Getting Familiar with Burial Insurance Definitions
Have you noticed how the Burial Insurance professional industry seems to have their own language? You know how it works. You’re reading an article or speaking with a Burial Insurance professional, and these terms, you’ve never heard of are used as if you are an expert! This can certainly lead to confusion and frustration if you are in need of some vital information that you can comprehend. Final Expense (Burial Insurance) is not that difficult to understand if you are just a little familiar with the industry terms used by sales professionals and policy authors. The following terms may be helpful in understanding your Burial Insurance options:
o ACCELERATED DEATH BENEFIT
This is an option or rider on many life insurance policies that allows the policyholder to
receive a large portion of the death benefit while they are alive. The option is triggered when the insured is diagnosed with a terminal illness, needs extreme medical intervention, or must reside in a nursing home for an indefinite amount of time. The balance of the death benefit will be paid to the beneficiary after the death of the insured.
o ADMITTED COMPANY
When an insurance company is licensed and authorized to business in your state it is considered an admitted company.
o AFFINITY SALES
Selling insurance policies through groups such as professional and business associations.
Insurance is typically sold by two types of agents: independent agents, also referred to as brokers, who are self-employed and represent multiple insurance companies, and exclusive or captive agents, who represent only one company and may or may not be self-employed.
o ANNUAL STATEMENT
This is a summary of a life insurance policy’s value that are provided to the policyholder on the anniversary date of the policy. The statement typically indicates the premiums paid, cost of insurance and riders, administrative fees, interest earned, and the cash value, if any, of the policy.
A method used to settle a claim dispute by accepting a decision made by a third party.
A temporary authorization of coverage issued prior to the actual insurance policy.
o BURIAL INSURANCE
An affordable, easy to qualify for whole life insurance policy that is meant to cover the cost of a burial or funeral. Burial Insurance policies can range from $3,000-$30,000 but the average is around $10,00. While typically the policies benefit is used to pay for Burial Expenses, the beneficiary can use the settlement however they’d like.
o CHARTERED FINANCIAL CONSULTANT / ChFC
A professional designation awarded by The American College for those professionals who pass business examinations on insurance, investments and taxes, and have life insurance planning experience.
o CHARTERED LIFE UNDERWRITER / CLU
A professional designation awarded by The American College for those professionals who have completed certain courses and have passed the associated examines regarding insurance, investments, and taxation.
o CREDIT LIFE INSURANCE
Life insurance coverage on a borrower designed to repay the loan balance in the event of the borrower’s death.
o DIRECT SALES / DIRECT WRITERS
Insurance companies that sell directly to consumers using exclusive agents or company agents. Sales are typically transacted over the telephone, internet, or direct mail.
Money that is returned to policyholders from their insurance company because of positive performance and is considered a partial premium refund and considered tax free.
o ECONOMIC LOSS
The total financial loss resulting from the death or disability of a wage earner.
A form attached to an insurance policy that alters the coverage, terms, or conditions. Also referred to as a rider.
o ERRORS AND OMISSIONS POLICY
A type of malpractice insurance carried by most agents and insurance companies.
o FINAL EXPENSE INSURANCE
An insurance policy that is purchased specifically to cover final expenses of the policyholder. Typical final expenses are funeral expenses, burial expenses, nursing home expenses, and other expenses and debts that may be passed on to survivors. It is also referred to as Funeral Insurance.
o FREE-LOOK PERIOD
A period of time, usually 30 days, when the policyholder can examine the insurance contract and be able to cancel it with no penalty for a full refund.
o GRAMM-LEACH-BLILEY ACT
Financial services legislation that was passed by Congress in 1999 that removed outdated prohibitions against the combination of commercial banking and investment banking activities. The act allows insurance companies to be in the banking business and banks to be in the insurance business and own one another.
o KEY PERSON INSURANCE
Insurance on the life or health of a key individual whose services are essential to the continuing success of a business and whose death or disability could cause the business significant financial loss.
o MORTGAGE PROTECTION INSURANCE
Insurance that is purchased to pay off a mortgage balance in the event of the borrower’s death, thereby leaving a paid for home to surviving family members or loved-ones.
o MUTUAL INSURANCE COMPANY
An insurance company that is owned by its policyholders and returns part of its profits to the policyholders as dividends.
o ORDINARY LIFE INSURANCE (PERMANENT)
A life insurance policy that remains in force for the life of the policyholder if premiums are paid.
o PERIOD OF CONTESTABILITY (CONTESTABILITY PERIOD)
This a short period of time in which a life insurance company can investigate, deny claims, or cancel a policy for misrepresentation. The period begins when the policy is issued and is usually last for two years in most states, but one year in others.
An estimated amount that an insurance company will pay in claims and set aside for other expenses.
o TERM LIFE INSURANCE
A form of life insurance that covers the insured person for a selected period of time that is specified in the policy. It pays a death benefit to the beneficiary only when the insured dies within the specified period, which is typically 1, 5, 10, 15, 20, or even 30 years. Although most term policies are renewable, the premiums will be calculated on the new age of the insured.
Examining, accepting, or declining insurance risks and classifying the ones that are accepted, in order to charge an appropriate premium.
o WAIVER OF PREMIUM
A life insurance provision that sets certain conditions, such as disablement, which allow the insurance coverage to remain in force without payment of premium.