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Glossary of Terms
A B C D F G I K L P R T U W
Agent: In insurance, the person authorized to represent the insurer.
Amendment: Document changing the provisions of an insurance contract signed jointly by the insurer and the policyholder.
Applicant: The party applying for an insurance policy.
Application: A printed form provided by the insurer that includes questions about the prospective insured and the desired insurance coverage and limits.
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B
Beneficiary: Any person, persons, or other entity designated to receive the policy benefits upon the death of the insured.
Broker: See Agent
Business Life Insurance: See key person insurance.
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C
Cash (Surrender) Value: The policy may also be cancelled in exchange for the Cash Surrender Value.
This is also amount that is approximately available in cash for loan. Accessing Cash Value by a loan may reduce the death benefit and may increase the risk of lapse.
Claim: A request for payment by an insurer for a loss covered by the insurance policy.
Conditions: The part of your insurance policy that states the obligations of the person insured and those of the insurance company.
Contestability: Insurers rely on statements made in the application(s) of a policy and the company may contest material misrepresentation of fact. An insurer will generally not contest the validity of a policy after it has been in force during the insured's life for 2 years from the date of policy issue. However, the insurer will always contest the validity of a policy for non-payment of any premium due. Also, the insurer will limit the proceeds paid under a policy if the insured commits suicide while sane or insane within 2 years from the date of issue.
Contingent Beneficiary: In a life insurance policy, the person designated to receive the policy benefits if the primary beneficiary dies before the insured.
Contract: A legally enforceable agreement between two or more parties.
Conversion Privilege: The right to convert or change insurance coverage from an individual term insurance policy to an individual whole life or universal life insurance policy.
Convertible Term Insurance: Term insurance that can be exchanged (converted), at the option of the policyowner and without evidence of insurability, for a permanent insurance policy.
Coverage Amount: See Face Amount.
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D
Death Benefit: Amount payable by the insurance company to a claimant, assignee, or beneficiary when the insured suffers a loss.
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F
Face Amount: Very similar and often exactly the same as the Death Benefit, but can also indicate the number of units where the death benefit increases over time.
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G
Grace Period: Life insurance policies provide a grace period of a specified period of time following the premium due date. If the premium is paid within this period, the policy continues in effect, and if death occurs, the premium overdue is deducted from the Death Benefit. If payment is not made by the end of the grace period, term insurance policies terminate. In Canada, the period is typically 31 days.
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I
Insurable Interest: An insurable interest is usually considered to be present if the named beneficiary of a life insurance policy will incur an economic loss upon the death of the proposed insured.
Insurability: Acceptability to the company of an applicant for insurance.
Insurance: Risk management plan that, for a price, offers the insured an opportunity to mitigate possible financial loss through an insurer.
Insurance Company: An organization that has been chartered by the Canadian government to transact the business of insurance.
Insured: The person whose life is insured under a policy as shown in the policy specifications.
Insurer: See Insurance Company.
Irrevocable Beneficiary: A named beneficiary whose rights to life insurance policy proceeds cannot be cancelled or changed by the policyowner unless the beneficiary consents.
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K
Key-Person Insurance: Insurance designed to protect a business against the loss of income resulting from the disability or death of an employee in a significant position.
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L
Lapse: Termination of a policy due to non-payment of premiums.
Level Premium: Rating structure under which the premium level remains the same throughout the life of the policy.
Life Insurance: Insurance that pays a specified sum of money to designated beneficiaries if the insured person dies during the policy term.
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P
Permanent Life Insurance: A phrase used to cover any form of life insurance except term; generally, insurance that accrues cash value, such as whole life or endowment.
Policy: The Contract document issued to the policyholder by the company stating the terms of the insurance contract. Insurance is a contract by which one party (the insurer), for a consideration (the premium), assumes another's (the insured's) risk of loss. A life insurance policy contains the specifications and provisions of the contract, original application and any additional applications, riders, amendments or endorsements that are attached to and made part of the policy
Policyholder: The person who owns a life insurance policy. This is often is the insured person, but it may also be a relative of the insured, a partnership or a corporation.
Policyowner: See Policyholder.
Policy Period: The amount of time an insurance contract or policy lasts.
Premium: The payment, or one of the regular periodic payments, that a policyholder makes to own an insurance policy. The price for insurance coverage as described in the insurance policy for a specific period of time.
Primary Beneficiary: The person designated as the first to receive the proceeds of a life insurance policy upon the death of the insured.
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R
Reinstatement: The process by which a life insurance company puts back in force a policy that has lapsed or has been cancelled for non-payment of premium.
Renewable Term Insurance: Term insurance providing the right to renew at the end of the term for another term or terms, without evidence of insurability. The premium rates increase at each renewal as the age of the insured increases.
Revocable Beneficiary: A named beneficiary whose rights to the life insurance policy proceeds can be revoked or changed by the policyowner at any time prior to the insured's death in accordance with the policy's instructions and conditions.
Rider(s): An addition to an insurance policy that becomes a part of the contract.
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T
Term Life Insurance: Term life insurance is so named because it provides financial protection for a limited, specified period of time. If death occurs within the time limits on the policy, the face amount of the policy is payable. Nothing is paid if the insured person survives beyond the length of the term policy. Unlike some other types of policies, term insurance does not generate cash values. It is for these reasons that term insurance is usually the least expensive means of protection. In addition, some people on limited incomes purchase term insurance for basic insurance protection and, as their incomes rise, convert the policy to other forms of life insurance. Renewable or convertible options may be included in a term life insurance policy. A renewable policy permits the owner of the policy to automatically extend the policy length regardless of the health or occupation of the insured, with a possible increase in premiums at renewal. A convertible policy permits the owner to change the insurance into a whole life or other permanent life insurance policy regardless of the health or occupation of the insured.
Term Period: Term insurance policies are contracts for a fixed period of time. For example, a 20-year term insurance plan provides coverage in the event of death for 20 years. However, many plans have options that allow you to renew or convert your policy to continue coverage beyond the initial term period.
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U
Underwriting: The process of reviewing applications for coverage. The underwriter then classifies applications that are accepted according to the type and degree of risk.
Universal Life Insurance: Unlike traditional cash-value policies (known as "whole life"), universal life policy returns were freed from long-term, fixed-rate contracts and replaced with policies whose returns were tied to short-term interest rates and periodically adjusted. In addition, the policyholder can change premiums and death benefits.
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W
Whole Life Insurance: A plan of insurance for life, with premiums payable for a person's entire life, or often to age 100.
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