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Life Insurance Glossary

Accelerated Death Benefit

A benefit included in a life insurance policy or added to a life insurance policy through a policy rider that gives the policy owner the right to receive an advance–usually between 50 and 75 percent–of the policy's death benefit when the insured is terminally ill as defined in the policy.

Accident Insurance

A type of health insurance coverage that only provides benefits for an insured's death, dismemberment, disability, or medical care that results from the insured being in an accident

Accidental Death Benefit (ADB)

A supplementary life insurance policy benefit that provides a death benefit in addition to the policy's basic death benefit if the insured's death occurs as the result of an accident. Accidental only policies cover only accidental death, while traditional term cover death for natural causes and accidents.

Accumulation Period

For a deferred annuity contract, the time period between the date that the contract owner purchases the annuity and either (1) the date that periodic income payments begin or (2) the date that the contract's surrender value is paid. During the accumulation period, the accumulation value of the annuity account grows.

Accumulation Unit

A unit of measurement that represents an ownership share in a selected sub account of a variable deferred annuity during its accumulation period. After the accumulation period ends, the accumulation units are used to buy annuity units

Activities of Daily Living (ADLs)

In long-term care insurance, activities such as eating, bathing, and dressing that an insured must be unable to perform in order to demonstrate a need for long-term care and, thus, qualify for long-term care benefits.

Actuary

A technical expert in insurance, annuities, and financial instruments who applies mathematical knowledge to industry and company statistics to calculate an insurance company's mortality rates, morbidity rates, lapse rates, premium rates, policy reserves, and other financial values

Agent

(1) In agency law, a party who is authorized by another party, the principal, to act on the principal's behalf in contractual dealings with third parties. (2) In insurance, any person or entity representing an insurance company and selling insurance. See also agent-broker, broker, general agent (GA), and personal producing general agent.

Age at Issue
The insured's age at the time coverage takes effect. Life insurance plans typically define issue age as either the age at the insured's last birthday or nearest birthday.

Beneficiary

The individuals or entities chosen to receive the proceeds for the death benefits from a life insurance policy or annuity contract.

Broker (Brokerage)
An insurance agency agent or licnesed representative who, on behalf of his or her clients, solicits life insurance quotes and generally sells various kinds of insurance for several companies.

Cash Surrender Value
The amount available to a policy owner when a life insurance policy is terminated for a reason other than the insured's death.

Claim
A request by an insured individual (or his or her service provider) for the insurance company to pay for services obtained from a health care professional

Contestable Clause (or Incontestable Clause)
A provision in a life insurance policy that states the time (called the contestable period) during which a policy may be contested or voided by the insurer based on misrepresentations contained in the application or medical examination. By law, the maximum contestable period is two years.

Contract (Policy)
The basic written agreement between the insurer and the policy owner or contract owner (sometimes referred to as "contract holder").

Conversion
A policy provision that states that the policy may be exchanged for another life insurance policy under certain circumstances, typically without further underwriting requirements. For instance, term life insurance can be converted to whole life or, Universal Life policy prior to expiration of the term policy.

Date of Issue
The effective date of the policy or contract as issued by the insurer.

Death Benefit
The amount paid to the beneficiary upon the death of the insured regardless of cause.

Deferred Annuity
An annuity in which periodic benefit payments do not begin until after a specified number of years or the annuitant reaches a specific age.

Rider: A modification made to a Certificate of Insurance regarding the clauses and provisions of a policy (usually adding or excluding coverage).

Risk: The chance of loss, the degree of probability of loss or the amount of possible loss to the insuring company. For an individual, risk represents such probabilities as the likelihood of surgical complications, medications' side effects, exposure to infection, or the chance of suffering a medical problem because of a lifestyle or other choice. For example, an individual increases his or her risk of getting cancer if he or she chooses to use tobacco.

Evidence of Insurability
Proof of a person's physical condition, occupation or other factors. This is used by a life insurance company to determine the acceptability of the applicant for life insurance. The applicaion questions, PHI Personal History Interview, APS- Attending Physicians Statement.

Face Amount
The amount stated on the life insurance policy that will be paid in the event of the death of the insured or at the policy's maturity, whichever occurs first. This does not include additional amounts which may be payable under accidental death or other special provisions or amounts acquired through the application of policy dividends, if any.

Fixed Amount Periodic Payment
Payments made in a specified amount that will completely exhaust a principal sum over a specified time period.

Fixed Annuity
An annuity that guarantees a minimum rate of interest during any accumulation period and provides a guaranteed periodic payment at annuitization.

Flexible Premium Deferred Annuity
An annuity that allows additional payments after the initial funding with annuitization beginning after a specified number of years.

Free-Look Provision
A provision in a life insurance policy or annuity contract that gives the policy owner or contract owner a stated amount of time to review a new policy or contract after issuance and receipt usually from 10-30 days. The policy or contract can be returned and voided within this time frame for a refund of all premiums paid; for life insurance policies, cancellation of coverage is effective from date of issue.

Grace Period
The time period following a monthly anniversary during which a life insurance policy will continue in force when the net cash surrender value is not sufficient to cover the monthly expense charge currently due.

Immediate Annuity
An annuity that begins payments within 12 months of the purchase date. An immediate annuity usually makes a payment at the end of each period of payment. The interval may be monthly, quarterly, semi-annually or annually.

Individual Retirement Annuity (IRA)
An annuity, available as a retirement account, for someone who is employed. IRAs receive favorable tax status under Section 408 of the Internal Revenue Code. IRAs are sometimes referred to as Individual Retirement Accounts.

Insured
The person whose life is covered by a life insurance policy.

Interest Rate (Current)
The current rate of interest credited to the life insurance policy or annuity contract.

Interest Rate (Loan)
The current rate at which interest is charged for a life insurance policy loan.

Irrevocable Beneficiary
A beneficiary designation that cannot be changed without the beneficiary's consent.

Issue Age
The insured's age at the time life insurance coverage takes effect. Insurance plans typically define issue age as either the age at the insured's last birthday or nearest birthday.

Joint Annuity (Joint Life Annuity)
An annuity payable to two or more annuitants until one of the two annuitants dies. The joint annuity may provide for continuation of payment or a reduced payment during the life of the surviving annuitant.

Lapse
The termination of an insurance policy due to nonpayment of premiums or, in the case of variable life and universal life insurance policies, the depletion of cash value below the amount needed to keep the policy in force. Under certain circumstances, coverage might continue under a settlement option.

Life Annuity
An annuity that pays a fixed income during the annuitant's lifetime. Payments cease at the annuitant's death, even if the annuity has not yet returned an amount equal to the premiums paid.

Lifetime Income with Period Certain
Income paid for the life of the annuitant, guaranteeing payment for a certain number of years if the annuitant does not survive. In the event the annuitant dies within the certain period, the beneficiary receives benefits for the remainder of the designated period.

Loan
A sum granted by a life insurance company to the owner of a life insurance policy, secured by the policy's cash surrender value.

Loan (Outstanding)
The total amount of policy loans, including both principal and interest accrued.

Maturity Date
For life insurance policies, the maturity date is the end of the contract term.

Monthly Anniversary
The same day as the policy date for each succeeding month.

Net Cash Surrender Value
The cash surrender value less any outstanding loans and/or surrender charges.

Period-Certain Annuity
An annuity with a predetermined guaranteed number of payments, at equal intervals made over a specified period. The payments are payable whether or not the annuitant dies prior to the end of the stipulated period.

Planned Periodic Payment
The premium designated at the time of application as the planned amount to be paid at specific intervals until the maturity date.

Policy Anniversary
An anniversary of the policy issue date.

(Policy) Contract
The basic written agreement between the insurer and the policy owner or contract owner. The policy or contract, together with the application and all endorsements and attached papers, constitutes the entire contract of insurance. A policy is usually life insurance; a contract is usually an annuity.

Policy Date
The date on which coverage becomes effective, as shown on the policy date page.

Policy Owner/Contract Owner (Owner)
An individual or entity that owns an insurance policy or annuity contract. The policy owner/contract owner may be the insured or the beneficiary. The policy owner pays the premium and is typically the only individual or entity who is permitted to make changes to a policy or contract, such as to change the beneficiary, withdraw cash values, or make loans on the policy. He or she may, or may not, also be the insured on the policy. Such rights may be limited in the event the policy has a collateral assignment.

Premium
Payments to the insurance company to purchase a life insurance policy and to keep it in force.

Rider
A written agreement attached to a life insurance policy or annuity contract that limits or expands the policy's or contract's terms or coverage. Riders may increase the premium you pay to the insurance company.

Surrender
The policy owner's right to terminate policy coverage in exchange for the policy's cash surrender value or other equivalent nonforfeiture values

Surrender Charge
As provided in the provisions of a life insurance policy or annuity contract, surrender charges are charges an insurance company may deduct if the owner surrenders a life insurance policy or annuity contract for the cash or accumulation value. Companies may also deduct this charge if the owner borrows money on his or her life insurance policy, if the policy lapses for nonpayment, or if the policy owner elects to decrease the face amount of the policy.

Term Insurance
A plan of insurance that covers the insured for a specified period of time (term) and not for his or her entire life. The policy pays a death benefit only if the insured dies during the term and if the policy has not lapsed for nonpayment of the premiums due.

Universal Life
A flexible-premium, current-assumption, adjustable death benefit policy. Similar to traditional life insurance policies, universal life pays a death benefit and accumulates cash value; however, unlike traditional life insurance policies, a universal life insurance policy allows the policy owner to adjust the death benefit and to vary the amount and/or frequency of premium payments and keep the policy in force .

Underwriter

The company that assumes responsibility for the risk, issues insurance policies and receives premiums.

Usual, Customary and Reasonable (UCR) or Covered Expenses: An amount customarily charged for or covered for similar services and supplies which are medically necessary, recommended by a doctor, or required for treatment.

Variable Life Insurance
A life insurance policy that provides flexible premiums and death benefits, as well as the opportunity to build cash value in separate investment options. The cash surrender value is not guaranteed, but will fluctuate with the market value of the separate account investment portfolio. The policy owner bears the risk of poor fund performance.

Whole Life Insurance
A life insurance policy that covers the insured for life, with level premiums payable for his or her entire lifetime.