Life Insurance Glossary

We created a life insurance glossary to help make it easier to understand life insurance terms:
Accelerated Benefit – a provision enabling payment of benefits when a terminal or long-term illness occurs
Accelerated Death Benefit – a special provision that enables a policyholder diagnosed with a terminal illness to obtain cash advances against the death benefit
Accidental Death Benefit – a provision that allows for an additional benefit should the insured’s death be classified as the result of an accident
Act of God – an event that occurs as the result of natural causes
Actuary – a professional who calculates dividends and rates as well as other statistics
Application – a completed document requesting insurance coverage
Approval – indicates legal acceptance of an applicant’s request for life insurance, a policyholder’s request for reinstatement of a policy, loan against the policy, or benefits, the insurer’s associated risk of insuring an individual, or the state’s legal receipt of insurance-related forms
APS –an attending physician statement, the APS is a common method of verifying factual data pertaining to a prospective policyholder’s request for insurance
Assignment – the legal transference of one individual’s policy interests to another party
Attained Age – the age of the insured individual at the current time
Beneficiary – the individual who is named by the owner of the life insurance policy
Binder – a temporary contract providing insurance protection prior to the issuance of the permanent policy
Business Life Insurance – a policy taken out on a business partner or key employee to protect the surviving partners’ financial interest in the company
Child Rider – the provision of insurance coverage added to an existing life insurance policy for a child (or several children) of the insured
Claim – the formal request for payment of the life insurance policy benefits
Collateral Assignment – securement of a loan by listing the creditor as a beneficiary of the life insurance policy
Contingent Beneficiary – the individual who has been named on the life insurance policy to take the place of the primary beneficiary if his or her death occurs prior to the insured
Credit Life Insurance – coverage issued to a creditor to protect against the death of a debtor who is responsible for a large debt
Declined Risk – the individual requesting life insurance is considered to pose too great of a risk for the insured to provide coverage
Disability Waiver of Premium – a provision, sometimes obtained with a higher premium, that enables the life insurance policy to stay in force without the payment of the premium should the insured become disabled
Effective Date – the actual date when a life insurance policy goes into effect
Endowment – benefits of a life insurance policy paid to the policyholder on the stated maturity date or to a beneficiary if the insured dies before that date occurs
Evidence of Insurability – the proof presented that an individual is an insurable risk
Face Amount – the value of the death benefit that is payable on the insurance policy
Financial Strength – determined by an independent company, the financial strength is a calculation of the insurer’s financial security or the ability of the insurer to pay out the benefits regarding the insurance policy
Free Look Provision – the provision that gives a policyholder a predetermined number of days to review the policy once it has been delivered and to cancel it if he chooses for a full refund of the existing premium payment
Grace Period – a limited timeframe during which an unpaid policy premium that is overdue can be paid without any penalty, but this provision is not available through all insurers
Group Life Insurance – acquired under a master policy to provide insurance benefits to a group of individuals, such as the members of a professional association or the employees of a specific company
Guaranteed Renewal – provides the insured with the ability to continue coverage simply by paying the premiums on time, while also providing the insurer with the right to increase premium rates as the insured ages into the next policy grouping
Guaranteed Insurability – a provision that enables an insured individual the right to obtain additional insurance coverage at predetermined intervals without providing any proof of insurability
Health Rating – an assessment of an individual’s health and accompanying rating for it
HIPPA – stands for the Health Insurance Portability and Accountability Act and provides strict guidelines regarding an individual’s right to privacy regarding health-related issues
High Risk Life Insurance – this type of coverage is intended for individuals with high risk factors
Insurance In Force – refers to any unpaid amounts on insured loans
Incontestability Provision – a provision for annuity and insurance coverage that limits the timeframe during which an insurer can ignore the existing contract due to the gross misrepresentation made by the insured in the policy application
Individual Life Insurance – also referred to as personal insurance, this type of policy provides coverage for a single policyholder as opposed to group life insurance
Insurable Interest – represents the insured person’s interest in the value of the policy’s subject, meaning that he has a valid stake in the continued existence of the insured individual
Irrevocable Beneficiary – an individual who has been named as the beneficiary on a life insurance policy and who cannot be removed as the beneficiary by the policyholder unless he first obtains this individual’s permission or consent
Key Man Life Insurance – a policy designed to protect the financial viability of a business should a key (essential) employee die or become disabled
Lapse – due to nonpayment of the premium, the insurance policy is terminated
Level Premium – the cost of the insurance policy remains the same from year to year with the policyholder paying a higher premium than is actually required in the early years and a lower one in the later years
Life And Health Guarantee Association – an organization that protects policyholders, beneficiaries, and specified individuals against unforeseen losses should the insurer suffer financial insolvency
Life Expectancy – based upon the statistics presented in a mortality table, this figure represents the average number of years a group of people can expect to continue living at a particular age
Limited Insurance Policy – provides coverage for pre-selected illnesses and/or accidents
Long Tail Liability – a claim is distanced from the actual cause of death or injury due to its occurrence 25 or more years earlier
Master Policy – an insurance policy issued to an employer or the trustee of a group to establish a group plan that provides life insurance coverage for all members of the group
Material Misrepresentation – an inaccurate portrayal of facts that might affect the way an insurer views the policy details
Mortality Tables – a chart-like presentation of the death rates that an insurer might reasonably expect to occur among a specific group of individuals at different age points
Non-Cancellable Insurance – the policy cannot be cancelled and the premiums cannot be raised as long as the policyholder continues to make timely payments.
Optional Renewable Policy – the insurer has the option to terminate the insurance policy on its anniversary date
Ordinary Life Insurance – issued in thousand-dollar increments and accompanied by annual or distributed (monthly, quarterly, semi-annual) premiums
Paid-Up Insurance – a policy for which all of the necessary premiums have been paid in full
Policy – the issued document that includes the terms of the policyholder’s insurance
Policy Anniversary – the date when the insurance coverage went into effect
Policy Owner – the person who has legal rights and ownership of a life insurance policy, whether or not it is term or whole/universal
Policy Rider – a change to the initial policy that limits or expands the benefits that are payable under the terms of the contract
Policy Term – defines the time period during which the insurance contract provides coverage
Policyholder – the individual who is the legal owner of the life insurance policy, typically the insured individual, but sometimes a relative or a business, as in the case of employee insurance
Pre-existing Condition – any ailment (physical or mental) that existed prior to the purchase of insurance coverage
Preferred Risk – an individual who can obtain lower premiums for insurance coverage due to the fact that he holds a less-than-average risk of death
Premium – the financial compensation or number of dollars paid to obtain the insurance policy
Quote –the estimated premium cost to obtain a life insurance policy based on the facts supplied by the applicant
Ratings – an assessed valuation of a company’s fiscal stability
Rated Policy –features a higher premium due to the higher level of risk connected to the insured’s existing health or dangerous occupation
Renewal – keeping an existing insurance policy in force by paying the premium for a new term
Return of Premium – the cost of the premium is repaid if the insured outlives the term of the insurance policy
Rider – a legal modification to an insurance policy, adding or restricting the payable benefits
Risk – the uncertainty of financial loss based upon the insured individual being covered by the insurance
Risk Classification – a determination of the premium rates based upon different risk characteristics
Second to Die Insurance – a life insurance policy covering two individuals that pays out only when the second individual dies (also known as survivorship insurance)
Short Term Life Insurance – a policy intended to offer coverage during a brief period of time when life insurance is desired, such as in between jobs or when an individual is young
Special Risk Insurance – life insurance coverage for high risk events involving aviation, scuba, and other dangerous activities or occupations
Substandard Rating – an assessment depicting an individual as uninsurable by regular standards, necessitating a specialized policy that restricts death benefits related to specific causes
Term Insurance – a temporary policy that covers the insured for a single year at a time with no cash value attached to the policy
Underwriting – a process designed to identify the degree of risk presented by an individual wishing to obtain insurance coverage
Variable Life Insurance – a policy with a face value that fluctuates based upon the current value of the American dollar or equity products that are supporting the contract at the time that the benefit becomes due
Viator – an individual who is terminally ill and sells his life insurance policy
Waiver of Premium – a specialized provision enabling the insurer to forego premium payments, while keeping the policy in force, if the policyholder suffers an injury that prevents him from earning a wage
Additional Glossary Term Life Insurance
Annually Renewable Term Insurance Policy – an insurance policy that features increasing premiums each year
Convertible Term Insurance Policy – a term life insurance policy that includes a provision allowing the policyholder to convert the policy into whole/universal life insurance
Cost-of-living Rider – a provision that enables the policyholder to increase his existing term insurance coverage to keep up with the increase in the cost of living at an additional fee
Guaranteed Level Term Insurance Policy – an insurance contract offering level premiums over specific time periods, including 5, 10, 15, 20, or 25 year increments
Original Age Conversion – converting a term life insurance policy to whole life coverage using a premium rate that is determined by the policyholder’s age at the time the term policy was obtained
Renewable Term Insurance – term insurance policy featuring the right to renew for an additional time period
Return of Premium Term Life Insurance – the cost of the premium is repaid if the insured outlives the term of the insurance policy, which typically features a higher premium
Additional Glossary Universal/Whole Life Insurance
Acceleration Clause – a provision that states when a loan made against the policy is determined as due and payable
Annuity – periodic payments made by the insurer to the annuitant for a pre-determined time period
Cash Value – the savings portion or the policyholder’s interest in a whole life insurance policy
Modified Life Insurance – a form of whole life insurance that features a lower premium cost in the early years that gradually begins to increase
Non-Forfeiture Option – this occurs when the policyholder discontinues payment on a cash-value policy and he has the option of taking it as reduced paid-up insurance or switching it to term insurance
Non-Forfeiture Value – the monetary worth of a canceled policy that held cash value
Policy Loan – a sum of money that has been borrowed with interest against an insurance policy that is used as collateral
Reduced Paid-Up Insurance – a downgraded policy that features a smaller payout, available through a non-forfeiture option
Universal or Whole Life Insurance – a permanent policy featuring a savings aspect that covers the policyholder throughout the insured individual’s lifetime
Valuation – a calculation of the reserve held in a life insurance policy
Variable Annuitization – the conversion of an annuity that is variable from its accumulation period to its payout phase
Variable Universal Life Insurance – a policy that combines some of the features of variable life insurance with aspects of universal life insurance, featuring adjustable premiums and benefits at the bequest of the policyholder