|
A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
absolute
assignment
An irrevocable transfer of complete ownership of a life
insurance policy from one party to another. See also
assignment.
Top | Back
accelerated
benefits
Some companies provide "accelerated benefits," also known
as "living benefits." This rider allows you, under certain circumstances,
to receive the proceeds of your life insurance policy before you die. Such
circumstances include terminal or catastrophic illness, the need for
long-term care, or confinement to a nursing home.
Ask your agent for
information about these and other policy riders.
Top | Back
accidental death and
dismemberment (AD&D) rider
A supplementary benefit rider or
endorsement that provides for an amount of money in addition to the basic
death benefit of a life insurance policy. This additional amount is
payable only if the insured dies or loses any two limbs or the sight of
both eyes as the result of an accident. Some AD&D riders pay one half
of the benefit amount if the insured loses one limb or the sight in one
eye.
Top | Back
accidental death benefit
(ADB) rider
A supplementary benefit rider or endorsement that
provides for an amount of money in addition to the basic death benefit of
a life insurance policy. This additional amount is payable only if the
insured dies as the result of an accident.
Top | Back
accidental means
provision
A life insurance policy accidental death benefit
provision which states that an accidental death benefit will be payable if
the insured's death was the result, directly and independently of all
other causes, of bodily injury caused solely by external, violent, and
accidental means.
Top | Back
accidental result
provision
A life insurance policy accidental death benefit
provision which states that an accidental death benefit will be payable if
the insured's death was the result, directly and independently of all
other causes, of accidental bodily injury.
Top | Back
accident perils
A
classification used by health insurance underwriters to evaluate the type
and degree of peril represented by a particular occupation. Accident
perils include exposure to fire, the use of dangerous machinery, the
handling of heavy objects, and the risk of falling. See also illness
perils.
Top | Back
accrued benefit
In
a defined benefit pension plan, the amount of pension benefit which has
accumulated in a pension plan on behalf of an individual plan participant
at any particular time.
Top | Back
accumulated cost of
insurance
A factor used in the calculation of life insurance
reserves. For a given group of insureds, the accumulated cost of insurance
equals the net single premium that would have to be paid at the end of the
term of coverage by the surviving insureds to provide death benefits on
the insureds who died during the term.
Top | Back
accumulated funding
deficiency
In the United States, the amount by which a qualified
pension plan fails to meet the minimum funding standards set by law. Plans
with an accumulated funding deficiency are subject to a penalty tax and
enforcement provisions. Sometimes simply called a funding deficiency.
Top | Back
accumulated
value
An amount of money invested plus the interest earned on that
money.
Top | Back
accumulation at interest
option
A life insurance policy dividend option under which policy
dividends are left on deposit with the insurer to accumulate at interest.
Also called the accumulation option.
Top | Back
accumulation
period
The period during which premiums are payable on a deferred
annuity.
Top | Back
accumulation
units
The term used to identify ownership shares in a variable
annuity's separate-account fund. When a person pays premiums for a
variable annuity, those premiums are credited to the purchaser's account
as a certain number of accumulation units. After the accumulation period
ends, the accumulation units are used to buy annuity units. See also
annuity units.
Top | Back
acquisition
expenses
See policy
acquisition costs.
Top | Back
actively-at-work
provision
A provision found in many group insurance contracts which
specifies that, if an employee is absent from work because of sickness,
injury, or certain other specified reasons, on the day the employee's
coverage under the contract is due to begin, then coverage will not begin
until the day the employee returns to work.
Top | Back
actuarial
assumptions
(1) The mortality, morbidity, interest, expense, and
other forecasts used to calculate premium rates and reserves. (2) In
pension planning, the assumptions that actuaries make in the areas of
investment earnings, mortality, plan expenses, salary levels, and employee
turnover. These assumptions affect the amount of the annual contribution
that is necessary to adequately fund a defined benefit pension plan.
Top | Back
actuarial cost
method
For a defined benefit pension plan, a method of calculating
the annual amount a plan sponsor must contribute to fund a given set of
plan benefits for a particular group of participants.
Top | Back
actuarial
department
The department in a life and health insurance company
responsible for seeing that the company's operations are conducted on a
mathematically sound basis. In conjunction with other departments, it
designs and revises a company's life and health insurance products. The
actuarial department calculates premium and dividend rates, determines
what a company's reserve liabilities should be, and establishes
nonforfeiture, surrender, and loan values. It also does the research
needed to predict mortality and morbidity rates, to establish guidelines
for selecting risks, and to determine the profitability of the company's
products.
Top | Back
actuarial
valuation
A determination by an actuary of the value of a pension
plan's assets and its liabilities. The valuation, which is based on
statistical probability, is used to determine if the assets are adequate
to fund the plan's liabilities. If the value of the assets is not
adequate, the plan sponsor must increase its contributions to make up the
deficiency; if the assets are more than adequate, the plan sponsor can
reduce contributions. Also called plan valuation.
actuary
A technical
expert in life insurance, particularly in mathematics. A person in this
job applies the theory of probability to calculate mortality rates,
morbidity rates, lapse rates, premium rates, policy reserves, and other
values.
Top | Back
additional term insurance
option
A life insurance policy dividend option under which policy
dividends are used as a net single premium to purchase one-year term
insurance. Also called the additional insurance option or the fifth
dividend option.
Top | Back
adjustable life insurance
policy
A life insurance contract designed specifically to allow the
policyowner to alter the policy's plan by changing the amount of the
coverage or the amount of the premium. The insurer calculates the specific
plan of insurance that can be provided based on the requested death
benefit and premium. Therefore, an adjustable life insurance policy can
use insurance plans that range from a term insurance policy of short
duration to a limited-payment whole life insurance policy.
Top | Back
administrative services
only (ASO)
An arrangement whereby an organization (usually an
employer) hires an outside firm to perform specific administrative
services, usually including claim administration, for a group health
insurance program. The organization retains financial responsibility for
paying claims. See also self-insured group insurance and third-party
administrator (TPA).
Top | Back
admitted
reinsurer
In the United States, a reinsurer which is licensed to
accept reinsurance in a given jurisdiction. Also called an authorized
reinsurer. Contrast to nonadmitted reinsurer.
Top | Back
advanced underwriting
department
An insurance company home office department responsible
for providing technical and sales assistance to agents involved in estate
planning and business insurance cases. Also known as the estate planning
department.
Top | Back
advance funding
A
procedure in which a pension plan sponsor deposits amounts of money in a
fund during the working years of plan participants to guarantee payment of
pension benefits to the plan participants when they retire.
Top | Back
adverse
selection
See antiselection.
Top | Back
Age Discrimination in
Employment Act of 1967 (ADEA)
United States legislation that
protects employment rights of individuals age 40 and over. ADEA prohibits
age-based firings and generally prevents employers from forcing employees
to retire at age 65. In relation to pension plans, ADEA prohibits
employers from discontinuing contributions or benefit accruals to an
individual's pension plan after that person reaches age 65.
Top | Back
agency
The legal
relationship between an agent and a principal. See agency relationship.
Top | Back
agency agreement
An
agreement between a principal and an agent that describes the scope of the
agent's actual authority. See agent and principal.
Top | Back
agency bank
A
mutual savings bank that does not sell its own savings bank life insurance
policies to the public but, instead, sells such policies as an agent for
an issuing bank. An agency bank only accepts applications, collects
premiums, and provides service for its policyowners. See also issuing bank
and savings bank life insurance (SBLI).
Top | Back
agency by
appointment
An agency relationship that is created when a principal
appoints an agent to act on the principal's behalf. See agency
relationship. Contrast with agency by ratification.
Top | Back
agency by
ratification
An agency relationship that is created when the
principal ratifies a purported agent's unauthorized act. See agency
relationship. Contrast with agency by appointment.
Top | Back
agency
relationship
In law, the relationship between two parties by which
one party, the agent, is authorized to perform certain acts on behalf of
the other party, the principal.
Top | Back
agency system
A
distribution system in which insurance companies use their own
commissioned agents to sell and deliver insurance policies. The agency
system is the most common system for distributing individual life
insurance products and includes the branch office distribution system and
the general agency distribution system. Also called the ordinary agency
system. See also branch office distribution system, brokerage distribution
system, and general agency distribution system.
Top | Back
agent
A party who
is authorized by another party, the principal, to act on the principal's
behalf in contractual dealings with third parties. Called a mandatary in
Quebec. See also insurance agent.
Top | Back
agent-brokers
Career agents
who place business with companies other than their primary companies. Also
known as agents of other companies, surplus brokers, or simply brokers.
Top | Back
agent of record
The
agent or broker who is recognized by the insurer as the person to whom the
commission is to be paid.
Top | Back
agent-owned reinsurance
company (AORC)
A captive reinsurance company formed by an insurance
company and owned by a group of the company's agents. The company insures
all business written by those agents with the captive so that the agents
can share in the profits of their own labor.
Top | Back
agent's
statement
The portion of the insurance application in which the
agent reports anything he or she knows or suspects about the proposed
insured that is not reported by the applicant or proposed insured.
Top | Back
age of majority
The
age at which a person has the legal capacity to enter into and be bound by
a contract.
Top | Back
aggregate funding
methods
Pension plan funding methods in which the amount of
contributions necessary to fund a plan is determined in the aggregate for
all plan participants, rather than separately for each individual plan
participant. Contrast with individual funding methods.
Top | Back
aggregate mortality
table
A mortality table based on the experience of all insured
lives, including mortality rates both during and after the select period.
The mortality rates of an aggregate mortality table fall between those of
the select and the ultimate mortality tables. See also mortality tables,
select mortality table, select period, and ultimate mortality table.
Top | Back
aleatory contract
A
contract under which one party provides something of value to another
party in exchange for a conditional promise, which is a promise that the
other party will perform a stated act if a specified, uncertain event
occurs. Insurance contracts are aleatory because the policyowner pays
premiums to the insurer, and in return the insurer promises to pay
benefits if the event insured against occurs.
Top | Back
alien
corporation
In the United States, a company that is incorporated
under the laws of another country. Compare to domestic corporation and
foreign corporation.
Top | Back
alienation of
benefits
In pension planning, the assignment of a plan
participant's benefits to an individual other than the participant. In the
United States, ERISA generally prohibits the alienation of benefits,
although exceptions to this rule include the use of a participant's vested
benefit as collateral for a loan. The ERISA prohibition on alienation of
benefits prevents creditors from attaching an individual's pension
benefits.
Top | Back
all-causes
deductible
In health insurance, a deductible which need only be
satisfied once during a given period of time. If the period of time is a
calendar year, as it usually is, then this type of deductible is known as
a calendar year deductible. Contrast with per-cause deductible.
Top | Back
allocated funding
A
method of funding a pension plan in which a portion of the total plan
funds is allocated to each participant. This type of funding is often
achieved through the purchase of annuities or insurance contracts for each
participant. Contrast with unallocated funding.
Top | Back
American Council of Life
Insurance (ACLI)
In the United States, an organization which
collects and disseminates data on life insurance markets.
Top | Back
Annual Information
Return
In Canada, a report containing financial and other
information that pension plans must file annually with the appropriate
provincial or federal government.
Top | Back
annually renewable term
(ART) insurance
See yearly renewable term (YRT) insurance.
Top | Back
Annual Report Form
5500
In the United States, a detailed report of membership and
financial information pertaining to the operation of a pension plan. This
report must be filed annually with the Internal Revenue Service.
Top | Back
Annual Statement
An accounting report that insurers must file each year with the
appropriate regulatory agency. This report contains detailed accounting
and statistical data that regulators use to evaluate a life and health
insurance company's solvency and its compliance with insurance laws.
Top | Back
annuitant
(1) The
person designated to receive annuity payments. (2) The person whose
lifetime is used as the measuring period to determine how long benefits
are payable under a life annuity.
Top | Back
annuity
(1) A
series of payments made or received at regular intervals. (2) A contract
that provides for a series of payments to be made or received at regular
intervals. There are many kinds of annuities. For the annuities identified
in this glossary, see annuity certain, annuity due, annuity immediate,
deferred annuity, deferred life annuity, disabled life annuity, flexible
premium annuity, group deferred annuity, immediate annuity, joint and
survivor annuity, level premium annuity, life annuity, life annuity with
period certain, refund annuity, single premium annuity, single premium
deferred annuity (SPDA), straight life annuity, temporary life annuity,
temporary life annuity due, variable annuity, whole life annuity, and
whole life annuity due.
Top | Back
annuity certain
An
annuity that provides a benefit amount payable for a specified period of
time regardless of whether the annuitant lives or dies.
Top | Back
annuity due
A
series of payments in which the payments are made at the beginning of each
interval of time.
Top | Back
annuity immediate
A
series of payments in which the payments are made at the end of each
interval of time.
Top | Back
annuity mortality
table
A tabulation of probabilities of dying at each age. Used by
actuaries to calculate premiums and reserves for annuities in which
benefits are paid only if a designated person is alive. Annuity mortality
tables usually project lower rates of mortality than do mortality tables
that are used for life insurance. See also mortality tables.
Top | Back
annuity period
The
time between each benefit payment made under an annuity contract.
Top | Back
annuity units
The term used for ownership shares in a variable annuity's
separate-account fund after the accumulation period has ended. Annuity
units are bought with accumulation units and are used to determine benefit
payment amounts. See also accumulation units.
Top | Back
antiselection
The
tendency of people with a greater-than-average likelihood of loss to apply
for or continue insurance to a greater extent than do other people. Also
called adverse selection or selection against the insurer.
Top | Back
apparent
authority
Authority that is not expressly conferred on an agent but
that the principal either intentionally or negligently allows a third
party to believe the agent possesses. See agent and principal. Compare to
express authority and implied authority.
Top | Back
applicant
The party
applying for an insurance policy.
Top | Back
application
A form
that must be completed by an individual or other party who is seeking
insurance coverage. This form provides the insurance company with much of
the information it will need to decide whether to accept or reject the
risk.
Top | Back
approval type temporary
insurance agreement
An agreement issued in conjunction with a
conditional premium receipt that provides temporary life insurance
coverage as of the date the insurer approves the proposed insured as a
standard risk. See also conditional premium receipt and temporary
insurance agreements. Compare to insurability type temporary insurance
agreement.
Top | Back
assessment
method
An early method of funding life insurance under which
members of the plan were charged in advance for the amount of money that
the administrators estimated would be needed to pay each year's death
claims. Also called the pre-death assessment method. See also mutual
benefit method.
Top | Back
asset-liability
matching
The process of investing, purchasing, selling, and
otherwise adjusting an insurance company's asset holdings so that cash is
available when it is needed to cover the company's liabilities.
Top | Back
assets
All
things of value owned by an individual or organization. Examples of assets
include cash, data processing equipment, and investments. Assets are shown
on the balance sheet of a life insurance company's Annual Statement as
required by law or by insurance department ruling.
Top | Back
asset share
The
amount of assets that any block of insurance policies will have
accumulated by a given time.
Top | Back
asset share
calculation
A computation that simulates the way in which the
assets of a block of policies should grow, depending on various
assumptions about future interest rates, mortality, morbidity, expenses,
lapses, etc.
Top | Back
assignee
The party
to whom all or certain contractual rights are transferred under an
absolute or collateral assignment.
Top | Back
assignment
(1) The
transfer of ownership rights in a life insurance policy or other type of
contract from one party to another. (2) The document that causes the
transfer of ownership rights to go into effect. See also absolute
assignment and collateral assignment.
Top | Back
assignment of
benefits
An authorization directing an insurer to make payment
directly to a provider of benefits, such as a physician or dentist, rather
than to the insured.
Top | Back
assignor
The person
or party who transfers certain contractual rights under an absolute or
collateral assignment.
Top | Back
association group
insurance
Group insurance extended to the members of a trade,
professional, or other association.
Top | Back
assumption
reinsurance
A reinsurance agreement by which one company
permanently transfers full responsibility for a block of policies to
another company. After the cession, the ceding company is no longer a
party to the insurance agreement.
Top | Back
attained age
The
current age of the insured. The age of the insured at the time the
insured's policy was issued plus the number of years elapsed since the
policy was issued.
Top | Back
attained age
conversion
The changing of a life insurance policy from one form of
insurance to another (such as from term life insurance to whole life
insurance) at a premium rate that is based on the age the insured person
has reached at the time the change takes place.
Top | Back
Attending Physician's
Statement (APS)
A written statement from a physician who has
treated, or is currently treating, a proposed insured or an insured for
one or more conditions. The statement provides the insurance company with
information relevant to underwriting a risk or settling a claim.
Top | Back
automatic dividend
option
For a particular life insurance policy, the dividend option
that applies in the event the policyowner does not choose an option. See
dividend options.
Top | Back
automatic nonforfeiture
option
For a particular life insurance policy, a specified
nonforfeiture benefit that becomes effective automatically when a renewal
premium is not paid by the end of the grace period and the policyowner has
not elected another nonforfeiture option. See also nonforfeiture options.
Top | Back
automatic premium loan
(APL)
A life insurance nonforfeiture option that allows the insurer
to pay overdue premiums on a policy by establishing a loan against the
policy's cash value. See also nonforfeiture options.
Top | Back
automatic reinsurance
treaty
A reinsurance agreement in which the reinsurer agrees, for a
stipulated type of risk, to accept each risk or a portion of each risk
submitted by the ceding company, up to a certain limit, provided the
ceding company insures up to its usual retention limit. In this agreement,
the ceding company assumes full underwriting responsibility for all cases
reinsured.
Top | Back
average indexed monthly
earnings
In the United States, the figure on which social security
disability, retirement and other benefits are based. The figure is an
average of the monthly earnings on which a worker has paid social security
tax. The figure is indexed, that is, adjusted to compensate for inflation.
Top | Back
aviation
exclusion
A life insurance contract provision which specifies that
the death benefit is not payable if the insured dies as a result of
certain aviation activities.
Top | Back | 