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CFP - Steps in the Financial Planning Process > Insurance Planning Definitions > Flashcards

Insurance Planning Definitions Flashcards

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1
Q

ACCIDENTAL DEATH BENEFIT

A

An optional provision that provides an additional payment for loss of life due to an accident that was the direct cause of death.

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2
Q

ACCUMULATED DIVIDENDS

A

Dividends left with the insurer to accumulate at interest. These dividends are generally income tax free but the interest is taxable as earned.

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3
Q

ACTUARIAL ASSUMPTIONS

A

An insurer

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4
Q

ADDITIONAL PROVISIONS

A

Each life insurance contract contains ‘insuring’ and ‘benefit’ provisions as well as ‘uniform’ provisions that define and limit coverage.

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5
Q

ADMITTED ASSETS

A

In regulating insurers

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6
Q

ADHESION

A

There is no true bargaining or ‘meeting of the minds’ in a life insurance contract.

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7
Q

ADVANCED LIFE UNDERWRITER

A

This term refers to the agent marketing products and services where a sophisticated knowledge of law and high degree of creativity is required.

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8
Q

ADJUSTABLE DEATH BENEFIT

A

Certain life insurance products allow the policyowner to increase or decrease the face amount (within limits and often only with evidence of insurability).

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9
Q

ADVANCE PREMIUM

A

Any premiums paid before their due date.

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10
Q

ADJUSTABLE LIFE INSURANCE

A

Many of the features of term and whole life are contained in this flexible type of coverage.

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11
Q

ADVERSE SELECTION

A

The tendency of people who are less than standard insurance risks to seek or continue insurance to a greater extent than other individuals.

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12
Q

AG 38 RESERVE

A

This is the reserve value used for a UL policy with a no lapse secondary guarantee.

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13
Q

ADJUSTABLE PREMIUM

A

Term applicable to policies where the company has the contractual right to modify or change premium payments under certain specified conditions.

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14
Q

AGE

A

The age in years of an applicant

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15
Q

AGE AT ISSUE

A

The age of an insured at the time coverage goes into effect.

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16
Q

ADJUSTED GROSS ESTATE

A

The adjusted gross estate is the gross estate less debts

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17
Q

AGE LIMITS

A

Minimum or maximum age limits for the insuring of new applicants or for the renewal of policies.

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18
Q

ADJUSTED TAXABLE GIFTS

A

Sum of taxable portion of post-1976 gifts other than those for any reason included in a deceased’s gross estate.

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19
Q

ADMINISTRATOR

A

The person or persons appointed by the probate (also called Surrogates’ or Orphans’) court to settle the estate of a person who died without a valid will.

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20
Q

AGENCY

A

The legal relationship empowering one party to act on behalf of another in dealing with third parties.

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21
Q

NET AMOUNT AT RISK

A

The difference between the face value of a policy and its accrued cash value at a given time.

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22
Q

Annual Premium

A

The premium amount required on an annual basis under the contractual requirements of a policy to keep a traditional level premium whole life or term policy in force.

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23
Q

Agent

A

A person who solicits insurance or aids in the placing of risks

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24
Q

Annuity

A

A systematic liquidation of principal and interest over a specified period

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25
Q

Annuity

A

Cash Refund

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26
Q

Agent of Record

A

Typically

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27
Q

Annuity Certain

A

An annuity that pays a specified amount for a definite and specified period of time

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28
Q

Aggregate Mortality Table

A

A mortality table where the mortality rates at any age are based on all insurance in force at that age

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29
Q

Annuity Certain

A

Life

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30
Q

Annuity

A

Deferred

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31
Q

Aleatory Contract

A

Where a contract between two parties depends upon an uncertain event and where one party may pay a very small amount and receive a very large amount upon the occurrence or nonoccurrence of the specified event.

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32
Q

Annuity Due

A

An annuity under which payments will be made at the beginning

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33
Q

Annuity

A

Flexible Premium

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34
Q

Annuity

A

Installment Deferred

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35
Q

Annuity

A

Installment Refund

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36
Q

Alternate Valuation Date

A

Typically

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37
Q

Amount at Risk

A

The pure insurance element of a life insurance policy.

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38
Q

Annuity

A

Joint and Survivor

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39
Q

Annuity

A

Joint Life

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40
Q

Annuity

A

Life

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41
Q

Annuity

A

Private

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42
Q

Automatic Premium Loan Provision

A

An option that will allow the insurer to automatically borrow money from a policy’s cash value to pay any premium in default at the end of the grace period.

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43
Q

Annuity

A

Refund

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44
Q

Annuity

A

Single-Premium Deferred

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45
Q

Aviation Exclusion

A

A contract provision that excludes from coverage deaths due to airline accidents unless the insured was a passenger on a regularly scheduled commercial airline.

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46
Q

Annuity

A

Temporary

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47
Q

Annuity

A

Variable

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48
Q

Anti-Rebate Laws

A

State laws that prohibit an agent or company from giving part of the premium

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49
Q

Back-End Load

A

A charge against policy values for business expenses of the insurer in issuing the contract

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50
Q

Applicant

A

The person(s) or party(ies) applying for and signing the written application for a contract of life insurance.

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51
Q

Application

A

A written form provided by an insurer typically completed by the insurer’s agent and its medical examiner based on information on the physical condition

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52
Q

Banding

A

Refers to the recovery of ongoing administrative and handling costs

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53
Q

Assign

A

To transfer a right or risk.

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54
Q

Assignee

A

The person or party who receives a transferred right or risk when a life insurance policy is assigned.

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55
Q

Assignment

A

The shift of rights and benefits of a life insurance contract from a policyowner to an assignee.

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56
Q

Assumed Interest Rate

A

The rate of interest used by an insurance company to calculate its reserves.

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57
Q

Beneficiary

A

The recipient of life insurance proceeds at the death of the insured.

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58
Q

Attained Age

A

The age an insured has reached on a specific date

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59
Q

ATTAINED AGE

A

The age an insured has reached on a specific date

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60
Q

BINDING RECEIPT

A

The receipt for payment of the first premium that assures the applicant that if they die before receiving the policy

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61
Q

CAPITAL NEEDS ANALYSIS

A

An appraisal of needs system that assesses a client’s financial needs through the economic value and income-producing capabilities of current and future assets.

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62
Q

BROKER

A

A broker legally represents the customer rather than the insurer and may purchase policies on behalf of their clients from almost any insurer.

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63
Q

BROKERAGE AGENCY

A

A life insurance general agency servicing business of agents other than full-time (career) agents of the company represented by the agency.

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64
Q

CAPITAL STOCK INSURANCE COMPANY

A

An insurance company owned by its stockholders

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65
Q

BROKER-AGENT

A

A business entity licensed and registered with the SEC with the legal right to offer securities products to the public.

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66
Q

CAPITAL UTILIZATION METHOD

A

A life insurance needs computation method based on the assumption that both the earnings and principal will be used up over the period during which the income will be needed.

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67
Q

CAPTIVE INSURANCE COMPANY

A

A licensed insurance company created for the express purpose of writing property and casualty insurance for a specific business or group of businesses.

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68
Q

BUSINESS INSURANCE

A

Coverage concerned primarily with protecting an insured’s business against economic loss incurred at the death or disability of key executives and/or other key employees.

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69
Q

CASH ACCUMULATION POLICY

A

A contract that builds significant cash value or equity

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70
Q

BUY-SELL AGREEMENT

A

An agreement in which either the business or the surviving owners will purchase the shares owned by a deceased or retiring shareholder at a previously agreed value or formula.

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71
Q

CASH REFUND ANNUITY

A

An annuity that pays a lump-sum cash benefit to a beneficiary if the annuitant dies before recovering premiums paid.

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72
Q

CAPITAL CONSERVATION METHOD

A

A method for determining insurance needs that assumes only income will be used to protect capital

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73
Q

CASH SURRENDER VALUE

A

The amount available to the policyowner when a life insurance policy is surrendered

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74
Q

CAPITALIZATION OF POLICY LOANS

A

The process of increasing the policy loan to pay unpaid loan interest.

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75
Q

CHANGE OF BENEFICIARY PROVISION

A

A provision that gives a policyowner the right to change the beneficiary at any time unless an irrevocable beneficiary designation has been made.

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76
Q

COMMISSIONS

A

GRADED

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77
Q

CLASSIFIED RISK

A

The classification of insureds as ‘standard’ risks

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78
Q

COMMISSIONS

A

LEVEL

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79
Q

CLAUSE

A

A specific provision of a life insurance contract dealing with a particular subject in that policy.

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80
Q

COLLATERAL ASSIGNEE

A

The person or party to whom a collateral assignment is made.

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81
Q

COMMUTATION RIGHTS

A

The right of the beneficiary to receive the value of the remaining stream of future payments in one lump sum.

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82
Q

COMMUTE

A

To compute and pay the lump-sum actuarial equivalent to a series of future payments due under a life insurance contract.

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83
Q

COLLATERAL ASSIGNMENT

A

When a life insurance contract is transferred as security for a debt

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84
Q

COMMUTED VALUE

A

The present actuarial value of a series of installments payable at fixed future dates

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85
Q

COMPOUND INTEREST

A

Interest earned on interest.

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86
Q

CONCEALMENT

A

Intentional failure of the insured to disclose a material fact to the insurance company at the time application is made.

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87
Q

COLLATERAL ASSIGNMENT PLAN

A

A collateral assignment plan is a variation in a split dollar life insurance arrangement in which the insured initially applies for and owns the policy and names the beneficiary but collaterally assigns the policy to the payor of the bulk of the premiums as security for that party’s outlays.

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88
Q

COLLATERAL LOAN

A

A loan guaranteed by the pledge of the life insurance contract as collateral.

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89
Q

CONDITIONAL ASSIGNMENT

A

An assignment made solely for the purpose of securing a debt. A conditional assignment is typically automatically terminated when the obligation is repaid.

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90
Q

COMMISSION

A

The percentage of the premium paid to an insurance agent or broker by the insurer as compensation.

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91
Q

COMMISSIONER

A

Also called superintendent in some states

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92
Q

COMMISSIONERS STANDARD ORDINARY MORTALITY TABLE (CSO)

A

A standard mortality table approved by the National Association of.

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93
Q

CONDITIONAL PREMIUM RECEIPT

A

This is the receipt given to a policy applicant if all or part of the premium is paid at the time of application. This receipt does not provide absolute interim insurance until the company acts on the application.

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94
Q

CONVERSION

A

ATTAINED AGE

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95
Q

CONSIDERATION

A

Consideration is an essential element of a binding contract. In a life insurance contract

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96
Q

CONVERSION

A

ORIGINAL AGE

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97
Q

CONVERTIBLE

A

A provision giving the policyowner the right to exchange the policy for another without evidence of insurability.

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98
Q

CONTESTABLE CLAUSE

A

The provision in the insurance contract that states the time (called the contestable period) the insurer has to contest and the grounds under which the policy may be contested or voided by the insurer.

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99
Q

CONTINGENT BENEFICIARY

A

A contingent beneficiary is one who will receive death proceeds if the principal beneficiary predeceases the insured.

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100
Q

CONVERTIBLE TERM INSURANCE

A

A term contract that may be converted to a permanent form of insurance without a medical examination

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101
Q

COST OF INSURANCE

A

In the case of a split dollar arrangement or life insurance in a qualified plan

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102
Q

CONTRACT OF INSURANCE

A

A legally binding agreement in which an insurer agrees to pay a death benefit upon the death of the insured in return for the consideration of the policyowner’s payment of an initial premium and the policy application.

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103
Q

COST OF LIVING ADJUSTMENT (COLA)

A

A rider available with some policies that provides for automatic

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104
Q

CREDIT LIFE INSURANCE

A

A policy issued on the life of a borrower with the creditor named as beneficiary to cover the repayment of a loan in the event the borrower dies before the loan has been repaid.

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105
Q

CONTRACT RATES

A

Life insurance settlement option rates are listed in the policy. The insurer may allow the purchase to be made at current rates if those are more favorable to the policyowner.

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106
Q

CROSS PURCHASE

A

A buy-sell arrangement that provides that in the event of one owner’s death

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107
Q

CONVERSION

A

One type of life insurance contract can be exchanged for a different type assuming the contract is ‘convertible.’

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108
Q

CRUMMEY POWER

A

A provision in a trust that gives a beneficiary a limited period of time to demand all or a portion of a gift be made to the trust for the purpose of converting what would otherwise be a future interest gift into a present interest gift.

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109
Q

DECLARED INTEREST RATE

A

In a universal life policy

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110
Q

DECREASING TERM INSURANCE

A

If the face value of term insurance decreases over time in scheduled increments until the policy expires

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111
Q

DEFAULT

A

If a policyowner fails to make a premium payment by a policy’s final due date or by the end of its grace period

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112
Q

CURRENT-ASSUMPTION POLICY

A

Current-assumption policies reflect the insurer’s current interest

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113
Q

interest-sensitive

A

Although inaccurate

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114
Q

current-assumption

A

A broader concept implying direct sensitivity not only to current interest rates but also to mortality and expense experience.

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115
Q

deferred annuity

A

A series of payments that are not begun until the lapse of a specified period of time or until the annuitant reaches a specific age.

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116
Q

current interest rate

A

This is the interest rate credited to current-assumption and universal life products (versus the fixed rate of traditional life insurance policies).

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117
Q

current value

A

The fair market value of a security or other property at the present time.

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118
Q

delivery of policy

A

Delivery is

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119
Q

date of maturity

A

The date upon which a life insurance policy endows if the insured is still living.

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120
Q

dependency period

A

In computing life insurance needs

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121
Q

date of policy

A

The date appearing on the front page of an insurance policy indicating when the policy went into effect.

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122
Q

death benefit

A

The amount stated in the policy as payable upon the death of the insured.

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123
Q

death claim

A

When the insured dies

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124
Q

disability premium waiver insurance

A

An important option or rider in a life insurance policy that provides that if an insured becomes totally disabled for six months or longer

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125
Q

deficiency reserve

A

For policies with secondary guarantees

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126
Q

dividend

A

When a policy participates in the favorable investment

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127
Q

dividend additions

A

Participating policies provide that their dividends may be used as single premiums to purchase paid-up insurance at the insured’s attained age as additions to the amount of insurance specified on the face of the contract.

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128
Q

emergency fund

A

When calculating the amount of life insurance needed

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129
Q

dividend class

A

All policyowners are grouped into categories in which members who bought the same type of contract at the same age are classed.

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130
Q

endorsement

A

A written modification to an insurance policy

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131
Q

dividend deposits

A

Cash dividends and interest arising from the policy left on deposit with the company under the terms of the dividend option.

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132
Q

endow

A

A life insurance policy is said to endow when its cash value equals the face amount.

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133
Q

dividend

A

extra

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134
Q

endowment

A

A life insurance contract that provides for the payment of the face amount at the end of a fixed period

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135
Q

evidence of insurability

A

A statement or proof of a person’s physical condition

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136
Q

dividend options

A

The different ways in which the insured

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137
Q

divisible surplus

A

The amount of the company’s surplus earnings available for distribution among the policyowners in the form of dividends.

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138
Q

exceptions provision

A

An insurance policy provision that limits the insurance company’s liability by excluding coverage for certain losses.

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139
Q

excess initial expenses

A

An insurer’s first-year expenses that exceed first-year expense loading.

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140
Q

double indemnity

A

A clause in a life insurance contract providing for a double benefit if death occurs under certain circumstances.

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141
Q

earned premium

A

The amount of premium that would compensate the insurance company for its loss experience

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142
Q

economic benefit

A

The economic benefit is

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143
Q

excess interest

A

The positive difference between the rate of interest an insurer guarantees to pay on proceeds left under settlement options and the higher interest actually paid.

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144
Q

exclusion clause

A

A policy provision that excludes certain risks from coverage

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145
Q

face amount

A

The amount payable in the event of death

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146
Q

exclusion ratio

A

A fraction used to determine the amount of annual annuity income exempt from federal income tax.

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147
Q

FAIR MARKET VALUE (FMV)

A

The price at which the property would change hands between a willing buyer and a willing seller

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148
Q

EXECUTOR

A

A person appointed in a person’s will to carry out the terms of the will.

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149
Q

FAMILY INCOME POLICY

A

A life insurance policy that combines whole life and decreasing term to provide income protection against the premature death of the family breadwinner. If the insured dies within a specified period

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150
Q

EXPENSE CHARGE

A

In variable universal life

151
Q

FAMILY INCOME RIDER

A

Similar to a family income policy except that the decreasing term coverage is written as a rider to a whole life policy rather than as combination of both coverages.

152
Q

EXPENSE LOADING

A

The amount added to the premium during the rate-making process to cover the expenses of maintaining the business

153
Q

EXPERIENCE

A

The loss record of a type of insurance written. This record is used in adjusting premium rates and predicting future losses.

154
Q

EXPERIENCE MODIFICATION

A

The adjustment of premiums as a result of the application of experience rating; usually expressed as a percentage.

155
Q

FAMILY MAINTENANCE POLICY

A

A life insurance policy combining level term and whole life to provide income protection against the premature death of the family breadwinner. If the insured dies within a specified period (say

156
Q

FAMILY POLICY

A

A policy that combines whole life and convertible term to provide insurance on each family member.

157
Q

EXTENDED TERM OPTION

A

A nonforfeiture option that provides that the net cash surrender value of a policy may be used as a net single premium at the attained age of the insured to purchase term insurance at the face amount of the original policy for as long a period as possible.

158
Q

FAMILY RIDER

A

An optional policy supplement attached to the insurance policy issued to the head of a family and insuring other members of the family

159
Q

EXTRA DIVIDEND

A

A dividend that is paid in addition to regular

160
Q

EXTRA PREMIUM

A

The amount charged in addition to the regular premium to cover an extra hazard

161
Q

EXTRA PROTECTION BENEFIT

A

An insurance policy provision that provides an extra amount of insurance payable if death occurs during the term of the provision.

162
Q

FIFTH DIVIDEND OPTION

A

If selected

163
Q

FINAL EXPENSES

A

Costs incurred during a last illness

164
Q

FRONT-END LOAD

A

A contract is front-end loaded when certain of the insurer’s expenses are deducted from the gross premium before the remaining net premium goes into the cash value account.

165
Q

FIRST-YEAR PREMIUM

A

Insurance premiums that are due during the first policy year

166
Q

FULL DISCLOSURE

A

The requirement that prospective purchasers of variable universal life and universal life products be fully informed of the charges and costs and provided with all important information about their policies.

167
Q

FIXED-AMOUNT SETTLEMENT OPTION

A

A life insurance policy beneficiary can request that proceeds be paid in regular installments of a fixed dollar amount.

168
Q

FULLY INSURED PLAN

A

Pension plans that are funded entirely through individual insurance contracts issued on the lives of participants.

169
Q

FIXED ANNUITY

A

An annuity that provides fixed payments during the annuity period.

170
Q

GENERAL ACCOUNT

A

Traditionally

171
Q

FIXED-PERIOD SETTLEMENT OPTION

A

A life insurance settlement option in which the number of payments is set by the payee

172
Q

FLEXIBLE PREMIUM ANNUITY

A

An annuity that allows the owner of the contract to vary premium payments (within limits) from year to year.

173
Q

GRACE PERIOD

A

Most life insurance contracts provide that premiums may be paid at any time within a period of generally 30 or 31 days following the premium due date

174
Q

FRATERNAL INSURANCE

A

Life or health insurance protection provided by fraternal benefit societies.

175
Q

GRADED DEATH BENEFITS

A

A life insurance policy provision that provides for death benefits that

176
Q

FRAUD

A

An act of deceit; misrepresentation of a material fact made knowingly

177
Q

FREE-LOOK PROVISION

A

A provision in life insurance policies that gives the policyowner a stated amount of time (usually ten days) to review a new policy.

178
Q

GRADED PREMIUM LIFE INSURANCE

A

A form of modified life insurance that starts with relatively low premiums that increase slowly each year.

179
Q

GROSS PREMIUM

A

This is the premium paid by the policyowner. More technically

180
Q

IMMEDIATE ANNUITY

A

An annuity contract that pays the annuity at the end of each period of payment. The interval may be monthly

181
Q

GROUP LIFE INSURANCE

A

A form of life insurance covering a group of persons generally having some common interest or activity

182
Q

INCIDENTS OF OWNERSHIP

A

The right to exercise any of the privileges in the insurance policy (e.g.

183
Q

INCONTESTABLE CLAUSE

A

See: contestable clause.

184
Q

GUARANTEED CASH VALUE

A

The guaranteed amount available to the insured on surrender of a policy according to a table of guaranteed values scaled to the number of years in which the policy is in force.

185
Q

INCREASING TERM INSURANCE

A

Term life insurance coverage that increases in face value each year (or certain period) from the date of policy issue to the date of expiration.

186
Q

GUARANTEED COST

A

This is another term for non-participating (non par) insurance. Guaranteed cost can also be defined as the maximum costs that can be deducted from cash value under the terms of the policy in universal or variable universal life contracts.

187
Q

GUARANTEED INSURABILITY RIDER

A

A rider

188
Q

INDEXED UNIVERSAL LIFE INSURANCE

A

These policies have all the typical features of regular universal life policies except that

189
Q

GUARANTEED INTEREST RATE

A

The minimum annual rate of interest used in calculating policy reserves from year to year

190
Q

GUARANTEED PURCHASE OPTION

A

See: guaranteed insurability rider.

191
Q

INDETERMINATE PREMIUM

A

Refers to policies where the actual premium charged may be lower than the guaranteed premium stated in the policy.

192
Q

HUMAN LIFE VALUE

A

One method of determining how much insurance a person should own is to measure his or her ‘human life’ value

193
Q

INDIVIDUAL LIFE INSURANCE

A

Life insurance contract that covers only one insured

194
Q

INITIAL DEATH BENEFIT

A

In flexible feature life insurance policies

195
Q

INTENTIONALLY DEFECTIVE GRANTOR TRUST

A

A trust drafted with an intentional flaw that runs ‘afoul’ of the rules contained in sections 671 through 679 of the internal revenue code.

196
Q

INITIAL PREMIUM

A

The first premium

197
Q

INITIAL RESERVE

A

The reserve amount determined at the beginning of the policy year. It equals the preceding year’s ending reserve

198
Q

INTEREST-ADJUSTED COST METHOD

A

A method of comparing costs of similar policies by using an index that takes into account the time value of money due at different times through interest adjustments.

199
Q

INSTALLMENT DEFERRED ANNUITY

A

An annuity in which the annuitant pays into the annuity fund over a period of time

200
Q

INTEREST FACTOR

A

One of three factors taken into consideration by an insurance company when calculating premium rates.

201
Q

INSTALLMENT REFUND ANNUITY

A

A life annuity that will continue to make payments to a stipulated beneficiary after the death of the annuitant until the total payments equal the consideration paid to the insurer.

202
Q

INTEREST-ONLY OPTION

A

A settlement option under which all or part of the proceeds of a policy are left with the insurance company for a definite period at a guaranteed minimum rate of interest.

203
Q

INSTALLMENT SETTLEMENT

A

A series of periodic payments of proceeds instead of payment in a lump-sum.

204
Q

INTEREST-SENSITIVE WHOLE LIFE

A

A traditional whole life policy with fixed premiums and traditional nonforfeiture values where interest is credited directly to the cash value at current rates.

205
Q

INSURABILITY

A

The term insurability encompasses all conditions pertaining to an individual that affect his or her health

206
Q

INSURABLE INTEREST

A

A person who has a reasonable expectation of benefiting from the continuance of another person’s life or of suffering a loss at his or her death.

207
Q

INTERIM TERM INSURANCE

A

Term life insurance issued to an applicant during the period between submission of the application and the time the insurance company either issues a permanent insurance policy or rejects the application.

208
Q

INSURANCE RESERVES

A

The present value of future claims minus the present value of future premiums. Reserves are balance sheet accounts set up by insurers to reflect actual and potential liabilities under outstanding insurance contracts.

209
Q

INTERPOLATED TERMINAL RESERVE

A

A reserve fund that an insurance company uses to cover its liability in a particular policy. It is used in determining the value of certain life insurance policies for gift tax purposes.

210
Q

INSURED

A

The individual or group covered by the contract of insurance.

211
Q

INVESTMENT ACCOUNT

A

A separately managed cash value investment fund into which variable life and variable universal life insurance policyowners allocate the premiums and cash value.

212
Q

JOINT LIFE ANNUITY

A

A life annuity payable to two or more annuitants that continues payments until one of the two annuitants dies.

213
Q

INVESTMENT PORTFOLIO

A

A list detailing the securities owned by a person

214
Q

JUVENILE INSURANCE

A

Life insurance policies written on the lives of minors within specified age limits

215
Q

INVESTMENT YEAR METHOD OF DIVIDEND CALCULATION

A

Any dividend calculation method that recognizes differences in earned interest rates depending upon the year in which the investment is made.

216
Q

KEY EMPLOYEE INSURANCE

A

Provides cash to absorb the financial loss caused by the death or disability of a vital individual in a business.

217
Q

ISSUE

A

A term applying to the insurer’s approving and forwarding new policies to the agent for delivery to applicants.

218
Q

LAPSE

A

Termination of an insurance policy because of nonpayment of premiums or

219
Q

ISSUE LIMIT

A

The maximum amount of coverage a company is willing to extend on a given risk.

220
Q

LAST TO DIE INSURANCE

A

A life insurance contract on two or more persons that pays proceeds only upon the death of the last insured.

221
Q

JOINT AND SURVIVOR ANNUITY

A

A life annuity payable over the lives of two or more annuitants that continues to make payments until the death of the last surviving annuitant.

222
Q

LEVEL PREMIUM

A

A life insurance premium that remains fixed through the life of a policy.

223
Q

JOINT AND X-PERCENT SURVIVOR ANNUITY

A

An annuity that pays an income to two individuals

224
Q

LEVEL TERM INSURANCE

A

Term life coverage on which the face value remains the same from the date the policy is issued to the date the policy expires.

225
Q

JOINT AND SURVIVORSHIP OPTION

A

A contract option that permits policy proceeds to be paid out as a joint and survivor annuity.

226
Q

LIFE ANNUITY

A

An annuity contract that pays only until the annuitant dies.

227
Q

JOINT CONTROL

A

A life insurance policy provision that states that a person

228
Q

LIFE EXPECTANCY

A

The average remaining term of life for a number of persons of a given age

229
Q

JOINT INSURANCE

A

A life insurance contract covering two or more lives that pays death proceeds.

230
Q

LIFE INCOME OPTION

A

One of the settlement options under which the proceeds of a life insurance or annuity policy may be applied to buy an annuity payable to the beneficiary for life.

231
Q

MEDICAL INFORMATION BUREAU (MIB)

A

An entity that collects and stores medical data on life and health insurance applicants

232
Q

LIFE INCOME WITH PERIOD CERTAIN OPTION

A

A life insurance proceeds settlement option that will pay at least a minimum specified number of periodic installments in a guaranteed amount whether the named beneficiary lives or dies.

233
Q

MINIMUM PREMIUM

A

The smallest amount of premium the insurer requires to be paid in the first year of a universal life contract.

234
Q

LIFE PAID-UP AT AGE ( )

A

A form of limited payment life insurance that provides protection for the whole of life

235
Q

MINOR BENEFICIARY

A

A beneficiary who is under the state’s legal age of majority and not considered competent to make certain financial transactions on his or her own.

236
Q

LIFE SETTLEMENTS

A

The sale

237
Q

MISREPRESENTATION

A

A false statement as to a past or present material fact made in an application for insurance intended to induce an insurance company to issue a policy it would not otherwise issue.

238
Q

LIMITED-PAYMENT (LIMITED-PAY) POLICY

A

A life insurance policy that provides for payment of the premium for a period of years less than the period of protection provided under the contract.

239
Q

LOADING CHARGE

A

The additional charge for overhead costs added to the net premium

240
Q

MISSTATEMENT OF AGE

A

Giving the wrong age for oneself in an application for insurance or for a beneficiary who is to receive benefits on a basis involving a life contingency.

241
Q

MODE OF PAYMENT

A

The frequency with which premiums are paid (e.g.

242
Q

LOAN

A

Money loaned at interest by the insurance company to a policyowner on the security of the cash value of his or her policy.

243
Q

LOAN VALUE

A

A specified amount that can be borrowed from the insurance company by the policyowner

244
Q

MODIFIED LIFE

A

Whole life insurance with reduced premiums payable during the first few years (usually three to five) that are only slightly higher than the rate for term insurance.

245
Q

LUMP SUM

A

Payment of the entire proceeds of a life insurance policy at one time.

246
Q

MORAL RISK

A

Moral condition as reviewed by a study of habits

247
Q

MATURE

A

The time when a policy becomes payable.

248
Q

MORTALITY FACTOR

A

One of the basic factors needed to calculate basic premium rates.

249
Q

NET LEVEL PREMIUM

A

The pure annualized level mortality cost of a life insurance policy from age of entry to maturity date.

250
Q

MORTALITY RISK

A

The risk of death carried by a life insurance company and sometimes called the pure insurance risk.

251
Q

NET PREMIUM

A

This term has several meanings

252
Q

MORTALITY TABLE

A

A table of the mortality experience of groups of individuals categorized by age and sex that is used to estimate how long a male or female of a given age is expected to live.

253
Q

NEW MONEY INTEREST RATE

A

See: investment year method of dividend calculation.

254
Q

NONASSIGNABLE CONTRACT OR POLICY

A

A policy that the owner cannot legally assign to a third party.

255
Q

MULTIPLE LIFE POLICY

A

A life insurance policy taken out on the lives of three to five persons

256
Q

NONCONVERTIBLE TERM INSURANCE

A

A term policy that may not be converted to a permanent policy.

257
Q

NONFORFEITURE VALUES

A

Those values or benefits in a life insurance policy that by law the policyowner does not forfeit

258
Q

MUTUAL COMPANY

A

A life insurance company that has no capital stock or stockholders.

259
Q

NONMEDICAL INSURANCE

A

Life insurance issued on a regular basis without requiring the applicant to submit to a medical examination.

260
Q

NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS (NAIC)

A

An association of state insurance commissioners attempting to solve insurance regulatory problems

261
Q

NONPARTICIPATING LIFE INSURANCE

A

So called ‘non-par’ life insurance does not pay policy dividends.

262
Q

NET COST

A

A term ordinarily referring to the actual cost of insurance to a policyowner in a mutual company after the policy dividends are deducted from the premiums deposited.

263
Q

NONRENEWABLE CONTRACT

A

An agreement or policy written for a specific period and purpose and that does not contain an option to be renewed for successive terms.

264
Q

NONTRANSFERABLE

A

A contract in which the benefits or any of its value cannot be sold

265
Q

OFFER AND ACCEPTANCE

A

An offer is made by the life insurance policy applicant when he or she signs the application

266
Q

PARTICIPATING INSURANCE

A

An insurance policy

267
Q

PAYOR

A

The person who pays the premiums on a policy.

268
Q

OPTIONAL BENEFIT

A

An additional benefit offered by the company

269
Q

OPTIONAL PAID-UP INSURANCE

A

One of the guaranteed nonforfeiture options in a policy where the cash value of the policy is used to buy a single premium paid-up insurance at the attained age.

270
Q

OVERRIDE

A

An override is the commission paid to a general agent or manager in addition to the commission paid the agent or broker who sells the policy.

271
Q

PERC VALUE

A

PERC

272
Q

OWNERSHIP PROVISION

A

A provision stating who the owner is when the owner is someone other than the insured.

273
Q

PERMANENT INSURANCE

A

Any form of life insurance in which the insured has the guaranteed right to keep the policy in force as long as he or she pays the premium.

274
Q

PAID-UP ADDITIONS

A

A dividend option that allows the policyowner to use policy dividends to purchase paid-up additional insurance on a net single premium basis at the insured’s attained age.

275
Q

PAID-UP POLICY

A

A policy on which the policyowner has completed payments

276
Q

PERSISTENCY

A

A measure of the number of policies sold that ‘stay on the books

277
Q

PARTIAL WITHDRAWALS (SURRENDERS)

A

The policyowner’s right in universal and variable universal life insurance policies to receive a portion of the cash value.

278
Q

PLEDGE

A

The placing of policy cash values as collateral for a loan.

279
Q

POLICY

A

The basic written contract between the insurer and the policyowner

280
Q

PORTFOLIO METHOD OF DIVIDEND CALCULATION

A

The method whereby dividends are calculated based on the average interest rate earned on total portfolio of investments.

281
Q

POLICY ANNIVERSARY

A

The anniversary of the date of issue of a policy

282
Q

PREFERRED RISK

A

A person whose characteristics indicate an above-average life expectancy and qualifies for a more favorable premium rate.

283
Q

POLICY CHANGE PROVISION

A

A provision stating that the policyowner has the right to change coverage from a term policy to a permanent policy without providing evidence of insurability.

284
Q

POLICY DATE

A

The date on which coverage becomes effective

285
Q

PREFERRED RISK POLICIES

A

Policies warranting a lower premium charge based on underwriting criteria indicating better-than-average mortality risk.

286
Q

POLICY FEE

A

A small annual charge to the policyowner

287
Q

POLICYHOLDER

A

The person or organization having rightful possession of a policy

288
Q

PRELIMINARY TERM INSURANCE

A

Term insurance attached to a newly issued permanent life insurance policy extending term coverage for a preliminary period of one to 11 months.

289
Q

POLICY LOAN

A

A loan to the policyowner by the insurer with the cash value of the policy assigned as the only security for the loan.

290
Q

PREMIUM

A

The periodic payment required to keep a specific insurance policy in force.

291
Q

POLICY MATURITY DATE

A

The date at which a policy matures if the insured is still alive at that age.

292
Q

PREMIUM LOAN

A

Payment of the premium by taking a loan against the cash value of a policy.

293
Q

POLICYOWNER

A

The person who has ownership rights in an insurance policy and who may or may not be the insured.

294
Q

POLICY PERIOD

A

The length of time during which the policy contract provides protection.

295
Q

PREMIUM MODE

A

The frequency with which premium payments are made

296
Q

PREMIUM PAYMENT PERIOD

A

The number of years during which premiums are payable.

297
Q

POLICY PROCEEDS

A

The amount payable in a single sum to the beneficiary or policyowner under a policy at death

298
Q

PREMIUM REFUND

A

A life insurance provision or rider that is a form of increasing term insurance

299
Q

PREMIUM RETURN

A

A return of premium that may occur as a result of cancellation

300
Q

Rebating

A

Generally

301
Q

PRIMARY BENEFICIARY

A

The beneficiary specifically designated by the insured as the first in priority to receive policy proceeds.

302
Q

REDUCED PAID-UP OPTION

A

A nonforfeiture option that permits the insured to have the cash surrender value of his or her policy used to purchase a paid-up policy for

303
Q

PRIVATE ANNUITY

A

Annuity issued by an individual or organization other than an insurer or other company regularly engaged in annuity sales.

304
Q

RE-ENTRY TERM

A

Renewable term insurance that will charge lower new-issue term premiums if the insured periodically provides suitable evidence of insurability.

305
Q

PROCEEDS

A

The net amount of money payable by the insurance company at the death of an insured or at the maturity of a policy.

306
Q

REFUND ANNUITY

A

An annuity that will make payments after the death of the annuitant to a designated beneficiary

307
Q

PROHIBITED PROVISIONS

A

Life insurance policy provisions that are not allowed in the contract under state law

308
Q

PROTECTION

A

A term synonymous with the term ‘coverage’ that denotes the amount of insurance provided by the policy.

309
Q

REINSTATEMENT PROVISION

A

A policy provision defining a policyowner’s right to reinstate a lapsed policy within a reasonable time after lapse

310
Q

RENEWABLE AND CONVERTIBLE TERM

A

Term life insurance offering the policyowner both the option to renew the coverage at the end of the term period and the option (within the term period) to convert it to a permanent form of insurance.

311
Q

PURE ENDOWMENT

A

A theoretical contract that provides for payment only if a specific person survives to a certain date and not in event of that person’s prior death.

312
Q

RATABLE CHARGE METHOD

A

A method of accounting for policy cash values

313
Q

RENEWAL

A

Continuance of coverage under an insurance policy beyond its original term.

314
Q

RATED

A

A rated policy is one issued on a substandard risk with higher than standard premiums.

315
Q

RENEWAL COMMISSION

A

The commission paid or credited to an agent after the first policy year for premiums received by the company on business written by the agent.

316
Q

RATING

A

The premium classification given to a person who applies for life insurance. The term is usually used when an applicant is designated as a substandard risk.

317
Q

RENEWAL PREMIUM

A

Any premium due after the first policy year.

318
Q

REPORTABLE ECONOMIC BENEFIT COST (REB)

A

The term cost of life insurance death benefit protection that is provided to a participant in a split dollar arrangement or a qualified plan.

319
Q

SCHEDULED PREMIUM

A

The selected premium by the policyowner in variable universal life and universal life policies.

320
Q

REPRESENTATIONS

A

Statements made by an applicant on the application that the applicant attests are substantially true to the best of his or her knowledge and belief

321
Q

REQUIRED PROVISIONS

A

Certain provisions must be included under state law in an insurance policy.

322
Q

RESERVE

A

The funds held by the company for all policies which

323
Q

RESERVE BASIS

A

The mortality and interest rate assumptions used in the computation of premiums and necessary reserves.

324
Q

SECONDARY GUARANTEE UNIVERSAL LIFE

A

Insurers include secondary guarantees in some universal life policies to produce a policy with a guaranteed death benefit for a specified period of time

325
Q

RETIREMENT INCOME POLICY

A

A type of limited-pay life insurance contract designed to build cash values with the principal objective of funding a desired level of guaranteed monthly income for life

326
Q

SECTION 79 PLAN

A

Merely a group-term life insurance plan but so called because of the favorable taxation under Internal Revenue Code section 79.

327
Q

RETROACTIVE CONVERSION

A

Conversion of a term life insurance policy to a permanent policy with premiums determined as if the permanent policy were issued at the insured’s original issue age rather than at the insured’s attained age at the time of conversion.

328
Q

RETURN OF PREMIUM RIDER

A

A type of increasing term rider that will pay an amount equal to the sum of all premiums paid to date if the insured dies within a specified term

329
Q

SECTION 162 PLAN

A

A plan that involves the purchase of a life insurance policy on the life of one or more employer-chosen employees.

330
Q

RIDER

A

An attachment to a life insurance policy that modifies the policy by expanding or restricting benefits or excluding certain conditions of coverage.

331
Q

SECTION 419(E) MEDICAL BENEFIT PLAN

A

A post-retirement medical benefits plan that businesses can establish to cover retiree medical expenses.

332
Q

RISK FACTOR

A

One of the three principal factors entering gross premium calculations.

333
Q

SELECT MORTALITY TABLE

A

A mortality table showing better-than-average mortality rates in the initial years after issue as a result of the insurer’s ability to screen out bad risks through its underwriting process.

334
Q

STATUTORY RESERVE

A

This is the reserve value reported in an insurance company’s statutory financial statement filed with the state insurance department. The primary difference between this and the tax reserve is the interest rate used.

335
Q

SEPARATE ACCOUNT

A

An investment account that is segregated from the general investment portfolio of the insurer. Required by law for assets backing variable products.

336
Q

STOCK COMPANY

A

A company that is owned and controlled by stockholders rather than policyowners.

337
Q

SETTLEMENT

A

A term that is synonymous with the payment of a claim. It implies that both the policyowner and the insurance company are satisfied with the amount and the method of payment.

338
Q

SUBSTANDARD INSURANCE

A

Life insurance issued at premium rates higher than standard

339
Q

SETTLEMENT DIVIDEND

A

A special or extra dividend payable at the time of termination of a policy by death

340
Q

SETTLEMENT OPTIONS

A

The various methods by which policy proceeds may be paid to the beneficiary.

341
Q

SUBSTANDARD RISK

A

A person whose mortality risk is greater than average for his or her age.

342
Q

SINGLE-PREMIUM DEFERRED ANNUITY

A

Annuity purchased with one premium

343
Q

SINGLE-PREMIUM POLICY

A

A policy that is paid-up with one premium.

344
Q

SUICIDE PROVISION

A

Life insurance policies include a provision that if the insured commits suicide within a specified period

345
Q

SPENDTHRIFT PROVISION

A

A policy provision to shelter policy proceeds

346
Q

SUPPLEMENTAL TERM INSURANCE

A

A supplemental agreement or rider available in some policies

347
Q

SPLIT-DOLLAR INSURANCE

A

An arrangement between two parties (often employer and employee) where there is a sharing or splitting of premiums

348
Q

STANDARD POLICY

A

A policy issued with standard provisions and at standard rates; not rated or with special restrictions.

349
Q

SURPLUS ACCOUNT

A

The difference between a company’s assets and liabilities.

350
Q

STANDARD RISK

A

A person who meets the insurer’s underwriting criteria for standard policies.

351
Q

SURRENDER

A

The policyowner’s return of a policy to the insurance company in exchange for the policy’s cash surrender value or other equivalent nonforfeiture values.

352
Q

TERM INSURANCE RIDER

A

A form providing term life insurance that is attached to a permanent life insurance policy

353
Q

SURRENDER CHARGE

A

In a variable universal life or universal life policy

354
Q

TERM OF POLICY

A

The period for which a policy is in force.

355
Q

SURRENDERED POLICY

A

A life insurance policy that has been returned to the insurance company and terminated

356
Q

TERM TO AGE

A

A form of long-term life insurance continuing to the designated age of the policyowner.

357
Q

TARGET PREMIUM

A

The annual premium for a universal life policy that will maintain the plan of insurance if the actual interest

358
Q

THIRD PARTY OWNERSHIP

A

An arrangement in which the life insurance policy is owned by an entity other than the insured or the beneficiary.

359
Q

TAX RESERVE

A

This is the reserve value used in the determination of an insurance company’s federal income tax.

360
Q

TRADITIONAL NET COST COMPARISON METHOD

A

A method of determining policy cost over a stipulated period by adding a policy’s premiums and subtracting dividends and the cash value at the end of the stipulated period.

361
Q

TEMPORARY LEVEL EXTRA PREMIUMS

A

A type of rating most frequently used with physical impairments where the risk is considered to be a temporary nature.

362
Q

TEMPORARY ANNUITY

A

A life annuity that terminates at the earlier of the end of a stipulated period or the death of the annuitant.

363
Q

TRADITIONAL PRODUCT

A

A life insurance product with fixed premiums

364
Q

TERM CONTRACT OR POLICY

A

See: term insurance.

365
Q

ULTIMATE MORTALITY TABLE

A

A mortality table based on average life insurance experience after the period when the benefit of favorable ‘selection’ attributable to the insurer’s underwriting process has worn off.

366
Q

TERMINAL DIVIDEND

A

Dividends that may be payable upon termination of a policy at death

367
Q

UNBUNDLED FEES

A

Refers to the legal requirement that variable universal life

368
Q

TERMINATION

A

Refers to a policy’s becoming of no effect. No more premiums are payable on the policy after termination

369
Q

TERM INSURANCE

A

Life insurance protection that expires after a specified term without any residual value if the insured survives the stated period.

370
Q

UNDERWRITER

A

Technically

371
Q

UNEARNED PREMIUM

A

The portion of the premium applicable to the unexpired or unused part of the period for which the premium has been charged.

372
Q

VARIABLE DEATH BENEFIT

A

A death benefit option in most variable life policies. The death benefit varies based on a formula relating the cash value to the death benefit.

373
Q

UNIFORM POLICY PROVISION

A

A provision that is required by state statute to be in all insurance contracts of a given type.

374
Q

VARIABLE LIFE INSURANCE

A

Life insurance that provides a guaranteed minimum death benefit

CFP - Steps in the Financial Planning Process (9 decks)

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