Insurance
Defined as the transfer of pure risk to the insurance company in consideration for a premium
Pure Risk
A chance of loss without any chance of gain
Speculative Risk
The possibility for gain or loss and is not insurable
Risk
The chance of loss
Exposure
A condition that could result in a loss
Hazard
Something that increases the chance of loss
Peril
cause of loss
liquidiy
the policys cash value can be borrowed against at any time for immediate needs
Estate conservation
Life insurance proceeds may be used to pay inheritance taxes and federal estate taxes so that it is not necessary for the beneficiaries to sell off the assets.
Human Value approach
- the approach to determine how much insurance one should get
- it looks at the lost earnings potential if someone should die
- often limited to 10x annual income
Needs Approach
the amount needed depends on the financial needs that must be met if the family head should die
Buy-Sell Agreement
A legal contract that determines what will be done with a business in the event that an owner dies or becomes disabled.
Cross Purchase
used in partnerships when each partner buys a policy on the other
Entity Purchase Agreement
Type of buy-sell agreement that obligates the business entity to purchase an owner's interest in the entity upon that owner's death
Stock Purchase
used by privately owned corporations when each stockholder buys a policy on each of the others
Stock Redemption Plan
A type of buy and sell agreement
If a corporation has an agreement with a shareholder, and that shareholder dies, the corporation will be able to repurchase the outstanding stock the shareholder owned
Executive Bonus
an arrangement where the employer offers to give the employee a wage increase in the amount of the premium on a new life insurance policy on the employee
Insurable Interest
Any financial interest in life or property such that, if the life or property were lost or harmed, the insured would suffer financially.
Solicitation of insurance
attempt to persuade a person to buy a policy
Policy Summary
a written statement describing the features and elements of the policy being issued
Policy Replacement
- An action which eliminates the original policy or diminishes its benefits or values
Underwriting
the process of selecting, classifying, and pricing applicants for insurance
Annuity
payment received every year
Annuities
a fixed sum of money paid to someone each year, typically for the rest of their life.
Annuitant
The party receiving the benefits of an annuity, similar to the insured on an insurance policy. The annuitant usually also owns the annuity, although you can buy an annuity to benefit another party, who would then be the annuitant.
Beneficiaries
a person who derives advantage from something, especially a trust, will, or life insurance policy.
Accumulation Period
The time over which the annuitant makes payments or investments in an annuity, and when those payments earn interest tax deferred.
Annuity Period
The payout period of an annuity during which the annuitant receives periodic income payments. Synonymous with annuity phase.
Immediate Annuity
an annuity in which the annuitant begins receiving monthly benefits immediately
Deferred Annuity
An annuity that starts sometime in the future.
Accelerated Benefits
Riders attached to life insurance policies which allow death benefits to be used to cover nursing or convalescent home expenses.
Accident
An unexpected happening that may result in injury, loss, or damage.
accident insurance
A type of insurance that protects the insured against loss due to accidental bodily injury.
Accidental Bodily Injury
Unplanned, unforeseen traumatic injury to the body.