13-13. THE LANGUAGE OF LIFE INSURANCE
ACTUARY. An individual who is trained in the mathematics of insurance including the calculation of premiums, reserves, and dividends. ACCIDENTAL DEATH BENEFIT. A life insurance option that increases the death benefit in the event that the insured’s death is accidental. If the accidental death benefit is double the face amount of the policy, the option is often called a “Double Indemnity” provision. ANNUITANT. The individual designated to receive an annuity. CASH SURRENDER VALUE. An amount available to a policyholder upon voluntary termination of a policy before it becomes payable by death or maturity. CHARTERED LIFE UNDERWRITER (CLU). Professional designation given to individuals in the life insurance profession who have successfully passed a series of examinations and who have met other eligibility requirements. CONTESTABILITY PERIOD. The period of time (normally two years) during which the insurer can challenge the validity of a life insurance policy. CONVERTIBILITY. Refers to the ability to exchange one type of insurance for another (i.e. term or whole life) without additional medical review or examination. CREDIT LIFE INSURANCE. Term life insurance sold by a lender to cover the repayment of a loan, installment purchase, or other obligation in case of the debtor’s death. DIVIDEND (To Policyholder). A return of part of the premium on participating insurance. In effect a refund which represents the difference between the premium charged by the insurance company and the company’s actual expenses, mortality costs, and investment experiences. ENDOWMENT INSURANCE. A type of insurance that pays the insured if he or she is living on the maturity date of the policy or the beneficiary if the insured dies prior to the maturity date of the policy. FACE AMOUNT. The amount stated in the policy that will be paid upon the death of the insured or upon the maturity date of the policy. FAMILY POLICY. A life insurance policy that provides coverage on all members of the family in one contract. GROUP INSURANCE. An insurance plan under which the members of a given group (i.e. employees of a company and their dependents) are insured under a single policy issued to the group, while the individual members of the group are provided with separate certificates of insurance.
INDEMNITY. A legal principle applicable to the insurance industry which holds that the individual recovering under an insurance claim is only entitled to be restored to the approximate financial condition that they were in prior to incurring the loss. INDEPENDENT AGENT. An individual business operator who represents several insurance companies and divides the policies that he or she writes among the companies represented. INDEXED LIFE INSURANCE. A type of whole life insurance policy that provides for both the death benefit and the premiums to automatically increase each year in accordance with the annual increase in the Consumer Price Index (CPI). LIVING BENEFIT RIDER. A policy clause which allows the insured to receive all or part of the policy’s death benefit if certain conditions are met. This type of provision is often used to help the insured pay their health care costs if they become terminally ill. MASTER CONTRACT. The contract between an insurance company and a group insurance policy holder (normally an employer or association). The master contract insures the participating individuals under a single life insurance contract. MUTUAL INSURANCE COMPANY. A nonprofit insurance company that is owned by the policyholders. PAID-UP INSURANCE. Insurance on which all required premiums have been paid. PERIOD CERTAIN. A specified time during which the insurer guarantees the payment of benefits. PERMANENT LIFE INSURANCE. A phrase which refers to any type of life insurance that accrues a cash value. REINSTATEMENT PROVISION. A provision that outlines the conditions the policyholder must meet in order for the insurer to reinstate the policy after it has been terminated for nonpayment of premiums. REINSURANCE. A transaction between two insurance companies in which one company purchases insurance from another company to cover a portion of the risks that the first company does not want to retain. RENEWABILITY. A provision which allows the insured to renew a term policy without a medical examination. Subsequent premium payments are usually higher. SUPPLEMENTAL GROUP LIFE INSURANCE. Life insurance coverage that exceeds basic coverage provided in a group policy. Supplemental coverage is usually paid for by the insured. UNDERWRITER. The organization that assesses the insurance risk and guarantees that funds will be available to pay for insured losses.
CHAPTER 13: LIFE INSURANCE
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