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Term life insurance Glossary
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Most of the common questions and
answers are here
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Accelerated
Benefits/Living Benefits
Riders: These
riders let policyholders,
which may be terminally ill
or critically ill, draw upon
a percentage of the face
value of their life
insurance policies.
Conditions under which this
option can be exercised and
the amount available to the
policyholder can vary with
each insurance company.
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Accidental Death
Benefit: An extra
feature of a life insurance
policy that provides an
additional benefit if the
insured dies in an accident.
Because the face amount of
the policy is often doubled
under this proportion.
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Adverse Selection:
Selection against the
insurance company. It is the
tendency for those who know
that they are highly
vulnerable to specific pure
risks to be most likely to
acquire and to retain
insurance to cover that
loss.
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Life
Insurance Agent:
Consumers' primary link to
an insurance company. Agents
work with consumers to
assess their needs and plan
for long-term financial
stability. Agents may also
be referred to as insurance
advisors, financial
advisors, financial
representatives, associates,
life underwriters, and field
underwriters.
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Annual Exclusion:
The amount of a gift exempt
from federal transfer
taxation. Currently it is
$10,000 annually for gifts
to any one person. This can
be increased to $20,000 if
the donor is married and the
donor's spouse elects to
split the gift on a timely
filed gift tax return.
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Application for
insurance: A form
that furnishes the insurance
company with necessary
information on the
applicant's age, sex,
address, occupation,
earnings, height, weight,
medical history and other
facts. The company uses this
information to determine
whether or not to insure the
applicant.
Beneficiary: The
person, persons, or entity
that is entitled to receive
a term life insurance
benefit upon death of the
insured party
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Backdating: Ability
sometimes offered to choose
effective date prior to
application date in order to
lock in lower rates.
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Buy-sell Agreement:
A contract binding the owner
of a business interest to
sell the business interest
for a specified or
determinable price at his or
her death or disability and
a designated purchaser to
buy at that time.
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Cancelable:
A contract in which the
insurance company reserves
the right to terminate the
coverage at any time (and
perhaps for any reason)
during the term of coverage
by providing notice to the
insured.
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Capital Needs
Analysis: A system
for determining how much
life insurance a client
needs if the principal sum
is to be preserved in the
process of meeting the
financial objectives for his
or her survivors.
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Captive Agent:
An agent or agency that
primarily transact life
insurance for one particular
life insurance agency.
Etermlifeinsurancequote.com
is a Independent Agent (see
Independent Agent)
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Conditional Receipt:
A receipt given to an
applicant of life insurance
in exchange for the payment
of the first premium in
which the insurer, through
its agent, specifies that
the coverage will be
effective as of the date of
the receipt, subject to the
condition that the proposed
insured later be found to
have been insurable as of
the date the receipt was
issued.
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Contestability
Period: Usually a
specific time frame,
commonly two years, during
which the insurer may deny
coverage, void a contract or
question the validity of a
claim.
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Contingent
Beneficiary: The
person designated to receive
the death proceeds of a life
insurance policy if the
primary beneficiary
predeceases the insured.
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Cross-purchase
Agreement: A
business buy-sell agreement
in which the surviving
co-owners will be the
purchasers of the business
interest of a deceased
owner.
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Convertibility:
A feature in term life
insurance that allows the
insured to replace the term
coverage with permanent
individual life insurance
without having to show
evidence of insurability. In
group insurance, the right
is available only at certain
times, including termination
of the insured from the
group or from an eligible
class within the group.
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Cost of Waiting: The
extra cost or premium that
results from waiting to
purchase term life insurance
over the length of the term.
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Endowment:
A type of life insurance
policy that pays the face
amount if the insured dies
during a specific period of
time and also pays the face
amount if he or she lives to
end of that period.
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Estate Tax:
A tax imposed upon the right
of a person to transfer
property at death. The
federal government and many
states levy such taxes.
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Exclusions:
This term refers to losses
or risks that a policy does
not cover.
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Face amount:
The amount stated on the
policy that will be paid at
death or maturity. It does
not include additional
amounts payable under
accidental death or other
special provisions, or
acquired through the use of
policy dividends.
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Final Expense: Costs
associated with end of life
issues such as funeral,
taxes, debts, medical
expenses, etc.
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Free-look period:
Time during which the
policyholder may return the
policy if he/she is not
completely satisfied and
receive a complete refund.
The customary length of time
for a "free look" is
10 days but may be longer.
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Grace Period:
An additional period of
time, usually 31 days,
granted in some types of
insurance for the
policyowner to pay the
premium after it has become
due. During the grace
period, the coverage remains
in force.
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Guaranteed
Renewable: A policy
that is renewable at the
policyholder's option and
cannot be terminated by the
insurance company.
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Health Class: Term
life rate tiers based on
health status and history
according to life carrier's
underwriting guidelines.
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Independent Agent: An
agent or agency who transact
life insurance but is not
employed or "captive" by one
insurance carrier.
Etermlifeinsurancequote.com!
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Insurable Interest:
A right or relationship with
regard to the subject matter
of an insurance contract
such that the insured will
suffer financial loss from
damage, loss, or destruction
to that subject matter.
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Joint-Life Policy:
A type of life insurance
policy covering two or more
persons in which the
proceeds are payable on the
death of the first one to
die.
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Level Term: A
form of term life insurance
where benefits, premium, and
length of coverage are
fixed.
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MIB Medical Information
Bureau: Repository
of medical information
shared by life and health
companies to avoid fraud.
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Mutual Life Company: structure
of life insurance company
where excess premium is paid
back to policy owners who
are essentially the partners
or owners of the company in
the form of dividends.
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Net Payment Cost
Index: A method of
estimating the net cost of
life insurance on a
time-value-adjusted basis if
the policy's death benefit
is paid at the end of a
specified time period.
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Noncancelable:
An insurance contract in
which the insured has the
right to renew the coverage
at each policy anniversary
date, usually up to some
stated age, and the coverage
may not be terminated by the
insurer during the term of
coverage. Also the rates for
the coverage are guaranteed
in the contract, though they
are not necessarily level.
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Nonforfeiture Value:
The savings element in
permanent life insurance
policies. Also sometimes
called the cash value.
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Paramedical Exam: A
physical exam as part of
term life insurance
enrollment process.
See Term life Paramedical
Exam article.
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Participating Party:
A life insurance policy that
distributes company surplus
funds to policyholders as
dividends.
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Permanent life
insurance policy:
Type of life insurance
(other than term insurance)
that accrues cash value and
is designed for long-term,
or permanent, needs of a
policyholder. Includes
whole, universal and
variable life, among others.
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Policyowner:
The person or organization
that owns an insurance
policy. The policyowner
generally has the right to
change, renew, or cancel the
policy and the obligation to
comply with policy
conditions, such as premium
payments.
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Preexisting
Condition: An
illness or condition of
health that originated prior
to the issuing of the
policy.
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Premium:
The price charged for a
period of coverage provided
by an insurance policy and
found by multiplying the
rate by the number of units
of coverage.
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Premium Bands:
Price points that each
carrier have where the cost
per dollar of coverage
decreases with increasing
amounts of term.
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Primary Beneficiary:
The beneficiary in a life
insurance policy who is
first entitled to receive
the policy proceeds upon the
insured's death.
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Real Property:
Land and anything that is
growing on it, erected on
it, or affixed to it, and
the bundle of rights
inherent in the ownership.
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Rescission: The act of
cancelling a life insurance
policy by the company based
on certain established
requirements.
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Replacement:
The replacing of one life
insurance policy with
another. To prevent
financial harm to the
policyowner, agents and
insurers must follow
prescribed procedures.
It's best to contact us
regarding replacement as
there are many variables.
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Rider: The
term used in life insurance
which augments, adds to, or
provides further options to
core life insurance policy
usually for an additional
premium
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Settlement Options:
The ways that policyholders
or beneficiaries may choose
to have benefits paid other
than a lump sum.
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Standard Risk: Usually
lowest (most expensive)
health class available.
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State Guarantee Funds:
State funds set up
to insure up to a certain
amount of life insurance
benefit
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Split-Dollar Life
Insurance: A plan
under which two parties,
usually an employer and an
insured employee, share the
premium costs, death
proceeds, and perhaps cash
value of a life insurance
policy pursuant to a
prearranged agreement.
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Stock Life insurance
company: Structure
of life insurance company
where excess premium is paid
to stockholders in the
company.
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Suicide Clause:
A life insurance policy
provision that specifies
that if the insured, whether
sane or insane, commits
suicide during the first one
or 2 years of the policy,
the insurer will be liable
only for a return of the
premium.
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Term Insurance:
Life insurance written for a
specific time period and
payable only if the
policyholder dies within
that time period.
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Underwriting:
The process of qualification
for term life according to
the life companies
guidelines and requirements.
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Waiver of Premium: Rider
typically found with whole
life plans to address
inability to pay premium in
the future.
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Whole Life:
Life insurance coverage that
remains in force during the
insured's entire lifetime,
provided premiums are paid
as specified in the policy.
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