Lifequote Glossary

Lifequote Glossary

The “language of insurance” can seem foreign to a lot of us. The lingo can be obscure; words and terminologies that are unfamiliar to those outside of the industry. LifeQuote wants you to be in the “know”, an insider in this complicated world of life insurance. That is why we provide you with this glossary of insurance terms in an effort to help our customers decipher and understand the concepts and terms relating to the insurance industry. We want you to share our knowledge because the more familiar you are with this life insurance lingo the better you will understand how to select and buy the right life insurance policy for you. If you cannot find the term or definition you are looking for let us know and we will be glad to research it and provide an explanation. 1.800.521.7873.

Choose any alphabet to get a list of life insurance terminology and definitions that can help you understand your policy:

A B C D E F G H I J K L M
N O P Q R S T U V W X Y Z

Accelerated Death Benefit

A provision or rider that allows you to receive all or part of the benefits of your policy before you die. These benefits are paid for terminal illnesses such as AIDS, organ transplant, nursing home confinement, etc. The allowable reasons to receive such benefits vary from company to company. Also known as "living benefits".

Accidental death benefit

A provision or rider that pays more (i.e., double) in case you die as a result of an accident. Also called "double indemnity."

Actuary

An expert trained in the mathematics of insurance responsible for the calculation of reserves, premiums, and other values.

Administrative expense charge

An amount deducted from the policy to pay the costs of administering the policy.

Amendment

An attachment to a policy that modifies certain policy benefits.

Annuitization

The process of paying the cash from a life insurance policy according to a schedule of monthly (or other) periodic payments for the lifetime of the payee or for joint lifetimes of two payees. Various guarantees of a minimum number of payment periods are also usually available. The option selected will affect the precise amount of each payment.

Applicant

The person applying for a life insurance policy. He/she can apply for an individual insurance policy, a trust policy, or a business policy.

Application

A signed request for life insurance providing detailed information about the prospective policyholder.

Assignment

Giving rights and benefits under your insurance policy to someone else.

Assumed interest rate

The minimum interest rate on a variable life insurance policy.

Attained age conversion

Attained age often comes into play for convertible term policies which allow conversion to permanent insurance such as whole life with no medical examination or medical questions. The new permanent insurance policy will be issued at the age the policyholder has attained at the time of the conversion.

Automatic premium loan

If you cannot pay your premiums, the insurance company takes money from your policy's cash value to pay the premiums, assuming there is sufficient cash value.


B

Backdating

Many top rated insurance companies will allow an applicant to request a term policy that takes effect on an earlier date that their actual application date in order to get a lower premium rate. Age, for life insurance premium purposes, is based either on the applicant's last birthday or nearest birthday. In most states, the maximum length of time that a policy can be back-dated is six months.

Back-Loaded Policy

A life insurance policy in which most of the expense charges occur when the policy owner or contract owner surrenders the policy or makes cash withdrawals from the policy.

Basic Illustration

A spreadsheet, a ledger, or a proposal used in the sale of life insurance that shows both guaranteed and nonguaranteed elements of the policy.

Beneficiary

The person, persons or entity designated to receive the death benefits from a life insurance policy when you die.

Blood Chemistry Profile

This is commonly ordered this laboratory test by life insurance underwriters to determine risk. The requested sample of blood may identify possible chronic diseases or other health problems.

Broker

An insurance sales agent who sells insurance products for more than one insurance company, and does not exclusively represent one insurance carrier.

Burial Policy

A policy to cover funeral and burial costs.

Business Continuation Insurance Plan

An insurance plan designed to enable a business owner (or multiple owners) to provide for the business' continued operation if the owner or a key person dies.

Buy-Sell Agreement

An agreement in which one party agrees to purchase the financial interest that a second party has in a business following the second party's death, and (2) the second party agrees to direct his estate to sell his interest in the business to the purchasing party.


C

Captive Agent

An insurance agent who is under contract to only one insurer and who is not permitted to sell the products of other insurers.

Cash Value

The money that accumulates in your life insurance policy while the policy is in force that the insured can borrow.

Certificate

The evidence of coverage received by persons insured under group life policy.

Commission

When a new life insurance policy is purchased, the agent or broker representing the insurance company in the transaction usually receives a fee which is computed as a percentage of the premium. The percentage for a specific transaction is determined by various factors such as the type of policy and marketing agreement between the company and representative.

Conditional Receipt

Some applicants may want to submit the initial premium payment with the application in order to start coverage before the actual policy is issued. The conditional receipt is found inside the insurance application and it details the carrier's terms and conditions. Life insurance companies limit the maximum amount of coverage under a conditional receipt and have specific qualifications that must be met.

Contestable Period

A life insurance company may contest a death claim for a specified period of time after the policy is in force. The most common contestable period is two years but each policy specifies that period, which is subject to state regulations.

Contingent Payee

The person who is to receive life insurance policy proceeds, in accordance with the terms of a settlement agreement following the payee's death. This is also sometimes called successor payee.

Convertible Term Insurance Policy

A term life insurance policy that gives the policy owner the right to convert the policy to a permanent plan of insurance.

Cost of Insurance

See "mortality charge"

Cost-of-Living Rider

Permits you to purchase increasing term insurance coverage, coinciding with an estimated rise in the cost of living.

Coverage

The total amount of life insurance for which the policy holder has coverage and the type of life insurance carried.

Current Mortality Rate

The monthly mortality rate actually used to calculate the monthly mortality charge in a Universal Life Insurance Policy. This amount is generally substantially lower than the guaranteed maximum mortality rate.


D

Death Benefit

Amount paid to the beneficiary upon your death.

Death Certificate

The official document that attests to the death of a person and that bears the signature, and sometimes the seal, of an official authorized to issue such a certificate.

Declination

The rejection by a life insurance company of a life insurance application.

Decreasing Term Life Insurance

Term life insurance that provides a death benefit that decreases in amount over the policy term.

Deferred Premiums

Life insurance premiums due after the date of the Annual Statement but before the next policy anniversary date and the next Annual Statement date.

Direct Writer

Sell through their own exclusive agents or through some other selling systems such as direct mail or over the Internet that deal directly with the public.

Disability Benefit

A feature of some policies for the waiver of premium if the policyholder becomes permanently and totally disabled.

Dividend

Money paid annually to a policyholder as a partial return of the paid premium on participating insurance to reflect a company's favourable operating experience. Dividends are not guaranteed.


E

Effective Date

The date the insurance policy begins.

Endorsement

An addition to a policy that modifies its benefits.

Endowment

A cash value policy payable to the policyholder on the maturity date-- if they are living-- or to a beneficiary at the time of the insured's death.

Errors and Omissions (E&O) Insurance

Insurance that protects a sales agent against financial liability for any negligent acts or mistakes.

Estate Planning

This type of planning, usually done with the assistance of a professional financial advisor, helps clients preserve the personal assets that individuals want to pass on after death to their heirs.

Evidence of Insurability

The proof that an insurance underwriter requires during the underwriting process in order to determine that a proposed applicant meets the insurer's health and lifestyle requirements and is an insurable risk.

Extended Term Insurance Option

One of several non-forfeiture options included in life insurance policies that allows the owner of a policy with a cash value to discontinue premium payments and to use the policy's net cash value to purchase term insurance for the full coverage amount provided under the original policy for as long a term as the net cash value can provide.


F

Face Amount

For a fixed-amount whole life insurance policy, the amount of the death benefit payable if the insured person dies while the policy is in force.

Family Benefit Coverage

A type of supplementary benefit rider offered in conjunction with a life insurance policy that insures the lives of the insured's spouse and children; also referred to as dependent life insurance and spouse and children's insurance rider.

Family Policy

A type of life insurance policy that covers all the members of a family under one contract. The primary insured is issued a whole life insurance policy; and the insured's spouse and children receive term life insurance coverage.

Fiduciary

A person or other legal entity who holds a special position of trust or confidence when handling the business affairs of another and who must put the other's interests above his or her own.

Financial Disclosure Form

A form that some insurers require an insurance applicant to read, understand, and sign, which provides information about an insurance product's investment options, expenses, charges, and other specifics.

Financial Planning

A process, often done with the assistance of a professional financial advisor, to address goals related to financial needs for individuals, families, and small businesses.

Financial Worksheet

A document used during the underwriting of insurance that enables an underwriter to organize an insurance applicant's financial information and to develop a clear picture of the person's financial situation.

First-to-Die Life Insurance

Insurance policies that offer benefits for two or more lives, payable on the first death, the second death, or upon each death.

Fraudulent Claim

When someone tries to collect benefits on a claim under which false information was provided to an insurer.

Fixed Period Option

A life insurance policy settlement option under which the insurer pays the policy proceeds and interest in a series of annual or more frequent installments for a preselected period.


G

Gender-based Mortality Table

A mortality table showing the ages at which men and women are expected to die.

General Agent (GA)

An independent businessperson who is under contract to an insurance company whose focus is to distribute and/or sell the products of a single company within a defined territory.

Grace Period

A specified length of time following a premium due date at which an insurance renewal premium may be paid without penalty. The length of the grace period may vary by insurance carrier and is specified in the life insurance policy.

Group Insurance

Life or health insurance coverage usually provided by employers for a group of people under a "master contract" for all.

Guaranteed Death Benefit

This covers variable universal life insurance policies. It is a minimum death benefit amount that will be provided regardless of the underlying policy's cash value at the time of the death of the insured.


H

Hazardous Activity

When applying for a life insurance policy some activities like sky diving, auto racing, etc. -- may be considered too dangerous to qualify for coverage at a standard or may cause the company to deny coverage all together. Different insurance companies have different standards.


J

Illustration

A computer-generated printout of an insurance company's explanation of how the life insurance policy will work for a prospective policyholder. It may project each year's premium payment, cost index, dividends, and death benefit as well as guaranteed interest payments (if any). Sometimes called a "ledger statement".

Impaired Insurance Company

Refers to an insurance company that has been deemed to have financial difficulties that call into question its ability to continue to meet its obligations to customers and regulators.

Incontestable Clause

An optional provision that places a time limit up to two years on a company's right to deny payment of a claim because of suicide or a material misrepresentation on your application.

Indeterminate Premium

Premium for a life insurance policy that may change over the policy's life, depending on the company's operating experience, but not higher than the maximum amount as stated in the policy.

Insured

A person on whose life an insurance policy is issued.

Irrevocable Assignment

Under such an agreement you transfer all of your rights to a third party and this agreement can never be changed.


J

Joint Life Insurance

Insurance policies that offer benefits for two or more lives, payable on the first death, the second death, or upon each death. Also known as first-to-die life insurance.

Juvenile Insurance Policy

An insurance policy that is issued on the life of a child but is owned and paid for by an adult, usually the child's parent or legal guardian.


K

Key-Person Insurance

A type of life insurance or disability insurance that protects a business from the financial losses that occur when a key person dies or becomes disabled.


L

Lapsed Policy

A policy terminated because of failure to pay the premium(s).

Level Premium Insurance

A policy in which the payments remain the same over the life of the policy.

Life Insurance Attorney

Attorneys who deal with matters of life insurance law. They could be life insurance company lawyers or outside practitioners who handle complex life insurance and tax issues or engage in litigation concerning such matters.

Limited Payment Life Insurance

Whole life insurance where the policyholder pays premiums for a specified number of years, or until death.

Living Benefits

Proceeds of a life insurance policy that may be paid out before death in the event of terminal illness or need for long term care. This is also called "accelerated death benefits."

Loading

Administration costs you pay when buying life insurance.

Loan

Borrowing against your policy's accumulated cash value. The borrowed amount is deducted from the death benefit until you have repaid it.

Low Value Policy

A life insurance policy with a high premium and small death benefit.


M

Material Misrepresentation

A significant misstatement in an application form. For example, you did not tell the truth about a situation or medical condition at the time of applying for coverage which would have caused the company to deny you insurance if they had known the truth.

Maturity

The time at which the insurance contract is paid to the policyholder, if still alive.

Mortality Charge

The charges a company makes against the policy to cover the policy's share of the cost of death claims, based upon a mortality table used by the insurance company. Also called the "cost of insurance".

Mortality Table

A statistical table that shows how long people are expected to live under various situations.

Mortgage Life Policy

A life insurance policy that is intended to pay off the mortgage balance if the insured dies during the mortgage term. Frequently, a decreasing term insurance policy is used for this situation.


N

Non-Forfeiture Options

Choices available to a policyholder when he or she discontinues a cash-value life insurance policy before maturity. It may be in a cash payment, extended term insurance, or as reduced paid-up term insurance.


O

Open Enrollment Period

A limited time period in which people who were eligible, but did not choose to participate in group insurance plans, are allowed to join the plan by presenting only an application and without providing evidence of insurability.


P

Paid-up Life Insurance

Insurance on which no further premiums are due.

Participating Insurance

Insurance that has the possibility of paying dividends to its policyholders. Also called a par policy.

Payout Method

(same as settlement option).

Permanent Life

A phrase that covers any form of life insurance with the exception of term.

Policy Dividend

A partial premium refund on a participating life insurance policy.

Policy Loan

A loan made by a life insurance company to the policyholder on the cash value of the policy.

Policy Reserves

Funds held by a life insurance company specifically to fulfill its policy obligations.

Policyholder

The person or party who owns an individual insurance policy. This person may be the insured, a relative, the beneficiary, a corporation, or another person.

Pre-need Contract

A contract with a funeral home that makes it possible to pay your funeral expenses in advance.

Premium

Money paid by the policy owner for coverage.

Premium Expense Charges

An amount deducted from each premium payment that reduces the amount credited to the policy.

Premium Waiver Provision

An optional provision that takes effect if the policy owner becomes disabled. The disabled person will not have to pay premiums for the duration of the disability, including lifetime disability.


R

Rated Policy

A policy issued at a higher than standard premium to cover a person classified as a greater than-average risk, usually due to impaired health or a hazardous occupation. Sometimes called an extra-risk policy.

Rating Tables

Tables that companies use to classify risks or categories in which the applicant will be placed. It also determines the premiums the policy holder will pay.

Reinstatement

The resumption of coverage under a policy that has lapsed because of nonpayment of the premium after the grace period has ended.

Renewable Term

A term policy that guarantees the policy owner the right to renew coverage at the end of the term, without presenting evidence of insurability. Premiums increase at each renewal since the insured's age increases.

Rider

A written addition or amendment to an insurance policy that adds or limits the benefits payable under the policy. Common riders are accelerated death benefits, accidental death benefits, automatic premium loan, guaranteed insurability, and premium waivers.

Risk

The likelihood that you will die while insured.

Risk Factor

Things about you that affect your risk (e.g., older age, smoking, heart disease, occupation).


S

Settlement Option

The several ways the insurance company can pay a policyholder or beneficiary.

Single Premium Whole Life

Type of whole life insurance where the policy owner pays one premium.

Surrender

Terminating or cancelling a policy before its maturity date and cashing in its cash surrender value.

Surrender Charges

Fees that are deducted if your life insurance policy is cashed in prematurely.


T

Term Life

Life insurance that generally offers no cash value feature payable to a beneficiary when an insured dies within a specified period.


U

Underwriter

The person who decides if the applicant is an acceptable risk and at what premium rate.

Underwriting

The insurance company's process for determining whom it will insure based on risk factors.

Universal Life

A flexible premium life insurance contract that permits policy owners to adjust their policy's premiums, timing of payments, and face amount from time to time.


V

Vanishing Premium

An option that allows a policy owner to stop paying premiums after a number of years.

Variable Life

A type of whole life policy in which the death benefit and the cash value relate to the investment performance of a separate account fund that the policyholder selects. The separate account assets are invested in bonds, money market funds, stocks, and other instructions.


W

Waiver of Premium

A rider that suspends the payment of future premiums in the event you are disabled. What constitutes a disability varies.

Whole Life Insurance Policy

A form of cash value policy which is intended to be permanent as opposed to coverage for a specific number of years or term. Premiums are set at a level amount which will be continued for many years and maintain a continuing amount of life insurance coverage until the insured dies or discontinues the policy.


Y

Yearly Renewable Term (YRT) Insurance

One-year term life insurance that is renewable at the end of the policy term. This is also commonly referred to as annually renewable term (ART) insurance.