Life Insurance Glossary

Life insurance learning center
Accelerated Death Benefit Rider
An optional add-on life insurance benefit that allows the insured to receive partial payment of the policy's face amount before dying in the case of terminal illness or injury. Also called a living benefit.
Accidental Death and Dismemberment Insurance
A type of insurance that provides payment if the insured's death is the result of an accident, if he/she becomes paralyzed, loses limbs, or permanently loses eyesight.
Accidental Death Benefit Rider
An optional life insurance add-on that pays extra benefits above the face amount if the cause of death is a covered accident.
Annually Renewable Term
A type of term insurance that provides one year of coverage and automatically renews each year. Premiums increase every year and the annual increase gets larger as the insured gets older.
Beneficiary
The recipient of a life insurance death benefit.
Binding
Temporary coverage to protect an insurance applicant during the underwriting process.
Cash value (or cash surrender value)
Most permanent life insurance policies have a built-in savings function. The policy owner can borrow against it or receive payment if they cancel the policy.
Conditional Receipt
Policy owners have the option to pay a premium when submitting an application. Doing so provides coverage during the underwriting process. If the insured dies during underwriting, the death benefit will be paid if he/she is shown to qualify for the policy applied for.
Contingent Beneficiary
Person(s) or organization(s) that will receive life insurance death benefits if the primary beneficiary dies before the insured. Also called a secondary or tertiary beneficiary.
Conversion Privilege (or Right)
The ability to convert a term life insurance policy into a permanent policy, usually without a medical exam or proof of insurability. Almost all term policies offer this privilege.
Death benefit
The amount a policy's beneficiaries receive when the insured dies. Also known as the face amount or proceeds.
Decreasing Term Insurance
A type of term life insurance in which the face value decreases over time at a predetermined rate. The premium is level throughout the life of the policy. Sometimes called "mortgage insurance" because it is designed to cover liabilities that decrease as the insured gets older.
Disability Income Insurance
A type of insurance benefit that provides income replacement during periods when the insured is disabled.
Face Amount/Value
The amount a policy's beneficiaries receive when the insured dies. Also called the death benefit.
Final Expense Insurance
A type of permanent life insurance designed to cover the expenses directly related to the death of the insured, such as funeral costs, medical expenses or legal fees. The face amount is generally lower than other types of insurance.
Guaranteed Issue Life Insurance
A type of life insurance that is offered to an individual without regard to health conditions. The applicant does not have to undergo a medical examination or answer any medical questions. Guaranteed life insurance costs considerably more than other kinds of insurance and the death benefit is limited.
In-Force
A term used to describe a life insurance policy that is active and in good standing.
Increasing Term Insurance
A type of term life insurance in which the death benefit increases at a predetermined rate.
Insured
The person whose life is covered by a life insurance policy. The insured and the owner are not always the same person.
Level Term Insurance
Term insurance with premiums that stay the same for the life of the policy. The most common term lengths are 10, 15, 20, and 30 years.
Long Term Care Insurance
A type of health insurance designed to cover costs of long-term care in-home or at assisted living and nursing homes.
Other Insured Rider
An optional life insurance add-on that provides coverage for a person other than the insured. Also called a second insured rider.
Permanent Life Insurance
A life insurance policy that covers the insured until death rather than a specific number of years.
Policy
The contract between a life insurance policy owner and an insurance company. The company promises to pay a death benefit to a beneficiary when the insured dies as long if the insured meets the conditions of the contract (for example, dying within the term period).
Policy Owner
The person who owns a life insurance policy. The policy owner and the insured do not have to be the same person.
Preferred Risk
A person who is deemed more likely to have above-average longevity (based on health, lifestyle, and other factors). Insured individuals in this rate class pay lower premiums.
Premium
The payment required to maintain an insurance policy. Payments can be made monthly, quarterly, semiannually or annually.
Primary Beneficiary
The beneficiary who will receive death benefits as long as he/she is alive when the insured dies. If the primary beneficiary dies before the insured, a contingent or secondary beneficiary will receive the proceeds.
Proceeds
The death benefit of a policy. Also known as the face amount.
Return of premium (ROP)
A type of term life insurance that pays all premiums back to the policy owner at the end of the term if the insured is still living, or percentage of the premiums if the policy is cancelled before the term ends.
Rider
An optional benefit added on to a life insurance policy to expand the coverage of the base policy.
Secondary Beneficiary
Person(s) or organization(s) that will receive life insurance death benefits if the primary beneficiary dies before the insured. Also called a contingent beneficiary.
Simplified Issue Life Insurance
A type of life insurance that only requires the applicant to answer medical questions. No medical examination is needed. It is more expensive than other kinds of insurance and the death benefit is limited.
Smoker Ratings
Insurance companies charge higher premiums to tobacco users.
Standard Risk
A person who is deemed to have average longevity (based on health, lifestyle, and other factors).
Sub-Standard Risk
A person who is deemed to have below- average longevity (based on health, occupation, risky behavior, and other factors). Insured individuals in this rate class pay higher premiums.
Suicide Clause
Life insurance companies usually state that if the insured commits suicide within a specified period, usually two years, after beginning the policy, the company is not required to pay the death benefit. The company may return any premiums paid.
Term Life Insurance
A type of life insurance that proves coverage for a specific number of years, usually 10, 15, 20 or 30 years. If the insured lives beyond the term, no death benefit is paid. Term insurance is less expensive than permanent insurance.
Term of Policy
Length of time a term life insurance policy provides coverage.
Underwriting
The process of determining whether a life insurance company will insure an applicant. The company reviews the application, the results of the medical exam, and other relevant information in public records to make its decision. This is also when premiums costs are set.
Uninsurable Risk
A person who is deemed too risky to provide insurance coverage.
Universal Life Insurance
A type of permanent life insurance that gives the policy owner flexibility with regard to the face amount and premium amounts. These can be modified to respond to changing needs and circumstances. Universal life policies accumulate cash value.
Variable Life Insurance
A type of permanent life Insurance that allows some or all of the premium payments to be held in a separate account for investment purposes. The performance of the investments varies, but a minimum benefit payment is guaranteed.
Waiver of Premium Rider
An optional add-on benefit that waives policy premiums after the insured has been disabled for a predetermined length of time, usually six months.
Whole Life Insurance
A type of permanent life insurance. Whole life offers level premiums for the life of the policy and may accumulate cash value.