Review and use these key life insurance terms

s-z terms

separate account – premiums on a variable life policy can be allocated to the guaranteed interest account or to investment options in a separate account, which is separate from the company’s general account insurance. Assets held in the separate account are protected from insurance company creditors. the amounts allocated to separate accounts are never guaranteed by the life insurance company, as they vary depending on the performance of the investment options selected by the policyholder.

Standard Risk: A series of risk classes below “Preferred,” used by life insurance companies to underwrite an applicant’s mortality risk. These classes set premium rates based on the applicant’s health, lifestyle, creditworthiness, and other criteria. they can be used by the insurance company to offset above-average mortality risk by charging higher costs.

Reading: What is a corridor in relation to a universal life insurance policy?

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Stock Life Insurance Company: A life insurance company that is owned by the shareholders of its common stock. The company’s board of directors may choose to reward shareholders by paying quarterly dividends. Stock life insurance companies do not typically pay dividends to their policyholders.

substandard risk: the lowest risk classes used by life insurance companies to insure an applicant’s mortality. These classes typically assign above-average premiums based on a history of illness or an occupation/occupation with a higher-than-average mortality risk. Applicants assessed as deficient may be limited in their ability to purchase a desired amount of life insurance coverage. They are also generally differentiated by whether or not the insured consumes tobacco products.

surrender: the action of a policyholder to voluntarily surrender (surrender) a life insurance policy prior to death. The main reasons to redeem a policy are: 1) to avoid having to continue paying premiums; and 2) collect its surrender value in cash. Giving up a life insurance policy generally has income tax consequences if there is a gain on the policy.

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term life insurance: life insurance coverage that is purchased for a specific number of years, which can be up to age 95 in annual renewable term policies or up to 20 years or more in level premium policies. term policies. The main benefit in term life insurance is death benefit protection at a low initial premium. however, many term policies also have a convertibility feature, allowing them to become permanent coverage without evidence of insurability for several years.

underwriting: A life insurance company’s process of assessing risk in order to set premium rates and provide specific levels of coverage. Underwriters apply industry standard and company-specific guidelines to determine what risks the company can accept and an appropriate level of premium. Although life insurance insurers focus primarily on an applicant’s health and health habits (eg, smoking), they may also consider other factors, such as creditworthiness and job stability.

waiver of premium: an additional clause in a life insurance contract, at an additional cost, that allows the policyholder not to pay the required premiums during a period in which he is disabled and maintains the policy in force, according to the definition of disability contained in the policy or annex.

See also: What is Subrogation in Insurance? | Metromile

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