Life Insurance Definition Glossary

This glossary of common life insurance terms provides detailed definitions of common terms you will encounter during the process of securing term life insurance.

Accelerated Death Benefit: An optional provision in a life insurance policy that allows a specified percentage of the death benefit (less than 100%) to be paid prior to the insured's death, if a doctor certifies that the insured's life expectancy is limited (usually 12 months or less).

Actuary: An insurance industry math expert who uses statistics, tables, and other figures to determine risk classifications.

Agent: An authorized and licensed representative of an insurance company who solicits and services insurance contracts. Also known as an Associate.

Application: A written form provided by an insurance company that is typically completed by the insurer's agent and, in the case of most life insurance policies, also by its medical examination company. The form provides information about the physical condition, occupation and avocation of the proposed insured. The policy application is signed by the applicant (typically, but not always, the insured) and becomes a part of the information an insurance company considers when deciding whether or not, and on what terms and conditions, a policy should be issued.

Beneficiary: A life insurance beneficiary is the person who will receive the policy benefits upon the death of the insured. You may select one beneficiary, such as a spouse, or have multiple beneficiaries. Plus, if you desire, you can add or change your beneficiaries at any time simply by calling the life insurance company.

Beneficiary (contingent): The individual(s) designated to receive a death benefit in the event the primary beneficiary(ies) is/are no longer living at the time the insured or annuitant dies.

Carrier:The insurance company that issues and manages a policy. The carrier is responsible for underwriting the policy, collecting payments, and providing benefits in the event of a valid claim.

Cash Value: The funds available to a policyholder at the time a policy is surrendered to the carrier. Cash value typically can be built into policies that are intended to last a lifetime such as whole life, universal life, and permanent insurance.

Coverage Amount / Face Amount: The amount that the policy will pay to the insured's beneficiaries in the event of the death of the insured.

Conversion: A policy may contain a provision providing that under certain circumstances the policy may be exchanged for another life insurance policy, typically without further underwriting requirements. For instance, term insurance can be converted to whole life or, in some cases, another form of permanent life insurance.

Date of issue: The effective date of the policy or contract as issued by the insurer.

Evidence of Insurability: Proof of a person's physical condition, occupation, or other factors, utilized by an insurance company to determine the acceptability of the applicant for insurance.

Face Amount: Amount paid in the case of death of the policy holder or at maturity of a policy.

In Force: The life insurance phrase to describe a status of your policy. If your term life insurance policy is "In Force", then the premium payments have been made and you are currently protected.

Insurable Interest: Individuals related (by blood or otherwise) to a policyholder who have substantial economic interest in the continued well being of said policyholder.

Insured: The "insured" is the person who is covered by a life insurance policy.

Issue Date: The date upon which a policy is issued to the insured by the insurance carrier.

Lapse: A situation when a policy owner doesn't pay premiums and coverage terminates at the end of the unpaid premium's grace period.

Length of Coverage/Term Length: Length of time, or term, that you choose to have term life insurance coverage. Typically, term life insurance is issued in 5 year increments, such as 10, 15, 20 or 30 years. But it is also possible to get a term life insurance policy tailored to your specific needs. For example, you can get a 17-year term life insurance policy to protect your loved ones until your mortgage is paid off.

Medical Examination: A requirement for some types of life insurance policies, in which a medical technician will verify your medical history, height, weight, blood pressure, pulse, and collect urine and blood samples. The technician may also perform an ECG/EKG if necessary. Medical exams are conducted by medical professionals, generally at your home or place of work.

Medical Information Bureau (MIB): An independent entity that collects and stores medical data on life and health insurance applicants. The information is exchanged among member insurance companies upon written authorization from the insured. Its purpose is to guard against fraud and concealment by helping insurers discover pertinent, yet undisclosed, health facts.

Misstatement of Age: Falsification of one's date of birth during the application process.

Mortality: Rate of death.

Occupational Hazards: Risks and danger encountered during the course of one's regular job duties, which may be a factor considered during the underwriting process.

Policy Proceeds: The amount of money payable at the time of a policy holder's death or at a policy's maturity date.

Premium: A premium is the payment you make to the life insurance company for your life insurance coverage.

Premium Mode: Premium payments can typically be made monthly, quarterly, semi-annually or annually. The time period you choose is known as your "premium mode".

Proposed Insured: The proposed insured is the person who will be covered by a life insurance policy that is currently going through underwriting. In other words, this person's life insurance policy is not yet in force. (see also: Insured).

Rate Class: A "rate class" is the classification assigned to you during the underwriting process that indicates what you will pay for your term life insurance coverage.

Rated (Table Rated): A rated policy is one issued on a substandard risk with higher-than-standard premiums.

Renewal: The purchase of further coverage at the end of a term life insurance policy.

Reinstatement: An option for a policy owner to reinstate coverage after a lapse based on the insured submitting evidence of insurability and the policy owner paying back premiums plus interest.

Rider: A written agreement attached to a life insurance policy or annuity contract that limits or expands the policy's or contract's terms or coverage. Riders may increase the premium you pay to the insurance company.Examples of riders include:

  • Accelerated death benefit - An optional provision in a life insurance policy that provides for a specified percentage of the death benefit to be paid prior to the insured's death in the event a doctor certifies that the insured's life expectancy is limited (usually 12 months or less).
  • Accidental death benefit - A benefit that provides coverage for loss of life due to an accident that was the direct cause of death.
  • Automatic increase rider - An optional policy rider in a universal life insurance policy that provides scheduled increases in face amount based on a designated percentage, beginning in a designated policy year. This option must be applied for at the time of issue of the base policy
  • Children's term rider (or children's insurance benefit) - An optional policy rider that provides level term insurance on children or the lives of the primary insured.
  • Guaranteed insurability option - An amendment to a life insurance policy that gives the policy owner the right to purchase additional insurance of the same type as provided in the original policy. The additional insurance amount, based on terms outlined in the policy, can be purchased at specified ages and rates without providing new evidence of insurability
  • Other insured rider - An optional policy rider that provides convertible term insurance for a spouse or immediate family member of the primary insured.
  • Primary insured rider - An optional policy rider that provides level term insurance on the primary insured. When the Primary Insured Rider is combined with base coverage, it can reduce premium costs for the amount of coverage as compared to the cost of a permanent life insurance plan of the same face amount. For the same premium, it can improve policy performance on universal life or variable life insurance policies.
  • Waiver of monthly deduction - An optional life insurance policy rider that waives the monthly Cost of Insurance charges on a universal life or variable universal life policy for the length of a qualified disability as outlined in the policy contract.
  • Waiver of Specified Premium - An optional life insurance policy rider that waives a specified premium on a traditional product for the length of a qualified disability as outlined in the policy

Severe Cognitive Impairment: A loss of mental capabilities due to illness or injury.

Suicide Clause: An agreement in a life insurance policy defining a carriers liability in the event of a policyholder's death by suicide.

Underwriter: The individual responsible for reviewing life insurance applications and assigning applicants to a rate class.

Underwriting: The process of review used by life insurance companies for each new policy application.

Underwriting Guidelines: Guidelines to determine the appropriate rate class, which define the premiums for your life insurance coverage, along with age and gender.