FAQ & Glossary
After several years of selling life insurance, here are some of the most frequent questions our agents get.
Life Insurance FAQ
If I have life insurance through my employer, isn't that enough?
There are several things to consider about your employer-provided life insurance.
- Can I take the policy with me if I lose or leave my job?
- If the answer to this is “No,” then not only is this policy not enough, you may be throwing your money away. There are better options.
- Is this policy benefit enough coverage for my families needs?
- This is always a difficult question to answer because there are many factors to take into consideration. Many employer provided policies pay out one year to 18 months income. This is not typically considered adequate coverage.
- Is this policy a “Term” life insurance policy? If yes, how often does it renew and under what terms?
- A typical employer-provided life insurance policy is written as a 5-year Term policy. And, although it is usually renewable without a health exam, the rates begin to go up because you are aging.
- Is the policy “Convertible”?
- Some employer provided policies are convertible meaning the owner of the policy is allowed to change it to another type of policy, but this is not always your best option.
How much life insurance do I need?
There are many factors that are part of this decision. They should each be taken into consideration, given a priority, and then you have a better look at the whole picture.
- How is our life and lifestyle going to change over the next 10 years or more?
- Buying life insurance isn’t just about today. It’s also about what you believe your realistic future looks like. Some policies can change with you as your life and lifestyle change. These are typically a better investment, especially if you are younger and in good health.
- What would it take to maintain the lifestyle that we have today – or that I want my family to be able to maintain?
- As many as 91% of all widows lose EVERYTHING in the first 12 months of the death of their spouse due to inadequate life insurance.
- What are the things in life you don’t want your family to lose with the loss of your income?
- What are the future plans you don’t want your spouse or family to have to change with the loss of your income?
- What debt do you want covered if your family looses your income?
- Do you have children you want to pay for all or part of college or a wedding?
- What would the education for each of my children cost? How much would I want to pay for?
- How much money would I want to give each child for their wedding?
- Are there other things you would want to do for your children?
- How much money would I want to leave each child to buy a home? to travel? to start a business?
- Is there a small business to consider?
- Are there other expenses to consider?
- Are there other investments to consider?
Glossary of Insurance Terms
The terms listed here are taken directly from the National Association of Insurance Commissioners website. This is the inter-state governing body for insurance agents and insurance companies.
Hall Benefits, LLC has included in our Glossary of Insurance Terms, those terms which apply specifically to Life Insurance and the subjects that are discussed on our website, however, should you have additional questions or be unable to find the definition of a word you are looking for, please click on the link above to be taken directly to the site listed above where the Glossary is more in-depth and includes many other topics.
Actual Cash Value – repayment value for indemnification due to loss or damage of property; in most cases it is replacement cost minus depreciation.
Actuary – business professional who analyzes probabilities of risk and risk management including calculation of premiums, dividends and other applicable insurance industry standards.
Admission – hospital inpatient care for any medical condition.
Admitted Assets – insurer assets which can be valued and included on the balance sheet to determine financial viability of the company.
Admitted Company – an insurance company licensed to do business in a state(s), domiciled in an alternative state or country.
Advance Premiums – occur when a policy has been processed, and the premium has been paid prior to the effective date. These are a liability to the company and not included in written premium or the unearned premium reserve.
Agent – an individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.
Aggregate – the maximum dollar amount or total amount of coverage payable for a single loss, or multiple losses, during a policy period, or on a single project.
Beneficiary – an individual who may become eligible to receive payment due to will, life insurance policy, retirement plan, annuity, trust, or other contract.
Bodily Injury – physical injury including sickness or disease to a person.
Broker – an individual who receives commissions from the sale and service of insurance policies. These individuals work on behalf of the customer and are not restricted to selling policies for a specific company but commissions are paid by the company with which the sale was made.
Captive Agent – an individual who sells or services insurance contracts for a specific insurer or fleet of insurers.
Captive Insurer – an insurance company established by a parent firm for the purpose of insuring the parent’s exposures.
Claim – a request made by the insured for insurer remittance of payment due to loss incurred and covered under the policy agreement.
Commencement Date – date when the organization first became obligated for any insurance risk via the issuance of policies and/or entering into a reinsurance agreement. Same as “effective date” of coverage.
Conditions – requirements specified in the insurance contract that must be upheld by the insured to qualify for indemnification.
Convertible Term Insurance Policy – an insurance policy that can be converted into permanent insurance without a medical assessment. The insurer is required to renew the policy regardless of the health of the insured subject to policy conditions.
Credit Life Insurance – policy assigning creditor as beneficiary for insurance on a debtor thereby remitting balance of payment to creditor upon death of debtor.
Date of Issue – date when an insurance company issues a policy.
Declarations – policy statements regarding the applicant and property covered such as demographic and occupational information, property specifications and expected mileage per year.
Deductible – Portion of the insured loss (in dollars) paid by the policy holder
Effective Date – date at which an insurance policy goes into force.
Endorsement – an amendment or rider to a policy adjusting the coverages and taking precedence over the general contract.
Exposure – risk of possible loss.
Face Amount – the value of a policy to be provided upon maturity date or death.
Financial Reporting – insurance companies are required to maintain records and file annual and quarterly financial statements with regulators in accordance with statutory accounting principles (SAP). Statutory rules also govern how insurers should establish reserves for invested assets and claims and the conditions under which they can claim credit for reinsurance ceded.
Financial Statement – balance sheet and profit and loss statement of an insurance company. This statement is used by the NAIC, and by State Insurance Commissioners to regulate an insurance company according to reserve requirements, assets, and other liabilities.
Foreign Insurer – an insurance company selling policies in a state other than the state in which they are incorporated or domiciled.
Hazard – circumstance which tends to increase the probability or severity of a loss.
Independent Agent – a representative of multiple insurance companies who sells and services policies for records which they own and operate under the American Agency System.
Independent Contractor – an individual who is not employed for a company but instead works for themselves providing goods or services to clients for a fee.
Insurance – an economic device transferring risk from an individual to a company and reducing the uncertainty of risk via pooling.
Insurance to Value – Amount of insurance purchased vs. the actual replacement cost of the insured property expressed as a ratio.
Insured – party(ies) covered by an insurance policy.
Insurer – an insurer or reinsurer authorized to write property and/or casualty insurance under the laws of any state.
Irrevocable Beneficiary – a life insurance policy beneficiary who has a vested interest in the policy proceeds even during the insured’s lifetime because the policy owner has the right to change the beneficiary designation only after obtaining the beneficiary’s consent.
Key-Persons Insurance – a policy purchased by, for the benefit of, a business insuring the life or lives of personnel integral to the business operations.
Lapse – termination of a policy due to failure to pay the required renewal premium.
Level Premium Insurance – life insurance policy for which the cost is equally distributed over the term of the premium period, remaining constant throughout.
Liability – a certain or probable future sacrifice of economic benefits arising from present obligations of a particular entity to transfer assets or to provide services to other entities in the future as a result of a past transactions(s) or event(s). three essential characteristics: a) It embodies a present duty or responsibility to one or more other entities that entails settlement by probable future transfer or use of assets at a specified or determinable date, on occurrence of a specified event, or on demand; b) The duty or responsibility obligates a particular entity, leaving it little or no discretion to avoid the future sacrifice; and c) The transaction or other event obligating the entity has already happened.
Living benefits rider – a rider attached to a life insurance policy providing long term care for the terminally ill.
Named Insured – the individual defined as the insured in the policy contract.
Named Peril Coverage – insurance for losses explicitly defined in the policy contract.
Peril – the cause of property damage or personal injury, origin of desire for insurance. “Cause of Loss”
Permanent Life Insurance – policy that remains active for the life of the insured.
Policy – a written contract ratifying the legality of an insurance agreement.
Policy Period – time period during which insurance coverage is in effect.
Premium – Money charged for the insurance coverage reflecting expectation of loss.
Producer – an individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.
Provisions – contingencies outlined in an insurance policy.
Proximate Cause – event covered under insured’s policy agreement.
Renewable Term Insurance – insurance that is renewable for a limited number of successive terms by the policyholder and is not contingent upon medical examination.
Rider – an amendment to a policy agreement.
Self-Insurance – type of insurance often used for high frequency low severity risks where risk is not transferred to an insurance company but retained and accounted for internally.
Standard Risk – a person who, according to a company’s underwriting standards, is considered a normal risk and insurable at standard rates. High or low risk candidates may qualify for extra or discounted rates based on their deviation from the standard.
State of Domicile – the state where a company’s home office is located.
Term – period of time for which policy is in effect.
Term Insurance – life insurance payable only if death of insured occurs within a specified time, such as 5 or 10 years, or before a specified age.
Third Party – person other than the insured or insurer who has incurred losses or is entitled to receive payment due to acts or omissions of the insured.
Underwriter – person who identifies, examines and classifies the degree of risk represented by a proposed insured in order to determine whether or not coverage should be provided and, if so, at what rate.
Underwriting – the process by which an insurance company examines risk and determines whether the insurer will accept the risk or not, classifies those accepted and determines the appropriate rate for coverage provided.
Universal Life Insurance – adjustable life insurance under which premiums and coverage are adjustable, company expenses are not specifically disclosed to the insured but a financial report is provided to policyholder’s annually.
Variable Annuity – an annuity contract under which the premium payments are used to purchase stock and the value of each unit is relative to the value of the investment portfolio.
Variable Life Insurance – life insurance whose face value and/or duration varies depending upon the value of underlying securities.
Variable Universal Life – combines the flexible premium features of universal life with the component of variable life in which excess credited to the cash value of the account depends on investment results of separate accounts. The policyholder selects the accounts into which the premium payments are to be made.
Whole Life – life insurance that may be kept in force for a person’s entire life and that pays a benefit upon the person’s death, whenever that may be.
Whole Life Insurance – life insurance that may be kept in force for the duration of a person’s life and pays a benefit upon the person’s death. Premiums are made for same time period.
Written Premium – the contractually determined amount charged by the reporting entity to the policyholder for the effective period of the contract based on the expectation of risk, policy benefits, and expenses associated with the coverage provided by the terms of the insurance contract.