Insurance Terms

Immediate annuity

An annuity that begins to make income payments immediately (or soon after) after the first premium is paid, as opposed to a deferred annuity.
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Incapacity

The inability to properly care for one's property and/or person, or to make or communicate rational decisions concerning one's affairs.
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Incidents of Ownership

A policyowner's rights under a life insurance policy, including the right to change the beneficiary and the right to surrender the policy for the cash value.
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Income in Respect of a Decedent

All gross income that the decedent had a right to receive, but did not receive, prior to death such as uncollected wages, deferred compensation, and pension benefits. These income amounts are not included on the final Form 1040 but are reported on the fiduciary return or the beneficiary's tax return.
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Income Protection Allowance

An allowance that is based on the living costs of those family members who are not attending post secondary school. The allowance is included when calculating the expected family contribution as part of an application for federal student aid.
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Income Replacement

Benefit in disability insurance policies where an injured or sick wage earner receives a monthly income payment that is sufficient to replace a percentage of lost earnings.
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Income Tax

The annual tax on income that is levied by the federal government and by certain state and local governments.
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Incompetency

The inability to properly care for one's property and/or person, or to make or communicate rational decisions concerning one's person.
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Indemnity

The principle upon which all property/casualty insurance contracts are based. According to this principle, the objective of insurance is to restore the insured to the same financial position after a loss that he/she was in prior to the loss.
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Indemnity Plan

A type of health insurance plan that provides reimbursement of covered medical expenses and gives plan participants considerable freedom to choose their own health care providers.
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Independent Agent

A contractor who represents different insurance companies, is not controlled by any one company, and earns commissions from policies sold.
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Index

A statistical composite that measures changes in the economy or in financial markets by measuring the ups and downs of stock, bond, and commodities markets, and reflecting market prices and the number of shares outstanding for the companies in the index. Some well known indexes include the New York Stock Exchange Composite Index, S&P 500, American Stock Exchange Composite Index, and Dow Jones Industrial Average.
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Indirect Loss

A loss that arises from a peril, but is not directly and immediately caused by it.
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Individual Policy

An insurance policy (life, health, or disability) that provides coverage for an individual person (and, in some cases, his/her family members), as opposed to a group policy that provides coverage for a group of individuals.
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Individual Retirement Account (IRA)

A personal, tax-deferred retirement account that an individual can establish and fund with earned income up to a maximum amount. Deposits up to a maximum of $2,000 per year may be deductible within prescribed income levels and retirement plan participation. Income earned is tax deferred until it is withdrawn.
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Inflation Rider

An attachment or amendment to an insurance policy that provides protection against inflation by adjusting the level or amount of the benefit to keep pace with inflation.
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Inflation-Adjusted Yield

The net rate of return after taking inflation into account.
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Inland Marine Insurance

A form of property-casualty insurance that covers portable property and goods in transit over land, extending the coverage that is provided by Ocean Marine insurance over water.
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Insolvent

The inability to pay debts when due and/or meet other current financial obligations.
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Installment Payments

A sale made with the agreement that the purchased goods or services will be paid for in fractional amounts over a specified period of time.
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Institutional Methodology

A formula that is administered by the College Scholarship Service and is used to determine financial need when applying for institutionally funded student aid.
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Insurable

An individual applicant who qualifies for an insurance policy based on the coverage standards that are set by the insurance company.
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Insurable Interest

A relationship between an insured person or property and the potential beneficiary of the insurance. This requirement must be present at the time the life insurance policy is applied for but doesn't need to exist at the time of the insured's death. Insurable interest exists because there is a reasonable expectation that the beneficiary will benefit from the continued life of the insured, or experience a loss at the death of the insured.
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Inter Vivos

Property that is transferred while living, as opposed to being transferred by will.
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Interest

The cost charged for the use of money, expressed as a rate per period of time, usually one year (in which case it is called an annual rate of interest). The rate is derived by dividing the dollar amount of interest by the amount of principal borrowed.
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Interest Rate Cap

Method of limiting the interest-rate increases of an adjustable rate mortgage (ARM). A periodic rate cap limits how much the interest rate can increase from one adjustment period to the next. A lifetime cap limits the interest rate increase over the life of the mortgage.
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Interest-Rate Risk

The risk that changes in interest rates will adversely affect the value of an investment portfolio. Interest-rate risk affects portfolios with large holdings in long-term bonds or many dividend-paying utility company stocks because the value will fall in the event interest rates rise.
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Intestacy Laws

State laws governing the disposition of property when an individual dies without a valid will.
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Intestate

To die without leaving a valid will.
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Intestate Succession

Distribution of property according to state laws of descent upon the death of an individual who has not left a valid will.
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Irrevocable

Something that cannot be legally undone, altered, amended, revoked, or terminated.
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Irrevocable Beneficiary

A beneficiary designation that cannot be changed.
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Irrevocable Trust

A trust that cannot be altered, amended, revoked, or terminated by the settlor.
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