Glossary
 

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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.

Paid-up Insurance Insurance that will remain in force with no need to pay additional premiums.

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. It can be used to pay for term insurance.

Yearly Renewable Term (YRT) (See Annually Renewable Term)

 
 

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