Life Insurance Glossary
Use these plain-English definitions to interpret life insurance contracts, underwriting decisions, cash values, beneficiaries and claims. The issued policy's definitions still control a specific contract.
People and policy roles
People and policy roles terms explained
- Insured
- The person whose life is covered. The insured does not automatically own or control the policy. Read the full insured explanation.
- Policy owner
- The person or entity that controls contract rights, including beneficiary changes, assignments, loans or surrender when the policy permits them. Read the full policy owner explanation.
- Beneficiary
- The person, trust, estate or entity designated to receive policy proceeds after a covered death. Read the full beneficiary explanation.
- Contingent beneficiary
- The next beneficiary tier if no primary beneficiary can receive the proceeds. Read the full contingent beneficiary explanation.
- Insurable interest
- A relationship recognized under applicable law that supports purchasing insurance on another person's life. Read the full insurable interest explanation.
- Assignee
- A person or entity receiving some or all policy rights through a valid assignment. Read the full assignee explanation.
Coverage and premiums
Coverage and premiums terms explained
- Death benefit
- The amount payable under the contract after a covered death, adjusted for loans, withdrawals, riders or other policy provisions. Read the full death benefit explanation.
- Face amount
- The stated amount on which the death benefit is based. It may not equal the final amount paid in every policy design. Read the full face amount explanation.
- Premium
- The payment required or planned to fund coverage. Flexible-premium policies can still require enough value to cover ongoing charges. Read the full premium explanation.
- Level term
- Term coverage designed to keep its stated premium and death benefit level for a specified period. Read the full level term explanation.
- Renewable term
- Term insurance that can be continued for another period under contract rules, commonly at a higher age-based premium. Read the full renewable term explanation.
- Conversion
- A contract right that can allow eligible term coverage to become permanent insurance without new evidence of insurability. Read the full conversion explanation.
- Rider
- An endorsement that adds, changes or limits a specific policy benefit, trigger or cost. Read the full rider explanation.
Underwriting and issue
Underwriting and issue terms explained
- Underwriting
- The insurer's process for assessing applicant information and deciding eligibility, rate class and policy terms. Read the full underwriting explanation.
- Rate class
- An insurer's pricing category based on its underwriting rules. Class names are not standardized across companies. Read the full rate class explanation.
- Accelerated underwriting
- A process that may reach a decision without a traditional medical exam by using application information and permitted data sources. Read the full accelerated underwriting explanation.
- Simplified issue
- Coverage using fewer health questions or evidence than full underwriting, often with different limits or pricing. Read the full simplified issue explanation.
- Guaranteed issue
- Coverage offered without health questions within eligibility rules, commonly with lower limits and a graded natural-death benefit. Read the full guaranteed issue explanation.
- Contestability period
- A contract and law-based period when an insurer can investigate application statements after a claim. It is not itself an exclusion. Read the full contestability period explanation.
- Free-look period
- A state and contract-specific period after delivery in which the owner can review and return a policy under stated procedures. Read the full free-look period explanation.
Permanent policy values
Permanent policy values terms explained
- Cash value
- Value inside a permanent policy after applicable charges and credits. It is not automatically added to the stated death benefit. Read the full cash value explanation.
- Cash surrender value
- The amount available if a policy is surrendered, after surrender charges, loans and other adjustments. Read the full cash surrender value explanation.
- Policy loan
- An insurer advance secured by policy value. Interest accrues and the loan can reduce value, increase lapse risk and reduce the death benefit. Read the full policy loan explanation.
- Cost of insurance
- A charge supporting the insurance risk, often affected by age, insured amount and contract terms. Read the full cost of insurance explanation.
- Participating policy
- A policy that may receive non-guaranteed policyholder dividends under the insurer's rules. Read the full participating policy explanation.
- Dividend
- A non-guaranteed amount that may be paid on a participating policy and used through contract options such as cash, premium reduction or paid-up additions. Read the full dividend explanation.
- Paid-up addition
- Additional permanent insurance purchased with a dividend or other value, subject to the policy's rules. Read the full paid-up addition explanation.
- Surrender charge
- A contract charge that can reduce value available when a policy is surrendered or changed during a stated period. Read the full surrender charge explanation.
- Nonforfeiture option
- A contract or law-based value, such as cash surrender or reduced paid-up insurance, available when certain permanent coverage ends. Read the full nonforfeiture option explanation.
Statements, claims and policy status
Statements, claims and policy status terms explained
- Illustration
- A depiction of policy performance under stated guaranteed and non-guaranteed assumptions. It is not a forecast or the policy contract. Read the full illustration explanation.
- In-force illustration
- An updated illustration beginning with an existing policy's current values, charges, loans and assumptions. Read the full in-force illustration explanation.
- Grace period
- A limited period after a premium or value shortfall when the contract describes how coverage can remain active or be restored by payment. Read the full grace period explanation.
- Lapse
- Termination of coverage after required premium or supporting value is insufficient under the contract. Read the full lapse explanation.
- Reinstatement
- A contract process that may restore lapsed coverage after overdue amounts, interest and required evidence are supplied and accepted. Read the full reinstatement explanation.
- Exclusion
- A contract provision removing or limiting coverage for a defined event or circumstance. Read the full exclusion explanation.
- Claim
- A beneficiary's formal request for policy benefits with the insurer's required proof and documents. Read the full claim explanation.
- Settlement option
- A method for receiving proceeds, such as a lump sum or installments, with different access and interest consequences. Read the full settlement option explanation.
- No-claim bonus
- A claim-free reward used in some health, motor and general insurance markets. It is not a standard feature of U.S. individual life insurance. Read the full no-claim bonus explanation.
- Premium increase after a claim
- A renewal price change in some insurance lines after claims experience. It does not apply to a paid individual life insurance death claim because that coverage ends. Read the full premium increase after a claim explanation.
How to use these definitions
The issued policy controls
These are general educational definitions. The issued policy, endorsements, applicable law and insurer communications control a specific contract. Similar terms can have different definitions across policy forms.
For contract structure, continue with how life insurance works. For policy choices, compare term and whole life insurance.