GLOSSARY Understand key life insurance terms so you can find the policy that fits your needs.
Individual who uses risk factors to calculate premium rates, reserves, dividends and more.
Adjustable Life Insurance
Type of life insurance that allows the policyholder to change the policy’s benefits, such as the premium amount, the duration of coverage and the duration of the premium payment period.
Age Nearest Birthday
Way to calculate an applicant’s insurance age using the person’s nearest birth date for rate calculations. For example, if the applicant’s birthday is in the next six months, they are their next age.
Age restriction set by the insurance company. If an applicant is above or below this age, the policy won’t be issued or continued.
Process of providing a series of periodic payments, sometimes for the rest of the recipient’s life, which is one way of settling a life insurance policy.
Type of settlement option paying out fixed or variable payments to the beneficiary for a set period of time.
Transferring a life insurance policy’s ownership from one person to another.
Individual’s age on a given date. This term usually comes into play when life insurance premiums are calculated.
Attending Physician’s Statement (APS)
Account of a prospective insured’s medical history and medical examination results. Life insurance companies use this information to appropriately underwrite the policy.
The insured’s occupation.
Makes the policy’s effective date earlier than the application date so the insured receives a lower premium. Policies can often be backdated up to six months. Also called saving age.
The person, people, charity or trust that receive the proceeds of the life insurance policy when the insured passes. The policyholder typically chooses the beneficiary when they purchase the policy but can change it as desired.
Amount of money specified to be paid to the beneficiary when the insured passes away. Often referred to as the death benefit.
The duration that benefits will be paid.
Policy that provides only enough coverage to pay for funeral and burial expenses.
Amount of cash accumulated in some types of permanent life insurance policies. Once accrued, it can be borrowed against, withdrawn or used to pay future premiums.
Cash Value Insurance
Coverage designed to help provide protection for one’s lifetime as long as premiums are paid. It can ensure payments for final expenses and more. It also increases in cash value the longer it is in force. A common type of cash value insurance is whole life insurance. Also called permanent insurance.
Change of Beneficiary
Provision that allows the policyholder to change the beneficiary whenever they want.
Child Rider / Children Rider
Policy provision that provides coverage for the insured’s children.
When the insured’s beneficiary notifies the insurance company that the insured has passed away in order to receive the life insurance benefits.
Beneficiary’s right to receive in a single lump sum the remaining payments of the life insurance policy’s settlement.
Person the policyholder selects to receive policy proceeds if the primary beneficiary is deceased. Also called a secondary beneficiary.
Provision, usually available in term life insurance policies, that allows the policyholder to change one policy type for another (e.g., changing term life insurance for permanent life insurance).
One-time credit offered when a policyholder converts term life insurance to permanent life insurance.
Dollar amount a life insurance policy provides. Also called a face amount.
Dollar amount paid to a life insurance policy’s beneficiaries when the insured passes away. Often referred to as the benefit.
Date on which the insurance coverage under a policy begins.
Employer-Provided Life Insurance
Policy provided by an employer that covers individual employees and often provides coverage equal to or double the individual’s salary. Policy may end once the employee leaves or retires.
Amendment to the basic insurance policy. Also called a rider.
Evidence of Insurability
Information, such as medical exams and medical records, insurance companies use to determine an applicant’s eligibility for insurance.
Certain policy restrictions that limit or exclude coverage. Exclusions may vary by policy type and state.
Date when the insurance policy’s coverage ends.
A charge in addition to the premium to cover a special risk or hazard. Also called a flat extra.
The dollar amount a life insurance policy provides. Also called a coverage amount.
Costs incurred at the time of an individual’s death, such as funeral costs, probate costs and taxes.
Benefit that remains the same throughout the course of an insurance policy.
A charge in addition to the premium to cover a special risk or hazard. Also called an extra premium.
Flexible Premium Policy
A permanent life insurance policy that allows the policyholder to adjust the timing or amount of premium payments.
Flexible Premium Variable Life Insurance
A permanent life insurance policy that allows the policyholder to vary the amount or timing of premium.
Usually a 30-day period between a premium’s due date and when the policy lapses if the premium goes unpaid.
Provision that allows the insured to buy certain amounts of life insurance at certain times without evidence of insurability.
Provision that keeps the premium rates the same throughout the policy term. This provision is often included in guaranteed term life insurance policies.
Guaranteed Term Life Insurance
Renewable term life insurance that remains in force so long as the premium is paid.
Activities, such as bungee jumping, mountain climbing and skydiving, that may make an insured ineligible for life insurance coverage.
Incidents of Ownership
Rights the policyholder has, such as the right to cash in the policy, to receive a loan on the policy’s cash value, and to change the beneficiary.
Report typically completed by the insurance company that details information about the applicant’s occupation, financial standing and medical history.
Insurance company’s decision to insure an applicant based on their health status, medical history and more.
The individual an insurance policy covers.
Beneficiary designation that can only be changed with the beneficiary’s written consent.
Whole life insurance for a child’s life.
Key Person Insurance
Policy for an important person in a company that helps offset the company’s loss when that person passes away.
When an insurance policy is terminated because the premium hasn’t been paid.
Length of Coverage
Duration for which a person is covered by an insurance policy.
Level Term Insurance
Term life insurance policy where the coverage amount remains the same.
How long a person is predicted to live.
Contract purchased to leave your beneficiaries a sum of money to help them cover any expenses after you pass away. Amount of coverage is based on your needs, assets, and future goals and can be used to pay for final expenses, mortgages, debts and more.
Life Insurance Trust
Policy where a trust company receives the proceeds and distributes them according to terms the policyholder sets.
Physical examination of a life insurance applicant. Insurers may require (and pay for) this exam in order to issue a life insurance policy.
Interval for premium payments – usually monthly, quarterly, semi-annual or annual. Also called a premium mode.
Applicant’s habits that could impact insurability.
Insurance plan paid for by an employer.
Dangers associated with a job that may impact the applicant’s insurability.
Policy that has been fully paid for.
Permanent Life Insurance
Coverage designed to help provide protection for one’s lifetime as long as premiums are paid. It can ensure payments for final expenses and more. It also increases in cash value the longer it is in force. A common type of permanent insurance is whole life insurance. Also called cash value insurance.
Formal written contract of insurance that lists policyholders, coverage and effective dates.
Person who owns and is listed in the policy.
Amount of money to be paid for an insurance policy.
Person who receives the proceeds of a life insurance policy when the insured passes away.
Amount a life insurance policy pays out upon the insured’s death.
Estimated premium amount for an applicant based on the type of insurance, coverage amount, health and medical history, and more. Quotes are not final premium amounts.
Rate Per Thousand
Price per $1,000 of the death benefit. Figure used to calculate term life insurance premiums.
Provision that allows term life insurance to be renewed at the end of the term, depending on the insured’s attained age and health status. Evidence of insurability is required.
Provision that allows a policy to be restored after it lapses.
Renewable Term Insurance
Term life insurance that can be renewed without evidence of insurability.
When a policy is terminated and replaced with a new insurance policy.
Beneficiary that can be changed without consent from the beneficiary.
Provision that adds to or limits a policy’s benefits. Also called an endorsement.
Underwriting guidelines that determine the applicant’s risk.
Makes the policy’s effective date earlier than the application date so the insured receives a lower premium. Policies can often be backdated up to six months. Also called backdating.
Person or entity that receives policy proceeds if the primary beneficiary has passed away. Also called a contingent beneficiary.
Second-To-Die Life Insurance
Policy that insures two people, usually spouses.
How a life insurance policy’s proceeds are paid. Settlements can usually be paid in lump sum payments or through annuitization.
Single Premium Life Insurance
Policy that requires only one premium to remain in force throughout the insured’s lifetime.
Split Dollar Plan
When two parties, typically an employer and employee, purchase the policy and share the policy’s benefits.
When the second policy fee is waived or discounted because spouses buy life insurance from the same insurance company.
When a life insurance policy is canceled.
Provision that allows the insured to change a term life insurance policy to a permanent life policy.
Term Life Insurance
Type of life insurance that provides protection for a certain amount of time, usually 10, 15, 20, 25 or 30 years. Rate and coverage amount stay the same throughout the duration of the policy. This policy can help cover temporary needs, like a mortgage or income replacement.
Person or team of people at the life insurance company who evaluates policy applications. They help decide whether the applicant is eligible for coverage and what their premium for the policy will be.
Process of assessing insurance applications based on an established set of guidelines. Underwriting determines the applicant’s risk and either declines coverage or assigns the premium rate.
Universal Life Insurance
Permanent life insurance policy that offers term life insurance and an investment feature in one contract.
Waiver of Premium Rider (WP)
Rider that continues life insurance coverage without additional premium payments if the insured becomes disabled.
Whole Life Insurance
Permanent life insurance that provides a death benefit when the insured passes away. These policies accumulate cash value that can be borrowed against, withdrawn or used to pay future premiums.
Yearly Renewable Term (YRT)
Term life insurance with premiums that increase with the insured’s age each year.
At Advisen Life & Wealth, we’re dedicated to diligently work together to know our customers and understand their unique scenarios fully in order to provide thorough, and the most efficient insurance solutions for themselves and their families.