Life Insurance
Helpful Life Insurance Terms to Know
Adjustable Life Insurance: A type of permanent life insurance that allows the policy owner to make adjustments to the policy such as to raise or lower the death benefit, increase or decrease the premium payments or change the protection period to suit their needs.
Administrator: Especially in situations where a person has left no will, an Administrator is appointed by the state to manage and settle the estate of the deceased.
Beneficiary: the named person, group of people, specified organization, institution or trust identified in the life insurance contract to receive the policy death benefit of the insured.
Business Life: purchased on the life of a member of the business, typically purchased by partnerships protecting the surviving partners against the financial loss caused by the death of a partner, key employee or executive.
Cash Surrender: the internal buildup of cash value inside a whole life or permanent life policy that is available to the policy owner upon voluntary surrender or termination of a policy before death or maturity
Cash Value: the cash fund the builds within a whole life or permanent life insurance plan; it is part of the death benefit and typically can be used for policy loan or cash surrender.
Charitable Giving: following specific guidelines, a charitable organization can be the named beneficiary to receive a death benefit upon the death of the insured. In specific circumstances this provide as tax free benefit to the charity.
Contingent Beneficiary: also called secondary beneficiary, this beneficiary is named in the policy to receive the benefit if the primary beneficiary dies while the insured person is still living.
Convertible Term Life: term insurance that can be converted to another plan of insurance, after the policy is issued, at the option of the policy owner, without needing to prove current insurability.
Cost of Waiting: the concept that by waiting to become insured, the cost of insurance typically increases due to factors such as age increases and the risk of insurability increases. Newly developed health issues may cause an individual to be uninsurable or receive a sub-standard rating or rated policy.
Date of Issue: the exact day a policy is issued; also, the issue date is normally the beginning of clauses such as incontestability or suicide clause.
Death Benefit: upon the death of the insured, this is the amount payable to the beneficiary.
Death Claim: the forms and procedures required by the insurance company upon the death of the insured to provide proof of death and entitlement of the death benefit.
Decreasing Term Insurance: a term life insurance policy in which the death benefit decreases over time at a specific rate; the premiums may be level.
Emergency Fund: part of the immediate needs of a survivor to protect against the sudden, unbudgeted expenses at the unexpected death of the insured.
Estate Tax: a tax imposed by the Federal Government and some states on the transfer of property at death.
Exclusions: listed in a life insurance contract, specified circumstances or conditions in which a policy will not provide a death benefit.
Executor: the person named in a will and appointed by court approval to carry into effect the provisions of the will; a corporation can be an executor; a female executor is an executrix.
Final Expenses: Used to help determine the amount of life insurance needed, final expenses are the financial costs of dying; funeral expenses, credit debt, loans, taxes, last medical expenses, administrative costs and others.
Fraud: Misrepresentation of facts or intentional concealment of information in a manner to deceive or force an insurer to provide a death benefit which otherwise would not be provided.
Human Life Value: the capitalized value of a person’s future income producing ability. The estimated future earnings or an individual can be insured to support dependants in the event of that individual’s death.
Immediate Needs: the immediate cash needs of the survivor at the death of the insured that is typically paid in lump sum in order to pay for expenses that the family will face such as burial expenses, mortgage or rent payments, emergency funds, debt repayment or funds for education
Income Needs: the future income needs of a family to pay for ongoing expenses formerly provided for by the deceased.
Insurability: meeting the qualifications of health, age, asset tests, occupation, avocation and other factors which an individual must meet in order to satisfy the requirements of the insurance company for the issuance of a policy.
Insurance Agent: a representative of an insurance company who sells insurance.
Insured: the person in the insurance policy whose life is being protected and a death benefit is predicated.
Intestacy: in general, dying without a will; intestacy laws differ by state.
Irrevocable Beneficiary: designated beneficiary that which can not be changed or renamed without the permission of that beneficiary or at the death of that beneficiary.
Juvenile Life: a life policy on a child under the age of 18; the owner is typically the parent, grandparent or guardian that has an insurable interest in the juvenile.
Key Person Life: insurance on the life of a valued employee that is important to the operation of a company, designed to protect the firm against the financial loss of business income upon the death of the key employee.
Lapse: the act of a policy to no longer be in effect typically due to nonpayment of required premium.
Level Premium: a policy in which the premium stays the same throughout the life of the policy.
Level Term Life: term insurance that provides a constant face value death benefit from date of issue to expiration of policy.
Life Insurance Contract: a binding agreement between a policy owner and an insurance company in which the insurance company agrees to pay a death benefit upon the death of an insured person if the policy owner complies with all the requirements of the contract.
Long Term Care: Long Term Care insurance is not life insurance.
Lump Sum: the method of payment of the death benefit proceeds to the named beneficiary in which the entire amount is paid in one lump sum settlement.
Medical Examination: used in the process of determining the insurability of the applicant, this is a physical examination by a qualified physician or examiner.
Mortgage Protection Insurance: life insurance in which the lump sum death benefit is used to pay off the mortgage to secure the ownership of the home for the surviving family of the deceased.
Permanent Life Insurance: a policy designed to be permanent protection for the individual being insured that typically builds cash value within the policy: see also whole life .
Policy Loan: an available feature on permanent life policies in which a policy owner can loan against existing cash values in the policy.
Policy Owner: the legal owner of a life insurance policy; the policy could be on the life of the policy owner or on the life of another in which the policy owner has an insurable interest.
Pre-Existing Conditions: physical or medical conditions of the person applying for insurance, existing prior to the issuance of a policy and are considered in the underwriting process.
Premiums: the payment one makes in consideration of a life insurance policy; payments can usually be divided into periodic payments or made as one single premium.
R ated Policy: also referred to as substandard or extra-risk; a policy issued at higher than standard premium rates due to circumstances such as a medical condition, life style, avocation and so on.
Renewable Term Life: a life insurance policy that provides the right to renew the policy at the end of the term for another term or continuous terms without proof of insurability.
Return of Premium Life: a life insurance policy that provides a condition that if you outlive the initial term of the policy and kept the policy in force by paying all required premiums, a stated amount of premiums paid will be returned to you. Early termination of policy may also provide some return of premiums.
Rider: an additional provision or attachment to a policy that enhances the value or benefit of the policy; riders are typically added on at time of policy issue: examples are Waiver or Premium, Spousal Rider, Term Rider, Child Rider, Guaranteed Insurability Option.
Survivor: the remaining individual, individuals or entity at the death of the insured
Suicide Clause: a standard disclaimer in most life insurance polices that states no death benefit will be paid if suicide is determined as the insured’s cause of death; for many states this clause is within the first two years of the policy; this clause can vary by state.
Surrender Charge: upon surrendering a permanent life insurance policy, this is the difference between the cash value accumulation building in the policy and the reserve held by the company
Term Life Insurance: a life insurance policy that provides a death benefit for a specified period of time on the life of the insured; upon expiration there is typically no cash vale in a term life policy.
Universal Life: designed as a permanent life insurance policy, the policy owner can vary the timing and amount of premiums paid as well as the death benefit.
Whole Life: a permanent life insurance plan in which protection is provided and premiums are paid for the whole life of the insured.
Will: a prepared legal document created for an individual, used for the disposition of owned property, last wishes of the individual after death and may even address guardianship of children.
