Jason Fisher Below you’ll find a complete glossary of life insurance terms, from a simple life insurance definition to more advanced terms you may hear or read on this site. If there is a term missing or you would like greater clarification, please don’t hesitate to contact us.
- Life Insurance – a contract between a person and an insurance company, where the company agrees to pay a death benefit when the person dies
Alphabetical Glossary of Life Insurance Definitions
- Actuary – in life insurance, an actuary measures the financial impact of dying based on age, gender, and risk
- Agent – one who aids consumers in applying for life insurance by way of qualifying consumers, matching them to carriers, and applying in return for a commission from the carrier
- Application – formal document submitted to an insurance company in request of a life insurance policy with contact information, beneficiary information, and medical questionnaires where necessary
- Broker – another term for an agent who not captive, and can pursue quotes from multiple carriers on behalf of the consumer (see independent agent)
- Captive Agent – type of agent who works for one carrier, the opposite of an independent agent
- Carrier – another name for life insurance company (also: issuer, insurer)
- Cash Value – accumulated amount of funds within a life insurance contract after the premiums are paid, usually consisting of excess premiums, dividends and interest, but also market returns where applicable
- Commission – the fee paid to the agent by the insurance company when a consumer buys a life insurance policy
- Conditional Receipt – temporary coverage agreement given to the consumer by the carrier when a formal application is supplied with the first months premiums, stating the applicant is temporarily covered for a period of time, usually the application process or 90 days
- Contingent Beneficiary – the named entity to receive the death benefit if the first beneficiary (primary) has predeceased them
- Death Benefit – the amount or value the insurance company is obligated to pay when the insured dies, less loans and fees due
- Death Claim – the process and documents required of the beneficiary to file with the insurance company in order to request a payout of death benefit proceeds
- Dividend – excess premiums paid to a carrier which are redistributed back to the policyholders who are entitled to receive the payment, although never guaranteed
- Face Amount – the death benefit amount, or lump sum amount, which will be paid when the insured passes and a claim is verified
- Grace Period – period of time where missed payments (premiums) are allowed to be caught up, and the insured is still covered
- Incontestability – clause within a life insurance contract which states an insurance company has the right to verify the cause of death, which may void a claim for a number of reasons such as suicide within two years of approval
- Independent Agent – type of agent who is not employed by one insurance company, but rather who offers policies through a variety of carriers (see broker)
- Indexed Life – type of policy which is tied to an index fund
- Insurability – the measure of whether or not a proposed insured is able to be approved, and at what rating or class
- Insurable Interest – a requirement for approval where the proposed insured must have a reasonable interest to own the amount of insurance they are applying for, such things being mortgage protection, debts, replacement of income or other needs
- Lapse – when a policy is foreclosed upon for lack of funds, liberating the insurance company of its contractual obligation to pay out a claim
- Life Expectancy – the statistical age at which a person might be expected to die, based on age, gender and risk class
- Modified Endowment Contract (MEC) – a modification in tax status for the cash value within a life insurance policy, whereas the deferment of taxes on growth and access ceases because the threshold of cash to death benefit ratio was exceeded
- Mortality Rate – measure of deaths to scale for a certain demographic or risk class, such as 1 death per 1,000 or 1:1,000
- Non-Participating – a life insurance policy which does not see benefit of returned premium (dividends) from an insurance company
- Participating – a life insurance policy which may receive additional funds in form of dividends from an insurance company if they are given
- Policy – the legal contract between the insurance company and the insured
- Policy Loan – an amount of cash accessed by the policy owner which is taken from the cash value available within the policy, subject to interest until paid back
- Policy Owner – the person who owns the policy, including the ability to modify it, access cash within it, or transfer it, but not always the same as the insured
- Premium – the amount of money due from the owner of the policy in order to keep it current with the insurance company, usually in a monthly, quarterly or annual fee schedule
- Primary Beneficiary – the first person in line to receive the death benefit upon the insured’s death, which may be split between multiple parties
- Primary Insured – the person whose life is being covered, and the life for which the death benefit will pay when the person is deceased
- Proceeds – the death benefit, or cash value, paid when the primary insured dies, paid in lump sum or streams of payment
- Rating – for applicants, this is the risk class for which they are approved for by the insurance company, ranging from preferred plus to substandard
- Reduced Paid-Up – when a cash value policy is modified to a term policy, the cash value within the policy pays for a permanent death benefit which does not require any new funds
- Reinstatement – a lapsed policy which is brought back to in force status by the insurance company after all past due payments are received
- Rider – additional benefits attached to a life insurance policy, which may or may not have additional costs tied to them
- Survivorship Life – a life insurance type which spreads the death benefit across two lives, not just one
- Term Life – a life insurance type where a single amount of premium is given in exchange for a stated death benefit
- Underwriter – one who evaluates the risk of the proposed insured, approving or denying them based on medical documents, driving records, blood profiles, urinalysis and more
- Underwriting – the process undergone by the insured of proving their level of risk to the insurance company before an offer can be made
- Uninsurable – risk class whereby the insurance company can not make an offer because the risk of premature death of the proposed insured is too great
- Universal Life – a life insurance type which has a cash value component, but not necessarily accessible in all ways
- Variable Life – a life insurance type where the cash growth inside is wholly or partially tied to funds in the market
- Viatical – also called a viatical settlement, the owner of a policy sells the current policy and all its rights to a party who, in exchange, gives immediate funds of a lower value
- Whole Life – a life insurance type which is both permanent and has the most guarantees
