A

Accidental Death and Dismemberment
This type of insurance pays a death benefit in the amount of the face value of the policy to the insured if he dies from accidental causes. This can be a separate policy or it can be a rider that is added to a life insurance policy. The dismemberment benefit is usually paid when the insured loses his eyesight or limbs.

Accidental Death Rider
A rider that is added to a life insurance policy and pays an additional amount specified to the beneficiary of the policy if the insured dies from accidental causes. Sometimes it is referred to as "double indemnity".

Actuary
A specialist in the mathematics of insurance who calculates rates, reserves, dividends and other statistics for the insurance company.

Adjustable Life Insurance
This type of permanent insurance allows a policyholder, after the initial payment, to pay premiums at any time, in virtually any amount, subject to certain minimums and maximums.

Age Basis
There are two ways to determine your age for insurance purposes. 1) Nearest Birthday: Insurance age advances six months prior to applicant's birthday. 2) Last Birthday: Applicant's last birthday will be used to determine age.

Amendment
A revision to an original policy that comes in the form of an official document.

Annual Renewable Term (ART)
This policy allows the insured to renew his policy annually without showing evidence of insurability until the insured reaches a specified age or the policy reaches the end of its specified term. The premium increases each year.

Annuity
A conservative financial vehicle that allows an individual to set aside and/or accumulate funds for a future need.

Application
A form that the proposed insured uses to provide information to the insurance company so that they can evaluate the risk and determine the applicant's appropriate rate class for the purpose of making an offer of insurance to the applicant.

Assignment
The transfer of ownership of a life insurance policy to another person or entity.

Attained Age
The age of the insured or applicant on a specific date.

Attending Physician's Statement (APS)
A statement from an applicant's physician which contains medical information and records for use in evaluating a life or health insurance application.

Authorization
A form signed by the applicant that allows the insurance company to obtain information required in the underwriting process.

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B

Back Dating
Issuing the policy with an effective date that is earlier than the issue date of the policy, but no more than six months earlier. This is done to obtain a lower issue age thus a lower premium.

Beneficiary / Beneficiaries
The person or entity designated by the owner of the policy as the recipient of funds under a life insurance policy at the time of the insured's death.

Benefits
The monetary amount paid and/or services provided under the terms of the insurance contract..

Buy-Sell Agreement
Used to ensure orderly transitions when an owner dies or is disabled. It is a plan used by partnerships, corporations and sole proprietorships whereby the deceased or disabled person's ownership is sold to the remaining partners, proprietors or shareholders according to a pre-arranged plan that is funded by the use of life insurance or disability income insurance.

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C

Cancellation
This is the termination of an insurance contract according to the terms of the contract. It may be executed by the insured or the insurer.

Cash Accumulation
Certain policies have features allowing cash accumulation that may be used by the insured person who does not die. For example, a policy might accumulate cash values that would be payable to the policy owner when she or he reaches a certain age or after the policy has been in force for a specified number of years.

Cash Surrender Value
The amount of money that the insured receives when he or she surrenders their policy. It is calculated using the terms specified in the contract usually less any surrender charges and loans.

Cash Value
Amount of cash that accumulates within the policy according to the provisions of the policy. It is the total of the premium paid, less the cost of insurance, plus adjustments for interest or investments.

Child Rider
Provides life insurance coverage for any child, stepchild or legally adopted child of the insured, subject to certain age requirements. The premium is usually a flat amount and provides coverage for any number of children.

Claim
Written request made by the insured or the beneficiary for the insurance company to pay benefits according to the provisions of the insurance policy.

Clause
A part of the insurance policy the encompasses various provisions of the policy such as exclusions, responsibilities of the carrier or insured and conditions of coverage.

Collateral Assignment
Using the insurance policy or its value to secure a loan.

Collusion
When two or more persons join together to commit insurance fraud.

Concealment
Failure to disclose a fact that could affect the issuance or premium of a policy or the settlement of a claim.

Conditional Receipt
A temporary insurance agreement that, subject to certain conditions, allows an applicant to obtain temporary insurance coverage during the issuance of his or her policy.

Contestable Period
A period of time, usually two years, during which the insurance company can declare a life insurance contract null and void due to misrepresentation or concealment by the insured during the application and issuance process. Once the stated constable period has elapsed, the insurance company cannot cancel the policy for any reason other than non payment of premiums.

Contingent Beneficiary
A secondary beneficiary designated by the insured to received the policy benefits in the event that the primary beneficiary predeceases the insured.

Contract
A legally enforceable agreement between two parties to provide or perform certain specified things.

Conversion
A opportunity provided in certain policies whereby an insured can change his type of insurance coverage usually from term insurance to some form of permanent insurance usually without showing evidence of insurablility.

Coverage Amount
The face amount of the policy or the amount specified as that which will be paid to the beneficiaries upon the death of the insured.

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D

Date of Issue
The date indicated on the policy as the actual date that the policy was issued, This may not be the same date as the effective date of the coverage.

Death Benefits
The amount of money paid or services performed as specified in the policy that is due to the beneficiary(ies) at the time of the death of the insured.

Decreasing Term Insurance
A certain type of policy whereby the face amount of the policy decreases each year but the premiums remain the same. This is typically used to satisfy the requirements of a loan, such as a mortgage where the amount owing decreases each year.

Disability Insurance/Disability Income Insurance
A type of insurance whereby the insured is paid a specified amount of money each month if he becomes impaired and can no longer work.

Dividend
Distribution of company's earnings to the shareholders.

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E

Effective Date
The actual date that the insurance policy becomes effective.

Endorsement
A written agreement attached to an insurance policy that amends the coverage by adding or subtracting coverage.

Estate Planning
The act of planning for the eventual distribution of your assets at the time of your death.

Evidence Clause
A provision in the policy that requires the insured to cooperate in any investigation into the validity of a claim.

Evidence of Insurability
Health information such as attending physician's statements, medical exams or lab results required by the underwriting process.

Exclusions
Certain specified perils that are not covered by the provisions of the policy. A common exclusion for a life insurance policy might be a hazardous sport such as rock climbing.

Expiry
The date that a policy ceases coverage.

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F

Face Amount
The specific death benefit shown in the policy that is to be paid to the beneficiary(ies) at the time of the death of the insured.

Fiduciary
A person, such as an executor of an estate, attorney or trustee to whom property or power is entrusted for the benefit of another.

Flat Extra Premium
An amount of money charged in addition to the basic policy premium that reflects an increased risk due to hazardous activities or temporary conditions of health or behavior.

Free Look
A stated period of time in which the insured can examine the policy to decide whether or not to keep the policy with no financial obligation incurred. The stated period of time is usually 10 days during which time the insured may return the policy for a full refund of any monies paid for the policy.

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G

Grace Period
A period of time, usually 30 or 31 days, after the premium due date during which time the insured can pay the premium and bring the policy current to keep it in force.

Graded Premium
A life insurance policy with a low initial premium which increases over time until it becomes level.

Group Life Insurance
A life insurance policy that covers a group of individuals who are affiliated in some way, either through an employer, trade association or some other group. The employer typically has a master policy and the employees are offered some coverage without any underwriting requirements. The premiums may be paid by the employer, employee or a combination of both.

Guaranteed Issue
The issuance of a policy for an individual who has not disclosed past or present physical condition or taken an exam to show evidence of insurability.

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H

Hazardous Activities
Activities that increase the risk of death or disease to an individual. These might typically include activities such as scuba diving, mountain or rock climbing, sky diving or race car driving. These activities are considered by the underwriting in determining the insurability of an applicant.

Human Life Value
The value of the future earnings of a person. This value is used in considering the amount of insurance that a carrier will consider providing for an applicant. It is usually determined by considering the number of years that a person will continue to work, and the wages to be earned.

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I

Impaired Risk
Used to describe the condition of a person who would be at higher risk for insurance due to his physical condition or history. This term could also be used to describe a person who participates in hazardous activities.

Incontestability
A provision of most insurance policies that provides for a period of time, usually 2 years, wherein the insurance company can contest payment of the proceeds of the policy if it can be shown that the applicant lied or failed to reveal existing conditions at the time of issuance of the policy.

Indemnity
The principle upon which all property/casualty insurance contracts are based. According to this principle, the objective of insurance is to restore the insured to the same financial position after a loss that he/she was in prior to the loss.

In-Force Business
Policies that are currently active and whose premiums have been paid.

Inspection Report
Reports that may be required for issuance of certain life insurance policies. They might typically include information about an applicant's financial, physical, moral or other attributes.

Insurable Interest
A relationship between an insured person and the potential beneficiary of the insurance. This relationship must be present at the time the life insurance policy is applied for but doesn't need to exist at the time of the death. Insurable interest exists because there is a reasonable expectation that the beneficiary will benefit from the continued life of the insured, or experience a loss at the death of the insured.

Insurance
A contractual agreement that transfers the risk of loss to an insurance company in return for premiums paid.

Insured
The person who is covered by an insurance policy.

Insurer
The party who provides the insured with protection, usually in the form of a monetary payout, against loss as outlined in the policy.

Irrevocable Beneficiary
A beneficiary who can be changed only by written consent of that beneficiary.

Issue Age
The age upon which premiums are based for the payment of an insurance policy. Some companies consider that age as the last attained age, others may consider it to be the nearest age.

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J

Joint Life (Survivor) Insurance
This type of insurance is usually used for estate planning. It provides coverage for two or more persons and typically pays at the death of the last of the insureds.

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K

Key Employee (Key Man) Insurance
This insurance is designed to provide monetary compensation upon the death of a key employee whose death has caused hardship to the company. The employer is usually the owner, beneficiary and payer of the policy.

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L

Lapse
The termination of an insurance policy due to non payment of premiums.

Level Premium Term Insurance
A term life insurance policy whose premiums remain the same over the term of the policy.

Liabilities
An obligation of one party to another for damages resulting from the actions of another.

Life Expectancy
A factor used in determining insurance rates. Statistically, it is the length of time that a person is expected to live based upon tables that have been calculated reflecting different physical and mental conditions and history.

Life Settlement
The sale of an existing life insurance policy to a third party for an agreed upon compensation.

Limitations
Certain specified provisions in the insurance contract that limit the amount of coverage and or the exclusion of certain situations or premises.

Loss
The actual damage incurred under the coverage provisions of the contract.

Loss Reserve
The amount of money that an insurance carrier must, by law, have available to pay for incurred losses.

Lump Sum
A form of payment of proceeds of an insurance policy that is paid as a result of an incurred and covered loss. It is paid in a single payment as opposed to a series of installments.

Loan (Policy Loan)
Amount of money available to the insured person to borrow from his policy under the provisions of the contract.

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M

Master Policy
A policy issued to an employer or other entity that is the basis for group insurance. Individual certificates may then be issued to the individual employees or members.

Medical Information Bureau (MIB)
An organization that provides member companies a means whereby they can access medical and other information about individuals who have applied for insurance. The information is available to member companies for future underwriting assessment. Information available at www.mib.com.

Misrepresentation
An attempt to defraud the insurance company by purposely providing inaccurate information with the intent to obtain a more favorable underwriting outcome.

Mortgage Life Insurance
A type of insurance coverage that pays the outstanding balance on a mortgage in the event of the mortgagor's death. It is usually a decreasing term life insurance policy wherein the coverage amount decreases as the unpaid balance of the mortgage decreases.

Mutual Insurer (Mutual Company)
An insurance company whose policyowners are also the owners of the company. Mutual companies do not have stocks that trade on the stock exchange, however, they do pay dividends to their owners based upon the profitability of the company.

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N

Nonparticipating Policy (nonpar)
A life insurance policy whose owner does not receive dividends from the profits of the insurance company.

Notice of Cancellation
A written notice provided to the policyowner specifying that the policy will cancel on a certain date.

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O

Offer
The submission of an application for insurance or the resulting response of the insurance company wherein the have evaluated the risk and propose a premium amount.

Offer and Acceptance
Submission of an application for life insurance (including a premium check) and the resulting issuance of the policy

Overinsured
A situation in which the amount of the insurance benefits are greater than the actual potential damage. In the case of life insurance, when the insured has coverage for an amount greater that the human life value.

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P

Paid-up Insurance
Insurance that will remain in force with no need to pay additional premiums.

Paramedical Exam (Paramed)
A medical examination conducted by medical professional (usually non MD) for the purpose of evaluating an individual's health risk. This evaluation is a factor in determining the rate class and resultant premium for the policy.

Partial Disability
A disability that prevents the insured from completing some but not all of his normal duties connected with his occupation.

Partial Loss
Damage or loss of a portion of the insured property.

Participating Policy (par)
A life insurance policy whose owner receives dividends based upon the profitability of the insurance company

Per Capita
A term used in the designation of beneficiaries wherein if there is more than one beneficiary and one or more of the beneficiaries should pre-decease the insured, the remaining beneficiaries will share equally in the death benefit.

Per Stirpes
A term used in the designation of beneficiaries wherein if there is more than one beneficiary and one of more of the beneficiaries should pre-decease the insured, the remaining beneficiaries will share equally in the death benefit with one equal share per dead beneficiary to be divided among the heirs of the dead beneficiary.

Permanent Policy (Permanent Life Insurance)
A policy that provides coverage for the entire life of the insured.

Persistency
The percentage of insurance policies that stay in force and do not lapse.

Policy
A legal contractual agreement between and insurance company and an insured.

Policy Anniversary
The anniversary of the date that the policy was issued.

Policy Date
The date that the policy was put into effect.

Policy Fee
A fee that is added to the premium of the insurance company to cover the cost of administration of the policy

Policy Not Taken (NTO)
A policy is not taken when an applicant decides not to accept a policy.

Policyholder / Policyowner
This is the person who owns the policy.

Power of Attorney
A legal agreement wherein one person has the power and permission to act on behalf of another. This usually applies to legal proceedings and decision making.

Preferred Best Risk
A premium and rating classification that is better than standard risk. This is usually the lowest designated premium classification.

Preferred Risk
A premium classification that is better than standard risk, but not as low a premium as the preferred best rating.

Premium
The amount of money required to keep a policy in force. It is determined by the rate class and the underwriting evaluation of the risk.

Premium Notice
Billing provided to the policyowner to notify them of the premium required to keep the policy in force.

Primary Beneficiary
The person or entity indicated by the policyowner to receive the proceeds of the policy in the event of the death of the insured.

Proof of Loss
Legal documentation provided to the insurance company about any incurred losses and required in order for any proceeds of the policy to be paid.

Provisions
The contents of an insurance contract that details the terms of the policy and the requirements of both the insured and the insurer.

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R

Rate Class
The premium class determined by the underwriting process wherein the health and other conditions and histories of the applicant are evaluated.

Rated
A term used to describe a policy that is evaluated and placed in a rate category that is more expensive than standard due to findings in the underwriting process and specific applicant evaluation.

Reinstatement
The process of putting a policy in force after it has lapsed by bringing the premium payments current.

Renewable Term Life Insurance
A type of life insurance policy that is renewed annually and the premium is adjusted, usually higher, each year.

Replacement
The process of canceling one policy and obtaining another policy to replace it usually to obtain better coverage or lower rates.

Representation
Written or verbal statements made during the application process usually relative to the medical or other condition or history of the applicant.

Revocable Beneficiary
A person designated as beneficiary that may be removed or changed at the discretion of the policyowner.

Rider
An endorsement to an insurance policy that provides additional coverage usually for an increased charge. A rider may also remove or change a condition in the policy.

Risk
For insurance purposes, risk refers to the probability that a given covered event, such as death or a car accident, will occur. It is the probability that the insured will incur financial loss as a result of a specified occurrence, as in damage to property, personal injury or loss of life.

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S

Section 1035 Exchange
This is a provision in the tax code that allows a person to take the proceeds from an existing life insurance policy and transfer them immediately into another life insurance policy while deferring the payment of taxes on the gain.

Split Dollar Plan
A type of life insurance purchase wherein an employer and an employee split the premiums, ownership and proceeds of an insurance policy.

Standard Risk
For insurance purposes, a person who is considered to have an average risk of loss of life based upon their medical condition and history, avocation and lifestyle.

Substandard Risk
For insurance purposes, a person who is considered to have a more than average risk of loss of life based upon their medical condition and history, avocation and lifestyle

Suicide Clause
A provision in a life insurance policy that states that the policy will not provide benefits if the insured dies from suicide during a specified period of time, usually the first two years of the policy.

Super-Preferred Risk
For insurance purposes, a person who is considered to have a less than average risk of loss of life based upon their medical condition and history, avocation and lifestyle.

Surrender
A term used to describe the voluntary termination of an insurance policy.

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T

Term Life Insurance
Usually low cost life insurance that pays a death benefit upon the death of the insured but does not have an investment or cash accumulation provision in the policy.

Termination
The cancellation of an insurance policy by either the policyowner or the insurance company.

Tertiary Beneficiary
A beneficiary that is third in line for the proceeds of a life insurance policy following the primary and secondary beneficiaries, if either of them should predecease the insured.

Trustee
According to the term of a trust, the person who is designated to act as guardian and manage or use the property for the benefit of the trust recipients.

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U

Underwriter
A person who assesses and applicant's risk and assigns a corresponding risk category and thus assigns premiums.

Unilateral Contract
A legal contract in which only one party makes legally enforceable promises. In the case of life insurance, the insurance company makes the promises and the policyowner pays premium to the company in exchange for the promises.

Uninsurable Risk
A person whose medical condition and history or avocation or lifestyle are determined to represent such a high risk of loss of life that an insurance company will not offer coverage.

Universal Life Insurance
An adjustable type of life insurance wherein the policy provides a death benefit and additional provisions for an investment with minimum guarantees. The policy face amount and or investment amounts may be subject to change at the discretion of the policyowner and the stated policy provisions.

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V

Variable Adjustable Life Insurance
A type of permanent life insurance policy that provides a death benefit and sub-accounts for varied investment and savings accounts per policy provisions.

Variable Life Insurance
One of several types of life insurance policies that provide both life insurance protection and a savings component. The return on the savings portion of a variable life policy will generally vary, as it depends on the performance of the underlying securities.

Voidable
A provision that allows for an insurance policy to be cancelled by either the insurance company or the insured if either side breaches the contract.

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W

Waiver of Premium
A rider to an insurance policy that provides that the premium payment will no longer be required to keep the policy in force if the insured is disabled for a period of time, usually six months.

Whole Life Insurance
A type of life insurance policy that stays in force for the insured's entire life, as long as the premiums are paid.

Y

Yearly Renewable Term
A term life insurance policy that is renewed at the end of each year without evidence of insurability. The premium usually goes up each year.

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