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A

Absolute Beneficiary
A beneficiary that cannot be changed without written consent.

Accelerated Benefits
Benefits available in some life insurance policies before death and usually triggered by long-term, catastrophic or terminal illness.

Accidental Death Benefits (ADB)
A provision added to a life insurance policy for payment of an additional benefit in case of death that results from an accident. This provision is often called "double indemnity."

Account Value or Accumulation Value
The accumulated premiums and interest after expense charges, cost of insurance, and charges for any supplemental benefits or riders in Universal life Insurance policies. Used to determine the policy's amount-at-risk in calculating mortality charges. A surrender charge is applied to it to determine the loan and surrender cash value.

Actual Age
An age calculation based on a person's last birth date (actual age) for premium rate determinations.

Actuary
A mathematician employed by an insurance company to calculate premiums, reserves, dividends, and insurance, pension, and annuity rates, using risk factors obtained from experience tables.

Adjustable Life Insurance
A type of life insurance that allows the policy holder to change the plan of insurance, raise or lower the face amount of the policy, increase or decrease the premium and lengthen or shorten the protection period.

Advanced Premium Deposit
Annual premiums paid in advance at a discount. The interest earned on the amount deposited before the premium due date reduces the cost of the premiums.

Adverse Selection
The tendency of persons with higher risk health expectations to apply for or continue insurance coverage to a greater extent than persons with lesser health expectations.

Age Change
The date on which an insured's age changes. In most life insurance contracts this is the date midway between the insured's birthdays. The date of age change depends on whether the insurer uses a age nearest birthday or age last birthday calculation for determining premium rates.

Age Nearest Birthday
An age calculation based on a person's nearest birth date for premium rate determinations. If the person's birth date is within six months, they are considered the next age.

Age Limits
Ages below and above which an insurance company will not accept applications or renew policies.

Agent
An authorized representative of an insurance company who sells and services insurance contracts.

Amendment
Document changing the provisions of an insurance contract signed jointly by the insurer and the policyholder.

Annual Policy Statement
Individual statements, providing specific policy information and values, which are sent to policyowners on each contract anniversary.

Annuitize
To begin a series of payments from an annuity. This term also refers to the settlement of a life insurance policy under the contract's annuity options.

Annuity
A contract sold by a life insurance company that provides fixed or variable payments to an annuitant, either immediately or at a future date.

Applicant
The person applying for the insurance policy. The applicant is not necessarily the owner or the insured.

Application
A statement of information made by someone applying for life insurance. The information gathered helps the life insurance company assess whether the risk presented by the applicant is acceptable to underwriters.

Application Supplement
A supplement to the application which documents that the non-guaranteed elements of the contract have been disclosed to the applicant during the sales process.

Approval
Signifies the legal acceptance of forms by a state when policy information is filed; Signifies the insurer's acceptance of risks as set forth in an application for insurance (as originally made or modified by the insurer); or Signifies the acceptance of a request from an applicant or policy holder for new insurance, reinstatement of a terminated policy, a policy loan, or other request.

Assignment
The legal transfer of one person's interest in an insurance policy to another person.

Attained Age
The insured's age on a given date. Attained age is one of the factors life insurance companies use to determine the insured's premiums. Some insurance companies round up the insured's age to the next age six months after each birthday.

Attending Physician's Statement (APS)
Information from a proposed insured's physician covering medical history and results of medical examinations. It is used to determine the appropriate underwriting classification for the proposed insured.

Authorization
Permission from the policy owner or proposed insured which allows release of information to a named party.

Aviation Hazard
The extra hazard of death or injury resulting from participation in aeronautics, usually as other than a passenger. This generally requires an extra premium rating or waiver of certain coverage benefits

B

Backdating
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 consumer at policy issue lower than it actually was in order to get a lower premium.

Beneficiary
The person(s) named in the policy to receive the life insurance proceeds upon the death of the insured.

Benefit Period
A period of time typically one to three years during which disability income or long term care benefits are paid after the waiting period is satisfied. When the benefit period ends, the insured must generally then satisfy a new waiting period in order to establish a new benefit period.

Benefits
The sum of money specified in a life insurance contract to be paid to the beneficiary when a loss occurs.

Binder
A written or oral contract issued temporarily to place insurance in force when it is not possible to issue a new policy or endorse the existing policy immediately. A binder is subject to the premium and all the terms of the policy to be issued.

Binding Receipt
A receipt given for a premium payment accompanying the application for insurance. If the policy is approved, this binds the company to make the policy effective from the date of the receipt.

Blended Product
A general term used to describe products structured with both Whole Life and Term components.

Broker
A licensed person or organization paid by you to look for insurance on your behalf.

Burial Insurance
A life insurance policy of minimal face amount intended to provide just enough insurance to cover the burial and funeral expenses.

Business Life Insurance
Life insurance purchased by a business enterprise on the life of a member of the firm. It is often bought by partnerships to protect the surviving partners against loss caused by the death of a partner, or by a corporation to reimburse it for loss caused by the death of a key employee.

Buy-Sell Agreement
An agreement made by the owners of a business to purchase the share of a disabled or deceased owner. The value of each owner's share of the business and the exact terms of the buying-and-selling process are established before death or the beginning of disability.

C

Cancellation
The discontinuance of an insurance policy before its normal expiration date, either by the insured or the company.

Capacity
The amount of capital available to an insurance company or to the industry as a whole for underwriting general insurance coverage or coverage for specific perils.

Capital Retention Approach
A method used to estimate the amount of life insurance to own. Under this method, the insurance proceeds are retained and are not liquidated.

Capital Stock and Surplus
Represents the excess of a company's assets over its liabilities as reported in its financial statements. Stock companies have capital stock and surplus. Capital stock represents funds paid into the company by stockholders. Surplus represents the remaining excess of assets over liabilities. Mutual companies only have surplus since there are no stockholders in a mutual company.

Captive Agent
Representative of a single insurer or fleet of insurers who is obliged to submit business only to that company, or at the very minimum, give that company first refusal rights on a sale. In exchange, that insurer usually provides its captive agents with an allowance for office expenses as well as an extensive range of employee benefits such as pensions, life insurance, health insurance and credit unions.

Carrier
The underwriting insurance company.

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. Please note that the cash value only pertains to permanent life insurance and not term life insurance.

Cash Value Life Insurance
A type of insurance where premiums charged are higher at the beginning than they would be for the same amount of term insurance. The part of the premium that is not used for the cost of insurance is invested by the company and builds up a cash value that may be used in a variety of ways. You may borrow against a policy’s cash value by taking a policy loan. If you don’t pay back the loan and the interest on it, the amount you owe will be subtracted from the benefits when you die, or from the cash value if you stop paying premiums and take out the remaining cash value. You can also use your cash value to keep insurance protection for a limited time or to buy a reduced amount without having to pay more premiums . You also can use the cash value to increase your income in retirement or to help pay for needs such as a child’s tuition without canceling the policy. However, to build up this cash value, you must pay higher premiums in the earlier years of the policy. Cash value life insurance may be one of several types; whole life, universal life and variable life are all types of cash value insurance.

Cede
To transfer risk from a direct insurer to his reinsurer.

Ceding Insurer
One who cedes a risk to his re insurers or retro cessionaries.

Cession
Amount of the insurance ceded to a reinsurer by the original insuring company in a reinsurance operation.

Change of Beneficiary Form
A form provided by the insurer that the policyowner must complete in order to change the beneficiary on a policy.

Chartered Life Underwriter (CLU)
An individual who has attained a high degree of technical competency in the fields of life and health insurance and who is expected to abide by a code of ethics. Must have minimum of three years of experience in life or health insurance sales and have passed ten professional examinations administered by The American College.

Child Rider
Rider which provides insurance to the insured's child(ren).

Claim
A request for payment of a loss which may come under the terms of an insurance contract.

Claimant
A first or third party who asserts right of recovery.

Claims Notification Clause
A clause in a policy which provides for prompt notification of claims and commonly designates a specific adjuster to receive notice and deal with the claim.

Collateral Assignment
A temporary transfer of some, but not all, policy rights to a lender to provide security for a loan.

Combined Ratio
A measure of the relationship between dollars spent for claims and expenses and premium dollars taken in; the sum of the ratio of losses incurred to premiums earned and the ratio of commissions and expenses incurred to premiums written. A ratio above 100 means that for every premium dollar taken in, more than a dollar went for losses, expenses, and commissions.

Commission
The part of an insurance premium paid by the insurer to an agent or broker for his services in procuring and servicing the insurance.

Commissioner
A state officer who administers the state's insurance laws and regulations. In some states, this regulator is called the director or superintendent of insurance.

Concealment
Deliberate failure of an applicant for insurance to reveal a material fact to the insurer.

Conditional Receipt
A receipt given for premium payments accompanying an application for insurance. If the application is approved as applied for, the coverage is effective as of the date of the prepayment or the date on which the last of the underwriting requirements, such as a medical examination, has been fulfilled.

Conservation
The attempt by the insurer to prevent the lapse of a policy.

Consideration
One of the elements for a binding contract. Consideration is acceptance by the insurance company of the payment of the premium and the statement made by the prospective policy holder in the application.

Contest, policy
A court action challenging the validity of a policy.

Contingent Owner
The person to succeed as owner of a life insurance policy if the original owner dies.

Contract
A binding agreement between two or more parties for the doing or not doing of certain things. A contract of insurance is embodied in a written document called the policy.

Contract Law
The portion of civil law that interprets written agreements between parties and resolves disputes between them.

Contribution Principle
The principle under which divisible surplus is distributed among policies in the same proportion as the policies are considered to have contributed to that surplus.

Conversion Privilege
A privilege granted in an insurance policy to convert to a different plan of insurance without providing evidence of insurability.

Convertible Term Insurance
Term insurance which can be exchanged, at the option of the policy holder and without evidence of insurability, for another plan of insurance. Also known as credit life insurance. May take the form of term life insurance issued through a lender or lending agency to cover payment of a loan, installment purchase, or other obligation, in case of death.

Cost Basis
An amount attributed to an asset for income tax purposes; used to determine gain or loss on a life insurance contract to determine the value of a gift.

Cost-of-Living Rider
Benefit that can be added to a life insurance policy under which the policy owner can purchase one-year term insurance equal to the percentage change in the consumer price index with no evidence of insurability.

Cost of pure risk
All costs related to pure risk which include, from the perspective of shareholders, retained risk, loss prevention costs and insurance costs.

Coverage
The scope of protection provided under a contract of insurance; any of several risks covered by a policy.

Cross liability clause
Obligates an insurer to protect each insured separately.

Cross Purchase Agreement
Specifies the terms for the surviving partners or shareholders to buy a deceased's share of the business's ownership.

Customer Service Representative (CSR)
Customer service representatives support the work of insurance agents with a variety of tasks that must be done within a company or agency to deliver services to and handle requests from clients.

Cumulative Premium
The total amount paid over the course of a specified amount of years.

Current Assumption Whole Life Insurance
Nonparticipating whole life policy in which the cash values are based on the insurer's current mortality, investment, and expense experience. An accumulation account is credited with a current interest rate that changes over time. Also called interest-sensitive whole life insurance.

Current with Reentry Premiums
Non-guaranteed premiums at the time of re-entry; applicable to certain term life insurance policies.

Cut-through endorsement
An endorsement to an insurance contract stating that reinsurance proceeds will be paid directly to the named payee in the event of an insurer's insolvency.

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