Speak with an experienced advisor! Our video and pictograph life insurance definitions are here to assist you in understanding a little bit more about life insurance. We have chosen the best definitions that we could find and have indicated their source. On occasion when we found no ideal definition we created one ourselves.
Life insurance definitions are varied and complex being that there are so many specific terms and concepts. Our video and slide definitions are here to assist you in your search for life insurance.
The Definition of Life Insurance:
What is Life Insurance?
"A policy that will pay a specified sum to beneficiaries upon the death of the insured."
Source: The California Department of Insurance.
Commentary: The concept of life insurance is far more complex than numerous people think. There are so many different types and kinds of life insurance. From Single Premium Whole Life Insurance to Universal Life Insurance. Term Insurance, a form of pure insurance has been gaining in populartity for years.
Commentary: The concept of life insurance is far more complex than numerous people think. There are so many different types and kinds of life insurance. From Single Premium Whole Life Insurance to Universal Life Insurance. Term Insurance, a form of pure insurance has been gaining in populartity for years.
The Definition of Term Life Insurance:
What is Term Life Insurance?
"A policy that gives protection for only a definite period of time (e.g., 1, 3, or 5 years). If death occurs during the term for which the policy is written, proceeds are payable to the beneficiary. If the insured survives the term, the policy expires. There is no cash value build-up in a term policy. Guaranteed renewable term insurance can be renewed without proof of insurability. Under other types of term insurance, the insured must once again undergo an underwriting process (e.g., a medical examination)."
A secondary definition of Term Insurance is below:
Commentary: Term insurance is pure insurance and has been becoming more and more popular as the years go by. Term insurance stands in direct contrast to cash value policies such as whole and universal life. Term insurance can often be one tenth of the cost of whole life. Term Insurance itself can be broken down into a number of different types and kinds such as decreasing term, increasing term, and level term
The Definition of Whole Life Insurance:
What is Whole Life Insurance?
"Permanent life insurance that provides for the payment of the face value upon death of the insured, regardless of when it may occur. This contrasts with term insurance, which pays benefits only if death takes place during the limited term of the policy. Under whole life policies, the insured pays a level premium rate all of his or her life. This approach results in an overpayment of premiums in the early years of the policy and an underpayment in the latter years—which averages out over the life of the policy. Whole life insurance also accumulates a cash value that the insured may borrow or otherwise use."
Source: IRMI.com
A secondary of Whole Life is below:
Commentary: Whole life insurance is terrific product for a minority of the population. Popular with life insurance agents, whole life insurance policies are best used by pretty wealthy families. There are some exceptions to this. But in general whole life is often pitched and pushed by life insurance agents to too many people.
The Definition of a Paramedical Exam:
What is a Life Insurance Paramedical Exam?
An exam done by a certified medical professional, often either at your home or office, to assist a life insurance company is ascertaining your overall health profile for the purposes of offering a potential life insurance policy. During the exam the medical professional will discuses your current and past medical history. They will take your height, weight, and body measurements. The Medical Technician will also, take your heart rate and blood pressure. They may also take urine, blood, and saliva samples and possibly perform an EKG. An EKG stands for electrocardiogram.
Source: WholeVsTermLifeInsurance
Commentary: Paramed exams are required often for fully underwritten life insurance contracts. However not all policies will require them. In addition non med policies actually avoid them. Typically for slightly more money consumers to choose this simpler for of term insurance.
The Definition of a Participating Policy:
What is a Participating Policy?
"A participating policy is an insurance contract that pays dividends to the policy holder. Dividends are generated from the profits of the insurance company that sold the policy and are typically paid out on an annual basis over the life of the policy. Most policies also include a final or terminal payment that is paid out to the holder when the contract matures. Some participating policies may include a guaranteed dividend amount, which is determined at the onset of the policy."
Source: Investopedia.com
Commentary: Participating policies stand in direct contrast to Non Participating policies which are cash value life insurance contracts that DO not pay out yearly dividends. If you are going to buy a whole life insurance policy buying a participating one can often make the most sense.
The Definition of a Policy Owner:
What is a Policy Owner?
"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."
Note: the term policy owner can also be written policyowner.
Source:Source New York Department of Financial Services
Commentary: Simply put the policyowner owns the policy.
The Definition of a Premium:
What is a Life Insurance Premium?
"The amount of money an insurance company charges for insurance coverage."
Commentary: A premium is the amount of money that the insurer charges as in an Annual Premium. One single annual premium is often the cheapest way to procure and pay for life insurance. Premiums though do not necessarily have to be paid only once per year. There are various mode payment options for Life Insurance Premiums, including Monthly, Yearly, Quarterly, Semi Annually. Not all premium mode options are available with all insurers.
In certain situations such as with Single Premium Life Insurance, there is only one premium ever due.
The Definition of a Life Insurance Application:
What is a Life Insurance Application?
"A statement of information made by a person applying for life insurance. It helps the life insurance company assess the acceptability of risk. Statement made in the application are used to decide on an applicant's underwriting classification and premium rates."
Commentary: A life insurance application is the document used to apply for life insurance. Essentially all life insurance policies have applications.
The Definition of a Rider:
What is a Life Insurance Rider?
"Usually known as an endorsement, a rider is an amendment to the policy used to add or delete coverage."
Commentary: The term rides are most often used in the life insurance world and the term endorsement are used in the property causality world (home and auto.) Popular riders include Children's Life Riders and the Terminal Illness Rider.
Riders are common in the world of life insurance. Probably more common with cash value plans than term insurance policies.
The Definition of an Underwriter and Underwriting:
What is an Underwriter and Underwriting?
Underwriter - The person who reviews the application for insurance and decides if the applicant is acceptable and at what premium rate.
Underwriting - The process by which a life insurance company determines whether it can accept an application for life insurance, and if so, on what basis so that the proper premium is charged.
The Definition of Misstatement of Age:
What is the misstatement of age provision?
The Misstatement of Age Provision is the clause contained within a life insurance policy that deals with what happens when a client misstates their age after the policy has been issued.
The Definition of Free Look:
What is the Free Look Provision?
A Free Look Provision is a limited, state dependent period of time, in which a consumer of life insurance or an annuity may terminate their policy with no surrender charges, typically with no questions asked.
The Definition of the Incontestability Clause:
What is the Incontestability Clause?
"A clause" commonly found in a life insurance policy "that stipulates" a given period of time from which an insurer can no longer dispute the validity of the policy "on the basis of fraud or mistake" after a certain period of time. That period of time is commonly, but not necessarily, two years.
Life Insurance Definitions Presentation Slideshare
The Definition of the Insurable Interest:
What is Insurable Interest?
"A right or relationship in regard to the subject matter of the insured contract such that the insured can suffer a financial loss from damaged, loss or destruction to it."
Commentary: The concept of insurable interest is at the heart of what life insurance is all about. You can not be involved with a life insurance contract unless you have an insurable interest. Countless agents have to explain this basic insurance concept to consumers on a daily basis. What is your legitimate tie to this individual.
Often insurable interest is so obvious that is not need to be discussed.
The Definition of the Agent:
What is an Agent?
"A licensed person or organization authorized to sell insurance by or on behalf of an insurance company."
Commentary: The concept of agents in important in the world of life insurance. In general life insurance agents and property causality agents are similar but not the exact same thing.
In some states in the US there is a legal distinction with regards to the differences between agents and brokers.
It is important to note that Agents are "Authorized" by an "insurance company."
The Definition of a Broker:
What is an Broker?
"A licensed person or organization paid by you to look for insurance on your behalf."
Commentary: The concept of brokers are distinct somewhat in the property casualty world vs the life insurance world. Whereas Agents sometimes can be considered working for the insurer, brokers can sometimes be thought of as working for you. There are state specific distinctions.
The subject of insurance brokers is an evolving field.
The Definition of a Captive Agent:
What is a Captive Agent?
"An individual who sells or services insurance contracts for a specific insurers or fleet of insurers."
Commentary: Captive Agents and Captive Agencies are one of those important considerations that most consumers know nothing about.
Essentially a captive agent can only sell insurance for one insurance company. Often this company will have some additional insurers that they partner with or the master organization is broken down into smaller insurance entities.
Examples of captive insurers in the life insurance space include: New York Life and Northwestern Mutual.
In the property casualty world, examples of captive insurance agencies are State Farm, Farmers, Nationwide, etc. Captive Agents should NOT be confused with Captive Insurers.
The Definition of a Captive Insurer:
What is a Captive Agent?
"An insurance company established by a parent firm for the purpose of insuring the parent's exposures"
Commentary: For most consumers the definition of Captive Insurers is not all that important. We present it here just to be clear that Captive Agents (or Agencies) and Captive Insurers are vastly different concepts.
Essentially a Captive Insurer is an insurer established to assist in protecting one's own company.
Conclusion to Life Insurance Definitions:
Thank you for perusing our life insurance definitions page. Please feel free to contact us with any questions that you may have, either below in the comments section or via email.
