Accidental Death Benefit
Benefit paid on an accidental death in addition to face amount of policy.
Canít exceed $300,000 or face amount of policy. Requires additional
Accelerated Death Benefit Option
Free option that allows insured to withdraw up to 25% of the death benefit
(not to exceed $250,000) in event of terminal illness lasting a year or
Most insurers calculate age by the nearest birthday. Example: itís January
and a 45-year-old insured, whose birthday is in March, is being rated for
insurance. Rate determination would be based on age 46.
Transfer of life insurance ownership rights from one
person to another.
Risk factor that applies to death or injury to people
participating in aeronautics, not fare-paying passengers in a licensed
aircraft. Requires additional premium or waiving of certain benefits.
State laws sometimes allow the effective date of a
policy to be backdated by no more than six months. Backdating is used in order to get
a lower premium.
Recipient designated to receive the benefit on death
Coverage designed for business purposes, i.e., key
employee, buy-sell, business loan protection, etc.
Agreement among business partners that obligates
heirs of a partner to sell that partnerís portion of the business, at a
price fixed in the Buy-Sell Agreement, under certain conditions, i.e.,
disability, death, partner vacates the business. Can be funded by
disability or life insurance or both.
Children's Term Insurance Rider
Provides term insurance to insured's dependents for
flat premium. Benefit is $1,000 to $10,000.
Vehicle for assigning life insurance policy as
security on a loan. In event of death, creditor would receive amount due
on the loan.
Conditional Binding Receipt
Assures that coverage is in force from date of
application or medical examination, whichever is later, if premium
accompanies life or health insurance application. Applicable only if
insurer would have issued the coverage on basis of application, medical
examination and other standard underwriting information. Coverage is
temporary until policy delivery/receipt.
Without a conditional binding receipt, a life or
health insurance policy isnít effective until delivered to the insured and
the premium is paid.
Provision defining conditions/time period during
which insurer may contest or void a policy. After that time has lapsed,
normally two years, policy canít be contested. Example: suicide.
Person/persons to receive benefits if primary
beneficiary is deceased.
Allows policy to be changed to another form without
evidence of insurability. Most term policies can be converted to permanent
Insurance in favor of a creditor. Pays off loan
balance in event of debtorís death.
Enables business partners to purchases life insurance
on each other.
Little-used life insurance providing death benefit to
cover term of a contract. Term insurance is preferred option.
Placement of life insurance policy in the hands of
Assures payment of twice the basic benefit in event
of loss from specific cause or circumstances.
Buy-sell agreement in which company agrees to
purchase interest of deceased/disabled partner.
Evidence of Insurability
Statement of information needed by insurer to
underwrite an insurance policy.
Medical examination for life insurance application.
Provided by physician, nurse, or para-medic appointed by insurance company
The end of term life insurance coverage.
First page of a life insurance policy.
Amount of insurance provided by an insurance
contract, usually found on the policy face.
Dollar amount of insurance benefit which doesnít
Period of time (usually 10, 20, or 30 days) during
which policyholder may examine a new life insurance policy and surrender
it in exchange for full premium refund.
Defines length of time policy has been in effect
(usually two or three years) after which insurer cannot contest statements
contained in the application. Example: If a life insurance applicant lied
regarding his/her health condition in the policy application, that lie
couldnít be used to contest payment if death occurred after the time limit
stated in the incontestable clause.
Acceptability to the insurer of an insurance
A party has an ďinsurable interestĒ if, upon an
insuredís death, that party would suffer financial loss.
Formal social device for reducing financial risk by
transferring risks of several individual entities to an insurer. The
insurer agrees, for a premium, to pay for the loss in the amount
Printed form that serves as contract between insurer
Party who is being insured. In life insurance, itís
the person whose death would trigger payment of a death benefit by the
insurance company to a designated beneficiary.
The company that pays the death benefit if the
A beneficiary who cannot be changed without his/her
Key Person (Key Man) Insurance
Insurance owned by and payable to an employer on the
life of a key employee whose death would cause the employer financial
Policy that has expired due to premium nonpayment.
Level Term Insurance
Type of term policy where face value remains the same
from the effective date to the expiration date. In the context of the
policies presented by Instant Quote, it also means a period of time when
premiums would remain level; i.e., the 5, 10, 15, 20, and lifetime term.
After the level premium period most policies revert to Annual Renewable
Term where premiums increase annually.
Average number of years remaining for a person of a
given age to live according to mortality or annuity tables.
Agreement that guarantees payment of a stated
monetary benefit upon death of the insured.
Medical Information Bureau (MIB)
Subscriber data service that maintains coded health
history information of persons who have applied for insurance in the past.
Most life insurers are subscribers.
Charge for the element of pure insurance protection
in a life insurance policy.
First factor considered in establishing life
insurance premium rates. It reflects probability that any person will die
at any particular age.
The number of deaths in a group of people - usually
expressed as deaths per thousand.
Table showing the incidence of death at specific
Life insurance policy covering a mortgagor. On death
of the insured, benefits will pay off the balance due on a mortgage. Level
term life insurance is recommended.
Life insurance underwritten on the basis of an
insured's statement of his/her health. No medical examination is required.
Policies applied for and issued but rejected and not
paid for by the proposed owner.
Occupational condition that increases possibility of
accident/sickness/death. Usually requires higher premium.
All rights, benefits and privileges under life
insurance policies are controlled by policy owners. The owner may or may
not be the insured. Ownership may be assigned or transferred by written
request of owner.
Permanent Life Insurance
Term loosely applied to Life Insurance policy forms
other than Group and Term; usually Cash Value Life Insurance, such as
Whole or Universal Life.
Flat fee for term insurance based on a rate per
thousand times the number of thousands of death benefit. Usually, itís the
same for all ages and amounts.
Pre-authorized Check Plan
Premium payment arrangement by which policy owner
authorizes insurer to draft monthly premium payment from his/her bank
Any risk considered better than the standard risk on
which the premium rate was calculated. Some companies offer degrees of
preferred to further reduce rates.
Price of insurance protection for a specified risk
for a specified period of time.
Person named as first in line to receive proceeds
from an insurance policy.
Statements in an insurance policy explaining
benefits, conditions, other insurance contract features.
Coverage issued at higher than standard rate due to
health condition or impairment of insured.
Term insurance that can be renewed without evidence
of insurability. Level term usually reverts to renewable term with
increasing premium on conclusion of the level premium period.
New policy written to replace one currently in force.
Policy ownerís right to revoke or change beneficiary.
Most policies include a revocable beneficiary.
Policy attachment that modifies policy conditions by
expanding or restricting benefits or excluding certain conditions.
A risk on par with those where the rate is based on
health, physical condition and morals. An average risk, not subject to
rate loading or health restrictions. At one time the standard risk was the
best class of risk. With improved underwriting skills, insurers are able
to further define health risks and offer better rates to preferred risks.
Stock Purchase Agreement
Formal buy-sell agreement obligating stockholders to
purchase shares of a deceased stockholder and obligating heirs to sell.
Usually funded with life insurance.
Stock Redemption Agreement
Formal buy-sell agreement obligating corporation to
purchase shares of a deceased stockholder and obligating heirs to sell.
Usually funded with life insurance.
Life insurance that provides protection for a
specified period of time. It usually builds no cash value.
Technician trained to evaluate risks and determine
rates and coverage.
The function of determining the class of risk.
Interest-sensitive life insurance policy that builds
cash values. Premium payer controls policy structure. He/she may eliminate
premiums (pay no more premiums based on assumptions that are not
guaranteed) or continue premiums for life. Itís a matter of juggling three
variables: assumed interest rate; cash value; premium payment plan.
A change in interest rates (from the assumed
interest) will affect the other two variables. In the past, many Universal
Life Policies were structured assuming a higher interest rate than was
actually received, therefore, most of them have under performed. Universal
Life policyholders should have occasional policy evaluation to determine
need for a premium adjustment.
The Universal Life owner should be aware of a
possible fourth variable: Mortality. Universal Life policies are
structured assuming current mortality rates, which can change. This is
another reason for occasional policy evaluation.
Waiver of Premium
Life insurance provision that continues coverage
without further premium payments if insured becomes totally disabled.
Whole Life Insurance
Life insurance thatís kept in force for an insuredís
whole life as long as premium payments are maintained. Whole Life policies
build up cash values. Dividends vary depending on how well the insurance
is doing. If the company is doing well and policies arenít experiencing a
higher than projected mortality rate, premiums are paid back to the
policyholder as dividends. Policyholders can use the dividends in many
ways. The three main uses are: (1)lower/eliminate premiums; (2) purchase
more whole life insurance; (3) purchase term insurance.