Life Insurance Glossary
A B C D E F G I L M P R T U V W
AGENT
An individual who sells, services, or negotiates insurance policies on behalf of a company or independently.
BENEFICIARY
An individual who may become eligible to receive payment due to will, life insurance policy, retirement plan, annuity, trust or other contract.
CASH VALUE
The savings component of a permanent life insurance policy, which accumulates over time and can be accessed by the policyholder through loans or withdrawals.
CONTESTABILITY PERIOD
A specific time frame (typically two years) during which the insurance company can investigate and deny a claim if the policyholder’s statements on the application are found to be untrue.
COVERAGE
The period of time the life insurance covers the policy-holder.
DEATH BENEFIT
The payout to the beneficiary of like insurance policy when the insured person dies.
EVIDENCE OF INSURABILITY
A statement of the policy holder’s physical health and other insurance, such as assets and income, which helps the insurance company decide if the applicant is eligible for insurance, the amount of risk they pose, and what premium the company will charge.
FACE AMOUNT
The initial death benefit amount stated in the life insurance policy.
FINANCIAL NEEDS ANALYSIS
Analysis that reviews the policy holder’s current financial goals, with the objective of helping to determine how much insurance they might require.
GRACE PERIOD
A specified period (usually 30 days) during which the policyholder can make a premium payment after the due date without the policy lapsing.
INSURANCE POLICY
The legal document issued to a policy holder by a life insurance company that outlines the terms of the insurance.
LAPSE
When a life insurance policy is terminated due to non-payment of premiums.
LIFE INSURANCE
A form of protection from risk that guarantees payment upon the death of the policyholder.
MIB REPORT
A “Medical Information Bureau Report,” commonly known as an “MIB Report,” is a comprehensive record that contains an individual’s medical and health-related information, including past medical conditions, insurance application history, and details of previous insurance coverage. It is used by insurance companies to assess an applicant’s risk and eligibility for coverage.
POLICYHOLDER
The person who owns and pays for a life insurance policy.
POLICY LOAN
A loan taken by the policyholder against the cash value of a permanent life insurance policy.
PREMIUM
The periodic payment made by the policyholder to the insurance company to keep the life insurance policy in force.
RIDER
An optional add-on to a life insurance policy that provides additional coverage or benefits, such as a critical illness rider or a disability rider.
RISK CLASSIFICATION
The step in the life insurance underwriting process in which a company assesses and classifies an applicant’s risk of mortality.
TERM LADDERING
The strategy of buying term life insurance policies with different term lengths and different coverage amounts at the same time. Since the policies are set to expire at different times, you only pay for the amount of coverage you need throughout your different life stages.
TERM LIFE INSURANCE
A life insurance policy for a specific time period that stipulates the insurance company must deliver a tax-free payment if the insured person dies within that time frame. Many term policies only cover periods of 5, 10, or 20 years but can be renewed, usually for a higher cost, at the end of the policy.
UNDERWRITING
The process used by insurance companies to determine how much life insurance a person can qualify for and at what price, based upon risk factors.
UNIVERSAL LIFE INSURANCE
A flexible permanent life insurance policy that allows the policyholder to adjust the premium payments and death benefit.
VARIABLE LIFE INSURANCE
A type of life insurance that allows the policyholder to invest the cash value in various investment options, potentially leading to higher returns but also greater risk.
WHOLE LIFE INSURANCE
Permanent life insurance that covers the insured person for their entire life and includes a cash value component that grows over time.
