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Glossory

A.M. Best

Assesses and Issues financial strength ratings evaluating an insurance companies’ ability to pay claims.

Accelerated Death Benefit

A benefit included or added to a life insurance policy with a rider that allows the policy owner the right to receive a portion of the death benefit as defined in the policy if the insured becomes terminally ill and furnishes proof.

Accidental Death Benefit

The face amount benefit is paid out if the death is the direct result of an accident in accord to the terms of the policy.

Accidental Death and Dismemberment (AD&D)

A rider on a life policy or can be its own policy.  This policy covers death by accidents, (not natural causes) and dismemberment, and generally pays for the loss of certain body parts such as loss of a limb, eyesight and paralysis.  This rider or policy will usually pay double for what is called double indemnity in certain instances as specified by the policy.

Accidental Death Benefit Insurance (ADB)

A life insurance death benefit if you die in an accident, in accordance to the terms of the policy.  Will not cover death due to natural causes.

Actuary

An expert who uses statics and mathematics to conclude insurance companies premium rates, mortality rates, lapse rates, and other calculations.

Adverse Underwriting Decision

Underwriting decision coverage when existing coverage is terminated, an application is declined or offering coverage at a higher rate.

After-Tax Dollars

Money remaining after taxes have already been paid on it.

Amendment

A change to the contract made by correction, addition or deletion.

Renewable term insurance that offers coverage for one year and allows the policy owner to renew coverage each year without evidence of insurability.

Annuity

A financial product that is designed to grow funds from an individual with a stream of fixed payments of a specified period of time.

Asset

Items of ownership that can be converted into cash.

Attained Age

In insurance means, the current age.

Attending Physician Statement (APS)

A written statement or report by a physician, medical facility or hospital of treatment history.

B

Backdating

A process which an insurer makes the effective date of a life insurance policy earlier to make the premium lower.

Beneficiary

Person or parties who receive the life insurance policy proceeds when the insured dies.

Benefit

The sum money paid to the beneficiary or beneficiaries when an life insurance claim is approved.

Buy-Sell Agreement

An agreement or buyout,  where one party between co-owners of a business

C

Capital Gain

The profit by which the selling price exceeds the purchase price.

Cash Value

The accumulated cash one receives if a life insurance policy is canceled.

Captive Agent

An insurance agent who works for one insurance company, as opposed to an independent agent.

Claim

An official request to the insurance company based on the terms of the insurance policy.

Contestable Period

The time period during the insurance company can cancel or rescind the policy, typically two years, if the application contained misrepresentation.

Contingent Beneficiary

The party or parties designated to receive the life insurance proceeds if the primary beneficiary where to pass away before or at the same time as the insured.

Convertible Term Insurance

Term life insurance that can be converted to permanent life insurance, during or at the end of the term.

D

Death Benefit

The amount of money the beneficiary or beneficiaries would receive if one where to pass away while the policy is in effect.

Death Claim

A request for payment when due to the death of the insured.

Double Indemnity

A provision in certain life insurance policies that will pay an additional amount, typically double the face amount, in the event of an accidental death.

E

Estate

One’s net worth calculated by one’s assets minus liabilities.

Exclusion

A provision in which the benefit will not be paid out for certain causes.

F

Face Amount

The benefit that is paid to the beneficiary when one passes away.

Fitch Ratings

An insurance rating agency.

G

Grace Period

The period of time past the actual due date that allows payment to be received before cancellation or penalty.

Group Insurance

Insurance coverage for a certain group of people.  Typically it is employees at work or members of a group or society.

Guaranteed Renewable

Obligates the insurance company to continue coverage as long as the premiums are paid and is usually capped at a certain age.

Guaranty Association

Established by each state to pay covered claims of policyholders of an insolvent company.  There is a cap as defined by each state.

H

HIPAA-Health Insurance Portability and Accountability Act

A federal law that protects the privacy of identifiable health information.   Signing the HIPPA authorization will allow the life insurance company to request your medical information from your doctors or health providers.

I

Independent Insurance Agent

A licensed agent who can represent multiple insurance companies and is not under contract with only one company.

Inforce

The policy is active and claim will be paid in the event of a death.

Insurance

The transfer of the risk of a loss, from a person or entity to the insurance company, in return for payment.

Insured

The person who’s life being insured.

Insurer

The insurance company who agrees to pay the benefit under the terms of the policy or contract.

Irrevocable Trust

A trust that cannot be revoked, changed or terminated and is typically not subject to estate taxes.

IRS Form 4506T-EZ

IRS document used to obtain previously filed tax returns.

Key Person or Key Man Life Insurance

Protects a business from the loss of a “key employee”.

L

Lapse

The policy is terminated due to nonpayment of premium.

Level Premium

Payments that do not change each year the policy remains inforce.

Level Term Life Insurance

Life Insurance where the payments are fixed for the term of the policy.

Life Insurance

Insurance that pays out a sum of money if the insured passes away as defined in the policy.

M

Medical Exam (Paramed Exam)

A physical examination the insurance company may require as part of the underwriting process.

Misrepresentation

False or misleading statement on the application.

Mortgage

Loan that allows one to buy property.

P

Paid-Up Policy

Life Insurance policy where all the premiums have been paid and remains inforce.

Payor

The person who pays the premium.

Permanent Life Insurance

Life Insurance that does not expire and may have a cash value.

Policy

A written contract between the insurance company and the insured that encompasses the terms and conditions.

Policy Owner

The one who owns the insurance policy.

Preferred Risk

An Insurance underwriting class in which one will pay a lower premium due to one having a lower risk.

Premium

The money required as payment to sustain the coverage.

Probate

Legal process of administering the estate of the person who passed away.

R

Rated Policy

An insurance policy that costs a higher premium because of a great risk of loss than the average or standard policy.

Rating Agency

An independent organization that evaluates the strength of the insurance company.

Reinstatement

When an insurance company puts a lapsed policy back into inforce, usually due to missed payments.  The policy holder has to pay back the missed premium payments.

Revocable Trust

A trust that can be changed or canceled and is subject to estate taxes.

T

Term Life Insurance

Life insurance that provides a death benefit for a specific period of time and doesn’t have a cash value.

Trust

Property held by one party for the assistance of another.

U

Underwriting

The process insurance companies use to determines the proposed risks, approves or declines applications, and determines the rate the insured will pay.

Unilateral

A contract between two parties in which only one of the parties has a legal duty to uphold the terms of the contract.

Universal Life Insurance (UL)

A type of permanent life insurance which had more flexibility than whole life and usually at a lower cost.