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Definitions - F

Face Amount
The amount stated on the policy that will be paid in case of death. It does not include additional amounts payable under accidental death or other special provisions or acquired through the application of policy dividends, and can be reduced by loans or withdrawals.

Face Page
The first page of a life insurance policy. It includes basic information such as the policy number, type of policy, amount of insurance and premium amount, as well as the name of the insured, the owner and the beneficiary.

Facility of Payment
A contractual provision that allows the insurer, under stated conditions, to pay insurance benefits of up to $1,000 to a person or persons other than the insured, the designated beneficiary, or the insured's estate.

Facultative Reinsurance
An individual reinsurance negotiated and placed individually.

Facultative/Obligatory
A reinsurance term for a contract where the reinsured can select which risks he cedes to the reinsurer, but where the reinsurer is obliged to accept all cessions made.

Fair premium
The premium level that is just sufficient to fund an insurer's expected costs and provide insurance company owners with a fair return on their invested capital.

Family Income Policy
Special life insurance policy combining decreasing term and whole life insurance that pays a monthly income of $10 for each $1000 of life insurance if the insured dies within the specified period. The monthly income is paid to the end of the period, at which time the face amount of insurance is paid.

Family Policy
A life insurance policy providing coverage on all or several family members in one contract. The primary breadwinner's coverage is typically Whole Life insurance, with the spouse and children, including those born after the policy is issued, insured with small amounts of Term Life insurance.

Fiduciary
A person who holds something in trust for another.

Fidelity Bond
Bond that protects an employer against dishonest or fraudulent acts of employees, such as embezzlement, fraud, or theft of money.

Fifteen-Year Level Term
A Term Life insurance policy with a level death benefit where the premium remains the same for fifteen years.

Final Expenses
Immediate expenses incurred at the time of a person's death. These include funeral costs, court expenses associated with probating his or her will, current bills or debt, and taxes.

Five-Year Level Term
A Term Life insurance policy with a level death benefit where the premium remains the same for five years.

Fixed Amount Option
Life insurance settlement option in which the policy proceeds are paid out in fixed amounts.

Fixed Annuity
Annuity whose periodic payment is a guaranteed fixed amount.

Fixed Expenses
Fixed expenses are those not directly related to a policy (for example: a premium tax or the payment of a commission associated with the sale of a policy). Includes: advertising, accounting, planning, rent, computer facilities, etc. These expenses must be allocated to each "block" of policies sold; the distribution is discretionary and can be critical. Some insurers assume too many (or too few) policies will be sold, thereby reducing (or increasing) the fixed expense factor assumed in the pricing of the policy. This may lead to lower credits or increased policy charges.

Fixed Period Option
Life insurance settlement option in which the policy proceeds are paid out in fixed amounts.

Flat Schedule
A type of schedule in group insurance under which everyone is insured for the same benefits regardless of salary, position, or other circumstances.

Flexible Premium Policy or Annuity
A life accident policy or annuity under which the policy holder or contract holder may vary the amounts or timing of premium payments.

Flexible Premium Variable Life Insurance
A life insurance policy that combines the flexible premium feature of Universal Life insurance with the equity-based benefit feature of Variable Life insurance. Cash values are not guaranteed and the death benefit usually has little or no guarantee. Policy values depend on the performance of a separate account.

Foreign Insurer
An insurer is a foreign company in any state other than the one in which it is incorporated.

Fortuitous Loss
Unforeseen and unexpected loss that occurs as a result of chance.

Franchise Insurance
Insurance under individual contracts issued to the employees of a common employer or the members of an association under an arrangement by which the employer or association agrees to collect the premiums and remit them to the insurer. The insurer usually agrees to waive its right to discontinue or modify any individual policy, unless its simultaneously discontinues or modifies all other policies in the same group.

Fraternal Insurance
Insurance provided by fraternal orders or societies to their members. Such insurance may be written on an assessment or legal reserve basis

Fraternal Life Insurance
Life insurance provided by fraternal orders or societies to their members.

Fraternal Society
A social organization that provides insurance for its members.

Free-Look Period
A provision required in most states whereby policyowners have a period of time - usually, 10, 20 or 30 days, depending on the state - to examine their newly issued policy, and return it for a full refund of premium if not satisfied for any reason.

Fronting Company
A domestic insurance company that provides claims or administrative services to a captive.

Funeral Expenses
Expenses incurred for a funeral and burial. These can include casket, vault, grave plot, headstone and funeral director.

Future Increase Option
A provision found in some insurance policies that allows the insured to purchase additional disability income insurance at specified future dates regardless of the insured's physical condition.

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.