III IC-26 key terms

The amount a policyholder pays, usually monthly or annually, to keep an insurance policy in force. It funds death benefits, expenses, and any cash value accumulation.

The total charge billed to the policyholder, consisting of the net premium for benefits plus loading for expenses, commissions, taxes, and profit margin.

The portion of premium calculated from mortality and interest assumptions alone, excluding expense loading. It represents the pure cost of the insurance protection and reserve funding.

The expense component added to the net premium to cover commissions, underwriting, administration, taxes, and profit. It bridges the difference between net and gross premium.

A statistical table showing death rates by age and sex for a defined population. Insurers use it to project claims and price premiums and reserves.

The frequency of illness or disability within a population over a period, expressed per thousand lives. It drives pricing and reserving for health and disability products.

A liability recorded for future policy obligations the insurer expects to pay. It reflects the present value of future benefits minus future premiums, not a fund of earmarked cash.

The accumulated savings element inside a permanent life policy that the owner can borrow against, withdraw, or receive on surrender. It grows tax-deferred and is distinct from the death benefit.

The amount an insurer pays the owner when a permanent policy is voluntarily terminated before maturity or death. It equals cash value less any surrender charges.

A fee deducted from cash value when a policy is cancelled during early years. It recovers upfront acquisition costs and typically declines to zero over a set schedule.

Money borrowed from an insurer using a permanent policy's cash value as collateral. Interest accrues, and unpaid principal plus interest reduces the death benefit or cash value.

Termination of coverage because required premium was not paid and the policy had no value or grace-period remedy. Lapsed policies may be reinstated under stated conditions.

A set number of days after a premium due date during which coverage remains in force. Payment within this window prevents lapse and keeps the policy fully effective.

Restoring a lapsed policy to full force after the owner pays overdue premiums with interest and provides evidence of insurability. New contestability periods may restart.

A guaranteed alternative available when a permanent policy lapses or is surrendered, such as reduced paid-up insurance or extended term coverage. It protects the accumulated value.

The excess of an insurer's admitted assets over its total liabilities, representing financial cushion for unexpected losses. Regulators and rating agencies watch it as a solvency measure.

Assets an insurer may count on its statutory balance sheet because they are liquid and verifiable under regulatory rules. Items such as furniture or overdue receivables are generally excluded.

A regulatory formula setting minimum capital according to the risk profile of assets and liabilities. It flags weakly capitalized insurers before they become insolvent.

An insurer's ability to meet all obligations as they fall due, measured by the margin of assets over liabilities. It is distinct from liquidity, which concerns short-term cash needs.

The value today of expected future cash flows discounted for interest and adjusted for the probability of payment. It underlies premium calculation and reserve estimation.

The cost deducted from a universal life policy's account value each month for the pure death protection. It rises with age as the probability of death increases.

A flexible permanent policy separating the account value from the insurance element. The owner adjusts premium and death benefit within limits, and the insurer deducts expenses and mortality charges.

A permanent policy whose cash value is invested in separate accounts chosen by the owner. The owner bears investment risk, and the death benefit may vary with account performance.

An investment pool held apart from the insurer's general account, used for variable products. Assets in it are insulated from the insurer's general creditors.

The insurer's pooled portfolio backing fixed obligations such as guaranteed cash values and traditional whole life. Investment risk and results remain with the insurer.

A contract that converts accumulated funds into a stream of payments, often for life. It addresses longevity risk by guaranteeing income the owner cannot outlive.

The period during which an annuity's value grows through contributions and investment returns before payouts begin. Taxes on earnings are generally deferred until distribution.

The period when an annuity makes scheduled income payments to the annuitant. The contract is said to be annuitized, and the payout amount depends on chosen options.

The person or entity designated to receive policy proceeds upon the insured's death. A clear designation directs payment and helps avoid probate delays.

The party entitled to proceeds if the primary beneficiary dies before the insured or cannot collect. Naming one prevents proceeds from falling to the estate.

A beneficiary whose consent is required before the owner may change the designation, borrow, or surrender the policy. This protects that party's interest in the proceeds.

The amount an insurer pays to beneficiaries when the insured dies while coverage is in force. It may be reduced by outstanding loans or unpaid premiums.

A window, typically two years from issue, during which the insurer may rescind coverage for material misrepresentation on the application. After it ends, claims are generally incontestable.

The process of assessing an applicant's risk to decide insurability, rating class, and premium. It uses health, financial, and lifestyle information gathered from applications and exams.

An optional provision added to a policy that expands or limits coverage for an extra or included cost. Examples include waiver of premium and accelerated death benefit features.

A rider that suspends premium payments while the insured is totally disabled beyond a waiting period. The policy stays in force as if premiums were being paid.

Coverage that replaces a portion of earned income when the insured cannot work due to illness or injury. Benefit levels and definitions of disability vary by contract.

Accounting rules prescribed by regulators that emphasize solvency and conservative asset valuation. Insurers file statutory statements, which differ from GAAP figures.

Operating expenses divided by premium or assets, showing how efficiently an insurer runs its business. A high ratio can signal cost pressure that affects pricing and competitiveness.