Absolute assignment - The irrevocable transfer of all of a policy owners ownership rights in a life

insurance policy to another. Contrast with collateral assignment.

Accidental death and dismemberment (AD&D) benefit- A supplemental life insurance policy
benefit that provides an accidental death benefit and provides a dismemberment benefit payable if an
accident causes the insured to lose any two limbs or sight in both eyes.

Accidental death benefit (ADB)- A supplemental life insurance policy benefit that requires the
insurer to pay a specified amount of money in addition to the policys basic death benefit if an insured
dies as a result of an accident.

Actuary- An expert in financial risk management and the mathematics and modeling of insurance,
annuities, and financial instruments.

Advance premiums-See premiums paid in advance.

Amortization- In general, the reduction of a debt by regular payments of principal and interest that
result in full payment of the debt by the maturity date. In accounting, the periodic and systematic
increase (decrease) of the original cost of an investment to its ultimate value at maturity; amortization
typically applies to an insurers long-term assets such as bonds, mortgages, and other debt securities.
Contrast with depreciation.

Annually renewable term (ART) insurance- yearly renewable term insurance.

Annuity- In general terms, a series of periodic payments. In the financial services industry, a contract
under which an insurer promises to make a series of periodic payments to the contract owner in
exchange for a premium or series of premiums. See also deferred annuity and immediate annuity.

APL option- automatic premium loan option.

Assumed mortality- The hypothetical or assumed number or rate of deaths in a given cohort, or
group of people. Contrast with expected mortality.

Backdating- A practice by which an insurer makes the effective date of an insurance policy earlier
than the date of the application.

ASIC mortality table-A type of mortality table that has no margin built into the rates, is used for
technical product design, and provides realistic mortality rates so that an insurer can best estimate
future mortality costs. Contrast with valuation mortality table.

Claim- A request for payment under the terms of an insurance policy.

Contingent annuitant-A person who becomes the annuitant of an annuity contract if the primary
annuitant dies before annuity payments begin or during the payout period.

Contingent beneficiary- The party named to receive a life insurance policy's proceeds if the primary
beneficiary should die before the insured. Also known as a secondary beneficiary or successor
beneficiary. See also primary beneficiary.

Contract- A legally enforceable agreement between two or more parties; the agreement consists of a
promise or a set of promises.

Contract of indemnity- An insurance policy under which the amount of the policy benefit payable for
a covered loss is based on the actual amount of financial loss that results from the covered event, as
determined at the time of the event. For example, many medical expense policies are contracts of
indemnity. Contrast with valued contract.

Endowment insurance- A type of life insurance that provides a policy benefit payable either when
the insured dies or on a stated date if the insured is still alive on that date.

Financial planner-A professional who analyzes a customers personal financial circumstances and
goals and prepares a program designed to help the customer achieve those goals.

Foreclosure- A legal proceeding by which a lender can take possession of and sell a mortgaged
property to recover the unpaid loan balance if the borrower fails to make timely contractual principal
and interest payments on the loan.

Free-look provision-An insurance or annuity policy provision that gives the policy owner a stated
period of timeusually at least 10 daysafter the policy is delivered in which to examine the policy.
Sometimes referred to as a free-examination provision or a cooling-off provision.

Insurable interest- The interest an insurance policy owner has in the risk that is insured. A policy
owner has an insurable interest if he is likely to suffer a genuine loss or detriment should the event
insured against occur. Without the presence of insurable interest, an insurance contract would not
have been formed for a lawful purpose and, thus, would be void.

Insurance- A mechanism for transferring some or all of the risk of a financial loss caused by events
such as fire, accident, illness, or death from an individual or entity to an insurance company.

Mortality rate- The rate at which death occurs among a specified group of people during a specified
period, typically one year. Contrast with morbidity rate.

Paid-up policy- A life insurance policy that requires no further premium payments but continues to
provide coverage.

Partial disability- A disability that prevents the insured either from performing some of the duties of
his usual occupation or from engaging in that occupation on a full-time basis.

Policy loan- A loan a policyowner receives from an insurer using the cash value of a life insurance
policy as security.

Sum assured- It is the amount that would be paid to the nominee in case of the death of the
insured person (The afterlife effect) and plays a crucial role in determining the premium one has
to pay to get the policy (The effect on an alive person).

Sum under consideration (SUC) - It is the amount that would be paid to the nominee in case of the
death of the insured person

Term life insurance-Life insurance that provides a death benefit only if the insured dies during the
period specified in the policy. Contrast with cash value life insurance.

Underwriter- An insurance company employee who (1) assesses and classifies the degree of risk a
proposed insured or group represents with respect to a specific insurance product and (2) makes a
decision concerning the acceptance of that risk.

Underwriting- The process of (1) assessing and classifying the degree of risk a proposed insured or
group represents with respect to a specific insurance product and (2) making a decision to accept or
decline that risk. Also known as selection of risk.

Whole life insurance-A type of cash value life insurance that provides lifetime insurance coverage
usually at a level premium rate that does not increase as the insured ages.

Withdrawal- A transaction in which the owner of a cash value life insurance policy or a deferred
annuity contract elects to receive a portion of the policys cash value while the policy is in force or of
the contracts accumulation value during the accumulation period. Also known as a partial surrender
or policy withdrawal. A full withdrawal, also known as a surrender, results in the termination of the
policy.

Yield to maturity-The rate of return a bondholder will earn if he holds a bond until maturity.