Premiums and Proceedsq Flashcards
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
Accelerated Benefit (Option) Rider
the person or entity designated in a life insurance policy to receive the death proceeds
Beneficiary
equity or savings element of whole life insurance policies
Cash Value
a beneficiary group designation (for example, all my children) opposed to specifying one or more beneficiaries by name
Class Designation
provision of the Uniform Simultaneous Death Act, which ensures a policy owner 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 by a specified period of time in order to receive the proceeds
Common Disaster Provision
beneficiary second in line to receive death benefit proceeds if the primary beneficiary dies before the insured
Contingent (secondary) Beneficiary
the amount of premium paid by the policy owner for policy coverage or insurance protection received up to this point
Earned Premium
also known as the loading charge, is a measure of what it costs an insurance company to operate
Expense Factor
this provision in life insurance means that the cash value will increase faster than the guaranteed rate if the insurer earns a greater return than the guaranteed rate
Excess Interest
pays a fixed death benefit in automatic installment amounts until the principal and interest are exhausted
Fixed Amount Installment Option
concept of averaging what would be the total single premium for a policy over periodic payments. more periodic payments = higher total premium
Fixed/Level premium
settlement option that pays the death benefit proceeds in equal installments over a set period of years. The dollar amount of each installment depends upon the total number of installments
Fixed Period or Period of Certain Option
as 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. It then remains fixed or constant for the life of the policy
Graded Premium
an insurer’s gross is the net premium for insurance plus commissions, operating and miscellaneous expenses, and dividends
Gross (Annual) Premium
the calculation for determining the amount of interest an insurance company can expect to earn from investing insurance premiums
Interest Factor
a death settlement option where the insurance company holds the 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
Interest Only Option
beneficiary which may not be changed by the policy owner without the written consent of the beneficiary
Irrevocable Beneficiary
Settlement option that guarantees that benefits will be paid on a lifelong 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
Joint and Survivor Option
death benefit settlement option which provides the beneficiary with an income option that they cannot outline. 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 pricipal
life income option
an agreement in which policy owner sells or transfers 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
life settlement
death benefit option where the death benefit is paid in a single payment, minus any outstanding policy loan balances and overdue premiums. Considered the automatic (or “default”) option for most life insurance contracts
Lump Sum Option
a premium funding option characterized by an initial premium that is lower than it should be during an introductory period of time (usually the first three to five years). After this time, the premium will increase to an amount greater than what the initial premium would have been and then remains level or constant for the life of the policy
modified premium
demonstrates the incidence and extent of disability that may be expected from a given group of people
Morbidity Rate
measure of number of deaths (in general, or due to a specific cause) in some population, scaled to the size of that population, per unit time
Mortality Rate
a formula used to determine the actual cost of a policy for a policy owner. It helps the consumer compare costs of death protection between policies that will be held for ten or twenty years
Net Payment Cost Index
a premium calculation used to calculate an insurer’s policy reserves factoring in interest and mortality
Net (single) Premium
evenly distributes benefits among all named living beneficiaries (i.e. all living children)
PER CAPITA (by the head)
evenly distributes benefits among an insured’s according to the family line, branch, or root (i.e. children and grandchildren)
Per Stirpes
the frequency in which a policy owner elects to pay premiums
Premium Mode
first beneficiary in line to receive benefit proceeds upon the death of an insured
Primary Beneficiary
the amount actually paid as a death, surrender, or maturity benefit. In 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, minus surrender charges, and outstanding loans and interest. If maturity, the benefit amount includes the cash value less any outstanding loans and interest
Policy Proceeds
the money set aside (required by the state’s insurance laws) to pay future claims
Reserves
a beneficiary that a policy owner may change at any time without notifying or getting permission from the beneficiary
Revocable Beneficiary
optional modes of settlement by most life insurance policies. Options include lump-sum cash, interest only, fixed-amount, and life income
settlement options
a policy funding option where the policy owner pays a single premium that provides protection for life as a paid-up policy
Single Premium Funding
Prevents creditors from obtaining any portion of policy proceeds upon an insured’s death. Additionally, the clause can be selected by the policy owner to prevent a beneficiary from recklessly spending benefits by requiring benefits to be paid in fixed amounts or installments over a certain period of time
spendthrift clause
a cost comparison calculation formula used to determine the average cost-per-thousand for a policy that is surrendered for its cash value. It aids in cost comparisons if the policy owner plans to surrender the policy for its cash value in ten or twenty years
surrender cost index
the third beneficiary in line to receive death benefit proceeds. This beneficiary will only receive the death benefit if both the primary and contingent beneficiaries die before the insured
Tertiary Beneficiary
department within an insurance company responsible for reviewing applications, approving and denying applications, and assigning risk classifications
underwriting department
includes the premium that has been paid by a policy owner for insurance coverage that has not yet been provided
Unearned Premium
states that if the insured and the primary beneficiaries die at approximately the same time, in a common accident, with no clear evidence as to who died first, the law will assume the primary died first. Therefore, the death benefit proceeds are paid to the contingent beneficiaries.
Uniform Simultaneous Death Act
involves someone with a terminal illness selling their existing life insurance policy to a third party for a percentage of the death benefit
Viatical Settlement
New third party owner in a viatical settlement
Viatical (Viatee)
original policy owner in a viatical settlement
viator
