T_Glossary 7

Question 1

lapse

Answer 1

a life insurance contact lapses if the policyholder terminates a contact early due to non payment of premiums without the company making a surrender value payment to the policyholder. some companies also use lapse to describe policies that have been surrendered.

Question 2

liabilities

Answer 2

the liabilities of a lic are the benefits it has contractually agreed to pay its policyholders, plus its future expenses less future premiums.

Question 3

marginal pricing

Answer 3

this refers to when a company decides, for competitive reasons, to price a contract ignoring any contribution to overheads.

Question 4

market consisent valuation

Answer 4

the value at which whatever is being valued (A or L)could be exchanged in a sufficiently deep and liquid market, between knowledgeable and willing parties in an arms length transaction.

Question 5

mutual (lic)

Answer 5

this is a lic that does not have any shareholders - it is effectively owned by the policyholders

Question 6

offer price

Answer 6

in the context of a unitised life insurance contract, this is the price a lic uses to allocate units to the contract.

Question 7

office premium

Answer 7

the office premium is the premium that the policyholder pays under a life insurance contract. it is also known as the gross premium

Question 8

health option

Answer 8

a health option is where the lic gives a policyholder the right to increase or extend the death cover under a life insurance contract at some future time or times without further evidence of health.

Question 9

policy fee

Answer 9

this is an amount, usually independent of the size of the benefit, included in the office premium to cover part of a lic’s maintenance expense.

Question 10

proprity lic

Answer 10

this is a lic that is owned by shareholders.