Saturday, November 21, 2009

Life Insurance Glossary

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Paramedical Exam (Paramed):
A medical examination performed by a non-physician medical professional used to determine an applicant's health risk. The health risk is used in determining insurability and premium classification for life and health insurance.

Partial Disability:
A disability that prevents the insured from performing all of the normal duties associated with their occupation.

Partial Loss:
Damage to property that falls short of a total loss.

Participating Policy (par):
Life insurance policy where the policyowner receives dividends from the insurance company's surplus.

Per Capita:
A term used in the designation of beneficiaries. All surviving beneficiaries will share equally in the death benefit. If one beneficiary predeceased the insured, the remaining beneficiaries will share equally in the death benefit.

Per Stirpes:
A term used in the designation of beneficiaries. The distribution of the death benefit among beneficiaries with the provision that protects the heirs of each beneficiary in case the beneficiary dies before the insured. If one beneficiary predeceased the insured, that beneficiary's heirs would share equally in the death benefit of that beneficiary.

Permanent Life Insurance:
A policy that provides coverage throughout the insured's lifetime, with no policy expiration date, as long as premium payments are made. This policy may also build cash value.

Persistency:
The percentage of policies that remain in force and have not lapsed. The higher the persistency for an insurer, the better the retention of business.

Policy:
A legal document that details the terms of an agreement between an insurance company and a policy owner.

Policy Anniversary:
The anniversary of the date a policy was issued.

Policy Date:
The date on which a policy is in effect. This may be different than the issue date, if the policy was backdated.

Policy Fee:
A flat charge, added to the basic premium cost, used for the administrative expenses the insurance company incurs in processing a policy.

Policy Not Taken:
A Policy is not taken when an applicant decides not to accept the policy. If a policy was prepaid and the applicant declines the policy within the free-look period, the premium is fully refunded to the applicant.

Policyholder:
Person(s) or other entity who is the owner of the insurance policy.

Policyowner:
See Policyholder.

Power of Attorney:
A legal document that authorizes a specific person to act on behalf of the another person. This generally applies to signing certain legal documents and making decisions on behalf of the another person. A power of attorney may be designated to help decide the payment options for a beneficiary.

Preferred Risk:
An applicant or insured that represents lower risk than the standard category that was used to calculate the premium rate. This usually results in lower premiums.

Premium:
The payment(s) necessary to keep an insurance policy in force. Premiums are calculated based on the applicant's/insured's risk level of incurring a loss.

Premium Notice:
This is a notice from the insurance company detailing how much premium payment is due, and by what date.

Primary Beneficiary:
The entity (relative, business, trustee, etc.) selected by the owner of the policy to whom the proceeds are payable in the event of the insured's death.

Proof of Loss:
Formal documentation by the policy owner to the insurer about any incurred losses. This documentation is needed to assess the loss and also required before an insurer will compensate the policy owner for the loss.

Provisions:
The contents of an insurance contract that details the terms of the policy and the obligations and rights of the insured and the insurance company.

For more reference, click on any of the letters below to find life insurance terms that begin with that letter.
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