Glossary
Life insurance terms can be confusing. We can help! Here are explanations for some common life insurance words or phrases.
Accelerated death benefit – A feature that allows you to receive a portion of your life insurance benefit early if you are diagnosed by a doctor with a terminal illness and have a life expectancy of twelve months or less, subject to policy terms and conditions
Accidental death and dismemberment (AD&D) – Extra coverage for unexpected injuries or loss of life due to an accident
Actuarial tables – Life expectancy calculations
Beneficiary – The person or persons you name, when you sign up, to receive cash should anything happen to you
Cash value – The sum of money that can build inside many permanent life insurance policies and can be accessible. The actual cash value may be decreased by a surrender charge, loans or withdrawals.
Contestability period – The time after your policy becomes effective, when both your claims and application are subject to review
Conversion option – a feature in some life insurance policies—especially term life insurance—that lets you switch your current policy to a permanent one without needing a medical exam
Critical illness rider – Extra coverage for major health events
Death benefit – Payout to your loved ones
Death certificate – Official proof of passing
Exclusion period – Waiting period before benefits apply
Exclusions and limitations – What’s covered and what’s not
Group life insurance – life insurance that’s offered to a multiple people—typically employees of a company or members of a union—as part of a benefits package
Guaranteed Issue – The amount of coverage you may be eligible for without answering medical questions or taking a medical exam
Lapse – Policy expiration
Long-term care rider – Extra coverage for future healthcare needs
Medically underwritten policy – Coverage available to you based on a health review
Mortality risk – The likelihood of death for an individual or group, based on factors such as age, gender, health, and lifestyle. Mortality risk is used by insurers to determine life insurance premiums and coverage needs, but actual life protection needs may also depend on personal and financial circumstances.
Policy maturity – The date when your life insurance policy ends and pays out its full benefit if you’re still living. This is also called an “endowment.”
Policyholder – The owner of the policy
Portable – Insurance portability lets you take your life insurance coverage with you when you leave a job, your employer stops offering life insurance as a benefit, or you retire
Pre-existing condition – A known health issue that is taken into consideration before coverage starts
Premium – The payment, or one of the periodic payments, a policy owner agrees to make for an insurance policy. Depending on the terms of the policy, the premium may be paid in one payment or a series of regular payments, e.g., annually, semi-annually, quarterly or monthly.
Rider – An optional add-on to your policy, also known as an amendment or endorsement
Surrender charge – Early withdrawal fee
Underwriting – A review of your eligibility and pricing for risk
Underwriting risk assessment – A review of your health and lifestyle to determine eligibility and premium
Waiting period – the period of time after signing up for insurance before your coverage actually starts or before certain benefits kick in
Waiver of premium – Coverage that keeps your policy active if you can’t pay due to disability