Chapter 6 Life Insurance Premiums

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Accelerated benefit option Rider

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Allows the insured to receive a portion of the death benefit prior to death if the insured has a terminally illness and is certified by a physician as expected to die within 1 to 2 years

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Beneficiary

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The person or entity designated and a life insurance policy to receive the death proceeds.

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Cash value

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The equity or savings element of whole life insurance policies

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Class designation

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A beneficiary group designated (for example all of my children) as opposed to specifying one or more beneficiaries names.

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Common disaster provision

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a provision of the uniform simultaneous death act which ensures a policyowner if both the insured and the primary beneficiary die within a short period Of time the death benefits will be paid to the cotingent beneficiary. It also states that the primary beneficiary must outlive the insured a specified period of time in order to receive the proceeds

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Earned premium

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The amount of premium paid by the policy owner for policy coverage or Insurance protection already received

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Expense factor

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Also known as the loading charge, is a measure of what it cost an insurance company to operate.

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Fixed amount installment option

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Pays a fix the death benefit in specified installment amount until the principal and interest are exhausted

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Fixed / level premium

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A concept of averaging what would be the total single premium for a policy over periodic payments. More periodic payments equal higher total premium.

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Graded premium

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a premium funding option characterized by a lower premium in the early years of the contract with premiums increasing annually for an introductory period. after the introductory time the premium jumps to an amount higher than what the initial level premium would have been and then remains fixed or constant for the life of the policy.

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Gross annual premium

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The net premium of Insurance plus commissions operating in miscellaneous expenses and dividends.

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Interest factor

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The calculation for determining the amount of interest in insurance company can expect to earn from investing insurance premiums.

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Interest only option

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a death settlement option where the insurance company holds death benefits for a period of time and pays only the interest earned to the named beneficiary. A minimum rate of interest is guaranteed and the interests must be paid at least annually.

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Irrevocable beneficiary

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A beneficiary which may not be changed by the policy owner without the written consent of the beneficiary.

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Joint and survivor option

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A settlement option which guarantees that benefits will be paid on a life-long basis to two or more people. This option may include a certain period. And of the amount payable is based on the ages of the beneficiaries.

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Life income option

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a death benefit settlement option which provides the beneficiary with an income that they cannot live without. Installment payments are guaranteed for as long as the recipient lives.The amount of each installment is based on the recipients life expectancy in the amount of principal

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Life settlement

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an agreement in which a policyholder cells or transfer ownership in all or part of a life insurance policy to a third party for compensation that is less than the expected death benefit of the policy.

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Lump sum option

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a death settlement option where death benefit is paid in a single payment, minus any outstanding policy loan balances and overdue premiums. The lump sum option is consider the automatic or default option for most life insurance contracts.

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Modified premium

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A premium which is at first lower for the first 3 to 5 years and thereafter will be higher but remains constant for the rest of the policy

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Morbidity rate

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Demonstrates the incident and extent of disability that may be expected from a given group of.

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Mortality rate

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a measure of the number of deaths in general or do to specific cause in some populations Gail to the size of that population per unit time.

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Next payment cost index

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a formula used to determine the cost of a policy for a policyowner. It uses the same formula as the surrender cost index with the exception that it doesn't assume that the policy will be surrendered at the end of the period. Net payment cost index is useful if one's primary concern is the amount of death benefits provided in the policy.

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Net single premium

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A premium calculation used to calculate an insurance policy reserves factoring in interest and mortality

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Per capita by the head

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Evenly distributes benefits among all names living

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Per stirpes by bloodline

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Evenly distributes benefits amongst a beneficiary zehrs in the event that the beneficiary dies before the insured

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Premium mode

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The frequency in which a policyowner elects to pay premiums.

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Policy proceeds

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The amount actually paid as a death, surrender or maturity benefit.in the case of

*Death benefit includes the face value plus any earn dividends.

*If surrender benefit the amount includes any cash value

*Maturity benefit the amount includes the cash value

(All less any outstanding loans or interest.)

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Reserves

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The money set aside required by the state insurance laws to pay future claims.

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Revocable beneficiary

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A beneficiary that the policy owner may change at any time without notifying or getting permission from the beneficiary

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Settlement options

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optional modes of settlement provided by most life insurance policies. Options include lump sum cash, interest-only, fixed-period, Fixed amount, and life income.

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Single premium funding

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a policy funding option where the policy owner pays a single premium that provides protection for life as a paid-up policy

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Spendthrift clause

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a clause which prevents creditors from obtaining any portion of policy proceeds upon an insured's death. Additionally the claws can be selected by the policyowner to prevent a beneficiary from recklessly spending benefits by requiring the benefits to be paid in fixed amounts or installments over a certain period of time.

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Surrender cost index

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A cost comparison calculation formula where the net cost is averaged over the number of years the policy was in force to arrive at the average cost per thousand for a policy that is surrendered for its cash value at the end of that period.

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Tertiary beneficiary

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the third beneficiary in line to receive death benefit proceed with the primary and contingent beneficiaries both died before the insured

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Unearned premium

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Premium which has been paid by a policy owner for insurance coverage which has not yet been provided

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Uniform simultaneous death act

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states that if the insured in the primary beneficiary died at approximately the same time for a common accident with no clear evidence as to who died first the law will assume that the primary died first this allows the death benefit proceeds to be paid to the cotangent beneficiary

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Viatical settlement

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involve someone with a terminal illness selling their existing life insurance policy to a third party for a percentage of the death benefit. In this agreement, the owner of the life insurance policy sells the policy to another person in exchange for a bargained-for payment, which is generally less than the expected death benefit under the policy. The original policy owner is called the viator in the new third-party owner is called the viatical or sometimes referred to as the viatee