This glossary provides some commonly used definitions of insurance terms. These are meant to provide you with a general background. Please refer to your insurance contract for specific definitions that apply to your policy.
Accelerated Death Benefit A benefit available on some life insurance policies that provides access to death benefit proceeds prior to death. This benefit is usually triggered by illness expected to be terminal within a certain time. Also known as "Living Needs" or "Living Needs Benefits."
Adjustable Life
A form of life insurance which allows changes on the insurance policy face amount, the amount of premium, period of protection, and the length of the premium payment period. (See also "Flexible Premium Adjustable Life Insurance Policy").
Age Change Date
The date on which a person's age changes for purposes of calculating insurance age. In most life insurance contracts this is the date midway between the insured's next and last birth dates. On the Age Change date, a person's insurance age may change to that of the age nearest the insured's next birthdate. This is also called the Attained Age.
Age Limits
Stipulated minimum and maximum ages below and above which the Insurance Provider will not accept applications or may not renew policies.
Agent An individual or company licensed and appointed by state(s) to solicit insurance and provide services to the policy owner on behalf of the Insurance Provider. An agent does not have the authority to alter any terms of the Insurance Provider's application or policies or to bind the Insurance Provider.
Applicant An individual applying for insurance either on his or her own life or on the life of another. The person who signs a written application for insurance.
Application A signed statement of facts and representations made by a person applying for life insurance. The application is used by the Insurance Provider to decide whether to issue an insurance policy and at what premium rate. The application is attached to and becomes part of the insurance policy when issued.
Assignment A transfer of an ownership right. In life insurance contracts, it must be in writing on forms provided by, and filed with, the Insurance Provider. No assignment is binding on the Insurance Provider unless received and accepted by it.
Attained Age The date on which a persons age changes for purposes of calculating insurance age. In most life insurance contracts this is the date midway between the insured's next and last birth dates. On the age change date, a person's insurance age may change to that of the age nearest the insured's next birthdate. This is also called
Age Change.
Automatic Premium Loan Provision A provision in a Cash Value life insurance policy that allows the Insurance Provider to use the cash value to automatically pay any premium in default at the end of the grace period, provided the premium does not exceed the insurance policy's Cash Surrender Value on the due date of the premium.
Backdating A procedure for making the effective date of an insurance policy earlier than the application date. Backdating is often used to make the age at issue lower than it actually was at the time of the application in order to get a lower premium. State laws often limit backdating of policies to six months.
Beneficiary
A person or persons named by the policy owner who will receive the proceeds upon the death of the insured.
Benefits The amount payable by the Insurance Provider to a claimant, assignee, or beneficiary, contingent upon the conditions set out in the insurance policy.
Business Insurance With respect to life insurance, insurance policies written for business purposes on selected lives, such as key employee, sole proprietorship, partnership, corporation and Buy-Sell Agreements.
Buy-Sell Agreement An arrangement among part-owners of a business, where under stated conditions, e.g., disability or death, the person withdrawing from the business or his/her heirs are legally obligated to sell their interest to the remaining part-owners, and the remaining part-owners are legally obligated to buy at a price fixed in the agreement. Cash Value
The equity amount available to the policy owner when a life insurance policy is surrendered to the insurance company, or the amount upon which the total available for an insurance policy loan is determined. (Also known as Account Value.)
Claim
A request for payment according to the terms of an insurance policy.
Collateral Assignment
The assignment of an insurance policy to a creditor as security for a debt. The creditor is entitled to be reimbursed out of insurance policy proceeds for the amount owed in the event of the insured's death.
Contestable Clause
The conditions under which, or the period of time during which, the Insurance Provider may question or void the insurance policy for material misrepresentation(s). After that time has lapsed, normally two years from the issue date, and in the absence of fraud, the insurance policy cannot be contested except for non payment of premiums and the existence of any Accidental Death Benefit or disability benefit.
Contingent Beneficiary
A person or persons named to receive insurance policy benefits if the primary beneficiary dies before the insured or is ineligible to receive the proceeds at the time the benefits become payable.
Convertible An insurance policy feature that allows the policy to be changed to another form without additional evidence of insurability. Most Term policies can be converted into permanent insurance.
Cost of Insurance
The amount that is paid for the pure insurance protection element of a life insurance contract.
Charles Schwab & Co., Inc. ("Schwab"), in association with the Small Business Insurance Agency, Inc. ("SBIA") provides customers with access to term life insurance issued by respected insurance companies. Schwab and SBIA are licensed insurance agencies.
The term life products available are underwritten and issued by the participating life insurance companies listed on this Web site. Not all policies and product features are available in all states. This is not an offer or solicitation in any jurisdiction where the policies are not approved for sale. Any obligations under the policies are the exclusive obligations of the insurance company and are subject to the financial condition of the insurance company.
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