Life Insurance Definitions
When looking into any type of life insurance from online term life insurance quotes, no medical exam term or return of premium life insurance, you need to understand the definitions and how they all work around and with your insurance policy.
Check out our complete list of definitions below:
Life Insurance Glossary "In Plain English"
Absolute Assignment: When you transfer the ownership of a life insurance policy to someone else.
Accelerated Death Benefit: A benefit attached to most term life policies for no additional fee that will pay out a portion of the death benefit while you are still living and diagnosed with a terminal illness, each benefit is different based on the company.
Accidental Death Benefit (ADB): The accidental death benefit is a rider that can be purchased in addition to your policy, that will pay out an extra amount of money if you pass away by cause of accident.
Actual Age: The age some carriers use to calculate your premiums. Actual age is your current age and is also known as Attained age or Age Last Birthday.
Actuary: An individual employed by an insurance company to calculate your premium based on specific company data.
Age Last Birthday: A method of calculating your premium based on your current age.
Age Nearest Birthday: A method of calculating your insurance premiums based on how close you are to your next birthday. If you are six months away from your next birthday, usually you are given a rate based on the new age.
Agent: A licensed person that sells and services insurance policies.
A.M. Best: A company that rates the measure of a company's overall financial performance.
Amendment: A document used to make changes or corrections to an insurance policy.
Applicant: The person completing the insurance application. A parent can be an applicant for a child under the age of 18.
Application: Documents used by an applicant to request insurance from a company.
Approved: A status given to you once underwriting has been completed and the insurance company agrees to cover you.
Approved Other Than Applied: A status given to you once underwriting has been completed but the insurance company wants to offer you coverage other than you applied for based on their findings.
Attained Age: A method of calculating your insurance premiums based on your current age.
Attending Physician's Statement (APS): Another name for your medical records.
Aviation Hazard: The risk of death or injury resulting from participation in aviation.
Backdating: The process of changing the issue date of an insurance policy to reflect a date before you had a birthday to allow for lower premium payments.
Your Birthday - May 5th 1980
Policy Issue Date - November 3th 2017
Your current age - 37
If we backdate the policy to an Issue Date of May 3rd, we will save your age of 36 for lower premiums.
Beneficiary: The person or people you plan to leave your money to when you pass away.
Benefit: Commonly known as the Death Benefit, it's the amount that will pay out to the beneficiary if you pass away.
Blood Chemistry Panel: Blood tests that an insurance company may require of applicants during the underwriting process.
Broker: A licensed agent who sells and services insurance policies for more than one insurance company.
Burial Insurance: A whole life insurance policy designed to provide just enough insurance to cover funeral and burial expenses. Usually marketed to people between the ages of 50 and 85.
Business Life Insurance: Normally this is called Key Persona Life Insurance and is used mainly to cover key employees of a business if their death would financially affect the business.
Carrier: Another name for an insurance company.
Cash Value: The amount of cash accumulated inside of permanent life insurance policies.
Change of Beneficiary: The ability of the policy owner to change the beneficiary of a policy.
Change of Beneficiary Form: A form provided by the insurer that the policy owner must complete in order to change the beneficiary on a policy.
Claim: A request for payment of the benefit that is due under the terms of the policy.
Clause: An article or added provision in a life insurance contract, such as a Suicide Clause.
Commissions: A fee or percentage of premium allowed to a salesperson or agent for services rendered. This fee is almost always paid by the insurance company and doesn't cost the customer anything additional.
Conditional Premium Receipt: A receipt given to an applicant when a payment is given at the time of an application for insurance. Used normally to have your policy application date be the issue date of the policy upon your approval.
Contestability Period: A period of time where an insurance company can contest your death if you pass away. This normally lasts for only 24 months. After this time your death is considered incontestable.
Contingent Beneficiary: Another name for Secondary Beneficiary. You can have a Primary and/or Secondary Beneficiary.
Conversion Benefit: A benefit that allows you to change one policy type into another. Like converting a term policy into a whole life policy.
Conversion Credit: A credit given when converting term life insurance to whole life insurance.
Death Benefit: The amount of coverage that will be paid out from a life insurance policy upon the death of the person insured.
Effective Date: The date an insurance policy goes into effect. This is sometimes referred to as the Policy Date.
Endorsement: Used to clarify or make revisions to particular provisions of a health or life insurance policy.
Evidence of Insurability: Factual information used by insurance companies to determine an applicant's qualification for insurance.
Exam Company: A company that sends out an examiner to complete your exam. Examples of an exam company include ExamOne and Parameds.
Examiner: A health care professional designated to provide paramed or medical exams on insurance applicants.
Exclusions: Specific conditions or circumstances listed in an insurance policy for which the policy will not provide benefit payments.
Expiration Date: The date on which an insurance policy ceases to provide coverage on the insured.
Extra Premium: The amount charged in addition to the regular premium to cover any extra hazard or special risk such as aviation or hazardous activities. This is commonly referred to as Flat Extra.
Face Amount: The amount of coverage provided by a life insurance policy. This is also referred to as Coverage Amount.
Face Page: One of the first pages of a life insurance policy. This page lists the policy specifications such as the name of the insured, the policy owner, the beneficiary, the policy number, the amount of insurance and the premium amount among other things.
Final Expenses: Expenses incurred at the time of a person's death including funeral costs, probate costs, current liabilities and taxes.
Fixed Benefit: A benefit that remains the same and does not change within an insurance policy.
Flat Extra: An extra dollar amount per $1,000 of insurance that is charged to cover any extra hazard or special risk such as aviation or hazardous activities. This is commonly referred to as Extra Premium.
Flexible Premium Policy: A type of permanent life insurance policy in which the policy owner may vary the amount or timing of premium payments.
Free Look Period: The period of time given to a policy owner to decide if they want to keep the life insurance policy they purchased. Almost like a money back guarantee, it can range from 10 days to 30 days.
Grace Period: The period of time between a premium’s due date and the date the policy will lapse if the premium remains unpaid. This period is usually 30 days. If the insured dies during the grace period, the unpaid premium is deducted from the policy proceeds.
Guaranteed Issue: An insurance policy provision that allows a certain amount of insurance or type of insurance to be issued without medical evidence of insurability.
Guaranteed Rates: A life insurance policy provision that guarantees the premium rates will not change during the entire term of the policy.
Guaranteed Insurability: An insurance policy provision that allows the insured to buy additional fixed amounts of life insurance at fixed time intervals without evidence of insurability.
Guaranteed Renewable: An insurance policy provision that guarantees an insurance policy will continue in force provided the policy premiums are paid on time.
HIV Consent Form: A form used to advise you that you will be tested for HIV when you complete an exam for life insurance.
Home Office Urine Specimen (HOS): A urine test to check for nicotine, drugs, alcohol and medical issues.
Incontestability Clause: A life insurance policy provision that states after the policy has been in force for a specified period of time, the company cannot deny a claim based on a material misrepresentation made in the application. The typical period of time for the clause is two years.
Insurability: General acceptability by an insurance company of an applicant for insurance based on underwriting review, which may include items such as the applicant's current health status, medical history and driving record among others.
Insurable Interest: Being affected financially if someone to pass away.
Insurance Department: An area within each state's government that administers and regulates the insurance industry within the state.
Insurance Policy: The physical, written contract between the insurance company and the policy owner.
Insured: The individual covered by an insurance policy.
Irrevocable Beneficiary: A type of beneficiary designation that cannot be changed without the written consent of the beneficiary.
Irrevocable Trust: A trust that cannot be revoked or amended by the party who establishes it. This type of trust is often established when life insurance is purchased to protect an estate.
Issue Age Limits: The ages that a specific insurance carrier will not cover you. Some carriers will not issue people under 18 or over 85 a life insurance policy.
Issue Date: The actual date an insurance policy is issued. This may also be the effective date of the policy.
Juvenile Insurance: Life insurance issued on the life of a child. This type of life insurance policy is typically whole life insurance.
Key Person Insurance: An insurance policy placed on the life of an important person within a company. The policy proceeds are used to offset the loss experienced by the company due to the person's death.
Lapse: The termination of an insurance policy due to non-payment of premium.
Lapse Notice: The notice provided in writing to the policy owner that the policy has lapsed.
Length of Coverage: The length of time you will be covered by an insurance policy. Length of coverage is typically applied to term life insurance products.
Level Premium: A premium that remains the same throughout the period specified in the insurance policy.
Level Term Insurance: A type of term life insurance policy where the face value remains the same throughout the period specified in the insurance policy.
Life Insurance Trust: A type of life insurance policy where a trust company is named as the beneficiary and distributes the proceeds of the policy under the terms of the trust agreement.
Material Misrepresentation: To lie or make false statements on your application so that you can get approved.
Medical Examination: An exam completed by a physician. The exam may be required as a part of medical underwriting.
Medical Information Bureau (MIB): A service that compiles medical information and application history of individuals who have applied for insurance in the past.
Mortality: The frequency of deaths in proportion to a specific population.
Mortality Rate: The number of deaths in a group of people, usually expressed as deaths per thousand.
Mortality Table: A table listing the likelihood of death occurring at various ages.
Non-Contributory: A group benefit plan typically through an employer, in which the employer pays all of the premiums.
Non-Tobacco/Non-Smoker: A rating class assigned to an insurance policy in which the insured has been classified as a non-user of tobacco and/or nicotine products.
Occupational Hazards: Hazards associated with an insured's occupation that increase the possibility of injury, illness or death. Such hazards may have an impact on the insurability of an applicant.
Orphan: A policy owner who is not currently being serviced by the writing agent/broker.
PAC: See Pre-Authorized Check.
Paid-Up Insurance: An insurance policy that does not require future premium payments to provide the death benefit of the insured person.
Paramedical Exam/Paramed Exam: A brief exam the insurer typically requires of applicants during the underwriting process.
Payment Mode: Most insurance companies allow you to choose from the following payment modes:
Payor: The person making premium payments on a policy.
Policy: The written document issued by an insurance company to a policy owner. The policy represents the insurance contract between the insurance company and the policy owner.
Policy Anniversary: The anniversary of the date of issue as shown in the policy.
Policy Date: The date the insurance policy becomes effective.
Policy Fee: A charge for policy administration expenses incurred by the insurance company. The policy fee is usually included in the premium.
Policy Loan: A loan from the insurance company to the policy owner secured by the policy's cash value.
Policy Owner: The individual who owns an insurance policy and who has all contractual rights related to the insurance policy. The policy owner may or may not be the same person as the insured, payer or beneficiary.
Pool: A method of distributing insurance risk in which the individual participants share overall risk with the other participants.
Pre-Authorized Check (PAC): A premium-payment arrangement in which the policy owner authorizes the insurer to withdraw the premium payments from a bank account. This arrangement is usually required for the monthly payment mode.
Premium Notice: A notice from an insurance company to a policy owner that a premium will be due on a given date.
Premium Rate: The price per unit of insurance.
Premium Receipt: The receipt given a policy owner for the payment of a premium.
Primary Beneficiary: The person(s) designated by the policy owner to which the proceeds of a life insurance policy will be paid upon the death of the insured.
Proceeds: The amount payable under the terms of a life insurance policy upon the insured's death or upon the maturity of an endowment.
Proposed Insured: The person named in a life insurance application as the person whose life is to be covered by the insurance.
Provision: A statement or clause, found in an insurance policy, to establish some term of the contract.
Quote: The initial estimated premium amount for an applicant based on factors including but not limited to type of insurance, coverage amount, length of coverage, age and gender. All quotes are preliminary estimates with final rates determined by insurance company underwriting.
Rate Per Thousand: The price per unit (or $1,000) of death benefit. Term life insurance premiums are calculated by multiplying the rates per thousand of death benefit, then adding the policy fee.
Rated Policy: A policy issued at a substandard rating class based on underwriting guidelines.
Rebating: Giving someone money or a gift in return for buying an insurance policy. Rebating is illegal in most states.
Reinstatement: A policy provision that allows a policy to be restored from a lapsed status. This is usually allowed during the 31 days following the expiration of an insurance policy's grace period.
Renewable Term Insurance: Term life insurance that may be renewed for another term without evidence of insurability.
Renewal: The process of continuing a policy by paying the premium due.
Replacement: The act of terminating a policy with an insurance company and replacing it with a new insurance policy.
Replacement Form: A required form that must be completed if the applicant is replacing existing coverage.
Revocable Beneficiary: A type of beneficiary designation that can be changed without the beneficiary's consent.
Rider: A special provision attached to a policy that either expands or restricts the benefits of the policy. Exclusion riders typically exclude certain conditions from coverage.
Risk: The probability of injury, illness or death associated with an insured.
Risk Classification: The process by which underwriting determines the risk associated with an applicant and assigns an appropriate rating class to the policy.
Sample Policy: A sample of the policy you are applying for. Usually requested so that a customer can see what the official documents will look like before applying or getting approved. These documents will have the word SAMPLE written across them because they are not legally binding or proof of any type of coverage.
Saving Age: A procedure used to make the effective date of a policy earlier than the application date.
Secondary Beneficiary: A person(s) designated by the policy owner to receive policy proceeds if the Primary Beneficiary is deceased at the time benefits become payable. This is often referred to as a contingent beneficiary.
Second-To-Die Life Insurance: A type of life insurance policy that insures the lives of two people, typically a husband and wife. The death benefit proceeds are payable upon the second death.
Settlement: The process of receiving the proceeds from a life insurance policy. Settlement choices usually include lump sum payments or annuitization.
Single Premium Life Insurance: A life insurance policy that requires only one premium and is guaranteed to remain paid-up throughout the insured's lifetime.
Suicide Clause: A clause that states an insurance company will not payout for a death caused by suicide. This clause usually lasts for 2 years, however, you should check policy documents for provision.
Surrender: The cancellation of a life insurance policy.
Term Conversion: A policy provision that allows a term life insurance policy to be converted to a whole life policy.
Third-Party Owner: A policy owner who is not the insured.
Twisting: The illegal practice of inducing a policy owner to replace a policy by providing inaccurate, incomplete or misleading information.
Underwriter: The individual or team within a life insurance company who is trained to evaluate and determine your insurability.
Underwriting: The process an insurance company goes through to determine if you are eligible for coverage.
Uninsurable Risk: An individual whose total risk is outside of the underwriting guidelines for an insurance company based on health, lifestyle or other factors.
Universal Life Insurance: A type of permanent life insurance that combines term life insurance and an investment feature into one contract. Universal Life insurance policies generally offer flexible premium payments.
War Clause: A provision in a life insurance policy stating that if you die in a war they don't have to pay out.
Yearly Renewable Term (YRT): Most commonly referred to as Annually Renewable Term. Is a A type of term life insurance policy that renews annually and the rates also increase annually or yearly.
Sa El is the Co-Founder & CEO of Simply Insurance. He is a Licensed Life and Health Insurance Agent with over 11 years of experience in the industry. He is an Entrepreneur, Insurance Educator and Field Underwriter. Sa is on a Journey to get 1 Million Families insured.