GLOSSARY OF LIFE INSURANCE TERMS
A B C D E F G I J L M N O P R S T U V W Y
Accidental death benefit - paid when death is caused directly by accidental bodily injury. Called a "double indemnity" benefit if it is attached to a life policy of the same face amount.
Accident and sickness insurance - various kinds of insurance offering benefits for loss of income or expenses resulting from accidental injury, sickness, or from accidental death.
Actuary - someone professionally trained in the mathematical and technical aspects of life insurance, pensions and related fields, such as the calculation of premiums, reserves and other values.
Age (for insurance purposes) - depending on the company, the age of the life insured on his or her last birthday, or on the nearest birthday.
Agent - sales and service representative of a life insurance company, often called a life underwriter.
Annuitant - usually a person receiving annuity income (see next definition), but in strict terms the person during whose lifetime the income is payable.
Annuity (life annuity) - contract providing periodic payments during the lifetime of annuitant. Often payments are guaranteed for a minimum number of years.
Annuity certain - a contract providing periodic payments for a specified number of years, not depending on any person's survival.
Annuity consideration - a payment, or one of the regular periodic payments made to purchase an annuity; same as a premium for life insurance,
Application - information statement made by a person applying for life insurance. Identifies the type of policy, amount of insurance wanted, the insured, life insured and beneficiary. Provides other data used in evaluating risk.
Assignment - transfer by the owner of a legal right or interest in a policy to somebody else. May be done for collateral purposes (security for a debt) or may be an actual sale.
Assurance - term for insurance commonly used by British companies. Other examples are the use of the word "assured" for insured and "assurer" for insurer.
Automatic premium loan - provides that any premium for permanent life insurance that has not been paid at the end of the grace period will be paid automatically by a loan on the policy.
Beneficiary -person entitled to the insurance money when the life insured dies.
Bonus - See Reversionary Bonus.
Cash surrender value - cash available when an owner voluntarily cancels a policy. (Also referred to as "cash value")
Cash value life insurance - life insurance that provides a cash surrender value when the policy is cancelled.
Chartered Life Underwriter (CLU) - professional designation of an agent who has completed a comprehensive training course.
Conditional receipt - given to an insurance applicant who pays a premium with the application. If the insurance is assessed at standard rates, the coverage, up to a certain limit, will begin at the time set out in the receipt rather than when the policy is delivered. (Also referred to as "conditional insurance agreement")
Contestable - see Incontestability.
Convertible term insurance - may be exchanged for a permanent life insurance policy without providing evidence of insurability.
Credit report - see Inspection report.
Creditor's group insurance - life insurance issued on the lives of customers of banks and other institutional lenders, (naming the institution concerned as beneficiary) to pay off any debt if the customer dies.
Date of issue - when the company issued the policy.
Death benefit - paid when the life insured dies.
Decreasing term insurance - term insurance in which the face amount decreases over the term of the policy.
Delivery - presentation of the insurance policy to the applicant. Will be deemed to have occurred if the policy has been placed in the mail to the applicant or has been sent to the agent for unconditional delivery to the applicant.
Disability income insurance - provides specific, periodic payments to an individual who becomes totally disabled as a result of accident or sickness.
Dismemberment benefit - payable for loss by accident of arms, legs, hands, feet or eyesight. Usually combined with accidental death insurance.
Dividend - see Policy dividend.
Dividend options - ways in which an owner can elect to receive policy dividends payable under participating life insurance. Typical choices: taking the policy dividends in cash; using them to reduce premiums; converting them into paid-up additions to the sum insured; leaving them to accumulate as an interest-bearing cash deposit.
Double indemnity - see Accidental death benefit.
Effective date - date when the insurance policy goes into effect. Failing any clause to the contrary (see Conditional receipt), the policy only goes into effect when it has been delivered to the applicant, the first premium has been paid and there has been no change in the insurability of the life insured since the time of application.
Endorsement - provision changing the terms of an insurance contract.
Endowment insurance - pays the face amount on a specified future date (maturity date) if the life insured is then living, or on death if that occurs sooner.
Evidence of insurability - statement of factual information requested by an insurance company to determine the acceptability of an applicant for insurance. See Underwriting.
Extended term insurance - term insurance available as an option to the owner of a cash value life insurance policy who discontinues premium payments. It continues the coverage for the face amount (less any outstanding policy loan) for a limited period of time which depends on the cash value. See Nonforfeiture options.
Face amount - amount stated on the front of a policy to be paid on the death of the life insured (Also referred to as the "sum insured")
Grace period - period, usually 30 or 31 days, after the premium due date. During this time an overdue premium may be paid without penalty and the policy remains in effect.
Group life insurance - issued, usually without medical examination, on a group of people under a master contract. Usually issued to an employer for the benefit of employees, who are issued certificates as evidence of insurance.
Guaranteed insurability rider - provides the right to purchase additional insurance on stated future dates without evidence of insurability.
Incontestability - if the life insured dies after the first two years a policy has been in force, the company cannot contest or refuse payment of the claim because of false statements in the application, unless they are fraudulent.
Inspection report - report completed by a consumer-reporting agency on behalf of an insurance company. Used to evaluate information in an insurance application as well as potential areas of risk other than health or occupation.
Insurability - acceptability of an applicant for insurance (see Underwriting).
Insured - see Policyowner.
Insurer - life insurance company issuing the policy.
Joint and (last) survivor life annuity - annuity providing periodic payments lasting as long as either one of the two named people is still alive.
Lapse - termination of a policy when premiums have not been paid. The term is someArial limited to a termination occurring before the policy has a cash or other non-forfeiture value.
Level premium insurance - premium does not change from year to year. It exceeds the cost of protection in the earlier years and is less than the cost in later years. The excess paid in earlier years builds up a reserve, which is invested and helps keep the amount of the premium down.
Life annuity - see Annuity (life annuity)
.Life Insured - person on whose death or disability the insurance becomes payable.
Life underwriter - see Agent
Limited payment life insurance - "whole life insurance", but premiums are payable only for a limited number of years.
Morbidity rate - relative incidence of sickness or accidents in a given group of people during a given period of time.
Mortality rate - relative number of deaths in a given group of people during a given period of time.
Mortgage life insurance - insurance bought specifically to pay off the outstanding balance of a mortgage on the death of the life insured.
Mutual life insurance company - life insurance company without shareholders. Management is directed by a board elected, in most cases, by holders of participating policies.
Nonforfeiture options - choices available to a policyowner who discontinues premium payments on a policy that has accumulated a cash value. Policyowner can usually take this value in cash; apply it to buy "reduced paid-up insurance" or "extended term insurance"; or use it as security for a loan against the policy to pay the premium or premiums due ("automatic premium loan").
Non-participating life insurance - policyowners do not share in any surplus earnings distributed by the company. No "policy dividends" are payable. Premium is set as closely as possible to the expected cost of insurance, with a small margin for profit.
Ordinary life insurance - see whole life insurance.
Paid-up insurance - life insurance on which all the required premiums have been paid.
Participating life insurance - policyowners share in the surplus earnings distributed by the company through "policy dividends". The premium is based on an estimate of future costs at a somewhat higher level, and earnings at a somewhat lower level than the company feels likely to occur.
Pennanent life insurance - includes whole life insurance and endowment insurance and so is another name for cash value life insurance.
Policy - printed document given to the policyowner by the life insurance company, stating the terms of the life insurance contract.
Policy anniversary- any anniversary of the policy date.
Policy date - date from which policy years and anniversaries are measured for calculating due dates for premiums and policy dividends, and for determining policy values.
Policy dividend - refund each year of an amount which is based on the company's experienced and expected costs and investment earnings. Policy dividends are not guaranteed but depend on the mortality experience, investment earnings, expenses and other factors, and may be increased or decreased at the discretion of the company.Dividends may be paid out in cash at the declaration date or used to purchase additional sums assured. In the latter case, the additional sum assured becomes payable when a claim is made.
Policy loan - loan made by d life insurance company to a policyowner on the security of the cash value of a policy.
Policyowner - the person who owns a life insurance policy, usually the life insured, but not necessarily so. (Also referred to as the "insured" or "Policyholder" or, simply, the "owner".)
Premium - payment policyowner is required to make to keep a life insurance policy in force.
Rated policy - see Substandard life insurance.
Reduced paid-up insurance - insurance for a reduced amount available as an option to the owner of a cash value life insurance policy who discontinues premium payments. It continues the coverage under the original policy for a reduced amount which depends on the cash value. See Nonforfeiture options.
Reinstatement - a policy that has lapsed may be reinstated within two years of the date of lapse unless it has been surrendered for cash or one of the options of reduced paid-up or extended-term insurance has been exercised. Reinstatement requires payment of overdue premiums, satisfactory evidence of insurability and someArial payment of any outstanding policy loan.
Renewable term insurance - may be renewed when it expires without providing evidence of insurability. At each renewal date (every year or every five years) the premiums increase. There is usually a limit on the number of renewals, or else a limiting age, such as 65 or 70.
Reversionary bonus - an increase in the sum assured payable out of declared profits of the company. Reversionary bonuses are not guaranteed but depend on mortality experience, investment earnings, expenses and other factors, and may be increased or decreased at the discretion of the company.
Rider - benefit attached to a policy providing for extra amounts or types of coverage in addition to the basic policy benefit.
Settlement options - ways that the policyowner or beneficiary may choose to have the policy benefits paid, other than payments in one sum.
Single premium insurance - the entire premium is paid in one sum at the beginning of the policy.
Stock life insurance company - company with share capital in which management is directed by a hoard of directors elected partly by the shareholders and partly by the participating policyholders, if any.
Straight life insurance - see Whole life insurance.
Substandard life insurance - issued at a higher than normal premium rate to applicants whose insurance risk is greater than normal because of health problems or other reasons. See Underwriting.
Suicide - if the life insured commits suicide within two years of the date of issue of the policy, the amount paid will be refund of premiums, not the face amount.
Sum insured - see Face amount.
Superintendent of Insurance - the Head of the Department of Insurance which supervises the insurance industry. The Office of the Superintendent of Insurance falls under the Ministry of Finance.
Surrender - cancelling or giving up a policy to the insurance company in return for the cash surrender value or other nonforfeiture values.
Term insurance - provides protection for only a specified period of time, unless it is renewable. See Renewable term insurance.
Total disability - the inability to perform the duties of one's usual occupation or perhaps to engage in any occupation for renumeration or profit. The actual definition depends on the policy.
Underwriting - classifying the insurance risk of the applicant. It involves evaluating the factors that affect the likelihood of death or sickness, such as age, sex, health, occupation, hobbies, sports and lifestyle, so that an appropriate premium can be determined. Very few (about two in a hundred) applicants represent such high risks that they are not insurable.
Variable annuity - an annuity in which the level of the income payments is not fixed in advance, but depends on the investment performance of a specified fund in which the premiums have been placed.
Waiver of premium - provides that insurance premiums do not have to be paid if the policyowner has been totally disabled for a specified period of time, usually six months.
Whole life insurance - provides protection for the lifetime of the person insured. (Also referred to as "ordinary" or"straight" life insurance.)
Yearly renewable term insurance - see Renewable term insurance.