can you explain the phrase “life insurance in force”?
UPDATED: Apr 29, 2015
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Asked April 29, 2015
The insurance industry has developed terms that apply specifically to the field, such as the term, life insurance in force. In truth, "in force" can be applied to most financial contracts, but is most commonly used in insurance. The term can be used both for the individual policyholder and for the life insurance underwriter, and has a similar meaning in both cases.
If a person says that they have X amount of life insurance in force, it means that they have policies with a total face value of X dollars, and that all policies are currently paid up. In most cases, there is no difference between individual life insurance in force and all of a person's life insurance policies. The only exception would be if someone owned a policy that was currently lapsed or overdue for a premium payment.
For a life insurance company, the term refers to the total of all life insurance policies the company has that are currently paid up and active. The term could be modified to refer only to policies owned by a particular branch or person, but is most commonly used in this way in association with a total value of life insurance policies.
In common industry use, life insurance in force refers to the total obligations of the insurance provider, and is equal to the amount that would have to be paid out if all of the life insurance policies were to mature at the same time. The amount refers to the face values, however, and does not account for any additional cash values that have accumulated on those policies. This is because the cash value is variable and can be affected by individual policy owners at any given time.
Answered May 3, 2015 by Anonymous