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Guide To Life Insurance Terms
Listed below is a useful guide to life insurance terms. It is a list of definitions of life insurance terms that may or may not be familiar to you. 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 or permanently confined to a nursing home. Accidental Death Benefit A provision added to a policy that provides an additional benefit if the insured dies from accidental causes. CertificateA document provided to a person insured under a group insurance policy that provides evidence that the coverage exists. Convertible Term Insurance These policies allow conversion, without further medical evidence, to a different type of policy from an insurance company's range. Decreasing Term Insurance The sum assured decreases each year throughout the term of the policy. Dependent protection Where the protection is required on a permanent basis rather than just for a specified term. Evidence of InsurabilityMedical and other information about a person applying for insurance that the life insurance company keeps confidential, but uses to decide whether the policy can be issued and what premiums will be charged. Face AmountThe amount to be paid to the beneficiary when the insured dies. Free LookThe right of the policy holder to have a period of ten or more days to examine an insurance policy, and if not satisfied, return it to the company for a full refund of all amounts paid. Grace PeriodA period of time after the premium due date when an overdue premium may be paid without penalty. The policy remains in force throughout the period. Guaranteed InsurabilityAn option that permits the policyholder to buy additional stated amounts of life insurance at certain times in the future, without having to provide new evidence of insurability. IllustrationA document used in life insurance sales presentations showing year-by-year numbers indicating how a policy will work. Increasing Term InsuranceUnder this option, the benefit payable on death increases and is particularly useful to avoid the sum assured being eroded by inflation. InsuredThe person whose life is covered by a life insurance policy.LapseThe discontinuation of insurance without cash value when the required premium is not paid. Level Term Life InsuranceIn this form a policy will pay out a fixed sum on death during the term.Loan ValueThe amount which can be borrowed by the policy holder from the company using the value of the policy as collateral. Mode of Premium PaymentThe frequency of premium payments during
the policy year. Premium payments can usually be made on annual, quarterly, or monthly basis. Mortality TableA statistical table showing the death rate for each age.Nonforfeiture OptionsA provision in the policy that allows the policy holder to choose how the cash value of the policy will be used if the policy is surrendered or lapses due to non-payment of premium. OwnershipAll rights, benefits, and privileges under a policy controlled by the insured.Paid-Up InsuranceA life insurance policy where all premiums have already been paid, with no further premium payment due. PolicyThe printed document issued to the policy holder by the company stating the terms of the insurance contract. Policy YearA one-year period starting on the day and the 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 date. PremiumThe payment a policy holder is required to make to an insurance company to purchase insurance coverage and to keep the policy in force. Rated PolicyA policy issued with an additional premium to cover the extra risk involved if an insured has impaired health, a hazardous occupation or hobby.ReinstatementThe restoring of a lapsed or surrendered policy to full force and effect.Renewable Increasable Convertible Term InsuranceThis contract combines the options of increasing the sum assured, converting the policy and renewing the contract. Reviewable TermLevel term assurance with an option to renew the contract at the end of the term, without the need for further medical evidence. RiderA provision added to a policy that provides additional benefits.Settlement OptionThe manner in which the insured or beneficiary may choose to have the policy proceeds paid. Suicide ClauseA policy provision which reduces or eliminates the amount to be paid if the insured dies from suicide.
SurrenderTo voluntarily terminate or cancel a policy for its cash value. Term
Life InsuranceThis type of policy runs for a specified time period. UnderwritingThe
process of evaluating applicants for insurance and classifying them fairly,
so the appropriate premium rate may be charged Waiver of PremiumA provision
added to a policy that will waive the premium payments required by an insured
during the total disability of the insured. You may freely reprint this article
provided the author's biography remains intact:.
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