Life Insurance 101: A Glossary of Terms
November 22, 2023
Most people know they need life insurance, but some put off shopping for a policy because they feel overwhelmed by insurance jargon. Learning what insurance terminology means can make you feel more confident about contacting an agent for your life insurance needs.
Top 25 Life Insurance Terms
Here are simple definitions of 25 of the most important terms associated with life insurance.
1. Agent
A professional who represents an insurance company and sells their policies to clients.
2. Beneficiary
The person who receives money from a policy when the insured person dies.
3. Contingent Beneficiary
The person who receives money from a life insurance policy if the beneficiary is no longer alive when the insured person dies.
4. Carrier
The insurance company providing coverage.
5. Cash Value
A portion of certain types of policies that acts as a cash accumulation vehicle.
6. Conversion
Changing one type of policy into another.
7. Evidence of Insurability
Factors related to a person’s age and health history.
8. Face Amount
The amount of money that beneficiaries receive upon the death of the insured.
9. Insurable Interest
A person has an insurable interest in another person when the death of that person would cause a financial, emotional, or another type of loss.
10. Insured
The person the life insurance policy covers.
11. Issue Date
The date when an insurance company issues a policy to someone.
12. Lapse
A period of nonpayment that may result in a company terminating coverage.
13. Length of Coverage
The period during which a policy insures a person’s life.
14. Medical Examination
Tests that some companies require people to undergo before they issue a policy.
15. Mortality Table
Tabulated demographic statistics that help predict how likely a person is to die within a certain time.
16. Nonqualified Annuity
A non-qualified annuity is funded with money that's already been taxed. There are no contribution limits, and income payments from the principal are free of income tax. Only the funds derived from income growth in the annuity are taxed.
17. Premium
The cost of an insurance policy.
18. Premium Mode
The time interval at which you pay your insurance bill, for example, monthly, quarterly, semi-annually, or annually.
19. Proposed Insured
A person applying for coverage under a life insurance policy.
20. Rate Class
The category in which an insurance company categorizes a person to determine a premium.
21. Renewal
The option to continue your insurance policy after a specified coverage period ends.
22. Reinstatement
The process of reactivating your insurance policy after a lapse in payment.
23. Rider
An add-on to an insurance policy that alters the coverage, additional persons insured, or situations.
24. Underwriting
Reviewing an application for life insurance and determining whether someone meets the criteria for a policy.
25. Underwriter
A person who works for an insurance company and decides whether to sell a policy.
Life Insurance Words That Matter
Once you understand what the above words mean, purchasing life insurance becomes easier. Another way to simplify the process is to work with an insurance agent who can answer your questions about these terms. Contact 1891 Financial Life to learn more.
About 1891 Financial Life
At 1891 Financial Life, we don’t just sell policies, we offer possibilities. We pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs. In 2023, 1891 Financial Life was listed by Forbes as one of "The World's Best Life Insurance Companies."
Our portfolio is extensive, ranging from various life insurance policies to our annuities to support your financial needs no matter what stage of life you’re in.