Life Insurance Terms Glossary

Accelerated Benefits Rider
– A life insurance rider that allows for the early payment of some portion of the policy’s face amount should the insured suffer from a terminal illness or injury.

Accelerated Death Benefit Riders
– Supplementary life insurance policy benefit riders that allow a policy owner-insured to receive a specified portion of the policy’s death benefit before death if certain conditions are met.

Accidental Death and Dismemberment
– Insurance providing payment if the insured’s death results from an accident or if the insured accidentally severs a limb above the wrist or ankle joints or totally and irreversibly loses his or her eyesight.

Accidental Death Benefit Rider
– A life insurance policy rider providing for payment of an additional benefit related to the face amount of the base policy when death occurs by accidental means.

Age Limits
– The age, usually around 70-85, that an insurance company will not issue or renew a life policy.

Agent
– An authorized representative of an insurance company who sells and services insurance contracts

Annually Renewable Term
– A form of renewable term insurance that provides coverage for one year and allows the policy owner to renew his or her coverage each year, without evidence of insurability. Also called Yearly Renewable Term (YRT).

Annuitant
– This is the person during whose life an annuity is payable.

Annuity
– It is a contract sold by a life insurance company that provides fixed or variable payments to an annuitant either immediately or at a future date usually to supplement retirement income.

Applicant
– The party applying for an insurance policy.

Assigned Risk
– A risk which underwriters do not care to insure, but because of state law or otherwise, the insured must be protected and the insurance is therefore handled through the state, or a bureau and assigned to companies.

Assignment
– The transfer of the ownership rights of a Life Insurance policy from one person to another.

Attained Age Conversion
– The conversion of a term life insurance policy to a permanent life insurance policy at a premium rate that is based on the insured’s age at the time the coverage is converted.

Backdating
– A procedure for making the effective date of a policy earlier than the application date. Backdating is often used to make the age of the consumer at issue lower than it actually was in order to get lower premium. State laws often limit to six months the time to which policies can be backdated.

Beneficiary
– Person to whom the proceeds of a life policy are payable when the insured dies. The various types of beneficiaries are: primary beneficiaries (those first entitled to proceeds); secondary beneficiaries (those entitled to proceeds if no primary beneficiary is living when the insured dies); and tertiary beneficiaries (those entitled to proceeds if no primary or secondary beneficiaries are alive when the insured dies).

Best’s Insurance Report
– A guide, published by A.M. Best, Inc., that rates insurers’ financial integrity and managerial and operational strengths.

Binder
– A temporary insurance policy that expires at the end of a specific time period or when the permanent policy is written. A binder is given to an applicant for insurance during the time the complete policy paperwork is being completed.

Binding Premium Receipt
– A type of premium receipt that provides a potential insured with temporary insurance coverage from the time the applicant receives the receipt until the insurer declines the application or issues and delivers a policy.

Buy-Sell Agreement
– An agreement in which one party agrees to purchase a second party’s financial interest in a business following the second party’s death and the second party agrees to direct their estate to sell that interest to the purchasing party.

Broker
– (1) An individual who for compensation solicits, negotiates or procures insurance or the renewal or continuance thereof on behalf of insureds or prospective insureds.

Cancelable
– A contract of insurance that may be terminated by the insurance company or insured at any time.

Cancellation
– Termination of contract of insurance in force by voluntary act of the insurance company or insured.

Cash Value
– The equity amount or “savings” accumulation in a whole life policy.

Claim
– Notification to an insurance company that payment of an amount is due under the terms of the policy.

Clause
– A term used to identify a particular part of a policy or endorsement.

Co-insurance
– In medical insurance, the insured person and the insurer sometimes share the cost of services under a policy in a specified ratio, for example 80% by the insurer and 20% by the insured. By this means, the cost of coverage to the insured is reduced.

Commission
– That portion of the premium retained by the agent or broker as compensation for sales, service, and distribution of insurance policies.

Contestable Clause
– A provision in an insurance policy setting forth the conditions under which or the period of time during which the insurer may contest or void the policy. After that time has lapsed, normally two years, the policy cannot be contested. Example: Suicide.

Contingent Beneficiary
– Person or persons named to receive proceeds in case the original beneficiary is not alive. Also referred to as secondary or tertiary beneficiary.

Conversion Privilege
– Allows the policy-owner, before an original insurance policy expires, to elect to have a new policy issued that will continue the insurance coverage. Conversion may be effected at attained age (premiums based on the age attained at time of conversion) or at original age (premiums based on age at time of original issue).

Convertible Term
– A policy that may be changed to another form by contractual provision and without evidence of insurability. Most term policies are convertible into permanent insurance.

Coverage
– Another word for insurance. Insurance companies use the term coverage to mean either the dollar amounts of insurance purchased ($200,000 of liability coverage), or the type of loss covered (coverage for theft).

Coverage Amount
– See Face Amount.

Credit Insurance
– Insurance on a debtor in favor of a lender intended to pay off a loan or the balance if the insured dies.

Death Benefit
– The amount of money paid to the beneficiary when the insured person dies.

Debit
– The collectable premium accounts assigned to one industrial or combination agent.

Declaration Page
– The portion of an insurance policy containing the information regarding the risk

Direct Writer
– An insurance company which sells its policies through salaried employees (licensed agents) who represent it exclusively, rather than through independent local agents, who represent more than one company.

Disability Income Rider
– A type of health insurance coverage, it provides for the payment of regular, periodic income should the insured become disabled from illness or injury.

Dividend
– A return of part of the premium on participating insurance that is based on the insurer’s investment, mortality, and expense experience. Dividends are not guaranteed

Double Indemnity
– Payment of twice the basic benefit in the event of loss resulting from specified causes or under specified circumstances.

Electronic Funds Transfer (EFT) Method
– An automatic premium payment technique whereby the policy owner authorizes their bank to withdraw funds from their account to pay each renewal premium.

Elimination Period
– A loosely-used term sometimes designating the “waiting period” and sometimes the “probationary period.”

Endowment
– Life insurance payable to the policyholder, if living on the maturity date stated in the policy, or to a beneficiary if the insured dies before that date. For example, some Term to age 100 policies offer the option of taking the face amount of the policy as a cash payout at age 100 if the policyholder is still alive and paying all required income taxes on the amount received or leaving the policy to pay out upon death whereupon the payout is tax free.

Errors and Omissions Insurance
– Insurance coverage purchased by the agent/broker which provides protection against loss incurred by a client because of some negligent act, error, oversight, or omission by the agent/broker.

Evidence of Insurability
– Any statement or proof of a person’s physical condition, occupation, etc., affecting acceptance of the applicant for insurance.

Exclusions
– Specified hazards listed in a policy for which benefits will not be paid.

Experience
– The loss record of an insured, a class of coverage, or of an insurance company.

Expiry
– The termination of a term life insurance policy at the end of its period of coverage.

Exposure
-Being subject to the possibility of loss.

Face
– The first page of a policy.

Face Amount
– The amount of insurance provided by the terms of an insurance contract, usually found on the first page of the policy. In a life insurance policy, the death benefit.

Fiduciary
– A person who occupies a position of special trust and confidence (for example, in handling or supervising the affairs or funds of another).

First To Die Insurance
– Insurance policy whose death benefit is paid to the surviving insured upon the death of one of the insured’s. There is no longer a benefit once the benefit is paid, however, the surviving insured usually has the option of purchasing a policy of the same amount without providing evidence of insurability.

Fixed Benefit
– A death benefit, the dollar amount of which does not vary.

Form
– An insurance policy itself or riders and endorsements attached to it.

Free Look
– provision required in most states whereby policy owners have up to 20 days to examine their new policies at no obligation.

Funeral Expenses
– Expenses incurred for a funeral and burial. These can include casket, vault, grave plot, headstone and funeral director.

Guaranteed Insurability
– (Guaranteed Issue) Arrangement, usually provided by rider, whereby additional insurance may be purchased at various times without evidence of insurability.

Guaranteed Renewable
– A contract that the insured has the right to continue in force by the timely payment of premiums for a substantial period of time.

IMSA
– The Insurance Marketplace Standards Association. A voluntary membership organization of life insurers who agree to follow a specific set of ethical and market conduct standards in their advertising, sales, and service for individual life insurance and annuity products.

Incontestable Clause
– A clause in a policy providing that a policy has been in effect for a given length of time (two or three years), the insurer shall not be able to contest the statements contained in the application. In life policies, if an insured lied as to the condition of his health at the time the policy was taken out, that lie could not be used to contest payment under the policy if death occurred after the time limit stated in the incontestable clause.

Independent Broker
– This is a provincial government licensed independent business person who usually represents five or more life insurance companies in a sales and service capacity and who is paid a commission by those life insurance companies for sales and service of life insurance products.

In Force
– Insurance on which the premiums are being paid or have been fully paid.

Initial Premium
– The first premium that is paid for an insurance policy and that is part of the consideration the policy owner gives for the policy.

Irrevocable Beneficiary
– A life insurance policy beneficiary whose designation as beneficiary may not be cancelled by the policy owner unless the beneficiary consents.

Insurable Interest
– Requirement of insurance contracts that loss must be sustained by the applicant upon the death of another and it must be sufficient to warrant compensation.

Insurance
– A formal social device for reducing risk by transferring the risks of several individual entities to an insurer. The insurer agrees, for a consideration, to pay for the loss in the amount specified in the contract.

Insurance Company
– An organization that has been chartered by a governmental entity to transact the business of insurance

Insurance Policy
-The printed form which serves as the contract between an insurer and an insured.

Insured
– The party who is being insured. In life insurance, it is the person because of his or her death the insurance company would pay out a death benefit to a designated beneficiary.

Insurer
– Party that provides insurance coverage, typically through a contract of insurance.

Irrevocable Beneficiary
– A beneficiary that cannot be changed without that beneficiary’s consent.

Increasing Term Insurance
– Term life insurance in which the death benefit increases periodically over the policy’s term. Usually purchased as a cost of living rider to a whole life policy

Lapse
-Termination of a policy upon the policy owner’s failure to pay the premium within the grace period.

Last To Die Coverage
– This means that there are two or more life insured on the same policy but the death benefit is paid out on the last person to die. The cost of this type of coverage is much less than a first to die policy and it is generally used to protect estate value for children where there might be substantial capital gains taxes due upon the death of the last parent. This kind of policy is also valuable when one of two people covered has health problems which would prohibit obtaining individual coverage.

Level Term Insurance
– Term coverage on which the face value and premiums remain unchanged from the date the policy comes into force to the date the policy expires.

Life Expectancy
– The average number of years remaining for a person of a given age to live as shown on the mortality or annuity table used as a reference.

Life Insurance
– An agreement that guarantees the payment of a stated amount of monetary benefits upon the death of the insured.

Loan (Policy Loan)
– A loan made by a life insurance company from its general funds to a policy owner on the security of the cash value of a policy.

Long Term Care Benefits
– A special rider or policy offered by some companies will pay long term or catastrophic health care benefits as a supplemental benefit. These are called living benefit or care riders. Depending upon the policy, benefits may be for nursing home care and/or at home health care.

Maturity Date
– The date on which the policy comes to on end.

Maturity Value
– The amount payable under a life insurance policy upon its maturity date.

Medical
– A document completed by a physician or another approved examiner and submitted to an insurer to supply medical evidence of insurability (or lack of insurability) or in relation to a claim.

Medical Expenses
– Reasonable charges for medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, prosthetic devices, and funeral expenses. (The insurance company defines what is reasonable.)

Modified- Premium Whole Life Policy
– An insurance policy for which the policy owner pays a lower than normal premium for a specified initial period and then pays a higher premium than he would for a similar whole life policy.

Mortality Charge
– The charge for the element of pure insurance protection in a life insurance policy.

Mortality Cost
– The first factor considered in life insurance premium rates. Insurers have an idea of the probability that any person will die at any particular age; this is the information shown on a mortality table.

Mortality Rate
– The number of deaths in a group of people, usually expressed as deaths per thousand.

Mortality Table
– A table showing the incidence of death at specified ages. Non medical Insurance A contract of life insurance underwritten on the basis of an insured’s statement of his health with no medical examination required.

Net Cost
– Your total payments for a policy less any cash surrender value in your policy, the profit or loss if you cancelled the policy at a given date.

Occupational Hazard
– A condition in an occupation that increases the peril of accident, sickness, or death. It usually will mean higher premiums.

Offer and Acceptance
– The offer may be made by the applicant signing the application, paying the first premium and, if necessary, submitting to physical examination. Policy issuance, as applied for, constitutes acceptance by the company. Or the offer may be made by the company when no premium payment is submitted with the application. Premium payment on the offered policy then constitutes acceptance by the applicant.

Original Age Conversion
– The conversion of a term life insurance policy to a permanent life insurance policy at a premium rate that is based on the insured’s age when the policy was purchased.

Outlay
– The actual cash payment you make to the insurance company for premium payments each year.

Ownership
– All rights, benefits and privileges under life insurance policies are controlled by their owners. Policy owners may or may not be the insured. Ownership may be assigned or transferred by written request of current owner.

Para-Med (Paramedical) Examination
– The medical examination of an applicant for Life Insurance.

Para-Med (Paramedical)
– A physician, nurse, or para-med appointed by the medical director of a life insurance company to examine applicants.

Paid-up Insurance
– Insurance that will remain in force with no need to pay additional premiums.

Permanent Life Insurance
– A term loosely applied to life insurance policy forms other than Group and Term, usually Cash Value Life Insurance, such as Whole Life Insurance.

Policy
– The printed document issued to the policyholder by the company stating the terms of the insurance contract.

Policy Holder
-The person who owns a life insurance policy. This is usually the insured person, but it may also be a relative of the insured, a partnership or a corporation.

Policy Term
– The specified period of coverage provided by a term insurance policy.

Preauthorized Check (PAC) System
– An automatic premium payment technique whereby the policy owner authorizes the insurer to generate a check against the policy owner’s bank account to pay each renewal premium.

Preferred Risk
– A risk whose physical condition, occupation, mode of living and other characteristics indicate a prospect for longevity superior to that of the average longevity of unimpaired lives of the same age. (See standard risk.)

Premium
– The periodic payment required to keep and insurance policy in force.

Premium Flexibility
– The policy holder’s right to vary the amount of premium paid each month towards a universal life policy.

Premium Payment Mode
– The frequency at which renewal premiums are payable.

Primary Beneficiary
– In life insurance, the beneficiary designated by the insured as the first to receive policy benefits.

Proceeds
– Net amount of money payable by the company at the insured’s death or at policy maturity.

Provisions
– Statements contained in an insurance policy which explain the benefits, conditions and other features of the insurance contract.

Rated
– Coverage’s issued at a higher rate than standard because of some health condition, or impairment of the insured.

Rated Up
– Someone who’s is charged higher premiums because they didn’t buy coverage when they were healthy

Re-entry Option
– An option in a renewable term life policy under which the policy owner is guaranteed, at the end of the term, to be able to renew his or her coverage without evidence of insurability, at a premium rate specified in the policy.

Re-offered
– When a carrier offers insurance to a high risk person, but at a higher premium than initially quoted.

Reinstatement
– Putting a lapsed policy back in force by producing satisfactory evidence of insurability and paying any past-due premiums required.

Renewable Term/Annual Renewable Term
– Term insurance that may be renewed for another term without evidence of insurability. Level term usually turns into renewable term with increasing premiums after the level premium period.

Renewal Provision
– A term life insurance policy provision that allows the policy owner to renew the insurance coverage at the end of the specified term without submitting evidence of insurability.

Replacement
– A new policy written to take the place of one currently in force.

Representation
– Statements made by applicants on their applications for insurance that they represent as being substantially true to the best of their knowledge and belief but that are not warranted as exact in every detail.

Revocable Beneficiary
– The beneficiary in a life insurance policy in which the owner reserves the right to revoke or change the beneficiary. Most policies are written with a revocable beneficiary.

Rider
– Strictly speaking, a rider adds something to a policy. However, the term is used loosely to refer to any supplemental agreement attached to and made a part of the policy, whether the policy’s conditions are expanded and additional coverages added, or a coverage or condition is waived.

Risk
– The chance of injury, damage, or loss.

Risk Selection
– The method a home office underwriter uses to choose applicants that the insurance company will accept. The underwriter must determine whether risks are standard, substandard or preferred and set the premium rates accordingly

Secondary Beneficiary
– An alternate beneficiary designated to receive payment, usually in the event the original beneficiary predeceases the insured.

Single Premium Policy
– A whole life policy for people who want to buy a policy for a one-time lump sum, and then be covered for the rest of their lives without paying any additional premiums.

Smoker Ratings
– Insurers will give a lower premium rate to buyers who do not smoke or use tobacco. If you smoked in the past, most carriers will consider you a non-smoker if you have not smoked for one year prior to applying for coverage. Consumers should be aware that nicotine can be detected in a variety of routine screenings tests that are now commonly required by most insurance companies.

Standard Risk
– Person who, according to a company’s underwriting standards, is entitled to insurance protection without extra rating or special restrictions.

Sub-Standard Risk
– Person who is considered an under-average or impaired insurance risk because of physical condition, family or personal history of disease, occupation, residence in unhealthy climate or dangerous habits.

Suicide Clause
– Most life insurance policies provide that if the insured commits suicide within a specified period, usually two years, after the issue date, the company’s liability will be limited to a return of premiums paid.

Surrender Charge
– Expense charges sometimes imposed when a policy owner surrenders a universal life policy.

Surrender Value
– The amount given to policyholder upon surrender of the policy before the maturity date of the policy.

Tabled
– Higher than standard risks to the insurance company

Term
– Period for which the policy runs. In life insurance, this is to the end of the term period for term insurance

Term Insurance
– Protection during limited number of years; expiring without value if the insured survives the stated period, which may be one or more years but usually is five to twenty years, because such periods usually cover the needs for temporary protection.

Term Period
– Term insurance policies are contracts for a fixed period of time. For example, a 20-year term insurance plan provides coverage in the event of death for 20-years. However, many plans have options that allow you to renew or convert your policy to continue coverage beyond the initial term period.

Term of Policy
– Period for which the policy runs. In life insurance, this is to the end of the term period for term insurance.

Terminal Illness (TI) Benefit
– An accelerated death benefit provided by some individual life insurance policies under which the insurer pays a portion of the policy’s death benefit to a policy owner-insured who suffers from a terminal illness and has a life expectancy of 12 months or less.

Tertiary Beneficiary
– In life insurance, a beneficiary designated as third in line to receive the proceeds or benefits if the primary and secondary beneficiaries do not survive the insured.

Third-Party Owner
– A policy owner who is not the prospective insured. The policy owner and the insured may be, and often are the same person. If for example, you apply for and are issued an insurance policy on your life, then you are both the policy owner and the insured and may be known as the policy owner-insured. If, however, your mother applies for and is issued a policy on your life, then she is the policy owner and you are the insured.

Underwriter
– Company receiving premiums and accepting responsibility for fulfilling the policy contract. Also, company employee who decides whether the company should assume a particular risk; or the agent who sells the policy.

Uninsurable Risk
– One not acceptable for insurance due to excessive risk.

Universal Life
– A flexible premium life insurance policy under which the policy owner may change the death benefit from time to time (with satisfactory evidence of insurability for increases) and vary the amount or timing of premium payments. Premiums (less expense charges) are credited to a policy account from which mortality charges are deducted and to which interest is credited at rates which may change from time to time.

Variable Life
– Life insurance under which the benefits relate to the value of assets behind the contract at the time the benefit is paid. The assets fluctuate according to the investment experience of funds managed by the life insurance company. Premium payments may be fixed as to timing and amount (scheduled premium variable life) or subject to change by the policy holder (flexible premium variable life).

Waiver of Premium
– Rider or provision included in most life insurance policies exempting the insured from paying premiums after he or she has been disabled for a specified period of time, usually six months.

Whole Life Insurance
– Life insurance that is kept in force for a person’s whole life as long as the scheduled premiums are maintained. All Whole Life policies build up cash values. Most Whole Life policies are guaranteed as long as the scheduled premiums are maintained. The variable in a Whole life Policy is the dividend which could vary depending on how well the insurance is doing. If the company is doing well and the policies are not experiencing a higher mortality than projected, premiums are paid back to the policy holder in the form of dividends. Policyholders can use the cash from dividends in many ways. The three main uses are: it can be used to lower or vanish premiums, it can be used to purchase more insurance or it can be used to pay for term insurance.

Yearly Renewable Term (YRT) Insurance
– Term life insurance that gives the policy owner the right to renew the coverage each year, over a specified period of time.

Additional Resources:

Life Insurance Advice.

Life Insurance Company Ratings.

Life Buyers Guide.

Life Insurance Premiums.

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