Premium:

The amount of money an individual pays to an insurance company in exchange for coverage. Premiums can be paid monthly, annually, or in other agreed-upon intervals.

Policyholder:

The person who owns the life insurance policy. The policyholder is typically the one who pays the premiums and has the right to make decisions regarding the policy.

Beneficiary:

The person or entity designated to receive the death benefit when the insured person passes away. The beneficiary is named by the policyholder and can be a family member, friend, or an organization.

Death Benefit:

The amount of money paid to the beneficiary upon the death of the insured person. This is the primary purpose of life insurance and is intended to provide financial support to the beneficiary.

Cash Value:

In some types of life insurance policies, a portion of the premium is set aside and invested. The cash value is the amount of money that accumulates over time and can be accessed or borrowed against while the policy is active.

Policy Term:

The period during which the life insurance policy is in force. This could be a fixed number of years (term life insurance) or for the entire lifetime of the insured (permanent life insurance).

Underwriting:

The process by which an insurance company assesses the risk associated with insuring an individual and determines the premium rates and coverage terms based on factors such as health, age, and lifestyle.

Rider:

An additional provision or amendment to the basic life insurance policy that provides extra benefits or coverage. Common riders include accidental death, waiver of premium, and accelerated death benefits.

Term Life Insurance:

A type of life insurance that provides coverage for a specified term, such as 10, 20, or 30 years. If the insured person dies during the term, the death benefit is paid to the beneficiary; otherwise, the coverage expires.

Whole Life Insurance:

A type of permanent life insurance that provides coverage for the entire lifetime of the insured. It also includes a cash value component that grows over time and can be accessed by the policyholder.

Universal Life Insurance:

Another type of permanent life insurance that offers flexibility in premium payments and death benefits. It also includes a cash value component, and policyholders can adjust the amount and timing of premium payments.

Annuity:

A financial product that provides a series of payments over a specified period, often used as a way to provide a steady income stream during retirement. Some life insurance policies include annuity options.

These are just a few of the many terms associated with life insurance. Understanding these terms can help individuals make informed decisions when purchasing life insurance coverage.

Dividend:

Some participating life insurance policies, particularly with mutual insurance companies, may pay policyholders a share of the company’s profits in the form of dividends. Policyholders can choose to receive dividends in cash, use them to reduce premiums, or reinvest them.

Grace Period:

The period after a premium payment is due during which the policy remains in force, even if the premium hasn’t been paid. This allows policyholders a bit of time to make late payments without losing coverage.

Contingent Beneficiary:

A secondary or backup beneficiary named by the policyholder to receive the death benefit in case the primary beneficiary predeceases the insured or is unable to receive the benefit.

Incontestability Clause:

A provision in the life insurance policy that limits the insurance company’s ability to contest the validity of the policy after it has been in force for a certain period, usually two years. This is designed to protect the policyholder from having the policy voided based on misrepresentations.

Suicide Clause:

A provision in the life insurance policy that limits the payout if the insured dies by suicide within a specified period after the policy is issued, typically within the first two years. After this period, the full death benefit is usually payable.

Conversion Privilege:

 A feature in some term life insurance policies that allows the policyholder to convert the policy into a permanent life insurance policy without undergoing a medical examination. This is often valuable if the insured’s health has deteriorated and they wish to maintain coverage.

Face Amount:

The death benefit amount specified in the life insurance policy that will be paid to the beneficiary upon the death of the insured. It is also referred to as the “coverage amount” or “policy amount.”

Underinsured:

An individual whose life insurance coverage is insufficient to meet their financial needs or those of their beneficiaries. It’s important to regularly review and adjust coverage to ensure it aligns with changing circumstances.

Nonforfeiture Options:

Choices available to the policyholder if they decide to surrender or stop paying premiums on a permanent life insurance policy. Common options include receiving the cash value, converting to a reduced paid-up policy, or using the cash value to purchase paid-up term insurance.

Accelerated Death Benefit:

A provision that allows the policyholder to receive a portion of the death benefit before death if the insured is diagnosed with a terminal illness or a specified critical illness. This can help cover medical expenses and other financial needs.

Exclusion Rider:

A provision added to a life insurance policy that excludes coverage for specific risks or conditions. For example, a policy might have an exclusion rider for certain pre-existing health conditions.

Understanding these additional terms can enhance your comprehension of life insurance policies and help you make informed decisions regarding your coverage.

Annuitant:

The person whose life expectancy is used to calculate the payouts in an annuity. The annuitant may or may not be the same person as the policyholder.

Policy Lapse:

The termination of a life insurance policy due to non-payment of premiums. If a policy lapses, the coverage is no longer in force, and the policyholder loses the associated benefits.

Cash Surrender Value:

The amount of cash that the policyholder is entitled to receive if they surrender or cancel a permanent life insurance policy before its maturity or before the insured’s death. This value is typically the accumulated cash value minus any surrender charges.

Underwriting Class:

The classification assigned to an applicant based on their health, lifestyle, and other risk factors during the underwriting process. This classification determines the premium rate for the life insurance policy.

Convertible Term Life Insurance:

A type of term life insurance that allows the policyholder to convert the policy to a permanent life insurance policy without undergoing a medical examination. This provides flexibility for individuals who may want permanent coverage in the future.

Waiver of Premium:

A rider or provision in a life insurance policy that allows the policyholder to waive premium payments if they become disabled and are unable to work. The coverage remains in force even if premiums are not paid during the disability period.

Inforce-Illustration:

A document provided by the insurance company that illustrates the current status and future projections of a life insurance policy. It typically includes details such as cash value, death benefit, and premium payments.

Term Conversion Option:

An option available in some term life insurance policies that allows the policyholder to convert the policy to a permanent life insurance policy without evidence of insurability within a specified period.

Paid-up Insurance:

A life insurance policy where all required premiums have been paid, and no further premium payments are due. The policy remains in force with a reduced death benefit or a level death benefit for the rest of the insured’s life.

Mortality Charge:

The portion of the premium or cost of insurance that covers the risk of death. Mortality charges are based on the likelihood of the insured’s death and are a fundamental component of life insurance premiums.

Reinstatement:

The process of restoring a lapsed life insurance policy to its original status after the policyholder pays any overdue premiums and meets the insurer’s reinstatement requirements.

Living Benefits:

Benefits in a life insurance policy that can be accessed by the policyholder before death. This may include features like accelerated death benefits for critical illness or long-term care needs.

These terms further contribute to a comprehensive understanding of life insurance products and their various features.

Guaranteed Issue Life Insurance:

A type of life insurance policy that is issued without requiring a medical examination or health questionnaire. Guaranteed issue policies are typically more expensive and may have lower coverage limits.

Net Cash Value:

The cash value of a permanent life insurance policy after deducting any outstanding policy loans, loan interest, and surrender charges.

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 if not repaid, it will be deducted from the death benefit upon the insured’s death.

Suicide Exclusion Period:

The initial period, usually two years from the policy’s start date, during which the life insurance policy may not pay the full death benefit in the case of suicide.

Preferred Risk:

A classification given to individuals who pose a lower risk to the insurance company due to factors such as excellent health, lifestyle choices, or family medical history. Preferred risk policyholders often qualify for lower premium rates.

Substandard Risk:

A classification given to individuals who pose a higher risk to the insurance company due to health issues, lifestyle choices, or other factors. Substandard risk policyholders may be charged higher premiums.

Face Amount Plus Cash Value Option:

An option in some whole life insurance policies where the death benefit consists of the original face amount plus any accumulated cash value.

Underinsured Motorist Coverage:

A type of life insurance rider that provides coverage in the event that the policyholder is injured or killed in a motor vehicle accident caused by a driver who is underinsured or uninsured.

Underwriting Risk:

The risk that an insurance company takes on when providing coverage to an individual. Underwriting risk is assessed based on various factors, including health, occupation, and lifestyle.

Conversion Period:

The timeframe during which a term life insurance policyholder can convert their policy to a permanent life insurance policy without undergoing a medical examination.

Family Income Benefit:

A type of life insurance policy that pays out a regular income to the beneficiaries instead of a lump sum upon the insured’s death. This can help provide ongoing financial support.

Non-Medical Underwriting:

The underwriting process that doesn’t require a medical examination. Instead, the insurance company assesses risk based on other information provided by the applicant.

Renewable Term Life Insurance:

A type of term life insurance that allows the policyholder to renew the coverage at the end of the term without undergoing a medical examination. Premiums usually increase with each renewal.

Contingent Owner:

An individual designated by the policyholder to become the owner of the life insurance policy if the original policyholder becomes incapacitated or passes away.

Living Trust:

A legal entity that holds ownership of a life insurance policy. Living trusts can help streamline the distribution of assets upon the policyholder’s death.

Understanding these additional terms can provide you with a more comprehensive grasp of life insurance concepts and policies.

Accelerated Underwriting:

A streamlined underwriting process that uses advanced data analytics and technology to quickly assess an applicant’s risk and eligibility for coverage, often without the need for a traditional medical examination.

Joint Life Insurance:

A life insurance policy that covers two individuals, typically spouses, under a single policy. The death benefit is paid upon the death of the first insured, and the policy terminates.

Universal Life Insurance Cost of Insurance (COI):

The portion of the universal life insurance premium that covers the mortality risk, administrative expenses, and other charges. The cost of insurance is deducted from the cash value.

Guaranteed Universal Life Insurance:

A type of universal life insurance that offers a guaranteed death benefit with flexible premium payments. It provides a level premium throughout the policy’s duration, assuming premiums are paid as planned.

Premium Loading:

The additional amount added to the base premium to cover administrative costs, commissions, and other expenses associated with issuing and maintaining a life insurance policy.

Underwriter:

An individual employed by the insurance company responsible for assessing risks and determining the eligibility, premium rates, and terms for insurance coverage based on the underwriting guidelines.

Policy Exclusion:

Specific conditions or circumstances that are not covered by the life insurance policy. Exclusions are outlined in the policy contract and may include certain pre-existing medical conditions or high-risk activities.

Insurance Rider:

An additional provision or endorsement added to a life insurance policy to modify or expand its coverage. Riders can customize the policy to meet specific needs, such as adding coverage for critical illness or disability.

Variable Life Insurance:

A type of permanent life insurance that allows the policyholder to allocate a portion of the premium payments to investment accounts, typically mutual funds. The cash value and death benefit can vary based on the performance of these investments.

Return of Premium Rider:

A rider that can be added to some term life insurance policies, providing a refund of the premiums paid if the insured outlives the policy term. This rider usually increases the cost of the policy.

Conversion Premium:

The additional premium charged when converting a term life insurance policy to a permanent policy during the conversion period. The conversion premium is based on the insured’s age at the time of conversion.

Living Annuity:

An annuity that begins making payments to the annuitant while they are still alive. Living annuities can be purchased with a lump sum or through periodic payments.

Third-Party Ownership:

When a person or entity other than the insured or the beneficiary owns a life insurance policy. This could include a business, trust, or another individual.

Incontestability Period:

A specific period, usually the first two years after the policy is issued, during which the insurance company can contest the validity of the policy based on misrepresentations or omissions by the policyholder.

Premium Financing:

A strategy where a third party lends money to the policyholder to pay life insurance premiums, often used in high-value life insurance policies. The policy’s cash value or death benefit is used as collateral for the loan.

These additional terms should contribute to a more comprehensive understanding of various aspects of life insurance.

Accidental Death and Dismemberment (AD&D) Insurance:

A type of insurance that pays benefits in the event of death or specific bodily injuries resulting from accidents. AD&D insurance may be offered as a standalone policy or as a rider to a life insurance policy.

Annuity Certain:

An annuity that guarantees payments for a specific period, regardless of whether the annuitant is alive. If the annuitant passes away during the guaranteed period, payments continue to the beneficiary.

Benefit Period:

The length of time during which benefit payments are made under certain types of life insurance policies or annuities. For example, in disability income insurance, it’s the maximum duration for which benefits are paid.

Convertible Whole Life Insurance:

A type of whole life insurance policy that allows the policyholder to convert the policy into an equivalent amount of another type of insurance without evidence of insurability.

Disability Waiver of Premium:

A rider that waives the premium payments on a life insurance policy if the policyholder becomes totally disabled and is unable to work. This ensures that coverage remains in force during the disability.

Excess Interest:

In the context of universal life insurance, excess interest refers to the interest earned on the policy’s cash value, which exceeds the guaranteed interest rate. This can enhance the cash value accumulation.

Illustration:

 A visual representation or table showing the projected future performance of a life insurance policy, including values such as cash surrender values, death benefits, and premiums.

Living Benefit Rider:

A rider that allows the policyholder to access a portion of the death benefit before death in the case of a qualifying event, such as a terminal illness or the need for long-term care.

Nonforfeiture Values:

The values in a life insurance policy that the policyholder is entitled to receive if the policy lapses or is surrendered. Nonforfeiture values typically include cash surrender value, reduced paid-up insurance, or extended term insurance.

Premium Mode:

The frequency at which premiums are paid, such as monthly, quarterly, semi-annually, or annually. Different premium modes may have different total premium amounts over a policy’s life.

Risk Class:

The classification assigned to an individual based on their risk factors during the underwriting process. Risk classes, such as preferred, standard, or substandard, influence the premium rates for life insurance coverage.

Term Conversion Credit:

A credit applied when converting a term life insurance policy to a permanent policy, which reduces the cost of the new policy. It encourages policyholders to convert their term policies.

Underwriting Guidelines:

The set of rules and criteria used by an insurance company to evaluate an applicant’s risk and determine eligibility for coverage. Underwriting guidelines consider factors like health, age, and lifestyle.

Voluntary Life Insurance:

Life insurance coverage that employees can choose to purchase through their employer. Voluntary life insurance often allows employees to customize coverage levels for themselves and their dependents.

YRT (Yearly Renewable Term) Insurance:

A type of term life insurance where the premium increases each year as the policyholder gets older. YRT insurance is renewable annually without the need for a medical examination, but premiums rise with age.

These additional terms should further enhance your understanding of the diverse aspects of life insurance.

Joint and Survivor Annuity:

An annuity payment option that provides income to two annuitants (typically spouses) during their lifetimes. After the death of one annuitant, the surviving annuitant continues to receive payments for the rest of their life.

Paid-up Additions:

Additional amounts of whole life insurance coverage that a policyholder can purchase using dividends or other policy credits. These paid-up additions increase the policy’s death benefit and cash value.

Underwriting Profit:

The profit made by an insurance company through the difference between the premiums collected and the costs associated with providing coverage, including claims, administrative expenses, and commissions.

Accumulation Period:

The period during which the cash value in a permanent life insurance policy grows. This is typically the early years of the policy when premiums are paid and cash value accumulates.

Convertible Term Life Insurance:

 A type of term life insurance that allows the policyholder to convert to a permanent life insurance policy without a medical examination. It provides flexibility as needs change.

Fully Underwritten Policy:

A life insurance policy for which the insurance company conducts a comprehensive underwriting process, including medical examinations and a detailed assessment of the applicant’s health history.

Underwriting Classifications:

Different categories or classes assigned to applicants based on risk factors, such as health and lifestyle, during the underwriting process. Common classifications include preferred, standard, and substandard.

Cost of Insurance (COI) Rate:

The rate at which the cost of insurance charges are deducted from the cash value in a universal life insurance policy. The COI rate is a key factor in determining policy performance.

Free Look Period:

A specified period, usually 10 to 30 days, during which the policyholder can review a new life insurance policy, and if dissatisfied, can cancel the policy for a full refund of premiums paid.

Participating Policy:

A life insurance policy that allows the policyholder to share in the company’s financial success, typically through the receipt of dividends. These dividends can be used to enhance the policy’s cash value or purchase additional coverage.

Reversionary Annuity:

An annuity in which the annuitant receives regular payments for a specified period, and if they pass away before the end of the period, the remaining payments go to a designated beneficiary.

Underwriting Score:

A numerical score assigned to an insurance applicant based on various risk factors, helping insurers assess the likelihood of an applicant’s mortality or other risks.

Guaranteed Issue Annuity:

An annuity that is issued without requiring the annuitant to undergo a medical examination or answer health-related questions. It is typically suitable for individuals with health conditions.

Joint Life and Last Survivor Insurance:

A type of life insurance that covers two lives and pays the death benefit upon the death of the last surviving insured.

Underwriting Manual:

A set of guidelines and rules used by underwriters to assess risk and determine eligibility for life insurance coverage. The manual provides a framework for evaluating various factors.

Residual Death Benefit:

A feature in variable life insurance policies that guarantees a minimum death benefit, even if the cash value decreases due to poor investment performance.

Lapse Ratio:

The ratio that measures the percentage of life insurance policies that lapse or are surrendered by policyholders before reaching maturity.

Optionally Renewable:

A provision in some term life insurance policies that gives the policyholder the option to renew the policy for additional terms without undergoing a medical examination.

Primary Beneficiary:

The person or entity designated to receive the death benefit from a life insurance policy upon the death of the insured. The primary beneficiary takes precedence over any contingent beneficiaries.

Secondary Guarantee:

A secondary level of protection in certain life insurance policies, ensuring that the policy remains in force even if the primary guarantees, such as the cash value, are not sufficient.

These terms should further enrich your understanding of life insurance concepts and policies. If you have specific questions about any term or would like more details on a particular topic, feel free to ask!

Modified Endowment Contract (MEC):

A life insurance policy that fails to meet certain IRS criteria, resulting in adverse tax consequences. MECs are subject to different tax treatment, and policyholders may face penalties for withdrawals.

Policy Summary:

A document provided by the insurance company that summarizes the key features and details of a life insurance policy, including premiums, benefits, exclusions, and any riders.

Excess and Surplus Lines Insurance:

Insurance coverage that is not available from standard insurance companies and is provided by non-admitted insurers. This type of coverage is often used for high-risk or unique situations.

Liquidity Provision:

A feature in certain life insurance policies, such as universal life, that provides policyholders with access to the policy’s cash value for liquidity needs, subject to policy terms and conditions.

High Net Worth (HNW) Insurance:

Insurance products and services designed for individuals with substantial assets and high net worth. HNW insurance often includes specialized coverage and may be customized to address complex financial situations.

Non-Contributory Group Life Insurance:

Group life insurance where the employer bears the entire cost of coverage, and employees do not contribute to the premiums. This is in contrast to contributory group life insurance, where employees share the cost.

Asset-Based Long-Term Care (LTC) Insurance:

A type of hybrid insurance that combines life insurance with long-term care benefits. The policy provides a death benefit and allows for the acceleration of benefits to cover long-term care expenses if needed.

Life Expectancy:

The average number of years a person is expected to live, often used by insurance companies in underwriting and pricing life insurance policies.

Cost-of-Living Adjustment (COLA) Rider:

A rider that can be added to certain life insurance policies, adjusting the death benefit or cash value to keep pace with inflation or changes in the cost of living.

Guaranteed Insurability Option (GIO):

A rider that allows the policyholder to purchase additional coverage at specified intervals without undergoing a medical examination or proving insurability.

Non-Medical Limit:

The maximum amount of life insurance coverage that an individual can obtain without undergoing a medical examination. This limit is set by the insurance company based on the applicant’s age and coverage needs.

Payout Period:

The period over which the death benefit or annuity payments are distributed to beneficiaries or annuitants. The payout period can be a fixed number of years or continue for the lifetime of the recipient.

Impaired Risk:

An individual considered to be a higher risk for insurance purposes due to pre-existing health conditions, lifestyle factors, or other factors that may impact life expectancy.

Contestable Period:

The period during which an insurance company has the right to contest or investigate the validity of information provided by the policyholder during the application process.

Medical Information Bureau (MIB):

A central database that collects and shares medical information about insurance applicants to assist insurance companies in underwriting and preventing fraud.

Probate:

The legal process through which a deceased person’s estate is settled, debts are paid, and assets are distributed. Life insurance proceeds typically pass directly to beneficiaries and bypass the probate process.

Underinsured Coverage:

A type of insurance coverage that provides protection if the at-fault party in an accident has insurance, but the coverage is insufficient to fully cover the damages. It is often associated with auto insurance.

Automatic Premium Loan:

A provision in some life insurance policies that allows the insurer to use the policy’s cash value to pay premiums automatically if the policyholder fails to make a premium payment.

Retrospective Rating:

A method of determining insurance premiums based on the policyholder’s actual loss experience during the policy term. Premiums are adjusted retrospectively based on actual claims.

Reinsurance:

The practice where one insurance company transfers a portion of its risk to another insurance company. Reinsurance allows insurers to manage their risk exposure and maintain financial stability.