50 life insurance terms explained

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50 life insurance terms explained

Here are 50 life insurance terms along with brief explanations:

  1. Beneficiary: The person or entity designated to receive the death benefit upon the insured's death.
  2. Death Benefit: The amount paid out to the beneficiary upon the insured's death.
  3. Premium: The payment made by the policyholder to the insurance company to keep the policy active.
  4. Policyholder: The person who owns the life insurance policy.
  5. Insured: The person whose life is insured under the policy.
  6. Policy: The contract between the insurance company and the policyholder.
  7. Cash Value: The savings component of permanent life insurance policies that can be accessed during the insured's lifetime.
  8. Term Life Insurance: Life insurance coverage for a specific period, typically 10, 20, or 30 years.
  9. Whole Life Insurance: Permanent life insurance that provides coverage for the insured's entire life.
  10. Universal Life Insurance: Flexible permanent life insurance with adjustable premiums and death benefits.
  11. Variable Life Insurance: Permanent life insurance with a cash value that can be invested in various subaccounts, subject to market fluctuations.
  12. Underwriting: The process by which the insurance company assesses the risk and determines the premium for the policy.
  13. Risk Classification: The categorization of applicants based on their health, lifestyle, and other factors to determine the appropriate premium rate.
  14. Underwriter: The person responsible for evaluating insurance applications and determining the risk involved.
  15. Rider: An optional add-on to a life insurance policy that provides additional coverage or benefits.
  16. Conversion Option: The ability to convert a term life insurance policy into a permanent policy without undergoing a medical exam.
  17. Accelerated Death Benefit: A provision that allows the insured to receive a portion of the death benefit if diagnosed with a terminal illness.
  18. Contingent Beneficiary: The secondary beneficiary who receives the death benefit if the primary beneficiary predeceases the insured.
  19. Face Amount: The death benefit amount stated in the life insurance policy.
  20. Policy Loan: A loan borrowed against the cash value of a permanent life insurance policy.
  21. Dividend: A portion of the insurance company's profits distributed to policyholders of participating whole life insurance policies.
  22. Premium Payment Mode: The frequency at which premiums are paid, such as annually, semi-annually, quarterly, or monthly.
  23. Guaranteed Issue Life Insurance: Life insurance that is issued without requiring a medical exam or health questions.
  24. Mortality Charge: The cost of insurance coverage based on the insured's risk of death.
  25. Surrender Value: The amount of cash value available if the policy is surrendered before maturity.
  26. Nonforfeiture Options: Alternatives available to policyholders if they choose to surrender their policy, such as cash surrender value, reduced paid-up insurance, or extended term insurance.
  27. Annuitization: Converting the cash value of a life insurance policy into a series of annuity payments.
  28. Incontestability Clause: A provision that prevents the insurance company from contesting the validity of the policy after a certain period, usually two years.
  29. Grace Period: The period after the premium due date during which the policy remains in force, even if the premium is not paid.
  30. Suicide Clause: A provision stating that the death benefit will not be paid if the insured dies by suicide within a specified period after the policy is issued.
  31. Premium Waiver Rider: A rider that waives premium payments if the insured becomes disabled and unable to work.
  32. Joint Life Insurance: A policy that covers two or more individuals and pays the death benefit upon the first insured's death.
  33. Second-to-Die Insurance: A type of life insurance that covers two individuals and pays the death benefit after both insureds have died.
  34. Assignment: The transfer of ownership or rights of a life insurance policy to another person or entity.
  35. Annuity: A financial product that provides a series of payments over a specified period, typically used for retirement income.
  36. Convertible Term Insurance: Term life insurance that can be converted into a permanent policy without evidence of insurability.
  37. Cash Surrender Option: The option to surrender a life insurance policy in exchange for the cash value.
  38. Policy Exclusion: Specific events or circumstances not covered by the life insurance policy.
  39. Reinstatement: Restoring a lapsed life insurance policy to its original active status.
  40. Policy Illustration: A document provided by the insurance company that illustrates how the policy's cash value and death benefit may perform over time.
  41. Incontestable Period: The period during which the insurance company cannot contest the validity of the policy, usually after the policy has been in force for a certain period, typically two years.
  42. Adjustable Life Insurance: A type of flexible permanent life insurance that allows policyholders to adjust the premium, death benefit, and coverage period.
  43. Preferred Risk: Individuals who are considered lower risk and qualify for lower premium rates.
  44. Substandard Risk: Individuals who are considered higher risk and may be charged higher premium rates or have certain exclusions on their policy.
  45. Term Conversion Privilege: The right to convert a term life insurance policy into a permanent policy without evidence of insurability.
  46. Paid-up Additions: Additional whole life insurance coverage purchased using dividends.
  47. Face Value: The death benefit amount stated on the face of the life insurance policy.
  48. Premium Load: Additional charges added to the premium to cover administrative expenses and commissions.
  49. Policy Lapse: The termination of a life insurance policy due to non-payment of premiums.
  50. Permanent Disability Rider: A rider that provides additional benefits if the insured becomes permanently disabled.

These terms cover various aspects of life insurance policies, including types of policies, benefits, riders, and policy provisions. Understanding these terms can help individuals make informed decisions when purchasing life insurance coverage.

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