Amendment:
An official document that serves as a revision to the original life insurance policy.

Application:
A form that the proposed insured completes with personal, financial and familial history information and used by the insurer (life insurance company) to decide whether or not to accept the risk and determine the proposed insured's underwriting classification.

B

Beneficiary (-ies):
The entity (relative, business, trustee, etc.) selected by the owner of the life insurance policy to whom the proceeds are payable in the event of the insured's death (See also Contingent and Primary beneficiary).

Benefits:
The monetary amount paid (or payable) and/or services provided to the insured by the life insurance company under the terms of the life insurance contract.

C

Claim:
A request for payment of the contractual benefits by the insurer that is made by the insured or the beneficiary.

Concealment:
Refers to a fact that is intentionally not disclosed to the insurance company that could affect either the premium or the settlement of a loss. Concealment of material fact may be cause to void the contract.

Conditional Receipt:
A temporary contract that requires the life insurance company to provide conditional coverage during the underwriting process when premium is submitted with the application and the life insurance applicant has been examined.

Contestable Period:
A period of time during which the insurer can cancel or contest the policy. For life insurance, the contestable period is normally two years.

Contingent Beneficiary:
A secondary beneficiary designated by the insured to receive the benefits of the life insurance policy if the named primary beneficiary is deceased when the proceeds become payable.

Convertible (Convertibility Option or Conversion Privilege):
The right of an individual to change the form of the original life insurance policy without evidence of insurability. For a example, a term life insurance policy may be convertible to permanent insurance without a new medical examination.

Coverage Amount:
The face amount of the life insurance policy. This is the amount of benefit the insurer would pay in the event of the insured's death.

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D

Date of Issue:
The date printed on the life insurance policy that indicates when the policy was issued. This date may be different than the policy date, which is the date the policy went into effect.

E

Effective Date (Policy Date):
The date the life insurance policy is effective and in force.

Evidence Clause:
A statement in the life insurance policy relating to the investigation of a claim and requiring the insured to cooperate fully in an investigation by providing any records and taking exams that would satisfy the adjuster and the validity of the claim.

Evidence of Insurability:
Health information such as a medical exam or an attending physician's statement required to satisfy life insurance underwriting requirements.

Expiry:
The date a term life insurance policy terminates coverage.

F

Face Amount:
The death benefit amount of a life insurance policy.

Free Look:
An opportunity for the policyholder to examine the terms of a new policy and surrender it for a complete refunds of premium if not fully satisfied. This period is usually 10, 20 or 30 days, depending on the state in which the policy is written in.

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G

Grace Period:
A period of 30 or 31 days after the premium due date when the insured can pay the premium and keep the policy current while the policy remains in force.

Group Life Insurance:
Life insurance offered to members of a group, usually employees. The employee typically has a master policy and all employees are offered some coverage without any underwriting requirements. The premiums may be paid by the employer, the employee or both.

H

Hazardous Activities:
Any activity that increases one's risk of peril or danger. On an insurance application, scuba diving, aviation, sky diving, and racecar driving are examples of hazardous activities that are taken into account when an insurance company decides whether or not to accept the risk of insuring the applicant.

Human Life Value:
The quantitative value of the future earnings of a wage earner. By calculating the human life value, one may determine the amount of life insurance to purchase on an applicant. By determining the average income of a wage earner, the number of years the wage earner is going to work and the present value of the income of the wage earner, one can calculate the human life value of a wage earner.

I

Impaired Risk:
A person with a substandard physical condition such as a history of stroke or heart attack who would be a higher probability of risk for the insurer. An applicant who engages in hazardous activities could also be an impaired risk.

Inspection Report:
A report prepared by an inspection organization for the insurance company that summarizes the financial, physical, moral or other attributes of an applicant for insurance. Inspection reports are typically required for applicants applying for larger amounts of life insurance.

Insurance:
A mechanism for reducing the risk of many by contractually transferring the risk to an insurer, thereby pooling the risk in return for monetary considerations from the insured.

Insured:
The person who is covered by an insurance policy.

Insurer:
The party who offers protection to the insured as outlined in the policy.

Irrevocable Beneficiary:
A beneficiary who can be changed only through written consent from that beneficiary.

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J

Joint Life and Survivor Insurance:
Insurance coverage that is written on two or more persons and payable at the death of the last of those insured. This type of insurance is typically used for estate planning purposes.

K

Key Employee Insurance:
Insurance on a key employee whose loss of services would cause hardship for the employer. The employer is the owner, beneficiary and payer of the policy.

L

Lapse:
The termination of an insurance policy for failure to pay the policy's premium.

Level Premium Term Insurance:
A term life insurance policy where the premium paid remains the same throughout the term of the policy.

Life Expectancy:
A calculation made to determine the number of years a person is expected to live according to a particular mortality table. This is one of the considerations in determining life insurance premiums.

Limitations:
The maximum amount of insurance coverage available under a policy or exclusion of certain described premises.

Lump Sum:
A single payment from the insurer for the total benefit amount due, instead of a series of installment payments. Life insurance face amounts may be paid in lump sum, if requested by the beneficiary.

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M

Medical Information Bureau (MIB):
The organization that maintains a secure, centralized computer facility that stores the coded health history of persons who have applied for insurance from subscribing companies in the past. This information is then available to other insurance companies for future insurability evaluations.

Misrepresentation:
Inaccurate information provided by the applicant during the application process. Providing inaccurate information with the intent to receive a lower premium in considered intent to defraud.

N

Non-assignable Policy:
Prohibits a policyowner from transferring the rights of a policy to a third party.

Notice of Cancellation:
A written notice stating that the insurer will cancel a policy or that the insured is requesting the cancellation of the policy.

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O

Offer and Acceptance:
The submission of an application for an insurance policy by the applicant and in the case of a life insurance application, a first premium payment ("Offer"), followed by an issuance of a policy by the insurer ("Acceptance").

Overinsured:
A circumstance in which the amount of insurance benefits exceeds the value of damages. For life insurance, an applicant considered overinsured will not be offered additional coverage unless the applicant replaces their current coverage.

P

Paramedical Exam:
A medical examination performed by a non-physician medical professional used to determine an applicant's health risk. The health risk is used in determining insurability and premium classification for life and health insurance.

Permanent Life Insurance:
A policy that provides coverage throughout the insured's lifetime, with no policy expiration date, as long as premium payments are made. This policy may also build cash value.

Policy:
A legal document that details the terms of an agreement between an insurance company and a policyowner.

Policy Date:
The date on which a policy is in effect. This may be different than the issue date, if the policy was backdated.

Policy Fee:
A flat charge, added to the basic premium cost, used for the administrative expenses the insurance company incurs in processing a policy.

Policy Not Taken:
A Policy is not taken when an applicant decides not to accept the policy. If a policy was prepaid and the applicant declines the policy within the free-look period, the premium is fully refunded to the applicant.

Policyholder:
Person(s) or other entity who is the owner of the insurance policy.

Policyowner:
See Policyholder.

Premium:
The payment(s) necessary to keep an insurance policy in force. Premiums are calculated based on the applicant's/insured's risk level of incurring a loss.

Primary Beneficiary:
The entity (relative, business, trustee, etc.) selected by the owner of the policy to whom the proceeds are payable in the event of the insured's death.

R

Reinstatement:
Placing a policy back in force that was previously discontinued due to lack of premium payment(s) after the grace period has expired.

Renewable Term Life Insurance:
A term life insurance policy that may be renewed annually by the policyowner annually without any further evidence of insurability.

Revocable Beneficiary:
A life insurance beneficiary who can be removed or changed, by the policyowner, at any time prior to the death of the insured.

Rider:
An endorsement to an original policy that adds, removes or changes a condition(s) in the original policy.

S

Section 1035 Exchanges:
A section of the Internal Revenue Code that allows for taking the proceeds of one life insurance policy or annuity and immediately investing them into another life insurance policy or annuity, without having to pay taxes on any gains.

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T

Term Life Insurance:
A type of low-cost, life insurance that only pays benefits if the insured dies during the specified period of time. Term life insurance does not build cash value.

Termination:
The cancellation of an insurance policy by the insurance company or the insured.

Tertiary Beneficiary:
The third beneficiary to a life insurance policy eligible for policy benefits should the primary and secondary beneficiaries not survive.

U

Underwriter:
The party who assesses the applicant's/insured's risk level, establishes the corresponding premium(s) and assures that funds will be available to pay to the insured in the event of a loss.

Unilateral Contract:
A legal contract in which only one party makes any legally enforceable promises. A life insurance policy is a unilateral contract since the insurer writes the contract and makes future promises and the insured pays the premium in exchange for such considerations.

Uninsurable Risk:
The risk of incurring a loss is so high that an insurer will not offer coverage.

Universal Life Insurance:
An adjustable type of life insurance that provides both term life insurance coverage and a savings vehicle side account with a guaranteed minimum return on the investment. This type of life insurance also allows the policyowner to change the amount of coverage and premiums throughout the duration of coverage.

V

Variable Life Insurance:
An investment-oriented type of permanent life insurance that provides both life insurance coverage and a savings vehicle through sub-accounts with the amount of return linked to an underlying portfolio of securities. Variable life insurance has a fixed premium and a guaranteed minimum death benefit.

Voidable:
An insurance policy that can be cancelled by either the insurer or the insured if either side breaches any term(s) in the contract.

W

Waiver of Premium:
When a life insurance company no longer requires that an insured party make premium payment if he/she has become disabled for longer than six months. The insurance policy remains in full force even though premium payments are no longer required.

Whole Life Insurance:
A type of life insurance that remains in full force for the insured's entire life, as long as premiums are paid.