Life Insurance Glossary D

D’s

death benefit
The amount of money paid or due to be paid when a person insured under a life insurance policy dies. This amount does not include adjustments for outstanding policy loans, dividends, paid-up additions, or late premium payments. See also basic death benefit and policy proceeds.
death claim
A request for payment under the terms of a life insurance policy.

decreasing term insurance
A type of term life insurance in which the amount of coverage decreases during the term of coverage.

deferral date
A date some time after the first anniversary of a group insurance policy to which an insurance company defers the payment of the policy’s first renewal premium. An insurance company might defer this payment so that it could use the full first year’s experience to help calculate the new premium.

deferred annuity
(1) A series of payments in which the first payment is postponed (deferred) for one or more periods. (2) An annuity contract under which premiums are accumulated at interest but the annuity payment period is postponed (deferred) for one or more periods. See also deferred life annuity and group deferred annuity.

deferred compensation plan
A plan established by an employer to provide benefits to an employee at a later date, such as after the employee’s retirement.

deferred life annuity
A deferred annuity that provides a series of payments, each of which is made only if a designated person is alive.

deferred premium arrangement
In group insurance, an agreement between an insurer and a policyholder to lengthen a group insurance policy’s grace period, on a permanent basis, usually by 30, 60, or 90 days. This arrangement allows the policyholder to use the deferred premium amounts for the length of time by which the grace period is extended. The arrangement is usually only granted to companies with excellent credit ratings. Also called a premium-delay arrangement.

defined benefit pension plan
A pension plan that specifies the benefits that the plan promises to pay to a participant upon retirement, with the benefits determined according to a specified formula. Contrast with defined contribution pension plan.

defined contribution pension plan
A pension plan that specifies the amount of annual contributions that the plan sponsor will make on behalf of a plan participant. A defined contribution plan does not guarantee a specific amount of retirement benefits. A participant’s benefits at retirement are based on the amount that has been contributed to the participant’s account, plus investment earnings. Contrast with defined benefit pension plan.

demutualization
The process of converting a stock insurance company to a mutual insurance company.

dependent life insurance
Group life insurance made available to group members, usually on an optional and contributory basis, to cover the spouse, children, or other dependents of the group member. It is usually sold in small amounts which are intended to pay funeral expenses.

deposit term insurance
A type of level term insurance that requires a substantially larger premium payment in the first year than the amount of level annual premiums payable in subsequent years.

disability
Inability to work due to an injury or sickness. See also partial disability, presumptive disability, and total disability.

disability benefits
Benefits that are payable periodically while an insured continues to be disabled. “Being disabled” is generally defined in terms of inability to work. See also total disability.

disability buy-out insurance
Insurance that provides cash funds to a business or professional partnership so that the business interests of a totally disabled partner or stockholder may be purchased if the disability is long-term or permanent.

disability income insurance
A type of health insurance designed to compensate insured people for a portion of the income they lose because of a disabling injury or illness. Generally, benefits for disability income insurance are provided for the disabled person in the form of monthly payments. Sometimes called loss of time insurance. See also long-term disability income insurance and short-term disability income insurance.

dividend
(1) A refund of excess premium paid to the owner of an individual participating life insurance policy. Such a dividend is paid out of an insurer’s divisible surplus. Also called a policy dividend or a policyowner dividend. See also divisible surplus. (2) The portion of a group insurance premium that is returned to a group policyholder whose claims experience is better than had been expected when the premium was calculated. Also called experience rating refund, experience refund, and retroactive rate reduction. (3) A periodic payment paid by a business to a stockholder. Dividends paid in cash are called cash dividends. Dividends paid in the form of additional shares of stock are called stock dividends.

dividend accumulations
Amounts that result when a policyowner decides to leave the policy dividends owed to him or her on deposit with the insurer. Also called dividend credits.

dividend expenses
When an insurer calculates policyowner dividends, dividend expenses represent the amount of money that it costs the insurer to maintain each policy in force for the current year.

dividend interest rate
The interest rate that represents the actual rate being earned on an insurer’s present investments. The dividend interest rate is used to calculate policyowner dividends.

dividend options
Several alternatives that participating policyowners can choose from to indicate the manner in which they want to receive their share of the insurance company’s divisible surplus. See accumulation at interest option, additional term insurance option, automatic dividend option, cash payment option, dividend accumulations, enhancement type policy, paid-up additions, and premium reduction option.

domestic corporation
From the point of view of a particular state in the United States, a company incorporated under the laws of that state. Compare to alien corporation and foreign corporation.

double indemnity
Death benefit coverage that pays an additional benefit equal to the basic death benefit of the policy if the insured’s death is accidental. See also accidental death benefit (ADB) rider.