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Accelerated Benefit
Provision - A provision in many new policies which will
allow the policy owner to receive a portion of the death benefit
early if the insured person is diagnosed with a terminal illness.
Accidental Death Benefit - A rider added to a policy
that provides an additional benefit if the insured dies from
accidental causes.
Agent - A licensed person or organization authorized
to sell insurance by or on behalf of an insurance company.
Binder - A temporary or preliminary agreement which
provides coverage until a policy can be written or delivered.
Broker - A licensed person or organization paid by
you to look for insurance on your behalf.
Cancellation - The termination of insurance coverage
during the policy period. Flat cancellation is cancelling
a policy as of its effective date, without any premium charge.
Certificate - A statement provided to an employee describing
the benefits provided under group insurance.
Claim - Notice to an insurer that under the terms of
a policy, a loss maybe covered.
Claimant - The first or third party. That is any person
who asserts right of recovery.
Deferred
Annuity - In a deferred annuity, you receive payments
starting at some later date, usually at retirement. With a
deferred annuity you can invest either a lump sum all at once,
or make periodic payments, either fixed or variable. Those
funds grow tax-deferred until you're ready to begin receiving
payments. Deferred annuities make up a large majority of all
annuity sales in the United States, and are the type of annuity
that Annuity FYI generally recommends if you do not need immediate
income from your annuity.
Endorsement - Amendment to the policy used to add or
delete coverage. Also referred to as a "rider."
Evidence of Insurability - Medical and other information
about a person applying for insurance that the life insurance
company keeps confidential, but uses to decide what premiums
to charge.
Exclusion - Certain causes and conditions, listed in
the policy, which are not covered.
Expiration Date - The date on which the policy ends.
Face Amount - The amount to be paid to the beneficiary
when the insured dies. It will be reduced by any unpaid policy
loans and interest on those loans.
Fixed
Annuity - Fixed annuities are invested primarily
in government securities, and high-grade corporate bonds. They offer a guaranteed rate of return, typically over
a period of one to ten years. There are two basic types of
fixed annuities: the Guaranteed Return Annuities (GRA) is
a fixed annuity that offers a guarantee that you can never
receive less than 100% of your investment -- no penalties
or fluctuations in the interest rate market can impact your
principal should you surrender. The Market Value Adjustment
annuity (MVA) works much like the GRA, but there is no guarantee
of your principal if rates rise and you surrender your
contract. MVAs work like a bond and often pay more than a
GRA due to the increased short-term risk of rising rates.
Free Look - A required period, usually 10 days after a policy has been
delivered to the policy owner, during which the policy can
be returned for a refund of all amounts paid.
Grace Period - A period (usually 31 days) after the
premium due date, during which an overdue premium may be paid
without penalty. The policy remains in force throughout the
period.
Guaranteed Insurability - An option that permits the
policy holder to buy additional stated amounts of life insurance
at certain times in the future without having to provide new
evidence of insurability.
Illustration - A document used in life insurance sales
presentation showing yearly numbers indicating how a policy
will work. Usually it assumes that amounts being paid today
will continue in all future years.
Immediate
Annuity - In an immediate annuity, the investor
begins to receive payments immediately upon investing. This
is for investors that need immediate income from their annuity. When you purchase an immediate annuity you can choose
between payments for a certain period of time (typically five
to twenty years – "period certain"), payments
for the rest of your life and/or your spouse's life, or any
combination of the two. You can even choose between a fixed
payment that doesn't vary or a variable payment that is based
on market performance.
Insured -
The person on whose life an insurance policy is issued.
Insurer - The insurance company.
Lapse - Discontinuation of insurance without cash values
when required premiums are not paid.
Limit - Maximum amount a policy will pay either overall
or under a particular coverage.
Loan Value - The amount which can be borrowed by the
policy owner from the company using the value of the policy
as collateral. Usually the interest rate payable on the loan
varies based on an index defined in the policy
Mode of Premium Payment - The frequency of premium
payments during the policy year. Premium payments can usually
be made on annual, semiannual, quarterly or monthly modes.
Mortality Table - A statistical table showing the death
rate (probability of death) at each age.
Non-Forfeiture Options - Provision in the policy which
allow policy owner to chooses how the cash value of the policy
will be used if the policy is surrendered.
Ownership - All rights, benefits, and privileges under
a policy are controlled by the owner, who is usually the insured.
Ownership may be transferred or assigned to someone else by
written request of the current owner.
Paid-Up Insurance - Policy on which it is guaranteed
that no further premium need be paid.
Participating Insurance - Insurance on which the policy
owner is entitled to share in the surplus earnings of the
company through dividends which reflect the difference between
the premium charged and the actual earnings and costs of providing
coverage.
Policy - The printed document issued to the policy
owner by the company stating the terms of the insurance contract.
Policy Year - A one-year period starting on the day
and month the policy was issued. The first policy year starts
on the date of issue, and ends on the day before the policy's
first anniversary.
Premium - The payment, or one of the regular periodic
payments, a policy owner is required to make for an insurance
policy to keep it in effect.
Premium Financing - A a policyholder contracts with
a lender to pay the insurance premium on his/her behalf. The
policyholder agrees to repay the lender for the cost of the
premium, plus interest and fees.
Pro-rata Cancellation - When the policy is terminated
midterm by the insurance company, the earned premium is calculated
only for the period coverage was provided.
Quote - An estimate of the cost of insurance, based
on information supplied to the insurance company by the applicant.
Rated Policy - A policy issued with an additional premium
to cover the extra risk involved if an insurer has impaired
health or a hazardous occupation or hobbies.
Reinstatement - The restoring a lapsed or surrendered
policy to full force and effect. The company requires evidence
of insurability, and payment of all amounts necessary, including
interest, to put the policy into the condition it would have
been in had the lapse or surrender not occurred.
Rider - A provision added to a policy that provides
additional benefits.
Settlement Option - One of the several ways, other
than immediate payment in a lump sum, that the insured or
beneficiary may choose to have the policy proceeds paid.
Standard Risk - The classification of an applicant
for a life insurance who fulfills the physical, occupational
and other requirements on which most of a company's policies
are issued. Someone whose characteristics are more favorable
may be classified as a "Preferred Risk". When the
characteristics are less favorable, the applicant may be characterized
as "Rated", or refused coverage altogether.
Suicide Clause - A policy provision which reduces the
amount to be paid if the insured dies of suicide within the
first two policy years.
Surrender - To terminate or cancel a policy for its
cash value or other nonforfeiture options before the maturity
date.
Underwriting - The process of evaluating applicants
for insurance and classifying them fairly so the appropriate
premium rates may be charged. This may involve a physical
examination of the applicant.
Variable
Annuity - It is a contract between you (the annuity
owner) and a life insurance company. In return for your payment,
the insurance company agrees to provide either a regular stream
of income or a lump sum payout at some future time (generally,
once you retire or pass age 59 1/2). Your premiums are invested
in one or more securities portfolios and fixed interest accounts,
where they earn interest and/or capital appreciation. No taxes
are due until these earnings are paid out. (If you make a
withdrawal before age 59 1/2, you could incur a 10% tax penalty.)
Waiting Period - A period of time set forth in a policy which must pass before
some or all coverages begin.
Waiver of Premium - A rider added to policy that will
pay the premiums during the total disability of the insured.
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