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Life Insurance Glossary of Terms

Learning about a subject often requires learning the specialized words used in the subject.  We have provided this life insurance glossary to aid you in your research of life insurance.  If, at any time you come across an insurance term in this website you don’t understand, come back to this glossary and look up the definition.  By knowing the definitions to these terms, your study of the subject should be much easier.

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Accelerated Death Benefit

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This benefit is sometimes part of the policy and at times is added as a rider.  It will pay the benefit (sometimes a lesser amount than the death benefit) under certain specified conditions, such as a terminal disease (check your policy for exact conditions and the maximum amount paid).  Take note that if this benefit is exercised, it will reduce the actual death benefit by the amount of Accelerated Death Benefit paid.

Accidental Death Benefit:
A payment for loss of life due to an accident which was the direct cause of death.  A provision added to a life insurance policy for payment of an additional benefit, above and beyond the death benefit, when death occurs by accidental means, as defined in the policy.

Accidental Death and Dismemberment Benefit

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Pays a stated benefit in case of death or the loss of limbs or sight as a result of an accident.

Actuary

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A professional person trained in mathematics, statistics, and legal-accounting methods, and principles of the operation of insurance, annuities and retirement plans.  An insurance company actuary determines, on the basis of existing experience, the monetary value of risk presented by age, sex, health and lifestyle factors.  As an example, an actuary can determine the extra cost of risk presented by a cigarette smoker and present the findings to the insurance company to help compute the extra premiums a smoker will pay.

Age

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For life insurance purposes, the age in years of an applicant or insured.  Some companies us the age at the last birthday, while others use the age at the nearest birthday, prior or succeeding.

Age last birthday

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One method of insurance rating which rates people a their age as of their last birthday, with such rating held until the next birthday.  If your policy is approved at your current age (prior to your next birthday), you will be rated at your current age (as opposed to age nearest birthday).

Age nearest birthday

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A method use by some insurance companies to compute an insured’s age as that nearest the closest birthday.  Therefore, if the insured has passed six months after the last birthday, he or she is considered to be one year older (as opposed to age last birthday).

Agent

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Anyone who solicits insurance or aids in the placing of and delivering of insurance policies and/or the collection of premiums on behalf of an insurance company.

Annual Premium

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The total premium amount due on an annual basis to meet the contractual requirements of a policy and to keep it in force.

Annual Renewable Term (ART) Life Insurance

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Term life insurance that renews on an annual basis.  The premiums typically increase every year on the policy anniversary date of the policy.

Application

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A form supplied by the life insurance company and usually filled in by the agent and medical examiner (if applicable) on the basis of information received from the applicant.  The form is signed by the applicant and becomes part of the insurance contract if a policy is issued.  The application is reviewed by an insurance company underwriter to consider whether the requested policy will be issued and, if so, in what classification and at what premium rate.

Appointment

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The authorization of an agent to represent an insurance company.  An agent must be appointed by the insurance company in the state(s) business is being written in order to submit a client’s application to the insurance company.  In some cases, the insurance company will permit agent contracting paperwork to be submitted along with the first application in that state.

Approved

:
A term referring to an application for life insurance being approved and accepted by the insurance company.  The application can either be approved as applied, which means the health class and premium approved matches the original quote; or; approved other than applied, which means your health class and premium will differ from your original quote.  This is usually due to information attained by the medical examiner and/or underwriter, which places the applicant in a different health class than what was applied for.

Assets

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Anything of value that is owned.  An insurance company will sometimes request you list your total assets and liabilities on the application to help them evaluate, in conjunction with your income, your need for the amount of death benefit applied for.

Assignment

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The signed transfer of the benefits of a policy to another party by a policy owner.  If the insurance company is given due notice of the assignment, the policy benefits will accrue to the person named as assignee.  The company does not guarantee the validity of an assignment.

Attending Physician’s Statement (APS)

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A report the insurance company requests from an applicant’s personal physician when additional information is needed to support medical information disclosed in the application or in the medical examiner’s report.  If there is no significant medical history, at the discretion of the underwriter, an APS might not be required.  Due to physicians’ busy schedules, it sometimes takes quite a while to receive the APS  from a physician and, therefore can increase the time it takes to underwrite your policy.

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