Accelerated Death Benefit: A provision or rider that allows you (the policy owner) to receive all or part of the benefits of your life insurance policy while you are alive but living with a terminal illness. Depending on the insurance company issuing the policy, and the policy form involved, these benefits are paid either on diagnosis of a terminal illnesses, such as AIDS, certain organ transplants, or upon a diagnosis that death within two years is almost certain. Some companies permit payout of some of the face amount of the policy by way of accelerated death benefits in the event of nursing home confinement or other health conditions. The circumstances under which such benefits are available varies from company to company, and the manner the payments are accounted for also can vary, in some as an “advance” against the ultimate benefit to be paid and in others as a loan, to be repaid, in some cases with interest, when the face amount is paid out. Also known as “living benefits.”
Accelerated Endowment: A dividend option allowing dividend accumulations to be applied to convert a life insurance policy into an endowment, or to shorten the endowment term.
Accidental Death and Dismemberment Coverage: Coverage that will pay you, your family members, a set amount, under the terms of the policy, for certain serious injuries or death resulting from an accident while in your car.
Accidental Death and Dismemberment Insurance: A policy that pays the beneficiaries a fixed death benefit but only if the insured person dies in or from a covered accident. Sometimes the policies pay extra benefits if the death occurred while a passenger on a common carrier, or while wearing a seatbelt. That is the “accidental death” portion of the policy. The policy also pays the policy owner a percentage of the face amount for the loss of an arm, leg, eye, etc. in a covered accident; the percentage typically varies with the extent of disablement or loss of bodily function, such as loss of one hand, 25%, one arm, 50%, both arms 100%, if the person loses the bodily parts or functions as a result of a covered accident. It is important to determine what types of accidents are covered and which are not. These policies are typically very inexpensive as most deaths occur from illness or disease, not accidents.
Accidental Death Benefit: A provision or rider to a life insurance policy that pays the beneficiary more than the face amount (such as double) in case you, the insured, die as a result of a covered accident, Formerly known as a “double indemnity” rider, there are some forms that pay 3 times the face amount if the accident occurred while a passenger on a commercial airline or other common carrier.
Accumulation Value: A term used in Universal Life policies to describe the total of all premiums paid and interest credited to the account before deductions for any expenses, loans or surrenders.
Accumulations (or Accumulation Benefits): Percentage additions to policy benefits when the contract is continuously renewed.
Actual Cash Value: An amount equal to the cost of replacing a damaged item with a new one, minus depreciation.
Actual Charge: The charges for a particular service/treatment by a health care provider.
Actuary: An expert trained in the mathematics of insurance and is responsible for the calculation of reserves, premiums, and other values.
AD&D: See Accidental Death and Dismemberment Insurance.
Additional Insured or Additional Interest: A person or an organization, other than the named insured or covered person, who is protected under the named insured’s auto policy. If an auto is leased, the leasing company may want to be listed as an Additional Insured as well as a lien holder or loss payee. This protects the leasing company if it’s named in a lawsuit for an accident caused by a policyholder.
Adjustable Life: A form of life insurance which allows changes on the policy face amount, the amount of premium, period of protection, and the length of the premium payment period. See also Flexible Premium Adjustable Life Insurance Policy.
Adjustable Premium: The right of an insurer to change the premium rate on classes of insureds, or blocks of business at the time of policy renewal.
Adjuster: A person who investigates and evaluates for an insurance carrier the damages caused in an accident.
Administrative Expense Charge: An amount charged by the insurer and/or administrator (sometimes separately delineated) to pay the costs of administering the policy.
Administrative Services Only: The services provided by an insurer, such as providing claim forms and processing claims, when the insurer is not the party funding the loss payments. See also Self Funded Plan.
Age Change: The date which a person’s age, for insurance purposes, changes. In most Life Insurance contracts this is the date midway between the insured’s natural birth dates. Health insurers frequently use the age of the previous birth date for rate determinations. On the date of age change, a person’s age may change to that of the last birth date, the nearer birth date, or the next birth date, depending upon the way in which the rating structure has been established by that particular insurer.
Agent: An insurance salesperson who sells and services policies. An independent agent usually represents two or more insurers in a sales and service capacity and is paid on a commission basis. An exclusive agent or captive agent represents only one company, usually on a commission basis.
Alternative Medicine: Some medical techniques once considered outside the boundaries of standard practice have become more accepted in recent years and may now be eligible for coverage. Acupuncture, midwives, and osteopathic treatments are examples of formerly excluded treatments that are now covered under many health insurance policies.
Amendment: An attachment to a policy that modifies certain policy benefits.
American College: An educational institution within the Life Insurance business. It confers the Chartered Life Underwriter designation and is concerned with continuing agents’ training and with research and publication in areas related to the Life Insurance business. It also sponsors specialty Life Insurance courses and offers a college degree in financial services. It was formerly known as the American College of Life Underwriters.
American Council of Life Insurance, Inc.: An association made up of several previously independent insurance groups. It is concerned with legislative matters, intercompany communications, and the exchange of information.
American Experience Table of Mortality: A statement of expected mortality rates based upon data accumulated in 1868 from a large number of insured persons. This table was widely used by life insurers until the 1950s to establish rates.
American Life Convention: A former association of Life companies; now part of the American Council of Life Insurance. See American Council of Life Insurance, Inc.
Amount at Risk: The difference between the face amount of a Whole Life Insurance contract and the cash value which it has built up. The net amount at risk declines throughout the life of the contract, while the policy reserve increases along with the cash value. It is the amount the insurer would have to draw from its own funds rather than the policy reserve were the contract to become a death claim.
Annual Limits: Are maximums on the dollar amounts the plan will pay for any given year.
Annual Payment Annuity: An annuity which was purchased by the payment of annual premiums for a specified period of time.
Anti-Theft Device: Devices designed either to reduce the chance an auto will be vandalized or stolen, or assist in its recovery. Examples include car alarms, keyless entry, starter disablers, motion detectors, parts of the vehicle etched with the Vehicle Identification Number, and recovery systems.
Application: A signed request for life insurance giving information about the prospective policyholder, including age, sex, and if the policy is subject to underwriting, typically it also asks a series of health related questions. A false statement by the applicant for life insurance makes the policy “voidable” within the first two years of issue, or “contestable” if the insured dies within the first two years.
Approved Charge: The dollar amount which your insurer bases its payments and your co-payments.
Arbitration: A determination made by impartial persons (often experts) as to the value of property or the extent of damage. In arbitration the proceeding is typically far less formal that a court proceeding, but the decision of the arbitrator is final, absent fraud. Arbitration is typically used as an alternative to formal court-based litigation in which the determination is made by a judge and/or jury operating according to all legal rules.
Armstrong Investigation: A study authorized by the New York state legislature in 1905 which reviewed the operations and practices of Life insurers operating in the state. Numerous changes in policy forms and investment practices came from the study and were eventually reflected in other state codes.
Asset Share Value: The value of a book of business to an insurer, assuming that the business has been in force long enough to show true mortality rates. This value must be known by the insurer in order to make rates and also in order to sell the business. If assets share values do not grow properly, either the rates have been too low or expenses too high.
Assigned Risk Plan: A state-supervised insurance plan for people who are unable to obtain insurance coverage in the regular market. The cost of this insurance is substantially higher.
Assigned Risk: A risk not ordinarily acceptable to insurers which is, according to state law, assigned to insurers participating in a plan in which the insurers agree to accept their share of these risks.
Assignment: Giving rights and benefits under your insurance policy to someone else.
Assignment: The transfer of the ownership rights of a Life Insurance policy from one person to another. The term also refers to the document that effects the transfer.
Assignments of Benefits: The insured allows a hospital or doctor to collect your health insurance benefits directly from your insurance company.
Associated Group Plans: Fully insured plans issued to employee groups, including those formed by labor unions, nonprofit membership corporations, etc.
Association Group Insurance: Technically, group insurance issued to an association rather than to an employer or a union.
Association of Life Insurance Council: An organization of Life company attorneys which seeks to increase knowledge in areas of the law affecting Life Insurance.
Assumed Interest Rate: The minimum interest rate on a variable life insurance policy.
At-Fault: Responsible for an accident.
Attained Age: The age an insured has reached on a given date.
Automatic Premium Loan: A provision in a Life policy authorizing the insurer to use the loan value to pay any premiums still due at the end of the grace period.
Automatic Reinsurance: This form of reinsurance, also known as Treaty Reinsurance, is one whereby an insurer must cede that portion of a risk that is above the limit established by contract, and the re-insurer must accept all risks ceded to it.
Automobile Insurance: A form of insurance that protects against losses involving autos. Different types are available depending on the needs and wants of those buying policies. Examples of coverage types include: bodily injury liability, property damage liability, medical payments, and collision and comprehensive coverage for physical damage to the insured’s vehicle.
Aviation Accident Insurance: A form of insurance which protects individuals as passengers or pilots, usually on scheduled aircraft, or which covers the flight travel of the employees of a company under a master policy.
Aviation Hazard: The extra hazard of death or injury resulting from participation in aeronautics, usually as other than a fare-paying passenger in licensed aircraft. This generally requires an extra premium rating or waiver of certain benefits or coverage.