Ch 11

Front 1

Human life value:

Back 1

For purposes of life insurance, the present value of the family's share of the deceased breadwinner's future earnings.

Front 2

Needs approach:

Back 2

Method for estimating amount of life insurance appropriate for a family by analyzing various family needs that must be met if the family head should die and converting them into specific amounts of life insurance. Financial assets are considered in determining the amount of life insurance needed.

Front 3

Dependency period:

Back 3

Period of time following the readjustment period during which the surviving spouse's children are under eighteen and therefore dependent on the parent.

Front 4

Readjustment period:

Back 4

One-to two-year period immediately following the breadwinner's death during which time the family should receive approximately the same amount of income it received while the breadwinner was alive.

Front 5

Blackout period:

Back 5

The period during which Social Security benefits are not paid to a surviving spouseÑ between the time the youngest child reaches age 16 and the surviving spouse's sixtieth birthday.

Front 6

Capital retention approach:

Back 6

A method used to estimate the amount of life insurance to own. Under this method, the insurance proceeds are retained and are not liquidated. Capital retention approach: A method used to estimate the amount of life insurance to own. Under this method, the insurance proceeds are retained and are not liquidated.

Front 7

Term insurance:

Back 7

Type of life insurance that provides temporary protection for a specified number of years. It is usually renewable and convertible.

Front 8

Ordinary life insurance:

Back 8

Type of whole life insurance providing protection throughout the insured's lifetime and for which premiums are paid throughout the insured's lifetime.

Front 9

Legal reserve:

Back 9

Liability item on a life insurer's balance sheet representing the redundant or excessive premiums paid under the level-premium method during the early years. Assets must be accumulated to offset the legal reserve liability. Purpose of the legal reserve is to provide lifetime protection.

Front 10

Net amount at risk:

Back 10

Concept associated with a level-premium life insurance policy. Calculated as the difference between the face amount of the policy and the legal reserve.

Front 11

Cash surrender value:

Back 11

Amount payable to the owner of a cash-value life insurance policy should he or she decide it is no longer wanted. Calculated separately from the legal reserve.

Front 12

Limited-payment policy:

Back 12

Type of whole life insurance providing protection throughout the insured's lifetime and for which relatively high premiums are paid only for a limited period.

Front 13

Single-premium whole life insurance:

Back 13

A whole life policy that provides lifetime protection with a single premium payment.

Front 14

Endowment insurance:

Back 14

Type of life insurance that pays the face amount of insurance to the beneficiary if the insured dies within a specified period or to the policyowner if the insured survives to the end of the period.

Front 15

Variable life insurance:

Back 15

Life insurance policy in which the death benefit and cash surrender values vary according to the investment experience of a separate account maintained by the insurer.

Front 16

Universal life insurance:

Back 16

A flexible-premium whole life policy that provides lifetime protection under a contract that separates the protection and saving components. The contract is an interest-sensitive product that unbundles the protection, saving, and expense components.

Front 17

Variable universal life insurance:

Back 17

Similar to universal life insurance with certain exceptions. Cash values can be invested in a wide variety of investments; there is no minimum interest rate guarantee; and the investment risk falls entirely on the policyowner.

Front 18

Current assumption whole life insurance:

Back 18

Nonparticipating whole life policy in which the cash values are based on the insurer's current mortality, investment, and expense experience. An accumulation account is credited with a current interest rate that changes over time. Also called interest-sensitive whole life insurance.

Front 19

Indeterminate-premium whole life insurance:

Back 19

Nonparticipating whole life policy that permits the insurer to adjust premiums based on anticipated future experience. Initial premiums are guaranteed for a certain period. After the initial guaranteed period expires, the insurer can increase premiums up to some maximum limit.

Front 20

Modified life policy:

Back 20

Whole life policy for which premiums are reduced for the first three to five years and are higher thereafter.

Front 21

Preferred risks:

Back 21

Individuals whose mortality experience is expected to be lower than average.

Front 22

Savings bank life insurance:

Back 22

Life insurance originally sold by mutual savings banks in Massachusetts, New York, and Connecticut. Now sold in other states as well.

Front 23

Industrial life insurance:

Back 23

Type of life insurance in which policies are sold in small amounts and the premiums are collected weekly or monthly by a debit agent at the policyowner's home. See also Home service life insurance.

Front 24

Home service life insurance:

Back 24

Industrial life insurance and monthly debit ordinary life insurance contracts that are serviced by agents who earlier called on the policyowners at their homes to collect the premiums.

Front 25

Group life insurance:

Back 25

Life insurance provided on a number of persons in a single master contract. Physical examinations are not required, and certificates of insurance are issued to members of the group as evidence of insurance.