DA.<DT>

See Deposit Administration.

Death Benefit.

The amount stated in a policy contract as payable upon the death of the person whose life is being insured (cesti que vie). See also Principal Sum.

Death Rate.

See Mortality Rate.

Debit.

(1) The amount of premium charged or debited to an agent to be collected. (2) The book of business represented by such premiums. (3) The territory where most of the insureds are located. (4) The total number of individual or home service insureds assigned to a given agent for collection of weekly or monthly premiums and for servicing, commonly referred to as "people in my debit."

Debit Agent.

An agent who works on the debit system.

Debit Life Insurance.

See Industrial Life Insurance.

Debit System.

The system of collecting insurance premiums weekly or monthly by an agent.

Decreasing Term.

A form of Life Insurance that provides a death benefit which declines throughout the term of the contract, reaching zero at the end of the term.

Deferred Premium.

The unpaid and yet undue premiums on Life Insurance, paid on other than an annual premium basis.

Deferred Vesting.

That form of vesting under which rights to vested benefits are acquired by a participant commencing upon a fulfillment of specified requirements, usually, reaching a certain age or number of years of service or membership. See also Vesting.

Deficiency Reserve.

A supplemental reserve that Life insurers are required to show in their balance sheet if the gross premium charged on a class of insureds is less than the net level premium reserve or modified reserve.

Delay Clause.

A contract provision permitting the insurer to defer granting a loan on the sole security of the policy for any other purpose than that of paying premiums on the policy for a stated interval of time, usually six months.

Delayed Payment Clause.

In Life Insurance, a clause deferring payment to the beneficiary for a specified period after the death of the insured with proceeds to be paid to contingent beneficiaries or the estate if the primary beneficiary does not survive the delay. It is used as one method of handling common-disaster situations, such as the death of the insured and the death of the primary beneficiary occurring in the same accident. The clause usually states that the beneficiary has to survive the death of the insured by a certain period of time in order to collect.

Delivered Business.

Contracts issued by an insurer and delivered to an insured but not yet paid for. See also Examined Business, Paid Business and Written Business.

Delivery.

The actual placing of a Life Insurance policy in the hands of an insured.

Dependent Coverage.

Insurance coverage on the head of a family which is extended to his or her dependents, including only the lawful spouse and unmarried children who are not yet employed on a full-time basis. "Children" may be step, foster, and adopted, as well as natural. Certain age restrictions on children usually apply. (LI,H)

Dependent Life Insurance.

A life insurance benefit which is part of a group life insurance contract which provides death protection to the eligible dependents of a covered employee.

Deposit Administration (DA).

A group annuity providing for the accumulation of contributions in an undivided fund out of which annuities are purchased for each covered person in the group when he retires.

Disability Benefit.

The benefit payable under a Disability Income policy or a provision of some other policy, such as a Life Insurance contract. (LI,H)

Disability Pension.

A pension paid to a disabled worker prior to the time of normal retirement.

Dividend Accumulation.

One of the options in a Life Insurance policy which allows the policyholder to leave any premium dividends with the insurer to accumulate at compound interest.

Dividend Additions.

An option whereby the insured can leave dividends with the insurer, and each dividend is used to buy a single premium life insurance policy for whatever amount it will purchase. Also called Paid-Up Additions.

Dividend Option.

Alternative ways in which insureds under participating Life Insurance policies may elect to receive their policyholder dividends.

Double Indemnity.

Payment of twice the basic benefit in the event of loss resulting from specified causes or under specified circumstances. For example, a Life Insurance contract may provide for twice the basic benefit if death is due to accident. Accident policies may provide double indemnity coverage for death due to an elevator accident. See also Multiple Indemnity. (LI,H)

Double Protection.

A form of Life Insurance combining Whole Life and an equivalent amount of Term, with the Term expiring at a stated future date, usually at 65 years of age. For example, an individual may purchase $50,000 worth of Life Insurance protection, $25,000 of it being Term Insurance and the other $25,000 Whole Life. The provision would state that the $25,000 of Term Insurance ceases when the insured reaches age 65.

Educational Fund.

One of the uses of Life Insurance. It is designed to provide money for a child's education should the breadwinner of the family die.

Eligibility Requirements.

Requirements imposed for eligibility for coverage, usually in a group insurance or pension plan. (LI,H)

Emergency Fund.

One of the uses of Life Insurance which provides money for the emergency expenses of a deceased's family prior to the final settlement of the estate.

Employee Benefit Program.

Benefits offered an employee at his place of work by his employer, covering such contingencies as medical expenses, disability, retirement, and death, usually paid for wholly or in part by the employer. These benefits are usually insured. (LI,H)

Employee Certificate of Insurance.

The employee's evidence of participation in a group insurance plan, consisting of a brief summary of plan benefits. The employee is provided with a certificate of insurance rather than the actual insurance policy. (LI,H)

Employee Retirement Income Security Act (ERISA).

This act prescribes federal standards for funding, participation, vesting, termination, disclosure, fiduciary responsibility, and tax treatment of private pension plans.

Endorsement Split Dollar.

A split dollar plan in which the employer owns and controls a life policy on the life of an employee. The employee's rights to certain policy benefits are protected by an employer endorsement.

Endowment Insurance.

A form of Life Insurance where the face amount is payable to the insured at the end of the contract period or to a beneficiary if the insured dies before that. An example would be an insured purchasing an endowment payable at age 65: If he reaches that age, the proceeds would be payable to him. If he dies prior to that age, the proceeds would

be payable to the designated beneficiary as a Life Insurance benefit.

Entire Contract Clause.

A provision in an insurance contract stating that the entire agreement between the insured and the insurer is contained in the contract, including the application if it is attached, declarations, insuring agreements, exclusions, conditions and endorsements. (LI,H)

Entity Agreement.

A buy-sell agreement usually used with a partnership in which the partnership agrees to purchase the interest of a deceased or disabled partner.

Evidence of Insurability.

The statement of information needed for the underwriting of an insurance policy. (LI,H)

Examination.

The medical examination of an applicant for Life or Health insurance. (LI,H)

Examined Business.

Coverage written on an applicant who has been examined and who has signed the application but has paid no premium. (LI,H)

Examiner.

A physician appointed by the medical director of a Life or Health insurer to examine applicants. (LI,H)

Excepted Period.

See Probationary Period. (LI,H)

Excess Interest.

Interest credited to an insured's contract in excess of the amount guaranteed by the terms of the contract.

Expectation of Life.

The average number of years of life remaining for persons of a given age according to a particular mortality table. Also called life expectancy.

Expected Mortality.

The expected incidence of death within a given group during a given period of time as shown on a mortality table.

Experienced Mortality.

The mortality that actually occurs to a group of inureds of a given insurance company in contrast to expected mortality. (See Expected Mortality.)

Experienced Mortality or Morbidity.

The actual mortality or morbidity experienced in a group of insureds as compared to the expected mortality or morbidity. (LI,H)

Expiry.

The termination of a Term Life Insurance policy at the end of its period of coverage.

Extended Death Benefit.

A group policy provision which will pay the life benefit when (1) the insured is totally and continuously disabled at the time the policyholder stops paying premium until the insured's death, and (2) if the insured dies within one year of the date the premium payments stopped, or prior to age 65.

Extended Term Insurance.

A provision in most policies which provides the option of continuing the existing amount of insurance as Term Insurance for as long a period of time as the contract's cash value will purchase. This is one of the nonforfeiture options available to the insured in case a premium is not paid within the grace period. See also Nonforfeiture Values.

Extra Percentage Tables.

Mortality or morbidity tables showing the extra premium for certain impaired health conditions. Usually this premium is shown as a percentage of the standard premium. A form of substandard rating. (LI,H)

FEGLI.

Federal Employees Group Life Insurance.

FLMI.

Fellow of the Life Management Institute. See Life Office Management Association.

Face.

The first page of a Life Insurance policy.

Facility-of-Payment Clause.

A contract provision found in Industrial Life policies which permits the insurer to pay a portion of the proceeds of the policy to any relative or person who has possession of the policy and who appears equitably entitled to such payment. This provision is designed to facilitate payment when some doubt may exist as to who the beneficiary is and to save legal expenses in the settling of an estate.

Family Income Policy.

A policy that pays an income up to some future date designated in the policy to the beneficiary after the death of the insured. The period of payment is measured from the date of the inception of the contract, and at the end of the income period the face amount of the policy is paid to the beneficiary. If the insured lives beyond the income period, only the face amount is payable in the event of his death.

Family Maintenance Policy.

A policy that pays an income to the beneficiary starting after the death of the insured and continuing for a stated period of time. At the end of the income period, the face amount of the policy is paid to the beneficiary.

Family Policy.

A contract that provides insurance within a single policy for a father, mother, and born and unborn children. The father's coverage is typically Whole Life Insurance, with the mother and children insured for smaller amounts of Term Insurance.

Fellow, Life Management Institute (FLMI).

See Life Office Management Association.

Financed Premium.

The payment of insurance premiums with funds borrowed outside the contract itself.

Fixed-Amount Installments.

A settlement option under which fixed, periodic benefits payments are made until the principal and interest are exhausted.

Fixed Benefit.

A benefit, the dollar amount of which does not vary.

Fixed-Period Installments.

A settlement option under which the proceeds are guaranteed to be paid in equal installments for a specified period of time.

Flexible Premium Adjustable Life Insurance Policy.

This is another term used to describe Universal Life type policies.

Flexible Premium Policy.

A life insurance policy under which the policyholder may vary the amount or timing of premium payments.

Flexible Premium Variable Life.

A whole life contract and a security which features flexible premium payments, nonguaranteed cash values and either a minimum guaranteed death benefit or no guaranteed death benefit. Policy values are dependent on the performance of a separate account.

Franchise Insurance.

A plan for covering groups of persons with individual policies having uniform provisions, although they may differ in benefits. Individual contracts are issued to each person with individual underwriting. It is usually applied to groups too small to qualify for true group coverage, and the solicitation of cases usually takes place among an employer's work force with his consent. In Life Insurance, it is sometimes called Wholesale Insurance. Contrast with True Group Insurance. (LI,H)

Fraternal Insurance.

Insurance offered a special group of people, namely, members of a lodge or a fraternal order. Such insurance may be written on an assessment basis or on a legal reserve basis. (LI,H)

Free Look.

A period of time (usually 10, 20 or 30 days) during which a policyholder may examine a newly issued individual policy of life or health insurance, and surrender it in exchange for a full refund of premium if not satisfied for any reason. (LI,H)

Full Preliminary Term Reserve Valuation.

A method for determining reserves on Life Insurance contracts, whereby no reserve is required for the first year of a contract's life, with an appropriate adjustment in subsequent years' reserves to make up the difference. This method of valuation makes it possible for an insured to have more funds available for the high first year expenses incurred in the writing of Life Insurance.

Fully Paid Policy.

A limited payment Life Insurance contract on which all required payments have been made. For instance, a 20-Pay Life policy would be fully paid after the insured has paid premiums for 20 years.

GAMC.

See General Agents and Managers Conference. (LI,H)

General Agency System.

The marketing of Life Insurance through general agents.

General Agent (GA).

An individual appointed by a Life or Health insurer to administer its business in a given territory. He is responsible for building his own agency and service force and is compensated on a commission basis, although he possibly has some additional expense allowances. (LI,H)

General Agents and Managers Conference.

An association of insurance general agents and managers affiliated with the National Association of Life Underwriters. (LI,H)

Grace Period.

A prescribed period, usually 30 to 31 days from the premium due date, during which an insurance contract is in force and the premium may be paid. (LI,H)

Graded Death Benefits.

A provision in Life Insurance contracts for death benefits that, in the early years of the contract, are less than the face amount of the policy but that increase with the passage of time. Most commonly found in juvenile policies issued at or near age zero.

Graded Premium.

A modified Life Insurance policy for which the initial premium is low, and then increases in steps over a period of time (usually five years), after which it becomes a level premium.

Graduated Life Table.

A mortality table in which the experience has been smoothed out by formula.

Gross Premium.

The premium for participating Life Insurance. If an insured elects to use his dividends to pay premiums, this becomes the net premium when dividends are subtracted from it. Contrast with Net Premium.

Group Certificate.

The document provided to each member of a group plan. It shows the benefits provided under the group contract issued to the employer or other insured. (LI,H)

Group Contract.

A contract of insurance made with an employer or other entity that covers a group of persons identified by reference to their relationship to the entity buying the contract. The group contractual arrangement is generally used to cover employees of a common employer, members of a trade association or trusteeship, members of a welfare or employee benefit association, members of a labor union, or members of a professional or other association not formed only for the purpose of obtaining insurance. (LI,H)

Group Credit Insurance.

Insurance on the Life or Health of debtors of a creditor, payable for reduction or extinguishment of the debts in case of the disability or death of the debtor. (LI,H)

Group Life Insurance.

Life Insurance provided for members of a group. It is most often issued to a group of employees but may be issued to any group provided it is not formed for the purpose of buying insurance. The cost is lower than for individual policies because administrative expenses per life are decreased, there are certain tax advantages, and measures taken against adverse selection are effective. See also Franchise Insurance, True Group, and the first definition of Master Policy.

Group Permanent Life Insurance.

A form of Life Insurance under which members of a group are provided one of several plans of Permanent Life Insurance on a group basis instead of the more usual plan of Term Life Insurance.

Guaranteed Insurability.

An option in Life and Health Insurance contracts that permits the insured to buy additional prescribed amounts of insurance at prescribed future time intervals without evidence of insurability. (LI,H)

Guaranteed Renewable.

A contract that the insured has the right to continue in force by the timely payment of premiums for a substantial period of time as set forth in the contract. During that period of time, the insurer has no right to make any change in any provision of the contract other than a change in the premium rate for all insureds in the same class. Contrast with Noncancellable, from which Guaranteed Renewable should be distinguished. (LI,H)

Guertin Laws.

The valuation and nonforfeiture laws which have been standard in all states since 1947, named for Alfred Guertin, then actuary of the New Jersey Insurance Department and head of the NAIC committee which developed the model bill for these laws. See also Nonforfeiture Values.

Guideline Premium.

A Universal Life insurance term used to describe the maximum premium that may be paid while still qualifying as life insurance under the federal Internal Revenue Code.

HR-10 Plan.

See Keogh Act Plan.

Home Office Life Underwriters Association.

An organization offering a course of study for home office Life Underwriters.

Home Service Industrial Insurance.

See Industrial Life Insurance.

Home Service Life Insurance.

See Industrial Life Insurance.

Home Service Ordinary.

A monthly premium policy of Ordinary Life Insurance, not Industrial, with the premiums collected according to the debit system.

Human Life Value.

A method of determining Life Insurance needs by considering a person's income, expenses, remaining years of earning capacity, and depreciation in the value of the dollar over time.

Immediate Annuity.

An annuity that commences payment to the annuitant at the end of the first prescribed payment period. If an insured buys an immediate annuity with monthly payments, he will start receiving benefits at the end of the first month after the purchase.

Immediate Vesting.

A term used in pension or retirement plans. With immediate vesting an employee's right to benefits begin as soon as he enters the plan. See also Vesting.

Impaired Risk.

A risk, or subject of insurance, with insurable qualifications below the standard of risks on which the premium for the coverage was based. For example, a Life Insurance prospect with heart disease would be an impaired risk. See Substandard Risk. Contrast with Standard Risk. (LI,H)

Incidents of Ownership.

Various rights that may be exercised under the policy contract by the policy owner. Some of the incidents of ownership would be: (1) the right to cash in the policy, (2) to receive a loan on the cash value of the policy, and (3) to change the beneficiary.

Income Policy.

A Life Insurance contract which provides income on a monthly basis, as opposed to a policy which pays proceeds in a lump sum.

Incontestable Clause.

A clause in a policy providing that after a policy has been in effect for a given length of time (two or three years), the insurer shall not be able to contest the statements contained in the application. A Health Insurance provision also states that after that time no claim shall be denied or reduced on the grounds that a condition not excluded by name at the time of issue existed prior to the effective date. In Life policies, if an insured lied as to the condition of his health at the time the policy was taken out, that lie could not be used to contest payment under the policy if death occurred after the time limit stated in the incontestable clause. (LI,H)

Individual Life Insurance.

(1) That type of Life Insurance which covers in one contract usually only one insured. (2) The term used to distinguish this type of Life Insurance from Group Life Insurance.

Industrial Life Insurance.

One of the major classes of insurance. It is generally sold in amounts of less than $1,000 by agents who service insureds on debits. The premiums are collected weekly or monthly at the address of the insured. See also Debit.

In-Force Business.

Life or Health Insurance for which premiums are being paid or for which premiums have been fully paid. The term refers to the total face amount of a Life insurer's portfolio of business. In Health Insurance it refers to the total premium volume of an insurer's portfolio of business. (LI,H)

Installment Settlement.

Payment of the proceeds of a Life Insurance policy or its cash value in installments rather than in a lump sum. The term refers to any one of the options in a Life Insurance policy that has this result.

Installments Certain.

A settlement option under which the proceeds are guaranteed to be paid in equal installments for a specified period of time.

Institute of Life Insurance.

Formerly an agency of the Life Insurance business responsible for building the image of Life Insurance through a variety of programs. It is now a division of the American Council of Life Insurance.

Insurance In Force.

The face amounts of contracts still to be paid out to insureds.

Interest.

In the calculation of premium, it is the rate of return on the company's investment of premium dollars over the lifetime of the policy. Insurance company investment experience will affect life insurance cost.

Interest Adjusted Cost.

A method of determining the cost of Life Insurance that takes into account the interest that might have been earned on premium money if it had been invested rather than put into premiums.

Interest Sensitive Provision.

Provisions in variable and flexible premium policies which guarantee certain interest earnings plus an additional interest percentage should the current interest rate rise above a specified percentage.

Irrevocable Beneficiary.

A beneficiary that cannot be changed without his consent.

Issued Business.

Contracts actually written by an insurer and paid for but not yet delivered to or accepted by the insured.

Joint and Survivorship Annuity.

An annuity which is payable to the named annuitants during the period of their joint lives which will continue to the survivor when the first annuitant dies.

Joint Insurance.

Insurance written on two or more persons with benefits usually payable only at the first death.

Joint Life and Survivorship Annuity.

A contract which provides income to two or more people and continues in force as long as any one of them survives.

Joint Life Annuity.

This policy pays a benefit which continues throughout the joint lifetime of two people but terminates at the first death.

Joint Life Insurance.

See Joint Insurance.

Jumping Juvenile.

A popular name for a Life Insurance contract written on the life of a child, usually in units of $1,000. When the child reaches a prescribed age, generally 21, the face of the policy is increased automatically without the imposition of either an additional premium charge or a medical examination. Hence the term "jumping" juvenile.

Juvenile Insurance.

Life insurance written on a child.

Keogh Act (HR-10) Plan.

A plan under the Self-Employed Individual's Tax Retirement Act which permits a self-employed individual to establish a formal retirement plan including himself and to obtain tax advantages similar to those available in qualified corporate pension plans.

Key Employee Insurance.

(1) Insurance on the life or health of a key employee, the loss of whose services would cause an employer financial loss. The policy is owned by and payble to the employer. (2) In Health Insurance the term is also used to designate Salary Continuation Insurance or a medical benefit plan payable to the key employee himself, with the employer paying all or part of the premium. (LI,H)

Key Person (Key Employee) Insurance Policy.

An insurance policy on the life of a key employee whose death would cause the employer financial loss, owned by and payable to the employer. In health insurance, the term Key Employee A&H policy is also used to designate salary continuation insurance payable to a key employee or to a medical benefits plan, payable to that employee paying all or part of the premium.

LIAA.

See Life Insurance Association of America.

LIAMA.

See Life Insurance Agency Management Association. )

LIMRA.

See Life Insurance Marketing and Research Association. )

LOMA.

See Life Office Management Association. )

LUPAC.

See Life Underwriting Political Action Committee. )

LUTC.

See Life Underwriting Training Council. )

Lapse Ratio.

The ratio of the number of Life Insurance contracts lapsed within a given period to the number in force at the beginning of that period.

Ledger Cost.

The net cost of a Life Insurance contract which is found by subtracting the cash value of the contract at the end of a given year from the premiums paid, less all dividends.

Legal Reserve Life Insurance Company.

A Life insurer that maintains the reserves required by the jurisdiction within which it operates.

Level Death Benefit Option.

Under Universal Life insurance, the level death benefit option provides the greater of (1) the face amount of the policy at the time of death, or (2) a stipulated percentage of the accumulation value.

Level Premium Insurance.

That form if insurance for which the premium remains the same throughout the life of the contract. Most Whole Life Insurance is paid for in this way. The amount of a level premium is higher than needed for the protection afforded in the early years of the contract but less than needed for protection in the later years. It is a method of leveling off the cost of insurance so as not to have it increase each year until it becomes inaffordable. See also Net Level Premium.

Level Term Insurance.

A type of term policy where the face value remains the same from the effective date until the expiration date. See also Term Insurance.

Lien Plan.

(1) A plan for issuing coverage on substandard risks under which a standard premium is paid but less than the full face amount of the policy is payable if death occurs within a certain period of years. It is rarely used and is even illegal in some states. (2) A plan under which an impairment of the insurer's assets if offset by pro rata liens against policies to be deducted from the face amount when paid as a claim.

Life Conservation.

The administration of efforts to preserve human life through research, legislation, and appeals to society.

Life Expectancy.

The average number of years remaining for a person of a given age to live as shown on the mortality or annuity table used as a reference.

Life Expectancy Term Insurance.

A form of Term Life Insurance that provides protection for a person's "expectation of life." This becomes the term of the policy, as opposed to the ordinary Term policies which are for a given number of years or to a stated age, such as 65.

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 (Generic).

A contractual system of risk sharing under which contributions are accumulated and redistributed to meet the economic consequences of the uncertain duration of life.

Life Insurance (Narrow).

An agreement that guarantees the payment of a stated amount of monetary benefits upon the death of the insured, or under other circumstances specified in the contract, such as total disability.

Life Insurance Agency Management Association (LIAMA).

An organization that, through research, seeks solutions to the problems of administering the agency force of a Life insurer.

Life Insurance Association of America (LIAA).

Formerly an organization that served as the legislative relations arm of a large segment of the Life Insurance business. Now a part of the American Council of Life Insurance.

Life Insurance Marketing and Research Association (LIMRA).

An organization that, through research, seeks solutions to the problems of administering the agency costs of a Life insurer.

Life Insurance, Ordinary.

See Ordinary Life Insurance.

Life Insurance, Straight.

See Ordinary Life Insurance.

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.

Life Insurance, Whole Life.

See Whole Life Insurance.

Life Insurers Conference.

An organization that provides for exchange of information on management problems among the member insurers.

Life Office Management Association (LOMA).

An organization serving a large proportion of the Life Insurance business by providing educational programs relating to administrative and technical procedures within the industry. It confers the designation of Fellow, Life Management Institute (FLMI) upon those who complete a prescribed course of study.

Life Paid Up At Age.

A form of limited payment Life Insurance that provides protection for the whole of life but with payment of premiums to stop at a particular age, thus paying up the policy. A common form would be Life Paid Up At Age 65.

Life Underwriter.

Usually, a Life Insurance agent. It can be more narrowly defined as a risk appraiser. See also Risk Appraiser.

Life Underwriter Political Action Committee (LUPAC).

A lobbying organization established by the National Association of Life Underwriters.

Life Underwriting Training Council (LUTC).

An organization that prepares and administers training programs for Life Insurance agents.

Lifetime Policy.

(1) A policy guaranteed renewable or noncancellable to age 65 or some later date. (2) A policy paying disability benefits for life.

Limited Payment Life.

A Life Insurance contract providing protection for the whole of life with premiums paid for an indicated number of years. See also Life Paid Up At Age.

Limited Policies.

(1) Health Insurance contracts, such as those offered by newspapers to their customers, with low limits and somewhat restricted forms. (2) Policies paid only upon the occurrence of certain contingencies, such as cancer, in contrast to policies covering all contingencies other than those excluded. (LI,H)

Loan Value.

A term which refers to the amount of money an insured can borrow using the cash value of his Life Insurance policy as security.

Lump Sum.

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

Mature.

In insurance, a policy matures when its face amount becomes payable. This could occur upon the death of the insured, or in some forms of insurance such as endowments, as of a specified date.

Maturity Date.

The date at which the face amount of a Life Insurance policy becomes payable by reason of either death or endowment.

Maturity Value.

The amount payable to a living insured at the end of an endowment period or to the owner of a Whole Life policy if he lives past a certain age.

McClintock Table.

An American morality experience table developed in 1896 by McClinton McClintock from the experience of 15 American insurers and influenced by foreign underwriting experience.

Medical Examination.

The examination of an applicant for insurance or a claimant by a physician who acts in the capacity of the insurer's agent. (LI,H)

Medical Examiner.

The physician who examines an applicant or claimant on behalf of the insurer and as an agent of the insurer. (LI,H)

Medical Information Bureau (MIB).

A data pool service that stores coded information on the health histories of persons who have applied for insurance from subscribing companies in the past. Most Life and Health insurers subscribe to this bureau to get more complete underwriting information. (LI,H)

Million Dollar Round Table (MDRT).

An association of Life Insurance agents who qualify by selling $1 million worth or more of Life Insurance coverage. The policies must meet certain qualification standards, and applicants must be members of the National Association of Life Underwriters.

Minimum Deposit Policy.

A Cash Value Life Insurance policy having a first-year loan value that is available to borrow against immediately upon payment of the first-year premium. This is not the case with most Life Insurance policies, the main reason being high first-year expenses.

Misstatement of Age.

(1) Giving the wrong age for oneself on an application for Life and Health Insurance or for a beneficiary who is to receive benefits on a basis involving his life contingency. (2) A provision in most Life and Health policies setting forth the action to be taken if a misstatement of age is discovered after the policy is issued. This is one of the uniform provisions for Individual Health Insurance policies. (LI,H)

Modified.

This term has several meanings, only a few of which will be mentioned here. (1) Under a modified coinsurance provision in Life Reinsurance, the ceding insurer retains and maintains the entire reserve, with the annual increase in reserve being transferred to the ceding insurer by the reinsurer at the end of the year. (2) Under Preliminary Term Insurance, a modified reserving system permits at least part, if not all, of the first year's net premium on a Life Insurance policy to be used to meet first-year acquisition costs and claim expenses and requires that part of the renewal loading be added to the policy reserve accumulation. (3) Any premium that is altered from the regular premium for similar Life policies, such as the premium for a Modified Life policy.

Modified Life Policy.

An Ordinary Life contract under which the premiums are modified so as to be lower than normal for the first three to five years and higher than normal after that. A special case is a level Term policy, under which no part of the premium goes towards savings, that is automatically converted to a Whole Life policy at a designated time.

Monthly Administration Fee.

In Universal Life insurance, an administrative fee is charged each month to cover administrative expenses.

Monthly Debit Ordinary (MDO).

Ordinary Insurance the premiums for which are collected at the door monthly in the same fashion as Industrial policies.

Monthly Debit Ordinary Status Card.

An IBM card showing the status of MDO business in force and lapsed.

Mortality, Experienced.

See Experienced Mortality.

Mortality Rate.

The number of deaths in a group of people, usually expressed as deaths per thousand. It can be the rate for the total population, called the crude mortality rate, or it can be refined by factors such as age groupings or causes of deaths. Same as Death Rate.

Mortality Savings.

The remainder, if any, after subtracting experienced mortality from expected mortality.

Mortality Table.

A table showing the incidence of death at specified ages. It shows the number of persons in each age group that die, expressed in terms of deaths per thousand, and based on the deaths in a population of a million persons.

Mortgage Insurance.

In Life and Health Insurance, a policy covering a mortgagor from which the benefits are intended (1) to pay off the balance due on a mortgage upon the death of the insured, or (2) to meet the payments on a mortgage as they fall due in the case of his death or disability. Also called Mortgage Redemption Insurance. (LI,H)

Mortgage Redemption Insurance.

(1) See Mortgage Insurance. (2) A monthly reducing Term policy used for Mortgage Insurance. (LI,H)

Multiple Indemnity.

A provision that some or all of the benefits under a policy will be increased by a stated multiple, such as 100% or 200%, in the event that a peril occurs in a specified way, e.g., double indemnity on Life Insurance for accidental death.

Multiple Protection Insurance.

A combination of Term and Whole Life Insurance that pays some multiple of the face during the period of the Term policy, becoming a regular Whole Life policy after the Term policy expires. The multiple protection period is thus the period during which both the Term and the Whole Life coverages are in effect.

NALC.

See National Association of Life Companies. (LI,H)

NSLI.

See National Service Life Insurance.

National Association of Life Companies (NALC).

A voluntary association of smaller and newer companies for exchange of information and ideas. (LI,H)

National Association of Life Underwriters (NALU).

An association of Life Insurance agents, the activities of which center on the welfare and education of agents and legislation affecting agents. (LI,H)

National Fraternal Congress of America.

A federation of fraternal benefit societies. (LI,H)

National Service Life Insurance (NSLI).

Life Insurance made available by the federal government for members of the United States armed forces from 1940 to 1951.

Natural Premium.

The pure mortality cost of Life Insurance for one year at any given age. See also Pure Premium.

Net Amount At Risk.

A term which refers to the differences between the face amount of a policy and the reserve or cash value which has been built up under that policy.

Net Increase.

The increase in the total amount of business an insurer has to force over a given period of time. It is figured as the total of new policies issued plus those renewed less policies lapsed and cancelled.

Net Level Premium.

The pure mortality cost of a Life Insurance policy from its inception to its maturity date, divided by the number of years the policy is to be in force. See also Level Premium Insurance.

Net Level Premium Reserve.

The reserve needed by an insurer to cover net level policies which are in their later years. Loosely speaking, the level premium system of paying for a long-term Life or Health policy involves overpayment in the early years and underpayment in the later years. (LI,H)

Net Rate.

(1) See the third definition of Net Premium for the definition applicable to participating Life Insurance policies. (2) In a nonparticipating policy, the rate book rate.

Noncontributory.

A plan or program of insurance, usually group, for which the employer pays the entire premium and the employee contributes no part of the premium. (LI,H)

Nonforfeiture Values.

Those values in a Life Insurance policy that by law the policy owner cannot forfeit even if he ceases to pay the premiums. These benefits are the cash surrender value, the loan value, the paid-up insurance value, and the extended term insurance value. The policy owner may choose one of these nonforfeiture options, but even if he fails to do so, the one specified in the contract for such a case automatically goes into effect.

Nonmedical (Non-Med).

A contract of Life or Health Insurance underwritten on the basis of an insured's statement of his health with no medical examination required. (LI,H)

Numerical Rating.

An underwriting method of determining the extra rate to be charged for a substandard insured. "Standard" is rated 100. Various impairments are assigned various numerical values. The sum of 100 plus the values of the ratings of the impairments indicates the table to use in determining the rate of the policy.

Occupational Hazard.

A condition in an occupation that increases the peril of accident, sickness, or death. (LI,H,WC)

Old Line.

A term without a precise meaning but generally applied to nonfraternal insurers operating on a legal reserve basis. The origin of the term is in doubt but it seems to have come into use at the time of the competition between the "new" fraternal insurers and the commercial insurers to indicate the fact that the fraternals were "newcomers."

Open Debit.

A Life and Health Insurance debit (territory) currently without an agent. (LI,H)

Option.

A choice of methods of receiving policy dividends, nonforfeiture values, death benefits, or cash values.

Optional Modes of Settlement.

The different options from which the beneficiary can choose to receive the proceeds from a Life Insurance Policy.

Ordinary Agency.

A Life Insurance agency handling only Ordinary Life. See also Ordinary Life Insurance.

Ordinary Life Policy.

A Whole Life policy for which premiums are paid continuously as long as the insured lives. Same as Straight Life Policy. See also Whole Life Insurance.

Ordinary Register.

The record book in a combination insurer or agency containing data on the ordinary policies in an agent's account.

Ownership.

All rights, benefits and privileges under life insurance policies are controlled by their owners. Policy owners may or may not be the insureds. Ownership may be assigned or transferred by written request of the current owner.

Ownership Provision.

A provision that a policy may be owned by someone other than the insured.

PPO.

See Preferred Provider Organization. (LI,H)

P.S. 58 Charges.

The cost of one-year term insurance used in the calculation of economic benefit for a stockholder under a split dollar plan.

Paid Business.

Insurance for which the application has been signed, the medical examination completed, and the settlement for the premium tendered. (LI,H)

Paid-Up Additions (or "Adds").

See Dividend Additions.

Paid-Up Insurance.

Insurance on which all premiums are paid but which has not yet matured by either death or endowment. An example would be a Limited Payment Life policy for which the premium-paying period is over.

Participant.

An employee or former employee who is eligible to receive benefits from an employee benefit plan or whose beneficiaries may be eligible to receive benefits from the plan. (LI,H,PE)

Partnership Insurance.

Life or Health Insurance sold to a partnership, usually for guaranteeing business continuity in case of the death or disability of one of the partners. For instance, two partners might buy Life Insurance on each other so that in the event of one partner's death, the other can use the insurance proceeds to purchase his share of the business from his heirs. (LI,H)

Past Service Benefit.

A term used in Pension or Retirement Insurance policies to refer to credit given an employee for the amount of time the person was employed prior to the effective date of the retirement plan. Example: An insured starts a pension plan on January 1, 1980. It states that all eligible employees will be given credit for their length of service or employment prior to that date.

Pay.

An abbreviation for payment as in "20-Pay Life policy."

Pay-As-You-Go.

See Current Disbursement.

Payor Benefit.

A rider or provision often found in juvenile policies under which premiums are waived if the person paying the premium, usually one of the parents, becomes disabled or dies while the child is still a minor.

Per Capita.

Literally "by heads." Distribution among survivors by persons on a share-and-share-alike basis. The term is often used in beneficiary designations. Contrast with Per Stirpes.

Per Stirpes.

Literally "by branches." Distribution of property between or among two or more beneficiaries with the provision that if one dies before the insured, his heirs shall have his full share distributed among them. Contrast with Per Capita.

Permanent Life Insurance.

A term loosely applied to Life Insurance policy forms other than Group and Term, usually Cash Value Life Insurance, such as endowments and Whole or Ordinary Life policies.

Persistency.

The staying quality of insurance policies, i.e., the renewal quality. High persistency means that a high percentage of policies stay in force to the end of the period coverage, while low persistency means that a high percentage of policies lapse for nonpayment of premiums.

Policy Fee.

(1) A one-time charge added to the first premium to help defray acquisition costs, now illegal in many states. (2) A flat, per policy charge that does not change with the size of the policy and thus serves as a form of quantity discount. Various insurers call it by other names, such as quantity discount factor and quantity adjustment fee.

Policy Loan.

A loan made by an insurer to a policy owner of a part or all of the cash value of the policy assigned as security for the loan. This is one of the usual nonforfeiture values.

Policy Proceeds.

The amount actually paid on a life insurance policy at death or when the insured receives payment at surrender or maturity. It includes any dividends left on deposit and the value of any additional insurance purchased with dividends; and it excludes any loans not repaid, plus unpaid interest on those loans.

Policy Reserve.

A reserve which exists because of the concept that each policy has a pro rata share of the total reserve established for all policies.

Postdated Check Plan.

A premium-paying arrangement under which the policy owner gives the insured a series of checks, each dated ahead of the date on which premiums fall due for a year or more. The insurer then presents each check on its date.

Preauthorization Check Plan.

A premium-paying arrangement by which the policy owner authorizes the insurer to draft money from his or her bank account for the payments. This is usually done on a monthly basis.

Preferred Provider Organization (PPO).

An organization of hospitals and physicans who provide, for a set fee, services to insurance company clients. These providers are listed as preferred and the insured may select from any number of hospitals and physicians without being limited as with an HMO. Coverage is 100%, with a minimal copayment for each office visit or hospital stay. Contrast with Health Maintenance Organization. (LI,H)

Preliminary Term.

A reserve system in Life Insurance under which the entire first-year premium is used for clean and acquisition costs. The effect is to reduce the first year's premium, making it more attractive to the prospective buyer.

Premium Load.

A Universal Life term, also called a "front-end load," meaning the percentage of premium deducted from each premium payment to help cover expenses. Some policies provide for a "no load" feature.

Premium Receipt Book.

The policy owner's record of premium paid, usually used for a Weekly Payment or Monthly Debit Ordinary policy.

Premium Refund.

A special provision which allows a beneficiary to collect the face amount of a policy plus all the premiums that have been paid.

Primary Beneficiary.

The beneficiary named as first to receive proceeds or benefits from a policy when they become due.

Principal Sum.

The amount payable in one sum in the event of accidental death or certain accidental dismemberments. When a contract provides benefits for both accidental death and accidental dismemberment, each dismemberment benefit is an amount equal to the principal sum or some fraction thereof. Examples would be half the principal sum for loss of one arm, half the principal sum for the loss of one leg, etc. (LI,H)

Proceeds.

The amount payable by a policy, usually in reference to the face amount of a Life Insurance policy, payable at the death of the insured.

Prospective Reserve.

A Life or Health Insurance reserve which it is estimated will be sufficient to pay future claims when probable future premiums, interest, and survivorship benefits are added to it. (LI,H)

Pure Endowment.

An endowment payable if the designated person is alive at the end of the endowment period but not payable if the person is not alive at that time. This type of policy is not often used today.

Pure Mortality Cost.

See Mortality Cost.

"Q" Schedule.

A schedule of the business expenses of a Life insurer required by the New York State Code to be filed to determine compliance with the state's limitation on total expenses. This limitation has the effect of setting a ceiling on commissions.

Quadruple Indemnity.

A multiple indemnity form similar to double indemnity and triple indemnity. See also Multiple Indemnity.

Quantity Discount.

A premium discount given for the purchase of a policy with a larger face amount. See also Policy Fee.

Rated.

Coverages issued at a higher rate than standard because of impairment of the insured. Usually used as an adjective in such expressions as "rated risk," "rated policy," and "rated up."

Rated Up.

See Rated.

Readjustment Income.

(1) The income needed after the death or disability of a wage earner to allow the family time to adjust to a new, lower standard of spending. (2) The insurance coverage that provides readjustment income.

Recurrent Disability.

Disability resulting from the same or a related cause as a prior disability. (LI,H)

Reduced Paid-Up Insurance.

A form of insurance available as a nonforfeiture option. It provides that the cash value of the policy be used as a single premium to purchase paid-up insurance in whatever amount the cash value will provide, which will be less than the original face amount in most cases. See also Nonforfeiture values.

Register.

A record of all policies charged to a debit account.

Renewable Term.

Term Insurance that may be renewed for another term without evidence of insurability.

Renewal.

The automatic reestablishment of in-force status effected by the payment of another premium. (LI,H)

Retirement Annuity.

A form of annuity contract that is entered into before a selected retirement age with the consideration paid in installments until that age is reached. It is a form of deferred annuity.

Retirement Income Policy.

An adaptation of an endowment at a selected retirement age in which the annuity benefit is a percentage of the face amount of Life Insurance in force prior to retirement age, usually 10%; e.g., for each $1000 of insurance a $10 per month annuity installment is payable. Under this type of policy, the cash value will exceed the face amount in the later policy years, and if death occurs before the selected retirement age, the death benefit would be the face amount or the cash value, whichever is greater.

Retroactive Conversion.

The conversion of a Term Life Insurance policy to a Cash Value form as of the original date of issue of the Term policy, rather than as of the time the conversion is made. In other words, the Cash Value policy will have already attained the age of the former Term policy.

Return of Cash Value.

A provision or rider on a Life Insurance policy that states that if death occurs during a certain period of years (often 20), the policy will pay an amount, in addition to the face amount, that is equal to the cash value of the policy as of the date of death.This is really a form of Increasing Term Insurance and is used as a sales tool.

Return of Premium.

A rider on a Life Insurance policy providing that, in the event of the death of the insured within a specified period of time, the policy will pay, in addition to the face amount, an amount equal to the sum of all premiums paid to date. This is a form of Increasing Term Insurance and is used as a sales tool.

Revocable Beneficiary.

The beneficiary in a Life Insurance policy in which the owner reserves the right to revoke or change the beneficiary.

Risk Appraiser.

An employee of a Life insurer who screens the applications submitted. He may accept an applicant, reject him, or propose an alternative policy or premium.

Risk Premium Insurance.

See Yearly Renewable Term.

SEGLI.

Service Employees Group Life Insurance, which is issued to members of the armed forces while they are in the service. After separation it is convertible to individual policies from certain private insurers.

Salary Savings Insurance (Deductions or Allotment).

Insurance issued to an individual employee whose employer agrees to deduct the premiums from his paychecks and submit them to the insurer.

Sales Representatives.

See Special Agent.

Savings Bank Life Insurance.

Life Insurance sold by mutual savings banks. Allowed only in a few states, such as New York, Connecticut, and Massachusetts.

Schedule "Q."

See "Q" Schedule.

Scheduled Premium Variable Life Insurance.

A whole life policy which features a fixed, level premium and a minimum guaranteed face amount. The performance of the policy is dependent on the separate account.

Secondary Beneficiary.

The second person named to receive benefits upon the death of an insured if the first-named beneficiary is not alive or does not collect all the benefits before his or her own death. See also Contingent Beneficiary.

Self-Funded Plan.

Plan of insurance where an employer, which has fairly predictable claim costs, pays the claims rather than an insurance company. See also Administrative Services Only. (LI,H)

Settlement Options.

The various methods for the payment of the proceeds or values of a Life Insurance policy that may be selected in lieu of a lump sum.

Single Premium Policy.

A Life Insurance policy paid for in one single premium in advance rather than in annual premiums over a period of time.

Society of Actuaries (SA).

An association of actuaries organized in 1948 as the successor to the Actuarial Society of America and the American Institute of Actuaries. It grants the designation Associate of the Society of Actuaries upon completion of five examinations and Fellow of the Society of Actuaries upon the completion of five additional examinations.

Sole Proprietorship Insurance.

Life and Health Insurance that handles the business continuity problems peculiar to a sole proprietorship. Such insurance, for instance, could be used to enable the heirs of the sole proprietor to bring the value of the business back to the level where it was prior to the death of the owner. (LI,H)

Spendthrift Clause.

A clause in most Life Insurance policies which prevents the creditors of a beneficiary from claiming any of the benefits payable to him before he actually receives the money. The purpose of this clause is to keep those to whom he is in debt from taking legal action to require the insurer to pay the proceeds directly to them.

Split Dollar Coverage.

An arrangement under which an employer pays that part of the premium that equals the annual increase in the cash value of a policy, while the employee pays the rest. Under assignment upon the death of the employee, the employer recovers the total of its payments from the proceeds of the policy, with the remainder going to the employee's beneficiary.

Split Dollar Plan.

A method of purchasing life insurance whereby the employer and employee jointly purchase the policy, pay premiums and share in the policy's benefits.

Split Life Insurance.

A combination of Installment Annuity and Term Insurance under which the amount of annuity consideration (premium) paid determines the amount of one-year renewable Term Insurance an annuitant can purchase and place on the life of anyone designated.

Standard Provisions.

(1) Provisions prescribed by state law that must appear in all policies issued in that jurisdiction. (2) Provisions adopted by the NAIC to apply to group Life Insurance as minimum protection. They are required by law in most states. (3) Formerly, a set of prescribed provisions regulating the operating conditions of a Health Insurance policy required by law in most jurisdictions between about 1912 and 1950. They are now superseded by uniform provisions for Individual Accident and Health Insurance policies which contain an NAIC model bill. These have been enacted in virtually all jurisdictions. (LI,H)

Standard Risk.

A risk that is on a par with those on which the rate has been based in the areas of health, physical condition, and morals. An average risk, not subject to rate loadings or restrictions because of poor health.

Statement of Policy Information.

For Universal Life policies, this document is prepared at the end of each year giving complete information on all transactions affecting the policy, such as premium paid, current death benefit, interest credited, loans outstanding, monthly charges, and cash surrender value.

Step-rate Premium.

Premium is increased at times specified in the policy, based on a predetermined attained age, or number of policy years in force. (LI,H)

Straight Life Policy.

See Ordinary Life Policy.

Substandard Risk.

See Impaired Risk. (LI,H)

Supplemental Contract.

A rider usually relating to the method of settlement of the proceeds of a Life Insurance policy.

Surrender.

To give up a Whole Life policy. The insurer pays the insured the cash value which the policy has built up if it is surrendered.

Surrender Value.

See Cash Surrender Value.

Survivorship Annuity.

See Reversionary Annuity.

Survivorship Benefits.

Funds available to pay an annuitant who survives longer than statistically expected from premiums paid by annuitants who died before they had collected amounts equal to their contributions.

Life

TPA.

See Third Party Administrator. (LI,H)

Tax Sheltered Annuity.

An annuity program under which contributions reduce the taxable income of participating employees, and the benefits are not taxable until distributed.

Teachers Insurance and Annuity Association.

An organization selling Life and Health Insurance and annuities to college and university staff members. (LI,H)

Term Insurance.

The type of Life Insurance policy that provides protection only for a specified period of time. A common policy period would be one year, five years, 10 years, or until the insured reaches age 65 or 70. It does not build up any of the nonforfeiture values associated with Whole Life policies. Contrast with Whole Life Insurance.

Termination.

The cessation of premium paying for a Whole Life or Endowment policy before the agreed upon time. This ends the coverage, and the insured receives one of the nonforfeiture values. The cessation of a policy that does not or has not yet developed a cash value is termed a "lapse."

Thaisoi.

An ancient Greek benevolent society which was a step in the evolution of Life and Health Insurance. (LI,H)

Third Party Administrator (TPA).

A firm which provides administrative services for employers and other associations having group insurance policies. The TPA in addition to being the liaison between the employer and the insurer is also involved with certifying eligibility, preparing reports required by the state and processing claims. TPA's are being used more and more with the increase in employer self-funded plans. (LI,H)

Tontine Policy.

A kind of policy that came into use after the Civil War. It was a high premium contract that paid dividends to those participants who were still living at the end of a stated period, at the expense of those who had died or let their policies lapse. It is almost the opposite of insurance and is no longer allowed by law.

Triple Indemnity.

See Multiple Indemnity.

Triple Protection.

A form of Life Insurance that is usually a combination of Whole Life and twice as much Term Insurance. The Term portion applies until a stated date. Such a policy might be used to provide maximum protection to an individual at an earlier age when the need for insurance is greater but the ability to pay is less.

True Group Insurance.

Group insurance issued under a master contract with certificates of insurance that are not policy contracts issued to persons included in the group. This would be in contrast to Franchise or Wholesale "Group" Insurance, under which a covered person is issued an individual policy contract. (LI,H)