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Term Life Insurance Glossary

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Absolute Assignment

An assignment of a term life insurance policy or annuity contract under which the policyowner or annuity contract owner transfers all policy ownership rights to an assignee.

See also assignment.

Accelerated Death Benefit Rider

A supplementary term life insurance policy benefit rider that allows a policyowner-insured to receive a specified portion of the policy’s death benefit before the policyowner insured’s death if certain conditions are met.

Also known as living benefit rider.

Accidental Death Benefit (ADB) Rider

A supplementary term life insurance policy benefit rider that provides for an amount of money in addition to the basic death benefit of a term life insurance policy. This additional amount is payable only if the insured dies as the result of an accident.

Accidental Result Provision

A term life insurance policy accidental death benefit provision which states that an accidental death benefit will be payable if the insured’s death was the result, directly and independently of all other causes, of accidental bodily injury.

Actuarial Department

The department in a life and health insurance company responsible for seeing that the company’s operations are conducted on a mathematically sound basis. In conjunction with other departments, it designs and revises a company’s life and health insurance products. The actuarial department calculates premium and dividend rates, determines what a company’s reserve liabilities should be, and establishes nonforfeiture, surrender, and loan values. It also does the research needed to predict mortality and morbidity rates, to establish guidelines for selecting risks, and to determine the profitability of the company’s products.

Actuary

An expert in the mathematics of insurance, annuities, and financial instruments.

Additional Term Insurance Dividend Option

A term life insurance policy dividend option under which policy dividends are used as a net single premium to purchase one-year term insurance.

Also called the additional insurance option or the fifth dividend option.

Agent

A party who is authorized by another party, the principal, to act on the principal’s behalf in contractual dealings with third parties. Called a mandatary in Quebec.

Agent’s Statement

The portion of the insurance application in which the agent reports anything he or she knows or suspects about the proposed insured that is not reported by the applicant or proposed insured.

American Council of Life Insurance (ACLI)

In the United States, an organization which collects and disseminates data on life insurance markets.

Anniversary

See policy anniversary.

Annually Renewable Term (ART) Insurance

See yearly renewable term (YRT) insurance.

Antiselection

The tendency of people who believe they have a greater-than-average likelihood of loss to apply for or continue insurance to a greater extent than do other people.

Also called adverse selection or selection against the insurer.

Applicant

The party applying for a term life insurance policy.

Application

A form that must be completed by an individual or other party who is seeking term life insurance coverage. This form provides the insurance company with much of the information it will need to decide whether to accept or reject the risk.

Approval Type Temporary Insurance Agreement

An agreement issued in conjunction with a conditional premium receipt that provides temporary term life insurance coverage as of the date the insurer approves the proposed insured as a standard risk.

See also conditional premium receipt and temporary insurance agreements. Compare to insurability type temporary insurance agreement.

APS

See Attending Physician's Statement (APS).

ART

See yearly renewable term insurance (YRT).

Assignee

The party to whom all or certain contractual rights are transferred under an absolute or collateral assignment.

Assignment

An agreement under which one party—the assignor—transfers some or all of his ownership rights in a particular property to another party—the assignee.

See also absolute assignment.

Assignor

The owner of property who transfers certain rights in that property to another party by means of an absolute or collateral assignment.

Attained Age

The current age of an insured.

Attained Age Conversion

The conversion of a life insurance policy from one form of insurance to another (such as from term life insurance to whole life insurance) at a premium rate that is based on the age of the insured person at the time of the conversion.

Attending Physician’s Statement (APS)

A written statement from a physician who has treated, or is currently treating, a proposed insured or an insured for one or more conditions. The statement provides the insurance company with information relevant to underwriting a risk or settling a claim.

Automatic Dividend Option

For a particular life insurance policy, the dividend option that applies if the policyowner does not choose an option. The most common automatic dividend option is the paid-up additional insurance dividend option.

See dividend options.

Automatic Nonforfeiture Option

For a particular life insurance policy, a specified nonforfeiture benefit that becomes effective automatically when a renewal premium is not paid by the end of the grace period and the policyowner has not elected another nonforfeiture option. The most common automatic nonforfeiture option is the extended term insurance option.

See also nonforfeiture options.

Automatic Premium Loan (APL)

A life insurance policy provision that allows the insurer to pay an overdue premium on a policy by making a loan against the policy’s cash value.

Aviation Exclusion

A life insurance contract provision which specifies that the death benefit is not payable if the insured dies because of certain aviation activities.

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