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Definitions - P

Paid-up Insurance
Insurance on which all required premiums have been paid. The term is frequently used to mean the reduced paid-up insurance available as a non-forfeiture option.

Paramedical Examination
Physical examination of an applicant by a trained person other than a physician.

Participating Insurance
Insurance issued by an insurance company providing participation in dividend distribution.

Participating Policy
A life insurance policy under which the company agrees to distribute to policy holders the part of its surplus which its Board of Directors determines is not needed at the end of the business year. Such a distribution serves to reduce the premium the policy holder had paid. See also: Policy dividend; Nonparticipating policy.

Payor
The person making premium payments on a policy.

Pegging
Pegging is a practical smoothing device used to arbitrarily increase the actual dividend (s) paid on a new lower dividend scale to eliminate a temporary reduction in the actual dividends paid from year to year on a policy. Usually only base policy dividends are pegged; dividends on riders and Paid Up Additions (PUA) are not. See: Substitution. Pegging compares (normally before any adjustments for loans) the following: (a) The smaller of the dividend amount actually paid in the prior policy year and the prior year's dividend schedule payable in the current policy year, and (b) The current policy year's formula payment under the current year's schedule. This distribution does not follow the contribution method. It's done infrequently to enhance persistency.

Peril
The cause of a loss insured against in a policy.

Permanent Life Insurance
Type of life insurance other than term insurance which accrues cash value and is designed for long-term, or permanent, needs of a policy holder. Includes universal and variable life, among others.

Persistency
The degree to which policies stay in force through the continued payment of renewal premiums.

Persistency Bonus (Policy Owner's)
An enhancement to the policy's benefits, usually in the form of additional interest credits and/or reduced charges, for policies that remain in force for a certain period. The bonus may or may not be guaranteed in the contract.

Personal Representative
A person appointed through the will of a deceased or by a court to settle the estate of one who dies.

Policy
The legal document issued by the company to the policy holder, which outlines the conditions and terms of the insurance; also called the policy contract or the contract.

Policy Dividend
A refund of part of the premium on a participating life insurance policy reflecting the difference between the premium charged and actual experience.

Policy Fee
Fee added to the periodic premium payments to cover undefined policy costs.

Policy limit
The maximum amount a policy will pay, either overall or under a particular coverage.

Policy Loan: A non-recourse loan from the insurer to the policyowner secured by the policy's cash value.

Policy Owner
The individual who owns an insurance policy and who has all contractual rights. The policyowner is not necessarily the same person as the insured or the payor.

Policy Reserves
The measure of the funds that a life insurance company holds specifically for fulfillment of its policy obligations. Reserves are required by law to be so calculated that, together with future premium payments and anticipated interest earnings, they will enable the company to pay all future claims.

Policy Term
That period for which an insurance policy provides coverage.

Policy Holder
The person who owns a life insurance policy. This is usually the insured person, but it may also be a relative of the insured, a partnership or a corporation.

Policy Holders' Surplus
Sum left after liabilities are deducted from assets. Sums such as paid-in capital and special voluntary reserves are also included in this term. This surplus is an additional financial protection to policy holders in the event a company suffers unexpected or catastrophic losses. The financial base that permits a company to sell insurance.

Pool
A method of distributing insurance risk, whereby, the individual participants share overall risk with the other participants.

Pooling arrangement
An agreement to divide any losses that might occur equally among two or more people, typically with each paying the average loss.

Preexisting Condition
A physical and/or mental condition of an insured which first manifested itself prior to the issuance of his/her policy or which existed prior to issuance and for which treatment was received.

Preferred and Preferred Plus
The best premium rate classes for unimpaired, non-smoking applicants that are in better than average health.

Premium
The amount paid to an insurer or reinsurer in consideration of his acceptance of a risk.

Premium Discount
Periodic Payment discount given by a company.

Premium financing
A policy holder contracts with a lender to pay the insurance premium on his/her behalf. The policy holder agrees to repay the lender for the cost of the premium, plus interest and fees.

Premium Loan
A policy loan made for the purpose of paying premiums.

Present Value
Refers to a method that applies an assumed rate of interest to compute today's value for a future payment.

Premium Tax
A tax, imposed by each state, on the premium income of insurers doing business in the state.

Pricing Elements
The elements used in pricing a policy, principally investment earnings, mortality and expenses. If actual experience is better than the assumptions made in determining the policy guarantees, the difference after reflecting surplus needs is available for distribution to policy holders through the company's dividend scale or other non-guaranteed pricing structure.

Primary Beneficiary: The person who, upon the insured's death, has the first right to receive insurance proceeds.

Primary Insurance
Insurance that pays compensation for a loss ahead of any other insurance coverages the policy holder may have.

Principal
One for whom an agent acts, especially as to contractual dealings with third persons.

Principal Sum
The amount payable in one sum in the event of accidental death and in, some cases, accidental dismemberment. When a contract provides benefits for both accidental death and accidental dismemberment, each dismemberment benefit is an amount equal to the principal sum or some fraction thereof.

Privacy
(1) The right to be let alone; (2) in insurance contexts, the right to fair personal information practices. Probate: The court-supervised process of validating or establishing a distribution for assets of a deceased including the payment of outstanding obligations.

Proceeds
The amount payable under the terms of a life insurance policy upon the insured's death or upon the maturity of an endowment.

Producer
A term applied to an agent, solicitor or other person who sells insurance.

Projected Rates
Policy payment that is currently being charged by the company after the guarantee period.

Profit Commission
A commission payable on the profit generated under an insurance or reinsurance contract as an encouragement to maintain the flow of profitable business.

Proportional reinsurance
A type of reinsurance where the ceding insurer cedes to its reinsurer a predetermined proportion of the liability and premium of those policies subject to the reinsurance agreement.

Proposed Insured
The person named in a life insurance application as the person whose life is to be covered by the insurance, if the application is approved.

Prospectus
A form which is often part of the proposal form, giving details of the cover available with particulars of extra benefits and rebates.

Provision
A statement or clause, found in an insurance policy, to establish some term of the contract.

Proximate cause
The active efficient cause which sets in motion a chain of events which brings about a result without the intervention of any new cause working actively from a fresh or independent source. Proximate cause is not necessarily the closest in time to the result.

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.