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Insurance Glossary
A
B C D
E F G H
I J K L
M N O
P Q R S
T U V
W X Y Z
Accelerated Benefit Provision - A provision in many new
policies which will allow the policy owner to receive a portion of the
death benefit early if the insured person is diagnosed with a terminal
illness.
Accidental Death Benefit - A rider added to a policy that
provides an additional benefit if the insured dies from accidental
causes.
Agent - A licensed person or organization authorized to sell
insurance by or on behalf of an insurance company.
Binder - A temporary or preliminary agreement which
provides coverage until a policy can be written or delivered.
Broker - A licensed person or organization paid by you to look
for insurance on your behalf.
Cancellation - The termination of insurance
coverage during the policy period. Flat cancellation is canceling a
policy as of its effective date, without any premium charge.
Certificate - A statement provided to an employee describing
the benefits provided under group insurance.
Claim - Notice to an insurer that under the terms of a policy,
a loss maybe covered.
Claimant - The first or third party. That is any person who
asserts right of recovery.
Deferred Annuity - In a deferred
annuity, you receive payments starting at some later date, usually at
retirement. With a deferred annuity you can invest either a lump sum
all at once, or make periodic payments, either fixed or variable.
Those funds grow tax-deferred until you're ready to begin receiving
payments. Deferred annuities make up a large majority of all annuity
sales in the United States, and are the type of annuity that Annuity
FYI generally recommends if you do not need immediate income from your
annuity.
Endorsement - Amendment to the policy used to add
or delete coverage. Also referred to as a "rider."
Evidence of Insurability - Medical and other information about
a person applying for insurance that the life insurance company keeps
confidential, but uses to decide what premiums to charge.
Exclusion - Certain causes and conditions, listed in the
policy, which are not covered.
Expiration Date - The date on which the policy ends.
Face Amount - The amount to be paid to the
beneficiary when the insured dies. It will be reduced by any unpaid
policy loans and interest on those loans.
Fixed Annuity - Fixed annuities are
invested primarily in government securities, and high-grade corporate
bonds. They offer a guaranteed rate of return, typically over a
period of one to ten years. There are two basic types of fixed
annuities: the Guaranteed Return Annuities (GRA) is a fixed annuity
that offers a guarantee that you can never receive less than 100% of
your investment -- no penalties or fluctuations in the interest rate
market can impact your principal should you surrender. The Market
Value Adjustment annuity (MVA) works much like the GRA, but there is
no guarantee of your principal if rates rise and you surrender
your contract. MVAs work like a bond and often pay more than a GRA due
to the increased short-term risk of rising rates.
Free Look
- A required period, usually 10 days after a policy has been delivered
to the policy owner, during which the policy can be returned for a
refund of all amounts paid.
Grace Period - A period (usually 31 days) after the
premium due date, during which an overdue premium may be paid without
penalty. The policy remains in force throughout the period.
Guaranteed Insurability - An option that permits the policy
holder to buy additional stated amounts of life insurance at certain
times in the future without having to provide new evidence of
insurability.
Illustration - A document used in life insurance
sales presentation showing yearly numbers indicating how a policy will
work. Usually it assumes that amounts being paid today will continue
in all future years.
Immediate Annuity - In an immediate
annuity, the investor begins to receive payments immediately upon
investing. This is for investors that need immediate income from their
annuity. When you purchase an immediate annuity you can choose
between payments for a certain period of time (typically five to
twenty years – "period certain"), payments for the rest of your
life and/or your spouse's life, or any combination of the two. You can
even choose between a fixed payment that doesn't vary or a variable
payment that is based on market performance.
Insured
- The person on whose life an insurance policy is issued.
Insurer - The insurance company.
Lapse - Discontinuation of insurance without cash
values when required premiums are not paid.
Limit - Maximum amount a policy will pay either overall or
under a particular coverage.
Loan Value - The amount which can be borrowed by the policy
owner from the company using the value of the policy as collateral.
Usually the interest rate payable on the loan varies based on an index
defined in the policy.
Mode of Premium Payment - The frequency of premium
payments during the policy year. Premium payments can usually be made
on annual, semiannual, quarterly or monthly modes.
Mortality Table - A statistical table showing the death rate
(probability of death) at each age.
Non-Forfeiture Options - Provision in the policy
which allow policy owner to chooses how the cash value of the policy
will be used if the policy is surrendered.
Ownership - All rights, benefits, and privileges
under a policy are controlled by the owner, who is usually the
insured. Ownership may be transferred or assigned to someone else by
written request of the current owner.
Paid-Up Insurance - Policy on which it is
guaranteed that no further premium need be paid.
Participating Insurance - Insurance on which the policy owner
is entitled to share in the surplus earnings of the company through
dividends which reflect the difference between the premium charged and
the actual earnings and costs of providing coverage.
Policy - The printed document issued to the policy owner by the
company stating the terms of the insurance contract.
Policy Year - A one-year period starting on the day and month
the policy was issued. The first policy year starts on the date of
issue, and ends on the day before the policy's first anniversary.
Premium - The payment, or one of the regular periodic payments,
a policy owner is required to make for an insurance policy to keep it
in effect.
Premium Financing - A a policyholder contracts with a lender to
pay the insurance premium on his/her behalf. The policyholder agrees
to repay the lender for the cost of the premium, plus interest and
fees.
Pro-rata Cancellation - When the policy is terminated midterm
by the insurance company, the earned premium is calculated only for
the period coverage was provided.
Quote - An estimate of the cost of insurance, based
on information supplied to the insurance company by the applicant.
Rated Policy - A policy issued with an additional
premium to cover the extra risk involved if an insurer has impaired
health or a hazardous occupation or hobbies.
Reinstatement - The restoring a lapsed or surrendered policy to
full force and effect. The company requires evidence of insurability,
and payment of all amounts necessary, including interest, to put the
policy into the condition it would have been in had the lapse or
surrender not occurred.
Rider - A provision added to a policy that provides additional
benefits.
Settlement Option - One of the several ways, other
than immediate payment in a lump sum, that the insured or beneficiary
may choose to have the policy proceeds paid.
Standard Risk - The classification of an applicant for a life
insurance who fulfills the physical, occupational and other
requirements on which most of a company's policies are issued. Someone
whose characteristics are more favorable may be classified as a
"Preferred Risk". When the characteristics are less favorable, the
applicant may be characterized as "Rated", or refused coverage
altogether.
Suicide Clause - A policy provision which reduces the amount to
be paid if the insured dies of suicide within the first two policy
years.
Surrender - To terminate or cancel a policy for its cash value
or other non forfeiture options before the maturity date.
Underwriting - The process of evaluating applicants
for insurance and classifying them fairly so the appropriate premium
rates may be charged. This may involve a physical examination of the
applicant.
Variable Annuity - It is a contract
between you (the annuity owner) and a life insurance company. In
return for your payment, the insurance company agrees to provide
either a regular stream of income or a lump sum payout at some future
time (generally, once you retire or pass age 59 1/2). Your premiums
are invested in one or more securities portfolios and fixed interest
accounts, where they earn interest and/or capital appreciation. No
taxes are due until these earnings are paid out. (If you make a
withdrawal before age 59 1/2, you could incur a 10% tax penalty.)
Waiting Period - A period of time set forth in a policy which
must pass before some or all coverage's begin.
Waiver of Premium - A rider added to policy that will pay the
premiums during the total disability of the insured. |
