Life Insurance Glossary of Terms
This glossary contains terms and phrases applicable to life insurance. These definitions are for general information purposes only and may not apply to all insurance products and policies. It is important to read your policy and understand the terms and definitions that apply to your coverage.
This is the person or persons named to receive the death benefit on the death of the life insured person.
It is a formal request to an insurance company to pay out the benefit covered under the contract.
Cash value is the amount of cash that grows in a permanent life insurance policy.
Cash Surrender Value
When a permanent life insurance policy with cash value is cancelled, a cash surrender value is paid out to the policyowner. The cash surrender value is the cash value less any policy loan and outstanding premiums.
This is a payment to a designated beneficiary or beneficiaries or estate when the life insured person passes away.
For whole life participating policies, a dividend is a sum of money paid regularly to the policyholder.
These are certain provisions in an insurance policy that exclude coverage for specific events. Life insurance exclusions could include things like natural disasters or dangerous activities.
The period within which a premium that's overdue must be paid for the policy to remain active.
The insurance company.
The person who is covered by the insurance policy.
The person who owns an insurance policy from an insurance company.
The person whose life is covered under the contract. If the life insured dies, the policy pays out.
The ending of a life insurance policy due to non-payment of required premiums.
A contract between the policyowner and the insurer.
Periodic payments that are made to an insurance provider in exchange for coverage.
Reinstatement happens when a policy that ended due to non-payment of premiums is restored or restarted. For reinstatement, information called evidence of insurability must be submitted to the insurance company for them to decide whether to insure you. It's like reapplying for coverage. Outstanding costs plus interest, including premiums not paid during the reinstatement, must be paid.
The policy owner can name the beneficiary or beneficiaries of their life insurance policy. The policyowner can independently make changes to the insurance coverage– including changing the beneficiary.
These are optional add-ons to your coverage to expand or limit the coverage or benefits.
Term Life Insurance
A type of life insurance that provides coverage for a certain period and then expires. These plans have term periods within which premiums are guaranteed not to change.
Term to 100
A type of permanent life insurance where the coverage lasts for the entirety of the insured person’s life and premiums are paid until they turn 100 years old. While the coverage is permanent, Term to 100 plans generally have no cash value.
A type of permanent life insurance which consists of a life insurance and investment component. Funds are paid into the investment account. Payments for the premium and other expenses are taken from this account. Any investment growth or cash value accumulates within the account but is not guaranteed.
The process by which the insurance company determines whether to provide someone coverage. Underwriting can mean the applicant is not eligible for the product. For life insurance, an insurer will analyze factors like age, sex, smoker status, medical history, and lifestyle before determining the risk of death. The higher the risk of death, the higher the premium or cost of purchasing the insurance.
A type of permanent life insurance where a portion of the premium pays for the cost of insurance and the balance is deposited in a savings or investment account and builds cash value. It has fixed premiums and options that can be used to keep the policy active if you are unable to pay premiums.
Becoming familiar with these terminologies, which are common within the life insurance industry, can help you select the right coverage for your needs.