Life Insurance Terms

With all the discussion about life settlements, it was time to provide some education. Please call 1-888-973-8377 to speak with a specialist who would be glad to answer any additonal questions.

Here is a glossary of Life Insurance Terms:

-- Accelerated Death Benefit: A policy provision or rider that lets you collect part of your death benefit before you die. If you have a terminal illness, the policy advances you a specified part of your death benefit to pay medical bills or other expenses, then the amount is subtracted from the death benefit your beneficiary receives.

-- Accidental Death: A provision or rider that promises to pay more (usually double) if you die in an accident. Also known as double indemnity.

-- Actuary: A mathematics expert who applies probability theory to the business of life insurance and is responsible for calculating premiums, policy reserves and other values.

-- Administrative Fee: Charges some policies deduct from cash value accumulation each year.

-- Annuity: A contract purchased through an insurance company, usually to accumulate funds that can be used after retirement.

-- Annuitant: A person who receives an income benefit from an annuity.

-- Assignment: Giving rights under the insurance policy to someone else. You can assign beneficiary rights or policy ownership.

-- Automatic Premium Loan: A provision in a policy that authorizes the insurance company to use money from your cash value to pay premiums.

-- Beneficiary: The person you designate to be paid a death benefit when you die. A policy may have one or more beneficiaries.

-- Burial Policy: A policy with a relatively small death benefit, intended to cover your funeral and burial expenses.

-- Cash Value: The savings portion of a life policy. When your premium payments are more than the cost of insurance, the excess goes into a cash value account and draws interest.

-- Certificate: The evidence of coverage received by persons insured through a group life policy.

-- CLU: Charted Life Underwriter. A title that agents and other insurance professionals can achieve after taking a series of classes and passing exams. An agent with CLU after his or her name should know a lot about life insurance.

-- Contestable Period: In Ohio, an insurance company can challenge a life insurance policy during the first two years after issue.

-- Conversion: Changing a term life policy to some other form. This can be done only when the policy is described as convertible.

-- Credit Life: A policy intended to pay off a debt (loan for car, furniture, appliances, etc.) if you die.

-- Death Benefit: The money that a life insurance policy promises to pay your beneficiary when you die.

-- Decreasing Term: A term life policy whose death benefit goes down each year.

-- Dividends: When a company collects more money from policyholders than is needed to cover the cost of insurance.

-- Endowment: A cash value policy that sets a specific time at which the cash value will equal the death benefit. If you buy a $10,000, 20-year endowment policy, you will immediately be insured for $10,000. If you are still living at the end of 20 years, you will receive $10,000 in cash.

-- Face Amount: The sum a policy promises to pay when the insured person dies, or at the maturity of the contract.

-- Family History: Information about medical or mental problems of your parents and other family members. Companies may charge you higher premiums or reject you if your family has a history of cancer, heart attacks, or such diseases as Huntington's.

-- First to Die: Provision in a policy that insures both husband and wife. When the first spouse dies, the survivor collects the full death benefit.

-- Fraud: Any time you knowingly provide false or incomplete information on an application for insurance or on a claim.

-- Free Look: A time after you receive the policy for you to review and consider whether it is what you want.

-- Genetic Testing: Using modern scientific analysis of your blood to determine whether you have any genetic defects that might make it more likely that you would die earlier than the average person. Ohio permits insurance companies to use the results of genetic testing for life insurance policies, but only a few companies require genetic testing.

-- Grace Period: The time after an insurance premium is due during which the premium can still be paid with no interest charged, and coverage remains in force. This period is usually 30 to 31 days.

-- Group Life: A policy issued to an employer, association, or other organization.

-- Guaranteed Issue: A policy that is sold to all applicants without regard to their health.

-- Guaranteed Rate: The only interest amount that the insurance company promises to pay on any cash value in the policy.

-- In Force: A policy is in force when all conditions have been met to establish or maintain the company's obligation to pay if you die.

-- Insurable Interest: In order to be the owner and beneficiary of a life insurance policy, there must be some relationship to the insured person.

-- Lapse: The termination of an insurance policy as a result of failure to pay the premium.

-- Loan: If your policy has accumulated cash value, you may borrow part of it. Interest rates are generally better than bank rates. The amount you borrowed will be deducted from your death benefit until you have repaid it.

-- Mortality Charge: The cost of insuring you at your current age.

-- Nonforfeiture: If you cancel a cash value policy after several years, the company is required to refund part of the cash value.

-- Outlay: The amount you pay the insurance company for insurance (same as premium).

-- Paid-Up: A policy on which all premium payments have been made.

-- Participating Policy: A policy that has the possibility of paying dividends.

-- Policy Owner: The person who contracts with an insurance company for a life insurance policy. The owner of the policy has the right to designate beneficiaries.

-- Preferred Rate: The rate the company charges people who have the lowest risks.

-- Pre-need Contract: A contract with a funeral home that makes it possible to pay your funeral expenses in advance.

-- Reinstatement Period: Restoration of a policy that has lapsed due to non-payment of premium after the grace period has ended. The reinstatement period in life insurance is 3 years from the premium due date.

-- Renewable Term: A term life policy that guarantees you the right to renew at the end of the term.

-- Replacement: An insurance agent replaces your policy when he sells you a policy to take the place of one you already have. Ohio law requires you to sign replacement forms whenever money from one policy is used to buy or fund another policy. If the new policy is with a different company, the agent must notify your old company. The old company then has a chance to persuade you not to switch.

-- Rider: An addition or amendment to an insurance policy.

-- Risk: The likelihood that you will die while insured.

-- Risk Factor: Things about you that affect your risk, such as age, smoking, hazardous occupation, or a family history of heart disease.

-- Settlement Option: How a beneficiary receives payment of the death benefit.

-- Suicide Clause: A life insurance policy will not pay a death benefit if you commit suicide within the first two years after you buy the policy.

-- Surrender Charge: If you surrender an annuity or life policy prematurely, the company may deduct a fee from the amount it owes you.

-- Term Life: The simplest form of life insurance, it generally offers no cash value feature. You pay a premium and the company promises to pay your beneficiary if you die.

-- Underwriting: The insurance company's process for determining whom it will insure.

-- Universal Life: A flexible-premium life insurance contract that accumulates values and pays a death benefit. You choose the policy's premium and face amount, and you can adjust these as long as the policy is in effect.

-- Variable Life: A type of whole life insurance in which the face amount and cash value rely on the investment performance of a special fund. Reserves are placed in investment accounts that are separate from the company's general account.

-- Viatical Settlement: An agreement to sell the ownership of your life insurance policy to another, unrelated person, who becomes both the owner and beneficiary of the policy.

-- Waiver of Premium: A provision that suspends your obligation to pay premiums when you are disabled or you meet some other policy requirement. This is a common feature in life insurance polices.

-- Whole Life: Life insurance with a savings feature. Premiums generally are the same (level) every year. When you are young, your premiums are more than the cost of insuring your life at that time. The excess amount accumulates and resembles a savings account, called cash value. This excess is used by the company to insure you later in life, when your level premium is no longer enough to cover you.

TermLifeFlorida.com offers numerous types of Life Insurance, including:

Return of Premium
Low Cost Term Insurance
Mortgage Protection

Call 1-888-973-8377 with any questions.