Terminology
Beneficiary: The person or entity designated by the policyholder to receive the death benefit of a life insurance policy.
Death benefit: The amount of money that is paid out to the beneficiary of a life insurance policy upon the death of the insured.
Insured: The person whose life is covered by a life insurance policy.
Insurer: The company that underwrites and issues a life insurance policy.
Policyholder: The person who owns a life insurance policy and pays the premiums.
Premium: The amount of money that the policyholder pays to the insurer in exchange for coverage under a life insurance policy.
Term life insurance: A type of life insurance that provides coverage for a specific period of time, such as 10, 20, or 30 years.
Whole life insurance: A type of life insurance that provides coverage for the policyholder’s entire life and has a savings component that allows the policyholder to build cash value over time.
Universal life insurance: A type of life insurance that combines elements of term life insurance and whole life insurance, and allows the policyholder to adjust the premium and death benefit.
Variable life insurance: A type of permanent life insurance that allows the policyholder to invest the premiums in a variety of investment options.
Riders: Optional additions to a life insurance policy that provide additional coverage or benefits for an additional premium.
Cash value: The savings component of a whole life insurance policy or universal life insurance policy that accumulates over time and can be used to supplement retirement income or pay for unexpected expenses.
Conversion option: A feature of some term life insurance policies that allows the policyholder to convert the policy to a permanent life insurance policy, such as whole life insurance or universal life insurance, without undergoing additional medical underwriting.
Graded death benefit: A type of life insurance policy that pays a reduced death benefit during the first few years of the policy and increases the death benefit over time as the policy matures. Graded death benefit policies are often used to provide coverage for individuals who have a pre-existing medical condition and may not qualify for traditional life insurance coverage.
Accelerated death benefit: A rider that allows the policyholder to receive a portion of the death benefit while they are still alive if they are diagnosed with a terminal illness or require long-term care.
Long-term care insurance: A type of insurance that helps cover the costs of long-term care services, such as assisted living or nursing home care, for individuals who are unable to care for themselves due to a chronic illness or disability.
Guaranteed issue life insurance: A type of life insurance that is available to individuals without requiring a medical examination or answering medical questions. Guaranteed issue life insurance policies typically have lower death benefits and higher premiums than traditional life insurance policies.
No medical exam life insurance: A type of life insurance that does not require the policyholder to undergo a medical examination, but may still require the policyholder to answer medical questions or provide medical records. No medical exam life insurance policies typically have higher premiums than traditional life insurance policies.
Underwriting: The process of evaluating the risk of insuring an individual and determining the premiums for a life insurance policy. Underwriting typically involves reviewing the policyholder’s medical history, lifestyle, and other factors to assess their risk of premature death.
Rating: The process of classifying an individual’s risk of premature death based on their medical history, lifestyle, and other factors. Life insurance companies use ratings to determine the premiums for a life insurance policy.
Standard rating: A classification of an individual’s risk of premature death that is considered average or “standard.” Standard rating individuals typically receive the most favorable premiums for life insurance coverage.
Substandard rating: A classification of an individual’s risk of premature death that is higher than average due to medical conditions, lifestyle, or other factors. Substandard rating individuals typically receive higher premiums for life insurance coverage.
Guaranteed renewable: A feature of some life insurance policies that allows the policyholder to renew their coverage without undergoing additional medical underwriting as long as the premiums are paid on time.
Non-guaranteed renewable: A feature of some life insurance policies that allows the insurer to modify the terms of the policy, such as the premiums or death benefit, upon renewal. Non-guaranteed renewable policies may require the policyholder to undergo additional medical underwriting upon renewal.