Definitions - Life Insurance Technical Terms

Adjustable Rate - An interest rate that changes, based on changes in a published market-rate index.

Agent - Individual who sells and services insurance policies in either of two classifications:

  1. Independent agent represents at least two insurance companies and (at least in theory) services clients by searching the market for the most advantageous price for the most coverage. The agent's commission is a percentage of each premium paid and includes a fee for servicing the insured's policy.
  2. Direct or career agent represents only one company and sells only its policies. This agent is paid on a commission basis in much the same manner as the independent agent.

Applicant - The person who is applying for life insurance, the person the insurance coverage will be on, also known as the Proposed Insured.

Attained Age - Insured's age at a particular time. For example, many term life insurance policies allow an insured to convert to permanent insurance without a physical examination at the insured's then attained age. Upon conversion, the premium usually rises substantially to reflect the insured's age and diminished life expectancy.

Beneficiary - The person(s) named in the policy to receive the life insurance proceeds upon the death of the insured.

Broker - Insurance salesperson that searches the marketplace in the interest of clients, not insurance companies.

Captive Agent - Representative of a single insurer or fleet of insurers who is obliged to submit business only to that company, or at the very minimum, give that company first refusal rights on a sale.

Convertible - Term life insurance coverage that can be converted into permanent insurance regardless of an insured's physical condition and without a medical examination. The individual cannot be denied coverage or charged an additional premium for any health problems.

Death Benefit - The limit of insurance or the amount of benefit that will be paid in the event of the death of a covered person.

Dividend - The return of part of the policy's premium for a policy issued on a participating basis by either a mutual or stock insurer. A portion of the surplus paid to the stockholders of a corporation.

Exclusions - Items or conditions that are not covered by the general insurance contract.

Grace Period - The length of time (usually 31 days) after a premium is due and unpaid during which the policy, including all riders, remains in force. If a premium is paid during the grace period, the premium is considered to have been paid on time. In Universal Life policies, it typically provides for coverage to remain in force for 60 days following the date cash value becomes insufficient to support the payment of monthly insurance costs.

Guaranteed Renewable - A policy provision in many products which guarantees the policyowner the right to renew coverage at every policy anniversary date. The company does not have the right to cancel coverage except for nonpayment of premiums by the policyowner; however, the company can raise rates if they choose.

Guaranty Association - An organization of life insurance companies within a state responsible for covering the financial obligations of a member company that becomes insolvent.

Insurable Interest - Interest in property such that loss or destruction of the property could cause a financial loss.

Owner - The person that is in charge of the policy. The person that has full rights to make changes to an in-force policy, speaks on behalf of the insured.

Phlebotomist - are the experienced medical professionals who draw blood. Making sure that blood draws go quickly and smoothly is the motivation for phlebotomy.

Policy - The written contract effecting insurance, or the certificate thereof, by whatever name called, and including all clause, riders, endorsements, and papers attached thereto and made a part thereof.

Premium - The price of insurance protection for a specified risk for a specified period of time.

Proposed Insured - The person who is applying for life insurance, the person the insurance coverage will be on, also known as the Applicant.

Risk Class - Risk class, in insurance underwriting, is a grouping of insureds with a similar level of risk. Typical underwriting classifications are preferred, standard and substandard, smoking and nonsmoking, male and female.

Section 1035 Exchange - This refers to a part of the Internal Revenue Code that allows owners to replace a life insurance or annuity policy without creating a taxable event.

Surrender Charge - Fee charged to a policyholder when a life insurance policy or annuity is surrendered for its cash value. This fee reflects expenses the insurance company incurs by placing the policy on its books, and subsequent administrative expenses.

Underwriter - The individual trained in evaluating risks and determining rates and coverages for them. Also, an insurer.

Underwriting - The process of selecting risks for insurance and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not qualify.


The Ripley Group

P.O. Box 516

South Cle Elum, WA 98943