Term Life Insurance Glossary
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Impairment
Any aspect of a proposed insured’s health, occupation, activities, or lifestyle that could increase his or her expected mortality or morbidity.
Impairment Rider
See exclusion rider.
Incontestable Clause
Term life insurance policy clause that provides a time limit (usually two years) on the insurer’s right to dispute a policy’s validity based on material misstatements made in the application.
Also known as an incontestability provision. See also contestable period.
Increasing Term Life Insurance
A type of term life insurance in which the death benefit of the policy increases during the term of coverage. The death benefit may increase at stated intervals by some specified amount or percentage, or it may increase according to increases in the cost of living.
Individual Insurance
Term life insurance that is issued to insure the life or health of a named person or persons, rather than the life or health of the members of a group.
Also called ordinary insurance.
Initial Premium
The first premium payable for a term life insurance contract.
Inspection Report
A report made by a consumer reporting agency concerning a proposed insured’s lifestyle, occupation, and economic standing. An inspection report is considered an investigative consumer report, as defined by the Fair Credit Reporting Act.
See also investigative consumer report.
Installment Refund Option
A form of life income option with refund which specifies that any proceeds remaining after the death of the beneficiary will be paid in installments to the contingent payee.
Contrast with the cash refund option.
Insurability Provision
A term life insurance provision stipulating that, for a policy to become effective, the insured must still be insurable at the time of policy delivery according to the underwriting rules and practices of the company.
Insurability Statement
A questionnaire that an insurer may ask an applicant to complete when a considerable amount of time has elapsed between the time the application is received and the time the term life insurance policy is actually issued. The purpose of the insurability statement is to determine if any insurability factors have changed since the original application was completed. Insurability statements help protect insurers from post-issue antiselection.
See also antiselection.
Insurability Type Temporary Insurance Agreement
An agreement issued in conjunction with a conditional premium receipt that provides temporary term life insurance coverage as of the date specified in the agreement on the condition that the proposed insured is insurable.
See also conditional premium receipt and temporary insurance agreements. Compare to approval type temporary insurance agreement.
Insurable Interest
A condition in which the person applying for a term life insurance policy and the person who is to receive the policy benefit will suffer a genuine loss or detriment if the event insured against occurs. Without the presence of insurable interest, a term life insurance contract is not formed for a lawful purpose and, thus, is void from the start.
Insurance
A system of protection against loss in which a number of individuals agree to transfer risk by paying certain sums of money, called premiums. These premiums create a pool of money which guarantees that the individuals will be compensated for losses caused by events such as fire, accident, illness, or death.
Insurance Trust
A common form of trust, created during the lifetime of the person who creates the trust, that is funded by insurance policies on the life of the trust’s creator or by the proceeds of such policies.
Insured
(1) In the United States and Quebec, a person whose life is insured by an insurance policy (for individual life insurance policies, called the life insured in the rest of Canada).
(2) In the common law provinces of Canada, the owner of an individual life insurance policy (called the policyowner in the United States and the policyholder or owner in Quebec). (For the purposes of this glossary, we have used this term as it is used in the United States and Quebec, except in the definitions of purely Canadian terms, in which cases we have made it clear that we are using the term as it is used in Canada.)
Insurer
The party in an insurance contract that promises to pay a benefit if a specified loss occurs. Usually an insurance company.
Interest Option
A settlement option under which the insurer invests the proceeds of a term life insurance policy and pays interest on these proceeds to the payee.
Investigative Consumer Report
As defined by the Fair Credit Reporting Act, a consumer report that uses interviews with persons who are associated with, or who have knowledge of, the consumer in question in order to solicit information regarding the consumer’s character, lifestyle, or general reputation.
See also inspection report.
Irrevocable Beneficiary
A beneficiary whose rights to the proceeds of a term life insurance policy cannot be cancelled by the policyowner unless the beneficiary consents.
Contrast with revocable beneficiary. See also beneficiary.
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LOMA's Glossary of Insurance Terms (c) 1997 LOMA (Life Office Management Association, Inc.). Used with permission from the publisher. All rights reserved. Copying or downloading this information without permission from the publisher is a violation of federal and international law. For information on purchasing a copy of the Glossary or for additional information on LOMA and its educational programs, visit LOMA's Web site at www.loma.org.
