or sellers may require credit life insurance before they will approve your loan. If credit life is required, the lender or seller cannot require you to purchase it from them or a particular insurance company. If you have an existing life policy, the creditor has to accept an assignment of benefits under your existing policy instead of requiring you to purchase a credit life policy. Credit life insurance premium rates for loans of 10 years or less are regulated by the Texas Department of Insurance, but premium rates for loans that are more than 10 years old are unregulated.
The portion of a policy premium that has been used to actually buy coverage, or that the insurance company has "earned." For instance, if you have a six-month policy that you paid for in advance, two months into the policy, there would be two months of earned premium. The remaining four months of premium is called unearned premium.
Effective Date
The date on which the policy become effective.
Endorsement
A written agreement attached to a policy expanding or limiting the benefits otherwise payable under the policy. Same as a "rider."
Evidence of Insurability
To qualify you for a particular policy at a particular price, companies have the right to ask you for information about your health and lifestyle. An insurance company will use this information - your evidence of insurability - in deciding if your application for insurance is acceptable and at what premium rate.
Exclusion
Provision in an insurance policy that indicates what is denied coverage.
Expiration Date
The date on which an insurance policy expires.
Extended Term Insurance Option
A nonforfeiture benefit under which the net cash value of the policy is used to purchase term insurance for the amount of coverage available under the original policy.
The initial amount of death benefit provided by the policy as shown on the face page of the contract. The actual death benefit may be higher or lower depending on the options selected, outstanding policy loans or premium owed.
First Party Loss
A situation involving only the insurer and insured.
Free Examination Period
Also known as "10-day free look" or "Free Look," it is the time period after a life insurance policy or an annuity is delivered during which the policy owner may review it and return it to the company for a full refund of the initial premium. Variable life policies are required to include a "free-look" provision. For other coverage, it is at the company´s option.
The time - usually 31 days - during which a policy remains in force after the premium is due but not paid. The policy lapses as of the day the premium was originally due unless the premium is paid before the end of the 31 days or the insured dies. This is not a "free-insurance" period.
Group Life Insurance
This type of life insurance provides coverage to a group of people under one contract. Most group contracts are sold to businesses that want to provide life insurance for their employees. Group life insurance also can be sold to associations to cover their members and to lending institutions to cover the amounts of their debtor loans. Most group policies are for term insurance. Generally, the business will be issued a master policy and each person in the group will receive a certificate of insurance.
Group of Companies
Several insurance companies under common ownership and often common management.
A provision that places a time limit - up to two years - on a company´s right to deny payment of a claim because of suicide or a material misrepresentation on your application.
Indexed Life Insurance
A whole life plan of insurance that provides for the face amount of the policy and, correspondingly, the premium rate, to automatically increase every year based on an increase in the Consumer Price Index (CPI) or another index as defined in the policy.
Insurable Interest
A financial interest in the property insured, prerequisite to a valid contract of insurance. In life insurance, a person´s or party´s interest - financial or emotional - in the continuing life of the insured. Insured - The person or firm covered by an insurance policy. Insurer - The insurance company. Interpleader - This is a procedure when conflicting claims are made on a life insurance policy by two or more people. Using this procedure the insurance company pays the policy proceeds to a court, stating the company cannot determine the correct party to whom the proceeds should be paid. Irrevocable Beneficiary - A named beneficiary whose rights to life insurance policy proceeds are vested and whose rights cannot be canceled by the policy owner unless the beneficiary consents.
A significant misstatement in an application form. If a company had access to the correct information at the time of application, the company might not have agreed to accept the application.
Mortality Charge
The cost of the insurance protection element of a universal life policy. This cost is based on the net amount at risk under the policy, the Insured´s risk classification at the time of policy purchase, and the Insured´s current age
Mortality Expenses
The cost of the insurance protection based upon actuarial tables which are based upon the incidence of death, by age, among given groups of people . This cost is based on the amount at risk under the policy, the insured´s risk classification at the time of policy purchase, and the insured´s current age.
The cash value amount available to a policy owner after adjustments have been made to the cash surrender value to account for policy loans and dividends.
Nonparticipating Policy
A life insurance policy that does not grant the policy owner the right to policy dividends.
This event occurs when a policy will not require any further premiums to keep the coverage in force.
Paid-Up Additions
Additional amounts of insurance purchased using dividends; these insurance amounts require no further premium payments."
Policy
The contract issued by the insurance company to the insured.
Policy Loan
An advance made by a life insurance company to a policy owner. The advance is secured by the cash value of the policy.
Policy Owner
The person or party who owns an individual insurance policy. This person may be the insured, the beneficiary or another person. The policy owner usually is the one who pays the premium and is the only person who may make changes to a policy.
Policy Period
The period a policy is in force, from the beginning or effective date to the expiration date.
Premium
The amount paid by an insured to an insurance company to obtain or maintain an insurance policy.
Premium Expense Charges
An amount deducted from each premium payment, which reduces the amount credited to the policy.
A policy issued at a higher premium to cover a person classified as a greater-than-average risk, usually due to impaired health or a dangerous occupation.
Refund
Amount of money being returned to the policyholder.
Reinstatement
The process by which a life insurance company puts back in force a policy which had lapsed because of nonpayment of renewal premiums.
Renewal Policy
A policy issued as a renewal of a policy expiring in the same company or agency; not new business.
Return Premium
The premium returned to an insured for canceling or amending a policy.
Rider
A written agreement attached to the policy expanding or limiting the benefits otherwise payable under the policy. Same as an "endorsement."
Rule of 78
This is a method for calculating the amount of unused premium which takes into account the fact that more insurance coverage is required in the early months of the loan, since the payoff of the loan is greater. As the loan is paid off, less coverage is being paid for, so the refund percentage decreases.
Rule of Anticipation
This is a similar method to "Rule of 78" where the amount of unused premium takes into account the fact that more insurance coverage is required in the early months of the loan, since the payoff of the loan is greater. As the loan is paid off, less coverage is being paid for, so the refund percentage decreases.
Insurance coverage for only one of the parties having an insurable interest in that property.
Single-Premium Whole Life Policy
A type of limited-payment policy that requires only one premium payment.
Suicide Clause
Life insurance policy wording which specifies that the proceeds of the policy will not be paid if the insured takes his or her own life within a specified period of time after the policy´s date of issue.
Surrender Charges
Charges that are deducted if your life insurance policy or annuity is cashed in (surrendered). These charges also are deducted if you borrow money on your policy or if your policy lapses for non-payment.
An organization that performs managerial and clerical functions related to an employee benefit insurance plan by an individual or committee that is not an original party to the benefit plan.
Third Party Loss
A situation involving a person other than the insurer and insured; i.e., a person making a liability claim against the insured.
The person who reviews an application for insurance and decides if the applicant is acceptable and at what premium rate.
Underwriting
The process an insurance company uses to decide whether to accept or reject an application for a policy.
Unearned Premium
The insured´s remaining premium equity in his policy; that part of the policy premium that has not been "used up."
Universal Life Insurance
The key characteristic of universal life insurance is flexibility. Within limits, you can choose the amount of insurance and the premium you wish to pay. The policy will stay in force as long as the policy value is sufficient to pay the costs and expenses of the policy. The policy value is "interest-sensitive," which means that it varies in accordance with the general financial climate. Lowering the death benefit and raising the premium will increase the growth rate of your policy. The opposite also is true. Raising the death benefit and lowering the premium will slow the growth of your policy. If insufficient premiums are paid, the policy could lapse without value before the maturity date is reached. (The maturity date is the time your policy ceases and cash surrender value would be payable if the policyholder is still living.) Therefore, it is your responsibility to pay consistently a premium that is high enough to ensure that your policy´s value will be adequate to pay the monthly cost of the policy. The company is required to send you an annual report and also to notify you if you are in danger of losing your policy due to insufficient value.
A form of annuity policy under which the amount of each benefit payment is not guaranteed and specified in the policy, but which instead fluctuates according to the earnings of a separate account fund.
Variable Life Insurance
A type of whole life policy in which the death benefit and the cash value fluctuate according to the investment performance of a separate account fund that the policyholder selects. Because the investment account is regulated by the Securities and Exchange Commission, you must be presented with a prospectus before you purchase a variable life policy.
Viatical Settlement Agreements
Viatical settlements involve the sale of an existing life insurance policy by a viator (person with a life threatening or terminal illness) to a viatical settlement company in return for a cash payment that is a percentage of the policy´s death benefit.
Whole life insurance policies are one type of cash value insurance. Whole life policies offer protection through a lifetime - that is, for a person´s "whole life." From the day you buy the policy, you pay a scheduled premium,. The scheduled premium may be level or may increase after a fixed time period, but it will not change from the amount(s) shown in the policy schedule. It is important that you look at the policy schedule to be sure you understand what your premium payments will be and that you can afford them over time. This premium is based on your age at the time of purchase. Initially, it will be higher than the premium paid for a term policy, but you are likely to end up paying less in premiums when you are older, if you keep the policy for a long time. Part of each premium payment will go to cash value growth, part for the death benefit and part for expenses (such as commissions and administrative costs). There is no need to renew whole life policies. As long as you pay your premium when due, your coverage will continue in force throughout your life.
