LIFE SETTLEMENT GLOSSARY EXAMPLE

A

absolute assignment

Changing ownership of a policy from one party to another.

accelerated death benefit

A life insurance policy rider that pays a portion of the death benefit while the insured is still living, but expected to die soon.

accidental death benefit

A life insurance policy rider that pays an additional benefit if the insured's cause of the death is accidental.

account or accumulated value

The gross cash value of a life insurance policy before deducting surrender charges.

accredited investor

An individual or entity who meets the accredited investor requirements of Rule 501, Regulation D of The Securities Act of 1933.

accumulate at interest dividend option

A participating whole life insurance policy dividend option that allows dividends to remain on deposit with the insurance company and earn interest.

actuarial department

The department within an insurance company responsible for making sure operations are mathematically sound.

actuary

An insurance professional who analyzes, estimates, and manages statistical information. They also evaluate reserves, determine rates and rating methods in order and determine and manage business and financial risks.

additional term dividend option

A term life insurance policy dividend option under which policy dividends are used as a net single premium to buy one-year term insurance.

adjustable life insurance

A participating whole life insurance policy dividend option that allows dividends to purchase one-year term insurance to increase the policy death benefit.

admitted assets

Assets required by state insurance departments to determine the solvency of insurers and reinsurers.

admitted company

An insurance company that is licensed and eligible to do business in a particular state.

adverse selection

The potential for higher risks to obtain a disproportionate amount of insurance compared to lower risks.

affinity sales

Insurance that is sold through groups or associations.

age change

The date when a person's insurance age changes for rating purpose. Some companies determine according to the insured's nearest age and some determine based upon the insured's current age.

agency company

Insurance companies whose policies are sold primarily through independent as opposed to captive agents.

agent

Individuals or entities licensed to sell insurance by State Insurance Departments.

agent's statement

The section of an insurance application where the agent reports anything known or suspected that the applicant or proposed insured did not disclose.

aleatory contract

Contracts (such as insurance) whereby party #1 gives something of value to party #2 in exchange for #2's conditional promise to perform a stated act upon the occurrence of a stated event.

alien insurance company

An insurance company established under the laws of a foreign country.

alternative dispute resolution (adr)

Disputing parties agree to be bound to the decision of an independent third party who attempts to arrive at a settlement between the two sides. Used as an alternative to going to court to settle disputes.

American Council of Life Insurance

An insurance association that represents US member companies before federal and state legislators, regulators, and courts in addition to providing consumer information about life insurance and the life insurance industry.

amount of risk

The difference between the death benefit and the account or accumulated value of a life insurance policy.

anniversary

The anniversary of the original policy date of an insurance contract.

annual statement or annual report

Summary of an insurance policy that is provided to the policy owner annually on the anniversary date.

annually renewable term insurance

Term life insurance that can be renewed annually at increasing rates until the insured reaches the age specified in the policy.

antiselection

The tendency of those with a greater-than-average probability of loss to apply for or maintain more insurance than usual.

antitrust laws

Laws that prohibit price fixing by groups who want to restrict supply or prevent competition in the market. Insurance companies are currently subject to these statutes on the state but not federal level.

applicant

The individual or entity applying for an insurance policy.

application

The insurance company form used to collect personal, occupational, medical, financial, and avocational information about a proposed risk. Upon issuance it becomes part of the legal contract of insurance.

apportionment

The proportionate sharing of loss between two or more insurers covering that same loss.

approval type temporary insurance agreement

A conditional agreement given in conjunction a receipt and offering temporary term life insurance coverage on the date the insurer approves the proposed insured as a standard or better risk.

arbitration

Dispute resolution procedure whereby an insurance company and policy owner settle a disagreement based on an independent third party's decision.

assignee

An individual or entity who is assigned rights by the owner of a life insurance policy.

assignment

The act of assigning conditional or absolute rights in a life insurance policy.

assignor

The individual of entity who conveys to the assignee conditional or absolute rights in a life insurance policy.

association group

Group insurance for an association of individuals that was formed for another reason besides obtaining insurance.

attained age

The current age of the person insured by a policy.

attained age conversion

The conversion of a life insurance policy from one form to another at rates determined by the insured's age on the date of the conversion.

attending physician's statement (aps)

A written declaration (often accompanied by medical records) from a physician/provider regarding past or present medical treatment of an insured or proposed insured.

automatic dividend option

The default dividend option for a participating whole life insurance policy. Typically the purchase of paid up additional insurance.

automatic nonforfeiture option

The default nonforfeiture provision that goes into effect when a whole life insurance policy would otherwise lapse for non-payment of premium. Most frequently the extended term insurance option.

automatic premium loan

A whole life policy provision that allows the insurance company to automatically loan available cash values toward the payment of past due premiums to avoid the lapse of a policy.

aviation exclusion

A provision that exempts a life insurance company from paying claims resulting from certain specified aviation activities.