Glossary
Life insurance terms, defined plainly
45 words and phrases you’ll run into on quotes, applications, and policy documents — each explained in a sentence or three, with links to our deeper guides.
A
- Accelerated death benefit
- A provision or rider that lets the insured receive part of the death benefit early if diagnosed with a terminal, chronic, or critical illness as defined in the policy. Any amount paid out early is subtracted from what beneficiaries later receive.
- Accidental death and dismemberment (AD&D)
- Coverage that pays only if death or the loss of a limb, sight, or similar results from a covered accident. It does not pay for death from illness, so it is not a substitute for life insurance.
B
- Beneficiary
- The person, trust, or organization the policy owner names to receive the death benefit. You can usually name several and split the benefit by percentage.
C
- Cash value
- The savings component that builds inside permanent policies such as whole and universal life. It grows tax-deferred and can be borrowed against or withdrawn, though doing so can reduce the death benefit.Read: Term vs. whole life insurance
- Contestability period
- A window after a policy is issued — typically the first two years — during which the insurer can review the application and deny a claim or rescind coverage over a material misstatement. Answering health questions accurately protects your beneficiaries.
- Contingent beneficiary
- A backup beneficiary who receives the death benefit if the primary beneficiary has died or cannot be located when the claim is paid.
- Conversion privilege
- A feature of many term policies that lets you convert some or all of the coverage to a permanent policy without a new medical exam. Conversion must happen before a deadline set in the policy, and the new premium is based on your age at conversion.
D
- Death benefit
- The amount the insurer pays to the beneficiaries when the insured dies while the policy is in force. Life insurance death benefits are generally not subject to federal income tax.Read: Is life insurance taxable?
- Decreasing term
- Term coverage whose death benefit shrinks on a schedule over the policy's life, often to roughly track a declining mortgage or loan balance, while the premium usually stays level.Read: What is mortgage protection insurance?
E
- Evidence of insurability
- The health and personal information an insurer requires to approve coverage, such as application answers, medical records, prescription history, or exam results.
F
- Face amount
- The death benefit stated on the policy when it is issued. The amount actually paid can differ if there are outstanding loans, riders, or accelerated benefits.
- Final expense insurance
- A small whole life policy meant to cover funeral costs, medical bills, and other end-of-life expenses. It is often sold to older adults with simplified or guaranteed issue underwriting.Read: What is final expense insurance?
- Free-look period
- A short window after you receive a new policy during which you can cancel for a refund of premiums paid. The length is set by state law and commonly runs 10 to 30 days.
G
- Grace period
- The time after a missed premium due date during which the policy stays in force. If the premium is not paid before the grace period ends, the policy can lapse.
- Graded death benefit
- A benefit structure that pays a limited amount — often a refund of premiums plus interest — if the insured dies of natural causes during the first years of the policy. After that waiting period, the full death benefit applies. It is common on guaranteed issue policies.Read: Guaranteed issue life insurance
- Guaranteed issue
- Coverage that cannot be declined for health reasons within the eligible age range, because there are no medical questions or exams. The trade-off is higher cost per dollar of coverage, lower face amounts, and usually a graded death benefit.Read: Guaranteed issue life insurance
I
- Incontestability clause
- The policy provision stating that once the contestability period ends, the insurer generally cannot void the policy over misstatements on the application. Exceptions such as fraud or age misstatement vary by state.
- Indexed universal life (IUL)
- A type of universal life insurance whose cash value earns interest linked to a market index, subject to caps, participation rates, and a floor. It is more complex than whole life, and illustrated returns are not guaranteed.Read: What is indexed universal life insurance?
- Insurable interest
- The legal requirement that the policy owner would suffer a financial or emotional loss from the insured's death. Spouses, close family, and business partners typically qualify; strangers do not.
- Insured
- The person whose life the policy covers. The insured is often, but not always, the same person as the policy owner.
L
- Lapse
- When a policy ends because premiums were not paid by the end of the grace period, or because a permanent policy's cash value ran out. A lapsed policy may sometimes be reinstated.
- Level term
- Term life insurance with a death benefit and premium that stay the same for the whole term, such as 10, 20, or 30 years. It is the most common kind of term coverage.Read: Term vs. whole life insurance
- Living benefits
- A general name for features that let you use a policy's value while alive, such as accelerated death benefit riders or borrowing against cash value.
M
- MIB (Medical Information Bureau)
- A member-owned data exchange that insurers use to detect errors or omissions on applications. It keeps coded records of certain conditions reported during past applications, and you can request a free copy of your own MIB file.
- Mortgage protection insurance
- Life insurance bought to help pay off or keep up with a mortgage if the borrower dies. It may be level or decreasing term, and the payout can go to your family rather than directly to the lender.Read: What is mortgage protection insurance?
N
- No-medical-exam life insurance
- Any policy issued without a paramedical exam. Insurers instead rely on health questions and database checks, as with simplified issue, or skip health review entirely, as with guaranteed issue.Read: No-medical-exam life insurance
P
- Paid-up policy
- A permanent policy that needs no further premiums, either because all scheduled premiums have been paid or because cash value was used to buy a smaller fully paid-up benefit.
- Permanent life insurance
- Coverage designed to last for life as long as premiums are paid, usually with a cash value component. Whole life and universal life are the main types.Read: Types of life insurance compared
- Policy loan
- A loan from the insurer secured by a permanent policy's cash value. Interest accrues, and any unpaid balance is subtracted from the death benefit.
- Policy owner
- The person or entity that controls the policy: pays premiums, names beneficiaries, and can borrow against, change, or cancel it.
- Private mortgage insurance (PMI)
- Insurance many conventional lenders require when a down payment is under 20 percent. It protects the lender if the borrower stops paying the loan — it is not life insurance and pays nothing to your family.Read: Mortgage protection vs. PMI
R
- Reinstatement
- Restoring a lapsed policy, usually by paying overdue premiums with interest and sometimes by proving you are still insurable. Policies set a time limit for reinstatement.
- Renewable term
- Term coverage you can keep after the term ends without new medical underwriting, but at a higher premium based on your current age.
- Rider
- An optional add-on that changes or expands a policy, such as waiver of premium, accidental death, a child term rider, or an accelerated death benefit. Some riders carry an added cost.
S
- Servicemembers' Group Life Insurance (SGLI)
- Low-cost group term life insurance available to eligible active-duty service members, reservists, and National Guard members through the VA. Coverage ends after separation, though it can be converted to VGLI or a commercial policy.Read: Converting SGLI to VGLI
- Simplified issue
- Coverage approved on the basis of a health questionnaire and database checks, without a medical exam. Decisions are usually faster, but applicants can still be declined.Read: Guaranteed issue vs. simplified issue
- Surrender value
- The cash you receive if you cancel a permanent policy: its cash value minus any surrender charges and outstanding loans. Part of it may be taxable if it exceeds the premiums you paid.
T
- Term life insurance
- Coverage for a set period, such as 10, 20, or 30 years, that pays only if the insured dies during that term. It has no cash value, which is why it usually costs far less than permanent coverage.Read: Term vs. whole life insurance
U
- Underwriting
- The process an insurer uses to evaluate risk and decide whether to offer coverage and at what price. It can range from a full medical exam to a few questions to none at all.
- Universal life insurance
- Permanent coverage with flexible premiums and an adjustable death benefit. Its cash value earns interest, and if that value falls too low the policy can lapse unless premiums are raised.Read: Whole life vs. guaranteed universal life
V
- VA Life Insurance (VALife)
- A VA whole life program offering guaranteed acceptance to eligible veterans with a service-connected disability rating. Full coverage begins only after a waiting period; if the veteran dies before then, beneficiaries receive premiums paid plus interest.Read: VA Life Insurance (VALife) explained
- Veterans' Group Life Insurance (VGLI)
- Renewable term life insurance that lets veterans keep coverage after SGLI ends. You must apply within a set window after separation, and premiums rise with age in five-year increments.Read: VGLI vs. term life insurance
W
- Whole life insurance
- Permanent life insurance with a fixed premium, a guaranteed death benefit, and cash value that grows at a guaranteed rate. Some policies may also pay dividends, which are not guaranteed.Read: Term vs. whole life insurance
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