Life Insurance Glossary

A

Accidental Death Benefit: This is an added benefit that will usually be equal to the face-value of the principal sum, that will be payable in addition to the principal benefit in the event of an accidental death.

Adjustable Premium: This term refers to your right as an insurer to change your premium rate upon renewal.

B

Beneficiary: The individual named by your policy who’ll receive the life insurance benefits.

C

Cash Value: The amount of cash value available in your policy’s account for withdrawal, loans, etc.

Commutation Rights: This refers to a right of a beneficiary to receive any unpaid payments remaining under installment options in a lump sum.

Convertible Term Insurance: This is a term life plan that you can exchange for a permanent life insurance plan without first providing evidence of insurability.

Cost-of-Living Rider: This describes a life plan option that adjusts policy benefits in relation to changes in the economic climate. Most riders of this sort are tied to fluctuations in the Consumer Price Index.

D

Dividend: The return portion of your premium that will be based on your insurer's mortality, investment, and expense experience.

E

Expiry: This refers to the termination of a Term Life policy at the end of its coverage period.

F

Face: The first page of your Life Insurance policy.

Face Amount: The benefit amount stated on the face of your policy that will be paid in the event of your death.

Fixed Benefit: A face benefit amount that will not vary over your policy’s lifetime.

Free Look: This is common feature of Life Insurance plans. It will provide you with a short review period (typically ten, twenty or thirty days), during which you’ll be able to examine a new individual life policy while retaining the option to exchange or return it for a full refund if you aren’t satisfied for any reason.

I

Illustration: This proposal lays out a life plan’s future cash value, payments, and benefits. Non-guaranteed amounts are based on your carriers’ current interest rates, mortality rates and expenses. Go over these skeptically; they may contain unrealistic projections.

Insurability: This refers to an applicant’s level of acceptability to an insurance carrier.

Insured: The individual to whom a life policy has been issued.

J

Joint Life Annuity: This is a policy that will pay benefits that continue over the joint lifetime of two individual but terminates after the first death.

Juvenile Insurance: This refers to any life policy written on a minor.

L

Level Premium Insurance: This is a form of life insurance plan wherein your premium will remain level throughout your policy’s lifetime. The majority of whole life plans are paid for this way.

M

Maturity Date: This date indicates when the face value of your Life Insurance will become payable for reasons of either a death or an endowment.

Minimum Deposit Policy: This is a Cash Value Life Insurance plan that carries a first-year loan value that will be available for you to borrow against immediately upon the payment of your first-year premium.

Mortality Charge: This refers to the cost of the benefit portion of your insurance on a whole life plan. For example, if your premium was $2,000.00 per year, roughly $350.00 would be a mortality charge, while the rest would go toward your plan’s investment portion.

P

Participating Policy: This refers to a life plan that will be eligible for dividend payments from the insurer.

Policy Loan: This would refer to a loan made by your life insurance carrier, from its general funds, against the cash value of your policy.

Principal Sum: This is the cash amount that will be paid out as a lump sum in the event of your accidental death.

R

Renewable Term Insurance: This refers to a term life plan that will be eligible for renewal at the end of the term.

Retirement Income Policy: Under this type of life plan, your policy’s cash value will come to exceed its face value as the plan ages.

Retroactive Conversion: This refers to a Term Life plan’s conversion to a Cash Value plan as of the Term policy’s original date of issue. In other words, your Cash Value policy will have the age of your former Term policy.

Revocable Beneficiary: The current beneficiary of a life plan whose insured has reserved the right to change beneficiaries.

S

Second-To-Die: This is a kind of life policy that insures two individuals. The principle sum will be paid out following the second death. These products are generally used as funding vehicles for estate tax payments expected after the second death.

Secondary Beneficiary: Refers to the individual named in a life policy as a replacement beneficiary in case the first beneficiary does not collect the plan’s benefits prior to his or her own death.

Single Premium Life: This is a kind of life policy that will require an up-front lump-sum premium and will therefore often remain paid-up throughout your lifetime.

Surrender: To forfeit a Whole Life Plan.

T

Term Insurance: These are Life Insurance plan that do not build-up a cash value and whose premiums typically increase over the lifetime of the insured.

U

Universal Life: These are combinations of flexible premiums and adjustable life insurance plans. They allow you to select the premium amount you’ll be able to afford—for which you’ll receive benefits depending on the level of the premium.

V

Variable Life: These life plans combine a mortality charge with a savings account. The account will usually come in the form of an investment portfolio that will be structured in a way that’s similar to a mutual fund. Most life carriers offer ten portfolio varieties—including stocks, bonds and money-market funds.

W

Whole Life Insurance: This is a basic form of permanent (cash-value) life that can provide lifetime benefit protection for a level premium. The premium will usually need be paid as long as the plan is in force.

Y

Yearly Renewable Term: This is a Term Life policy that you will be able to renew annually without first having to provide evidence of your insurability.