Life Insurance Glossary
Choosing the right life insurance policy can feel overwhelming with all the technical terms and industry jargon. That’s why Noel Insurance Services created this Complete Life Insurance Glossary — a clear, easy-to-understand reference for every important term you may encounter. Whether you’re shopping for coverage, reviewing an existing policy, or learning how life insurance works, this glossary is designed to help you make informed, confident decisions about your financial future.
A
Accelerated Death Benefit (ADB) – Allows you to access part of your death benefit early if diagnosed with a terminal illness.
Accelerated Underwriting – A faster application process for healthy applicants with minimal health checks.
Actual Age – Your chronological age at the time of applying for coverage.
Actuarial Table / Mortality Table – Statistical tables used by insurers to estimate life expectancy and determine premiums.
Adverse Selection – When individuals with higher risk are more likely to buy life insurance, potentially impacting insurer costs.
Agent – A licensed professional who helps clients find suitable insurance policies and provides ongoing service.
Annual Renewable Term (ART or YRT) – A one-year term life policy that renews annually, with premiums that increase as you age.
Annuity – A financial product that provides a steady income stream, often used for retirement or as a payout option.
APS (Attending Physician Statement) – A medical summary from your doctor that insurers use to evaluate your health.
Avocation – A hobby or activity (like skydiving or scuba diving) that may influence your life insurance rates.
B
Backdating – Setting a policy’s effective date in the past to secure a lower premium based on a younger age.
Beneficiary – The person or entity who receives the policy’s death benefit.
Burial / Final Expense Insurance – A small whole life policy designed to cover funeral or end-of-life expenses.
C
Cash Surrender Value – The amount you receive if you cancel a permanent life policy before death.
Cash Value Life Insurance – Permanent coverage that builds a savings or investment component over time.
Child Rider – An optional add-on providing life insurance coverage for your children.
Claim – A formal request made by beneficiaries to receive a death benefit after the insured’s passing.
Contestability Period – Usually the first two years of a policy when insurers can review applications for misrepresentation.
Convertible Term Policy – A term policy that can be converted to a permanent one without a new medical exam.
D
Death Benefit – The amount paid to beneficiaries when the insured dies.
Decreasing Term Insurance – Coverage where the death benefit decreases over time, often aligned with a declining debt (like a mortgage).
Dividend – A return of profits paid to policyholders by mutual insurance companies.
E
Evidence of Insurability (EOI) – Health and lifestyle information required by insurers to determine eligibility.
Exclusion – Specific causes of death or circumstances not covered by a life insurance policy (e.g., suicide within two years).
Extended Term Insurance – A nonforfeiture option that converts the cash value of a lapsed policy into term coverage.
F
Face Amount – The original death benefit amount stated on the policy.
Free Look Period – The period (typically 10–30 days) in which you can cancel your policy for a full refund.
G
Grace Period – The time after a missed premium payment during which coverage remains active.
Group Life Insurance – Life insurance provided through an employer or organization, often at a lower cost.
Guaranteed Issue Life Insurance – Coverage approved without medical questions or exams, usually at higher premiums.
Guaranteed Insurability Rider – Lets you buy more coverage later without another medical exam.
H
Health Class / Rating Class – A risk category (e.g., Preferred, Standard) used to determine your premium rates.
I
Indexed Universal Life (IUL) – A permanent life policy where cash value growth is tied to a stock market index.
Insurable Interest – A requirement that the policyholder has a financial or emotional interest in the insured’s life.
Insured – The person whose life is protected by the policy.
Illustration – A projection showing how a life insurance policy may perform over time, based on assumptions.
J
Joint Life Insurance – Covers two people, typically spouses; may pay out after the first or second death.
K
Key Person Insurance – A business-owned policy protecting against the loss of a crucial employee or executive.
L
Lapse – When a policy ends due to unpaid premiums.
Level Term Life Insurance – A term policy with fixed premiums and a consistent death benefit.
Living Benefits – Features allowing early access to a portion of your death benefit if you experience certain medical conditions.
Loan Provision – Allows you to borrow against your policy’s cash value.
M
Medical Exam – A physical evaluation required during the underwriting process.
Mutual Insurance Company – A company owned by its policyholders, which may distribute dividends.
N
No-Exam Life Insurance – A policy that doesn’t require a medical exam, often approved quickly.
Nonforfeiture Options – Choices allowing you to keep some value in your policy if you stop paying premiums.
Non-Participating Policy – A policy that doesn’t earn dividends.
O
Owner / Policyholder – The person who owns and controls the policy, even if someone else is insured.
P
Paid-Up Insurance – A policy that requires no further premium payments but remains active.
Permanent Life Insurance – Long-term coverage with both death benefit and cash value (includes Whole, Universal, and Variable Life).
Premium – The payment made to keep a policy in force.
Policy Loan – Borrowing against the cash value of a permanent life insurance policy.
R
Rider – An optional policy add-on that customizes coverage (e.g., Child Rider, Waiver of Premium).
Return of Premium (ROP) – A feature that refunds premiums if the insured outlives a term policy.
Reinstatement – Restoring a lapsed policy after missed payments, often requiring proof of insurability.
S
Simplified Issue Life Insurance – A policy approved through a short health questionnaire without a medical exam.
Surrender Value – The cash amount available when canceling a permanent policy.
Survivorship / Second-to-Die Policy – Covers two lives and pays the death benefit after both insureds have passed.
T
Term Life Insurance – Provides coverage for a fixed term (e.g., 10, 20, or 30 years) with no cash value.
Trust – A legal entity that can own and manage a life insurance policy for estate planning purposes.
U
Underwriting – The process insurers use to assess risk and determine premium rates.
Universal Life Insurance (UL) – Permanent coverage offering flexible premiums and adjustable death benefits.
V
Variable Life Insurance – Permanent life insurance allowing investment in subaccounts, with returns tied to market performance.
W
Waiver of Premium Rider – Waives premium payments if the insured becomes totally disabled.
Whole Life Insurance – Lifetime coverage with guaranteed cash value accumulation and fixed premiums.
💡 Tip from Noel Insurance Services:
Understanding these terms helps you make smart choices about your coverage. Want expert guidance? Call us at (877-817-2583) or Schedule your free consultation today!