Glossary of Insurance Related Terms

Illustration

A graphic representation used by an agent to help explain an insurance product to a potential customer. Sales illustrations often consist of numeric charts describing the customer’s goals and the cost elements and mechanics of the insurance product being proposed.

Illustrations of Life Insurance Policies

The printed projections of a life insurance policy's performance based on certain return and premium payment assumptions. Life insurance illustrations show both guaranteed and non-guaranteed values of a life insurance policy assuming no change over time in premium payments, death benefits, etc. Since interest rates applied to cash values will fluctuate over time and cannot be predicted, illustrations should not be viewed as a true projection of future policy values.

Immediate Annuity

An annuity providing for payment to begin immediately.

Immediate Vesting

A term used in pension or retirement plans. With immediate vesting an employee's right to benefits begin as soon as he enters the plan. The attainment of a benefit right by a participant, attributable to employer contributions, that is not contingent upon a participant's continuation in specified employment.

Impaired Risk

A risk, or subject of insurance, with insurable qualifications below the standard of risks on which the premium for the coverage was based. For example, a Life Insurance prospect with heart disease would be an impaired risk. An individual, who, because of health history or physical limitations, does not measure up to the qualification of a standard risk. (LI,H)

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

An attachment to a health insurance policy that excludes or limits coverage for a specific health impairment.

In-Force Business

Life or Health Insurance for which premiums are being paid or for which premiums have been fully paid. The term refers to the total face amount of a Life insurer's portfolio of business. In Health Insurance it refers to the total premium volume of an insurer's portfolio of business. (LI,H)

In-Force Policy

Existing insurance policies for which the premiums are being paid or for which premiums have been fully paid.

Incidents of Ownership

Various rights that may be exercised under the policy contract by the policyowner. Some of the incidents of ownership may include rights: (1) to cash-in the policy, (2) to receive a loan on the cash value of the policy, and (3) to change the beneficiary designation.

Income Policy

A Life Insurance contract which provides income on a monthly basis, as opposed to a policy which pays proceeds in a lump sum. (LI)

Incontestability Clause or Period

Life policies provide that, except for non-payment of premiums and certain other circumstances, the policy shall be incontestable after the policy has been in force for two years during the lifetime of the insured.

Incontestable clause

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.

Increasing term insurance

A type of term 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.

Indemnification

Compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement.

Indemnity

Legal principle that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position as existed before the loss. 

Independent Adjustor

Claims adjustor who offers his or her services to insurance companies and is compensated by a fee.

Independent Agent

An independent business person who usually represents two or more insurance companies in a sales and service capacity and who is paid on a commission basis.

Individual insurance

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.

Individual Life Insurance

(1) That type of Life Insurance which covers in one contract usually only one insured. (2) The term used to distinguish this type of Life Insurance from Group Life Insurance. (LI)

Individual Retirement Account/ Annuity (IRA)

A retirement savings plan which allows individuals to contribute toward an account on a tax-deferred basis. The contributions and earnings are taxable as income only when withdrawn or paid out after retirement.

Industrial Life Insurance

Life insurance issued in small amounts, usually less than $1,000, with premiums payable on a weekly or monthly basis. The premiums are generally collected at the home by an agent of the company. Sometimes referred to as debit insurance.

Initial premium

The first premium payable for an 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.

Installment Income

The settlement option, or payment plan, which provides that the proceeds of a life insurance policy or annuity contract will be paid in a fixed amount at regular intervals for as long as the proceeds last, or for a fixed number of months or years.

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.

Installment Settlement

Payment of the proceeds of a Life Insurance policy or its cash value in installments rather than in a lump sum. The term refers to any one of the options in a Life Insurance policy that has this result. (LI)

Installments Certain

A settlement option under which the proceeds are guaranteed to be paid in equal installments for a specified period of time. (LI)

Institute of Life Insurance

Formerly an agency of the Life Insurance business responsible for building the image of Life Insurance through a variety of programs. It is now a division of the American Council of Life Insurance. (LI)

Insurability

Acceptability by the insurer of an applicant for insurance based on factors such as the person's age, health, occupation, etc.

Insurability provision

An 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 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.

Insurability type temporary insurance agreement

An agreement issued in conjunction with a conditional premium receipt that provides temporary life insurance coverage as of the date specified in the agreement on the condition that the proposed insured is insurable.

Insurable

An individual is insurable if he or she is able to obtain life insurance under the insurance company's underwriting criteria. Insurability is usually based upon the individual's age, health, occupation and lifestyle.

Insurable interest

A condition in which the person applying for an 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, an 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 Commissioner

The top insurance regulatory official in a state.

Insurance Department

A governmental bureau in each state charged with the administration of insurance laws, including the licensing of agents and insurers and their regulation and examination. In some jurisdictions the department is a division of another state department or bureau.

Insurance In Force

The face amounts of contracts still to be paid out to insureds. (LI)

Insurance Needs Calculator

An automated program for estimating a person's life insurance needs. Also referred to as Financial Needs Analysis.

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.)

Insured or Insured Life

The person on whose life the policy is issued.

Insurer

The party in an insurance contract that promises to pay a benefit if a specified loss occurs. Usually an insurance company.

Insurer Risk

The risk that an insurance company will be unable to meet its obligations to policyholders.

Interest

In the calculation of premium, it is the rate of return on the company's investment of premium dollars over the lifetime of the policy. Insurance company investment experience will affect life insurance cost. (LI)

Interest Adjusted Cost

A method of determining the cost of Life Insurance that takes into account the interest that might have been earned on premium money if it had been invested rather than put into premiums. (LI)

Interest Income Option

One of the settlement options, or payment plans, under which the proceeds of a life insurance policy are held by the company to earn interest that is paid periodically to the beneficiary. The total insurance benefit is not paid out until some specified date in the future, but there are limits as to the length of time a principal sum may be held.

Interest option

A settlement option under which the insurer invests the proceeds of a life insurance policy and pays interest on these proceeds to the payee.

Interest Rate

The rate of interest credited on a policy's cash value.

Interest Sensitive Provision

Provisions in variable and flexible premium policies which guarantee certain interest earnings plus an additional interest percentage should the current interest rate rise above a specified percentage. (LI)

Interest-Adjusted Method

A method of determining a policy's annual net cost by incorporating an interest factor into the calculation to reflect the time-value of money.

Interest-Adjusted Net Payment Index

An index of the average annual net payment (premium minus the equivalent annual dividend), which incorporates the time-value of money.

Interest-Adjusted Surrender Cost Index

This index is the average annual cost of insurance upon surrender, which incorporates the time-value of money.

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.

Irrevocable beneficiary

A beneficiary whose rights to the proceeds of a life insurance policy cannot be cancelled by the policyowner unless the beneficiary consents.

Irrevocable Trust

A trust that cannot be revoked or amended by the party who establishes it. This type of trust is often established when life insurance is purchased to protect an estate.

Issue Date

The date from which suicide and incontestability periods are calculated.

Issued Business

Contracts actually written by an insurer and paid for but not yet delivered to or accepted by the insured. (LI)