FREE QUOTE

Glossary of Life Insurance Terms

Actuary: An individual who calculates rates, risks, premiums, etc.

Agent: The person who sells insurance policies. An agent can represent only one company, or multiple companies, and is paid based on commission.

Annuity: A contract between an insurer and a policy holder in which the insurer agrees to make a series of periodic payments after a given point in time specified in the agreement.

Beneficiary: The person or persons who receive the benefits or proceeds from the policy after the insured has passed away. Typically the beneficiary will be a spouse and/or children.

Cash value: The amount returned to the policy holder upon cancellation of the policy. Usually used in plans with an investment component, such as whole life insurance. Part of your premium payments will go to your cash value. With some types of policies, policy holders can withdraw from the cash value, but you should check your policy.

Death benefit: The amount the beneficiary receives in the event of your death.

Dividends: money that is paid back to the policy holder or returned premiums paid annually. Not every policy is guaranteed to have dividends.

Flexible premium: a policy in which the policy holder can decide when to pay premiums and how much to pay at a time.

Guaranteed Issue: A whole life policy that does not require a medical exam.

Guaranteed Rate: A term policy with a guaranteed rate will have the same premiums throughout the duration of the policy.

Insured: The person who the policy is for. The policy will pay out when the insured passes away. The insured is often the same person as the policy holder, although this is not always the case.

Insurable interest: A person has "insurable interest" in someone if they are dependent on that person financially, and would suffer a financial loss should something happen to that person. For example, children would have insurable interest in their parents.

Lapsed policy: A policy that has expired or is terminated because the policy holder did not pay the premiums.

Level premium insurance: A policy in which the premiums remain at the same rate throughout the policy's duration.

Policy owner / policy holder: The person who pays for the policy. Typically this is also the person who is insured, but it does not have to be. For example, a wife might take out a policy on her husband. She would be the policy holder, while her husband would be the insured.

Preferred/Preferred Plus: this refers to your state of health. Those who are extremely healthy are considered "preferred plus".

Premium: The amount the policy holder pays for the policy, sometimes policy holder can determine when to pay and how much to pay at a time, sometimes premiums can be held at a level rate.

Tax deferred: An accumulated cash value or amount is not taxable until it is withdrawn, allowing the amount to grow without being taxed.

Underwriting: Process of evaluating the risk of accepting an applicant and how much their premiums should be.