The per-unit cost of insurance.
A policy issued with an extra premium charge because of physical impairment or dangerous hobby. A surcharge added to the rate per unit on Life insurance. For example, the standard rate for a 30 year old buying Whole life might be $10 per thousand, but due to his/her health, the insurer adds a surcharge of $2 per thousand, so his/her cost per unit is $12 instead of $10, so his/her premium for a $100,000 policy is $1,200 instead of $1,000.
- Rated-Up Policy
A policy issued to an applicant that reflects a higher rate, due to the presence of a greater risk, in the eyes of the underwriter. Rated-up policies often result from substandard health revealed in a medical examination or dangerous hobbies or occupations. See the two definitions immediately above.
- Rates and Premiums, Setting
The chance of loss for risk is a combination of the probable frequency of loss and the probable severity of loss, based on accumulated data for similar risks. In the absence of reasonably accurate projections of potential losses, insurance companies would have no basis for setting rates and premiums.
Rebating is illegal in most states. Rebating is a practice that involves the payment of something (usually part of the commission) or covert return of money or other value not stated in the policy, to an applicant in order to induce a sale. You can take your client to lunch, but you cannot say “I will pay for lunch if you buy this policy from me.” Dividends are not considered to be rebates since it is stated in the policy that a dividend might be payable.
- Reciprocal Company
An unincorporated group of subscribers that exchange insurance responsibilities with other members, managed by an attorney-in-fact.
- Recurrent Disability
On a Disability Income policy, a disability that the insured has had before that now reoccurs. If it reoccurs within a certain period of time (usually 90 days), the waiting or elimination period is waived.
- Recurring Clause
A Health policy provision defining the duration of time during which the recurrence of a condition will be considered a continuation of a prior period of disability or confinement.
- Reduced Paid-Up Insurance Option
A Life insurance Non-forfeiture option under which the insured uses the cash value of his/her present policy to purchase a single-premium Whole Life policy, at his/her attained-age, for a reduced face amount, to age 100. No physical exam is required and the insured may select this option at any time as long as there is a cash value.
- Reduced-Premium Dividend Option (Apply to Premium)
A Dividend option on a participating life policy under which the policyholder has the dividend applied to the next premium due on the policy and he/she only has to pay the difference. For example, if the dividend is $100 and the premium is $1,000, than the insured would only have to pay $900.