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Concept of insurance
The transfer of risk from one party to another through a legal contract.
Law of Large Numbers
The larger the number of risks insured in the same risk pool; the more predictable losses become.
Peril
An immediate, specific event that causes a loss.
Loss
An unintended, unforeseen reduction, or destruction of financial or economic value.
Hazard
Creates an increased possibility that a peril (a cause of a loss) will actually occur.
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Occurrence
Is any event that causes a loss.
Risk
Risk is defined as thepotential or uncertainty for loss.
Speculative risk
A situation in which either profit or loss is possible, not insured.
Industrial life insurance
Issues very small face amounts, such as $1,000 or $2,000. Premiums are paid weekly and collected by debit
agents. They were designed for burial coverage.
Ordinary life insurance
Life insurance of commercial companies not issued on the weekly premium basis. It is made up of several types of
individual life insurance, such as temporary (term), permanent (whole).
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Group life insurance
Insurance written for members of a group, such as a place of employment, association, or a union. Coverage is
provided to the members of that group under one master contract. The group is underwritten as a whole, not on
each individual member. One of the benefits of group life coverage is usually there is no evidence of insurability
required.
Term life insurance
Life insurance that pays a death benefit if the policyholder dies within a specific time period but has no remaining
value at the end of this time.
Whole life insurance
Sometimes called straight life insurance or ordinary life insurance; can provide lifetime insurance coverage; in this
case, fixed premiums are paid for life; pays interest on the cash value portion with a guaranteed minimum interest
rate during life of the contract.
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Joint survivor or last survivor life policies
Cover the lives of two individuals and saves on premium costs by averaging the ages of the two insureds. Joint Life
Survivor or Last Survivor policies only pay the death benefit upon the death of the last insured person. For
example, say B and M purchase a joint life survivor policy. If B were to die first and then M died 10 years later, no
benefits would be paid out from the policy until M died. A Joint Life and Survivor policy covers two lives but only
pays benefits after the death of the last insured.
Family maintenance policy
Pays a monthly income from the date of death of the insured to the end of the preselected period.
Family income policy
Combines Whole Life insurance with a Decreasing Term
Rider also written on the same person.
Adjustable life policy
Whole life insurance policy, but you can change your policy as your needs change. You can change your premium
payments to increase or decrease coverage.
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Concept of insurance
The transfer of risk from one party to another through a legal contract.
Law of Large Numbers
The larger the number of risks insured in the same risk pool; the more predictable losses become.
Peril
An immediate, specific event that causes a loss.
Loss
An unintended, unforeseen reduction, or destruction of financial or economic value.
Hazard
Creates an increased possibility that a peril (a cause of a loss) will actually occur.
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Occurrence
Is any event that causes a loss.
Risk
Risk is defined as thepotential or uncertainty for loss.
Speculative risk
A situation in which either profit or loss is possible, not insured.
Industrial life insurance
Issues very small face amounts, such as $1,000 or $2,000. Premiums are paid weekly and collected by debit
agents. They were designed for burial coverage.
Ordinary life insurance
Life insurance of commercial companies not issued on the weekly premium basis. It is made up of several types of
individual life insurance, such as temporary (term), permanent (whole).
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Group life insurance
Insurance written for members of a group, such as a place of employment, association, or a union. Coverage is
provided to the members of that group under one master contract. The group is underwritten as a whole, not on
each individual member. One of the benefits of group life coverage is usually there is no evidence of insurability
required.
Term life insurance
Life insurance that pays a death benefit if the policyholder dies within a specific time period but has no remaining
value at the end of this time.
Whole life insurance
Sometimes called straight life insurance or ordinary life insurance; can provide lifetime insurance coverage; in this
case, fixed premiums are paid for life; pays interest on the cash value portion with a guaranteed minimum interest
rate during life of the contract.
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Joint survivor or last survivor life policies
Cover the lives of two individuals and saves on premium costs by averaging the ages of the two insureds. Joint Life
Survivor or Last Survivor policies only pay the death benefit upon the death of the last insured person. For
example, say B and M purchase a joint life survivor policy. If B were to die first and then M died 10 years later, no
benefits would be paid out from the policy until M died. A Joint Life and Survivor policy covers two lives but only
pays benefits after the death of the last insured.
Family maintenance policy
Pays a monthly income from the date of death of the insured to the end of the preselected period.
Family income policy
Combines Whole Life insurance with a Decreasing Term
Rider also written on the same person.
Adjustable life policy
Whole life insurance policy, but you can change your policy as your needs change. You can change your premium
payments to increase or decrease coverage.
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