Glossary of Terms
Life Insurance can be complicated. We have a variety of articles that can help. Even then, our customers tell us that – sometimes – the most confusing part of life insurance isn’t the policies or products themselves, rather the terminology. So we put together some common terms you’ll run across as you look for the policy that is perfect for you. The terms below are ordered from most common to more advanced. Once you’ve mastered these, give us some basic information and we’ll match you to a licensed life insurance professional.
Insured – This is the person that is insured by the life insurance policy.
Death Benefit (also known as Face Amount) – The amount that will be paid out upon the Insured’s death.
Beneficiary – The person or people to whom the Death Benefit will be paid to upon Insured’s death.
Premium – The amount the Insured must pay each month or year to the carrier in return for life insurance coverage.
Licensed Life Insurance Agent – An individual that has passed rigorous tests and represents a life insurance carrier whose job it is to help you find the appropriate life insurance product and policy.
Carrier – The actual company that issues a life insurance policy to a consumer.
Cash Value – In certain life insurance products, the amount that builds on the side usually separate of the actual Death Benefit.
Application – Information provided by a customer that helps agents and carriers assess risk in a policy to determine the proper product, policy, and premium that a customer needs.
Underwriting – The process by which a customer’s information such as lifestyle, health, and ability to pay are reviewed in determining whether to issue a policy or determine exact premium for a policy.
Term Life Insurance – A low cost life insurance product that is in effect for a specified number of years and typically only pays the Death Benefit in the even of the Insured’s death.
Permanent Life Insurance – A guaranteed life insurance product that remains in effect usually forever and pays a Death Benefit as long as premiums are paid regularly. These products also allow accumulation and growth of Cash Value and the ability to take out loans against policies.
Whole Life Insurance – A type of Permanent Life Insurance.
Universal Life Insurance – Another type of Permanent Life Insurance.
See our full article about types of life insurance here.
Lapse – If a life insurance policy’s premiums are not paid in time, the act of terminating the policy by the carrier.
Policy Loan – Certain life insurance products (i.e. permanent life insurance) allow the Insured to borrow money against the Death Benefit or Cash Value accumulated within the life insurance policy.
Level Premiums – Premiums that remain constant through the life of the policy.
Policy Provisions – A declaration of the terms of a life insurance policy.
Risk Classification – A carrier’s assessment of the level of risk a consumer’s application represents to them; different risk classifications are priced differently even within the same product or policy type.
Cash Surrender Value – Accumulations of cash in a side fund that may be available for borrowing or return upon surrender of a policy.
Feel free to print these out and have them handy as you talk to one of our partner Life Insurance agents. Call now!