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Life insurance glossary

At a sporting event you need a program to know the players. With life insurance it helps to understand the terminology. Here are the definitions of some commonly used insurance terms.

Actuary -- A person who calculates statistically risks, premiums, life expectancies and other factors for insurance firms.

Agent -- A person authorized to sell and service insurance policies.

Annuity -- A regular periodic payment made by an insurance company to a policyholder for a specified period of time. Also see Tax-Sheltered Annuity.

Beneficiary -- One who benefits from an insurance policy, will or deed or trust.

Benefit package -- What the insurer covers under a particular policy.

Binder -- A temporary insurance contract that provides proof of coverage until a permanent policy can be issued.

Broker -- A person who represents the insurance buyer, not the insurance company or agent, and helps a buyer obtain the proper insurance coverage.

Carrier -- The insurer.

Cash (Surrender) Value -- The amount available in a permanent life insurance policy for loans or cash withdrawals. Accessing this amount may reduce the death benefit and may increase the risk of lapse.

Caveat emptor -- Latin for "let the buyer beware." It means that the buyer of a property or item buys it at his or her risk.

Claim -- A financial reimbursement requested for an insured loss.

Conditionally renewable -- Gives the individual the right to renew coverage up to a certain age or specified date. If the company decides not to renew, it must be for specific reasons or conditions stated in the contract.

Dependents -- Usually includes a lawful spouse and unmarried children, adopted, step, foster or biological, up to a certain age.

Entire contract clause -- An addendum stipulating that everything in the insurer/insured relationship is spelled out in the contract. In other words, if it's not in writing, it doesn't exist.

Exclusion -- A provision in an insurance policy that denies coverage for certain losses, locations, people and properties.

Face Amount -- The amount stated on the face of the policy that will be paid in case of death.

Group insurance -- Insurance coverage usually issued to an employer under a master policy for the benefit of employees.

Insurability -- Acceptability, to the insurer, of an applicant for insurance.

Insurance -- A product by which a policyholder pays a company a sum, and the company promises to pay compensation if a specified undesired event occurs.

Lapse -- The termination or discontinuance of a policy, usually resulting from the insured's failure to pay the premium due.

Level Premium -- Premium payments that remain the same from year to year. The premium usually is higher than the actual cost of protection through the early years of the policy and lower in later years.

Living benefits rider -- Provision on a life insurance policy that allows the insured to tap into the benefits to cover long term care or expenses associated with a terminal illness.

Mortgage life insurance -- A term policy that pays off the mortgage if the borrower dies.

Permanent life insurance -- Permanent life insurance is an umbrella term for insurance that lasts as long as you live (as opposed to "term insurance," which lasts for a set period).) Within the category of permanent life insurance are a variety of policy types such as cash value, whole life and universal life. type of insurance that combines a death benefit, in which funds are paid to the beneficiary upon your death, with a tax-sheltered savings plan that creates an accumulating cash value. It is called permanent life insurance because the policy is open-ended and does not have to be renewed or converted, unlike term insurance, which is in force for a specified period of time. The policy offers a fixed premium, but also carries significant fees.

Policy -- A written contract detailing your insurance coverage and the premium you agree to pay.

Premium -- The amount charged for an insurance policy. A premium is based on the type and amount of coverage you choose.

Renewable term insurance -- A term policy that can be renewed by the policy owner at the end of number of successive terms without evidence of insurability. The rates normally increase at each renewal.

Term Insurance -- Life insurance that does not build up cash value and where the premium normally increases as the insured gets older.

Term -- The time to the maturity of a loan or deposit, expressed in months or years.

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