1. Life Insurance: A contract between an individual (policyholder) and an insurance company, where the insurer agrees to pay a death benefit to the designated beneficiaries upon the death of the insured.
2. Policyholder: The individual who owns the life insurance policy and pays the premiums.
3. Insured: The person whose life is insured under the life insurance policy.
4. Beneficiary: The person(s) or entity designated by the policyholder to receive the death benefit upon the insured’s death.
5. Death Benefit: The amount of money paid by the insurance company to the beneficiaries upon the death of the insured.
6. Premium: The regular payment made by the policyholder to the insurance company to keep the life insurance policy in force.
7. Term Life Insurance: A type of life insurance that provides coverage for a specific period (term) and pays a death benefit if the insured dies during the term. It does not build cash value.
8. Permanent Life Insurance: A type of life insurance that provides coverage for the entire lifetime of the insured, as long as premiums are paid. It includes cash value accumulation.
9. Cash Value: The savings component of a permanent life insurance policy that grows over time, earning interest or investment returns.
10. Whole Life Insurance: A type of permanent life insurance that provides lifetime coverage and guarantees a level premium and death benefit.
11. Universal Life Insurance: A type of permanent life insurance that offers flexibility in premium payments and death benefit amounts, as well as a cash value component.
12. Variable Life Insurance: A type of permanent life insurance that allows the policyholder to invest the cash value in various investment options, with the potential for higher returns but also greater risks.
13. Variable Universal Life Insurance: A combination of variable and universal life insurance, offering investment flexibility and adjustable premiums and death benefits.
14. Face Amount: The initial death benefit amount stated in the life insurance policy.
15. Underwriting: The process by which the insurance company assesses the risk of insuring the applicant and determines the premium rates.
16. Contestability Period: A specific period after the policy is issued during which the insurance company can investigate and contest the validity of the policy if the insured dies.
17. Beneficiary Designation: The process of naming the person(s) or entity as beneficiaries in the life insurance policy.
18. Convertible Term Life Insurance: A term life insurance policy that allows the policyholder to convert it into a permanent life insurance policy without a new medical examination.
19. Lapse: The termination of a life insurance policy due to non-payment of premiums.
20. Surrender Value: The cash value that the policyholder receives if they surrender a permanent life insurance policy before its maturity or before the insured’s death.
21. Paid-Up Life Insurance: A type of permanent life insurance where the policyholder stops paying premiums, but the policy remains in force with a reduced death benefit.
22. Rider: An optional add-on to a life insurance policy that provides additional benefits or features, such as a disability income rider or an accelerated death benefit rider.
23. Term Conversion Rider: A rider that allows the policyholder to convert a term life insurance policy into a permanent policy without evidence of insurability.
24. Incontestability Clause: A provision in the life insurance policy that limits the insurer’s ability to contest the validity of the policy after a specific period, usually two years, from the policy’s issue date.
25. Nonforfeiture Options: The choices available to the policyholder if they stop paying premiums on a permanent life insurance policy, such as cash surrender, reduced paid-up insurance, or extended term insurance.
Remember that life insurance policies and their terms can vary significantly among insurance companies and specific policies. It’s essential to review and understand the details of your own life insurance policy carefully to ensure it meets your specific needs and objectives.