LOAN VALUE The amount of cash value in a policy which may be borrowed by the insured
LIFE INSURANCE Insurance that pays a specified amount upon the death of the insured to the insureds estate or to a beneficiary.
MISREPRESENTATION Falsely representing the terms, benefits, or privileges of a policy on the part of an insurer or its agent. Falsely representing the health or other condition of the proposed insured on the part of an applicant.
NON-FORFEITURE OPTION A legal provision whereby the life insurance policyowner may take the accumulated values in a policy as (1) paid-up insurance for a lesser amount (2) extended term insurance; or (3) lump-sum payment of cash value, less any unpaid premiums, or outstanding loans.
NON-PARTICIPATING POLICY A policy that does not provide for the policyowner to share in dividends. Also called a nonpar policy.
PRE-AUTHORIZED CHECK PLAN An arrangement under which the policyowner authorizes the insurer to draft his or her bank accounts for the (usually monthly) premium
PAID-UP INSURANCE A non-forfeiture option in life insurance policies under which insurance exists and no further premium payments are required.
PROOF OF DEATH A usual requirement before paying a death claim is that a formal proof of death form of some type be submitted to the insurer.
REINSTATEMENT Putting a lapsed policy back in force, sometimes requiring the payment of back premiums and evidence of insurability. Provision is usually made for a method of reinstating the policy to its original amount.
RIDER An amendment attached to a policy that modifies the conditions of the policy by expanding or decreasing its benefits or excluding certain conditions from coverage.
STANDARD RISK A risk that meets the same conditions of health, physical condition and morals as the risks on which the rate is based without extra rating or special restrictions.
SUICIDE CLAUSE In a life insurance policy, states that if the insured commits suicide within a specified period of time, the policy will be voided. Paid premiums are usually refunded. The time limit is generally one or two years.
TERM INSURANCE Life insurance that normally does not have cash accumulations and is issued to remain in force for a specified period of time, following which it is subject to renewal or termination.
WAIVER OF PREMIUM PROVISION When included, provides that premiums are waived and the policy remains in force if the insured becomes totally and permanently disabled.
Entire Contract Clause
Another factor which influences the cost of insurance is the interest income that the company earns from its investments. Insurance companies receive millions of dollars each month in premium dollars. And, while each company has death claims and other expenses, the costs for these claims and expenses should be less than the total premiums received.
By investing the excess part of the premium in the early years, the company accumulates funds to cover the deficiency which occurs in the latter years. These funds which the company holds to meet future policy obligations constitute the policy reserve or simply the reserve.
However, if the beneficiary dies in the sixth year the remaining four years of $ per month will go to his designated successor.
When the policy pays a dividend, the dividend accumulations may be applied to any premium not paid by the end of the grace period. In the event the amount of accumulated dividends is not enough to pay the entire premium coverage will then be extended in proportion with the amount of premium paid by the accumulated dividends. As a result of this a new grace period will start at the end of extension coverage.
Regarding the loss of hand or foot, the loss typically must involve complete severance through or above the wrist or ankle joint.
To determine the effective date of the policy, we must examine the principle of contract law known as offer and acceptance.
A desirable feature that a careful buyer will seek in an annuity is the bailout provision. With this provision, the contract owner may bail out without paying any surrender charge if the rate falls below a certain designated percentage from the original rate, even if the initial guarantee period has expired.