Term Life Insurance Glossary
C
Cafeteria Plan
An employee benefit plan that gives each employee several choices as to the types and/or amounts of group benefits.
Also known as a flexible benefit plan.
Capacity
The largest amount of insurance an insurer or a reinsurer is willing or able to underwrite. The term can refer to an insurer’s capacity on one individual or to the insurer’s capacity for all its business.
Captive Agents
See exclusive agents .
Carry-Over Provision
A provision found in most medical expense policies stating that expenses incurred during the last three months of a benefit period that are used to satisfy the current benefit period’s deductible may be used to satisfy any or all of the following benefit period’s deductible.
Case Management
A utilization management technique that addresses the medical necessity of care as well as alternative treatments or solutions, especially when the patient is likely to require very expensive treatment.
Also known as catastrophic claim management, large claim management, or medical case management.
Cash Payment Option
A life insurance policy dividend option under which policy dividends are paid to the policyowner in cash.
Cash Refund Option
A form of the life income option with refund which specifies that any proceeds remaining when the beneficiary dies will be paid in a lump sum to the contingent payee.
Contrast with the installment refund option.
Cash Surrender Value
(1) In a life insurance policy, the amount of money, adjusted for factors such as policy loans or late premiums, that the policyowner will receive if the policyowner cancels the coverage and surrenders the policy to the insurance company. Also called the net cash value. Compare to cash value. (2) In an annuity, the amount that a contractowner will receive if he surrenders a deferred annuity. This amount is equal to the accumulated value of the annuity less any surrender charges specified in the policy.
Cash Value
In a life insurance policy, the amount of money, before adjustment for factors such as policy loans or late premiums, that the policyowner will receive if the policyowner allows the policy to lapse or cancels the coverage and surrenders the policy to the insurance company. Cash values are a feature of most types of permanent life insurance, such as whole life and universal life.
Also called inside build-up and policyowners equity. Compare to cash surrender value.
Ceding Company
In a reinsurance transaction, the insurer that purchases reinsurance to cover all or part of those risks that it does not wish to retain in full. Also called the direct insurer, direct writer, or direct-writing company.
Certain Payment
A payment that, not being contingent upon any predesignated condition, will definitely be made under any circumstances.
Certificate of Assumption
In assumption reinsurance, a certificate sent to each policyholder whose policy has been ceded to give the policyowner (1) notice of the assumption and (2) information concerning the new insurer.
Certificate of Indebtedness
A certificate issued by an insurer to the beneficiary of a life insurance policy that specifies a guaranteed minimum interest rate and the frequency with which the insurer will make interest payments under the interest settlement option.
Certificate of Insurance
A document that describes the coverage provided by a group insurance policy and that is distributed by the group policyholder to each group insured.
Claim
A request for payment under the terms of an insurance policy.
Claim investigation
The process of obtaining necessary claim information in order to decide whether or not to pay a claim.
Claimant
The person or party making a formal request for payment of benefits due under the terms of an insurance contract.
COLA
See cost-of-living adjustment (COLA).
Conditional Premium Receipt
A type of premium receipt that specifies certain conditions that must be met before temporary life insurance coverage will become effective.
Also called a conditional receipt. See premium receipt, approval type temporary insurance agreement and insurabilty type temporary insurance agreement.
Conservation
An agent’s or an insurer’s efforts to prevent a policy from lapsing.
Contestable Period
The period of time (usually two years) during which an insurer may challenge the validity of a life insurance policy.
See also incontestable clause.
Contingent Beneficiary
The party designated to receive life insurance policy proceeds if the primary beneficiary should die before the person whose life is insured dies.
Also called the secondary beneficiary or the successor beneficiary.
Contingent Payee
The party who will receive any life insurance or annuity proceeds that are still payable at the time of the primary payee’s death.
Also called the successor payee.
Whole life insurance for which premiums are payable throughout the life of the policy.
Also called straight life insurance.
Contract of Adhesion
A legally binding agreement that is prepared by one party and that must be accepted or rejected as a whole by the other party, without any bargaining between the parties to the agreement. Insurance contracts are contracts of adhesion.
Contributory Group Insurance
Any group insurance plan that calls for the insureds to pay a portion of the cost of the group insurance coverage.
Contrast to noncontributory group insurance.
Conversion Privilege
(1) A group life insurance policy provision that allows a group insured whose coverage terminates for specified reasons to convert his group coverage to an individual policy of insurance without presenting evidence of his insurability. (2) The right to change insurance coverage in certain prescribed situations from one type of policy to another without presenting evidence of insurability. For example, the right to change from an individual term insurance policy to a permanent plan of insurance.
Convertible Term Insurance
A type of term insurance that allows the policyowner to change the term insurance policy to a whole life policy without providing evidence of insurability.
Corridor
(1) In the United States, the required difference between a universal life insurance policy’s face amount and the policy’s cash value. This difference is a specified percentage that depends on the insured’s age. If a policy’s cash value exceeds the required percentage of the face amount (that is, intrudes on the corridor), the policy will be considered an investment contract rather than an insurance contract. Also called the TEFRA corridor. (2) In reinsurance, an amount of insurance which is in excess of the ceding company’s retention limit but which is less than the reinsurer’s minimum cession. The ceding company must usually retain this amount of insurance.
Cost-of-Living Adjustment (COLA)
An increase in a pension benefit, disability income benefit or life income benefit to compensate for an increase in the cost of living.
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