Accidental Death Benefit:
A rider that provides an additional death benefit if the insured dies as a result of an accident. This benefit is usually a multiple of the base policy’s death benefit.
Accidental Death Benefit:
A rider that allows the policyholder to receive a portion of the death benefit if diagnosed with a terminal illness or specified medical condition. This benefit can help cover medical expenses and end-of-life costs.
Annuitant:
The person who receives annuity payments from an annuity contract. This can be the same person as the policyholder or a different individual.
Assignment:
The transfer of the ownership rights of a life insurance policy from one party to another. This can be done for various reasons, such as gifting the policy to a beneficiary or collateralizing a loan.
Beneficiary:
The person or entity designated by the policyholder to receive the death benefit from a life insurance policy upon the insured’s death. The beneficiary can be a family member, friend, trust, or organization.
Burial Insurance:
A type of final expense insurance specifically intended to cover the costs of a person’s burial or funeral expenses. It is typically a smaller policy compared to traditional life insurance policies.
Cash Value:
The savings component of permanent life insurance policies that accumulates over time. Policyholders can access the cash value through loans, withdrawals, or surrenders, though these actions may impact the death benefit.
Cash Surrender Value:
The amount of money that the policyholder is entitled to receive if they surrender (cancel) a permanent life insurance policy before the insured’s death. This value consists of the cash value minus any surrender charges.
Child Term Rider:
This rider provides life insurance coverage for the policyholder’s children. It can help cover funeral expenses in case of a child’s death.
Chronic Illness Benefit:
This benefit provides a portion of the death benefit if the policyholder becomes chronically ill and requires long-term care. It can help cover the costs of caregiving and medical treatment.
Critical Illness Benefit:
This benefit allows the policyholder to receive a portion of the death benefit if diagnosed with a critical illness such as cancer, heart attack, or stroke. The funds can be used to cover medical expenses or other financial obligations.
Contestability Period:
A specific timeframe, typically one to two years from the policy issue date, during which the insurance company can investigate and potentially deny a claim due to misrepresentation or fraud by the policyholder.
Convertible Term Insurance:
A term life insurance policy that includes an option to convert to a permanent life insurance policy without the need for additional underwriting. This allows the policyholder to extend coverage beyond the initial term.
Death Benefit:
The amount of money that is paid out to the beneficiary of a life insurance policy upon the death of the insured person. This sum is typically tax-free and can be used for various purposes.
Dividend:
A portion of the insurance company’s profits that is distributed to policyholders of participating whole life insurance policies. Policyholders can choose to receive dividends in cash, use them to reduce premiums, purchase additional coverage, or accumulate them with interest.
Exclusion:
Specific conditions or circumstances that are not covered by a life insurance policy. Common exclusions include suicide within the first two years of the policy, death due to war or acts of terrorism, and death while participating in hazardous activities.
Face Amount:
The initial death benefit amount specified in a life insurance policy. This is the amount that will be paid out to the beneficiary upon the insured’s death.
Final Expense Insurance:
A type of life insurance designed to cover the costs associated with a person’s funeral, burial, and other end-of-life expenses. It typically has a lower death benefit compared to traditional life insurance policies.
Grace Period:
A period of time, usually 30 days, after a missed premium payment during which the policy remains in force. The policyholder can make the overdue payment without penalty and keep the coverage active.
Guaranteed Issue:
Guaranteed issue life insurance is a type of policy that is typically available to individuals without the need for a medical exam or health questionnaire. These policies are guaranteed to be issued as long as the applicant meets the age requirements set by the insurer, usually between 50 and 85 years old. Guaranteed issue policies are designed for individuals who may have difficulty obtaining traditional life insurance due to health issues or other factors.
Immediate Coverage: Immediate coverage refers to a life insurance policy that provides full coverage from the moment the policy is issued and the premium is paid. This means that in the event of the insured’s death, the full death benefit will be paid out to the beneficiary without any waiting period. Immediate coverage is typically offered to individuals who meet the insurer’s underwriting requirements and do not have any significant health issues or high-risk factors.
Incontestability Clause:
A provision in a life insurance policy that prevents the insurance company from contesting the validity of the policy after a certain period of time (usually two years) has passed since the policy was issued.
Life Insurance:
A contractual agreement between an individual (the policyholder) and an insurance company, where the insurer agrees to pay out a sum of money (the death benefit) to the designated beneficiary upon the death of the insured person in exchange for regular premium payments.
Long-Term Care Rider:
This rider allows the policyholder to use a portion of the death benefit to cover long-term care expenses. It can help protect assets and provide financial security during times of illness or disability.
Mortality Charge:
The portion of the premium that covers the cost of providing the death benefit based on the insured’s life expectancy and mortality risk.
Nonforfeiture Options:
Choices available to the policyholder when a permanent life insurance policy lapses due to non-payment of premiums. Common nonforfeiture options include cash surrender, reduced paid-up insurance, and extended term insurance.
Policyholder:
The individual who owns the life insurance policy and is responsible for paying the premiums to maintain coverage. The policyholder has the right to make decisions about the policy, such as changing beneficiaries or coverage amounts.
Policy Loan:
A loan taken by the policyholder against the cash value of a permanent life insurance policy. The loan must be repaid with interest, and any outstanding loan balance reduces the death benefit payable to the beneficiary.
Premium:
The regular payment made by the policyholder to the insurance company to keep the life insurance policy in force. Premium amounts can vary based on factors such as age, health, coverage amount, and type of policy.
Premium Waiver Benefit:
A rider that exempts the policyholder from paying premiums if they become totally disabled and unable to work. The insurance company continues to cover the policyholder’s premiums while the coverage remains in force.
Rider:
An optional add-on to a life insurance policy that provides additional coverage or benefits beyond the base policy. Common riders include accidental death benefit riders, waiver of premium riders, and accelerated death benefit riders.
Simplified Coverage:
Simplified coverage is a type of life insurance policy that requires applicants to answer a few health-related questions but does not involve a full medical exam. These policies are designed to provide a quicker and easier application process compared to traditional life insurance policies that may require extensive medical underwriting. Simplified coverage policies are often suitable for individuals who may have minor health issues or prefer a more straightforward application process.
Term Life Insurance:
A type of life insurance that provides coverage for a specific term or period, typically ranging from 10 to 30 years. If the insured person dies within the term, the policy pays out the death benefit to the beneficiary.
A Two-Year Wait:
A two-year wait, also known as a graded death benefit period, is a feature of some life insurance policies where the full death benefit is not immediately available upon the insured’s passing. Instead, if the insured dies within the first two years of the policy’s issuance, the beneficiary may receive only a partial benefit or a return of premiums paid, rather than the full death benefit amount. After the two-year waiting period, the full death benefit typically becomes available to the beneficiary.
Underinsured:
A term used to describe an individual whose life insurance coverage is insufficient to meet their financial needs and obligations in the event of their death.
Underwriter:
The person or entity responsible for assessing the risk associated with insuring a particular individual and determining the premium rates for a life insurance policy based on that risk assessment.
Underwriting:
The process by which an insurance company assesses the risk of insuring a potential policyholder. Underwriting involves evaluating factors such as age, health history, lifestyle, and occupation to determine premium rates and coverage eligibility.
Universal Life Insurance:
A type of permanent life insurance that offers flexibility in premium payments and death benefits. It also accumulates cash value based on current interest rates.
Whole Life Insurance:
Permanent life insurance that provides coverage for the lifetime of the insured as long as premiums are paid. It also includes a cash value component that grows over time and can be borrowed against or withdrawn.