Glossary of Life Insurance Terms
| With so many industry terms to understand, it's easy to get confused when learning about life insurance. So Below, we've listed some key terms and expressions related to life insurance. |
Accelerative Endowment
An option to use Life Insurance policy dividends to mature a policy as an endowment before the regular maturity date.
Age Change
The date on which a person's age, for insurance purposes, changes. In most Life Insurance contracts this is the date midway between the insured's natural birth dates. On the date of age change, a person's age may change to that of the last birth date, the nearer birth date, or the next birth date, depending upon the way in which the rating structure has been established by that particular insurer.
Beneficiary
A person who receives the payment of the amount of insurance after the death of the insured.
Blackout Period
The period of time during which a surviving spouse no longer receives survivors benefits (after the youngest child is no longer eligible) and before he or she is eligible for retirement benefits.
Cash Surrender Value
The amount that is available to the owner if a life insurance policy is surrendered. The amount represents the cash value minus surrender charges and any outstanding loans due upon cancellation of the policy.
Contingent Beneficiary
A person(s) named to receive policy benefits if the primary beneficiary is deceased at the time the benefits become payable.
Cost of Insurance
The amount a policy owner pays to an insurer, minus what he or she gets back from the insurer. This expression is used when determining the true cost of permanent forms of Life Insurance to a policy owner.
Cash Value Life Insurance
A permanent insurance policy that builds cash value, often described as a savings account within the policy. Cash value life insurance differs from term insurance, where premiums purchase pure insurance protection only.
Certificates of Coverage
A statement of coverage, also known as a Certificate of Insurance, that an individual receives when insured under a group contract. The certificate serves as proof of insurance, and outlines benefits and provisions.
Contestability Period
Period of time, generally two years, during which an insurance company can declare a life insurance contract void because of misrepresentation or concealment by the insured in obtaining the policy. Once this period has elapsed, the company cannot cancel the policy or refuse to pay claims for any reason other than nonpayment of premiums.
Deferred Premium
The unpaid and yet undue premiums on Life Insurance, paid on other than an annual premium basis.
Dependent Life Insurance
A life insurance benefit which is part of a group life insurance contract which provides death protection to the eligible dependents of a covered employee.
Deposit Premium
The premium deposit paid by a prospective policyholder when an application is made for an insurance policy. It is usually equal to at least the first month's estimated premium and is applied toward the total policy premium when billed.
Disability Insurance
A type of policy which provides income benefits to the insured if he or she becomes ill or is injured and can no longer work. It is also known as disability income insurance.
Disability Benefit
The benefit payable under a Disability Income policy or a provision of some other policy, such as a Life Insurance contract.
Endowment Insurance
A form of Life Insurance where the face amount is payable to the insured at the end of the contract period or to a beneficiary if the insured dies before that. An example would be an insured purchasing an endowment payable at age 65: If he reaches that age, the proceeds would be payable to him. If he dies prior to that age, the proceeds would be payable to the designated beneficiary as a Life Insurance benefit.
Extended Term Insurance
Most of the policies provides this provision of continuing the existing amount of insurance as Term Insurance for as long a period of time as the contract's cash value will purchase.
Face Amount
The amount of death benefit coverage that is purchased under a life insurance policy.
Family Life Insurance Policy
A contract that provides insurance within a single policy for a father, mother, and born and unborn children. The father's coverage is typically Whole Life Insurance, with the mother and children insured for smaller amounts of Term Insurance. Protect your entire family by filling our simple online form to obtain a free life insurance quote.
Flexible Premium Variable Life
A whole life contract and a security which features flexible premium payments, no guaranteed cash values and either a minimum guaranteed death benefit or no guaranteed death benefit. Policy values are dependent on the performance of a separate account
Grace Period
A prescribed period, usually 30 to 31 days from the premium due date, during which an insurance contract is in force and the premium may be paid.
Gross Premium
The premium for participating Life Insurance. If an insured elects to use his dividends to pay premiums, this becomes the net premium when dividends are subtracted from it.
Group Permanent Life Insurance
A form of Life Insurance under which members of a group are provided one of several plans of Permanent Life Insurance on a group basis instead of the more usual plan of Term Life Insurance.
Human Life Value
A method of determining Life Insurance needs by considering a person's income, expenses, remaining years of earning capacity, and depreciation in the value of the dollar over time.
Joint Insurance
Insurance written on two or more persons with benefits usually payable only at the first death.
Life Insurance
A type of Insurance that guarantees a specific sum of money to a designated beneficiary upon the death of the insured or to the insured if he or she lives beyond the policy matures.
Long-Term Care Insurance
An insurance contract that pays benefits in the event the insured needs long-term medical care in a facility other than a hospital.
Long-Term Disability Insurance
A disability insurance policy that provides coverage in the form of monthly income payments for as long as the insured remains disabled (usually up to age 65).
Maturity Date
The date at which the face amount of a Life Insurance policy becomes payable by reason of either death or endowment.
Maturity Value
The amount payable to a living insured at the end of an endowment period or to the owner of a Whole Life policy if he lives past a certain age.
Minimum Deposit Policy
A Cash Value Life Insurance policy having a first-year loan value that is available to borrow against immediately upon payment of the first-year premium. This is not the case with most Life Insurance policies, the main reason being high first-year expenses.
Return of Premium
A rider on a Life Insurance policy providing that, in the event of the death of the insured within a specified period of time, the policy will pay, in addition to the face amount, an amount equal to the sum of all premiums paid to date.
Term Insurance
The type of Life Insurance policy that provides protection only for a specified period of time. A common policy period would be one year, five years, 10 years, or until the insured reaches age 65 or 70. It does not build up any of the nonforfeiture values associated with Whole Life policies.
Universal Life
A combination flexible premium, adjustable life insurance policy. The premium payer may select the amount of premium he or she can pay and the policy benefits are those which the premium will purchase. Or, the premium payer may change the amount of insurance and pay premium accordingly.
Whole Life Insurance
Insurance which may be kept in force for a person's whole life and which pays a benefit upon his death, whenever that may be. All Whole Life policies build up nonforfeiture values, but they are paid for in 3 different ways. Under a Straight or Ordinary Life policy, premiums are paid for as long as the insured lives. A single premium policy is paid for at one time in one premium. Between these two types there are many limited-payment plans, under which the insured pays premiums for a certain period or until reaching a certain age.
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