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Glossary of Life Insurance Terms
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Definitions written so you can actually understand them. Browse alphabetically, or search for a word or term by typing it into the search field located in the top navigation by the GO button (above right).
Immediate Annuity
This is an annuity with income payments that begin one period after the annuity is purchased. Available only with permanent life insurance policies, immediate annuities could be seen as working cross-grain against the normal function of life insurance — which is to grow in value over the long haul, not to make immediate payments to the policyholder. As such, policyholders interested in life insurance with an immediate annuity may need to specifically request it.
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Impairment
Any factor of the health, occupation, activities, or life-style of a prospective policyholder that could increase that person’s risk for premature death.
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Implied Authority
When a principal engages an agent, that principal intends the agent to have a degree of authority in order to carry out the services the principal engaged the agent to perform. This is called implied authority, and can exceed the perameters of authority laid out by any express grant of authority. See agent and principal. Compare with express authority
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Incontestable Clause
A clause in a life insurance policy that provides a specific time limit (usually two years) on the insurance carrier’s right to dispute a policy's validity based on material misstatements made in the application. See also contestability period.
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Increasing Term Insurance
This is a type of term insurance which is designed to behave more like a permanent life insurance plan in that the death benefit of the policy increases over the term of the coverage. The increases in death benefit may occur in stated intervals, or they may be linked to increases in the cost of living.
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Independent Life Brokers
These are licensed brokers who operate independently of any one life insurance carrier and who specialize in selling particular types of products or in meeting the life insurance needs of certain types of policyholders.
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Independent Marketing Organization (IMO)
An organization neither owned nor affiliated with any life insurance carrier that contracts specifically to perform distribution and other marketing functions for one or more of a life insurance carrier’s products or product lines. IMOs will frequently contract with multiple life insurance carriers at once. ChoiceAutoInsurance.com could reasonable be seen to be an electronic IMO.
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Indexed Life Insurance
A whole life insurance plan that automatically increases the policy’s death benefit as well as the premium rate every year in tandem with any increase in the Consumer Price Index.
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Individual Employer Groups
One of several of what insurance carriers consider to be group market segments. This one is composed of single employers providing coverage for employees through a master contract that the carrier issues to the employer.
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Individual Insurance
Contrast with group insurance, individual insurance is issued to an individual person. Also called ordinary insurance. See also ordinary life insurance.
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Initial Premium
The first premium paid, or due to be paid, on a life insurance contract.
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Initial Reserve
This is the reserve held on a policy at the beginning of the policy year. The initial reserve includes the net annual premium then due, regardless of whether it has yet been paid.
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Insolvency Clause
This clause is contained in most reinsurance contracts and is required by most states. The insolvency clause specifies that, if the ceding company becomes insolvent, the reinsurer must pay the ceding company or its liquidator all reinsurance which comes payable, without reduction, even if the ceding company or its liquidator has failed to pay all or a portion of any claim.
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Inside Build-Up
See cash value. See cash value.
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Inspection Receipt
This is a receipt that’s given to an applicant when the applicant receives a policy for inspection. The inspection receipt states that the insurance is not in effect and that there has been no delivery of the policy in the legal sense.
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Inspection Report
The Fair Credit Reporting Act defines an inspection report as an investigative consumer report. It is made by a consumer reporting agency and issued to a life insurance carrier, reporting on the occupation, lifestyle and economic standing of a life insurance applicant. See also investigative consumer report.
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Installation
This is a group life insurance term used to describe all the activities that occur from the time a potential customer decides to purchase a group insurance policy to the time the master contract and its individual certificates are issued.
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Installment Certificate
At the settlement of a life insurance claim, an installment certificate is issued to all the beneficiaries of the life insurance policy, specifying the amount of each benefit payment and the time frame in which payments will be made as dictated by the policy’s settlement option. The installment certificate also specifies whether a beneficiary is allowed to withdraw all or part of the funds during the payment period. See also settlement agreement and settlement options.
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Installment Refund Option
One of several life insurance refund options, the installment refund option specifies that any proceeds remaining after the death of the beneficiary will be paid in installments to the contingent payee. Contrast with the cash refund option.
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Insurability Provision
A life insurance provision stating the underwriting rules and practices of the carrier which hold that a policyholder must still be considered “insurable” at the time the policy is delivered in order for the policy to become effective.
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Insurability Statement
When a substantial amount of time has passed between the application for a life insurance policy and the time that policy is actually issued, the insurance carrier may ask an applicant to complete the insurability statement questionnaire. Its purpose is to determine if any factors have changed since the application that would affect the applicant’s insurability status.
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Insurability Type Temporary Insurance Agreement
This is an agreement a life insurance carrier would issue along with a conditional premium receipt to provide temporary life insurance coverage. The coverage is valid as of the date specified in the agreement on the condition that the applicant deemed to be insurable. See also conditional premium receipts and temporary insurance agreements. Compare to approval type temporary insurance agreement.
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Insurance
A system for protecting individuals against loss whereby a number of individuals agree to pay certain sums of money, called premiums, to create a pool of money that will then guarantee that the individuals will be compensated for the losses caused by the event should it occur to one or more members of the pool.
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Insurance Agent
A representative of an insurance carrier who sells that carrier’s insurance products. In the course of his job, an insurance agent locates prospective customers, determines the insurance needs of each customer, and assists the customer in applying for insurance. Typically, an insurance agent will deliver the policy when the application is approved, will collect the initial premium, and will provide customer service to the subsequent policyholder.
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Insurance Regulatory Information System (IRIS)
Developed by the NAIC, this information system helps state regulatory agencies assess the financial stability of individual insurance carriers by means of a series of ratios derived from statements that each carrier must provide by law on an annual basis.
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Insurance Trust
A common form of trust that is funded by the life insurance policies issued on the life of the trust’s creator, or by the proceeds of such a policy.
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Insured
The person whose life is insured by a life insurance policy.
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Insurer
The life insurance carrier, or otherwise the party in an insurance contract that promises to pay a benefit if a specified loss occurs.
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Interest-Adjusted Cost
One of the figures used in the interest-adjusted net cost (IANC) method of comparing the cost of insurance policies. The IANC gives us the average annual cost of a policy, including premiums, dividends and cash values. Also called the surrender cost index (SCI).
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Interest-Adjusted Net Cost (IANC) Method
A method of comparing the costs of life insurance policies. The IANC method compares the cost of life insurance policies by weighing dividends and cash values according to how far into the future the various amounts are payable. IANC then calculates three amounts: the interest-adjusted cost, the interest-adjusted payment, and the equivalent level annual dividend. Also known as the surrender cost index (SCI) method.
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Interest-Adjusted Payment
One of the figures used in the interest-adjusted net cost (IANC) method of comparing the costs of life insurance policies. The IANC gives us the average annual payment for a policy, and is calculated using only premiums and dividends. Also called the net payment cost index.
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Interest Option
A life insurance settlement option in which a policy’s proceeds are left temporarily on deposit with the carrier and the interest earned on those proceeds is paid at regular intervals to the beneficiary.
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Interest-Sensitive Insurance
See investment-sensitive insurance.
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Internal Replacement
This is when a policyholder surrenders one life insurance policy in order to buy another policy issued by the same insurance carrier.
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Interpleader
A claims settling method under which the insurance carrier pays the policy proceeds to a court, rather than to any beneficiaries. In doing so, the carrier states that it cannot determine the correct party to whom the proceeds should be paid and in essence transfers responsibility for that decision-making to the court.
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Investigative Consumer Report
As defined by the Fair Credit Reporting Act and employed in the field of life insurance, an investigative consumer report uses interviews with parties with knowledge of the life insurance applicant in order to gain information regarding that applicant’s character, mode of living or general reputation. See also inspection report.
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Investment-Sensitive Insurance
A category of insurance products with cash values and death benefits that vary according to the performance of the underlying investment portfolio. Investment-sensitive insurance policyholders share a portion of the insurer's investment risk in exchange for this potential increase in gain. The exact benefit amounts for these policies cannot be computed in advance, beyond any guaranteed minimums. Variable life and variable universal life are examples of investment-sensitive insurance.
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Investment Year Method (IYM)
Once of several accounting method used by life insurance carriers. With IYM, an insurance carrier keeps records of the interest rates it earns annually on funds assigned that year to accounts within the general account. Also called the new money method. Compare to the portfolio method.
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Irrevocable Beneficiary
A beneficiary whose rights to the proceeds of a life insurance policy cannot be cancelled by the policyholder unless the beneficiary consents. See also beneficiary.
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Irrevocable Trust
A type of trust that once established cannot be changed.
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Investigative Consumer Report
A process that interviews parties familiar with the applicant in order to gain information regarding that applicant’s character, mode of living or general reputation. See also inspection report.
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Investment-Sensitive Insurance
Insurance products with cash values and death benefits that fluctuate in tandem with the performance of the underlying investment portfolio. Investment-sensitive insurance policyholders share a portion of the insurer's investment risk in exchange for this potential increase in gain. The exact benefit amounts for these policies cannot be computed in advance, beyond any guaranteed minimums. Variable life and variable universal life are examples of investment-sensitive insurance.
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Investment Year Method (IYM)
Once of several accounting methods available to life insurance carriers. Using this method, an insurance carrier keeps records of the interest rates it earns annually on funds assigned that year to accounts within the general account. Also referred to as the new money method. Compare to the portfolio method.
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Irrevocable Beneficiary
A beneficiary whose rights to the proceeds of a life insurance policy cannot be cancelled by the policyholder without that beneficiary’s consent. See also beneficiary.
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Issuing Bank
A mutual savings bank that sells and issues its own life insurance policies. Issuing banks issue contracts, keep the records, and invest the assets of their own insurance departments.
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Life insurance...because
life is unpredictable. |
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