Life Insurance Dictionary
Human Life Value. A method of determining Life Insurance needs by considering a person's income, expenses, remaining years of earning capacity, and depreciation in the value of the dollar over time.
Impaired Risk. A risk, or subject of insurance, with insurable qualifications below the standard of risks on which the premium for the coverage was based. For example, a Life Insurance prospect with heart disease would be an impaired risk. See Substandard Risk. Contrast with Standard Risk.
- Incidents of Ownership. Various rights that may be exercised under the policy contract by the policy owner. Some of the incidents of ownership would be: (1) the right to cash in the policy, (2) to receive a loan on the cash value of the policy, and (3) to change the beneficiary.
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- Incontestable Clause. A clause in a policy providing that after a policy has been in effect for a given length of time (usually two years), the insurer shall not be able to contest the statements contained in the application. In Life policies, if an insured lied as to the condition of his health at the time the policy was taken out, that lie could not be used to contest payment under the policy if death occurred after the time limit stated in the incontestable clause.
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- Individual Life Insurance. (1) That type of Life Insurance which covers in one contract usually only one insured. (2) The term used to distinguish this type of Life Insurance from Group Life Insurance.
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- Interest. In the calculation of premium, it is the rate of return on the company's investment of premium dollars over the lifetime of the policy. Insurance company investment experience will affect life insurance cost.
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- Interest Adjusted Cost. A method of determining the cost of Life Insurance that takes into account the interest that might have been earned on premium money if it had been invested rather than put into premiums.
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- Interest Sensitive Provision. Provisions in variable and flexible premium policies which guarantee certain interest earnings plus an additional interest percentage should the current interest rate rise above a specified percentage.
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- Joint Insurance. Insurance written on two or more persons with benefits usually payable only at the first death.
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- Key Employee Insurance. (1) Insurance on the life or health of a key employee, the loss of whose services would cause an employer financial loss. The policy is owned by and payable to the employer.
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- LIMRA. See Life Insurance Marketing and Research Association.
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- LUTC. See Life Underwriting Training Council.
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- Legal Reserve Life Insurance Company. A Life insurer that maintains the reserves required by the jurisdiction within which it operates.
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- Level Death Benefit Option. Under Universal Life insurance, the level death benefit option provides the greater of (1) the face amount of the policy at the time of death, or (2) a stipulated percentage of the accumulation value.
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- Level Premium Insurance. That form if insurance for which the premium remains the same throughout the life of the contract. Most Whole Life Insurance is paid for in this way. The amount of a level premium is higher than needed for the protection afforded in the early years of the contract but less than needed for protection in the later years. It is a method of leveling off the cost of insurance so as not to have it increase each year until it becomes unaffordable. See also Net Level Premium.
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- Level Term Insurance. A type of term policy where the face value remains the same from the effective date until the expiration date. See also Term Insurance.
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- Life Expectancy. The average number of years remaining for a person of a given age to live as shown on the mortality or annuity table used as a reference.
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- Life Income. A settlement option under which equal installments are paid as long as the beneficiary lives, even if the principal has been exhausted.
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- Life Insurance Marketing and Research Association (LIMRA). An organization that, through research, seeks solutions to the problems of administering the agency costs of a Life insurer.
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- Life Insurance Trust. A type of Life Insurance policy where a trust company is named as the beneficiary and distributes the proceeds of the policy under the terms of the trust agreement.
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- Life Paid Up At Age. A form of limited payment Life Insurance that provides protection for the whole of life but with payment of premiums to stop at a particular age, thus paying up the policy. A common form would be Life Paid Up At Age 65.
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- Life Underwriter. Usually, a Life Insurance agent. It can be more narrowly defined as a risk appraiser. See also Risk Appraiser.
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- Life Underwriting Training Council (LUTC). An organization that prepares and administers training programs for Life Insurance agents.
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- Loan Value. A term which refers to the amount of money an insured can borrow using the cash value of his Life Insurance policy as security.
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- Lump Sum. A method of settlement whereby the beneficiary receives the entire proceeds of a policy at once rather than in installments.
