Insurance Chapter 9


a person or entity designated to receive the death proceeds of a life insurance policy.

Standard policy provisions laws

state laws that require life and health insurance policies to include certain provisions but allow insurers to select the actual wording as long as it is at least as favorable to the policyowner as the statutory language.

Grace period

an additional period of time, usually 30 or 31 days, granted in some types of insurance for the policyowner to pay the premium after it has become due. During the grace period, the coverage remains in force.

Late remittance offer

an offer made by an insurer to the owner of a lapsed life insurance policy that invites him or her to pay the premium and reinstate the coverage without having to provide evidence of insurability.

Policy loans

an advance of money available to life insurance policyowner from the policy's cash value.

Automatic premium loan option

life insurance policy provision by which a delinquent premium is automatically paid by a policy loan.

Direct recognition

in life insurance, the practice of paying smaller dividends on policies that have outstanding policy loans than on other policies.

Incontestable clause

a provision in life and health insurance that specifies that, except for nonpayment of the premium, the insurer will not contest the policy after it has been in force for a specified period of time (usually 2 years) during the insured's lifetime.

Divisible surplus

that portion of an insurer's surplus that is declared as a dividend to be distributed to policyowners and/or stockholders of the insurer.

Dividend option

a set of provisions in a participating life insurance policy that describe how the policyowner can use dividends, usually to reduce the premium payment, to buy additional paid-up permanent insurance, to accumalte at interest, to buy term insurance, or to

Fifth dividend option

a provision in cash value life insurance whereby dividends can be used to purchase term insurance.

Entire contract provision

in life and health insurance, a provision that specifies that the policy and the attached application constitute the entire agreement between the parties.

Reinstatement provisions

in life insurance, a clause giving the owner of a lapsed policy the right to reacquire the coverage under certain conditions.


a false and material statement made by an applicant for insurance. It is the basis for the insurer to make the contract voidable.

Misstatement of age or gender clause

a life insurance policy provision that specifies that if the insured's age or gender has been misstated, the benefits payable under the policy will be adjusted to what the premium paid would have purchased at the correct age or gender.

Nonforfeiture options

a set of choices available regarding how a life insurance policyowner can use the policy's cash value. These choices include the options to surrender for cash, buy a reduced amount of paid-up whole life insurance, or buy extended term insurance. For long-

Settlement options

ways in which a life insurance policy's death proceeds can be taken, typically in cash, under an interest option, under a fixed-period or fixed-amount option, or under a life-income option.

Primary beneficiary

the person or organization that is to receive the proceeds of a life insurance policy if he, she, or it survives the insured.

Contingent beneficiary

the person or entity designated to receive the death proceeds of a life insurance policy if the primary beneficiary predeceases the insured.

Contingent payee

in life insurance, the person or entity designated to receive the remaining death proceeds if the beneficiary dies after the insured but before the beneficiary has received the full amount of the proceeds payable.

Suicide provision

an optional life insurance provision that specifies that if the insured, whether sane or insane, commits suicide during the first 1 or 2 years of the policy, the insurer will be liable only for the return of the premium.

Ownership provision

in life insurance, a clause that specifies that the insured is the owner of the policy (unless the application states otherwise) and that the owner can change the beneficiary (unless named irrevocably), assign the policy, and exercise other ownership righ

Assignment provision

a clause that specifies the conditions under which a policyowner can transfer some or all of his or her ownership rights in the policy to another.

Plan change provision

an insurances policy provision that states the parties may agree to change the terms of the contract.

Accelerated benefits provision

a provision in a life insurance policy that allows death benefits to be paid to the policyowner prior to the insured's death under certain circumstances such as if the insured is terminally ill.

Add accidental death benefits

a life insurance rider that increases the death benefit, usually doubling it, if the insured dies accidentally.

Guaranteed purchase (insurability) option

a rider to a life insurance policy that gives the insured the right to buy additional insurance in specified amounts at specified times or ages without having to provide evidence of insurability.

Waiver-of-premium rider

a rider under which, if the insured becomes totally disabled, the insurer will waive the premiums on the policy during the continuance of the disability. It is commonly used in life and health insurance.