Key Terms:


  • Insured

    The person who the life insurance protection is on.

  • Beneficiary

    The person or people who will receive the benefit amount if the insured were to die.

  • Policy Owner

    The person who owns the life insurance policy. This can be the insured, the beneficiary, or a third party like a trust.

  • Life Insurance Company

    The companies which issue life insurance policies.

  • Policy

    The contract between the policy owner and the insurance company which lays out the terms of the agreement.

  • In Force

    Your policy is active and you are now covered.

  • Face Amount

    The amount of money paid to the beneficiary if the insured were to die. Also, know as the benefit amount or death benefit.

  • Premium Payment

    The amount of money paid by the policy owner to the insurance company to keep the policy in force.



Life Insurance Glossary


Accelerated Death Benefit Rider

— Benefits available before the insured’s death are available in some life insurance policies. These benefits are usually available only due to terminal or catastrophic illness, long-term care, or confinement to a nursing home.

Accidental Death Benefit Rider 

— Sometimes referred to as “double indemnity,” this policy add-on provides for the payment of an additional benefit in the event of death due to an accident.

Automatic Premium Loan 

— A provision in some life insurance policies designed to provide policyholders with added flexibility by automatically “borrowing” from a policy’s cash value (if sufficient) to keep the policy in force even if the premium due has not been received by the end of the grace period.

Beneficiary 

— The person or entity receiving the death benefit at the insured's death.

Cash Value 

— the amount of money accumulated by a life insurance policy as the policy matures and available to be borrowed while the policy is in force or paid to the policyholder when the policy is canceled.

Convertible Clause 

— a policy clause that gives the policyholder the right to convert term insurance to whole life insurance.

Death Benefit 

– The total cash payment made to the beneficiary upon the insured's death.

Decreasing Term 

— term insurance in which the face value decreases on a specified schedule. This type of policy is often used for insuring home mortgages.

Disability Waiver Rider

— a policy rider that waives premiums if the policyholder becomes permanently disabled or unable to work.

Dividend 

— the money paid back to the policyholder at the end of a year if an insurance company has collected more premiums than necessary to meet its expenses, death benefits, and reserve build-up.

Estate 

— The total value of a decedent’s assets at the time of death. Such assets may be passed directly to a beneficiary via a will or held in trust for the beneficiary.

Estate Planning 

— the process of planning to protect wealth from taxes and other costs and to distribute assets and income after death.

Evidence of Insurability 

— The presentation to a prospective insurer of an applicant’s current and historical medical status. Usually, this is a disclosure of health history via a questionnaire (although other evidence may be requested) to an insurer to determine the appropriate premium to charge for the risk the insurer expects to accept.

Face Value 

— the amount of money a life insurance policy pays if the insured dies.

Grace Period 

— A designated period of time following each premium due date in which an overdue premium may be paid without loss of coverage.

Guaranteed Insurability Rider 

— a policy rider that allows the policyholder to purchase stated amounts of additional life insurance at specified times without passing a physical exam.

Guardian 

— A person or persons named to care for minor children until they reach the age of majority. A will is the best way to ensure that the person or persons whom you wish to have care for your minor children are legally empowered to do so in the event of your death.

In-Force 

— “In-force” policies are active contracts that will pay out if the insured passes away. The opposite of in-force is a lapsed policy. 

Insurability 

— An assessment of the applicant’s health status is used in determining the appropriate premium commensurate with the insurer's risk. There are three basic categories of insurability: preferred, standard, and rated. Preferred applicants are those whose health is above-average. Standard applicants are of normal health status. Rated applicants are those whose health is below average. (e.g.., those who have had cancer or a heart attack, etc.).

Insured 

— The person covered by life insurance. 

Lapsed Policy 

— A policy that has been terminated and is no longer in-force due to non-payment of premium. 

Maturity 

— The date upon which the face amount of a life insurance policy is paid to the policyholder (if not previously invoked due to the insured's death).

Mortality Table 

— a mathematical table indicating the average length of life for a group of persons at any particular age.

Non-Forfeiture Values 

— The value of a policy if canceled, either in cash or in another form of insurance. 

Nonparticipating Life Insurance 

— coverage that is calculated as closely as possible to actual cost so that no dividends are paid to policyholders.

Owner 

– The person or entity who owns the insurance policy. The owner may or may not be the insured. The owner can designate the beneficiary and is responsible for paying premiums. 

Premium 

– The amount billed to the owner of an insurance policy (usually monthly, quarterly, or annually) by the insurance company. 

Participating Life Insurance 

— coverage that pays dividends to policyholders.

Policy 

— The actual terms of a contract of life insurance. 

Policy Loan 

— a loan made to a policyholder for part of the policy’s cash value.

Premium 

— the amount of money paid by the policyholder at regular intervals to keep the policy in force.

Probate 

 — The legal certification process of a decedent’s written instructions regarding the disposition of his or her estate.

Proceeds

 — the money the beneficiary receives upon filing a claim after the policyholder's death.

Reinstatement 

 — The restoration of a lapsed policy to in-force status. The company may require evidence of insurability (and, if health status has changed, may deny reinstatement) and will always require payment of the total amount of past due premium.

Renewable Clause 

— a policy clause that allows the policyholder to renew coverage for another period without a medical examination.

Rider 

— a clause that, when added to the policy, expands or restricts its benefits or excludes certain conditions from coverage.

Surrender 

— The cancellation of an in-force policy by the policy owner. The policy owner receives the full cash/non-forfeiture value, and the insurer is no longer obligated to pay the death benefit.

Term Insurance 

— a policy that pays a death benefit to survivors but doesn’t accumulate a cash value.

Trust 

— A trust is a legal entity established by one person to benefit other people. The person establishing the trust is usually called the “grantor.” Those receiving income from, or the assets of, a trust are called “beneficiaries.” The assets of a trust are managed or overseen by a “trustee” – whose responsibility is to act only in the interests of the beneficiaries.

Underwriting 

— The process of grouping applicants for insurance by characteristics such as age, gender, health occupation, and lifestyle or hobbies. People with similar characteristics are assigned a similar level of risk – and premium amounts are determined accordingly.

Universal Life Insurance 

— a flexible policy that lets the policyholder vary the premium payments and the face value of the policy.

Variable Life Insurance 

— a policy in which the death benefits and cash value depend on the investment performance of one or more separate accounts.

Whole Life Insurance 

— a policy that builds a cash value and gives protection through the policyholder’s lifetime as long as premiums are paid.

Key Terms:


  • Insured

    The person who the life insurance protection is on.

  • Beneficiary

    The person or people who will receive the benefit amount if the insured were to die.

  • Policy Owner

    The person who owns the life insurance policy. This can be the insured, the beneficiary, or a third party like a trust.

  • Life Insurance Company

    The companies which issue life insurance policies.

  • Policy

    The contract between the policy owner and the insurance company which lays out the terms of the agreement.

  • In Force

    Your policy is active and you are now covered.

  • Face Amount

    The amount of money paid to the beneficiary if the insured were to die. Also, know as the benefit amount or death benefit.

  • Premium Payment

    The amount of money paid by the policy owner to the insurance company to keep the policy in force.