Annuity

A policy under which an insurance company promises to make a series of periodic payments to a named individual in exchange for a premium or a series of premiums called the purchase price.

Assignment

A life insurance policy is regarded under the law as a form of personal property. Its owner can retain the policy, transfer it to someone else, mortgage or charge it or use it as the basis of a trust. Assignments are actions taken which affect ownership of the policy.

Assignee

The party to whom an assignment (a transfer of property or rights to property) has been granted.

Backdating

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.

Cash surrender value

The amount that is available to the owner if a life insurance policy is surrendered any time before the maturity date. The amount represents the cash value minus surrender charges and any outstanding loans due upon cancellation of the policy.

Collateral

A temporary assignment of the monetary value of a life insurance policy as security for a loan. In the event of default, the creditor would receive proceeds or values only to the extent of his interest.

Cash value

The equity amount or 'saving' accumulation in a whole life policy.

Claim

Notification to an insurance company that payment of an amount is due under the terms of the policy.

Contestable 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.

Convertible 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.

Deferred annuity

An annuity contract under which periodic benefits are scheduled to begin at some designated future date after the date on which the annuity was purchased.

Double indemnity

Payment of twice the basic benefit in the event of loss resulting from specified causes or under specified circumstances.

Evidence of insurability

Any statement or proof of a person's physical condition, occupation, etc. affecting acceptance of the applicant for insurance.

Exclusions

Specific hazards listed in a policy for which benefits will not be paid.

Extended term insurance

A provision in some policies which provides the option of continuing the insurance for a particular insured amount as per the policy condition as term insurance.

Graded 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.

Guaranteed 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.

Guaranteed insurability

Arrangement, usually provided by rider, whereby additional insurance may be purchased at various times without evidence of insurability.

Insurability

All conditions pertaining to individuals that affect their health, susceptibility to injury and life expectancy; an individual's risk profile.

Insured

The party who is being insured. In life insurance, it is the person because of whose death the insurance company would pay out a death benefit to a designated beneficiary.

Insurer

Party that provides insurance coverage, typically through a contract of insurance.

Increasing term insurance

Term life insurance in which the death benefit increases periodically over the policy's term.

Lapse

Termination of a policy upon the policy owner's failure to pay the premium within the grace period.

Level term insurance

Term coverage on which the face value and premia remain unchanged from the date the policy comes into force to the date the policy expires.

Life 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.

Maturity date

The date on which an endowment insurance policy's face amount will be paid to the policy-owner if the life insured is still living.

Medical questionnaire/form

A document completed by a physician or another approved medical examiner and submitted to an insurer to supply medical evidence of insurability (or lack of insurability) or in relation to a claim.

Mortality charge

The charge for the element of pure insurance protection in the life insurance policy.

Mortality 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 in a mortality table.

Mortality rate

The number of deaths in a group of people, usually expressed as deaths per thousand.

Non medical insurance

A contract of life insurance underwritten on the basis of an insured's statement of his health with no medical examination required.

Non-forfeiture benefit

Benefit which prevents a life insurance policy that has built up a cash value from lapsing due to non-payment of premiums by the policy-owner.

Non-participating policy

Non-participating policy is also known as a without-profit or non-par policy. The policy owner does not share in any divisible surplus made by the life insurance company. No bonus is paid on this policy.

Occupational hazard

A condition in an occupation that increases the peril of accident, sickness, or death. It usually will mean higher premiums.

Policy

The printed document issued to the policyholder by the Insurer stating the terms of the insurance contract.

Preferred 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.

Premium flexibility

The policy holder's right to vary the amount of premium paid each month towards a life policy.

Primary beneficiary

In life insurance the beneficiary designated by the insured as the first to receive policy benefits.

Probate 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 disturbed until the will is probated.

Participating policy

A participating policy is also known as a with-profits or par policy. A participating policy charges a higher premium than a non-participating policy.

In return, the policy owner shares in the life insurance company's divisible surplus, in the form of bonus allotted to the policy. The bonus is allotted in addition to the guaranteed sum assured. This bonus is paid along with the basic sum assured.

Policy bonuses

In participating policies the company gives the policyholders a share in the profits of the company in the form of bonuses. Generally, there are two types of bonuses for insurance policies.

Reversionary bonus is a guaranteed addition to your insured amount and is paid when the policy matures (i.e. when the sum assured becomes payable) or when the life assured dies. Cash Bonuses are paid out at periodical intervals.

Policy loan

Some of the non-investment-linked whole life and endowment plans have a loan option. It allows the policyholders to take a loan up to 90% of the surrender value of the policy without the need of a guarantor or security. Interest is charged on the loan amount and compounded on a half yearly basis.

Rated

Coverages issued at a higher than standard premium because of some health condition or impairment of the insured

Renewable term

Insurance that may be renewed for another term without evidence of insurability.

Revocable 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 beneficiary.

Rider

An attachment to a policy that modifies its conditions by expanding or restricting benefits or excluding certain conditions from coverage.

Risk selection

The method an 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.

Standard risk

Person who according to a company's underwriting standards is entitled to insurance protection without extra rating or special restrictions.

Substandard risk

Person who is considered an under-average or impaired insurance risk because of physical conditions family or personal history of disease, occupation, residence in unhealthy climate or dangerous habits.

Surrender charge

Fee charged to a policyholder when a life insurance policy or annuity is surrendered for its cash value.

Third-party owner

A policy owner who is not the prospective insured. The policy owner and the insured may be and often are the same person. Like, you apply for and are issued an insurance policy on your own life. If, however, your mother applies for and is issued a policy on your life, then she is the policy owner and you are the insured.

Underwriter

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 not.