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Insurance
Glossary of Terms... Page 3
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Non medical Insurance A contract of life insurance underwritten on the basis of
an insured's statement of his health with no medical examination required.
Occupational Hazard A condition in an occupation that increases the peril of
accident, sickness, or death. It usually will mean higher premiums.
Offer and Acceptance The offer may be made by the applicant signing the
application, paying the first premium and, if necessary, submitting to physical
examination. Policy issuance, as applied for, constitutes acceptance by the company. Or
the offer may be made by the company when no premium payment is submitted with the
application. Premium payment on the offered policy then constitutes acceptance by the
applicant.
Original Age The age you were when you bought the policy.
Other Insured Rider A term rider covering a family member other than the
insured that is attached to the base policy covering the insured.
Ownership All rights, benefits and privileges under life insurance policies
are controlled by their owners. Policy owners may or may not be the insured. Ownership may
be assigned or transferred by written request of current owner.
Para-Med (Paramedical) Examination The medical examination of an applicant
for Life Insurance.
Para-Med (Paramedical) A physician, nurse, or para-med appointed by the
medical director of a life insurance company to examine applicants.
Permanent Life Insurance A term loosely applied to life insurance policy
forms other than Group and Term, usually Cash Value Life Insurance, such as Whole Life
Insurance.
Policy The printed document issued to the policyholder by the company stating
the terms of the insurance contract.
Policy Holder The person who owns a life insurance policy. This is usually
the insured person, but it may also be a relative of the insured, a partnership or a
corporation.
Preferred Risk A risk whose physical condition, occupation, mode of living
and other characteristics indicate a prospect for longevity superior to that of the
average longevity of unimpaired lives of the same age.
Premium The periodic payment required to keep an insurance policy in force.
Premium Flexibility The policy holder's right to vary the amount of premium
paid each month towards a universal life policy.
Primary Beneficiary In life insurance, the beneficiary designated by the
insured as the first to receive policy benefits.
Primary Policy The insurance policy that pays first when you have a loss
that's covered by more than one policy.
Probate Costs The legal fees and other costs incurred in the probate process,
which is the legal processing of your will. Assets that you leave to other people through
your will cannot be distributed until the will is probated.
Provisions Statements contained in an insurance policy which explain the
benefits, conditions and other features of the insurance contract.
Rated Coverage's issued at a higher rate than standard because of some health
condition, or impairment of the insured.
Re-entry Option An option in a renewable term life policy under which the
policy owner is guaranteed, at the end of the term, to be able to renew his or her
coverage without evidence of insurability, at a premium rate specified in the policy.
Reinstatement Putting a lapsed policy back in force by producing satisfactory
evidence of insurability and paying any past-due premiums required.
Renewable Term/Annual Renewable Term Term insurance that may be renewed for
another term without evidence of insurability. Level term usually turns into renewable
term with increasing premiums after the level premium period.
Replacement A new policy written to take the place of one currently in force.
Representation Statements made by applicants on their applications for
insurance that they represent as being substantially true to the best of their knowledge
and belief but that are not warranted as exact in every detail.
Revocable Beneficiary The beneficiary in a life insurance policy in which the
owner reserves the right to revoke or change the beneficiary. Most policies are written
with a revocable beneficiary.
Rider An attachment to a policy that modifies its conditions by expanding or
restricting benefits or excluding certain conditions from coverage.
Risk The chance of injury, damage, or loss.
Risk Selection The method a home office underwriter uses to choose applicants
that the insurance company will accept. The underwriter must determine whether risks are
standard, substandard or preferred and set the premium rates accordingly.
Secondary Beneficiary An alternate beneficiary designated to receive payment,
usually in the event the original beneficiary predeceases the insured.
Single Premium Policy A whole life policy for people who want to buy a policy
for a one-time lump sum, and then be covered for the rest of their lives without paying
any additional premiums.
Standard Risk Person who, according to a company's underwriting standards, is
entitled to insurance protection without extra rating or special restrictions.
Substandard Risk Person who is considered an under-average or impaired
insurance risk because of physical condition, family or personal history of disease,
occupation, residence in unhealthy climate or dangerous habits.
Term Insurance Protection during limited number of years; expiring without value if
the insured survives the stated period, which may be one or more years but usually is five
to twenty years, because such periods usually cover the needs for temporary protection.
Term Period for which the policy runs. In life insurance, this is to the end
of the term period for term insurance.
Tertiary Beneficiary In life insurance, a beneficiary designated as
third in line to receive the proceeds or benefits if the primary and secondary
beneficiaries do not survive the insured.
Third-Party Owner A policy owner who is not the prospective insured. The
policy owner and the insured may be, and often are the same person. If for example, you
apply for and are issued an insurance policy on your life, then you are both the policy
owner and the insured and may be known as the policy owner-insured. If, however, your
mother applies for and is issued a policy on your life, then she is the policy owner and
you are the insured.
Underwriter Company receiving premiums and accepting responsibility for
fulfilling the policy contract. Also, company employee who decides whether the company
should assume a particular risk; or the agent who sells the policy.
Uninsurable Risk A person who is not acceptable for insurance due to
excessive risk.
Universal Life An interest-sensitive life insurance policy that builds cash
values. The premium payer has control over how the policy is structured. He has the
flexibility to eliminate the premiums (essentially pay up the policy and pay no more
premiums) or have the premiums continue for life. It is a matter of juggling three
variables: the assumed interest rate, the cash value and the premium payment plan. The
policy is interest-sensitive, and if interest rates change from the assumed interest, it
will affect the other two variables. In the past, many Universal Life Policies were
structured assuming a higher interest rate then was actually received, therefore, most of
them have under performed. If you have a Universal Life Policy, you should have it
evaluated to see if it needs to have the premiums adjusted to get it back on track. A
fourth variable that has not been a factor but could be in the future, and the owner
should be aware of, is the Mortality variable. Universal Life policies are usually
structured assuming current mortality rates. The insurance companies reserve the right to
change those rates.
Variable Life Life insurance under which the benefits relate to the value of
assets behind the contract at the time the benefit is paid. The assets fluctuate according
to the investment experience of funds managed by the life insurance company. Premium
payments may be fixed as to timing and amount (scheduled premium variable life) or subject
to change by the policy holder (flexible premium variable life).
Waiver of Premium Rider or provision included in most life insurance policies
exempting the insured from paying premiums after he or she has been disabled for a
specified period of time, usually six months.
Whole Life Insurance Life insurance that is kept in force for a person's
whole life as long as the scheduled premiums are maintained. All Whole Life policies build
up cash values. Most Whole Life policies are guaranteed as long as the scheduled premiums
are maintained. The variable in a Whole life Policy is the dividend which could vary
depending on how well the insurance is doing. If the company is doing well and the
policies are not experiencing a higher mortality than projected, premiums are paid back to
the policy holder in the form of dividends. Policyholders can use the cash from
dividends in many ways. The three main uses are: it can be used to lower or vanish
premiums, it can be used to purchase more insurance or it can be used to pay for term
insurance.
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