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Glossary
of Insurance Terms |
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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
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Accidental
Death Benefit Rider |
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An extra benefit which
generally equals the face amount of the policy. This benefit
is payable in addition to other benefits in the event of accidental
death.
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Advance Premiums |
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Collected premiums
which pay the coverage beyond the next policy anniversary.
These, plus interest, must be counted as a liability for valuation
purposes.
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Age, Attained Age |
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The insured's age at
his or her last birthday. |
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Annuity |
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A stipulated sum payable
at certain regular intervals during the lifetime of one or
more persons, or payable for just a specified period.
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Application |
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A form supplied by
the insurance company, usually completed by the member. The
form is signed by the member and is part of the insurance
contract if a policy is issued. This form allows the home
office to determine whether an insurance policy will be issued,
and if so, in what classification and at what premium rate.
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Assignment |
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The legal transfer
of ownership rights under a life insurance policy from one
person to another. Also, the document effecting the transfer.
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Automatic Premium Loan |
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An option in a life
policy authorizing the insurer to use the cash value to pay
any premiums still due at the end of a grace period.
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Basic
Accidental Death Benefit |
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A contract which automatically
provides all NALC members a determined benefit in the event
of accidental death.
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Beneficiary |
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The person, or persons,
designated by the insured to receive the benefits of an insurance
policy upon his or her death. In health insurance, the beneficiary
is the person designated to receive any accidental death benefit.
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Benefit |
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The amount payable
by an insurer to a claimant or beneficiary under each coverage
in the policy
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Billing |
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The notification of
premiums due on an insurance policy.
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Cash
Value or Surrender Value |
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The amount available
to the owner when a policy is surrendered to the company.
During the early policy years, the cash value is normally
the reserve less a "surrender charge". In the later
policy years, the cash surrender value usually equals or closely
approximates the reserve value at time of surrender.
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Certificate (of Insurance
or Participation) |
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The written contract
between a fraternal society and the member purchasing the
insurance, stating the terms and full details of the agreement.
Also, a certificate issued to a group policyholder which summarizes
the essential features of the insurance protection provided. |
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Claim |
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A demand by an insured
or beneficiary for the benefits provided by the contract.
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Contestable Clause |
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A provision in an insurance
policy setting forth the conditions or the period of time
which the insurer may contest or void the policy. After that
time has lapsed, cannot be contested.
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Contingent Beneficiary |
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An alternate beneficiary
designated to receive payment usually in the event that the
original beneficiary has died before the insured.
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Contract |
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The agreement by which
an insurer agrees, for a consideration, to provide benefits,
reimburse losses or provide services for an insured. A "policy"
is the written statement of the terms of the contract.
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Contract of Insurance |
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The contract whereby
an insurer agrees to indemnify an insured for losses, provide
other benefits, or render services to or on behalf on this
insured. The contract of insurance is often called an insurance
policy, but the policy is merely the evidence of the agreement.
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Conversion |
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The change of one policy
form to another, usually without evidence or insurability.
This usually refers to life or health insurance contracts.
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Conversion Privilege |
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The right of an individual
to convert a group health or life policy to an individual
policy, should the individual cease to be a member of the
group. This can usually be done without a physical examination.
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Convertible |
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A policy that may be
changed to another form by contractual provision without evidence
of insurability.
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Convertible Term |
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A term contract that
can be converted to more permanent forms of insurance without
medical examination. The conversion must be made within a
limited period as specified in the contract. The conversion
may be made as of the original date of issue, provided the
insured pays the difference in back premiums with interest
thereon, or as of the attained age of the insured at the time
of conversion.
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Death
Benefit Corridor |
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According to federal
tax law, a death benefit may not be less than a minimum percentage
of the account value as of the date of death. The corridor
varies from 250% to 101%.
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Decreasing Term Insurance |
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A form of life insurance
that provides a death benefit which declines throughout the
term of the contract, reaching zero at the end of the term.
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Deferred Annuity |
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An annuity contract
that provides for the initiation of payments at some designated
future date.
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Dependent |
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An insured's spouse
and children who meet certain eligibility requirements, and
who are not otherwise insured under the same policy.
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Delinquent Notices |
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Past due reminder notices
sent to policyholders before the policy is canceled or suspended.
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Dependent Coverage |
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Insurance coverage
on the head of a family which is extended to his or her dependents,
including only the lawful, spouse and unmarried children who
are not yet employed on a full- time basis. "Children"
may be step, foster, and adopted, as well as natural. Certain
age restrictions on children usually apply.
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Direct Pay Monthly |
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A payment option where
the policyholder pays premiums directly to the insurer on
a monthly basis.
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Direct Pay Annually |
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A payment option where
the policyholder pays a year's worth of premiums to the insurer
on the anniversary date of his or her policy. |
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Disability |
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A physical or mental
condition which makes an insured person incapable of performing
one or more duties of his or her occupation.
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Disability Waiver Premium
Benefit |
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A disability benefit
which provides that a policy of life or health insurance will
be continued in force without premiums during any period in
which the insured is disabled as defined in the policy
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Dividend |
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A dividend on participating
contracts is the refund of that part of the premium which
still remains at the end of a year after the company has set
aside the necessary reserve and made deduction for claims
and expenses. The dividend may also include a share in the
company's investment, mortality and operating profits.
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Dividend Accumulation |
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A life insurance policy
option which allows the policy holder to leave any premium
dividends with the insurer to accumulate at compound interest.
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Dividend (or Paid Up)
Additions |
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An option whereby the
insured can leave dividends with the insurer, and each dividend
is used to buy a single premium life insurance policy for
whatever amount it will purchase. Often called "paid
up additions."
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Dividend Option |
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Alternative ways in
which insureds under participating life insurance policies
may elect to receive their policyholder dividends.
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Back
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Effective
Date |
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The date on which insurance
coverage goes into effect. May refer to a case, contract,
coverage, benefit or an insured. The definition of this term
varies from company to company.
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Endorsement |
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The changing of provisions
in a policy or certificate by means of an official entry over
the signature of an insurance company officer.
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Evidence of Insurability |
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The statement of information
needed for the underwriting of an insurance policy.
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Exceptions |
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Specified conditions
or circumstances for which a policy does not provide benefits.
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Extended Term Insurance |
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A provision in most
whole life policies which provides the option of continuing
the existing amount of insurance as term insurance for as
long a period of time as the contract's cash value will purchase.
This is one of the nonforfeiting options available to the
insure in case a premium is not paid within the grace period.
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Face
Amount |
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The amount of insurance
protection provide under a given policy. The actual amount
payable by the company may be decreased by loans or increased
by additional benefits payable under specified conditions,
or state in a rider.
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Grace
Period |
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A determined period,
usually 30 or 31 days after the premium due date, during which
an insurance contract remains in force and the premium may
be paid.
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Group Certificate |
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A document provided
to each member of a group plan. It lists the benefits provided
under the group contract.
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Group Contract |
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A contract of insurance,
made with an employer or other entity, that covers a group
of persons. The group contractual arrangement is generally
used to cover employees of a common employer, members of a
trade association or trusteeship, members of a welfare or
employee benefit association, members of a labor union, or
members of another association not formed for the sole purpose
of obtaining insurance.
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Group Life Insurance |
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Life insurance provided
for members of a group. The cost of this insurance is lower
than individual policies because administrative expenses per
life are decreased.
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Guaranteed Renewable |
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A policy that the insured
has the right to continue in force by the timely payment of
premiums over a substantial period of time. During that period,
the insurer has no right to make any change in any provision
of the contract other than a change in the premium rate for
all insureds in the same class.
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Income
Policy |
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A life endowment policy
which provides the payments of proceeds in specified monthly
amounts. This is an alternative to a lump sum payment.
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Incontestable Clause |
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A clause in a policy
providing that after a policy has been in effect for a given
time (2 or 3 years), the insurer shall not be able to contest
the statements in the application.
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Indemnity |
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Benefit paid by a policy
to the limit of the insured loss.
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Installments for a Fixed
Period |
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A settlement option
whereby the insurer pays a monthly or annual income for a
fixed number of installments.
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Insured |
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The person who is covered
for insurance under a policy.
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Irrevocable Beneficiary |
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A beneficiary who cannot
be changed without his or her consent.
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Juvenile
Insurance |
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Insurance written on
the lives of children under a specified age. This insurance
is usually owned by a parent or parents.
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to Glossary Letter Contents
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Lapse |
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Termination of a policy
due to the failure to pay the premium.
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Left on Deposit Dividends |
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An option providing
for a policy owner's dividends to be deposited with the insurer
at a determined interest rate.
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Life Annuity |
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A settlement option
whereby the insurer pays a beneficiary a monthly income for
the rest of his or her life.
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Life Annuity With Period
Certain |
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A settlement option
whereby the insurer (1) pays the beneficiary a monthly income
for life, and (2) pays that monthly income to a survivor until
the end of a specified period, if the insured dies within
that period.
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Loan |
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Amount borrowed from
the insurance company secured by the value of a policy.
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Lump Sum |
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Payment of the entire
proceeds of a life insurance policy in one sum.
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Mature |
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A policy matures when
its face amount becomes payable. This could occur upon the
death of the insured or as of specified dates.
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Misrepresentation |
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The use of oral or
written statements that do not truly reflect the facts. Misrepresentation
can be given either by an insured on an application or by
an insurer concerning their terms or benefits of an insurance
policy.
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to Glossary Letter Contents
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Named
Insured |
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Any person, firm, or
corporation, or any member thereof, specifically designated
by name as the insured(s) in a policy.
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Noncontributory |
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A plan or program of
insurance, usually group, for which the employer pays the
entire premiums and the employee contributes no part of the
premium.
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Nonforfeiture Values
(or Provisions) |
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Those values in a life
insurance policy that by law the policy owner cannot forfeit,
even if he or she ceases to pay the premiums.
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Ownership |
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Any adult policy is
owned by the member whose life it insures. The person named
a "owner" has full control of the policy.
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Options at Lapse |
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If a premium remains
unpaid at the end of a grace period, the options at lapse
provision is exercised. This means a policyholder may surrender
the policy for cash, continue the policy as reduced paid-up
life insurance, or convert the policy to nonparticipating
extended term insurance.
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Paid-Up
Insurance |
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Insurance on which
all premiums are paid, but which has not yet matured by either
death or endowment.
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Paid-up Policy |
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A life insurance policy
under which no further premiums are payable but under which
the insurance coverage continues in effect.
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Participant |
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A person covered under
a group insurance plan.
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Participating |
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Insurance that pays
policy dividends to policy owners.
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Participation Certificates |
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A certificate given
to members who have contracted for supplemental coverage under
a group plan.
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Payor Benefit |
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A rider or provision
often found in juvenile policies under which premiums are
waived if the person paying the premium, usually one of the
parents, becomes disabled or dies while the child is still
a minor.
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Payroll Deduction |
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A payment option which
automatically deducts insurance premiums from a policyholder's
paychecks.
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Pending Claim |
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A reported claim on
which final action has not yet been taken.
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Pending File |
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Records of policies
not yet issued.
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Policy |
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The written statement
of a contract effecting insurance. This statement includes
all clauses, riders and endorsements.
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Policy Anniversary |
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The annual date which
separates the experience under a policy between one period
of time and the next for dividend and rate purposes.
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Policy Dividend |
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The return of a portion
of the premium paid on a participating policy. It represents
the difference between the gross premium charged and the actual
cost assessed against the policy.
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Policy Loan |
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A loan made by an insurer
to a policy owner. Part or all of the cash value of the policy
is assigned a security for the loan.
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Policy Owner |
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The person who has
ownership rights to an insurance policy. This person may or
may not be either the policyholder or the insured.
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Policy Year |
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The period between
policy anniversary dates.
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Policyholder |
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The person in actual
possession of the insurance policy.
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Pre-existing Condition |
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A physical condition
that existed prior to the effective date of the policy. In
many health policies, these are not covered until after a
stated period of time has elapsed.
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Premium |
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The periodic payment
required to keep a policy in force.
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Premium Notice |
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Notice of premium due,
sent out by the insurer to an insured.
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Premium Payment Method |
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The mode of premium
payment elected by the policy owner. Methods generally available
are monthly, annually, or biweekly payroll deduction.
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Proceeds |
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The amount an insurance
provider is obligated to pay under the terms of a policy when
the policy is surrendered or when the insured dies.
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to Glossary Letter Contents
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Reduced
Paid Up Insurance |
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A form of insurance
available as a nonforfeiture option. It provides that the
cash value of the policy be used as a single premium to purchase
paid-up insurance in whatever amount the cash value will provide.
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Reduction |
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A decrease in the benefits
in an insurance policy due to a specified condition.
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Revocable Beneficiary |
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The beneficiary in
a life insurance policy in which the owner reserves the right
to revoke or change the beneficiary.
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Reinstatement |
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Restoration of a lapsed
policy.
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Risk Rate |
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A premium amount set
by the board of trustees. The rate is determined according
to the insured's sex and attained age.
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to Glossary Letter Contents
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Settlement
Option |
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A choice of payment
to the beneficiary upon the settlement of a policy. Typical
options are interest, installments, life income with a specified
number of years, or fixed income as long as proceeds and interest
will last.
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to Glossary Letter Contents
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Term |
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The period of time
for which a policy or bond is issued. |
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Term Insurance |
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The type of life insurance
policy that provides protection only for a specified period
of time. The policy does not build up any of the nonforfeiture
values associated with whole life policies.
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Termination |
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The time the coverage
under an insurance policy ends, either because its term has
expired or because it has been canceled by either party. Whole
life policies are terminated if the holder ceases to pay premiums.
The insured would then receive one of the nonforfeiture values.
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to Glossary Letter Contents
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Waiver |
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A rider excluding liability
for a stated cause of injury of sickness, a provision or rider
agreeing to waive premium payments during a period of disability
of the insured; the act of giving up or surrendering a right
or privilege that is known to exist.
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© National Association of Letter Carriers, AFL-CIO |
