Life Insurance Premiums, Proceeds and Beneficiaries Vocab & Notes Chap 4

Question 1

This rider allows the insured to receive a portion of the death benefit prior to death if the insured has a terminal illness and is certified by a physician as expected to die within 1-2 years

Answer 1

ACCELERATED BENEFIT (OPTION) RIDER

Question 2

The person or entity designated in a life insurance policy to receive the death proceeds.

Answer 2

BENEFICIARY

Question 3

The equity or savings element of whole life insurance policies.

Answer 3

CASH VALUE

Question 4

A beneficiary group designation (for example, all of my children), opposed to specifying one or more beneficiaries by name.

Answer 4

CLASS DESIGNATION

Question 5

A provisions of the Uniform Simultaneous Death Act which ensures a policyowner if both the insured and the primary beneficiary die within a short period of time, the death benefits will be paid to the contingent beneficiary. It also states that the primary beneficiary must outlive the insured a specified period of time in order to receive the proceeds.

Answer 5

COMMON DISASTER PROVISION

Question 6

The beneficiary second in line to receive death benefit proceeds if the primary beneficiary dies before the insured.

Answer 6

CONTINGENT (SECONDARY) BENEFICIARY

Question 7

The amount of premium paid by the policyowner for policy coverage or insurance protection already received.

Answer 7

EARNED PREMIUM

Question 8

Also known as the loading charge, is a measure of what it costs an insurance company to operate.

Answer 8

EXPENSE FACTOR

Question 9

Pays a fixed death benefit in specified installment amounts until the principal and interest are exhausted.

Answer 9

FIXED AMOUNT INSTALLMENT OPTION

Question 10

A concept of averaging what would be the total single premium for a policy over periodic payments. More periodic payments = higher total premium.

Answer 10

FIXED/LEVEL PREMIUM

Question 11

Pays the death benefit proceed in equal installments over a set period of years. The dollar amount of each installment depends upon the total number of installments.

Answer 11

FIXED PERIOD OR PERIOD CERTAIN OPTION

Question 12

A premium funding option characterized by a lower premium in the early years of the contract with premiums increasing annually for an introductory period. After the introductory period, the premium jumps to an amount higher than what the initial level premium would have been, and then remains fixed or constant for the life of the policy.

Answer 12

GRADED PREMIUM

Question 13

The net premium for insurance plus commissions, operating and miscellaneous expenses, and dividends.

Answer 13

GROSS (ANNUAL) PREMIUM

Question 14

A calculation for determining the amount of interest an insurance company can expect to earn from investing insurance premiums.

Answer 14

INTEREST FACTOR

Question 15

A death settlement option where the insurance company holds death benefit for a period of time and pays only the interest earned to the named beneficiary. A minimum rate of interest is guaranteed and the interest must be paid at least annually.

Answer 15

INTEREST ONLY OPTION

Question 16

A beneficiary which may not be changed by the policyowner without the written consent of the beneficiary.

Answer 16

IRREVOCABLE BENEFICIARY

Question 17

A settlement option which guarantees that benefits will be paid on a life-long basis to two or more people. This option may include a period certain and the amount payable is based on the ages of the beneficiaries.

Answer 17

JOINT AND SURVIVOR OPTION

Question 18

A death benefit settlement option which provides the beneficiary with an income that they cannot outlive. Installment payments are guaranteed for as long as the recipient lives. The amount of each installment is based on the recipient’s life expectancy and the amount of principal.

Answer 18

LIFE INCOME OPTION

Question 19

An agreement in which a policyholder sells or transfer ownership in all or part of a life insurance policy to a third party for compensation that is less than the expected death benefit of the policy.

Answer 19

LIFE SETTLEMENT

Question 20

A death settlement option where death benefit is paid in a single payment, minus any outstanding policy loan balances and overdue premiums. Typically default option for life insurance.

Answer 20

LUMP SUM OPTION

Question 21

A premium funding option characterized by an initial premium that is lower than it should be during an introductory period of time (normally the first three to five years). After this time, the premium will increase to an amount greater than what the initial level premium would have been, and then remains level or constant for the life of the policy.

Answer 21

MODIFIED PREMIUM

Question 22

Demonstrates the incidence and extent of disability that may be expected from a given group of persons.

Answer 22

MORBIDITY RATE

Question 23

A measure of the number of deaths (in general, or due to a specific cause) in some population, scaled to the size of that population, per unit time.

Answer 23

MORTALITY RATE

Question 24

A formula used to determine the true cost of a policy for a policyowner. It uses the same the same formula as the Surrender Cost Index with the exception that it doesn’t assume that the policy will be surrendered at the end of the period. The _________________ is useful if one’s primary concern is the amount of death benefits provided in the policy.

Answer 24

NET PAYMENT COST INDEX

Question 25

A premium calculation used to calculate an insurer’s policy reserves factoring in interest and mortality.

Answer 25

NET (SINGLE) PREMIUM

Question 26

Evenly distributes benefits among all named living beneficiaries.

Answer 26

PER CAPITA (by the head)

Question 27

Evenly distributes benefits amongst a beneficiary’s heirs in the event that a beneficiary dies before the insured.

Answer 27

PER STIRPES (by the bloodline)

Question 28

The frequency in which a policyowner elects to pay premiums.

Answer 28

PREMIUM MODE

Question 29

The first beneficiary in line to receive benefit proceeds upon the death of an insured.

Answer 29

PRIMARY BENEFICIARY

Question 30

The amount actually paid as a death, surrender, or maturity benefit. In the case of a death benefit, it includes the face value plus any earned dividends less any outstanding loans and interest. If surrender benefit, the amount includes any cash value less surrender charges and outstanding loans and interest. If maturity benefit the amount includes the cash value less any outstanding loans and interest.

Answer 30

POLICY PROCEEDS

Question 31

The money set aside (required by the state’s insurance laws) to pay future claims.

Answer 31

RESERVES

Question 32

A beneficiary that the policy owner may change at any time without notifying or getting permission from the beneficiary

Answer 32

REVOCABLE BENEFICIARY

Question 33

Are optional modes of settlement provided by most life insurance policies. Options include lump-sum cash, interest-only, fixed-period, fixed-amount, and life income.

Answer 33

SETTLEMENT OPTIONS

Question 34

A policy funding option where the policyowner pays a single premium that provides protection for life as a paid-up policy.

Answer 34

SINGLE PREMIUM FUNDING

Question 35

A clause which prevents creditors from obtaining any portion of policy proceeds upon an insured’s death. Additionally the clause can be selected by the policyowner to prevent a beneficiary from recklessly spending benefits by requiring the benefits to be paid in fixed amounts or installments over a certain period of time.

Answer 35

SPENDTHRIFT CLAUSE:

Question 36

A cost comparison calculation formula where the net cost is averaged over the number of years the policy was in force to arrive at the average cost-per-thousand for a policy that is surrendered for its cash value at the end of that period.

Answer 36

SURRENDER COST INDEX

Question 37

The third beneficiary in line to receive death benefit proceeds if the primary and contingent beneficiaries both die before the insured.

Answer 37

TERTIARY BENEFICIARY

Question 38

Premium which has been paid by a policyowner for insurance coverage which has not yet been provided.

Answer 38

UNEARNED PREMIUM

Question 39

This states that if the insured and the primary beneficiary die at approximately the same time for a common accident with no clear evidence as to who died first, the law will assume that the primary died first, this allows the death benefit proceeds to be paid to the contingent beneficiaries.

Answer 39

UNIFORM SIMULTANEOUS DEATH ACT

Question 40

Involves someone with a terminal illness selling their existing life insurance policy to a third party for a percentage of the death benefit. In this agreement, the owner of a life insurance policy sells the policy to another person in exchange for a bargained for payment, which is generally less than the expected death benefit under the policy

Answer 40

VIATICAL SETTLEMENT