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Policy:
The printed document given to the insured, outlining the terms
and conditions of the Insurance coverage.
Policy
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.
Preferred
Risk: A positive characterisic of someone seeking
to be insured. Usually means a better likely hood for long
life, and usually means a lower premium.
Premium:
The agreed upon, payment made to keep an insurance policy
in force, usually a monthly payment.
Premium
Flexibility: The policy holder's right to vary the
amount of premium paid each
month.
Primary
Beneficiary: In life insurance, the beneficiary designated
by the insured as the first to receive policy benefits.
Primary
Policy: The insurance policy that pays first when
you have a loss that's covered by more than one policy.
Provisions:
Details of an insurance policy which explain the benefits,
conditions and other features of the insurance contract.
Re-entry
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
policy.
Reinstatement:
Putting a lapsed policy back in force by producing satisfactory
evidence of insurability and paying any past-due premiums
required.
Replacement:
A new policy written to take the place of one currently in
force.
Representation:
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.
Rider:
An attachment to a policy that modifies its conditions by
expanding or restricting benefits or excluding certain conditions
from coverage.
Risk:
The chance of injury, damage, or loss.
Secondary
Beneficiary: An alternate beneficiary designated
to receive payment, usually in the event the original beneficiary
predeceases the insured.
Single
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
premiums.
Term
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.
Term:
Period for which the policy runs. In life insurance, this
is to the end of the term period for term insurance.
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. 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 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 the agent who sells the policy.
Uninsurable
Risk: A person who is not acceptable for insurance
due to excessive risk.
Universal
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.
Waiver
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.
Whole
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.
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