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Accidental
Death Benefit (ADB): A benefit in addition to the
face amount of a life insurance policy, payable if the
insured dies as the result of an accident.
Sometimes referred to as "double indemnity."
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Agent:
An insurance company representative licensed by the state who solicits,
negotiates or effects contracts of insurance, and provides service to the
policyholder for the insurer.
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Application:
A signed statement of facts made by a person applying for life insurance
and then used by the insurance company to decide whether or not to issue a
policy. The application becomes part of the insurance contract when the
policy is issued.
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Automatic
Premium Loan (APL):
If an APL clause is made effective by request in the
application, the Union will effect a loan automatically without a signed
loan agreement if necessary to protect the policy against lapse, provided
there is sufficient cash value to pay at least a quarterly premium.
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Beneficiary:
The person or persons designated to receive the benefits of a policy
or plan when the insured dies.
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Benefits:
The amount payable by the insurance company to a claimant, assignee or
beneficiary under each coverage.
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Cancellation:
The discontinuance of an insurance policy before its normal expiration
date, either by the insured or the company.
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Cash
Surrender Value: The amount available in cash upon voluntary
termination of a policy by its owner before it becomes payable by death or
maturity.
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Claim:
A request for payment of a loss which may come under the
terms of an insurance contract.
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Contract:
A binding agreement between two or more parties for the doing or not doing
of certain things. A contract of insurance is embodied in a written
document called the policy.
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Conversion
Privilege: A privilege granted in an insurance policy to convert
to a different plan of insurance without providing evidence of
insurability.
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Convertible
Term Insurance: Term insurance which can be exchanged, at the
option of the policyholder and without evidence of insurability, for
another plan of insurance.
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Coverage:
The scope of protection provided under a contract of insurance; any of
several risks covered by a policy.
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Death
Benefit: A payment made to a designated beneficiary upon the
death of the insured.
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Effective
Date: The date on which the insurance under a policy begins.
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Evidence
of Insurability: Any statement of proof of a person's physical
condition and/or other factual information affecting his/her acceptance
for insurance.
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Face
Amount: The amount stated on the face of the policy that will be paid
in case of death or at the maturity of the policy. It does not include
additional amounts payable under accidental death or other special
provisions, or acquired through the application of policy dividends.
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Fixed
Annuity: Annuity whose periodic payment is a guaranteed fixed amount.
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Fraternal
Life Insurance:
Life insurance provided by fraternal orders or
societies to their members.
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Society: A social organization that provides insurance for its
members.
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Insurance:
Protection by written contract against the financial hazards (in whole
or in part) of the happenings of specified fortuitous events.
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Insurance
Company:
Any corporation primarily engaged in the business of
furnishing insurance protection to the public.
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Insured: A person covered by an insurance policy.
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Insurer:
The party to the insurance contract who promises to pay losses or
benefits. Also, any corporation engaged primarily in the business of
furnishing insurance to the public.
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Lapse: The termination or discontinuance of an insurance policy due to
non-payment of a premium.
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Level
Premium: A premium which remains unchanged throughout the life of a
policy.
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Level
Premium Life Insurance: Life insurance for which the premium
remains the same from year to year.
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Life
Insurance: Insurance providing for payment of a specified amount on
the insured's death, either to his or her estate or to a designated
beneficiary.
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Mode
of Premium Payment: The frequency with which premiums are paid
monthly, quarterly, semiannually, or annually.
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National
Association of Insurance Commissioners (NAIC): The association of
insurance commissioners of various states formed to promote national
uniformity in the regulation of insurance.
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Paid-up
Insurance:
Insurance on which all required premiums have been paid.
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Permanent
Life Insurance: A phrase used to cover any form of life insurance
except term; generally insurance that accrues cash value, such as whole
life or endowment.
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Policy: The legal document issued by the company to the policyholder, which
outlines the conditions and terms of the insurance; also called the policy
contract or the contract.
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Policy
Loan: A loan made by a life insurance company from its general funds
to a policyholder on the security of the cash value of a policy.
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Policy
Term:
That period for which an insurance policy provides coverage.
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Policyowner:
The person who owns a life insurance policy. This is usually the insured
person, but it may also be a relative of the insured.
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Premium:
The sum paid by a policyholder to keep an insurance policy in force.
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Reinstatement:
The resumption of coverage under a policy which has lapsed.
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Reinsurance:
The acceptance by one or more insurers, called reinsurers, of a
portion of the risk underwritten by another insurer who has contracted for
the entire coverage.
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Renewable Term Insurance:
Term insurance which can be renewed at the end of the term,
at the option of the policyholder and without evidence of
insurability, for a limited number of successive terms. The
rates increase at each renewal as the age of the insured
increases.
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Rider:
A document which amends the policy or certificate. It may increase or
decrease benefits, waive the condition of coverage or in any other way
amend the original contract.
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Surrender
Charge: An amount retained by the issuer of a
life insurance policy when a policy is canceled,
typically assessed only during the first five to ten
years of a policy.
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Term
Insurance: Life insurance payable to a beneficiary only when an
insured dies within a specified period.
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Underwriting: The process of selecting
risks for insurance and determining in what amounts and
on what terms the insurance company will accept the
risk.
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Waiver
of Premium (WP): A provision in
some policies to relieve the insured of premium payments
falling due during a period of continuous total
disability that has lasted for a specified length of
time, such as three or six months. |
Listed below are some important terms that you need to
know to navigate the often complex terminology of life
insurance. The purchase of life insurance is a
very important decision in your life. With
research and knowledge, this purchase should protect you
and your family for a lifetime.