Term Life Insurance Glossary
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Paid-up Additional Insurance Dividend Option
The dividend option under which the insurer uses each policy dividend to purchase paid-up additional term life insurance on the insured's life.
Paid-up Additions
Additional term life insurance purchased with policy dividends. No additional premiums are needed for paid-up additions.
Also called dividend additions.
Paid-up Policy
An term life insurance policy that requires no further premium payments.
Paramedical Report
A report based on a physical examination and a medical history completed by a medical technician, a physician's assistant, or a nurse, rather than a physician. A paramedical report describes the health of a proposed insured and can serve as part of an insurance application.
Partial Disability
A disability that prevents an insured from engaging in some of the duties of his or her usual occupation or from engaging in the occupation on a full-time basis.
Partial Disability Benefit
A flat amount specified in a disability income insurance policy that is payable when the insured suffers a partial disability. Usually the partial disability benefit is half the full disability benefit.
See also residual disability benefit.
Participating Policy
An insurance policy under which the policyowner shares in the insurance company's divisible surplus by receiving policy dividends.
Also known as a par policy. See also dividend.
Payee
(1) The person or party who is to receive the proceeds of a term life insurance policy in accordance with the terms of a settlement agreement. (2) The person who receives the periodic benefit payments during an annuity's payout period.
Pension
A lifetime monthly income paid to a person who has retired.
Pension Benefit Guaranty Corporation (PBGC)
In the United States, the organization that insures benefits in defined benefit pension plans. Its purpose is to make sure that all participants in qualified defined benefit pension plans receive the vested benefits to which they are entitled, even if their pension fund goes bankrupt.
Per Capita Beneficiary Designation
A class beneficiary designation under which term life insurance policy proceeds are shared only by those class members who survive the insured.
Contrast to per stirpes beneficiary designation.
per stirpes beneficiary designation
A class beneficiary designation under which the descendants of a deceased class member receive the deceased class member's share of the life insurance policy proceeds.
Contrast to per capita beneficiary designation.
Period Certain
A specified time during which an insurer unconditionally guarantees that benefit payments will continue under a settlement option or annuity.
Permanent and Total Disability
A condition that prevents an insured from returning to any gainful employment.
Permanent Life Insurance
Life insurance that provides coverage throughout the insured's lifetime and also provides a savings element that builds a cash value.
For descriptions of traditional permanent (whole) life products see continuous-premium whole life insurance, graded-premium whole life insurance, and joint whole life insurance policy. For descriptions of nontraditional whole life products see universal life insurance and variable life insurance.
Personal Interview Report
A report that contains the same types of information as an inspection report, except that the personal interview report relies on the proposed insured as the only source of information.
See also inspection report.
Policy
A written document that contains the terms of the contractual agreement between an insurance company and policyowner.
Policy Anniversary
The anniversary of the date on which a policy was issued.
Sometimes simply called the anniversary.
Policy Fee System
A pricing system for unbundled products whereby the customer pays a flat amount—called the policy fee—plus a specific rate per $1,000 face amount.
Policy Loan
A loan that is made to a term life insurance policyowner by an insurer. A policy loan is secured by a policy's cash value and cannot exceed the cash value. When the policy benefits are paid, the amount of any outstanding policy loan made against the policy is deducted from the benefits.
Policy Proceeds
The amount that the beneficiary actually receives from a term life insurance policy after adjustments have been made to the basic death benefit for policy loans, dividends, paid-up additions, late premium payments, and supplementary benefit riders.
Also called net policy proceeds. Compare to basic death benefit and death benefit.
Policy Provisions
The statements, following the face page of an insurance policy, that describe the operation of the insurance contract.
Policy Year
The 12-month period between a policy's anniversaries.
Policyowner
The person or party who owns an individual insurance policy. The policyowner is not necessarily the person whose life is insured. The terms policyowner and policyholder are frequently used interchangeably.
Preauthorized Check (PAC) System
An automatic premium payment technique whereby the policyowner authorizes the insurer to generate a check against the policyowner's bank account to pay each renewal premium.
Preference Beneficiary Clause
A term life insurance policy provision which states that if no beneficiary is named, the insurer will pay the policy proceeds to the first living individual listed in the policy. The provision might list the “spouse of the insured,” followed by the “children of the insured,” etc.
Also called a succession beneficiary clause.
Preferred Risk Class
The risk category that is composed of proposed insureds who present a significantly less-than-average likelihood of loss.
Sometimes called the superstandard risk class.
Preliminary Inquiry Form
A type of application form used when there is a high probability that a policy either will not be issued or will be issued with such a high substandard rating that the policy premium will be unacceptable to the applicant. Using a preliminary inquiry form usually brings a quick response from the underwriting department.
Also called a trial application.
Premium
The payment, or one of a series of payments, required by the insurer to put an insurance policy in force and keep it in force.
Premium Deposits
Amounts that are left on deposit with the insurer for the payment of future premiums.
Premium Receipt
A receipt that the sales agent gives to an applicant for insurance in exchange for the initial premium payment and that provides a proposed insured with temporary insurance coverage while the application is being underwritten.
See also binding premium receipt and conditional premium receipt.
Present Value
The amount of money that must be invested on a certain day, sometimes called the valuation date, in order to accumulate to a specified amount at a later date.
Presumptive Disability
A condition that, if present, automatically causes an insured to be considered totally disabled and entitles the insured to receive a disability policy's full income benefit. Examples of presumptive disabilities are total and permanent blindness or loss of two limbs.
Primary Beneficiary
The party or parties who have first rights to receive the benefits of a term life insurance policy following the death of the insured. Also called first beneficiary.
Compare to contingent beneficiary.
Proceeds
The amount of money that the life insurance company is obligated to pay for the settlement of a term life insurance policy, endowment insurance policy, or annuity.
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LOMA's Glossary of Insurance Terms (c) 1997 LOMA (Life Office Management Association, Inc.). Used with permission from the publisher. All rights reserved. Copying or downloading this information without permission from the publisher is a violation of federal and international law. For information on purchasing a copy of the Glossary or for additional information on LOMA and its educational programs, visit LOMA's Web site at www.loma.org.
