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P

Paid-up Insurance
Insurance on which all required premiums have been paid. The term is frequently used to mean the reduced paid-up insurance available as a non-forfeiture option.

Paramedical Examination
Physical examination of an applicant by a trained person other than a physician.

Participating Insurance
Insurance issued by an insurance company providing participation in dividend distribution.

Participating Policy
A life insurance policy under which the company agrees to distribute to policy holders the part of its surplus which its Board of Directors determines is not needed at the end of the business year. Such a distribution serves to reduce the premium the policy holder had paid. See also: Policy dividend; Nonparticipating policy.

Payor
The person making premium payments on a policy.

Pegging
Pegging is a practical smoothing device used to arbitrarily increase the actual dividend (s) paid on a new lower dividend scale to eliminate a temporary reduction in the actual dividends paid from year to year on a policy. Usually only base policy dividends are pegged; dividends on riders and Paid Up Additions (PUA) are not. See: Substitution. Pegging compares (normally before any adjustments for loans) the following: (a) The smaller of the dividend amount actually paid in the prior policy year and the prior year's dividend schedule payable in the current policy year, and (b) The current policy year's formula payment under the current year's schedule. This distribution does not follow the contribution method. It's done infrequently to enhance persistency.

Peril
The cause of a loss insured against in a policy.

Permanent Life Insurance
Type of life insurance other than term insurance which accrues cash value and is designed for long-term, or permanent, needs of a policy holder. Includes universal and variable life, among others.

Persistency
The degree to which policies stay in force through the continued payment of renewal premiums.

Persistency Bonus (Policy Owner's)
An enhancement to the policy's benefits, usually in the form of additional interest credits and/or reduced charges, for policies that remain in force for a certain period. The bonus may or may not be guaranteed in the contract.

Personal Representative
A person appointed through the will of a deceased or by a court to settle the estate of one who dies.

Policy
The legal document issued by the company to the policy holder, which outlines the conditions and terms of the insurance; also called the policy contract or the contract.

Policy Dividend
A refund of part of the premium on a participating life insurance policy reflecting the difference between the premium charged and actual experience.

Policy Fee
Fee added to the periodic premium payments to cover undefined policy costs.

Policy limit
The maximum amount a policy will pay, either overall or under a particular coverage.

Policy Loan
A non-recourse loan from the insurer to the policyowner secured by the policy's cash value.

Policy Owner
The individual who owns an insurance policy and who has all contractual rights. The policyowner is not necessarily the same person as the insured or the payor.

Policy Reserves
The measure of the funds that a life insurance company holds specifically for fulfillment of its policy obligations. Reserves are required by law to be so calculated that, together with future premium payments and anticipated interest earnings, they will enable the company to pay all future claims.

Policy Term
That period for which an insurance policy provides coverage.

Policy Holder
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.

Policy Holders' Surplus
Sum left after liabilities are deducted from assets. Sums such as paid-in capital and special voluntary reserves are also included in this term. This surplus is an additional financial protection to policy holders in the event a company suffers unexpected or catastrophic losses. The financial base that permits a company to sell insurance.

Pool
A method of distributing insurance risk, whereby, the individual participants share overall risk with the other participants.

Pooling arrangement
An agreement to divide any losses that might occur equally among two or more people, typically with each paying the average loss.

Preexisting Condition
A physical and/or mental condition of an insured which first manifested itself prior to the issuance of his/her policy or which existed prior to issuance and for which treatment was received.

Preferred and Preferred Plus
The best premium rate classes for unimpaired, non-smoking applicants that are in better than average health.

Premium
The amount paid to an insurer or reinsurer in consideration of his acceptance of a risk.

Premium Discount
Periodic Payment discount given by a company.

Premium financing
A policy holder contracts with a lender to pay the insurance premium on his/her behalf. The policy holder agrees to repay the lender for the cost of the premium, plus interest and fees.

Premium Loan
A policy loan made for the purpose of paying premiums.

Present Value
Refers to a method that applies an assumed rate of interest to compute today's value for a future payment.

Premium Tax
A tax, imposed by each state, on the premium income of insurers doing business in the state.

Pricing Elements
The elements used in pricing a policy, principally investment earnings, mortality and expenses. If actual experience is better than the assumptions made in determining the policy guarantees, the difference after reflecting surplus needs is available for distribution to policy holders through the company's dividend scale or other non-guaranteed pricing structure.

Primary Beneficiary
The person who, upon the insured's death, has the first right to receive insurance proceeds.

Primary Insurance
Insurance that pays compensation for a loss ahead of any other insurance coverages the policy holder may have.

Principal
One for whom an agent acts, especially as to contractual dealings with third persons.

Principal Sum
The amount payable in one sum in the event of accidental death and in, some cases, accidental dismemberment. When a contract provides benefits for both accidental death and accidental dismemberment, each dismemberment benefit is an amount equal to the principal sum or some fraction thereof.

Privacy
(1) The right to be let alone; (2) in insurance contexts, the right to fair personal information practices. Probate: The court-supervised process of validating or establishing a distribution for assets of a deceased including the payment of outstanding obligations.

Proceeds
The amount payable under the terms of a life insurance policy upon the insured's death or upon the maturity of an endowment.

Producer
A term applied to an agent, solicitor or other person who sells insurance.

Projected Rates
Policy payment that is currently being charged by the company after the guarantee period.

Profit Commission
A commission payable on the profit generated under an insurance or reinsurance contract as an encouragement to maintain the flow of profitable business.

Proportional reinsurance
A type of reinsurance where the ceding insurer cedes to its reinsurer a predetermined proportion of the liability and premium of those policies subject to the reinsurance agreement.

Proposed Insured
The person named in a life insurance application as the person whose life is to be covered by the insurance, if the application is approved.

Prospectus
A form which is often part of the proposal form, giving details of the cover available with particulars of extra benefits and rebates.

Provision
A statement or clause, found in an insurance policy, to establish some term of the contract.

Proximate cause
The active efficient cause which sets in motion a chain of events which brings about a result without the intervention of any new cause working actively from a fresh or independent source. Proximate cause is not necessarily the closest in time to the result.

Q

Quantity Discount
A premium discount given for the purchase of a policy with a larger face amount.

R

Rate
The pricing factor upon which the insurance buyer's premium is based.

Rate Banding
Term Life insurance death benefit thresholds, whereby, the rate per thousand decreases as the amount of death benefit increases – similar to a quantity discount.

Rate Per Thousand
Price per unit (or $1,000) of death benefit. Term premiums are calculated by multiplying the rates per thousand of death benefit, then adding the Policy Fee.

Rated Policy
Sometimes called an "extra-risk" policy, an insurance policy issued at a higher-than-standard premium rate to cover the extra risk where, for example, an insured has impaired health or a hazardous occupation.

Rating Territory
A geographical grouping in which like hazards tend to equalize and permit the establishment of an equitable rate for the territory.

Rebating
The granting of any form of inducement, favor, kickback or advantage to the purchaser of a policy, which is not available under the standard terms of the policy. Rebating is a penal offense in some states, whereby both the agent and the person accepting the rebate can be punished.

Re-Entry
A policy provision under which the insured, at the end of the specified term period, can renew (re-enter) the policy at a rate based on their attained age for another term period. Re-entry requires the insured to provide evidence of insurability. Also referred to as Re-Qualification.

Reinstatement
The period after the grace period (usually five years) during which the policy can be restored from a lapsed status through submission of acceptable evidence of insurability and unpaid premiums plus interest. Some companies allow reinstatement without evidence of insurability during the 31 days following the grace period if the insured is alive.

Renew
To continue the policy for another period of time.

Renewable Term Insurance
Term insurance which can be renewed at the end of the term, at the option of the policyholder and without evidence of insurability, for a limited number of successive terms. The rates increase at each renewal as the age of the insured increases.

Renewal
Continuance of coverage under a policy beyond its original term by the insurer's acceptance of the premium for a new policy term.

Replacement
The act of terminating a policy with one insurer for a new policy with another insurer. This practice is regulated by most states because often it is not in the insured's best interest to make such a switch.

Replacement Form
A state-specific form that must be completed if the applicant is replacing existing coverage. The replacement form notifies the existing insurer that the applicant is replacing their policy with a policy from another company.

Replacement ratio
The percentage of income before retirement that is required to be replaced to maintain the same standard of living after retirement.

Representative
An agent or sales representative.

Reserve
The amount of money an insurance company holds which, with future premiums and an assumed rate of interest, will pay all contractual obligations as they fall due.

Resident Agent
An agent domiciled in the state in which he or she writes insurance.

Restrictions
Factors affecting what actions can be taken on a policy, such as ownership restriction because of a divorce or tax levy.

Retention Limit
The maximum amount of insurance an insurer can retain before ceding business to a reinsurer. The maximum amount may depend on the insured's age, health, coverage in force, as well as the insurance company's financial condition.

Revocable Beneficiary
A beneficiary whose rights are subject to the rights of the policyowner who may revoke or change the beneficiary designation and exercise any ownership rights under the policy without the beneficiary's consent.

Rider
A special provision attached to a policy that expands or restricts the benefits otherwise payable or excludes certain conditions from coverage..

Risk
In life insurance, it is the probability of mortality.

Risk Classification
An underwriting process used to determine the appropriate price category or Premium Rate Class of the proposed insured, according to risk factors associated with that person's health condition, occupation, lifestyle, etc.

Rollover
The tax-free transfer of accumulated assets from a qualified retirement plan to an IRA, which must be completed within 60 days of the termination of the original plan.

S

Saving Age
A procedure for making the effective date of a policy earlier than the application date. Backdating is often used to make the age of the insured at issue lower than it actually was in order to get a lower premium. Most policies can be backdated up to six months. Also referred to as Saving Age.

Scheduled Premiums
Refers to planned premiums that are scheduled at the time of issue.

Secondary Beneficiary
A person(s) designated by the policyowner to receive policy proceeds if the Primary Beneficiary is deceased at the time benefits become payable. Also referred to as Secondary Beneficiary.

Second-To-Die
A type of life insurance policy that insures the lives of two people, typically a husband and wife. The death benefit proceeds are payable upon the second death and used to satisfy the estate tax. Available as either Whole Life or Universal Life, these policies feature premiums that are often less expensive than buying two separate policies. Also referred to as Joint and Last Survivorship Life Insurance or Joint Survivorship Life Insurance.

Section 401(k) Plan
Internal Revenue Code 401(k) is an employer-sponsored, salary-reduction retirement savings program. The employee defers a percentage of current salary on a pre-tax basis and the employer often matches some portion of that amount. There is a cap on the annual contribution, and a 10% penalty is levied on moneys withdrawn before age 59 1/2.

Select Mortality
Descriptive of the mortality experience of newly underwritten insured's. This period of discernibly different (favorable) mortality usually lasts 5 to 15 years.

Settlement Options
The ways in which policy holders or beneficiaries may choose to have benefits paid other than a lump sum.

Short Term
Preliminary Term insurance, not to exceed 11 months, which may be attached to a policy to change the anniversary date for the purpose of more conveniently spacing premium payments.

Simplified Underwriting
An underwriting process that applies a less strict analysis of risk factors. Participants in group plans may qualify for this abbreviated form of underwriting.

Single Premium Life Insurance
A life insurance plan that requires only one premium and is guaranteed to remain paid-up throughout the insured's lifetime.

Split Dollar Plan
An arrangement in which two parties, usually an employer and employee, jointly purchase the policy, pay premiums and share in the policy's benefits.

Spousal Discount
A discount for purchasing coverage together as husband and wife from the same insurance company.

Standard or Standard Plus
An underwriting rate classification for non-smokers who have minor health impairments.

Standard Risk
An average risk, not subject to rate loadings or restrictions because of poor health.

Step-Rate Premium
A rating structure in which the premiums increase periodically at pre-determined times such as policy years or attained ages.

Stock Life Insurance Company
A life insurance company owned by stockholders who elect a board to direct the company's management. Stock companies, in general, issue nonparticipating insurance, but may also issue participating insurance.

Straight Life Insurance
Whole life insurance on which premiums are payable for life.

Sub-Standard Risk
An individual, who, because of health history or physical limitations, does not measure up to the qualification of a standard risk.

Suicide Clause
A policy provision usually stating that if the insured dies by suicide within two years of the date of issue, the amount payable would be limited to the total premiums paid, less any policy debt. The full benefit would only be paid if the suicide occurs after the first two policy years.

Surplus
The amount by which the value of an insurer's assets exceeds its liabilities, i.e., the net worth of an insurance company.

Surrender
To terminate or cancel a life insurance policy before the maturity date. In the case of a cash value policy, the policy holder may exercise one of the non-forfeiture options at the time of surrender.

Surrender Charge
An amount retained by the issuer of a life insurance policy when a policy is canceled, typically assessed only during the first five to ten years of a policy.

Survivorship Life Insurance
A type of life insurance policy that insures the lives of two people, typically a husband and wife. The death benefit proceeds are payable upon the second death and used to satisfy the estate tax. Available as either Whole Life or Universal Life, these policies feature premiums that are often less expensive than buying two separate policies. Also referred to as Joint and Last Survivorship Life Insurance or Joint Survivorship Life Insurance.

(some definitions taken from the National Association of Insurance Commissioners' Life Insurance Buyers Guide)