Life Insurance Concepts and Vocabulary Flashcards

Vocabulary flashcards covering key insurance concepts, rider types, policy structures, risk classifications, and legal definitions.

Variable Universal Life Insurance (VUL)

A Life Insurance policy that combines the flexibility of Universal Life with the investment of the cash values in separate accounts from Variable Life.

Waiver of Premium Rider

Optional rider that requires an insurer to assume payment of premiums should the insured become totally disabled for six months for the duration of the disability.

Warranty

Statements made that are guaranteed to be absolutely true. Statements made by the insurer must be warranties.

Whole Life Insurance

Type of insurance where level coverage lasts until death or age 100 and then the policy matures and pays out either the face amount or the cash value. Also known as straight life, ordinary life, fixed, rigid or permanent.

Unilateral

One-sided promise. Only one party makes a legally enforceable promise. The insurance company promises to pay the policy proceeds at some future date or event.

Universal Life Insurance (UL)

An "interest sensitive" flexible premium life insurance policy. A combination of ART and cash value. Has two death benefit options (A & B) and develops cash value.

Variable Annuity

The product is invested in a separate account and has no guaranteed rate of growth. The annuity promises to pay a fixed number of annuity units to the annuitant for the rest of his/her life. The value of the annuity units varies depending on the performance of the investments of the separate account.

Variable Life Insurance (VL)

Whole Life Insurance with fixed premiums. Cash value is invested in "separate accounts". A minimum death benefit is guaranteed but could increase if the investments do well.

Third Party Ownership

When a person(s) other than the insured purchases the insurance policy.

Twisting

Knowingly making misleading statements or making fraudulent comparisons in order to induce a client to drop a policy with an existing insurer and start a new one with a different company.

Underwriting

The process by which an insurer evaluates, classifies and ultimately either accepts or rejects risks.

Uniform Simultaneous Death Act

It directs that in life insurance if the insured and the primary beneficiary die at the same time the policy benefits are payable as if the insured outlived the beneficiary.

Speculative Risk

The possibility of experiencing either a loss or a gain. Gambling is an example of speculative risk.

Spendthrift Clause

State legislation that protects the rights of policyowners and beneficiaries from creditors. Death benefits cannot be attached by creditors of the policyowner.

Stock Insurer

An insurance company publicly owned and controlled by its stockholders who elect a board of directors to manage it.

Tax Sheltered Annuity (403B)

A qualified retirement program for employees of non-profit organizations. Contributions are made through a salary reduction program.

Riders

Optional coverages that can be added to policies that provide additional benefits or protections. Vary from policy to policy and company to company. Also known as addendums, additions, amendments, or additional policy benefits.

Risk Classifications

Standard Risk: A normal or average risk; no special conditions are required in the policy. Substandard Risk: A high risk; requires special conditions to be included in the policy or issued a rated policy. Preferred Risk: Less risky than the normal or average risk. Usually issued policies on a discounted basis.

Roth IRA

A non-tax deductible individual retirement account which grows tax free after 5 years.

Settlement Options

The five ways that the proceeds of a policy can be paid upon maturity. (1) Cash (2) Interest Only (3) Fixed Period (4) Fixed Amount (5) Life Income