A

Accidental death benefit - a provision added to a life insurance policy for payment of an additional amount - usually equal to the face amount of insurance - in case of death by accidental means. It is often referred to as "double indemnity."

Agent - an individual authorized by an insurance company to create, modify, and terminate contracts of insurance.

Annuitant - the person during whose life an annuity is payable, usually the person to receive the annuity.

Annuity - a contract that provides an income for a specified period of time, such as a number of years or for life.

B

Beneficiary - a person who may become eligible to receive, or is receiving, benefits under an insurance policy.

Broker - an individual who represents an insured in the solicitation, negotiation or procurement of insurance. An insurance broker does not represent insurance companies as agent but places orders with insurance companies.

C

Cash surrender value - the amount available in cash on voluntary termination of a policy before it becomes payable by death or maturity.

Casualty insurance - the coverage of loss or liability arising from accident or mishap excluding certain types of loss which by law or custom are considering as falling exclusively within the scope of other types of insurance (such as fire or marine insurance).

Claim -a demand submitted to an insurance company requesting payment of an amount due under the terms of a policy.

Commission - a percentage of the premium paid to an agent or broker by the insurer.

Comprehensive insurance - a term used for a variety of policies providing broad protection.

Comprehensive automobile liability insurance - insurance designed to cover a variety of automobile liability exposures for bodily injury and property damage.

Comprehensive personal liability insurance - insurance that reimburses the policyholder if he or she becomes liable to pay money for damage or injury he or she has caused to others. This insurance does not include automobile liability or business operations, but does include almost every activity of the policyholder.

Conversion privilege - the right of an insured person to replace one policy with another without providing evidence of insurability.

Convertible term insurance - term insurance that can be exchanged for another plan of insurance offered by the company without evidence of insurability.

Credit life insurance - a form of decreasing term life insurance on the life of a borrower. The lender is named as beneficiary, and the insurance is kept in force for as long as the loan is outstanding. The amount of the policy matches the loan's balance during the term of the loan.

D

Damages - the amount claimed or allowed as compensation for injuries sustained or property damaged through the wrongful acts or the negligence of another.

Death benefit - the amount to be paid to a beneficiary upon the death of the insured person, also called the policy's face amount.

Decreasing term life insurance - a form of life insurance in which the premium remains level for a specified number of years, while the face amount of insurance declines during that term.

Deductible - the amount of the loss that the insured has to pay.

Deferred annuity - an annuity providing for the income payments to begin at some future time or date such as in a specified number of years or at a specified age.

Disability - inability to perform all or part of one's occupational duties because of an accident or illness.

Disability benefit - a provision added to a life insurance policy providing for a waiver of premium and sometimes payment of monthly income if the insured becomes totally and permanently disabled.

Disability income insurance - a form of health insurance that provides periodic payments when the insured is unable to work as a result of illness or injury.

Double indemnity - a provision in some policies that provides for twice the face amount of the policy to be paid if death results from stated but generally accidental causes.

E

Endorsement - a provision added to an existing insurance policy to modify its coverage, also called a "rider."

Endowment insurance - a type of life insurance that is payable to the insured if he or she is living on the maturity date stated in the policy, or to a beneficiary if the insured dies prior to that date.

Exclusion - a loss or risk that a policy does not cover.

Experience rate - the percentage applied to the cost of premiums in a subsequent period, based on the loss experience of the insurance company during the past period.

F

Face amount - the amount stated on the face of the policy that will be paid in case of death or at maturity. It does not include amounts added through dividend additions, double indemnity or other special provisions.

G

Grace period - a period of time, usually thirty-one days following the premium due date, during which the payment of the premium will continue the policy and during which the policy remains in force and effect.

Group insurance - any insurance plan by which a number of employees (and their dependents) are insured under a single policy, issued to the employer, with individual certificates given to each insured employee.

Guaranteed insurability - means that additional coverage may be purchased even if your health deteriorates.

Guaranteed renewable policy - a policy that is renewable at the option of the insured for a specified number of years, or until a stated age such as 50 or 60. During this period, the insurer cannot cancel the policy or modify its provisions; however, the premium can be increased based on standards that are applied to everyone in the policyholder's class.

H

Health insurance - insurance against loss by sickness or accidental bodily injury.

Health maintenance organization (HMO) - a form of health insurance combining a range of coverages in a group basis. Individual members are often required to pay a flat fee per visit in addition to their premiums in return for entitlement to a wide range of health services.

HO 00 01 - homeowner's insurance providing coverage only to the extent of 11 named perils, also called the basic policy. It is currently used only in a few states.

HO 00 02 - homeowner's insurance providing coverage for 18 named perils, also called the broad form.

HO 00 03 - homeowner's insurance that provides protection against all losses except named exclusions on the insured's dwelling, also called the all risks or open perils form.

I

Incontestable clause - a provision in life insurance policies that prevents the insurer from challenging the coverage because of alleged misstatements by the insured after a stipulated period has passed, usually two to three years.

Inflation rider - provides for the anticipated rise in the cost of long-term care. A rider to offset inflationary increases; however, can increase premium cost by as much as one-third.

Insurable interest - an interest that might be damaged if the peril insured against occurs; the possibility of a financial loss to an individual that can be protected against through insurance.

Insurance - an economic devise for reducing risk by transferring a risk of an individual to an insurer in exchange for a premium. The insurer agrees to assume, to a specified extent, the losses suffered by the insured.

Insured - the party to an insurance arrangement whom the insurer agrees to indemnify for losses.

Insurer - the party to an insurance arrangement who undertakes to indemnify for losses.

J

Joint-and-last survivor annuity - an annuity issued on two lives under which payments continue in whole or in part until both have died.

Joint-life annuity - an annuity issued on two lives under which payments cease at the death of either of the two persons.

L

Lapse - the cancellation of insurance due to the insured's failure to make premium payments.

Level premium insurance - a policy for which the premiums do not change for the entire duration of the policy. The amount of a level premium is higher than needed for the protection given in the early years of the contract but less than needed for protection in the later years.

Loading - an amount added to the basic rate or premium to cover the expense to the insurance company of securing and maintaining the business.

Long-term disability - a disability that exceeds a specified period of time. The actual number of days or months considered "long-term" will vary by insurer.

Loss - the amount of reduction in the value of an insured's property caused by an insured peril.

M

Medicaid - State programs of public assistance to persons regardless of age whose income and resources are insufficient to pay for health care.

Medicare - hospital and medical expense insurance provided under the Social Security Program.

Medigap - private health insurance products that supplement Medicare insurance benefits.

Modified endowment contract (MEC) - a life insurance contract that does not meet the requirements specified in the Internal Revenue Code and under which a withdrawal of investment earnings before age 59-1/2 is subject to penalty.

Mortality table - a table reporting the average rate of death for each given age, based on studies of a large group of individuals over many years.

N

Named peril coverage - property insurance that covers losses that result from specifically named causes.

Noncancelable guaranteed renewable policy - health insurance policies that the insurer cannot cancel the during an agreed upon term and cannot change the premium rate. Upon expiration of the term, the insured has the right to renew the policy under the same conditions.

Nonforfeiture option - the value, if any, either in cash or in another form of insurance available upon failure to continue the required premium payments.

P

Paid-up insurance - a life insurance policy on which all premiums have been paid.

Peril - the cause of possible loss; the event insured against.

Permanent life insurance - generally refers to any life insurance policy other than group and term.

Policy - the written contract of insurance that is issued to the insured by the insurer, which states the terms of the insurance contract.

Policy loan - a loan made by an insurance company to a policyholder on the security of the cash value of the policy.

Preferred provider organization (PPO) - a health care delivery organization composed of physicians, hospitals, or other health care providers that contracts with members to provide health care services at a reduced fee.

Premium - the payment or one of the regular periodical payments a policyholder is required to make for an insurance policy.

Premium loan - a policy loan made for the purpose of paying premiums.

R

Reduced paid-up insurance - a form of insurance available as a nonforfeiture option. It provides for continuation of the original insurance plan, but at a reduced amount.

Renewable term insurance - term insurance providing the right to renew at the end of the term for another term or terms, without evidence of insurability. The rates increase at each renewal as the age of the insured increases.

Retention - the amount of liability retained on a given risk.

Rider - a document or form containing special provisions that are not contained in the policy contract.

Risk - uncertainty as to the outcome of an event when two or more possibilities exist.

Risk Management - involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through such practices as reducing the risk, eliminating the risk, or transferring the risk, usually by insurance.

S

Second-to-die policy - a life insurance policy that insures two lives with the promise to pay only at the second death, also called survivorship whole life insurance.

Self-insurance - a form of allowing for risks by establishing reserves for future losses, as opposed to purchasing insurance protection.

Single premium whole life - a whole life policy in which the initial premium, together with interest earnings, is sufficient to pay the cost of the policy over its lifetime.

Survivor whole life - a life insurance policy that insures two lives with the promise to pay only at the second death, also called "second-to-die" policy.

T

Term - the length of time covered by a policy or a premium.

Term insurance - the type of life insurance policy that provides protection only for a specified period of time.

Traditional whole life - provides level premiums and level insurance coverage. It generally costs more than term in the earlier years of the policy and less in later years. Nontaxable dividends may be paid on the policy.

U

Umbrella liability insurance - a form of excess liability insurance available to individuals and businesses protecting them against claims in excess of the limits of their primary policies or for claims not covered by their insurance program, subject to a large deductible.

Underinsured motorist coverage - similar to uninsured motorist coverage, it can be added to your auto policy to cover property damage and bodily injury caused by a driver whose liability limits are too low to cover adequately the damages you have suffered.

Uninsured motorist coverage - coverage in a personal automobile policy providing for losses when another motorist does not carry liability insurance.

Universal life - a flexible premium life insurance policy under which the policyholder may change the death benefit from time to time (with satisfactory evidence of insurability for increases) and vary the premium payments.

V

Vanishing premium policy - a participating whole life policy on which dividends are allowed to accumulate until accumulated dividends plus future dividends are sufficient to pay all future premiums under the policy.

Variable annuity - an annuity contract under which the amount of each periodic payment fluctuates according to the investment performance of the insurer.

Variable life - life insurance under which the benefits are not fixed but relate to the value of assets behind the contract at the time the benefit is paid.

Variable/universal life - a form of life insurance that combines the flexible premium features of universal life with the investment features of variable life.

W

Waiting period - a provision designed to eliminate disability claims for the first number of days specified for each period of disability; the waiting period may run from three days to as long as one year.

Waiver of premium - a provision that waives payment of the premium that becomes due during a period of covered total disability that has lasted for a specified period of time.

Whole life - insurance payable to a beneficiary at the death of the insured whenever that occurs; premiums may be payable for a specified number of years or for life.

Worker's compensation - a system of providing for the cost of medical care and weekly payments to injured employees or to dependents of those killed in industry in which absolute liability is imposed on the employer.