Glossary of Life Insurance

When you are looking to purchase life insurance, you will probably read or hear a lot of terms that you are not familiar with. To make sure that you get the type of insurance that best fits your needs, for the lowest possible cost, it is helpful to know the following terms.

Accidental Death Benefit A benefit from a life insurance policy that is paid when an insured’s death results from an accident.

Age at Issue The insured’s age at the time coverage begins.

Beneficiary The individual chosen to receive the death benefits from a life insurance policy.

Cash Surrender Value The amount of money available when a life insurance policy is canceled for a reason other than the death of the insured.

Conversion Exchanging a policy for another life insurance policy under certain circumstances, usually without further underwriting requirements.

Death Benefit The amount paid to the beneficiary upon the death of the insured.

Individual Retirement Annuity (IRA) An annuity, available as a retirement account, for someone who is employed.

Insured The person whose life is covered by the life insurance policy.

Irrevocable Beneficiary A clause that does not allow the insured to change their beneficiary without their consent.

Issue Age The insured’s age at the time life insurance coverage takes effect.

Lapse The termination of an insurance policy when you do not pay your premiums.

Loan Cash given by a life insurance company to the owner of the life insurance policy, based on the policy’s cash surrender value.

Net Cash Surrender Value The cash surrender value minus any outstanding loans or surrender charges.

Planned Periodic Payment The premium designated at the time of application as the planned amount to be paid at specific intervals until the maturity date.

Policy Anniversary An anniversary of the date that the policy was issued.

Policy The basic written agreement between the insurer and the policy forming a contract of insurance.

Policy Date The date on which coverage becomes effective.

Policy Owner The individual that owns the insurance policy.

Premium The amount you pay to keep your life insurance current.

Rider A written agreement attached to a life insurance policy that limits or expands the policy’s terms.

Surrender The policy owner’s right to terminate policy coverage in exchange for the policy’s cash surrender value.

Term Insurance A plan of insurance that covers the insured for a specified period of time (term) and not for his or her entire life.

Universal Life A flexible-premium, adjustable-death-benefit policy.

Variable Life Insurance A life insurance policy that provides flexible premiums and death benefits, as well as a chance to build cash value in separate investment options.

Whole Life Insurance A life insurance policy that covers the policy holder for life.