Vocabulary

• Life Insurance – A contract between an insurer and a policyholder, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person.
• Policyholder – The person who owns the life insurance policy. Usually, this is the insured person, but it may also be a relative, a business partner, or a trust.
• Beneficiary – The person or entity designated to receive the life insurance policy's proceeds upon the death of the insured.
• Premium – The amount of money that the policyholder pays to the insurance company to keep the policy in force.
• Insurer – The company that issues the life insurance policy.
• Death Benefit – The amount of money paid out by the insurer to the beneficiary upon the death of the insured.
• Term Life Insurance – A type of life insurance that provides coverage for a certain period, or "term". If the insured dies during this term, the death benefit is paid to the beneficiaries.
• Whole Life Insurance – A type of life insurance that provides coverage for the insured's entire lifetime. It also has a cash value component that grows over time.
• Underwriting – The process by which an insurer determines whether to take on a potential policyholder's risk and, if so, how much to charge in premiums.
• Risk – The chance that an insured event, such as death, will occur.
• Coverage – The scope of protection provided under a life insurance policy.
• Claim – A formal request by a policyholder or beneficiary for payment from an insurer under the terms of the policy.
• Rider – An optional insurance policy provision that adds benefits to or amends the terms of a basic insurance policy.
• Cash Value – A component of some life insurance policies, it represents the amount of money that builds up over time and can be accessed by the policyholder during their lifetime.
• Face Amount – The amount of the death benefit as stated in the life insurance policy.
• Convertible Term – A term life policy that gives the policyholder the right to convert the policy to a permanent one without a medical examination.
• Annuity – A financial product that pays out a fixed stream of payments to an individual, primarily used as an income stream for retirees.
• Dividends – Profits distributed by a life insurance company to its policyholders.
• Surrender Value – The amount of money a policyholder will receive if they voluntarily terminate the policy before its maturity or an insured event occurs.
• Grace Period – The time after the premium due date during which the policyholder can still pay the premium without the policy lapsing.
• Lapse – Termination of a policy due to non-payment of premiums.
• Reinstatement – The process by which a lapsed policy is put back in force by the insurer.
• Permanent Life Insurance – Life insurance that provides coverage for the lifetime of the insured, it includes whole, universal, and variable life insurance.
• Universal Life Insurance – A type of permanent life insurance with a cash value component that earns interest, and a flexible premium payment.
• Variable Life Insurance – A type of permanent life insurance where the policyholder directs the investments.
• Level Premium – Premiums that remain the same throughout the term of the policy.
• Adjustable Life Insurance – A type of life insurance that allows the policyholder to adjust the premium or the benefit amount.
• Group Life Insurance – Life insurance that covers a group of people, typically employees of a company or members of a union or association.
• Credit Life Insurance – A type of policy designed to pay off a borrower's debt if the borrower dies.
• Accidental Death and Dismemberment Insurance (AD&D) – A policy that pays benefits to the beneficiary if the cause of death is an accident.
• Direct Term Life Insurance – Term life insurance that can be purchased directly from an insurance company, rather than through an insurance agent or broker.
• Joint Life Insurance – A life insurance policy that covers two people, and pays out on the death of the first person.
• Survivorship Life Insurance – Also known as second-to-die insurance, a policy that insures two lives and pays a benefit only after both insureds have died.
• Mortgage Life Insurance – A type of term life insurance designed to pay off the insured's mortgage if they die before it's fully paid.
• Key Person Insurance – A life insurance policy that a business purchases on a key individual's life. The company is the beneficiary of the plan and pays the insurance policy premiums.
• Estate Planning – The preparation of tasks that serve to manage an individual's asset base in the event of their incapacitation or death.
• Trust – A fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.
• Payout – The payment of the death benefit by the insurance company to the beneficiary.
• Incontestability Clause – A clause in most life insurance policies that prevent the provider from voiding coverage due to a misstatement by the insured after a specific amount of time has passed.
• Suicide Clause – A clause in a life insurance policy which states that the policy will not cover suicide if it occurs within a specified time period after the policy is issued.
• Policy Loan – A loan issued by an insurance company using the cash value of a person's life insurance policy as collateral.
• Living Benefits – Benefits that a policyholder can access during their lifetime, often in the form of a cash withdrawal or loan against the policy's cash value.
• Guaranteed Issue Life Insurance – A type of life insurance that is guaranteed approval, regardless of health status.
• Simplified Issue Life Insurance – A type of life insurance that does not require a medical exam but does include a health questionnaire.
• Free Look Period – A period of time during which a new life insurance policy owner can terminate the policy without penalties, such as surrender charges.
• Policy Illustration – A set of projections, prepared by actuaries, showing future premiums, cash values, and death benefits over the life of the policy.
• Return of Premium Life Insurance – A type of term life insurance policy that returns the premiums paid if the insured person is alive at the end of the term.
• Waiver of Premium Rider – A provision in a policy that waives the policyholder's obligation to pay any further premiums should he or she become seriously ill or disabled.
• Loan Protection Insurance – A type of policy designed to help policyholders meet their loan repayment commitments if their income falls due to death, illness, or redundancy.
• Overfunding – Paying more than the scheduled premium for a cash value life insurance policy.