Insurance Glossary: Part 1

Insurance Glossary: Part 1 Accelerated Benefits Rider: A life insurance rider that allows for the early payment of some portion of the policy's face amount should the insured suffer from a terminal illness or injury. Accidental Death Benefit Rider: A life insurance policy rider providing for payment of an additional cash benefit related to the face amount of the base policy when death occurs by accidental means. Accidental Death Insurance: Insurance providing payment if the insured's death results from an accident. Agent: An authorized representative of an insu rance company who sells and services insurance contracts. Annually Renewable Term: A form of renewable term insurance that provides coverage for one year and allows the policy owner to renew his or her coverage each year, without evidence of insurability. Also called yearly renewable term. Assignment Assignment: The transfer of the ownership rights of a Life Insurance policy from one person to another. Attained Age: Your current age. Your attained age is one of the factors life insurance companies use to determine your premiums. The older you are, the greater chance you'll die while you are covered - so the higher your premium. Backdating: A procedure for making the effective date of a policy earlier than the application date. Backdating is often used to make the age of the consumer at issue lower than it actually was in order to get lower premium. State laws often limit to six months the time to which policies can be backdated. Beneficiary: The person designated to receive the death benefit when the insured dies. Binder: A temporary insurance policy that expires at the end of a specific time period or when the permanent policy is written. A binder is given to an applicant for insurance during the time the complete policy paperwork is being completed. Cash Benefits: Money that is paid to the insured upon settlement of a covered claim. Often found with Hospital Income Programs, "cash benefits" are paid directly to the insured rather than the doctor or the hospital directly. Cash Value: The equity amount or "savings" accumulation in a whole life policy. Claim Notification to an insurance company that payment of an amount is due under the terms of the policy. Conditional Receipt: Given to policy owners when they pay a premium at time of application. Such receipts bind the insurance company if the risk is approved as applied for, subject to any other conditions stated on the receipt. Contestable Clause: A provision in an insu rance policy setting forth the conditions under which or the period of time during which the insurer may contest or void the policy. After that time has lapsed, normally two years, the policy cannot be contested. Example: Suicide. Contingent Beneficiary: Person or persons named to receive proceeds in case the original beneficiary is not alive. Also referred to as secondary or tertiary beneficiary. Coverage: Another word for insurance. Insurance companies use the term coverage to mean either the dollar amounts of insurance purchased ($200,000 of liability coverage), or the type of loss covered (coverage for theft). e a large proportion of part-time workers, or that experience high employee turnover. Conversion Privilege: Allows the policy owner, before an original insurance policy expires, to elect to have a new policy issued that will continue the insurance coverage. Conversion may be effected at attained age (premiums based on the age attained at time of conversion) or at original age (premiums based on ageat time of original issue). Convertible Term: A policy that may be changed to another form by contractual provision and without evidence of insurability. Most term policies are convertible into permanent insurance. Cross-Purchase Plan: An agreement that provides that upon a business owner's death, surviving owners will purchase the deceased's interest, often with funds from life insurance. Death Benefit: The amount of money paid to the beneficiary when the insured person dies. Decreasing Term Insurance: Term life insurance on which the face value slowly decreases in scheduled steps from the date the policy comes into force to the date the policy expires, while the premium remains level. The intervals between decreases are usually monthly or annually. Double Indemnity: Payment of twice the basic benefit in the event of loss resulting from specified causes or under specified circumstances. Evidence of Insurability: Any statement or proof of a person's physical condition, occupation, etc., affecting acceptance of the applicant for insurance. Exclusions: Specified hazards listed in a policy for which benefits will not be paid. Expiry: The termination of a term life insurance policy at the end of its period of coverage. Face Amount: The amount of insu rance provided by the terms of an insurance contract, usually found on the first page of the policy. In a life insurance policy, the death benefit. Final Expenses: Expenses incurred at the time of a person's death. These include funeral costs, court expenses associated with probating his or her will, current bills or debt, and taxes. Depending on their circumstances, the survivors may also want to pay the outstanding balances of mortgage and loans. First To Die Insurance: Insurance policy whose death benefit is paid to the surviving insured upon the death of one of the insured's. There is no longer a benefit once the benefit is paid, however, the surviving insured usually has the option of purchasing a policy of the same amount without providing evidence of insurability. Fixed Benefit: A death benefit, the dollar amount of which does not vary. Free Look: Provision required in most states whereby policy owners have up to 20 days to examine their new policies at no obligation. Funeral Expenses: Expenses incurred for a funeral and burial. These can include casket, vault, grave plot, headstone and funeral director. Grace Period: Period of time after the due date of a premium during which the policy remains in force without penalty. Graded Premium Policy: A type of whole life policy designed for people who want more life coverage than they can currently afford. They pay a lower premium rate that increases gradually over the first three to five years and then remains constant over the life of the policy.