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Lingo Associated with California Insurance Companies, Policies, and Agents

When you are researching term life insurance and other insurance types provided by California insurance professionals, you will come across words and phrases that you may not understand. To find out what a word or phrase means, just click on the appropriate letter to see the terms starting with that letter. For example, if your looking to find the definition of “Pre-existing condition”, then click on the “P” link below. A pop-up window will appear and you will be able to find the information you need! It’s that simple!

Accidental Death Benefit – Provides a specified death benefit amount if the insured dies as a result of an accident. This is often provided as a supplementary life insurance benefit, payable in addition to the policy’s basic death benefit.

Annuity – In the financial services industry, a contract under which an insurer promises to make a series of periodic payments to a named individual in exchange for a premium or series of premiums.

Beneficiary – The person or party the owner of a life insurance policy names to receive the policy benefit.

Benefit Period – The specified time during which disability income benefits will be paid under a disability income policy.

Cash Value – The element of a permanent life insurance policy, which represents the policyowner’s ownership interest in the policy.

Children’s Insurance Rider – A rider that may be added to a permanent insurance policy to provide term insurance coverage on the insured’s children.

Claim – A request for payment of insurance policy benefits following the occurrence of a covered loss.

Continuous premium whole life policy – A whole life insurance policy for which premiums are payable until the insured’s death. Also known as a straight life insurance policy or an ordinary life insurance policy.

Contract – A legally enforceable agreement between two or more parties.

Convertible term insurance policy – A type of Term Life Insurance policy that allows the policyowner to change the term insurance policy to a whole life policy without providing evidence of insurability.

Corporation – A legal entity that is created by the authority of a governmental unit and that is separate and distinct from the people who own it.

Credit life insurance – A type of decreasing Term Life Insurance policy designed to pay the balance due on a loan if the borrower dies before the loan is repaid.

Decreasing term life insurance – A type of Term Life Insurance that provides a death benefit that decreases in amount over the policy term.

Disability income insurance – Health insurance coverage that provides income replacement benefits to an insured who is unable to work because of sickness or injury.

Exclusion rider – An individual health insurance policy rider which states that benefits will not be provided for any loss that results from a condition specified in the rider.

Face amount – The amount of the death benefit payable under a life insurance policy.

Free-look provision – An individual life insurance and annuity policy provision that gives the policy owner a stated time – usually 10 or 20 days – after the policy is delivered in which to cancel the policy and receive a full refund of the initial premium payment.

Grace period – A specified length of time – usually 31 days – within which a renewal premium that is due may be paid without penalty.

Group insurance policy – An insurance policy that is issued to a party that is purchasing insurance coverage for a specified group of people.

Health insurance policy – An insurance policy that provides protection against the risk of financial loss resulting from the insured person’s sickness, accidental injury, or disability.

Home office – The headquarters of an insurance company.

Hospital expense coverage – A type of basic medical expense coverage that provides benefits for specified hospital expenses such as room and board, medications, laboratory services, and other fees associated with a hospital stay.

Increasing term life insurance – Term Life Insurance that provides a death benefit that increases by some specified amount or percentage at stated intervals over the policy term.

Insurance agent – A person who is authorized by an insurance company to represent that company in its dealings with applicants for insurance.

Insured – The person whose life or health is insured under an insurance policy.

Joint and Survivor Option – A life insurance settlement option that allows the beneficiary to have the death proceeds paid out in the form of a joint and last survivor annuity.

Joint Plan – A life insurance plan that insures two or more lives and pays proceeds at the time of the first death.

Jumbo Risk – A risk involving exceptionally high benefits.

Jumping Juvenile Insurance Policy – Life insurance purchased by parents for children under a specified age. Provides permanent life insurance that increases in face value five times at age twenty-one with no increase in premium.

Key-person life insurance – Any person or employee whose continued participation in a business is necessary to the success of the business and whose death would cause the business a significant financial loss.

Lapse – The termination or discontinuance of an insurance policy due to non-payment of a premium.

Lapse Notice – Written notice by an insurer that the policy has lapsed.

Lapsed Policy – A policy terminated for non-payment of premiums. The term is sometimes limited to a termination occurring before the policy has a cash or other surrender value.

Lapse Ratio – Surrenders and lapses as a percentage of average insurance in force for the year.

Legal Reserve Company – A company that maintains policy reserves according to the standards established by the insurance laws of the various states.

Level Premium – Rating structure under which the premium level remains the same throughout the life of the policy.

Level Premium Life Insurance – Life insurance for which the premium remains the same from year to year. The premium is more than the actual cost of protection during the earlier years of the policy and less than the actual cost in the later years. The building of a reserve is a natural result of level premiums. The overpayments in the early years, together with the interest that is to a earned, serve to balance out the underpayments of the later years.

Level Term Insurance – A type of Term Life policy where the face value remains the same from the effective date until the expiration date.

Life Expectancy: – The average number of years of life remaining for persons of a given age according to a particular mortality table.

Life Income – A settlement option under which equal installments are paid as long as the beneficiary lives, even if the principal has been exhausted.

Life Insurance – Insurance providing for payment of a specified amount on the insured’s death, either to his or her estate or to a designated beneficiary; or in the case of an endowment policy, to the policy holder at a specified date.

Life Insurance in Force – The sum of the face amounts, plus dividend additions, of life insurance polices outstanding at a given time. Additional amounts payable under accidental death or other special provisions are not included.

Life Insurance Trust – A type of life insurance policy where a trust company is named as the beneficiary and distributes the proceeds of the policy under the terms of the trust agreement.

Limit – Maximum amount a policy will pay either overall or under a particular coverage.

Living Benefits – Benefits available to owners of life insurance contracts while the insured is still living. This term may refer to the availability of policy loans and collateral assignments, but it is typically used to refer to advances on policy proceeds taken in the case of terminal illness. Also known as Accelerated Death Benefit.

Loan – Borrowing from the insurer and securing the amount of the loan with the cash value in the life insurance policy. If the insured dies when there is an outstanding loan balance, the amount of the loan and any unpaid interest will be deducted from the proceeds.

Loan Value – The amount that can be borrowed from the insurer, using the policy cash value as collateral.

Long-Term Care Policy – A plan designed to cover the insured’s long-term care (nursing home) costs.

Lump Sum – A method of settlement whereby the beneficiary receives the entire proceeds of a policy at once rather than in installments.

Material Misrepresentation – A statement made to the underwriter before acceptance of risk, which is material to his decision in accepting and rating the risk.

Mature – When an insurance policy’s guaranteed cash value equals the initial death benefit, it is said to “endow” or mature. Whole Life contracts typically endow at the insured’s age 100.

Maturity Date – The date which the policy endows for its total face amount.

Maturity Value – The amount payable under a Whole Life insurance policy if the insured person lives to the last age on the mortality table on which the values of the contract were based.

Medical Examination – A medical history and exam completed by a doctor that the insurer may require of the applicant during the underwriting process – typically, paid for by the life insurer underwriting the application.

Medical Information Bureau (MIB) – A data pool service that stores confidential reports on the health histories of persons who, in the past, have applied for insurance from other member companies. Most insurers subscribe to this bureau to get more complete underwriting information.

Misrepresentation – Act of making, issuing, circulating, or causing to be issued or circulated any written or verbal statement that does not represent the correct policy terms. Also, use of a name or title for any policy or class of policies that does not reflect its true nature.

Moral Hazard – Hazard arising from any nonphysical, personal characteristic of a risk that increases the possibility of loss or may intensify the severity of loss for instance, bad habits, low integrity, poor financial standing.

Mortality – The frequency of deaths in proportion to a specific population.

Mortality Rate – The number of deaths in a group of people, usually expressed as deaths per thousand.

Mortality Table – A table showing how many members of a group, starting at a certain age, will be alive at each succeeding age. It is used to calculate the probability of dying in, or surviving through, any period, and for the valuation of an annuity. To be appropriate for a specific group, it should be based on the experience of individuals having common characteristics, such as sex or occupation.

Mortgage Protection Insurance – A type of Term Life policy which pays off the balance of a mortgage upon the death of the insured. Typically, the death benefit decreases according to a schedule that fits the declining payoff requirements of the mortgage.

Multi-Year Premium Mode – A premium payment option where future annual premiums are paid in advance at a discount.

Mutual Insurance Company – An insurance company in which the ownership and control is vested in the policy holders and a portion of surplus earnings may return to policy holders in the form of dividends. No capital stock exists.

Mutual Fund – Pooled money from shareholders that is invested in a variety of securities, including stocks, bonds and money market securities. Mutual funds offer the individual investor the advantages of diversification and professional management.

Net Cost – The out-of-pocket cost of owning any particular life insurance policy.

Non-Contributory – A term applied to employee benefit plans under which the employer bears the full cost of the benefits for the employees. One hundred percent of the eligible employees must be insured.

Non-Forfeiture Option – One of the choices available if the policy holder discontinues premium payments on a policy with a cash value. This, if any, may be taken in cash, as extended term insurance or as reduced paid-up insurance.

Non-Medical Insurance (Non-Med) – Life insurance issued based on the insured’s statement of health with no medical examination required.

Non-Medical Limit – The maximum face value of a policy that a given company will issue without the applicant taking a medical examination.

Non-Participating Policy – A life insurance policy in which the company does not distribute to policy holders any part of its surplus. Note should be taken that premiums for non-participating polices are usually lower than for comparable participating polices. Note that some non-participating polices have both a maximum premium and a current lower premium. The current premium reflects anticipated experience that is more favorable than the company is willing to guarantee, and it may be changed from time to time for the entire block of business to which the policy belongs.

Nonresident Agent – An agent licensed to write insurance in a state in which he or she does not live.

Non-Tobacco Status – No cigarette or tobacco usage based upon company guidelines.

Occupational Hazards – Occupations which expose the insured to greater than normal physical danger by the very nature of the work in which the insured is engaged, and the varying periods of absence from the occupation, due to the disability, that can be expected.

Operating Ratio – The sum of expenses and losses expressed as a percent of earned premium.

Ordinary Life Insurance – Life insurance usually issued in amounts of $1,000 or more with premiums payable on an annual, semi-annual, quarterly or monthly basis.

Ordinary Life – Permanent insurance that provides for the payment of proceeds at death or at policy maturity (if the insured is still living at that time). Also known as Whole Life Insurance.

Other Insured Rider – Rider which provides coverage to an eligible business or family member other than the insured.

Overhead Expense Insurance – Insurance for business owners to help offset continuing business expenses if the owner is disabled

Overriding Commission – Commission payable in addition to the original commission.

Policy – A written document that contains the terms of the contractual agreement between the insurance company and the owner of the policy.

Policy loan – A loan that an insurer makes to the owner of a permanent life insurance policy. The policy loan is secured by the policy’s cash value and cannot exceed the cash value.

Portable provision – Group insurance coverage that can be continued when an insured employee leaves the covered group.

Pre-existing condition – (a) For most individual health insurance, an injury that occurred or a sickness that first manifested itself before the policy was issued and that was not disclosed on the application. (b) For most group health insurance, a condition for which an individual received medical care during the three months immediately prior to the effective date of coverage. Note: Actual language on the policy may vary.

Pre-existing conditions provision – An individual or group insurance policy provision which states that benefits will not be paid for pre-existing conditions until the insured has been covered under the policy for a specified length of time.

Preferred risk – A proposed insured who presents a significantly less-than-average likelihood of loss and who is charged a lower-than-standard premium rate.

Premium – A specified amount of money an insurer charges in exchange for its promise to pay a policy benefit when a specific loss occurs.

Quantity Discount – A premium discount given for the purchase of a policy with a larger face amount.

Regional office – An insurance company office that is charged with many of the same functions and operations as the company’s home office but that is geographically closer to the market it serves and generally reports to the home office.

Standard risk – A proposed insured who has a likelihood of loss that is not significantly greater than average.

Substandard risk – A proposed insured who has a significantly greater-than-average likelihood of loss.

Term Life Insurance – Life insurance that provides a death benefit if the insured dies during a specified period of time.

Underwriting – The process of identifying and classifying the degree of risk represented by a proposed insured.

Universal life insurance – Life insurance that is characterized by its flexible premiums, its flexible face amounts, and its unbundling of the pricing factors.

Variable Life Insurance – Life insurance under which the benefits relate to the value of assets behind the contract at the time the benefit is paid. The amount of death benefit payable would, under variable life policies that have been proposed, never be less than the initial death benefit payable under the policy.

Whole life insurance – Life insurance that provides lifetime insurance coverage at a level premium rate that does not increase as the insured ages.

No Definitions Available

Yearly renewal term (YRT) insurance – One-year Term Life Insurance that is renewable at the end of the policy term.

No Definitions Available