Texas Life Insurance Glossary: Questions and Answers 2024, Exams of Business Economics

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Texas Life Insurance Glossary

Questions with Answers 2024

Absolute Assignment ✔ A transfer by the policyholder of all control and rights to a third party. Accumulation at Interest Option ✔ A dividend or settlement option under which the policyholder allows his dividends or policy proceeds to accumulate interest with the company. Although the dividends or proceeds are not generally taxable, the interest earned is. Actuary ✔ One concerned with the application of probability and statistical theory to insurance, utilizing the law of large numbers. ADB ✔ Accidental Death Benefit (also known as Double Indemnity). A rider added to a Life policy that will pay double the face amount if the insured dies as a result of accident, generally within 90 days of the accident. Adverse Selection ✔ Selection not in favor of the company. The tendency of poorer risks to want insurance more often than standard risks. For example, a person who is already sick would like to buy health insurance. Adverse Underwriting Decisions, Consumer Rights ✔ Under the Fair Credit Reporting Act, when an adverse underwriting decision is made, the insurer must provide the applicant or policyholder with specific written reasons for the decision, or advise the individual that specific reasons are available upon written request. Upon receipt of the written request, the insurer must furnish specific reasons for the adverse decision and the names and addresses of the sources that provided the information. Agent / Producer ✔ The individual appointed by an insurance company to solicit and negotiate insurance contracts on its behalf. Agents or Producers represent the company, not the client. Alien Company ✔ An insurer organized and domiciled in a country other than the United States. Annuitant

✔ The party receiving the benefits of an annuity, similar to the insured on an insurance policy. The annuitant usually also owns the annuity, although you can buy an annuity to benefit another party, who would then be the annuitant. Annuity ✔ An agreement by an insurer to make periodic payments that continue during the lifetime of the annuitant(s) or for a specified period. Annuities are considered to be the opposite of life insurance, since annuities pay while your alive and life insurance pays when you die. Life insurance proceeds create an estate, while annuities are used to liquidate an estate over a period of time. All annuities are insurance products and a life insurance license is required. Applicant ✔ The party making application to the insurance company for the policy. Applicants must provide the insurer with the truth to the best of their knowledge, which is known as a "representation". Application ✔ A form on which the prospective insured states facts requested by the insurer and on the basis of which (together with any information from medical examiners, attending physicians, hospitals, investigators, and the producer) the insurer decides whether or not to accept the risk, modify the coverage offered, or decline the risk. With premium, the application is considered to be an offer to buy. If attached to the policy at issue, it becomes part of the Entire Contract. Assignee ✔ The person to whom policy rights are assigned in whole or in part by the policyholder, who is known as the Assignor. On Life insurance there are 2 types of assignment: Absolute and Collateral. Assignment ✔ Transfer of rights in a policy to another party by the policyholder. For example, if you bought a life insurance policy on a minor child, you are the owner and the child is the insured. When the child reaches age 21, you could assign all rights of ownership in the policy to the child. This is an absolute assignment. Attained Age ✔ The present or current age of the insured. Upon conversion, premiums are based on the current age of the insured.

✔ A statement evidencing that a policy has been written and stating the coverage in general. On Group insurance, the employer receives the master policy and the employees receive Certificates of Insurance. Claim ✔ A demand for payment under the insurance policy. Classification ✔ The grouping of persons for the purpose of determining an underwriting or rating group into which a particular risk must be placed. For example, on Whole Life, the "standard" rate for the average person at age 30 might be $10 per $1,000 of face amount. If the insured is "sub-standard", the rate will be higher. A Preferred risk receives a discount from the standard rate. Collateral Assignment ✔ Assignment of part of the proceeds of an insurance policy to a bank as collateral to settle the loan balance that may exist at the insured's death. Common Disaster Provision ✔ A provision in a Life contract that provides that the Primary Beneficiary must outlive the insured by a specified period of time in order to receive the proceeds. If not, then the Contingent Beneficiary receives the proceeds. The provision is designed to protect the rights of the Contingent Beneficiary in the event of simultaneous (or nearly simultaneous) death of the insured and the Primary Beneficiary. The time limit is usually 10, 15, or 30 days, depending on state law. Also known as the Uniform Simultaneous Death law. Concealment ✔ The deliberate withholding of facts by an applicant for insurance that materially affects an insurance risk or loss. Conditional Receipt ✔ In Life and Health insurance, a Conditional Receipt provides that if premium accompanies the application, coverage shall be in force from the date of application (whether the policy has yet been issued or not) provided the insurance company would have issued the coverage on the basis of facts as revealed by the application and other usual sources of underwriting information. Remember, there is never any coverage unless the premium has been paid! Conditions ✔ The part of an insurance contract setting out the responsibilities of both the Insured and the Insurer, such as the requirements regarding Notice of Claim and Proof of Loss. Consideration

✔ The exchange of value on which a contract is based. In Life and Health insurance, the Consideration is the premium and the statements in the application. Remember, consideration need not be equal. You might pay $1,000 in premium, but your policy will pay $100,000 if you die. Consideration Clause ✔ A clause in a Life policy specifying the premium due for the insurance protection and the frequency of payment (also called Mode). The more frequent the Mode of Payment, the higher the cost, since most insurers charge service fees for budget payments. The cheapest Mode is annual. Contingent Beneficiary ✔ Person or persons named to receive benefits if the Primary Beneficiary is not alive when the insured dies. For example, the Primary Beneficiary might be your spouse and the Contingent Beneficiary might be your children. Contract ✔ A legal agreement between two parties for consideration, such as an insurance policy. To hold up in court, contracts must contain 4 required elements: Consideration, Offer, Acceptance and Legal Purpose (remember the acronym COAL). Parties to the contract must also have Legal Capacity. Contributory Group ✔ Group insurance for which the employees pay part of the premium. If the group is contributory, at least 75% of those eligible must enroll in order to prevent "adverse selection". In noncontributory groups, 100% must enroll. Controlled Business ✔ Life-insurance coverage written on the producer's own life and on the lives of such persons as the producer's relatives and business associates. The amount of controlled business a producer may write is restricted in most states, often to a maximum of 50% in a 12 month period. Convertible Term Insurance ✔ A Term Life policy that can be converted any time to a permanent type of coverage without proof of insurability. Conversion premiums are based on current age and coverage cannot be increased. Most Term is convertible, but not all. Most Group insurance (which is usually Annual Renewable Term) is convertible by law during its 31 day grace period. Credit Insurance ✔ Insurance on a debtor in favor of a lender, intended to pay off a loan or the balance due thereon if the insured dies or is disabled. Credit Life is a type of decreasing term insurance and the face amount of the policy is limited to the amount of the loan. Generally not used as Mortgage Protection Insurance.

✔ That portion of the premium for which policy protection has already been given. For example, if you buy a 1 year Health policy for a premium of $1,200 and the insurer cancels you exactly 6 months later, they are entitled to keep $600 (the earned premium), but they must also refund you $600, which is called the "unearned" premium. If they covered you for the entire year, all the premium would be earned. This concept also applies to P&C insurance, but not to Life insurance, where all premiums are considered to be fully "earned" upon payment. Effective Date ✔ The date on which an insurance policy goes into effect and from which protection is furnished. Eligibility Period ✔ The period during which the employee is eligible to obtain coverage under a Group Life or Health plan. Also known as the "open enrollment" period. Endorsement ✔ A form attached to an insurance P&C policy changing the contract. Endorsements are called "riders" in Life and Health insurance. No change to a policy may become effective until approved by a company officer. Endowment Policy ✔ A cash value life policy for which premiums are paid for a limited number of years, such as to age 65. If the insured is alive at the end of this premium-paying period, she receives the face amount of the policy. If the insured dies before maturity of the policy, the beneficiary receives the proceeds. Generally the most expensive type of cash value life insurance, since the policy reaches maturity prior to age 100. Endowments are often purchased to supplement retirement or for children's educational purposes. Exclusions ✔ Causes or conditions listed in the policy that are not covered and for which no benefits are payable. For example, in most states, suicide is excluded on a Life policy for the first 2 years. On Health insurance, intentional self inflicted injury is never covered. Experience ✔ The loss record of an insured, a class of coverage, or an insurance company. For example, most large Group Life policies are rated based on the prior claims history of the group, which is called "experience rating". Extended Term Option ✔ A life-insurance non-forfeiture option under which the insured uses the policy.s cash- value to purchase one-year Term insurance in an amount equal to the original policy face amount. Although the policy holder could select the Extended Term Option at any time, if the policy lapses and no other non-forfeiture option has been selected, the policy

will automatically go into Extended Term. Remember, there are 3 non-forfeiture options: Cash Surrender, Reduced Paid Up and Extended Term. Face Amount ✔ The amount indicated on the face of a Life policy that will be paid at death or when a Whole Life policy matures at age 100. Also known as the Death Benefit or the policy limit. Not taxable. Family Income Rider ✔ Added to a Whole Life policy for an additional premium, this rider is similar to the Decreasing Term Rider except that payments to the beneficiary are in the form of monthly income rather than a lump sum. For example, if you added a 10 year $100, FIR to your policy and died 5 years later, your family would receive $10,000 a year for 5 years PLUS the face amount of your Whole Life policy. Remember, the rider is term insurance and you must die in the term. If you died after 11 years, the rider would not cover, but the Whole Life would, since Whole Life is "permanent" insurance, covering to age 100. Family Plan Policy ✔ A combination plan covering your entire family, usually with Permanent insurance on the father's life, with mother and children automatically covered for lesser amounts (usually Term), all included under one premium. Fiduciary ✔ A person who occupies a position of special trust and confidence when handling premiums on behalf of insureds and insurers. Insurance producers are considered to be fiduciaries. Fixed Amount Option ✔ A Life insurance Settlement option under which the beneficiary receives a fixed amount (such as $500 a month) for an unspecified period of time. Payments continue until the principal and interest are depleted. Fixed Period Option ✔ A Life insurance Settlement option under which the beneficiary receives a regular income for a specified period of time, such as 10 years, at which time the principal and interest are depleted. The name speaks for itself. Foreign Company ✔ An insurer organized under laws of a state other than the one in which the insurance is written. For example, a company that is domestic to Illinois would be considered to be "foreign" in all other states Fraud

two years, and "incontestable" thereafter. However, Health policies are always contestable for fraud! Indemnity ✔ Insurance is designed to restore the policyholder to the same financial condition enjoyed prior to a loss. The intent is to cover the amount of the actual loss only and to avoid paying amounts that allow an insured to profit from a loss situation. This is known as the Principle of Indemnity. Health insurance follows this concept, but Life insurance doesn't. All Life policies pay in addition to each other! Industrial Life ✔ Life insurance generally with a face amount of less than $1,000, with premiums collected weekly by the producer in person. The grace period for this type of insurance is 28 days. Also known as "Home Service" Life insurance. There are 3 types of Life insurance: Ordinary (which includes Whole Life, Term and Endowment), Group and Industrial. Insurable Interest ✔ An interest in the life of an individual by which there will be a loss if the insured dies. The interest may be based on either a family relationship or on economic factors. Must exist at the time of application, not necessarily at the time of loss. If you would benefit if a person continues to live, you have an insurable interest in that person. Insurance ✔ A contract or device for the transfer of pure risk to an insurer, who agrees, for a consideration, to indemnify or pay a specified amount for losses suffered by the insured. Risk is defined as the chance or uncertainty of loss. Pure risk is the chance of loss, with no chance for gain. It is the only type of risk that is insurable. Speculative risk, which is the chance for loss or gain, is not insurable. Insurance Age ✔ An age upon which current premium rates may be established. It is commonly based on age at last birthday, age next birthday, or age at nearest birthday. Also known as "original" age. Insurance Commissioner ✔ Common title for head of a state Department or Division of Insurance. Also known as the Director of Insurance in some states. Insurance is regulated by state law. The Commissioner's job is to protect the insurance buying public by administering state insurance laws and regulations. The Commissioner does not make the laws, he enforces them. Insured ✔ The party to an insurance contract to whom, or on behalf of, the insurance company agrees to indemnify for losses, provide benefits, or render services. In Prepaid Hospital Service plans (HMOs), the insured is called the subscriber.

Insurer ✔ The insurance company assuming risk and agreeing to pay claims or provide services. Insurers write "indemnity" plans, covering the insured. HMOs are not true insurance companies. They write prepaid "service" plans for their "subscribers". Insuring Clause ✔ The clause in a policy that specifies in brief the contract's intent and benefits. Also known as the Insuring Agreement. It specifies the covered perils, such as accident and sickness on Health insurance. A peril is a cause of loss. Interest Option ✔ A Life insurance settlement option under which the insurer keeps the insurance proceeds and invests them on behalf of the beneficiary. The beneficiary receives the interest from the investment. The proceeds remain the property of the beneficiary. The proceeds are not taxable but the interest earned is. Irrevocable Beneficiary ✔ Once elected, cannot be changed without named beneficiary.s consent, since they have a "vested" interest in the policy benefits. A policy loan would also require the consent of the Irrevocable Beneficiary, since if you die with a loan outstanding, they would receive less. Joint Life and Survivor Annuity ✔ Payments are made to two annuitants with the survivor continuing to receive payments after the first annuitant dies. Joint Life Annuity ✔ Payments continue to two annuitants for only as long as both live. Payments stop entirely when the 1st annuitant dies. There is no survivorship, so monthly payments would actually be higher to the annuitants on a Joint Life Annuity than they would be on a Joint & Survivor Annuity, which pays until the last party dies. Jumping Juvenile ✔ Juvenile Life insurance on which the face amount increases by a multiple, usually five, of the original face amount when the insured reaches 21. Used as a marketing tool to sell Life insurance covering children, whose rates are extremely low. Key Person Insurance ✔ Life or Health insurance on important employees whose absence would cause the employer financial loss. The insurance is usually owned by and payable to the employer. Premiums are not tax deductible, but benefits are not taxed. Lapse ✔ Termination of a policy because of failure to pay the premium. A policy lapses at the end of its grace period. For example, if you forget to pay your Whole Life premium when

✔ A Life insurance Settlement option that provides for payments during the entire life of the payee. Besides Joint and Survivor, there are three methods:

• Straight Life Income. The payee receives a specified income for life, with no refunds upon death. This is considered the most risky option, since there is no beneficiary. • Refund Annuity. Income is paid for the lifetime of the payee and to a second payee if the first dies before receiving the full proceeds of the policy. This is the least risky option. • Life Income with Period Certain. The payee receives installments for life with a second payee receiving the payments if the first dies before the end of the time specified in the Period Certain Period. The payee will not receive payments for life, only until the end of the Period Certain, which could be 5 years, 10, 15 or even 20 years, so there is still some risk! Limited Pay Life ✔ A Permanent Whole Life insurance policy on which premiums are paid for a specified number of years or to a specified age of the insured. Protection continues for the entire life of the insured. LP65 and 20-Pay Life are examples. A Life Paid up at age 65 is paid up at age 65, but the cash value does not equal the face amount of the policy until age 100 when the policy reaches maturity. Limited Pay Whole Life is more expensive than traditional Whole Life since the premiums must be paid within a shorter period of time. Loading ✔ The amount added to the cost of mortality (death) to cover the operating expenses of the insurer, such as commissions and the cost of underwriting. Loan Value ✔ That amount of Cash Value in a Whole Life or Endowment policy that may be borrowed by the insured. When you borrow from your policy, the insurer is loaning you their money and keeping your money as collateral. Since they usually have their funds invested, they will charge you annual interest on the loan (maximum 8% in most states). Loans don't have to be paid back while you are alive, but will continue to accrue interest. Upon death, the amount of the unpaid loan plus accrued interest will be subtracted from proceeds. Loss Ratio ✔ The percentage of losses to premiums. usually losses incurred to premiums earned. Lump Sum ✔ Proceeds of a policy taken all at once. A single amount. Manual Rates ✔ Insurance rates according to a company Rate Manual that vary from company to company. Also known as "Standard Rates". Most rates must be filed with the state Insurance Commissioner, but the insurance companies actually set their own rates in the competitive marketplace. Master Policy

✔ The policy contract issued to the employer under a Group insurance plan. Remember, the employees covered by a group plan are considered to be insureds, but they only receive certificates. Material Misrepresentation ✔ A misrepresentation that would have been important or essential to the underwriter's decision to issue the policy. A misrepresentation is the applicant's failure to tell the truth to the best of their knowledge. MIB ✔ Medical Information Bureau. An organization serving as a clearinghouse of medical information on risks reported to it by insurance companies as a source of underwriting information on applicants. Misrepresentation ✔ The use of written or oral statements of the insured, producer or insurance company misrepresenting the risk, terms, coverage, benefits, privileges or estimated future dividends of any policy. Misstatement of Age Clause ✔ Provides that if misstatement of age is discovered after policy issue, the company can, if the insured is currently alive, adjust the premium amount on future premiums and request payment of the additional premium the policyholder should have paid; or if the insured has died, adjust the face amount of the policy to fit the premium that was paid at the correct age before paying the claim. Mode Premium ✔ Premium paid according to the Mode of Payment selected by the policyholder, that is, monthly, quarterly, semi-annually, or annually. The less frequent the Mode, the lower the annual cost. Moral Hazard ✔ A condition of morals or habits that increases the probability of a loss from a peril. Generally, a Moral Hazard is presented by a dishonest person. Mortality Table ✔ A statistical table showing the number of deaths for all ages from 1 to 100. For example, if you are age 30, you could look at the table to find how many people your age will die this year, although the table cannot tell you which ones. Since the table tracks the life expectancies of 10 million people, it is very accurate. The 1980 CSO table is currently used by most companies, although companies (if large enough) are free to develop their own tables. Also known as the Law of Large Numbers. Mortgage Protection Policy ✔ In Life insurance, a decreasing term policy from which the benefits are intended to pay off the balance due on a mortgage upon the death of the insured. Although Credit

and in good standing in your home state and pay the required fees. You can only have one resident license, but you can have 49 nonresident licenses, if desired. One-Year Term Dividend Option ✔ A dividend option under which the insured has the company purchase one-year Term insurance with the dividend. For example, your dividend is $100, which you could have taken as cash. Instead, you have the insurer use the money to buy you an additional 1 year term policy at your current age. If you die in the term, your beneficiary will receive the proceeds of your Life policy PLUS the face amount of the one year term policy. At the end of the year, the term policy expires. Ordinary Life Insurance ✔ Life insurance other than Industrial or Group. Ordinary life may be Whole Life, Endowment or Term. The grace period on all Ordinary Life insurance is 30 days. The Mortality Table is used to calculate the rates and benefits payable for Ordinary Life insurance. Original Age ✔ The insured's age when the policy was initially purchased. Often calculated based on the applicant's closest birthday. Paid-Up Additions ✔ Additional single-premium Life insurance paid for by policy dividends and added to the face amount. For example, your mutual insurer declares a $100 dividend, which you could have taken as cash. Instead, you ask them to use the money to buy you an additional Whole life policy, which is paid up to age 100. Although this additional policy is small, no physical exam is required, so this option is very popular with clients who have health problems. Over a period of time, you can obtain substantial additional coverage. Participating (Par) ✔ Insurance that pays policy dividends to policy holders. Issued by a Mutual Company. Dividends may never be guaranteed and they are not taxable, since the IRS considers them to be a return of premium already paid. Partnership Insurance ✔ Life or Health insurance sold to a partnership to protect against the loss of business continuity caused by the death or disability of a partner. For example, if your partner dies, his share of the business would go to his spouse who knows nothing about the business. To avoid this, you buy a Life insurance policy on your partner and he buys one on you. If he dies, the money goes to you tax free and you use it to buy out his spouse. A .buy/sell. agreement should be drafted by a lawyer and signed by all 4 parties: you, your spouse, your partner and his spouse. Payor Benefit

✔ A rider or provision, usually found in Juvenile policies, under which premiums are waived if the Payor of the premium (usually a parent) becomes disabled or dies while the child is still a minor. Permanent Insurance ✔ Whole life insurance is considered to be permanent since it covers you until you die or to age 100, whichever comes first. Term insurance is considered to be temporary. Policy Dividends ✔ The policyholder's share of a company's divisible surplus which may be distributed to policy holders of a Mutual insurer at the discretion of their Board of Directors. Not taxable and not guaranteed. Policy Fee ✔ A special, one-time premium charge to offset in whole or part the insurer's first-year acquisition costs. Policyholder ✔ The person who has the right to exercise the privileges and rights of ownership in the policy contract. Also called the policyowner. Policy Loan ✔ A loan taken by the policyholder from the insurer using the insurance cash value as collateral. Insurers may defer requests for loans or for cash surrender up to six months. Loans are not taxable and need not by repaid, although interest will accrue on an annual basis. Upon death, any outstanding loans plus accrued interest will be subtracted from proceeds paid. Primary Beneficiary ✔ Named beneficiary first to receive proceeds or benefits, if living, when proceeds or benefits are due. Unless revocable, the policyowner may change the primary beneficiary at any time. If there is no primary beneficiary, proceeds are payable to the Contingent Beneficiary. If there is neither, proceeds are payable to the estate of the insured, who is considered to be the "final" beneficiary. Remember, proceeds of a Life insurance policy are not taxable to the beneficiary. Principal Sum ✔ On an AD&D policy, the amount payable in one sum in event of Accidental Death or severe accidental Dismemberment, which is defined as the loss of 2 limbs in the same occurrence. For loss of one limb, an AD&D policy will pay the Capital Sum, which is usually 50% of the Principal Sum. Proof of Loss ✔ A formal statement by the insured to the insurance company regarding a loss. The purpose is to place before the company sufficient information concerning the loss to enable it to determine its liability under the policy. Although both are conditions in a

dies before receiving this amount, the difference is paid to a named beneficiary either as a cash refund or in installments. Reinstatement ✔ When a Life policy lapses at the end of the grace period, the policy holder may apply for reinstatement by paying all back premiums and by passing a physical exam. The main advantage to reinstating rather than buying a new policy, is that the reinstated policy is based upon the insured's original age. However, a policy that has been surrendered for cash may not be reinstated. Reinsurance ✔ Agreement between insurance companies under which one company accepts all or part of the risk of loss of the other. Renewable Term ✔ Term insurance that can be renewed without proof of the insured's insurability, up to a certain specified maximum age. Most Group life insurance is Annual Renewable Term. Individual policies are often written as 5 year, 10, 15 or 20 year renewal term. The face amount is level, but the premiums will go up at renewal, since they are based upon the average age of the insured. Representations ✔ Facts that the applicant represents as true and accurate to the best of his knowledge and belief. Reserve ✔ The amount that, when increased by future premiums on outstanding policies and interest on those premiums, will enable the company to pay future death claims and cash surrenders. Rider ✔ A form attached to a policy that modifies the conditions of the policy by expanding or decreasing its benefits or excluding certain conditions from coverage. Also known as an "endorsement". Most riders cost extra, but the additional premium paid does not go towards cash value accumulation. Most riders (such as double indemnity) will drop off a Life policy automatically at age 65. Most riders are added at policy issue, but they may also be added later on with the mutual consent of the parties. Risk ✔ The uncertainty of loss that exists whenever more than one outcome is possible. In the area of Life insurance, death is certain, but time of death is uncertain. Also known as the "chance of loss". Remember, only "pure" risk is insurable. Pure risk is the chance of loss without any chance for gain. Risk Selection

✔ The process of selecting insureds with a normal claims expectancy, also known as underwriting or risk classification. Since most insurance companies are in business to make money, it is the underwriters job to select business that will generate an underwriting profit. Settlement Option ✔ Generally, there are 5 Life insurance Settlement Options: Cash, Interest, Fixed Period, Fixed Amount or the beneficiary may use the proceeds of the policy to purchase an Annuity. Remember, proceeds of a Life policy are tax free. However, if the beneficiary selects the Interest Option, the interest will be taxable. Single-Premium Annuity ✔ An Annuity purchased with one lump-sum payment, generally with after tax dollars. You can buy either a Single Premium Immediate Annuity, which allows you to "annuitize" right away, or you can buy a Single Premium Deferred Annuity, where you annuitize sometime in the future, perhaps at retirement age. Single-Premium Policy ✔ A Life insurance policy on which the entire premium is paid in one payment, which creates an immediate cash value. Remember, in lieu of a traditional Whole life policy where payments are payable to age 100, you can buy a Limited Pay Whole Life policy, such as a LP 65, a 20 Pay Life or even a 1 Pay life. Universal Life policies were often purchased with a single premium before tax law rules regarding Modified Endowment Contracts (MECs) were adopted. Standard ✔ A risk that meets the same conditions of health, physical condition, and other underwriting criteria used by actuaries when developing rates and benefits from a Mortality or Morbidity Table. The Standard Risk is also known as the Average Risk. Remember, most people are insurable. It is just a matter of classifying them into the proper rating category: Preferred, Standard or Non-Standard. Standard Non-forfeiture Law ✔ A law adopted by most states that provides that any cash-value accumulation or its equivalent must be made available to the policyholder should he stop paying the premiums. Any time a cash value Life insurance policy lapses, the policy owner must be given the choice of 3 Non-forfeiture options: Cash Surrender, Reduced Paid Up or the Extended Term option. In other words, the cash value may not be forfeited to the insurer! Standard Risk ✔ A person entitled to life-insurance protection without extra rating or special restrictions. See the definition of "Standard" above. Stated Amount