Insurance Glossary

A rider that lets you access a portion of your death benefit while you're still alive if you're diagnosed with a terminal illness. Most policies include this at no extra cost.

An optional rider that pays an additional benefit if the insured dies as a result of an accident rather than natural causes. Sometimes called 'double indemnity.'

A professional who uses statistics and math to calculate insurance risks and set premium rates. They're the reason your premium is what it is.

The person (or people) you choose to receive the death benefit when you pass away. You can name multiple beneficiaries and split the payout however you like.

An independent agent who represents multiple insurance carriers and shops the market on your behalf. Unlike a captive agent, a broker isn't tied to one company. There's no extra cost to you — the carrier pays the broker's commission.

The savings component inside a permanent life insurance policy (whole life or universal life). It grows tax-deferred over time and you can borrow against it or withdraw from it while you're alive.

A formal request made to the insurance company to pay the death benefit after the insured person passes away. Your beneficiaries file the claim with a death certificate and the policy information.

The first two years after a policy is issued, during which the insurance company can investigate and potentially deny a claim if they find material misrepresentation on the application.

Your backup beneficiary — the person who receives the death benefit if your primary beneficiary passes away before you do. Always name one.

A feature in many term life policies that lets you convert to a permanent (whole life) policy without taking a new medical exam. This can be valuable if your health changes.

The amount of money the insurance company pays to your beneficiaries when you die. This is the core purpose of life insurance. It's generally received income-tax-free.

A payment made by some mutual insurance companies to whole life policyholders when the company performs well. Dividends aren't guaranteed but can be used to reduce premiums, buy more coverage, or earn interest.

A specific situation or cause of death that the policy won't cover. Common exclusions include suicide within the first two years and death during illegal activities.

Another name for the death benefit — the total amount your policy will pay out. Also called face value or coverage amount.

A small whole life policy (typically $5,000–$35,000) designed to cover funeral costs, medical bills, and other end-of-life expenses. Usually has simplified underwriting with no medical exam required.

A window (usually 10–30 days after your policy is delivered) during which you can cancel for a full refund, no questions asked. Every state requires this.

The time after a premium due date (usually 30–31 days) during which you can make a late payment without losing your coverage. Your policy stays active during this window.

A feature of some guaranteed-issue policies where the full death benefit isn't available immediately. If you die in the first 2–3 years, beneficiaries receive only a return of premiums paid (plus interest) rather than the full benefit.

Coverage provided through your employer, usually as a workplace benefit. Often 1–2x your annual salary. It's free or cheap, but typically not enough on its own, and you lose it if you leave the job.

A type of policy that accepts everyone regardless of health — no medical exam, no health questions. Premiums are higher and benefits may be limited for the first 2–3 years (graded benefit).

A projection showing how your policy might perform over time, including premiums, death benefits, and cash value growth. For permanent policies, illustrations show both guaranteed and non-guaranteed scenarios.

After a policy has been in force for two years, the insurance company generally cannot deny a claim based on misstatements in the application (except for fraud). This protects your beneficiaries.

The person whose life is covered by the policy. This is usually (but not always) the same person who owns the policy and pays the premiums.

A beneficiary designation that cannot be changed without that beneficiary's written consent. Most people choose revocable beneficiaries so they can update them freely.

When a policy terminates because the premiums haven't been paid and the grace period has expired. A lapsed policy provides no coverage. Some policies can be reinstated within a certain timeframe.

A premium that stays the same for the entire life of the policy (or the entire term). Most term and whole life policies have level premiums — what you pay in year 1 is what you pay in year 20.

Benefits you can access while you're still alive, such as borrowing against your cash value, using an accelerated death benefit rider, or receiving chronic illness benefits.

A brief health screening (usually 20–30 minutes at your home or office) that many policies require. Includes blood pressure, blood and urine samples, and health history questions. Some policies skip this entirely (no-exam policies).

A database that insurance companies use to share medical history information reported by applicants. If you disclosed a condition on a previous application, it may appear here.

A life insurance policy that doesn't require a medical examination. You answer health questions instead. Premiums are often slightly higher, but approval is faster — sometimes same-day.

A whole life policy where all required premiums have been paid and the coverage remains in force for life without any further payments.

A loan taken against the cash value of a permanent life insurance policy. You don't need to qualify or explain why. Interest rates are usually low. Unpaid loans reduce the death benefit.

The person who owns the policy, pays the premiums, and has the right to make changes (like updating beneficiaries). The owner and the insured can be different people.

The amount you pay for your life insurance coverage, usually monthly or annually. Your premium depends on your age, health, coverage amount, and policy type.

The process of reactivating a lapsed policy. Most companies allow reinstatement within 3–5 years of lapse, but you'll need to pay back premiums and potentially pass a new health review.

A term policy that can be renewed at the end of its term without a new medical exam. The catch: premiums increase significantly at each renewal because you're older.

An optional add-on to your base policy that provides extra benefits or customization. Riders can be free or cost a small additional premium.

The different ways your beneficiaries can choose to receive the death benefit — as a lump sum, in installments, as an annuity, or left on deposit earning interest.

A standard provision that excludes death benefit payment if the insured dies by suicide within the first two years of the policy. After two years, the full benefit is paid regardless of cause of death.

Voluntarily canceling a permanent life insurance policy. If the policy has cash value, you'll receive the cash surrender value (minus any surrender charges). Once surrendered, coverage ends.

Coverage that lasts for a specific period — typically 10, 20, or 30 years. It's the most affordable type of life insurance because it has no savings component. If you outlive the term, the policy simply expires.

The process an insurance company uses to evaluate your risk and decide whether to approve your application — and at what price. They review your health, lifestyle, occupation, and other factors.

A type of permanent coverage with flexible premiums and an adjustable death benefit. Part of your premium goes into a cash value account that earns interest. More flexible than whole life, but requires more monitoring.

A rider that waives your premium payments if you become totally disabled and can't work. Your coverage stays in force without you having to pay. One of the most popular and valuable riders.

Permanent coverage that lasts your entire life, with a guaranteed death benefit and guaranteed cash value growth. Premiums are fixed. More expensive than term but builds wealth over time.