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No insurance resource would be complete without a helpful menu of terms and concepts. This information-rich list will help you make sense of the solutions you are considering.
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The transfer of ownership and all policy rights from the existing policy owner to another person or entity. If there is an irrevocable beneficiary or collateral assignment, that person must consent to the assignment since he/she has an irrevocable vested interest in the policy.
A living benefit rider available with life insurance policies. Allows the policy holder to receive cash advances as a pre-payment of the death benefit if diagnosed with a terminal illness. Enables individual to pay for treatments and comfort while also protecting his/her family after death.
A rider, sometimes referred to as Double Indemnity. May be added to some life insurance contracts. It provides that double or triple the face amount of insurance is payable if the death of the insured is caused by an accident.
There is an extra charge for the ADB. However, ADBs can be appealing because of their relatively low premium and the belief most people have that their death will be accident-related. But if double the coverage is actually needed, LLIS recommends doubling the face amount of the insurance since most deaths are not, in reality, accidental.
Daily self-care activities: bathing, dressing, eating, continence, toileting, transferring. A person's ability or inability to perform these ADLs is used to measure his/her functional status. To receive benefits from a long term care insurance (LTCi) policy (or Hybrid Life/LTCi or hybrid Annuity/LTCi), most companies require that insureds be unable to perform at least two of the six ADLs.
One method insurance companies use to determine the age of the individual. In this case, the applicant is that age for the 12 months following his/her birthday. For example, for a June 15th birthday: actual age would be until June 14th of the following year.
Allows the policy owner to adjust the face value, premium, and coverage period without a change of policy. It may also offer a conversion option (i.e., from Term to Whole life).
One method insurance companies use to determine the age of the individual. In this case, the person's age is assigned six months before the applicant's birthday to six months after the applicant's birthday. For example, for a June 15th birthdate: age nearest would be considered a year older after December 14th of the same year.
The Society of Actuaries says that alcohol abuse can take off 10 to 15 years of your life. It is also widely known that excessive drinking can lead to certain medical conditions. Therefore, insurance companies include alcohol usage in the standard application questionnaire. If it is found that the proposed insured uses alcoholic beverages in large amounts, he/she may be declined, postponed, or offered higher rates, depending on the degree of use and other related factors such as DWIs on the driving record or elevated enzyme levels from a blood test. Use of alcohol in moderation is considered normal. A person applying for insurance with a history of treatment for substance abuse may be eligible for standard rates after seven years with some companies. After 10 years, preferred rates may be available. These requirements differ widely among insurance companies.
Also known as Yearly Renewable Term (YRT), this insurance provides a guaranteed rate for a period of one year only. The policy owner may renew the policy each year at an increasingly higher premium. This insurance is very low cost in the first, second, and third years, but if insurance is needed for more than three years, a guaranteed level term contract may be less expensive.
Owners of insurance contracts (Life, Disability, Hybrid, Annuity) receive an annual statement (report) within 30 days of the policy anniversary date. It provides pertinent information relative to the policy type (name of the policy owner, name of the insured, coverage amount, optional benefits, and payment and expense history of the past policy year). This is the basis for completing a policy review.
Converting an annuity from the accumulation phase to the payout phase.
A report by a physician, hospital, or medical facility who has treated, or who is currently treating, a proposed insured. In traditional underwriting, an APS is one of the most frequently ordered additional sources of medical information for applicants requesting life insurance, and considered by many as the single most important source of underwriting information. Because of professional ethics and medical records privacy (HIPAA), the proposed insured is required to complete an authorization providing written consent, which is provided to the physician prior to information sharing.
A rider available with Disability insurance policies. Increases the total monthly disability benefit automatically each year for five to six years (varies among insurance companies). Premium will go up with this rider each year because more coverage is being provided. There is no additional charge for this rider. Also known as Automatic Benefit Enhancer.
If the insurance company perceives a hazard due to aviation activities (not including flights as a fare-paying passenger or pilot on regularly scheduled commercial airlines), they may charge an extra premium to compensate for that hazard. A policy may be issued with an aviation exclusion, in which upon death from an aviation incident, the company is liable only for return of premiums paid or the reserve accumulated on the policy.
With more individuals seeking excitement and thrills in their non-professional lives, hobbies and avocations have become important underwriting factors. Scuba diving, mountain climbing, competitive racing, hang gliding, rodeos, and sky diving clearly can involve a significant additional hazard to the insurance company. If such risk is perceived, the insurance company will typically charge the proposed insured a flat extra premium commensurate with the risk. In states permitting, a rider excluding death from participation in the hazardous activity may be required.