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Life Insurance Glossary

Agent - A licensed person or organization authorized to sell insurance by or on behalf of an insurance company.

Binder - A temporary or preliminary agreement which provides coverage until a policy can be written or delivered.

Broker - A licensed person or organization paid by you to look for insurance on your behalf.

Cancellation - The termination of insurance coverage during the policy period. Flat cancellation is the cancellation of a policy as of its effective date, without any premium charge.

Claim - Notice to an insurer that under the terms of a policy, a loss maybe covered.

Claimant - The first or third party. That is any person who asserts right of recovery.

Cost of Insurance (C.O.I.) - This is the insurance company's cost to provide the death benefit, depending on the insured's age and health. C.O.I. is a fixed price per thousand dollars of insurance, e.g., "$3.48 per thousand."

Decline - The company refuses to accept the request for insurance coverage.

Endorsement - Amendment to the policy used to add or delete coverage. Also referred to as a "rider."

Exclusion - Certain causes and conditions, listed in the policy, which are not covered.

Face Amount - The dollar amount to be paid to the beneficiary when the insured dies. It does not include other amounts that may be paid from insurance purchased with dividends or any policy riders.

Grace Period - A period (usually 31 days) after the premium due date, during which an overdue premium may be paid without penalty. The policy remains in force throughout this period.

Guaranteed Insurability - An option that permits the policy holder to buy additional stated amounts of life insurance at stated times in the future without evidence of insurability.

Insured - The policyholder :the person(s) protected in case of a loss or claim.

Insurer - The insurance company.

Life Insurance - A policy that will pay a specified sum to beneficiaries upon the death of the insured.

Limit - Maximum amount a policy will pay either overall or under a particular coverage.

Policy - The written contract of insurance. Policy Limit - The maximum amount a policy will pay, either overall or under a particular coverage.

Premium - The amount of money an insurance company charges for insurance coverage.

Quote - An estimate of the cost of insurance, based on information supplied to the insurance company by the applicant.

Surrender - To terminate or cancel a life insurance policy before the maturity date. In the case of a cash value policy, the policyholder may exercise one of the nonforfeiture options at the time of surrender.

Underwriting - The process of selecting applicants for insurance and classifying them according to their degrees of insurability so that the appropriate premium rates may be charged. The process includes rejection of unacceptable risks.

Waiting Period - A period of time set forth in a policy which must pass before some or all coverages begin.

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