Glossary
 

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Incontestable Clause A clause in a policy providing that a policy has been in effect for a given length of time (two or three years), the insurer shall not be able to contest the statements contained in the application. In life policies, if an insured lied as to the condition of his health at the time the policy was taken out, that lie could not be used to contest payment under the policy if death occurred after the time limit stated in the incontestable clause.

In Force Insurance on which the premiums are being paid or have been fully paid.

Insurability All conditions pertaining to individuals that affect their health, susceptibility to injury and life expectancy; an individual's risk profile.

Insurable Interest Requirement of insurance contracts that loss must be sustained by the applicant upon the death of another and it must be sufficient to warrant compensation.

Insurance A formal social device for reducing risk by transferring the risks of several individual entities to an insurer. The insurer agrees, for a consideration, to pay for the loss in the amount specified in the contract.

Insurance Policy The printed form which serves as the contract between an insurer and an insured.

Insured The party who is being insured. In life insurance, it is the person because of his or her death the insurance company would pay out a death benefit to a designated beneficiary.

Insurer Party that provides insurance coverage, typically through a contract of insurance.

Irrevocable Beneficiary A beneficiary that cannot be changed without that beneficiary's consent.

Increasing Term Insurance Term life insurance in which the death benefit increases periodically over the policy's term. Usually purchased as a cost of living rider to a whole life policy.

Lapse Termination of a policy upon the policy owner's failure to pay the premium within the grace period.

Level Term Insurance Term coverage on which the face value and premiums remain unchanged from the date the policy comes into force to the date the policy expires.
Level Premium (Life Insurance) Life insurance for which the premium remains the same from year to year. The premium is normally more than the actual cost of protection during the earlier years of the policy and less than the actual cost in the later years. The building of a reserve is a natural result of level premiums. The payments in the early years, together with the interest that is to be earned, serves to balance out the underpayment of the later years.

Life Expectancy The average number of years remaining for a person of a given age to live as shown on the mortality or annuity table used as a reference.

Life Insurance An agreement that guarantees the payment of a stated amount of monetary benefits upon the death of the insured.

Limited Pay Policy A type of whole life insurance designed to let the policyholder pay higher premiums over a specific period such as 10 or 20 years and then not pay any premiums for the rest of his or her life.
Loan (Policy Loan) A loan made by a life insurance company from its general funds to a policy owner on the security of the cash value of a policy. Generally, loans may reduce the policy's death benefit and cash value.

Medical A document completed by a physician or another approved examiner and submitted to an insurer to supply medical evidence of insurability (or lack of insurability) or in relation to a claim.

Medical Expenses Reasonable charges for medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, prosthetic devices, and funeral expenses. (The insurance company defines what is reasonable.)

Misrepresentation Act of making, issuing, circulating or causing to be issued or circulated an estimate, an illustration, a circular or a statement of any kind that does not represent the correct policy terms, dividends or share of surplus or the name or title for any policy or class of policies that does not in fact reflect its true nature.

Modified Premium Policy (See Graded Premium Policy)

Mortality Charge The charge for the element of pure insurance protection in a life insurance policy.

Mortality Cost The first factor considered in life insurance premium rates. Insurers have an idea of the probability that any person will die at any particular age; this is the information shown on a mortality table.

Mortality Rate The number of deaths in a group of people, usually expressed as deaths per thousand.

Mortality Table A table showing the incidence of death at specified ages. 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.

 
 

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