Life Definitions

100% vested.

A rider attached to a life policy which allows the owner to take a percentage of the face value of the policy in advance of the insured's death. The money must be used for life altering circumstances, such as entering a nursing home or for the terminally ill.

The time before an annuitant's retirement during which the annuitant is making payments into his annuity. Sometimes referred to as a Deferred Annuity.

An insurance contract is a "take-it-or-leave-it" contract. The insurer makes up and forms the contract issued to an insured, and the insured must adhere to those terms. Any ambiguities in an insurance contract will be settled in favor of the insured. An insurance contract is a contract of ...

A policy where the insurance company has the contractual right to increase or decrease premium payments.

A form of whole life insurance which allows changes on the policy face amount, the amount of premium and the length of the premium payment period.

An insurance company authorized and licensed to transact business in a specified State.

An insurance company that is incorporated outside of the United States.

Tendency of less favorable insurance risks to seek or continue insurance to a greater extent than others who are preferred risks.

The person during whose life an annuity is payable. The owner or owners of the policy. There can be more than one _____ for the same policy.

Stipulated sum payable at certain regular intervals during the lifetime of one or more persons, or payable for a specified period only. A means of liquidating an estate or lump sum of money. These policies are primarily designed to pay benefits during the life of the insured rather than waiting for him or her to die.

A contract that provides an income for a specified (certain) number of years, regardless of life or death, to the annuitant if living, or to his or her beneficiary if deceased.

The person who makes the application for insurance and who is proposed to be the policy owner. Must have insurable interest in the insured.

A form supplied by the insurance company which is a formal request for insurance coverage. It must be signed by the insured, owner and producer, and is part of the insurance policy (consideration).

Signed legal transfer of interest, rights or benefits of a policy from a policy owner to another party (the assignee). A living benefit right of the policy owner. Examples include: Collateral Assignment (used to guarantee a loan) and Absolute Assignment used when a policy is gifted).

With reference to an insured, their current age.

Often referred to as an "admitted" insurer which is licensed to transact insurance in a specific State.

It excludes coverage for death or disability due to aviation (other than as a fare-paying passenger on a scheduled commercial airline).

Person to whom the proceeds of a life or accident policy are payable when the insured dies. If there is no beneficiary, the proceeds will go into the insured's estate.

Person to whom the proceeds of a life or accident policy are payable when the primary beneficiary dies before or at the same time as the insured dies .

Person who is first in line to receive the proceeds of a life or accident policy when the insured dies.

Beneficiary whose interest cannot be revoked without his or her written consent, because the policy owner has made the beneficiary designation without retaining the right to revoke or change it. This is in contrast to a Revocable Beneficiary which can be changed at any time by the owner of the policy.

A legal contract that determines what will be done with a business in the event one of the owners dies or becomes disabled. One partner agrees to sell his share of the business if he dies or becomes disabled, and the other partner agrees to buy a partner's share of the business if that partner dies or becomes disabled.

A booklet that describes an insurance policies concepts and suggestions. It also provides general information to help a policy owner make an intelligent decision.

means termination of coverage in "advance" of the policy's renewal date.

The amount of equity or ownership of any cash accumulated in a life policy.

A document issued by the Office of the Insurance Commissioner giving the authority to transact insurance business in a specified state. Once an insurer is "authorized" to do business in a state, they are referred to as "admitted" in that specific state.

A legal document that specifies that an insurance policy has been issued. Examples of a Certificate of Insurance: includes your auto insurance card or your group insurance card.

This provision provides that the primary beneficiary must survive the insured by a stated number of days (a.k.a. short-term survivorship clause) to receive the policy death benefits. If the primary beneficiary does not survive for the designated period, the death benefits will go to the contingent beneficiary.

The withholding of a fact that would affect the validity of a policy of insurance.If the concealment is found to be "material " to the policy of insurance, it could cause the voiding of or cancellation of the policy. (see "incontestability period") Conditional Receipt - Given to policy owners when they pay a premium at the time of application. This is issued by Life and Disability insurance producers.

A contractual term that requires that something of value be exchanged for a contract to be legal. Premium from the insured and a promise to pay from the insurer is consideration.

That part of an insurance contract setting forth the amount of initial and renewal premiums and frequency of future payments. In contract terms it is the value given between parties for a contract to be legal.

An agreement between two or more parties which is enforceable by law.

A policy provision which allows a policy owner to change one contract for another without having to show evidence of insurability.

Contract that may be converted to a permanent form of life insurance without the insured having to show proof of insurability (non-medical transactions).

The amount received by the beneficiary upon death of the insured; it is received by the beneficiary income tax free.

An unfair business and trade practice in which one person or company makes false or inaccurate statements about another party with the intent of injuring the reputation of that party.

An annuity providing for income payments to begin at some unspecified future date (usually retirement). It is equivalent to a tax deferred savings account.

Dividend - Policy owner's share in the divisible surplus of a company issuing insurance on the participating plan, a.k.a., return of unused premiums. Insurance policy ____ are NOT taxable to the owner. ____ are paid by Participating life insurance companies. _____ may NOT be guaranteed to a policy owner.

An insurance company that conducts business transactions in the state where they are incorporated. Examples of Washington State's _____ companies are Pemco and Safeco.

The date when an insurance policy begins (could be called the inception date).

is a document which broadens or restricts coverage or changes the contract.An endorsement is not valid unless signed by an executive officer of the company and attached to and made part of the policy.

is a permanent life insurance plans, they provide features which give a sense of stability through a guaranteed minimum interest rate, tax-deferred interest accumulation, and access to cash value through withdrawal and loan provisions. In addition, the EIL products offers equity index-linked (stock market) returns with the potential to beat inflation and protection in the contract against downside market risk.

A policy provision which states the terms and conditions in which benefits will NOT be paid. Most life insurance policies list three exclusions: War, Aviation, and Hazardous Occupations and Hobbies

The date specified in the policy as the date that coverage ends or terminates.

Federal law requiring an individual to be informed if he or she is being investigated by an inspection company. The law requires that the consumer must be notified that a credit report will be sought and told how it will be used. The consumer must be told how to obtain a copy of the report.? Information on the credit report can be disputed, and if the reporting agency cannot prove the disputed information is accurate, the information must be removed from the person’s file within 30 days.

A person who is held in a position of trust for another has ____ responsibility to that person. A producer has _____ responsibilities to his clients from whom he collects premiums.

An annuity that offers fixed payments and guarantees a minimum rate of interest to be credited to the annuity funds.

An insurance company doing business in a specific State, but is incorporated in another State.

A life or disability insurance company formed to provide insurance coverage for members of an affiliated lodge, religious organization or fraternal organization with a representative form of government.

An intentional misrepresentation or deceit with the intent to induce another to part with something of value. For example, filing a false claim. Generally, a lie on an application is considered a misrepresentation but NOT ____.

A provision whereby a policy owner has a minimum number of days to examine his/her new policy, from the date the policy is received, at no obligation. All premiums must be refunded within 30 days if the policy is rejected by the owner.

Period of time after the due date of a premium during which the policy remains in force without penalty. For life contracts, a minimum period of 31 days is required. The insured is covered during the grace period, but the unpaid premium is deducted from the proceeds.

An insurance contract that the insured has the right to continue in force by payment of premiums, and which the insurer has no right to make unilaterally any change in any provision, other than a change in premium rate for classes of insureds.

Anything that increases the chance of a loss such as smoking, being overweight, having a heart defect, or being a logger or race car driver. (Noun)

States that after a policy has been in force for two years, the policy may not be canceled or a claim voided for any reason other than for fraud or non-payment of premium.

Loss that would be sustained upon the death or disability of another to warrant compensation. The owner/applicant must have ____ in the insured. Business partners have financial ____ in one another, parents have insurable interest in their children. _____ must exist at the time of the application.

The acceptance or qualifying of an application by the insurance company to issue a policy.

Social device for transferring risk (specifically the financial impact of the loss) by spreading it among a sufficiently large number of similar exposures.

The individual covered by the insurance.

An entity that pays for the financial losses of another due to sickness or accidents.

The insurance company's promise to pay. It defines and describes the scope of the coverage provided and limits of indemnification. The ____ is found on the first page of the life insurance contract. It is sometimes called "the heart of the contract."

An annuity issued on two lives under which payments continue in whole or in part until the death of both annuitants.

An insurance contract written on two or more lives, with the insurance payable at the death of the first insured. A ____ averages the risk factors (i.e., age and sex) to establish the premiums. This is one reason why a ____ is less expensive for covering two individuals than purchasing two separate policies.

A joint policy which covers two insureds and pays the proceeds after the second insured dies. This is a type of joint whole life policy and usually is used for estate planning. A joint policy averages the risk factors (i.e., age and sex) to establish the premiums. That is why a joint policy is less expensive for covering two individuals than purchasing two separate policies.

An annuity issued on two lives under which payments cease at the death of either of the two annuitants. Very risky for the annuitant.

A principal that states the larger the number of similar exposures considered, the more likely or closely the losses reported will equal the expected losses.

A policy premium that remains the same over the period of time premiums are due.

A contract that provides an income for the life of the annuitant (payments stop at death). --- a.k.a. Pure, Straight or Life Annuity with no refund. Very risky for the annuitant.

A legal contract, governed principally be state law, that promises to pay a specified amount of money to a beneficiary when the insured person dies. The contract is between the insurance company and the policy owner, who pays premiums in exchange for the promised death benefits. Frequently the policy owner is the person insured, but the policy can be owned by someone other than the insured. See third party owner.

A form of whole life insurance characterized by premium payments only being made for a limited number of years.

Information about the insured that if known would change the underwriting basis of the insurance, and that would cause the insurer to refuse the application. A ____  ____ could cause the policy to have been issued on "substantially different terms" such as charge a higher premium (i.e., surcharge or rate-up) or issue the policy with an exclusion rider (i.e., aviation, hobby or occupation).

An insurance industry bureau to which life and health insurers report applications and other reports about applicants. The information is then available to other member companies for underwriting purposes. The main purpose is to detect application fraud. The applicant has the same rights as those available under the Fair Credit Reporting Act.

On the part of an insurer or its producer, falsely representing the terms, benefits, or privileges of a policy to an insured or prospective insured. On the part of an applicant, falsely representing the health or other conditions of the proposed insured on the application. A misrepresentation is a lie.

The method of paying policy premiums. They include annual, semi-annual, quarterly or monthly.

Listing of the mortality experience of individuals by age; permits an actuary to calculate, on the average, how long a male or female of a given age may be expected to live.Mortality tables end at age 100.

An insurance company that has no capital stock, but is owned by the policy owners. ____ companies sell participating policies because they share in the profits with the policy owners by paying dividends. "Participating" Whole Life policies pay dividends.

An insurance company who does not have a certificate of authority to transact insurance business in a specific State. Often referred to as an "Unauthorized" company.

Privileges allowed under the terms of a whole life insurance contract after cash values have been created.

A life or health insurance policy that is underwritten based on the insured's statement of health rather than a medical examination.

The true name for Social Security.

Insurance on which all required premiums have been paid. The term is frequently used to mean the reduced paid-up insurance available as one of the nonforfeiture options.

Mutual Insurance Companies and Fraternal Companies "participate" with their profits by paying dividends (profits) to the policy owners.

The person or entity who pays the premium.

Available under juvenile life insurance policies. Provision can be made in all forms of juvenile insurance for the waiver of premium payments in the event of the death or total disability of the person responsible for the payment of premiums.

The cause of a loss. An accident or sickness causes death, a fire damages a house. Accident, sickness and fire are types of perils.

The party who has the right to exercise the rights in the contract. The owner may be a different party than the insured, who then would be known as a third party owner.

The payment or consideration that the insured makes to the insurance company for insurance coverage.

1. Fixed (a.k.a. level) premium refers to the premium paid which remains the same throughout the life of the contract. It is a method of leveling off the cost of insurance so as not to have it increase each year until it might become unaffordable.

2. Flexible premium means the policy owner is permitted to increase or decrease his premium.

3. Adjustable premium means the premium may be increased or decreased by the insurance company to reflect the insurance company's loss or profit experience.

4. Gross Premium = Mortality (charge), Interest (credit) and Expenses (a.k.a. load charges). Producers sell gross premium policies and aren't even aware of the net.

5. Net Premium = premium without the expenses added in.

Usually refers to the face amount or value of a policy.

A person licensed to transact insurance business.

The amount of money payable by the insurance company at the insured's death or at the policy maturity.

Refers to term life insurance protection that pays a death benefit but builds no equity or cash value in the contract.

A retirement plan governed by the Federal Government. Usually allows tax deductions for any contributions and tax deferred growth on those contributions. Full taxes will be due when withdrawn. Has early and late withdrawal penalties.

Giving money back to a person or guarantying to give money back to a person as an inducement for that person to purchase insurance. Illegal in the State of Washington.

An annuity that provides that the difference between the original cost and payments made to the annuitant, during the annuitant's life, will be paid to a beneficiary.

Putting a lapsed policy back in force by producing satisfactory evidence of insurability and paying the premiums required. In life insurance, the insured has three years to reinstate.

Allows the policy owner to renew an insurance policy by just paying the required premium, but will NOT require any evidence of insurability by the insured.

Statements made by an applicant in the application which are believed to be true to the best of the applicant's knowledge. These are not guarantees, but statements considered to be substantially true to the applicant at the time of the application.

A newly introduced term life insurance policy providing death benefit protection if the insured dies and return of premium feature if the insured lives.

A type of rider that will pay an amount equal to the sum of all premiums paid to date if the lives to a specified term, such as 10, 15, or 20 years after the policy is issued. Works the same as the ROP.

Beneficiary whose rights in a policy are subject to the policy owner's reserved right to revoke or change.

The term is used loosely to refer to any supplemental agreement attached to and made a part of the policy, whether the policy's conditions are expanded and additional coverage added, or a coverage or condition is waived.

(feeling) The probability or chance of a loss.

A Speculative ____ involves the chance of both loss or gain, such as investing in the stock market, and is not insurable.

Pure ____ is only the chance of a loss and no gain.

Only pure ____ is insurable, not speculative ____.

Under a group-life insurance plan, Internal Revenue Code section 79, the employee must report as gross income only the economic benefits (cost of insurance) over $50,000 which was tax deducted by the employer. The employee's spouse may be insured for up to 50% of the employee's coverage and the children may be insured for up to $2,000 without having to report the premiums as income.

_____ of the IRC governs non-qualified retirement plans for state and local government workers. _____ also governs deferred compensation and salary continuation plans.

Optional modes of settlement provided by life insurance policies in lieu of lump-sum payments. Identical to the annuity payout options.

A test applied to life insurance contracts under the Internal Revenue Code that is designed to determine if the contract is primarily an investment rather than a life insurance contract. Premiums during the first seven years of the contract may not exceed seven annual net level premiums. A life policy which violates the _____ is considered to be over-funded.

A life insurance policy that provides a guaranteed death and endowment benefit for one single lump sum premium payment. Has immediate cash value that will build and equal the face amount of the policy when the insured reaches age 100 and endows.

Gain or a loss. Value of a home or stock going up or down in value is known as a _____. This type of risk is NOT insurable. Only pure risk is insurable.

Are usually approved and required by individual States, and must be included in an insurance contract.

A company owned by stockholders. Profits or dividends are paid to the stockholders (NOT the policy owners).

An investor group initiates the insured's application and pays a sum to the insured up front to get the insured/owner to sell the policy to the "stranger-investor" after the policy is issued. The beneficiaries - strangers benefit from the death of the insured.

A basic life insurance policy that charges a fixed premium for the lifetime of the insured. May also be called a Continuous Premium Whole Life.

A person who is not as healthy as a standard risk but is still insurable. Often requires a high premium to be paid.

Life insurance policies provide that if the insured commits suicide within two years of the effective date or issue date of the policy, the company's liability will be limited to a return of all of the premiums paid (no interest), but not pay any death benefit. Meaning, death due to suicide is excluded from coverage for a maximum of two years.

The policy owner returns the policy to the insurance company in exchange for the policy's cash surrender value or other equivalent non-forfeiture values.

A person who is licensed to act as an agent for a brief period of time (no more than 180 days in Washington) without taking a written examination. Temporary licenses are commonly granted to allow someone to continue the business of an agent (to legally represent that agent) who has died or becomes disabled.

Least expensive of all types of life insurance protection; pays only upon death; builds no cash value. Types include Level, Decreasing, Increasing and a Return of Premium. This pure protection life insurance coverage which is in effect for a period of time or a term, such as 10 years or 20 years. After the stated term of the policy the policy ends, unless renewed by the owner.

The third person in line to receive the death proceeds of a life insurance policy. Will receive the death proceeds only if the primary and contingent beneficiaries die before the insured dies.

A person other than the insured, who has insurable interest, may apply for and own a policy covering the insured and is entitled to the benefits and other rights provided. The first party is the insured; the second party is the insurance company; and the third party is the owner of the contract, if other than the insured. For example, to prevent the financial impact of death, parents will purchase and own policies on their children, or business partners will insure one another.

The illegal practice of inducing a policy owner in one company to let lapse, forfeit or surrender a life insurance policy by using unfair advertising practices or by misrepresentation, for the purpose of taking out a policy in another company. Failing to fill out a replacement form when replacing an in force policy is considered twisting.

The process of selection, classification and rating of risks. Simply put, _____ is a risk management selection process. The selection process consists of evaluating information and resources to determine how an individual will be classified. For example, preferred, standard or sub-standard.

A contract characteristic that obligates only one party to a contract. The policy owner is not required to pay premiums and can cancel the policy whenever they want to. However, if the premium is paid, the insurer is required to pay death proceeds should the insured die.

1. Flexible premium
2. current assumption
3. adjustable death benefit
4. permanent life contract
5. containing renewable term insurance and a 6. cash value account that generally earns interest at a higher rate than a traditional policy.
7. Premiums are deposited in the cash value account after deductions for expenses and the cost for the term coverage.

A contract that pays a stated amount in the event of a claim or loss.

An annuity under which the amount of each periodic payment fluctuates according to the investment (stock market) performance of the separate account.

Life insurance under which the benefits are:
1. not fixed but relate to the value of assets behind the contract at the time the benefit is paid.
2. ______ insurance has an investment feature which allows cash value (known as accumulation units) to be invested in the stock market.

The time period between when a loss occurs and a benefit is paid by the insurer.

This provision or rider exempts the insured from paying premiums after he or she has been disabled for a specified period of time (known as a waiting period).

Works the same way the waiver of premium works but also pays a regular monthly income to the insured who becomes totally disabled.

A written (expressed) guarantee in the contract (policy) that something is true in every respect, and will remain true throughout the contract term.

For example, a hotel will ______(-y) to the insurance company that its sprinkler system will be in operation 24 hours a day to help prevent and limit damage caused from fire.? In any insurance contract or policy, the _____ given by the insurance company is their promise to pay. This is found in the insuring agreement (clause).