Chapter 4 - Life insurance Premiums, Proceeds, and Beneficiaries Flashcards Preview

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Flashcards in Chapter 4 - Life insurance Premiums, Proceeds, and Beneficiaries Deck (83)
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Accelerated Benefit (Option) Rider

Allows the insured to receive a portion of the death benefit prior to death if the insured has a terminal illness and is certified by a physician as expected to die within 1-2 years



The person or entity designated in a life insurance policy to receive the death proceeds


Cash Value

The equity or savings element of whole life insurance policies


Class Designation

A beneficiary group designation (for example, all of my children), opposed to specifying one or more beneficiaries by name


Common disaster provision

A provision of the Uniform Simultaneous Death Act which ensured a policyowner if both the insured and the primary beneficiary die within a short period of time, the death benefits will be paid to the contingent beneficiary. It also states that the primary beneficiary must outlive the insured a specified period of time in order to receive the proceeds.


Contingent (Secondary) Beneficiary

The beneficiary second in line to receive the death benefit proceeds if the primary beneficiary dies before the insured.


Earned Premium

The amount of premium paid by the policyowner for policy coverage or insurance protection already received.


Expense Factor

Also known as the loading charge, is a measure of what it costs an insurance company to operate


Fixed Amount Installment Option

Pays a fixed death benefit in specified installment amounts until the principal and interest are exhausted


Fixed/Level Premium

A concept of averaging what would be the total single premium for a policy over periodic payments. More periodic payments = higher total premium


Fixed period or period certain option

Pays the death benefit proceeds in equal installments over a set period of years. The dollar amount of each installment depends upon the total number of installments


Graded premium

A premium funding option characterized by a lower premium in the early years of the contract with premiums increasing annually for an introductory period. After the introductory period, the premium jumps to an amount higher than what the initial level premium would have been, and then remains fixed or constant for the life of the policy.


Gross (annual) premium

The net premium for insurance plus commissions, operating and miscellaneous expenses, and dividends.


Interest Factor

A calculation for determining the amount of interest an insurance company can expect to earn from investing insurance premiums


Interest Only Option

A death settlement option where the insurance company holds death benefit for a period of time and pays only the interest earned to the named of the beneficiary. A minimum rate of interest is guaranteed and the interest must be paid at least annually.


Irrevocable Beneficiary

A beneficiary which may not be changed by the policyowner without the written consent of the beneficiary


Joint and Survivor Option

A settlement which guarantees that benefits will be payed on a life-long basis to two or more people. This option may include a period certain and the amount payable is based on the ages of the beneficiaries.


Life Income Option

A death benefit settlement option which provides the beneficiary with an income that they cannot outlive. Installment payments are guaranteed for as long as the recipient lives. The amount of each installment is based on the recipient's life expectancy and the amount of principal.


Life Settlement

An agreement in which a policyholder sells or transfer ownership in all or part of a life insurance policy to a third party for compensation that is less than the expected death benefit of the policy.


Lump Sum Option

a death settlement option where death benefit is paid in a single payment, minus any outstanding policy loan balances and overdue premiums. The lump sum option is considered the automatic (or "default") option for most life insurance contracts.


Modified Premium

Demonstrates the incidence and extend of disability that may be expected from a given group of persons.


Mortality Rate

A measure of the number of deaths (in general, or due to a specific cause) in some population, scaled to the size of that population, per unit time.


Net Payment Cost Index

A formula used to determine the true cost of a policy for a policyowner. It uses the same formula as the Surrender Cost Index with the exception that it doesn't assume that the policy will be surrendered at the end of the period. The net payment cost index is useful if one's primary concern is the amount of death benefits provided in the policy.


Net (Single) premium:

A premium calculated used to calculate an insurer's policy reserves factoring in interest and mortality


Per Capita (by the head):

evenly distributes benefits among all named living beneficiaries


Per Stirpes (by the bloodline)

Evenly distributes benefits amongst a beneficiaries heirs in the event that a beneficiary dies before the insured


Premium Mode

The frequency in which a policy owner elects to pay the premiums


Primary Beneficiary

The first beneficiary in line to receive the benefit proceeds upon the death of an insured


Policy Proceeds

The amount actually paid as a death, surrender, or maturity benefit. In the case of a death benefit, in includes the face value plus any earned dividends less any outstanding loans and interest. If surrender benefit, the amount includes any cash value less surrender charges and outstanding loans and interest. If maturity benefit the amount includes the cash value less any outstanding loans and interest.



The money set aside (required by the state's insurance laws) to pay future claims