There are many terms used in life insurance. The glossary below will help you to better understand some of these terms.
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 or permanently confined to a nursing home.
A document provided to a person insured under a group insurance policy that provides evidence that the coverage exists.
Medical and other information about a person applying for insurance that the life insurance company keeps confidential, but uses to decide whether the policy can be issued and what premiums will be charged.
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, and may be increased by any dividends.
The right of the policyowner to have a period of ten or more days to examine an insurance policy, and if not satisfied, return it to the company for a full refund of all amounts paid.
A period of time (usually 31 days) after the premium due date when an overdue premium may be paid without penalty. The policy remains in force throughout the period.
An option that permits the policyholder to buy additional stated amounts of life insurance at certain times in the future, without having to provide new evidence of insurability.
A document used in life insurance sales presentations showing year-by-year numbers indicating how a policy will work. Usually it assumes that amounts being paid today will continue in all future years.
The person whose life is covered by a life insurance policy;the policyowner;the policyholder.
The discontinuation of insurance without cash value when the required premium is not paid. If cash value exists, there may be nonforfeiture provisions available.
The amount which can be borrowed by the policyowner 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.
The frequency of premium payments during the policy year. Premium payments can usually be made on annual, semi-annual, quarterly, or monthly mode.
A statistical table showing the death rate (probability of death) for each age.
A provision in the policy that allows the policyowner to choose how the cash value of the policy will be used if the policy is surrendered or lapses due to nonpayment of premium.
All rights, benefits, and privileges under a policy 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.
A life insurance policy where all premiums have already been paid, with no further premium payment due.
Insurance on which the policyowner 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.
The printed document issued to the policyowner by the company stating the terms of the insurance contract.
A one-year period starting on the day and the 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 date.
The payment a policyowner is required to make to an insurance company to purchase insurance coverage and to keep the policy in force.
A policy issued with an additional premium to cover the extra risk involved if an insured has impaired health, a hazardous occupation or hobby, or is a private pilot.
The restoring of 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. The company is not obligated to reinstate a policy.
A provision added to a policy that provides additional benefits, usually accompanied by a corresponding premium increase or change.
The manner in which the insured or beneficiary may choose to have the policy proceeds paid.
A policy provision which reduces or eliminates the amount to be paid if the insured dies from suicide within a specified time frame.
The classification of an applicant for a life insurance policy who fulfills the physical, occupational, and other requirements on which most of the 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.
To voluntarily terminate or cancel a policy for its cash value or other nonforfeiture options.
A rider added to policy that will waive the premium payments required by an insured during the total disability of the insured.
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