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Glossary of Long Term Care Insurance Terms

 


Understanding the terms in a life insurance policy can often be confusing. We've tried to define as many of those difficult terms for you in our glossary below.

Just click on the beginning letter of the word you would like defined.

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A B C D E F I K L M N O P R S T U W

A
Accidental Death Benefit
An extra death benefit amount that is paid out in addition to the face amount of the policy if the insured dies as the result of an accident.

Accelerated Death Benefit Option
In the event of terminal illness, usually l year or less, the insured has the option to withdraw some of the death benefit for his personal use.

Assignment
The transfer of the ownership rights of a Life Insurance policy from one person to another.


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B
Backdating

A procedure for making the effective date of a policy earlier than the application date. Backdating is often used to make the age at issue lower than it actually was in order to get lower premium.

Beneficiary
The person designated to receive the death benefit when the insured dies.

Business Insurance
Policies written for business purposes, such as key employee, buy-sell, business loan protection, etc.

Buy-Sell Agreement
An agreement among owners in a business which states the under certain conditions, his heirs are legally obligated to sell their interest to the remaining owners, and the remaining owners are legally obligated to buy at a price fixed in the Buy-Sell agreement.

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C
Children's Term Insurance Rider
Provides term insurance to the insured's dependents. It is a flat premium for all his dependents and the benefit usually is not less than $1,000 or more than $10,000.

Collateral Assignment
Assign all or part of a life insurance policy as security for a loan. If the insured dies the creditor would receive only the amount due on the loan.

Contestable Clause
A provision in an insurance policy setting forth the conditions under which the insurer may contest or void the policy. After that time has lapsed, normally two years, the policy cannot be contested.

Contingent Beneficiary
A person or persons named to receive policy benefits if the primary beneficiary is deceased at the time the benefits become payable.

Convertible (conversion)
A policy that may be changed to another form by contractual provision and without evidence of insurability. Most term policies are convertible into permanent insurance.

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D
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.


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E
Entity Agreement
A buy-sell agreement in which the company 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.

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F
Face Amount
The amount of insurance provided by the terms of an insurance contract, usually found on the face of the policy. In a life insurance policy, the death benefit.

Fixed Benefit
A benefit, the dollar amount of which does not vary

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I
Incontestable Clause
A clause in a policy providing that 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.

Insurability
Acceptability to the insurer of an application for insurance.

Insurable Interest
You have an insurable interest in the insured if upon the death of the insured you would suffer financial loss.

Insurance Policy
The printed form, which serves as the contract between an insurer and an insured.

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K
Key Person (Key Man) Insurance
Insurance on the life of a key employee whose death would cause the employer financial loss. The policy is owned and payable to the employer.

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L
Lapsed Policy
A Insurance policy, which has been allowed to expire because of nonpayment of premiums. RETURN TO INDEX

Level Term Insurance
A type of term policy where the face value remains the same from the effective date until the expiration date. However, after the level premium period most policies turn into Annual Renewable Term where the premiums increase annually.

Long Term Care Insurance
An insurance policy that provide benefits for the chronically ill or disabled over a long period of time.

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M
Medical Information Bureau (MIB)
A data service that stores coded information on the health histories of persons who have applied for insurance from subscribing companies in the past. Most Life insurers subscribe to this bureau to get more complete underwriting information.

Mortality Cost
The first factor considered in life insurance premium rates. Insurers have an idea of the probability that any person will die at any particular age; this is the information shown on a mortality table.

Mortality Table
A table showing the incidence of death at specified ages.

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N
Nonmedical (Non-Med)
A contract of life insurance underwritten on the basis of an insured's statement of his health with no medical examination required.

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O
Occupational Hazard
A condition in an occupation that increases the peril of accident, sickness, or death. It usually will mean higher premiums.

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P
Permanent Life Insurance
A term loosely applied to Life Insurance policy forms other than Group and Term, usually Cash Value Life Insurance, such as Whole Life Insurance or Universal Life.

Policy Fee
There are two calculations to determine the premium for term insurance. The Policy Fee, which is a flat fee added to each policy and the rate per thousand times the number of thousands of death benefit. The policy fee is usually the same for all ages and amounts.

Preferred Risk
Any risk considered to be better than the standard risk on which the premium rate was calculated. RETURN TO INDEX

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

Provisions
Statements contained in an insurance policy, which explain the benefits, conditions and other features of the insurance contract.

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R
Rated
Coverage issued at a higher rate than standard because of some health condition, or impairment of the insured.

Renewable Term
Term insurance that may be renewed for another term without evidence of insurability. Level term usually turns into renewable term with increasing premiums after the level premium period.

Replacement
A new policy written to take the place of one currently in force.

Revocable Beneficiary
The beneficiary in a life insurance policy in which the owner reserves the right to revoke or change the beneficiary. Most policies are written with a revocable beneficiary.

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S
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 loading or restrictions because of health.

Stock Purchase Agreement
A formal buy-sell agreement whereby each stockholder is bound by the agreement to purchase the shares of a deceased stockholder and the heirs are obligated to sell. This agreement is usually funded with life insurance.

Stock Redemption Agreement
A formal buy-sell agreement whereby the corporation is bound by the agreement to purchase the shares of a deceased stockholder and the heirs are obliged to sell. This agreement is usually funded with life insurance.

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T
Term Insurance
The type of life insurance that provides protection for a specified period of time. It usually has no real cash build up.

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U
Underwriter
A technician trained in evaluating risks and determining rates and coverage for them. When an application is submitted to the insurer, it is the underwriter who gathers all the necessary information to determine whether a person is a preferred risk, a standard risk, or rated.

Universal Life
An interest sensitive life insurance policy that builds cash values. The premium payer has control on how the policy is structured. He has the flexibility to vanish the premiums (pay no more premiums based on assumptions that are not guaranteed) or have the premiums continue for life. It is a matter of juggling 3 variables. The assumed interest rate, the cash value and the premium payment plan.

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W
Waiver of Premium
A provision of a life insurance policy, which continues the coverage without further premium payments if the insured becomes totally disabled.

Whole Life Insurance
Life insurance that is kept in force for a person's whole life as long as the scheduled premiums are maintained. All Whole Life policies build up cash values. Most Whole Life policies are guaranteed as long as the scheduled premiums are maintained. The variable in a whole life policy is the dividend, which could vary depending on how well the insurance is doing. Policyholders can use the cash from dividends in many ways. The three main uses are: It can be used to lower or vanish premiums, it can be used to purchase more insurance or it can be used to pay for term insurance.

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