Accelerated Death Benefit
Sometimes included in life insurance policies or offered as an option. Accelerated Death Benefit allows a specific percentage of the policy's death benefit to be paid to the policy owner prior to the insured's death if the insured is diagnosed with a terminal illness or if the insured's life expectancy is 12 months or less. Accelerated Death Benefits can be used to pay medical expenses or other items the policyowner may need. *Every policy will differ slightly in its language so ask your agent for details.
Accidental Death Benefit
This additional benefit is paid when an insured's death is caused by an accident in addition to the base death benefit amount. Additional circumstances may need to exist for this benefit to be paid.
Accumulation Value
The account value or cash accumulation value of an universal life insurance policy, variable life insurance policy, whole life policy, or annuity. The accumulation value is a function of premiums received, withdrawals made, expenses charged, cost of insurance deducted, and interest credited.
Age at Issue
The age of the insured at the time the policy goes into effect. Policies identify issue age as either the age at the insured's last birthday or nearest birthday. Using one way or the other can affect the cost of coverage.
Annual Statement
An important document provided by the insurance company to the policy owner every year detailing a policy's performance. Figures reported may include: account values, premiums paid, etc.
Application
A signed statement (either written or electronic) providing information about the health, occupation, lifestyle, and family history of someone applying for life insurance. The information provided will be reviewed and used to determine if the policy will be issued and at what value. The application often is completed with a combined effort by the insurer's agent, the insured, and the medical examiner.
Assignment
The legal transfer of one person's "Assignor" interest in an insurance policy to a third party "Assignee".
Attained Age
The insured's age the insurance company uses to determine the required premiums for a policy. Also referred to as "Actual Age" versus "Nearest Age".
Automatic Increase Rider
An optional policy feature or rider in a universal life contract that provides periodic increases in face amount based on a predefined percentage, starting in a predefine policy year. This option must be applied for at the time of issue for the policy, and additional costs for purchasing this option may apply.
Automatic Premium Loan Provision
A feature to prevent a policy from terminating by inadvertently due to non-payment. This provision allows the insurance company to automatically borrow money from a policy's cash value to pay any premium which has not been paid at the end of a grace period. This feature is generally available in whole life policies (not Term Life or Universal Life).
Bank Draft
Also known as an Electronic Funds Transfer (EFT). A payment method by which a policy owner allows his/her bank to withdraw a designated amount from his/her specified checking or savings account on a periodic basis and transfer the money to the insurance company.
Beneficiary (Primary)
The person(s) or entity designated in the policy to receive benefits in the event of the policyholder's death.
Beneficiary (Contingent)
The person(s) or entity designated in the policy to receive benefits in the event the primary beneficiary(ies) is/are no longer living at the time the policyholder's death.
Buy-Sell Agreement
Frequently life insurance is used to finance a buy-sell agreement in the event a business partner passes away. Usually drafted by an attorney, a buy-sell agreement guarantees a market/purchaser of your business should you leave the business, become disabled, or pass away. It does this by providing a method of determining the worth of the business, identifying the future buyer(s), and creating a legal obligation between you and the buyer(s).
Cash Surrender Value
The amount obtainable to a policyholder when a life insurance policy is surrendered or terminated for a reason other than the insured's death. This feature is available to owners of Universal Life, Variable Universal Life, and Whole Life (not Term Life).
Children's Term Rider (or Children's Insurance Benefit)
An optional policy feature or rider that provides term insurance coverage on children of the primary insured. Additional costs will apply.
Collateral Assignment
Designating a third-party creditor as the beneficiary of a life insurance policy as security or collateral for a loan. A collateral assignment may also result in restrictions or limitations of the ability to take policy loans.
Common Disaster
A situation when the insured and the beneficiary appear to die at the same time without any evidence of who died first.
Common Disaster Clause
A clause or language occasionally included in a life insurance policy that states the manner in which the insurance company is to distribute death benefit proceeds of the life insurance policy in the result of a COMMON DISASTER.
Contestable Clause (or Incontestable Clause)
A clause in a life insurance policy that states the time (called the contestable period) through which the policy may be contested, challenged or voided by the insurance carrier based on material misrepresentations contained in the original application or medical examination. By law, in most cases the contestable period limit is two years.
Contingent Beneficiary
The person(s) or financial instrument designated in the policy to receive benefits in the event the primary beneficiary(ies) is/are no longer living at the time the policyholder's death.
Contract (Policy)
The written agreement between the insurance company and the policyholder or contract owner stating: coverage and premium amount, length of coverage, beneficiaries, and any additional information applicable to your contract.
Conversion / Convertible
A term life insurance policy may contain a provision providing that under certain conditions the policy may be exchanged for another life insurance policy with the same insurance company, without further evidence of health or underwriting requirements. Usually, term insurance can be converted to Universal Life, Whole Life, or another form of permanent life insurance dictated by the insurance company.
Cost of Insurance (COI)
Universal Life and Variable Life insurance policies have a "cost of insurance" amount that is deducted monthly from the cash accumulation value of the policy to pay for the pure insurance protection provided by the policy. The COI is calculated based on a variety of factors such as age, health class, and the death benefit amount.
Critical Illness Rider
A supplementary form of insurance coverage that can be added to a life insurance policy which pays a specified benefit to the policyholder if the insured is diagnosed with a critical illness or condition.
Date of Issue
The date on which a policy contract is issued by the carrier. *This can be different from the policy "Effective Date".
Death Benefit
The amount of money paid to the beneficiary(ies) upon the death of the insured. This amount does not include additional amounts payable under accidental death or other special provisions. Also referred to as "Face Amount".
Death Benefit Option (A or B)
The method by which the death benefit payable is calculated for a Universal Life or Variable Universal Life insurance policies. For Level Death Benefits (aka Option A), the death benefit is the face amount of the policy reduced by the existing loan, if applicable. For Increasing Death Benefits (aka Option B), the death benefit amount is the face amount plus the cash value amount, reduced by the existing loan, if applicable.
Death Claim
The official process by which an insurance company is notified of the insured's death and the request for payment of policy proceeds in accordance with the terms and conditions of the life insurance policy.
Disability Waiver of Premium
A feature or rider in a life insurance policy which waives the required premiums should the insured become disabled (as defined by the policy).
Dividend
An annual payment made by the insurance carrier to Whole Life policyholders. The money is a partial refund of the premium paid and it is calculated based on actual mortality, interest and expenses that were more favorable than expected when the premiums were set. This option allows a policy holder the option to participate in the upside potential of an insurance company's good performance.
Electronic Funds Transfer (EFT)
A payment method by which a policy owner allows his/her bank to withdraw a designated amount from his/her specified checking or savings account on a periodic basis and transfer the money to the insurance company. Also known as a "Bank Draft."
Endow
When a life insurance policy's cash value becomes equal to the face amount of the policy.
Evidence of Insurability
Verification of a person's physical health condition, life style, occupation, and financial justification, utilized by an insurance company to determine if someone is insurable.
Excess Interest
Interest paid over and above the guaranteed interest rate (this amount is always greater than or equal to 0.)
Face Amount
The amount of money paid to the beneficiary(ies) upon the death of the insured. This amount does not include additional amounts payable under accidental death or other special provisions. Also referred to as "Death Benefit" or "Coverage Amount."
Free-Look Provision
A provision required by most state regulatory bodies in a life insurance policy or annuity contract that gives the policyholder or contract owner a certain amount of time to review a new policy or contract after issuance and receipt. The free look period should be prominently stated in your contract. This is a consumer friendly feature allowing the policy or contract to be returned and voided within the specified time limit and to get your money back for all premiums paid. A common specified Free Look Period is 60 days.
Grace Period
The period of time after the due date before a penalty is charged or the policy is canceled. The time length is defined in the policy and is usually 30 days.
Guaranteed Insurability Option
A rider to a life insurance policy that guarantees the right to buy additional stated amounts of life insurance coverage at set option dates without evidence of insurability.
Guaranteed Interest
Each life insurance policy or annuity contract has a minimum guaranteed interest rate. The existing interest rate paid by the insurance carrier may be greater than or equal to the guaranteed interest rate, but never less.
Impaired Risk
When an insurance company has assessed the applicant to be a sub-standard or impaired risk. Factors such as: health history, life style, and family history can result in an individual being classified as an "Impaired Risk". This assessment will result in higher premium requirements.
Independent Agent
An authorized representative of an insurance company who solicits and services insurance contracts. An Independent Agent is not an employee of the insurance company and typically represents many carriers. Click here to see a list of the carriers we represent. Click here to contact an Independent Agent.
Index
A measuring method for the performance of a group of securities. Some life insurance and annuity policies allow for the cash accumulation growth of a policy to be tied to a selected index. Examples are: Dow Jones Industrial Average, S&P 500, NASDAQ-100.
Insurable Interest
An insurable interest exists when there is financial reliance on someone else. Individuals or entities can establish an insurable interest if there is evidence that the insured's death would result in a financial loss or burden. Spouses, children, business partners, and creditors generally have an insurable interest in the life of the insured. An insurance company will not issue a new life insurance policy if the beneficiaries do not have an insurable interest.
Insured
The person on whose life the policy is issued. *Note: the owner and insured can be different or the same.
Interest Rate (Current)
The current interest rate credited to the life insurance policy or annuity contract by the insurance carrier.
Interest Rate (Guaranteed)
The stated minimum guaranteed annual interest rate to be credited by the insurance company.
Irrevocable Beneficiary
A beneficiary designation that can't be changed without prior written consent of the beneficiary(ies).
Issue Age
The insured's age at the point in time when the policy takes effect. Life insurance policies define issue age as either the age at the insured's last birthday or nearest birthday. Using one method or the other can influence the cost of coverage.
Key-Person/Key-Man policy
A life insurance policy designed to protect a business against the loss of income in the event of death or disability of a key employee.
Lapse
Termination of an insurance policy because of nonpayment within a specified time period. Or, in the case of Variable Life and Universal Life insurance policies, the depletion of cash values below the amount needed to keep the policy in force. Under some conditions, a policy might stay inforce under a "settlement option".
Lien
Granted by the courts, a lien is a third-party creditor's claim against property such as a life insurance policy or annuity. A familiar example is a mortgage is a lien against a house; if the mortgage is not paid, the house can be repossessed to satisfy the lien. As soon as the debt is repaid, the lien must be removed.
Life Expectancy
Life expectancy varies based on: age, sex, health, and family history. It is the average number of years a person is expected to live.
Life Settlement
A Life Settlement can enables a policyholder to sell an existing life insurance policy to a third-party investor. The investor pays the policyholder in cash. Policy ownership and beneficiary designation is transferred to the third party investor. Usually, a life settlement is available if an insured who is 70 years or older.
Loan Interest Rate
The current interest rate which is charged for a loan which has been take out from the policy. Interest is taken from the life insurance policy's cash value.
Loan (Outstanding)
The current value of a life insurance policy's outstanding loan balance, including principal and accrued interest.
Loan Provision
A policy feature that allows the policyholder of a life insurance policy the ability to take a loan from the policy's available cash surrender value.
Maturity Date
The end date of the contract term in a life insurance policy, dictated, either by a specified period, time, or by age.
Maximum Loan Amount
A new policy loan amount will be capped by the amount available in the policy's cash surrender value.
Medical Information Bureau (MIB)
An independent entity that collects and stores medical data on life and health insurance applicants. The information is exchanged among participating insurance companies. This information may only be attained with written authorization from the insured. Its purpose is to safeguard against fraud and concealment by allowing insurance companies to discover relevant, undisclosed, health facts.
Misstatement of Age
Misrepresenting a date of birth on an insurance application.
National Association of Insurance Commissioners (NAIC)
A national organization of state officials formed to present national uniformity in insurance regulations and guarantee insurance sales best practices. www.naic.org
Net Cash Surrender Value
The cash accrual value in a life insurance policy or annuity contract minus surrender charges and/or outstanding loans.
Other Insured Rider
An option on a policy (for an additional cost) that provides convertible term insurance coverage to a spouse or an immediate family member of the primary insured.
Owner (Policy owner)
The declared individual or entity who owns a life insurance policy. The owner could be the insured on the policy, the beneficiary, or another third party. Typically, the policy owner pays the premiums on the policy and is the only one who is allowed to make changes to a policy, such as: withdraw cash values, changing a beneficiary, or taking loans on the policy.
Paid-Up Additions
Dividends from whole life policies can be used to buy supplementary life insurance that increases the policy's overall cash value and death benefit without raising the premium amount.
Participating Policy
A Whole Life policy is a "participating" insurance policy. This means you will be entitled to be given dividends paid by the insurance company. Dividends provide the potential to enhance a policy's value, at no additional cost to you.
Payor
The person or entity who pays the premium on a policy or contract. If the payor is not the owner, the payor may not be entitled to the rights and provisions of the policy or contract.
Per Stirpes
Literally mean "by branches" in Latin. Per Stirpes is a beneficiary designation calling for the allocation of benefits or property between or among two or more beneficiaries, with the provision that if one beneficiary dies before the insured, the dead beneficiary's heirs shall be entitled to the beneficiary's full share distributed equally amongst them.
Planned Periodic Premium or Payment
The premium billing frequency and sum of premium to be paid at certain intervals until the policy matures.
Policy Anniversary
The date a year after the policy has been issued.
(Policy) Contract
The contractual agreement between the insurance company and the policyowner or contract owner. The policy or contract, along with the application, all endorsements, all amendments, and attached papers, constitutes the entire insurance contract. A policy typically refers to life insurance; and a contract typically refers to an annuity.
Policy Number / Contract Number
In order to track and identify a policy a unique code of letters and numbers is assigned to the policy by the insurance company.
Policy Date
The effective date on which coverage or a contract begins. This is clearly stated on the policy.
Policy Loan
The amount of money the policyholder can borrow against his/her life insurance policy. If the policyholder dies any outstanding balance and any accumulated interest will be deducted from the amount payable to the beneficiaries.
Policy Owner/Contract Owner (Owner)
The declared individual or entity who owns a life insurance policy. The owner could be the insured on the policy, the beneficiary, or another third party. Typically, the policy owner pays the premiums on the policy and is the only one who is allowed to make changes to a policy, such as: withdraw cash values, changing a beneficiary, or taking loans on the policy.
Policy Status
The present status of the policy (Paid, Inforce, In Grace (premiums are late), Lapsed/Cancelled).
Premium
The fee/cost that a policyholder pays to the insurance company for an insurance policy.
Premium Mode
The payment method which is determined by the policyholder. Options are: Annual, Semi-Annual, Quarterly or Monthly.
Primary Beneficiary(ies)
The person(s) or financial instrument specifically designated in the policy as the first in line to receive benefits in the event of the policyholder's death.
Primary Insured Rider
An optional policy rider that offers level term insurance in addition to the base policy amount. Often, when the primary insured rider is combined with the base coverage of a universal life policy, it can lower the premium expenses for the total amount of coverage as compared to the cost of a pure universal life policy.
Rated
If the insurance company asses the insured to be an impaired risk than a rated policy with a higher premium is issued.
Reinstatement Provision
The restoration of a lapsed policy to full force and effect. The company may require evidence of insurability and payment of past due premiums plus interest. This right is typically forfeited if a policy has been surrendered for its cash surrender value.
Return of Premium Term (ROP)
Term Life ROP is similar to traditional Term Life Insurance. The major difference is, with a Return of Premium (ROP) policy you can get 100% of your premiums returned to you, tax-free, should you live longer than the stated term of your policy. ROP policies pay a death benefit only if the insured dies during the term period and if premium payments have been paid current. Usual term coverage periods are: 10, 15, 20, 25, & 30 years.

Riders

A written amendment to a life insurance policy or annuity contract that modifies the policy's or contract's terms or coverage. Riders may increase the premium. Examples of riders include:
  1. Accelerated death benefit
  2. Accidental death benefit
  3. Automatic increase rider
  4. Children's term rider
  5. Guaranteed insurability option
  6. Other insured rider
  7. Primary insured rider
  8. Waiver of monthly deduction
  9. Waiver of Specified Premium
Suicide Provision
A provision in a life insurance policy stating that if the insured commits suicide within a certain time-period, the company is not obligated to pay the death benefit amount. However, the insurance company is required to return the premiums paid. A typical suicide provision would last for the first two years of a policy.
Surrender
The policyholder's right to cancel a life insurance policy in exchange for the policy's cash surrender value.
Surrender Charge
The fee or penalty charged when a policyholder cancels or surrenders a life insurance policy or annuity before the surrender charge period (usually several years.) by the insurance company in the event a policyholder surrenders or cancels a policy prior to the end of the surrender charge period.
Term Insurance
A plan of life insurance that covers the insured's life for a certain period of time (term). A death benefit is paid only if the insured dies during the term period and the policy is current. Typical term coverage periods are: 5, 10, 15, 20, 25, & 30 years. Term insurance does not have cash values.
Underwriting Class/Rating
When a policy is issued, the insurance carrier categorizes the insured's risk profile. Factors effecting underwriting class include: health, lifestyle, and family history.
Universal Life
This is a flexible-premium and adjustable death benefit life insurance policy. Policy performance is affected by current interest rates, and current costs of insurance. Universal life has the added features and benefits of flexible premiums, adjustable coverage amount, accumulating cash value, and the ability to take loans against the policy's cash value.
Variable Universal Life Insurance
A life insurance policy with a flexible-premium and adjustable death benefit. Policy performance is determined by investment fund performance, and current costs of insurance. Variable Universal Life has the added features and benefits of accumulating cash value and the ability to take loans. The cash surrender value is not definite, because it will change with the market value of the selected investment options. This type of policy carries extra risk for the owner due to poor investment fund performance.
Waiver of Monthly Deduction
An optional feature that waives the monthly cost of insurance charges on a universal life or variable life policy for the duration of a qualified disability as specified in the policy.
Waiver of Specified Premium
An optional feature that waives a specified premium on the policy for the duration of a qualified disability as stated in the policy.
Whole Life Insurance
A pan of life insurance which is designed to remain in place for the entire life of the insured. Level premiums are required every year, however, it has the benefit of accumulating cash values and there is an opportunity for dividend payments.
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