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Life Insurance

Glossary

Accidental Death Benefit -

An extra death benefit amount that is paid out in addition to the face amount of the life insurance policy if the insured dies as the result of an accident. This benefit adds additional cost to the life insurance policy premium.

Accelerated Death Benefit Option -

In the event of terminal illness, usually one year or less, the insured has the option to withdraw some of the death benefit for his personal use. This option is usually free and is offered by most insurance companies.

Backdating -

A procedure for making the effective date of a policy earlier than the application date. Backdating is often used to make the age at issue lower than current in order to get you a lower premium.

Beneficiary -

The person designated to receive the proceeds (death benefit) from the life insurance policy when an insured dies.

Collateral Assignment -

Assigns all or part of a life insurance policy as security for a loan. If the insured dies the creditor would receive only the amount due on the loan.

Conditional Binding Receipt -

Provides that if a premium check accompanies an application, the coverage will be in force from the date of the completed application and medical examination, whichever is later, provided the insurer would have issued the coverage on the basis of the facts revealed on the application, medical examination and other usual sources of underwriting information.

Contestability Clause -

A provision in a life insurance policy setting forth the conditions under which or the period of time during which the insurer may contest or void the life insurance policy. After that time has lapsed, normally two years, the life insurance policy cannot be contested. Example: Suicide.

Contingent Beneficiary -

A person or persons named to receive life insurance policy benefits if the primary beneficiary is deceased at the time the benefits become payable.

Evidence of Insurability -

A statement of information from the insured needed for the underwriting of an insurance policy.

Examination -

The no cost medical examination of an applicant for Life Insurance. Examiner: A physician, nurse, or Para-med appointed by the medical director of a life insurance company to screen applicants.

Face Amount -

The amount of life insurance provided by the terms of a life insurance contract, usually found on the face of the life insurance policy. Also known as the death benefit.

Insurable Interest -

You have an insurable interest in the insured if upon the death of the insured you would suffer financial loss. Beneficiary must have insurable interest (or financial loss) for the Insured.

Insurance Age -

Some life insurance companies calculate age by using the age you are nearest to or the age you will be in the next 6 months. Example: Insured is 45 and it is January and the insured's birthday is in March. If the insurance company was calculating age nearest, the insured would be considered age 46 for the purpose of calculating rates.

Medical Information Bureau (MIB) -

A data service that stores coded information on the health histories of persons who have applied for insurance from subscribing companies in the past. Most Life insurers subscribe to this bureau to get more complete underwriting information.

Ownership -

The owner of the life insurance policy controls all rights, benefits and privileges under life insurance policies. Policy owners may or may not be the insured. Ownership may be assigned or transferred by written request of current owner.

Rated Policy -

Coverage issued at a higher rate than standard because of some health condition, or impairment of the insured.

Rider -

An attachment or endorsement to an insurance policy that modifies its conditions by expanding or restricting benefits or excluding certain conditions from coverage.

Return of Premium Rider (Money Back Rider) -

Provides a guaranteed return of all premiums paid at the end of the term period minus any benefits paid. If no benefits have been paid, the insured or policy owner will receive a full refund of all premiums paid, guaranteed.

Term Insurance (Level Term Life Insurance) -

The type of life insurance that provides protection for a specified period of time only.

Waiver of Premium -

A provision of a life insurance policy which continues the coverage without further premium payments if the insured becomes totally disabled for a period of time, usually 6 continuous months.