Glossary of Insurance Related Terms

Rate

The pricing factor upon which the insurance buyer's premium is based.

Rate Banding

Term Life insurance death benefit thresholds, whereby, the rate per thousand decreases as the amount of death benefit increases – similar to a quantity discount.

Rate Per Thousand

Price per unit (or $1,000) of death benefit. Term premiums are calculated by multiplying the rates per thousand of death benefit, then adding the Policy Fee.

Rated

Coverages issued at a higher rate than standard because of impairment of the insured. Usually used as an adjective in such expressions as "rated risk," "rated policy," and "rated up." (LI)

Rated policy

A policy issued to insure a person classified as having a greater-than-average likelihood of loss. The policy may be issued (a) with special exclusions, (b) with a premium rate that is higher than the rate for a standard policy, or (c) with exclusions and a higher than standard premium rate.

Rated Up

Coverages issued at a higher rate than standard because of impairment of the insured. Usually used as an adjective in such expressions as "rated risk," "rated policy," and "rated up." (LI)

Rating Territory

A geographical grouping in which like hazards tend to equalize and permit the establishment of an equitable rate for the territory.

Re-Entry

A policy provision under which the insured, at the end of the specified term period, can renew (re-enter) the policy at a rate based on their attained age for another term period. Re-entry requires the insured to provide evidence of insurability. Also referred to as Re-Qualification.

Readjustment Income

(1) The income needed after the death or disability of a wage earner to allow the family time to adjust to a new, lower standard of spending. (2) The insurance coverage that provides readjustment income. (LI)

Rebating

The granting of any form of inducement, favor, kickback or advantage to the purchaser of a policy, which is not available under the standard terms of the policy. Rebating is a penal offense in some states, whereby both the agent and the person accepting the rebate can be punished.

Recurrent Disability

Disability resulting from the same or a related cause as a prior disability. (LI,H)

Redating

The process by which an insurer reinstates a term insurance policy without requiring the payment of past due premiums.

Reduced Paid-Up Insurance

A form of insurance available as a nonforfeiture option. It provides that the cash value of the policy be used as a single premium to purchase paid-up insurance in whatever amount the cash value will provide, which will be less than the original face amount in most cases. See also Nonforfeiture values. (LI)

Reduced paid-up insurance option

A nonforfeiture option under which the net cash value of a life insurance policy is used as a net single premium to purchase a smaller amount of fully paid insurance of the same kind and for the same period as the policy being surrendered.

Refund life income option

A type of life income settlement option in which the insurer guarantees that if the beneficiary dies before the total amount paid under the option equals the proceeds of the policy, then the insurer will pay the difference to a contingent payee.

Register

A record of all policies charged to a debit account. (LI)

Registered representative

Any person who is licensed with the National Association of Securities Dealers and who is engaged either in selling securities as the agent or representative of a broker-dealer or in training the sales persons associated with a broker-dealer.

Reinstatement

The process by which an insurer puts back into force a life or health insurance policy that has been terminated for nonpayment of premiums or a life insurance policy that has been continued as extended term or reduced paid-up insurance.

Reinstatement provision

A life insurance policy provision that describes the conditions the policyowner must meet in order for the insurer to reinstate the policy if it has terminated because of nonpayment of renewal premiums.

Reinsurance

A type of insurance that one insurance company, known as the ceding company, purchases from another insurance company, the reinsurer, in order to transfer risks on insurance policies that the ceding company issued.

Reinsurance treaty

A broadly worded statement of an on-going agreement between a reinsurer and a ceding company. The three common types of reinsurance treaties are automatic, facultative, and facultative-obligatory.

Reinsurer

An insurance company that accepts the risk transferred from another insurance company in a reinsurance transaction.

Renew

To continue the policy for another period of time.

Renewable Term

Term Insurance that may be renewed for another term without evidence of insurability. (LI)

Renewable term insurance

A type of term insurance which includes a renewal provision that gives the policyowner the right to renew the insurance coverage at the end of the specified term without submitting evidence of insurability.

Renewal

Continuance of coverage under a policy beyond its original term by the insurer's acceptance of the premium for a new policy term.

Renewal premiums

Premiums payable after the initial premium.

Renewal provision

(1) A term life insurance policy provision that gives the policyowner the right to continue the insurance coverage at the end of the specified term without submitting evidence of continued insurability. (2) A provision in an individual health insurance policy describing the circumstances under which the insurance company may refuse to renew the coverage, may cancel the coverage, or may increase the policy’s premium rate.

Replacement

The act of surrendering an insurance policy or part of the coverage of an insurance policy in order to buy another policy.

Replacement Form

A state-specific form that must be completed if the applicant is replacing existing coverage. The replacement form notifies the existing insurer that the applicant is replacing their policy with a policy from another company.

Replacement ratio

The percentage of income before retirement that is required to be replaced to maintain the same standard of living after retirement.

Representative

An agent or sales representative.

Rescission

An equitable remedy under which the insurer seeks to void a policy or have it declared void. Rescissions usually occur when there has been material misrepresentation in the insurance application.

Reserve

The amount of money an insurance company holds which, with future premiums and an assumed rate of interest, will pay all contractual obligations as they fall due. Resident Agent: An agent domiciled in the state in which he or she writes insurance.

Residual disability benefit

A partial disability benefit amount that is established according to a formula specified in a disability income insurance policy. The amount of the benefit varies according to the percentage of income loss attributable to the disability.

Restrictions

Factors affecting what actions can be taken on a policy, such as ownership restriction because of a divorce or tax levy.

Retention

(1) In reinsurance, the amount of a reinsured risk that the ceding company retains.

Retention limit

The maximum amount of insurance that an insurance company will carry on any individual without ceding part of the risk to a reinsurer.

Retirement Annuity

A form of annuity contract that is entered into before a selected retirement age with the consideration paid in installments until that age is reached. It is a form of deferred annuity. (LI)

Retirement Income Policy

An adaptation of an endowment at a selected retirement age in which the annuity benefit is a percentage of the face amount of Life Insurance in force prior to retirement age, usually 10%; e.g., for each $1000 of insurance a $10 per month annuity installment is payable. Under this type of policy, the cash value will exceed the face amount in the later policy years, and if death occurs before the selected retirement age, the death benefit would be the face amount or the cash value, whichever is greater. (LI)

Retroactive Conversion

The conversion of a Term Life Insurance policy to a Cash Value form as of the original date of issue of the Term policy, rather than as of the time the conversion is made. In other words, the Cash Value policy will have already attained the age of the former Term policy. (LI)

Return of Cash Value

A provision or rider on a Life Insurance policy that states that if death occurs during a certain period of years (often 20), the policy will pay an amount, in addition to the face amount, that is equal to the cash value of the policy as of the date of death.This is really a form of Increasing Term Insurance and is used as a sales tool. (LI)

Return of Premium

A rider on a Life Insurance policy providing that, in the event of the death of the insured within a specified period of time, the policy will pay, in addition to the face amount, an amount equal to the sum of all premiums paid to date. This is a form of Increasing Term Insurance and is used as a sales tool. (LI)

Revocable beneficiary

A named beneficiary whose right to life insurance policy proceeds is not vested during the insured’s lifetime and whose designation as beneficiary can be cancelled by the policyowner at any time prior to the insured’s death.

Rider

An amendment to an insurance policy that becomes a part of the insurance contract and expands or limits the benefits payable.

Risk

In life insurance, it is the probability of mortality.

Risk Appraiser

An employee of a Life insurer who screens the applications submitted. He may accept an applicant, reject him, or propose an alternative policy or premium. (LI)

Risk class

A group of insureds who present a substantially similar risk to the insurance company. Among the most common risk classes used by life insurance companies are standard, preferred, nonsmoker, substandard, and uninsurable.

Risk Classification

An underwriting process used to determine the appropriate price category or Premium Rate Class of the proposed insured, according to risk factors associated with that person's health condition, occupation, lifestyle, etc.

Risk Premium Insurance

(1) Term Life Insurance that may be renewed annually without evidence of insurability until some stated age. (2) A form of Life, and sometimes Health, Reinsurance in which the reinsurer assumes only the mortality risk, which is usually calculated as the face amount of reinsurance minus the terminal reserve. (LI,H)

Risk Tolerance

An investor's ability to withstand declines in the value of his/her portfolio, financially and emotionally.

Rollover

The tax-free transfer of accumulated assets from a qualified retirement plan to an IRA, which must be completed within 60 days of the termination of the original plan.