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back-dating
Making the effective date of an insurance policy earlier than
the date of the application so that the premium rate will
be lower. State law usually limits back-dating to not more
than six months. Also called dating back.
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back-loaded
policy
A life insurance policy (usually a universal life insurance
policy) in which most of the expense charges occur when the
policyowner surrenders the policy or makes cash withdrawals
from the policy. Such charges are usually highest in the early
policy years and are often eliminated at the end of a certain
number of years. See also front-loaded policy
and universal life insurance.
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backloading
The practice of providing a higher accrual of pension benefits
during a participant's later years of employment. The practice
is designed to encourage and reward long service.
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band grading
The grouping of life insurance policies according to death
benefit amounts for the purpose of calculating loading.
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basic death
benefit
The death benefit according to the terms of the original,
basic contract of a life insurance policy. The basic death
benefit does not include the benefit for any supplementary
riders, such as an accidental death benefit (ADB) rider. For
policies whose death benefit remains constant, the basic death
benefit is equivalent to the face amount. Compare to death
benefit and policy proceeds.
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basic mortality
table
A mortality table without a safety margin. Also called a basic
experience table. See also mortality table and safety margin.
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basic services
Under dental insurance, dental services, such as fillings,
periodontics, and oral surgery, which are often covered at
80 percent of their reasonable and customary charges.
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basket clause
(1) From an investment point of view, a provision that allows
insurance companies to invest a small percentage of their
assets generally without regard to statutory restrictions.
(2) From an accounting point of view, a clause which permits
life and health insurers to hold a specified amount of their
assets as nonauthorized assets, which are not restricted in
the same way as authorized assets.
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beneficiary
The person or other party designated to receive life insurance
policy proceeds. See also contingent beneficiary, irrevocable
beneficiary, primary beneficiary, and revocable beneficiary.
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beneficiary
declaration
In Canada, an insurance policy beneficiary designation that
is made in a separate written document after the insurance
policy has been issued.
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beneficiary
for value
In the common law jurisdictions of Canada, a person who belongs
to the class of beneficiaries composed of persons who were
named as life insurance policy beneficiaries in return for
providing valuable consideration to the insureds (U.S.: policyowners).
The 1962 revision of the Uniform Life Insurance Act abolished
this class of beneficiaries.
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benefit
The amount of money paid when an insurance claim is approved.
Also called the policy benefit.
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benefit of survivorship
Describes the fact that annuity payments will be made as long
as the designated recipient is alive at the time the payment
is due. This concept is used in the calculation of amounts
due under life insurance settlement options.
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benefit schedule
Under a group insurance plan, a table or schedule which specifies
the amount of coverage provided for each class of insured.
Insureds are often classified with reference either to earnings
or to rank or position. Also known as schedule of benefits.
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best-earnings
plan
A pension plan which specifies that each participant's benefit
will be calculated according to the final-average formula.
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binding premium
receipt
A type of initial premium receipt that makes insurance coverage
effective immediately but only until the insurance company
either rejects the application or approves it and issues a
policy. Compare to conditional premium receipt.
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birthday rule
A rule included in some coordination of benefits provisions
that specifies the manner in which benefits for dependent
children are to be coordinated between two insurance plans.
According to the birthday rule, benefits for dependent children
will be paid by the plan of the parent whose birthday falls
earlier in the year.
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blended rates
Group mortality rates that are based partially on a group's
own experience and partially on manual rates. Blended rates
are used to determine the appropriate group insurance premium
rates for intermediate-size groups. See also experience rating
and manual rates.
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Blue Cross plan
A hospital expense insurance plan offered by a regionally-operated
health care provider affiliated with a large national nonprofit
health care organization. This plan generally provides benefits
on a "service-type" basis.
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Blue Shield
plan
A physician expense insurance plan offered by a regionally-operated
health care provider affiliated with a large national nonprofit
health care organization. This plan generally provides benefits
on a "service-type" basis.
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branch manager
The individual in charge of a field office of an insurance
company that uses the branch office distribution system. Also
called a general manager. See also branch office distribution
system.
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branch office
distribution system
A common system for selling individual life insurance. Under
this system, the soliciting agents who work out of a branch
office are under contract to the insurance company, not to
the branch manager, and the agents receive commissions directly
from the insurance company. The branch office manager, supervisors,
and clerical personnel in the field office are employees of
the insurance company, and these employees are subject to
the same types of controls normally exercised by an employer.
See also agency system, branch manager, and general agency
distribution system.
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break in service
The length of time between the date an employee leaves a firm
and the date the employee resumes working for that firm. For
pension and employee benefit plan purposes in the United States,
a plan participant cannot be deprived of benefits which accumulate
before a break in service unless the break is longer than
(1) five years or (2) the amount of time that the participant
has been employed when the break commences, whichever is greater.
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bridging supplement
In Canada, a supplemental pension provided to a pension plan
participant who retires before age 65. The bridging supplement
is generally used to integrate private pension plans with
public pension plans. If a pension plan participant retires
before age 65, the plan sponsor can provide a bridging supplement
until the retiree begins to receive payments from the public
pension plans at age 65. The combined benefit payment that
the participant receives remains level and is the same as
the participant would have received had he or she waited until
reaching age 65 before beginning to receive benefits. The
sponsor is providing an amount in addition to the basic pension
payment. Also known as a bridging benefit. Compare to the
notched option.
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broker
(1) An insurance salesperson agent who sells insurance products
for more than one insurance company. (2) For a career agent,
to submit insurance applications to companies other than the
agent's own company.
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brokerage distribution
system
A distribution system that relies on commissioned agents,
called brokers, who sell the products of more than one insurance
company.
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brokerage manager
A salaried insurance company employee or an independent agent
whose responsibility is to appoint brokers on behalf of the
company and to encourage brokers to sell the products of a
particular insurance company.
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brokerage shop
An agency operated by an independent general agent who is
under contract to a number of insurance companies. Also known
as a brokerage general agency.
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broker-dealer
A firm that provides information or advice to its customers
regarding the sale and/or purchase of securities and that
serves as a financial intermediary between buyers and sellers
by manufacturing or acquiring securities in order to market
them to its customers.
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bundled insurance
product
An insurance product in which the mortality, investment, and
expense factors used to calculate premium rates and cash values
are not identified separately in the policy. Traditional whole
life insurance is an example of a bundled insurance product.
See also unbundled insurance product.
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business-continuation
insurance
A type of business insurance designed to provide funds so
the remaining partners in a business, or the remaining stockholders
in a closely-held corporation, can buy the business interest
of a deceased or disabled partner or stockholder. See also
partnership insurance and stock repurchase insurance.
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business insurance
Insurance that is intended to serve the insurance needs of
a business rather than the needs of an individual.
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Buyer's Guide
In the United States, a publication that many states require
insurance companies to give to an applicant for life insurance.
The Buyer's Guide helps the applicant make an informed choice
among policies.
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