LOMA 291 key terms

The amount a policyowner pays an insurer, usually on a scheduled basis, in exchange for the coverage promised in the insurance contract. It funds benefits, expenses, and reserves.

The sum an insurer pays to a named beneficiary when the insured dies while the policy is in force. It may be level, decreasing, or increase with account value.

The stated dollar amount of coverage shown on the policy's data page, used as the base for calculating the death benefit and many policy charges. It may differ from the actual amount payable.

The statistical frequency of death within a defined group over a period, usually expressed per thousand lives. Insurers use it to price products and set charges for the cost of insurance.

The frequency with which illness or injury occurs in a population during a period. Insurers use it to price health-related riders and disability benefits rather than death coverage.

A liability the insurer holds to cover future obligations under in-force policies. It represents premiums collected in advance of the claims they are expected to fund.

A financial or emotional stake in another person's continued life that justifies buying insurance on that person. It must exist when the contract is formed, or the policy is generally void.

The process of evaluating an applicant's health, finances, and lifestyle to classify risk and decide whether to issue coverage and at what price. It protects the pooled funds of other policyowners.

Grouping applicants with similar expected loss characteristics so each group pays a premium reflecting its own risk level. Standard, preferred, and substandard classes are common examples.

An applicant whose health or habits create higher-than-average expected mortality, so coverage is offered with extra premium, exclusions, or a modified benefit. Insurers may also decline the application.

Coverage that pays a death benefit only if the insured dies during a stated period, such as 10 or 20 years. It builds no cash value and usually costs less than permanent coverage.

Permanent coverage that stays in force for the insured's lifetime as long as premiums are paid, and that accumulates guaranteed cash value. Premiums are typically level for life.

Permanent coverage with flexible premiums and an adjustable death benefit. The insurer deducts mortality and expense charges from an account value that earns interest at a declared or indexed rate.

Permanent coverage in which the policyowner directs the investment of cash value among separate accounts, so the death benefit and value fluctuate with market performance. It is a securities product.

The savings component inside a permanent policy that belongs to the policyowner and can be borrowed against, withdrawn, or received on surrender. It grows tax-deferred and may be guaranteed or market-based.

The amount an insurer pays the owner who cancels a permanent policy and gives up its coverage. It equals cash value minus any surrender charge and outstanding loans.

A borrowing of available cash value from the insurer, secured by the policy. Interest accrues, and any unpaid balance plus interest reduces the death benefit or surrender value.

The person or entity named to receive policy proceeds when the insured dies. Primary beneficiaries are paid first; contingent beneficiaries receive proceeds only if primaries have died.

A beneficiary designation method that divides a deceased beneficiary's share among that person's descendants. It keeps a branch of the family from losing its inheritance.

A provision added to a policy that modifies its coverage, usually for an extra premium. Examples include waiver of premium, accidental death, and child term riders.

A rider that suspends premium payments if the insured becomes totally disabled for a specified period, while keeping the policy and its values in force. Conditions and definitions vary by contract.

A provision allowing the insured to receive part of the death benefit early when diagnosed with a terminal illness or qualifying condition. The remaining benefit is reduced accordingly.

A contract in which an insurer accumulates funds and then pays them out as a stream of income, often for life. It addresses the risk of outliving one's savings.

The irrevocable conversion of an annuity's accumulated value into periodic income payments. Once elected, the payout schedule generally cannot be reversed.

A fee an insurer deducts when an annuity or permanent policy is cancelled during its early years, designed to recover acquisition costs. It typically declines to zero over a set period.

An investment pool held apart from the insurer's general assets, used for variable products. Its value rises and falls with market performance, and the policyowner bears that investment risk.

The time after a premium due date during which the policy remains in force even though payment is late. If the insured dies in this window, the overdue premium is deducted from proceeds.

The termination of coverage when required premiums are not paid within the grace period and the policy has no value to sustain it. Reinstatement may later restore the original contract.

Restoring a lapsed policy to its original force, usually by paying overdue premiums with interest and providing evidence of insurability. Some values and contestability periods restart.

A provision barring the insurer from denying a claim based on misrepresentation in the application after the policy has been in force for a stated period, commonly two years.

A false or misleading statement in an insurance application that would have affected the insurer's decision to issue coverage or set its terms. It can justify rescission during the contestable period.

A set number of days after policy delivery during which the owner may cancel for a full premium refund. It gives buyers time to review the contract without penalty.

A choice available when a permanent policyowner stops paying premiums, allowing use of existing cash value instead of losing coverage. Common options are reduced paid-up and extended term insurance.

The sequence an insurer follows after a death, from notice and proof of loss through verification of coverage to payment of proceeds. Timelines and documentation requirements are set by contract and law.

The agency that licenses insurers and producers, examines financial condition, reviews policy forms and rates, and handles consumer complaints within its state. It is the primary day-to-day regulator of insurance.

The state process by which an individual earns and maintains authority to sell insurance, involving prelicensing education, an exam, a background check, and continuing education. Selling without a license is prohibited.

The legal obligation of an agent or insurer to act in the client's best interest when handling premiums and advising on coverage. It includes timely remitting of funds and avoiding undisclosed conflicts.

The requirement that a recommended product fit the consumer's financial situation, needs, and objectives. Insurers and producers must gather relevant information and document the basis for recommendations.

A regulatory review of an insurer's sales, underwriting, claims, and complaint practices to assess compliance with consumer protection laws. Findings can lead to fines, refunds, or corrective orders.

A state-created entity that pays covered claims of policyowners of insolvent insurers, within statutory limits. It is not a government guarantee of every benefit or product.

Required insurer procedures to detect and report suspicious transactions, verify customer identity, and keep records. They help prevent insurance products from being used to launder illicit funds.

The practices and systems an insurer uses to track interactions, preferences, and service history so that sales and support are coordinated across channels. It supports retention and personalized service.