Insurance Glossary

A provision in many life insurance policies that allows you to receive a portion of your death benefit while still alive if you are diagnosed with a terminal illness. This can help cover medical expenses or other costs during a difficult time.

A professional who uses mathematics, statistics, and financial theory to assess risk and set insurance premiums. Actuaries help insurance companies determine how much to charge for policies based on factors like age, health, and lifestyle.

A financial product sold by insurance companies that provides a series of regular payments over a specified period or for the rest of your life. Annuities are often used as a retirement income tool and can be funded with a lump sum or periodic payments.

The person, people, or entity (such as a trust or charity) you designate to receive the death benefit from your life insurance policy. You can name primary and contingent beneficiaries and update them at any time.

A type of whole life insurance with a smaller face amount, typically between $5,000 and $25,000, designed to cover funeral and burial costs. Also known as final expense insurance, it usually has simplified underwriting.

A savings component found in permanent life insurance policies (such as whole life or universal life). The cash value grows over time on a tax-deferred basis and can be borrowed against or withdrawn during your lifetime.

A formal request made by a beneficiary to the insurance company to receive the death benefit after the insured person passes away. Filing a claim typically requires a completed claim form and a certified death certificate.

A period, usually the first two years after a policy is issued, during which the insurance company can investigate and potentially deny a claim if material misrepresentation is found on the application.

A feature in many term life insurance policies that allows you to convert your term policy to a permanent (whole life) policy without undergoing a new medical exam or providing evidence of insurability.

The amount of money the insurance company pays to your beneficiaries when you pass away. The death benefit is generally received income tax-free and can be used for any purpose, including paying bills, replacing income, or covering funeral costs.

A type of term life insurance where the death benefit decreases over the life of the policy, typically in line with a declining obligation like a mortgage balance. Premiums usually remain level throughout the term.

A payment made by certain mutual insurance companies to policyholders of participating whole life policies. Dividends are not guaranteed and can be taken as cash, used to reduce premiums, left to accumulate interest, or used to purchase additional coverage.

Proof that you meet the health and risk requirements to qualify for life insurance coverage. This may include medical exams, health questionnaires, medical records, or other documentation requested by the insurer.

A specific condition or circumstance listed in a policy under which the insurance company will not pay the death benefit. Common exclusions include death by suicide within the first two years or death resulting from certain hazardous activities.

The dollar amount of coverage provided by a life insurance policy, also known as the face value or death benefit amount. This is the amount your beneficiaries will receive (before any outstanding loans or adjustments) when you pass away.

A type of permanent life insurance designed to cover end-of-life costs such as funeral services, burial or cremation, outstanding medical bills, and other small debts. Policies typically range from $5,000 to $25,000 in coverage.

A period after purchasing a life insurance policy (usually 10 to 30 days, depending on the state) during which you can cancel the policy for a full refund of premiums paid, no questions asked.

A set amount of time (typically 30 or 31 days) after a premium due date during which you can make a late payment without your policy lapsing. If you pass away during the grace period, the death benefit is still paid, minus the overdue premium.

Life insurance coverage provided through an employer or organization to a group of members. Group policies are often offered as an employee benefit with basic coverage at no cost and the option to purchase additional coverage.

A type of life insurance policy that does not require a medical exam or health questions for approval. Anyone within the eligible age range is guaranteed acceptance, though these policies may have higher premiums and a graded death benefit period.

A provision in life insurance policies stating that after the contestability period (usually two years), the insurer cannot void the policy or deny a claim based on misstatements in the application, except in cases of fraud.

The person whose life is covered by the insurance policy. The insured is not always the policy owner — for example, a parent may own a policy on their child, or a business may own a policy on a key employee.

A beneficiary designation that cannot be changed without the written consent of the named beneficiary. This is less common than revocable beneficiary designations and is sometimes used in divorce agreements or business arrangements.

The termination of a life insurance policy due to non-payment of premiums. When a policy lapses, coverage ends and no death benefit will be paid. Some policies offer reinstatement options within a certain timeframe.

A premium that remains the same amount throughout the life of the policy or for a specified period. Most term life and whole life policies feature level premiums, making it easier to budget for insurance costs.

A type of term life insurance where both the death benefit and the premium remain the same for the entire duration of the term. This is the most common type of term life insurance available today.

Benefits that can be accessed while the insured is still alive. These may include accelerated death benefits for terminal illness, chronic illness riders, or the cash value in permanent life insurance policies.

A life insurance policy designed to pay off your remaining mortgage balance if you pass away, ensuring your family can stay in their home. Coverage may decrease over time as the mortgage balance is paid down.

Life insurance policies that do not require a medical examination as part of the application process. These include simplified issue policies (health questions only) and guaranteed issue policies (no health questions). Premiums may be higher than traditional policies.

A life insurance policy that requires no further premium payments but continues to provide coverage. This can occur when a whole life policy has been fully paid according to its terms, or when cash value is used to purchase a reduced paid-up policy.

A category of life insurance that provides coverage for your entire lifetime, as long as premiums are paid. Types include whole life, universal life, and variable life. Permanent policies typically include a cash value component.

A loan taken against the cash value of a permanent life insurance policy. Policy loans typically have lower interest rates than traditional loans and do not require credit checks. However, unpaid loans reduce the death benefit.

The person or entity that owns the life insurance policy and has the right to make changes, such as naming beneficiaries, borrowing against cash value, or canceling the policy. The owner is often, but not always, the insured.

The amount you pay to the insurance company to keep your life insurance policy active. Premiums can be paid monthly, quarterly, semi-annually, or annually. The amount is determined by factors like age, health, coverage amount, and policy type.

The process of restoring a lapsed life insurance policy to active status. Reinstatement typically requires paying all overdue premiums with interest, providing evidence of insurability, and applying within a specific timeframe (often 3 to 5 years).

A term life insurance policy that can be renewed at the end of the term without a new medical exam. However, the premium will increase at each renewal based on your current age. Also called annually renewable term (ART) when renewed yearly.

An optional add-on to a life insurance policy that provides additional benefits or modifies the coverage. Common riders include waiver of premium, accidental death benefit, child term rider, and chronic illness rider. Riders may add to the policy cost.

A type of life insurance underwriting that requires answering health questions on the application but does not require a medical exam. Approval is based on your answers and may include a review of prescription drug databases or medical records.

A provision in most life insurance policies stating that the death benefit will not be paid if the insured dies by suicide within a specified period (usually the first two years) after the policy is issued. After this period, the full benefit is payable.

The amount of money you receive if you cancel (surrender) a permanent life insurance policy. The surrender value is the cash value minus any surrender charges, outstanding loans, and unpaid premiums.

Life insurance that provides coverage for a specific period of time, such as 10, 20, or 30 years. If the insured passes away during the term, the death benefit is paid to the beneficiaries. Term life is typically the most affordable type of life insurance.

The process by which an insurance company evaluates your application, health history, lifestyle, and other risk factors to determine whether to offer you coverage and at what premium. Underwriting helps insurers assess the level of risk involved.

A type of permanent life insurance that offers flexible premiums and an adjustable death benefit. Universal life policies have a cash value component that earns interest based on current market rates or a minimum guaranteed rate.

A rider that waives your premium payments if you become totally disabled and are unable to work. This ensures your life insurance coverage remains in force even if you cannot make payments due to a qualifying disability.

A type of permanent life insurance that provides coverage for your entire lifetime with level premiums that never increase. Whole life policies include a guaranteed cash value component that grows over time and may pay dividends.