Term life insurance
Temporary protection because it only provides coverage for a specific period of time. Also known as pure life insurance. - They provide the greatest amount of coverage for the lowest premium
Accelerated benefits rider
may be added to a life insurance policy that permits the policy owner to "accelerate" or receive a certain percentage of the death benefit while the insured is still alive when he or she has been diagnosed with a terminal illness. Whatever amount is paid
Accidental Death and Dismemberment Insurance
a form of insurance affording benefits in the event of accidental death; the accidental loss of sight, speech or hearing; loss of use of limbs (paralysis); or loss of member (arm or leg)
Accidental Death Benefit
a lump sum payment for loss of life due to an accident that was the direct cause of death. The cause of cause of death must be accidental for a benefit to be payable under the policy
Accumulation Period
the pay in period of an annuity during which the contract owner receives tax deferral. During this period the contract owner is referred to as the policyowner. Once this period end, the annuity phase or the income phase commences
Adverse Selection
The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all.
Annuitant
the individual whose life the annuity is based. If the annuity is paid out for a lifetime, the annuitant's age is used to determine payments. The person who normally receives the annuity payment, however, that may not or may not be the case
Annuity
a contract btwn an insurer and owner affording periodic income payments for a fixed period of time or during the lifetime of an annuitant. May be defined as the systematic reimbursement or liquidation of an estate
Attained Age
the age that a person or an insured has attained on a given date. Based on either the nearest bday or last, depending upon the practices of the company. "current age
Automatic Premium Loan
a provision in a life insurance policy that states that if the policy owner fails to pay a premium by the end of the grace period, the amount of the premium due will be loaned to the insured automatically from the policy's cash value. However, the cash va
Binding Receipt (Unconditional Receipt)
Insurance becomes effective on the date of the receipt and continues for a specified period of time or until the insurer declines the application
Buy-Sell Agreement
agreement btwn partners in a business or btwn an owner and a key employee. Provides for the continuation of the business when, for example, one of the partners dies. The remaining partners "buy-out" the interest of the deceased partner by paying an agreed
Cash Surrender Value
the amount that is available in cash upon the surrender of a policy by the owner before or after the policy matures (a as a death claim or otherwise). aka surrender value
Certificate of Authority
the name of the license to transact insurance business that is issued to an insurance company
Common Disaster Clause
this provision defines the method of payment of the proceeds of the policy by the insurer if the insured and the named beneficiary die simultaneously in the same accident
Conditional Receipt
A receipt that provides that if the premium accompanies the application, the coverage is in force from the date of application (whether the policy has yet been issued or not), provided the insurer would have issued the coverage on the basis of facts as re
Consideration
one of the requirements of a valid contract. Representations on the application and the premium is the policy owner's consideration. The insurance company's "promise to pay" is its consideration
Contingent Beneficiary (Secondary)
person who is entitled to a death benefit only if there is no primary beneficiary when the insured dies. Minor may be listed but an insurer is not permitted to pay policy proceeds to a minor beneficiary
Contributory plan
A term applied to a group insurance plan under which both employee and employer contribute to premium payment this is also referred to as the shared premium plan
Credit life insurance
Life insurance designed to pay the balance of a loan if the insured dies before the loan has been repaid in full. Generally sold by a lender or finance company
Death benefit
The amount that is paid upon the death of the insured. Also called the face amount, coverage amount or policy proceeds
Decreasing term insurance
Type of temporary or pure protection characterized by reducing face amount each year. Sometimes called mortgage redemption or mortgage protection insurance it is primarily used in conjunction with debt or loan
Deferred annuity
An annuity on which payments to the annuitant are delayed until a specified future date.
Dependent rider
A rider that maybe added to a life insurance policy specifically to provide coverage for dependents of the primary insured. Dependence riders may cover a spouse or children or dependents parents. A family rider may cover the primary insured spouse and chi
Dividend options
The owner of a participating life insurance policy is granted several choices in which to receive or use dividends earned: receive the dividends in cash, use it to reduce the premium, apply it to purchase paid-up additional amounts of life insurance, leav
Endowment
A whole life policy that, following an endowment period, pays a stated amount to the insured. If the insured dies during the endowment period, the face amount of the policy is paid to the primary beneficiary
Extended term insurance
In life insurance, a Nonforfeiture option under which the insured uses the policy's cash value accumulation to purchase term insurance in an amount equal to the original policy face amount.
Face amount
Another name for the death benefit of a policy
Family income policy
A policy that combines a whole life policy with a decreasing term rider in order to provide a death benefit together with monthly income payments to the beneficiary. Monthly income payments are made only from the date of death until maturity date of the c
Free-look period
All life insurance policies must include at least a 10 day free look-period in a life insurance contract. It begins when the policy is delivered by the producer. It's during this period the policy owner decides to return the contract to the insurer, he/sh
Incontestable Clause (Provision)
A life insurance and annuity provision limiting the time within which the insurer has the legal right to void the contract on grounds of material misrepresentation in the policy application.
Immediate annuity
Pays a monthly income commencing one, three, six, or 12 months after purchase. This type of contract must be funded with a lump sum or single premium
Installment refund annuity
The same as a cash refund annuity, except that money is refunded in installment payments and the insurer makes payments to the designated beneficiary until the total of payments made to the annuitant and the beneficiary equals the consideration paid
Joint and last survivor annuity
an annuity issued on the lives of two or more persons that is payable as long as the survivor lives
Joint life insurance
A life insurance policy covering the lives of two or more persons that pays a death benefit and ends when the first insured dies. also referred to as the "first to die" insurance
Key employee insurance
an individual policy designed to reimburse and employer for the loss of a key employee's service and contributions due to death. They employer generally pays the premium and is the owner of the contract
Lapse
that the policyholder failed to pay the premium within the grace period. No coverage exists once the policy lapses
Level premium
a premium that remains constant, fixed, or predetermined throughout the life of a policy
Living benefits rider
attached to a life insurance policy and allows for the payment of a percentage of the death benefit for terminally ill insureds. Normally there is no cost for this rider
Long-term care rider
attached to a life insurance policy and allows for the payment of a percentage of the death benefit if an individual is not terminally ill but requires long term care
Misstatement of age
a provision in a life insurance policy that states that if the age of the insured is understated on the application and the insurer later learns of the error, it will adjust the death benefit lower. The premium will remain the same. If the age has been ov
Modified endowment contract
a WL policy that fails to satisfy a seven pay test. When a policy owner over funds the contract attempting to use the policy as a short term investment vehicle, the policy will be designated for tax purposes as a MEC. This means that any cash distribution
Non-contributory plan
a group of employee benefit plan under which the employer pays for the full cost of the benefits for his employees. and "employer pay all" plan
Non-qualified annuity
a classification of annuity whose description is based upon the fact that interest or earnings paid into the contract are tax deferred and the contributions to the contract are not tax deductible
Ordinary life insurance
insurance policies of $1,000 or multiples thereof that provide coverage for the entire life of the policyholder and for which the premiums are payable until death. Also referred to as whole life insurance, straight life insurance, or continuous premium li
Paid-up additions
A dividend option under which the policy owner uses policy dividends as a single premium to buy additional life insurance.
Payor rider
A rider to a juvenile life policy providing that if the payor dies or becomes disabled before the insured juvenile reaches a certain age, the company waives the premiums and keeps the policy in full force.
Predetermined premium
type of premium paid for WL insurance coverage. Also referred to a fixed, level, or constant premium, this is predetermined for life or until death or policy surrender
Reduced paid-up insurance
A nonforfeiture option under which the insured uses the cash value of the present policy to purchase a single-premium insurance policy at attained age rates for a reduced face amount.
Reinstatement
the resumption of coverage under a policy that has lapsed. Before an insurer allows this, the insured must prove insurability and all back premiums must be paid. All statements on the reinstatement application are contestable for another 2 years
Renewable term life insurance
insurance that may be renewed at the end of the policy term without evidence of insurability. The premium increases at the end of each term and is based on the attained age of the insured at the time of renewal
Revocable beneficiary
the designated beneficiary may be changed at the owner's request w/o the consent of the beneficiary
Rider
an additional attachment to a policy. Riders may provide an additional benefit (benefit rider) or restrict coverage (impairment rider). Benefit riders generally require an additional premium such as the waiver of premium rider, accidental death benefit ri
Single Premium Whole Life
An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called
Single premium whole life requires the entire premium to be paid in one
Straight life annuity
also referred to as a pure life annuity or life annuity. Provided income to an annuitant for life with no refund to a beneficiary. A straight life annuity may be purchased with a "period certain". A guaranteed period of time for which benefits will be pai
Suicide clause
a provision specifying that in the event the insured commits suicide within two years from the date the policy was issued, the insurer's liability is limited to the payment of a single sum equal to the premiums actually paid
Target premium
a suggested premium used in universal life policies. Doesn't guarantee there will be adequate funds to maintain the policy to any time, especially to life. It may give an indication of what will be needed (under conservative estimates), to maintain the po
Twisting
an illegal sales practice involving a producer illegally or unfairly inducing to lapse his/her present insurance policy and purchase another. Not the same as replacement, replacement is a legal activity
Variable annuity
an annuity that invests funds in the stock market. Once income commences, the monthly account will vary based on investment performance. The contract owner bears the investment risk
Vesting provision
a pension plan participant's right to receive benefits from employer contributions to a plan even if the participant is no longer an employee of that employer. All employe contributions made to a plan are fully vested at the time they are made. Employer c
Viatical settlement
a transaction where the owner of a life insurance policy decides to sell the contract to a viatical settlement company (VSP: viatical settlement provider). This company buys the contract for a percentage of the face amount from the policy owner. The provi
Viator
another name for the policy owner of a life insurance contract in a viatical settlement
Waiver of premium
a benefit rider available to be included in a life insurance policy that waives the payment of premiums after the policy owner has been totally disabled for a specific period of time (6 months). Once the policy owner has been disabled for 6 consecutive mo
Warranties and representations
most State laws specify that all statements by the applicant on the application are considered to be representations and not warranties. A warranty must be absolutely and literally true. A breach of warranty may be sufficient to void the policy whether or
Annually renewable term (ART)
purest form of term insurance. The death benefit remains level, and the policy may be guaranteed to be renewable each year without proof of insurability, but the premium rises annually according to age as the probability of death increases.
Whole Life Insurance
Provides lifetime protection and includes a savings element. These policies nedow at the insured's age 100, meaning the cash value created by the accumulation of premium is scheduled to equal the face amount of the policy at age 100.
Universal Life Insurance (Flexible Premium Adjustable Life)
Also known as an interest-sensitive policy. Extremely flexible life insurance policy. A policy owner can increase premiums, reduce premiums, or cancel premiums. Same to death benefit.
Universal Life Insurance (Level Death Benefit Option A)
death benefit under which the benefit payable when the insured dies stays level and equal to the initial specified amount. (Option A).
Universal Life Insurance (Increasing Death Benefit Option B)
Generally increasing death benefit. Specified amount plus its cash value. the death benefit never decreases to less than the specified amount stated in the policy. cost insurance ded. are higher
Adjustable Life
term and permanent coverage, increase or decrease premium; change premium paying period; increase or decrease face amount of coverage; proof of insurability is only required IF: increases to death benefit or lower premium
Variable Whole Life
much like trad. whole life; fixed premium; death benefit and cash value are not guaranteed under variable life; may increase or decrease over the life of the policy depending on the investment performance; designed as a hedge against inflation must have s
Variable Universal Life
combination of universal life and variable life; flexible premiums and adjustable death benefit; policy owner decides where cash value is invested; cash values are not guaranteed and death benefit is not fixed; cash value and/or death benefit may by incre
Joint Life
insures two or more lives; premium is based off joint average age between ages of insured; death benefit is ONLY paid on first death
Survivorship Life
second to die" "last survivor" policy; same as joint life, insures two or more lives; PAYS ON LAST DEATH rather than first; used to offset the liability of the estate tax upon the death of the second spouse
SIMPLE Plan
A SIMPLE (Savings Incentive Match Plan for Employees) plan is available to small businesses that employ not more than 100 employees receiving at least $5,000 in compensation from the employer during the previous year. To establish a SIMPLE plan, the emplo
Indeterminate premium whole life policy
premium rate may vary from year to year. After the initial period (usually 2-3 years) when a lower premium is paid, the insurer establishes a new rate which could be raised up to the guaranteed maximum stated in the policy, kept the same or lowered, based
Aleatory
A contract in which the number of dollars to be given up by each party is not equal. Insurance contracts are aleatory because the policyholder pays a premium and may collect nothing from the insurer or may collect a great deal more than the amount of the
Common Disaster Provision
A provision that can be included in a life insurance contract providing that the primary beneficiary must outlive the insured for a specified period of time in order to receive the proceeds.
Contestable Clause
A provision in an insurance policy setting forth the conditions under which, or the period of time (2 years) during which the insurer may contest or void the policy. After that time has lapsed, the policy cannot be contested.
Elimination Period
A period of time after the inception of a disability during which benefits are not payable (commonly referred to as the waiting period). An elimination period must be satisfied for each separate disability occurring.
Face Amount
The value of a life insurance policy to be provided upon maturity date or death.
General Account
An investment portfolio used by the insurer for investment of premiums and cash values of fixed products. This portfolio generally consists of safe, conservative, guaranteed investments, such as real estate and mortgages.
Guaranteed Renewable
The option of renewal to a specified age, or for a lifetime, vested solely in the insured. However, the insurance company has the right to increase the premiums applicable to an entire class of policyholders.
Immediate Annuity
A type of annuity purchased with a lump sum, usually at retirement. Payments begin in the next payment period; can be fixed or variable.
Insurable Interest
A right or relationship in regard to the subject matter of the insured contract such that the insured can suffer a financial loss from damage, loss or destruction to it. (Bickelhaupt and Magee)
Morbidity
The frequency or severity of disease or illness within a subset of the population.
National Association of Insurance Commissioners (NAIC)
The U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards a
Nonforfeiture Option
A legal provision whereby the life insurance policy owner may take the accumulated values in a policy as paid-up insurance for a lesser amount; extended term insurance; or lump-sum payment of cash value, less any unpaid premiums or outstanding loans.
Pure (Straight) Life Annuity
An annuity payout option where payments end when the annuitant dies. Payments may be fixed or variable.
Reduction of Benefits
Automatic reduction in coverage under certain specified condition (i.e., after the insured has reached age 60).
Suicide Clause
In a life insurance policy, a clause that states that if the insured's death is the result of intentionally self inflicted injuries within a specified period of time, the policy will be voided. Paid premiums are usually refunded. The time limit is general
Straight life (also referred to as ordinary life or continuous premium whole life)
is the basic whole life policy. The policy owner pays the premium from the time the policy is issued until the insured's death or age 100 (whichever occurs first). Straight life will have the lowest annual premium.
Limited-Pay Whole Life
is designed so that the premiums for coverage will be completely paid-up well before age 100. Some of the more common versions are 20-pay life whereby coverage is completely paid for in 20 years, and life paid-up at 65 (LP-65) whereby the coverage is comp
Single Premium Whole Life (SPWL)
is designed to provide a level death benefit to the insured's age 100 for a one-time, lump-sum payment. The policy is completely paid-up after one premium and generates immediate cash.
Indexed Whole Life (or equity index whole life) Insurance
the cash value dependent upon the performance of the equity index, such as S&P 500 although there is a guaranteed minimum interest rate. The policy's face amount increases annually to keep pace with inflation (as Consumer Price Index increases) without re
Modified Whole Life
is a type of whole life policy that charges a lower premium (similar to term rates) in the first few policy years, usually the first 3-5 years, and then a higher level premium for the remainder of the insured's life. These policies were developed to attra
Graded Premium Whole Life
somewhat similar to modified life in that premiums start out relatively low and then level off at a point in the future. It typically starts with a premium that is approximately 50% or lower than the premium of a straight life policy. It increases each ye
Interest-sensitive Whole Life (Current Assumption)
whole life policy that provides a guaranteed death benefit to age 100. The insurer sets the initial premium based on current assumptions about risk, interest, and expense. It provides the same benefits as other traditional whole life policies with the add
Endowment Policies
provide a permanent level death protection if the insured should die prematurely, and they accumulate cash value. Premiums can be paid up until the endowment date, for a limited period of time, or in a lump sum single payment.It matures at an earlier age