Annual Statement: A document provided by the insurance company to the policy owner every year detailing a policy’s performance. Figures reported may include: account values, premiums paid, etc. It is important to review your Annual Statement when it is received.
Application: A written paper or electronic provided by an insurance company that is completed by the insurer’s agent, the insured, and in many cases also by the medical examiner. The completed application provides information about the health, occupation, lifestyle, and family history of the proposed insured. The policy application is signed by the policyowner, insured, and insurance agent. The completed and signed application is used by the insurance company to decide if a policy should be issued and at what price/cost.
Attained Age: The age of the insured the insurance company uses to calculate the required premiums for a policy. Automatic Increase Rider An optional policy feature or rider in a universal life contract that provides periodic increases in face amount based on a predefined percentage, starting in a predefine policy year. This option must be applied for at the time of issue for the policy. There are typically additional costs for purchasing this option.
Bank Draft: A premium payment method by which a policy owner allows his/her bank to withdraw a designated premium amount from his/her specified account on a periodic basis and transfer the money to the insurance company to be applied as payment for the policy premium. Also known as an Electronic Funds Transfer (EFT).
Broker: An individual or company who acts as an intermediary between the insurance buyer and the insurance company. Brokers by nature, generally represent many different insurance companies and sell many insurance products. A broker’s typical role is to research the market in order to find the best possible options for the insured.
Critical Illness Rider: An additional form of insurance coverage that can be added as a Rider to certain types insurance policy which has a specified benefit to the policyowner if the insured is diagnosed with a critical illness or condition.
Date of Issue: The date on which a policy or contract is issued by the insurance carrier. Note, this may be different from the policy “Effective Date”.
Disability Income Insurance Coverage: An insurance policy is designed to protect against the loss of income due to a disability or injury. Benefits are paid out as specified in the policy. Benefits provided can range from 40% – 100% of the insured’s income pre-disability income.
Electronic Funds Transfer: A premium payment method by which a policy owner allows the insurance company to withdraw designated premiums directly from his/her bank account at a specified amount on a periodic basis and to transfer the money to the insurance company to be applied as payment for the policy premium. Also known as a Bank Draft.
Evidence of Insurability: Proof of a person’s physical health condition, life style, occupation, or other factors, utilized by an insurance company to determine the acceptability of an applicant’s risk profile.
Free-Look Provision: Most state Departments of Insurance require a provision in a life, annuity, long-term care, or disability policy that gives the policyowner or contract owner a specified amount of time to review a new policy or contract after issuance and receipt. This is a consumer friendly feature allowing the policy or contract to be returned to the insurance company and voided within the specified time limit for a refund of all premiums paid. A common specified Free Look Period is 60 days.
Grace Period: A period of time stated in an insurance policy in which the policy will stay inforce in the event the required premium payment has not been made and there is not sufficient policy cash values. A common length of a Grace Period is 30 days.
Group Long Term Disability Insurance: Group DI insurance is provided by an employer through a master policy covering all employees. The policy is designed to provide income to an employee if he/she were to become disabled for a long period of time.
Guarantee of Insurability: A rider in a DI insurance policy that provides the insured with the ability to increase the benefits of the policy without evidence of medical insurability (evidence of financial insurability is still required).
Impaired Risk: Refers to an individual which the insurance company has assessed to be a substandard or impaired risk. Factors such as health history, life style, and family history can result in an individual being classified as an “Impaired Risk”. Being an impaired risk will result in higher premium requirements.
Independent Agent: An authorized representative of an insurance company who solicits and services insurance contracts. An Independent Agent is not an employee of the insurance company and typically represents many carriers.
Key-Man Policy: A life insurance policy that pays a specified death benefit to a business for financial losses incurred due to a key employee’s death. These proceeds are often used to supplement the loss of sales, loss of technical expertise, and the cost incurred to hire a replacement.
Lapse: The termination or cancellation of an insurance policy due to nonpayment of required premiums. Or, in the case of Variable Life and Universal Life insurance policies, the depletion of cash values below the amount needed to keep the policy in force. Under certain conditions, a policy might stay inforce under a “settlement option”.
Long-Term Disability Insurance: Long Term Disability Insurance is designed to provide an income when a short term DI policy’s benefits have expired (generally after three to six months). The DI benefits will pay a portion of the insured’s income for a specific amount of time or until the insured’s age 65. The policy allows the insured to not be reliant on savings and continue to provide for themselves and their dependents when/if a long term disability prevents them from earning an income.
Medical Information Bureau (MIB): An independent entity that collects and stores medical data on life, health and other insurance applicants. The information is exchanged among participating insurance companies, this information may only be accessed with written authorization from the insured. Its function is to safeguard against fraud and concealment by allowing insurance companies to discover relevant, undisclosed, health facts.
Monthly Anniversary: The same day as the policy date for each succeeding month (i.e. the 15th of every month).
National Association of Insurance Commissioners (NAIC): A membership organization of the appropriate state insurance commissioners. Its goals are to promote the uniformity of state regulation and legislation related to insurance and to ensure insurance sales best practices.
Owner (Policy Owner): The stated individual or entity who owns a life, annuity, long-term care, or disability insurance policy. The owner could be the insured on the policy, the beneficiary, or another third party. Normally, the policy owner pays the premiums on the policy and is the only one who is allowed to make changes to a policy, such as: a change of beneficiary, withdraw cash values, or taking loans on the policy.
Partial Disability: When an insured is unable to perform an occupational duty because of a disability, but is still able to perform their job at some level. Partial disability benefits can either be built into a DI policy, offered as a rider, or may not be available in some DI policies.
Payor: The individual or entity who is making premium payments on a policy or contract. If the payor is not the owner, the payor may not be entitled to the rights and provisions of the policy or contract.
Planned Periodic Premium or Payment: The premium billing frequency and amount of premium to be paid at specific intervals until the policy’s maturity date.
Policy / Contract: The written agreement between the insurance company and the policy owner or contract owner. The contract will state coverage amount, premium amount, length of coverage, beneficiaries, and additional information pertinent to your contract.
Policy Anniversary: The annual anniversary of the policy issue date.
Policy Date: The date on which coverage or a contract becomes effective. This is shown on the policy or contract specification page
Policy Number / Contract Number: A unique alpha numeric code assigned to the policy by the insurance company for identification and tracking purposes.
Policy Owner / Contract Owner: The stated individual or entity who owns the insurance policy. The owner could be the insured on the policy, the beneficiary, or another third party. Normally, the policy owner pays the premiums on the policy and is the only one who is allowed to make changes to a policy, such as: a change of beneficiary, withdraw of cash values, or taking loans on the policy.
Policy Status: The current status of the policy (Paid, Inforce, In Grace (premiums are late), Lapsed/Cancelled).
Premium: Payments made to the insurance company to purchase a an insurance policy and to keep the policy in force/active.
Premium Mode: The frequency with which premium payments are made. This is determined by the policy owner. The Premium Mode options are Annual, Semi-Annual, Quarterly, Monthly or Single Pay.
Rated: A rated policy is issued with a higher premium because the insurance company has assessed the insured to be a substandard or impaired risk.
Recurrent Disability: A recurrent disability is a disability that reoccurs within a short period of time. The recurrent disability provision in a DI policy allows the insured to forego the elimination period if they have a recurrent disability within a 12 month period of time.
Reinstatement Provision: A policy feature which allows a policyowner to reinstate a lapsed policy within a specified time after lapse. There are usually conditions which must be met to qualify for reinstatement which may include: evidence of insurability and or payment of back due premiums. This right is typically forfeited if a policy has been surrendered for its cash surrender value.
Residual Disability Benefit: A benefit available in some DI policies provided as a rider or built into a DI policy. It is designed to provide protection against a disability that prevents the insured from earning a full income. It usually qualifies as a residual disability if the insured is incurring a loss of time and duties, as well as an income loss of 20% or more.
Short-Term Disability Insurance: A policy designed to provide protection for a short period of time (three to six months). Generally this kind of protection is provided by a group DI policy and is used in conjunction with a personal Long-Term DI policy.
Total Disability: An insured is deemed to be totally disabled when they are no longer able to earn an income due to a disability that impairs their ability to perform the essential duties required by their occupation. Total disability can be due to injury or sickness
Underwriting Class / Rating: The classification of an insured’s risk profile as determined by the insurance carrier when a policy is issued. A favorable underwriting will result in lower premiums. Factors effecting underwriting class include: health, lifestyle, and family history.
Waiver of Monthly Deduction: An optional feature for a life insurance policy which waives the monthly cost of insurance charges on a universal life or variable life policy for the duration of a qualified disability as specified in the policy.
Waiver of Specified Premium: An optional feature for a life insurance policy which waives a specified premium on the policy for the duration of a qualified disability as dictated in the policy.