Life Insurance Definitions

Accelerated Benefit Provision
Enables a policy owner to receive early death benefits if he
or she is diagnosed with a terminal illness or permanently
confined to a nursing home.


Accidental Death Benefit
A policy rider that provides additional benefits for those who die of accidental causes


Actuary
A professional trained in the mathematics of insurance and risk management. Known as a mathematician in most countries outside the United States.
Adjuster
A person who investigates and settles insurance claims.
Administrative Costs
Costs related to utilization review, insurance marketing, medical underwriting, agents' commissions, premium collection, claims processing, insurer profit, quality assurance programs and risk management.
Admitted Company
An insurance company authorized to do business in a given state.
Age Limits
The ages below or above which the insurance company will not issue a given policy or renew a policy in force.
Agent
A person who sells insurance products of the insurance company; the person responsible for your insurance coverage needs.
Alien Insurance Company
An insurance company incorporated under the laws of a foreign country.
Assigned Risk
A risk assigned to insurers by law, which they may not otherwise accept.
Automatic Premium Loan
Any life insurance premium not paid by the end of the grace period (usually 31 days) is automatically paid by a policy loan if there is sufficient cash value.
Cancellation
The termination of insurance coverage during the policy period.
Cash Value
The amount of money, before adjustment for factors such as policy loans or late premiums, that the policy owner will receive if the policy owner allows the policy to lapse or cancels the coverage and surrenders the policy to the insurance company. Cash values are a feature of most types of permanent life insurance, such as whole life and universal life.
Certificate
A document used to verify coverage for a person covered under a group insurance policy.
Claim
A formal request for payment of a loss under an insurance contract.
Claimant
The first or third party. That is any person who asserts right of recovery.
Clause
A section or paragraph in an insurance policy that explains, defines or clarifies the conditions of coverage.
Commission
Paid to the insurance agent as compensation.
Composite Rate
A uniform premium applicable to all those eligible in a subscriber group, regardless of the number of claimed dependents. This is common among plans purchased by large employer groups.
Decline
An insurance company refuses to accept the request for insurance coverage.
Disability Benefits
A feature added to some life insurance policies providing for waiver of premium, if the policyholder becomes totally and permanently disabled.
Effective Date (Inception Date)
The date on which an insurance policy coverage starts.
Endorsement (Rider)
Amendment to the policy used to add or delete coverage.
Evidence of Insurability
Medical information about someone applying for insurance; this is used to determine which policies can be issued, and what premiums can be charged. It is kept confidential.
Exclusion
Certain causes and conditions, listed in the policy, which are not covered.
Experience
The record of claims made or paid within a specified period.
Experience Rating
Determination of the premium rate for an individual risk, made partially or wholly on the basis of that risk's own past claim experience.
Expiration Date
The date on which the policy ends.
Face Amount
The amount that the beneficiary receives upon the death of the insured.
Flat Cancellation
the cancellation of a policy as of it's effective date, without any premium charge.
Financial Ratings
Reflects the financial strength of insurance companies, and their ability to meet their obligations to their policyholders. Major rating organizations include Standard & Poor's, Moody's, and AM Best.
Free Look
The right of the owner of the policy to examine the policy, and return it for a full refund if necessary; this usually lasts for at least ten days.
Grace Period
A stated period over which an overdue premium may be paid without penalty.
Group Life Insurance
Life Insurance provided for members of a group. It is most often issued to a group of employees but may be issued to any group provided it is not formed for the purpose of buying insurance. The cost is lower than for individual policies because administrative expenses per life are decreased, there are certain tax advantages, and measures taken against adverse selection are effective.
Guaranteed Insurability
An option that allows a policyholder to purchase new life insurance at certain points in the future, without providing new evidence of insurability.
Illustration
A document showing yearly numbers to indicate how a policy will work; it is used in insurance sales presentations.
Incontestable Clause
A clause in a policy providing that after a policy has been in effect for a given length of time (two or three years), the insurer shall not be able to contest the statements contained in the application. A health insurance provision also states that after that time no claim shall be denied or reduced on the grounds that a condition not excluded by name at the time of issue existed prior to the effective date. In life policies, if an insured lied as to the condition of his health at the time the policy was taken out, that lie could not be used to contest payment under the policy if death occurred after the time limit stated in the incontestable clause.