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Definitions - C

Cancellation
The discontinuance of an insurance policy before its normal expiration date, either by the insured or the company.

Capacity
The amount of capital available to an insurance company or to the industry as a whole for underwriting general insurance coverage or coverage for specific perils.

Capital Retention Approach
A method used to estimate the amount of life insurance to own. Under this method, the insurance proceeds are retained and are not liquidated.

Capital Stock and Surplus
Represents the excess of a company's assets over its liabilities as reported in its financial statements. Stock companies have capital stock and surplus. Capital stock represents funds paid into the company by stockholders. Surplus represents the remaining excess of assets over liabilities. Mutual companies only have surplus since there are no stockholders in a mutual company.

Captive Agent
Representative of a single insurer or fleet of insurers who is obliged to submit business only to that company, or at the very minimum, give that company first refusal rights on a sale. In exchange, that insurer usually provides its captive agents with an allowance for office expenses as well as an extensive range of employee benefits such as pensions, life insurance, health insurance and credit unions.

Carrier
The underwriting insurance company.

Cash Surrender Value
The amount that is available in cash for loans and that may be available for withdrawals. Accessing Cash Surrender Value may reduce the death benefit and may increase the risk of lapse. Please note that the cash value only pertains to permanent life insurance and not term life insurance.

Cash Value Life Insurance
A type of insurance where premiums charged are higher at the beginning than they would be for the same amount of term insurance. The part of the premium that is not used for the cost of insurance is invested by the company and builds up a cash value that may be used in a variety of ways. You may borrow against a policy’s cash value by taking a policy loan. If you don’t pay back the loan and the interest on it, the amount you owe will be subtracted from the benefits when you die, or from the cash value if you stop paying premiums and take out the remaining cash value. You can also use your cash value to keep insurance protection for a limited time or to buy a reduced amount without having to pay more premiums . You also can use the cash value to increase your income in retirement or to help pay for needs such as a child’s tuition without canceling the policy. However, to build up this cash value, you must pay higher premiums in the earlier years of the policy. Cash value life insurance may be one of several types; whole life, universal life and variable life are all types of cash value insurance.

Cede
To transfer risk from a direct insurer to his reinsurer.

Ceding Insurer
One who cedes a risk to his re insurers or retro cessionaries.

Cession
Amount of the insurance ceded to a reinsurer by the original insuring company in a reinsurance operation.

Change of Beneficiary Form
A form provided by the insurer that the policyowner must complete in order to change the beneficiary on a policy.

Chartered Life Underwriter (CLU)
An individual who has attained a high degree of technical competency in the fields of life and health insurance and who is expected to abide by a code of ethics. Must have minimum of three years of experience in life or health insurance sales and have passed ten professional examinations administered by The American College.

Child Rider
Rider which provides insurance to the insured's child(ren).

Claim
A request for payment of a loss which may come under the terms of an insurance contract.

Claimant
A first or third party who asserts right of recovery.

Claims Notification Clause
A clause in a policy which provides for prompt notification of claims and commonly designates a specific adjuster to receive notice and deal with the claim.

Collateral Assignment
A temporary transfer of some, but not all, policy rights to a lender to provide security for a loan.

Combined Ratio
A measure of the relationship between dollars spent for claims and expenses and premium dollars taken in; the sum of the ratio of losses incurred to premiums earned and the ratio of commissions and expenses incurred to premiums written. A ratio above 100 means that for every premium dollar taken in, more than a dollar went for losses, expenses, and commissions.

Commission
The part of an insurance premium paid by the insurer to an agent or broker for his services in procuring and servicing the insurance.

Commissioner
A state officer who administers the state's insurance laws and regulations. In some states, this regulator is called the director or superintendent of insurance.

Concealment
Deliberate failure of an applicant for insurance to reveal a material fact to the insurer.

Conditional Receipt
A receipt given for premium payments accompanying an application for insurance. If the application is approved as applied for, the coverage is effective as of the date of the prepayment or the date on which the last of the underwriting requirements, such as a medical examination, has been fulfilled.

Conservation
The attempt by the insurer to prevent the lapse of a policy.

Consideration
One of the elements for a binding contract. Consideration is acceptance by the insurance company of the payment of the premium and the statement made by the prospective policy holder in the application.

Contest, policy
A court action challenging the validity of a policy.

Contingent Owner
The person to succeed as owner of a life insurance policy if the original owner dies.

Contract
A binding agreement between two or more parties for the doing or not doing of certain things. A contract of insurance is embodied in a written document called the policy.

Contract Law
The portion of civil law that interprets written agreements between parties and resolves disputes between them.

Contribution Principle
The principle under which divisible surplus is distributed among policies in the same proportion as the policies are considered to have contributed to that surplus.

Conversion Privilege
A privilege granted in an insurance policy to convert to a different plan of insurance without providing evidence of insurability.

Convertible Term Insurance
Term insurance which can be exchanged, at the option of the policy holder and without evidence of insurability, for another plan of insurance. Also known as credit life insurance. May take the form of term life insurance issued through a lender or lending agency to cover payment of a loan, installment purchase, or other obligation, in case of death.

Cost Basis
An amount attributed to an asset for income tax purposes; used to determine gain or loss on a life insurance contract to determine the value of a gift.

Cost-of-Living Rider
Benefit that can be added to a life insurance policy under which the policy owner can purchase one-year term insurance equal to the percentage change in the consumer price index with no evidence of insurability.

Cost of pure risk
All costs related to pure risk which include, from the perspective of shareholders, retained risk, loss prevention costs and insurance costs.

Coverage
The scope of protection provided under a contract of insurance; any of several risks covered by a policy.

Cross liability clause
Obligates an insurer to protect each insured separately.

Cross Purchase Agreement
Specifies the terms for the surviving partners or shareholders to buy a deceased's share of the business's ownership.

Customer Service Representative (CSR)
Customer service representatives support the work of insurance agents with a variety of tasks that must be done within a company or agency to deliver services to and handle requests from clients.

Cumulative Premium
The total amount paid over the course of a specified amount of years.

Current Assumption Whole Life Insurance
Nonparticipating whole life policy in which the cash values are based on the insurer's current mortality, investment, and expense experience. An accumulation account is credited with a current interest rate that changes over time. Also called interest-sensitive whole life insurance.

Current with Reentry Premiums
Non-guaranteed premiums at the time of re-entry; applicable to certain term life insurance policies.

Cut-through endorsement
An endorsement to an insurance contract stating that reinsurance proceeds will be paid directly to the named payee in the event of an insurer's insolvency.

Some whole life policies let you pay premiums for a shorter period such as 20 years, or until age 65. Premiums for these policies are higher since the premium payments are made during a shorter period.

Quick Life Insurance Terms Glossary

(some definitions taken from the National Association of Insurance Commissioners' Life Insurance Buyers Guide)

LIFE IS COMPLICATED....
BUT TERM LIFE INSURANCE DOES NOT HAVE TO BE.

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