Oregon Insurance Glossary of Terms: Life Insurance
Benefits Rider A life insurance rider that allows for
the early payment of some portion of the policy's face amount
should the insured suffer from a terminal illness or injury.
Death Benefit Rider A life insurance policy rider providing
for payment of an additional cash benefit related to the face
amount of the base policy when death occurs by accidental
Death Insurance Insurance providing payment if the insured's
death results from an accident.
An authorized representative of an insurance company who
sells and services insurance contracts.
Renewable Term A form of renewable term insurance
that provides coverage for one year and allows the policy
owner to renew his or her coverage each year, without evidence
of insurability. Also called yearly renewable term.
The transfer of the ownership rights of a Life Insurance
policy from one person to another.
Age Your current age. Your attained age is one of the
factors life insurance companies use to determine your premiums.
The older you are, the greater chance you'll die while you
are covered - so the higher your premium.
A procedure for making the effective date of a policy
earlier than the application date. Backdating is often used
to make the age of the consumer at issue lower than it actually
was in order to get lower premium. State laws often limit
to six months the time to which policies can be backdated.
The person designated to receive the death benefit when
the insured dies.
A temporary insurance policy that expires at the end of
a specific time period or when the permanent policy is written.
A binder is given to an applicant for insurance during the
time the complete policy paperwork is being completed.
Benefits Money that is paid to the insured upon
settlement of a covered claim. Often found with Hospital Income
Programs, "cash benefits" are paid directly to the
insured rather than the doctor or the hospital directly.
Value The equity amount or "savings" accumulation
in a whole life policy.
Notification to an insurance company that payment of an
amount is due under the terms of the policy.
Receipt Given to policy owners when they pay a premium
at time of application. Such receipts bind the insurance company
if the risk is approved as applied for, subject to any other
conditions stated on the receipt.
Clause A provision in an insurance policy setting forth
the conditions under which or the period of time during which
the insurer may contest or void the policy. After that time
has lapsed, normally two years, the policy cannot be contested.
Beneficiary Person or persons named to receive proceeds
in case the original beneficiary is not alive. Also referred
to as secondary or tertiary beneficiary.
Another word for insurance. Insurance companies use the
term coverage to mean either the dollar amounts of insurance
purchased ($200,000 of liability coverage), or the type of
loss covered (coverage for theft).
Privilege Allows the policy owner, before an original
insurance policy expires, to elect to have a new policy issued
that will continue the insurance coverage. Conversion may
be effected at attained age (premiums based on the age attained
at time of conversion) or at original age (premiums based
on ageat time of original issue).
Term A policy that may be changed to another form by contractual
provision and without evidence of insurability. Most
term policies are convertible into permanent insurance.
Plan An agreement that provides that upon a business owner's
death, surviving owners will purchase the deceased's interest,
often with funds from life insurance.
Benefit The amount of money paid to the beneficiary
when the insured person dies.
Term Insurance Term life insurance on which the face value
slowly decreases in scheduled steps from the date the policy
comes into force to the date the policy expires, while the
premium remains level. The intervals between decreases are
usually monthly or annually.
Indemnity Payment of twice the basic benefit in the event
of loss resulting from specified causes or under specified
of Insurability Any statement or proof of a person's physical
condition, occupation, etc., affecting acceptance of the applicant
Specified hazards listed in a policy for which benefits will
not be paid.
The termination of a term life insurance policy at the
end of its period of coverage.
Amount The amount of insurance provided by the terms
of an insurance contract, usually found on the first page
of the policy. In a life insurance policy, the death benefit.
Expenses Expenses incurred at the time of a person's death.
These include funeral costs, court expenses associated with
probating his or her will, current bills or debt, and taxes.
Depending on their circumstances, the survivors may also want
to pay the outstanding balances of mortgage and loans.
To Die Insurance Insurance policy whose death benefit
is paid to the surviving insured upon the death of one of
the insured's. There is no longer a benefit once the benefit
is paid, however, the surviving insured usually has the option
of purchasing a policy of the same amount without providing
evidence of insurability.
Benefit A death benefit, the dollar amount of which
does not vary.
Look Provision required in most states whereby policy
owners have up to 20 days to examine their new policies at
Expenses Expenses incurred for a funeral and burial. These
can include casket, vault, grave plot, headstone and funeral
Period Period of time after the due date of a premium
during which the policy remains in force without penalty.
Premium Policy A type of whole life policy designed
for people who want more life coverage than they can currently
afford. They pay a lower premium rate that increases gradually
over the first three to five years and then remains constant
over the life of the policy.
Term A form of renewable term insurance that remains
in force as long as the premiums are paid on time. With guaranteed
term insurance, the insurance company cannot terminate the
policy during the term.
Insurability (Guaranteed Issue) Arrangement, usually
provided by rider, whereby additional insurance may be purchased
at various times without evidence of insurability.
Clause A clause in a policy providing that a policy has
been in effect for a given length of time (two or three years),
the insurer shall not be able to contest the statements contained
in the application. In life policies, if an insured lied as
to the condition of his health at the time the policy was
taken out, that lie could not be used to contest payment under
the policy if death occurred after the time limit stated in
the incontestable clause.
Force Insurance on which the premiums are being paid or
have been fully paid.
All conditions pertaining to individuals that affect their
health, susceptibility to injury and life expectancy; an individual's
Interest Requirement of insurance contracts that loss
must be sustained by the applicant upon the death of another
and it must be sufficient to warrant compensation.
A formal social device for reducing risk by transferring
the risks of several individual entities to an insurer. The
insurer agrees, for a consideration, to pay for the loss in
the amount specified in the contract.
Policy The printed form which serves as the contract between
an insurer and an insured.
The party who is being insured. In life insurance, it
is the person because of his or her death the insurance company
would pay out a death benefit to a designated beneficiary.
Party that provides insurance coverage, typically through
a contract of insurance.
Beneficiary A beneficiary that cannot be changed
without that beneficiary's consent.
Term Insurance Term life insurance in which the
death benefit increases periodically over the policy's term.
Usually purchased as a cost of living rider to a whole life
Termination of a policy upon the policy owner's failure
to pay the premium within the grace period.
Term Insurance Term coverage on which the face value and
premiums remain unchanged from the date the policy comes into
force to the date the policy expires.
Expectancy The average number of years remaining
for a person of a given age to live as shown on the mortality
or annuity table used as a reference.
Insurance An agreement that guarantees the payment of
a stated amount of monetary benefits upon the death of the
Pay Policy A type of whole life insurance designed to
let the policyholder pay higher premiums over a specific period
such as 10 or 20 years and then not pay any premiums for the
rest of his or her life.
A document completed by a physician or another approved
examiner and submitted to an insurer to supply medical evidence
of insurability (or lack of insurability) or in relation to
Expenses Reasonable charges for medical, surgical, x-ray,
dental, ambulance, hospital, professional nursing, prosthetic
devices, and funeral expenses. (The insurance company defines
what is reasonable.)
Act of making, issuing, circulating or causing to be issued
or circulated an estimate, an illustration, a circular or
a statement of any kind that does not represent the correct
policy terms, dividends or share of surplus or the name or
title for any policy or class of policies that does not in
fact reflect its true nature.
Charge The charge for the element of pure insurance protection
in a life insurance policy.
Cost The first factor considered in life insurance premium
rates. Insurers have an idea of the probability that any person
will die at any particular age; this is the information shown
on a mortality table.
Rate The number of deaths in a group of people, usually
expressed as deaths per thousand.
Table A table showing the incidence of death at
medical Insurance A contract of life insurance underwritten
on the basis of an insured's statement of his health with
no medical examination required.
Hazard A condition in an occupation that increases
the peril of accident, sickness, or death. It usually will
mean higher premiums.
and Acceptance The offer may be made by the applicant
signing the application, paying the first premium and, if
necessary, submitting to physical examination. Policy issuance,
as applied for, constitutes acceptance by the company. Or
the offer may be made by the company when no premium payment
is submitted with the application. Premium payment on the
offered policy then constitutes acceptance by the applicant.
Age The age you were when you bought the policy.
Insured Rider A term rider covering a family member
other than the insured that is attached to the base policy
covering the insured.
All rights, benefits and privileges under life insurance
policies are controlled by their owners. Policy owners may
or may not be the insured. Ownership may be assigned or transferred
by written request of current owner.
(Paramedical) Examination The medical examination of an
applicant for Life Insurance.
(Paramedical) A physician, nurse, or para-med appointed
by the medical director of a life insurance company to examine
Life Insurance A term loosely applied to life insurance
policy forms other than Group and Term, usually Cash Value
Life Insurance, such as Whole Life Insurance.
The printed document issued to the policyholder by the
company stating the terms of the insurance contract.
Holder The person who owns a life insurance policy.
This is usually the insured person, but it may also be a relative
of the insured, a partnership or a corporation.
Risk A risk whose physical condition, occupation, mode
of living and other characteristics indicate a prospect for
longevity superior to that of the average longevity of unimpaired
lives of the same age.
The periodic payment required to keep an insurance policy
Flexibility The policy holder's right to vary the
amount of premium paid each month towards a universal life
Beneficiary In life insurance, the beneficiary designated
by the insured as the first to receive policy benefits.
Policy The insurance policy that pays first when you have
a loss that's covered by more than one policy.
Costs The legal fees and other costs incurred in
the probate process, which is the legal processing of your
will. Assets that you leave to other people through your will
cannot be distributed until the will is probated.
Statements contained in an insurance policy which explain
the benefits, conditions and other features of the insurance
Coverage's issued at a higher rate than standard because
of some health condition, or impairment of the insured.
Option An option in a renewable term life policy
under which the policy owner is guaranteed, at the end of
the term, to be able to renew his or her coverage without
evidence of insurability, at a premium rate specified in the
Putting a lapsed policy back in force by producing satisfactory
evidence of insurability and paying any past-due premiums
Term/Annual Renewable Term Term insurance that may be
renewed for another term without evidence of insurability.
Level term usually turns into renewable term with increasing
premiums after the level premium period.
A new policy written to take the place of one currently
Statements made by applicants on their applications for
insurance that they represent as being substantially true
to the best of their knowledge and belief but that are not
warranted as exact in every detail.
Beneficiary The beneficiary in a life insurance
policy in which the owner reserves the right to revoke or
change the beneficiary. Most policies are written with a revocable
An attachment to a policy that modifies its conditions
by expanding or restricting benefits or excluding certain
conditions from coverage.
The chance of injury, damage, or loss.
Selection The method a home office underwriter uses to
choose applicants that the insurance company will accept.
The underwriter must determine whether risks are standard,
substandard or preferred and set the premium rates accordingly.
Beneficiary An alternate beneficiary designated
to receive payment, usually in the event the original beneficiary
predeceases the insured.
Premium Policy A whole life policy for people who
want to buy a policy for a one-time lump sum, and then be
covered for the rest of their lives without paying any additional
Risk Person who, according to a company's underwriting
standards, is entitled to insurance protection without extra
rating or special restrictions.
Risk Person who is considered an under-average or impaired
insurance risk because of physical condition, family or personal
history of disease, occupation, residence in unhealthy climate
or dangerous habits.
Insurance Protection during limited number of years;
expiring without value if the insured survives the stated
period, which may be one or more years but usually is five
to twenty years, because such periods usually cover the needs
for temporary protection.
Period for which the policy runs. In life insurance, this
is to the end of the term period for term insurance.
Beneficiary In life insurance, a beneficiary designated
as third in line to receive the proceeds or benefits if the
primary and secondary beneficiaries do not survive the insured.
Owner A policy owner who is not the prospective insured.
The policy owner and the insured may be, and often are the
same person. If for example, you apply for and are issued
an insurance policy on your life, then you are both the policy
owner and the insured and may be known as the policy owner-insured.
If, however, your mother applies for and is issued a policy
on your life, then she is the policy owner and you are the
Company receiving premiums and accepting responsibility for
fulfilling the policy contract. Also, company employee who
decides whether the company should assume a particular risk;
or the agent who sells the policy.
Risk A person who is not acceptable for insurance due
to excessive risk.
Life An interest-sensitive life insurance policy that
builds cash values. The premium payer has control over how
the policy is structured. He has the flexibility to eliminate
the premiums (essentially pay up the policy and pay no more
premiums) or have the premiums continue for life. It is a
matter of juggling three variables: the assumed interest rate,
the cash value and the premium payment plan. The policy is
interest-sensitive, and if interest rates change from the
assumed interest, it will affect the other two variables.
In the past, many Universal Life Policies were structured
assuming a higher interest rate then was actually received,
therefore, most of them have under performed. If you have
a Universal Life Policy, you should have it evaluated to see
if it needs to have the premiums adjusted to get it back on
track. A fourth variable that has not been a factor but could
be in the future, and the owner should be aware of, is the
Mortality variable. Universal Life policies are usually structured
assuming current mortality rates. The insurance companies
reserve the right to change those rates.
Life Life insurance under which the benefits relate
to the value of assets behind the contract at the time the
benefit is paid. The assets fluctuate according to the investment
experience of funds managed by the life insurance company.
Premium payments may be fixed as to timing and amount (scheduled
premium variable life) or subject to change by the policy
holder (flexible premium variable life).
of Premium Rider or provision included in most life insurance
policies exempting the insured from paying premiums after
he or she has been disabled for a specified period of time,
usually six months.
Life Insurance Life insurance that is kept in force for
a person's whole life as long as the scheduled premiums are
maintained. All Whole Life policies build up cash values.
Most Whole Life policies are guaranteed as long as the scheduled
premiums are maintained. The variable in a Whole life Policy
is the dividend which could vary depending on how well the
insurance is doing. If the company is doing well and the policies
are not experiencing a higher mortality than projected, premiums
are paid back to the policy holder in the form of dividends.
Policyholders can use the cash from dividends in many ways.
The three main uses are: it can be used to lower or vanish
premiums, it can be used to purchase more insurance or it
can be used to pay for term insurance.
Renewable Term (YRT) (See Annually Renewable Term)