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Life Insurance Definitions
Beneficiary
The person(s) named in the policy to receive the life insurance
proceeds upon the death of the insured.
Cash (Surrender) Value
The amount that is available in cash for loans and that may be
available for withdrawals. Accessing Cash Surrender Value may
reduce the death benefit and may increase the risk of lapse.
Convertible Term
Insurance
Term insurance which can be exchanged (converted), at the option
of the policy owner and without evidence of insurability, for a
permanent insurance policy.
Dividend
A return of part of the premium on participating insurance that
is based on the insurer's investment, mortality, and expense
experience. Dividends are not guaranteed.
Face Amount
The amount stated on the face of the policy that will be paid in
case of death. It does not include additional amounts payable
under accidental death or other special provisions, or acquired
through the application of policy dividends.
Insurability
Acceptability to the company of an applicant for insurance.
Insured or
Insured Life
The person on whose life the policy is issued.
Level Premium
(Life Insurance)
Life insurance for which the premium remains the same from year
to year. The premium is normally more than the actual cost of
protection during the earlier years of the policy and less than
the actual cost in the later years. The building of a reserve is
a natural result of level premiums. The payments in the early
years, together with the interest that is to be earned, serves
to balance out the underpayment of the later years.
Loan (Policy
Loan)
A loan made by a life insurance company from its general funds
to a policyowner on the security of the cash value of a policy.
Paid-up
Insurance
Insurance that will remain in force with no need to pay
additional premiums.
Participating
Policy
A life insurance policy that is eligible for the payment of
dividends by the insurer (see also Dividend.)
Permanent (Life
Insurance)
Any form of life insurance except term; generally insurance that
builds up a cash value, such as whole life.
Policyowner
The person who owns a life insurance policy. This is usually the
insured person, but it may also be a relative of the insured, a
partnership or a corporation.
Premiums
Payments to the insurance company to buy a policy and to keep it
in force.
Renewable Term Insurance
Term insurance which can be renewed at the end of the term, at
the option of the policyowner and without evidence of
insurability, for a limited number of successive terms. The
rates generally increase at each renewal as the age of the
insured increases.
Term Life Insurance
Life insurance that does not build up cash value and where the
premium normally increases as the insured gets older.
Universal Life
Insurance
A flexible premium life insurance policy under which the policy
owner may change the death benefit from time to time (with
satisfactory evidence of insurability for increases) and vary
the amount or timing of premium payments. Premiums (less expense
charges) are credited to a policy account from which mortality
charges are deducted and to which interest is credited at rates
which may change from time to time.
Whole Life Insurance
A basic type of permanent life insurance which can provide
lifetime protection at a level premium. Premiums must generally
be paid for as long as the policy is in force.
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