Insurance Glossary
Life insurance has its own language. Use this glossary to decode the jargon and understand exactly what you are buying.
Accelerated Death Benefit
A policy provision (rider) that allows the insured to receive a portion of the death benefit while still living if they are diagnosed with a terminal, critical, or chronic illness.
Beneficiary
The person, people, or entity designated to receive the death benefit payout when the insured person passes away.
Cash Value
The savings component of a permanent life insurance policy (like Whole Life or IUL) that grows over time and can be borrowed against or withdrawn.
Death Benefit
The exact amount of money that the insurance company pays to the beneficiaries upon the death of the insured person. This payout is generally tax-free.
Dividend
A return of a portion of the premium paid to policyholders by a mutual insurance company when the company's financial performance is better than expected.
Grace Period
A specified period (usually 30 days) after a premium payment is due during which the policy remains in force even if the payment hasn't been made.
Guaranteed Issue
A type of life insurance policy that does not require a medical exam or answering health questions. You cannot be turned down for health reasons, though premiums are higher.
Premium
The payment made to the insurance company (usually monthly or annually) to keep the life insurance policy active.
Rider
An add-on provision to a basic life insurance policy that provides additional benefits or modifies the coverage (e.g., child rider, waiver of premium rider).
Underwriting
The process the insurance company uses to evaluate your risk profile (age, health, lifestyle) to determine if they will offer you a policy and at what price.
Term
The specific length of time (e.g., 10, 20, or 30 years) that a term life insurance policy provides coverage.