Adverse selection refers to a scenario in the insurance industry where individuals more prone to filing claims are more likely to seek insurance coverage, leading to potential imbalances for insurance providers.
Annual renewable term insurance is a type of term life insurance that provides coverage for one year at a time with the option to renew annually.
A buy-and-sell agreement is a strategic approach utilized in sole proprietorships, partnerships, and close corporations to safeguard the continuity of the business upon the death or disability of a proprietor, partner, or shareholder. Such agreements involve selling the business interests to remaining members according to a predetermined formula.
Cash surrender value refers to the amount a policyowner is entitled to receive from an insurance company upon surrendering a life insurance policy with cash value. This sum is the cash value stated in the policy minus any surrender charges and outstanding loans with interest.
Cash Value Life Insurance provides a permanent life insurance option that includes a savings element, allowing policyholders to accumulate a cash reserve over time within their insurance policies.
A Change of Beneficiary Provision allows the policyholder to alter the beneficiary designated to receive the benefits from a financial product such as life insurance or retirement accounts.
The informal phrase 'Cleanup Fund' describes the 'needs approach' used to determine the amount of life insurance necessary for a family. The Cleanup Fund is intended to cover last-minute expenses as well as those expenses that surface after the death of an insured, such as burial costs, probate charges, and medical bills.
Collateral assignment is the designation of a policy's death benefit or its cash surrender value to a creditor as security for a loan. If the loan is not repaid, the creditor receives the policy proceeds up to the balance of the outstanding loan, and the beneficiary receives the remainder.
The privilege of a beneficiary to convert unpaid income payments under a settlement option of an annuity or life insurance policy into a lump-sum payment.
Convertible Term Life Insurance is a type of life insurance coverage that can be converted into permanent insurance regardless of the insured's physical condition, and without a medical examination.
A Cross Purchase Plan is a life insurance strategy used among business partners. Each partner buys a life insurance policy on the other partners to ensure business continuity and facilitate buyouts in the event of a partner's death.
Definition, explanation, and discussion around the term 'Death Benefit,' including examples, FAQs, related terms, online resources, and suggested books for further readings.
Protection under life and health insurance policies for dependents of a named insured, including a spouse and unmarried children under a specified age.
In life insurance, a dividend addition refers to the increase in the face value of the policy, which is purchased using the dividends earned on that policy.
The face amount, also known as the face value or coverage amount, is the sum of insurance provided by a policy payable at death or maturity.
A Family Income Policy is an insurance policy that provides extra income during the period when children are growing up. This life insurance contract combines ordinary life and decreasing term insurance.
A fixed premium is a payment for insurance coverage that remains the same throughout the entire premium-paying period.
A Fully Paid Policy is a type of limited pay whole life insurance policy under which all premium payments have been made. This status indicates that no further premium payments are required, yet the policy remains active for the life of the insured.
Group life insurance is a basic employee benefit under which an employer buys a master policy and issues certificates to employees denoting participation in the plan. Group life is also available through unions and associations. It is usually issued as yearly renewable term insurance although some provide permanent insurance. Employers may pay all the cost, or share it with employees.
Guaranteed insurability refers to an insurance policy feature that allows an individual to purchase additional life insurance without undergoing a medical examination, under specific conditions, thereby ensuring continued coverage regardless of changes in health status.
An incontestable clause is a provision in an insurance policy that prevents the insurer from voiding coverage due to fraud or misstatement by the insured after a specified period.
An incontestable clause is a provision within a life insurance policy that prevents the insurer from voiding the policy after a specified period, usually two years, due to misrepresentation or concealment by the insured.
Individual life insurance provides coverage for a single life, as opposed to group life insurance, which covers multiple lives collectively. This type of insurance offers personalized policies tailored to the specific needs and circumstances of the individual.
Insurability is the circumstance in which an insurance company can issue life or health insurance to an applicant based on standards set by the company. It evaluates the risk and determines if the applicant qualifies for coverage.
Insurance is a system whereby individuals and companies concerned about potential hazards pay premiums to an insurance company, which reimburses (in whole or part) them in the event of loss. The insurer profits by investing the premiums it receives. Some common forms of insurance cover business risks, automobiles, homes, boats, worker's compensation, and health. Life insurance guarantees payment to the beneficiaries when the insured person dies. In a broad economic sense, insurance transfers risk from individuals to a larger group, which is better able to pay for losses.
Insurance premiums are the amounts paid to an insurance company to cover potential hazards. These payments can have tax implications and differ in deductibility based on whether they are made by businesses or individuals.
An individual or entity whose interests are protected under an insurance policy designed to indemnify against loss of property, life, health, etc.
Interest sensitive policies are a newer generation of life insurance policies that are credited with interest currently being earned by insurance companies on these policies, ensuring that policyholders can potentially benefit from favorable economic conditions.
Key Person Life and Health Insurance is a type of business insurance coverage designed to protect companies from the financial loss that can occur if a key employee becomes disabled or passes away.
Lapse occurs in insurance when a policy becomes inactive due to non-payment of the renewal premium, impacting both property and casualty and life insurance sectors.
Level Premium is a type of insurance premium that remains constant throughout the duration of the policy, regardless of changes in the nature of the risk or the insured's life circumstances.
Life insurance is a policy that pays a death benefit to beneficiaries upon the insured's death in return for premiums.
A Life Insurance Settlement is the sale of an existing life insurance policy to a third party for a lump sum that is greater than the policy's cash surrender value but less than its net death benefit.
Living benefits of life insurance refer to advantages and financial support provided to policyholders while they are still alive, ensuring additional financial security during critical life events.
In life insurance, a lump sum refers to a single payment made instead of a series of installments. This is typically issued to beneficiaries upon the policyholder's death.
A medical examination, often referred to as a physical checkup, is frequently required for applicants of life and/or health insurance. It helps to ascertain if they meet the insurance company's underwriting standards or should be classified as substandard or uninsurable.
Falsification of birth date by an applicant for a life or health insurance policy. If the company discovers that the wrong age was given, the coverage will be adjusted to reflect the correct age according to the premiums paid in.
Mortgage Life Insurance is a type of term life insurance specifically designed to pay off the remaining mortgage debt in the event of the policyholder's death, thus ensuring that the surviving household members are not burdened with the mortgage debt.
Definition and explanation of the nonforfeiture provision in life insurance policies, which allows the insured to access certain values and benefits even if they stop paying premiums.
A life insurance policy in which all premiums have been paid. These policies require premium payments for a limited number of years, and once all premiums have been paid, the policy is considered fully funded and requires no more payments. The policy remains active until the insured dies or cancels the policy.
A Participating Insurance Policy is a type of life insurance policy that pays dividends to the policyholder. These dividends are typically a share of the insurer's profits and can be taken in cash, used to reduce premiums, or reinvested back into the policy.
An insurance coverage type that allows the insured to receive dividends based on the company's earnings, which can be used to reduce premium payments.
A policy loan is a loan issued by an insurance company that is secured by the cash surrender value of a life insurance policy. The amount available for such a loan is contingent upon various factors.
A primary beneficiary is the individual or entity first in line to receive benefits from a trust, retirement account, or life insurance policy upon the policyholder's death.
A rated policy is an insurance policy where the applicant is charged a higher-than-standard premium due to unique factors such as health impairments, hazardous occupations, or risky hobbies.
Reinstatement refers to the restoration of a lapsed insurance policy, typically due to the nonpayment of premiums after the grace period. This requires the policyholder to meet certain conditions.
A type of life insurance policy that allows the insured to renew the coverage without providing evidence of insurability, regardless of physical health.
A revocable beneficiary is a designated individual or entity that can receive benefits from a life insurance policy, trust, or other financial product, and whose designation can be changed or revoked by the policyholder or grantor at any time.
A salary continuation plan is an arrangement often funded by life insurance to continue an employee's salary in the form of payments to a beneficiary for a certain period after the employee's death. The employer may act as the beneficiary, collecting the death benefit and making payments to the employee's designated beneficiary.
The savings element in cash value life insurance represents the portion of the policy that accumulates value over time, which policyholders can potentially access through withdrawals or surrenders. It functions both as a savings and investment vehicle.
Single Premium Life Insurance (SPLI) is a type of life insurance coverage where the policyholder makes a one-time lump sum payment to fully fund the policy. After this initial payment, no further premiums are required for maintaining the coverage.
A seller's agent is a real estate professional who represents the seller in a property transaction. They have a fiduciary duty to act in the best interest of the seller.
The surrender value is the sum of money given by an insurance company to the insured on a life policy that is canceled before it has run its full term. The amount is calculated approximately by deducting from the total value of the premiums paid any costs, administration expenses, and charges for life-assurance cover up to the cancellation date.
A multifaceted concept in finance and legal agreements, referring to either the period during which conditions of a contract will be carried out or the specific provisions within an agreement.
An additional amount of money added to payments made on the maturity of an insurance policy or on the death of an insured person due to profitable or surplus investments by the insurer.
Universal Life Insurance is a type of adjustable life insurance that allows flexibility in premiums, adjustable protection, and transparency in charges. It provides more flexibility compared to traditional whole life insurance products.
A life insurance policy that combines the features of universal life insurance and variable life insurance, allowing policyholders to direct excess interest credited to the cash value account based on investment results in various separate accounts such as equities, bonds, and real estate.
A variable annuity is a type of life insurance annuity whose value fluctuates with that of an underlying securities portfolio or other index of performance. It contrasts with a conventional or fixed annuity, whose rate of return is constant.
A group that provides for the payment of life, sickness, or accident benefits to individuals with an employment-related bond.
A clause in an insurance policy providing that all policy premiums will be waived if the policyholder becomes seriously ill or disabled, either permanently or temporarily, and is therefore unable to pay the premiums.
Whole life insurance is a form of life insurance policy that offers both protection in the event of the insured’s death and builds cash surrender value at a guaranteed rate, which can be borrowed against. The policy remains in force for the lifetime of the insured, given that it is neither canceled nor lapses. The policyholder pays a fixed annual premium that does not increase with age.
