aggregate funding methods
Pension plan funding methods
in which the amount of contributions necessary to fund a plan is
determined in the aggregate for all plan participants, rather than
separately for each individual plan participant. Contrast with
individual funding methods.
aggregate mortality table
A mortality table based on
the experience of all insured lives, including mortality rates both
during and after the select period. The mortality rates of an
aggregate mortality table fall between those of the select and the
ultimate mortality tables. See also mortality tables, select
mortality table, select period, and ultimate mortality table.
aleatory contract
A contract under which one party
provides something of value to another party in exchange for a
conditional promise, which is a promise that the other party will
perform a stated act if a specified, uncertain event occurs.
Insurance contracts are aleatory because the policyowner pays
premiums to the insurer, and in return the insurer promises to pay
benefits if the event insured against occurs.
alien corporation
In the United States, a company that
is incorporated under the laws of another country. Compare to
domestic corporation and foreign corporation.
alienation of benefits
In pension planning, the
assignment of a plan participant's benefits to an individual other
than the participant. In the United States, ERISA generally
prohibits the alienation of benefits, although exceptions to this
rule include the use of a participant's vested benefit as collateral
for a loan. The ERISA prohibition on alienation of benefits prevents
creditors from attaching an individual's pension benefits.
all-causes deductible
In health insurance, a deductible
which need only be satisfied once during a given period of time. If
the period of time is a calendar year, as it usually is, then this
type of deductible is known as a calendar year deductible. Contrast
with per-cause deductible.
allocated funding
A method of funding a pension plan in
which a portion of the total plan funds is allocated to each
participant. This type of funding is often achieved through the
purchase of annuities or insurance contracts for each participant.
Contrast with unallocated funding.
American Council of Life Insurance (ACLI)
In the United
States, an organization which collects and disseminates data on life
insurance markets.
Annual Information Return
In Canada, a report
containing financial and other information that pension plans must
file annually with the appropriate provincial or federal government.
annually renewable term (ART) insurance
See yearly
renewable term (YRT) insurance.
Annual Report Form 5500
In the United States, a
detailed report of membership and financial information pertaining
to the operation of a pension plan. This report must be filed
annually with the Internal Revenue Service.
Annual Statement
An accounting report that insurers
must file each year with the appropriate regulatory agency. This
report contains detailed accounting and statistical data that
regulators use to evaluate a life and health insurance company's
solvency and its compliance with insurance laws.
annuitant
(1) The person designated to receive annuity
payments. (2) The person whose lifetime is used as the measuring
period to determine how long benefits are payable under a life
annuity.
annuity
(1) A series of payments made or received at
regular intervals. (2) A contract that provides for a series of
payments to be made or received at regular intervals. There are many
kinds of annuities. For the annuities identified in this glossary,
see annuity certain, annuity due, annuity immediate, deferred
annuity, deferred life annuity, disabled life annuity, flexible
premium annuity, group deferred annuity, immediate annuity, joint
and survivor annuity, level premium annuity, life annuity, life
annuity with period certain, refund annuity, single premium annuity,
single premium deferred annuity (SPDA), straight life annuity,
temporary life annuity, temporary life annuity due, variable
annuity, whole life annuity, and whole life annuity due.
annuity certain
An annuity that provides a benefit
amount payable for a specified period of time regardless of whether
the annuitant lives or dies.
annuity due
A series of payments in which the payments
are made at the beginning of each interval of time.
annuity immediate
A series of payments in which the
payments are made at the end of each interval of time.
annuity mortality table
A tabulation of probabilities
of dying at each age. Used by actuaries to calculate premiums and
reserves for annuities in which benefits are paid only if a
designated person is alive. Annuity mortality tables usually project
lower rates of mortality than do mortality tables that are used for
life insurance. See also mortality tables.
annuity period
The time between each benefit payment
made under an annuity contract.
annuity units
The
term used for ownership shares in a variable annuity's
separate-account fund after the accumulation period has ended.
Annuity units are bought with accumulation units and are used to
determine benefit payment amounts. See also accumulation units.
antiselection
The tendency of people
with a greater-than-average likelihood of loss to apply for or
continue insurance to a greater extent than do other people. Also
called adverse selection or selection against the insurer.
apparent authority
Authority that is not expressly
conferred on an agent but that the principal either intentionally or
negligently allows a third party to believe the agent possesses. See
agent and principal. Compare to express authority and implied
authority.
applicant
The party applying for an insurance policy.
application
A form that must be completed by an
individual or other party who is seeking insurance coverage. This
form provides the insurance company with much of the information it
will need to decide whether to accept or reject the risk.
approval type temporary insurance agreement
An
agreement issued in conjunction with a conditional premium receipt
that provides temporary life insurance coverage as of the date the
insurer approves the proposed insured as a standard risk. See also
conditional premium receipt and temporary insurance agreements.
Compare to insurability type temporary insurance agreement.
assessment method
An early method of funding life
insurance under which members of the plan were charged in advance
for the amount of money that the administrators estimated would be
needed to pay each year's death claims. Also called the pre-death
assessment method. See also mutual benefit method.
asset-liability matching
The process of investing,
purchasing, selling, and otherwise adjusting an insurance company's
asset holdings so that cash is available when it is needed to cover
the company's liabilities.
assets
All things of
value owned by an individual or organization. Examples of assets
include cash, data processing equipment, and investments. Assets are
shown on the balance sheet of a life insurance company's Annual
Statement as required by law or by insurance department ruling.
asset share
The amount of assets that any block of
insurance policies will have accumulated by a given time.
asset share calculation
A computation that simulates
the way in which the assets of a block of policies should grow,
depending on various assumptions about future interest rates,
mortality, morbidity, expenses, lapses, etc.
assignee
The party to whom all or certain contractual
rights are transferred under an absolute or collateral assignment.
assignment
(1) The transfer of ownership rights in a
life insurance policy or other type of contract from one party to
another. (2) The document that causes the transfer of ownership
rights to go into effect. See also absolute assignment and
collateral assignment.
assignment of benefits
An authorization directing an
insurer to make payment directly to a provider of benefits, such as
a physician or dentist, rather than to the insured.
assignor
The person or party who transfers certain
contractual rights under an absolute or collateral assignment.
association group insurance
Group insurance extended to
the members of a trade, professional, or other association.
assumption reinsurance
A reinsurance agreement by which
one company permanently transfers full responsibility for a block of
policies to another company. After the cession, the ceding company
is no longer a party to the insurance agreement.
attained age
The current age of the insured. The age of
the insured at the time the insured's policy was issued plus the
number of years elapsed since the policy was issued.
attained age conversion
The changing of a life
insurance policy from one form of insurance to another (such as from
term life insurance to whole life insurance) at a premium rate that
is based on the age the insured person has reached at the time the
change takes place.
Attending Physician's Statement (APS)
A written
statement from a physician who has treated, or is currently
treating, a proposed insured or an insured for one or more
conditions. The statement provides the insurance company with
information relevant to underwriting a risk or settling a claim.
automatic dividend option
For a particular life
insurance policy, the dividend option that applies in the event the
policyowner does not choose an option. See dividend options.
automatic nonforfeiture option
For a particular life
insurance policy, a specified nonforfeiture benefit that becomes
effective automatically when a renewal premium is not paid by the
end of the grace period and the policyowner has not elected another
nonforfeiture option. See also nonforfeiture options.
automatic premium loan (APL)
A life insurance
nonforfeiture option that allows the insurer to pay overdue premiums
on a policy by establishing a loan against the policy's cash value.
See also nonforfeiture options.
automatic reinsurance treaty
A reinsurance agreement in
which the reinsurer agrees, for a stipulated type of risk, to accept
each risk or a portion of each risk submitted by the ceding company,
up to a certain limit, provided the ceding company insures up to its
usual retention limit. In this agreement, the ceding company assumes
full underwriting responsibility for all cases reinsured.
average indexed monthly earnings
In the United States,
the figure on which social security disability, retirement and other
benefits are based. The figure is an average of the monthly earnings
on which a worker has paid social security tax. The figure is
indexed, that is, adjusted to compensate for inflation.
aviation exclusion
A life insurance contract provision
which specifies that the death benefit is not payable if the insured
dies as a result of certain aviation activities.
