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Glosssary 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).
Paid-Up Additions
Additional life insurance purchased with the dividends generated by the original policy. With paid-up additions, the policy premium doesn’t increase even as the amount of insurance carried by the policy increases. Also called dividend additions.
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Paid-Up Policy
A life insurance policy with a cut-off date beyond which no further premiums are ever due. Once the cut-off date is reached, the policy is considered paid up, and the benefits of the policy are held until whatever future date when they become payable.
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Participating Policy
Sometimes referred to as a par policy, this is a life insurance policy with dividends payable to the policyholder. See also dividend.
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Per Capita Beneficiary Designation
A class beneficiary designation under which the proceeds of a life insurance policy proceeds are distributed only among those class members who survive the insured. Contrast with per stirpes beneficiary designation.
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Period Certain
A specified time frame during which the life insurance company unconditionally guarantees that benefit payments will continue under a settlement option.
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Permanent Life Insurance
A life insurance contract that is designed to go to age 100. These policies build cash value.
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Personal Interview Report
A report containing the same information as an inspection report. The difference is that a personal interview report gathers its data on the proposed policyholder solely from the proposed policyholder rather than from other sources. See also inspection report.
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Per Stirpes Beneficiary Designation
A class beneficiary designation under which the heirs of a deceased class member receive that deceased class member's share of the life insurance policy proceeds. Contrast with per capita beneficiary designation.
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Policy
Documentary evidence of an insurance contract which contains the pertinent facts about the policyholder, the insurance coverage, the insured, and the insurer.
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Policy Acquisition Costs
Costs, including advertising and sales commissions, that are directly attributable to the development of new business. Also called acquisition expenses.
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Policy Anniversary
Also called simply “the anniversary,” this is the date on which a life insurance policy was issued.
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Policy Charge
Also referred to as a policy fee, this is an amount that the life insurance carrier adds to the gross premium to help cover the carrier’s expenses. The charged amount is the same regardless of the size of the policy.
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Policy Loan
A loan made to a life insurance policyholder by the life insurance carrier, and which is secured by the policy’s cash value. No policy loan can ever exceed the cash value of the policy. Any policy loan amount that is still outstanding at the time of the policyholder’s death is deducted from the benefits prior to the payment to the policy’s beneficiaries.
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Policy Proceeds
The amount that the beneficiary actually receives from a life insurance policy after adjustments, either positive or negative, have been made to the basic death benefit for such things as policy loans, dividends, paid-up additions, late premium payments, and supplementary benefit riders. Compare to basic death benefit and death benefit.
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Policy Provisions
The statements in an insurance policy that describe the operation of the insurance contract. These provisions generally follow the face page in the policy.
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Policy Reserve
The assets an insurance company holds that serve to guarantee the insurance company will have sufficient funds to pay future claims.
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Policy Summary
A document containing certain legally required information about a policy being considered by an applicant.
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Policy Year
Described as the 12-month period between a policy's anniversaries.
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Portfolio
The array of products offered by an insurance company.
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Post-Notice
A Fair Credit Reporting Act-required notification from an insurance company to an applicant. In the event an insurance company makes an adverse decision about an applicant based on information contained in a report from a consumer reporting agency, a post-notice form must be sent to that applicant.
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Power of Agency
Established through agency contracts between insurers and their agents, the power of agency gives agent's the right to act on behalf of an insurer.
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Preference Beneficiary Clause
Wording in a life insurance policy which states that if no specific beneficiary is named, the insurer will pay the policy proceeds in a stated order according to a list of individuals included in the policy.
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Preferred Risk Class
A life insurance risk class that consists of individuals whose anticipated mortality is lower than the norm established for the standard risk class. Among other things, people in the preferred risk class are in excellent physical condition, have good family medical histories, and do not smoke.
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Preliminary Inquiry Form
Also called a trial application, this type of life insurance application form is used when there is a high probability that a policy either will not be issued or will be issued with such a high policy premium that it will be unacceptable to the applicant. Use of a preliminary inquiry form usually brings a quick response from the underwriting department.
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Premium
The payments you make on a life insurance contract. Premiums can be paid monthly, quarterly, semi-annually, or annually.
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Premium Deposits
Deposit amounts left with the life insurance company for the payment of future premiums.
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Premium Receipt
A written acknowledgement by a life insurance company that it has received an initial premium.
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Premium Reduction Option
A life insurance policy dividend option under which policy dividends are applied toward future premiums.
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Pre-Notice
Advance notice given by the life insurance company to the applicant that an investigative consumer report may be made on him or her. Pre-notice is a requirement of the Fair Credit Reporting Act.
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Primary Beneficiary
The party named in a life insurance policy as having the first rights to receive policy benefits when the life insurance policy become payable.
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Principal
The party who authorizes a second party, the agent, to act on the principal's behalf in contractual dealings with third parties.
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Probability
The likelihood of a given event occurring. In mathematics, it is the number of times that something is likely to occur out of a number of possible occurrences. The mathematical foundations of the life insurance industry are based on probability theory.
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Proceeds
The amount of money that the life insurance company is obligated to pay for the settlement of a life insurance policy.
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Professional Reinsurer
An insurance company whose sole or main business is reinsurance.
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Proximate Cause of Death
An event that is directly responsible for a death or an event that initiates an unbroken chain of events that lead to death.
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Life insurance...because
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