--- title: Life Insurance Glossary: 73 Terms Explained | Coverfolk url: https://coverfolk.com/glossary updated: 2026-10-08 --- # Life insurance words, in plain English 73 terms you will hear from agents and see on a policy, each with a source. [#](#g-num)[A](#g-A)[B](#g-B)[C](#g-C)[D](#g-D)[E](#g-E)[F](#g-F)[G](#g-G)[I](#g-I)[L](#g-L)[M](#g-M)[N](#g-N)[O](#g-O)[P](#g-P)[R](#g-R)[S](#g-S)[T](#g-T)[U](#g-U)[V](#g-V)[W](#g-W) ## # 1035 exchange : A tax rule that lets you swap one life insurance policy for another, or for an annuity, without paying tax on the gain at that time. [Source](https://www.law.cornell.edu/uscode/text/26/1035) ## A A.M. Best rating : A grade from A.M. Best, one of several firms that rate how financially strong insurers are. Each firm uses its own scale. [Source](https://www.insurance.wa.gov/sites/default/files/2025-03/life-insurance-guide.pdf) Accelerated death benefit : A feature that pays some of the death benefit early if you have a terminal illness, a certain disease, or a long term care illness. [Source](https://www.tdi.texas.gov/pubs/consumer/cb018.html) Accelerated underwriting : A faster way to apply that can skip the physical exam. The company uses outside data, like prescription history and driving records, instead. [Source](https://content.naic.org/insurance-topics/accelerated-underwriting) Accidental death benefit : An add on that pays extra, often double or triple, if you die in an accident. [Source](https://www.insurance.wa.gov/sites/default/files/2025-03/life-insurance-guide.pdf) AD&D : Accidental death and dismemberment. It pays if an accident causes your death or the loss of a limb or eyesight. [Source](https://www.opm.gov/healthcare-insurance/insurance-glossary/) Agent : A licensed person who sells insurance for one or more companies. Agents are paid commission. [Source](https://www.insurance.wa.gov/sites/default/files/2025-03/life-insurance-guide.pdf) Annual renewable term : A term policy that lasts one year at a time. The premium changes each year based on your age when you renew. [Source](https://www.opic.texas.gov/life/the-basics/) ## B Beneficiary : The person you name to get the death benefit when you die. You can name more than one. [Source](https://www.tdi.texas.gov/pubs/consumer/cb018.html) Broker : A licensed person who works for you and shops several companies for options. Brokers are also paid commission. [Source](https://www.insurance.wa.gov/sites/default/files/2025-03/life-insurance-guide.pdf) ## C Cap rate : The most an index linked product will credit, even if the index goes up more. For example, if the index rises 12 percent and the cap is 7 percent, you get 7 percent. [Source](https://www.finra.org/investors/insights/complicated-risks-and-rewards-indexed-annuities) Captive agent : An agent who sells for only one insurance company. [Source](https://insurance.ohio.gov/wps/wcm/connect/gov/d2a3692b-c0ae-4463-b2c6-d121c7c60a7a/LifeandAnnuityInsuranceGuide.pdf?CACHEID=ROOTWORKSPACE.Z18_79GCH8013HMOA06A2E16IV2082-d2a3692b-c0ae-4463-b2c6-d121c7c60a7a-pfwN-II&CONVERT_TO=url&MOD=AJPERES) Cash value : The savings part of a permanent policy. It grows over time and can be used for loans, cash, or to pay premiums. [Source](https://www.opic.texas.gov/life/the-basics/) Child rider : A rider that adds term life for your kids. They usually must be at least 14 days old, and coverage ends at 21 or 25. [Source](https://www.tdi.texas.gov/pubs/consumer/cb018.html) Chronic illness rider : A rider that pays part of the death benefit early if you are chronically ill. Under IRS rules, that means a health care worker certifies you can't do two daily tasks, like eating or bathing, for at least 90 days without help. [Source](https://www.irs.gov/instructions/i1099ltc) Contestability period : The first two years of a policy. If you die in this time, the company can review your application and deny the claim if you gave wrong information. [Source](https://www.tdi.texas.gov/pubs/consumer/cb018.html) Contingent beneficiary : A backup beneficiary. They get the money if your primary beneficiary can't be found. [Source](https://www.iii.org/article/what-is-a-beneficiary) Conversion from group : Switching your group life to your own permanent policy when group coverage ends. It will probably cost much more. [Source](https://www.insurance.ca.gov/01-consumers/105-type/95-guides/07-life/life-ins-guide.cfm) Conversion privilege : The right to switch your term policy to a permanent one without a medical exam. Your premium will go up, and there is usually a deadline. [Source](https://www.tdi.texas.gov/pubs/consumer/cb018.html) ## D Decreasing term : Term insurance where the death benefit goes down over the term while the premium stays the same. It is often sold as mortgage protection. [Source](https://www.dfs.ny.gov/consumers/life_insurance/types_of_policies) Dividend : Money a company may pay back when it collects more than it needs. You only get dividends with a participating policy, and they are not guaranteed. [Source](https://insurance.ohio.gov/wps/wcm/connect/gov/d2a3692b-c0ae-4463-b2c6-d121c7c60a7a/LifeandAnnuityInsuranceGuide.pdf?CACHEID=ROOTWORKSPACE.Z18_79GCH8013HMOA06A2E16IV2082-d2a3692b-c0ae-4463-b2c6-d121c7c60a7a-pfwN-II&CONVERT_TO=url&MOD=AJPERES) ## E Estate : All the money and property a person owns, especially at death. [Source](https://www.opic.texas.gov/life/the-basics/) Extended term : An option if you stop paying a cash value policy. Your cash value buys term insurance for a set time. [Source](https://www.myfloridacfo.com/division/consumers/understanding-insurance/lifeinsuranceoverview) ## F Face amount : The amount stated on the policy that will be paid if you die or the policy matures. [Source](https://www.dfs.ny.gov/consumers/life_insurance/glossary_terms) Final expense : A small policy, also called a burial policy, that covers or prepays funeral costs. [Source](https://www.insurance.wa.gov/sites/default/files/2025-03/life-insurance-guide.pdf) Flat extra : Another kind of extra charge added for higher risk. It is listed along with table ratings as a way to charge more. [Source](https://www.dfs.ny.gov/system/files/documents/2023/12/ind_ul_outline_20231213_updt.pdf) Floor : The lowest credit an index account can get. New York's product rules show index credits of not less than 0. [Source](https://www.dfs.ny.gov/system/files/documents/2023/12/ind_ul_outline_20231213_updt.pdf) Free look : A short time after you get your policy when you can cancel for any reason and get a full refund. Texas policies give at least 10 to 20 days. [Source](https://www.tdi.texas.gov/pubs/consumer/cb018.html) ## G Grace period : Extra time after your premium is due to pay without losing coverage. Most policies give 31 days. [Source](https://www.tdi.texas.gov/pubs/consumer/cb018.html) Graded death benefit : A policy that pays less than the full face amount in the early years. The payout grows over time. [Source](https://www.revisor.mn.gov/statutes/cite/72A.207) Group life : Life insurance offered by an employer or group to its members. You usually don't have to answer health questions, and coverage often ends when you leave. [Source](https://www.tdi.texas.gov/pubs/consumer/cb018.html) Guaranteed issue : A policy for people with health issues who may not qualify for other coverage. Very few people are turned down. [Source](https://www.myfloridacfo.com/division/consumers/understanding-insurance/lifeinsuranceoverview) Guaranty association : A state group that protects policyholders if their insurance company fails. It pays covered benefits up to limits set by state law. [Source](https://nolhga.com/policyholders/how-youre-protected/) ## I ILIT : An irrevocable life insurance trust. The trust owns your policy, so the death benefit is not counted in your estate. [Source](https://extension.umn.edu/transfer-and-estate-planning/life-insurance-and-estate-planning) Independent agent : An agent who can sell policies from many insurance companies. [Source](https://insurance.ohio.gov/wps/wcm/connect/gov/d2a3692b-c0ae-4463-b2c6-d121c7c60a7a/LifeandAnnuityInsuranceGuide.pdf?CACHEID=ROOTWORKSPACE.Z18_79GCH8013HMOA06A2E16IV2082-d2a3692b-c0ae-4463-b2c6-d121c7c60a7a-pfwN-II&CONVERT_TO=url&MOD=AJPERES) Indexed universal life : Universal life where the interest you earn follows a stock or bond index, within limits. Your money is not invested directly in the market. [Source](https://www.myfloridacfo.com/division/consumers/understanding-insurance/lifeinsuranceoverview) Insurable interest : A real reason to want someone to stay alive, either love or money. You need it to buy a policy on someone else. [Source](https://www.myfloridacfo.com/division/consumers/understanding-insurance/lifeinsuranceoverview) Insured : The person whose life the policy covers. [Source](https://www.insurance.wa.gov/insurance-resources/consumers-insurance-glossary) ## L Lapse : When your policy ends because you did not pay the premium in time. Your beneficiaries will not get the death benefit. [Source](https://www.tdi.texas.gov/pubs/consumer/cb018.html) Level term : Term insurance where the death benefit stays the same for the whole term. [Source](https://www.iii.org/article/life-insurance-basics) ## M MIB : A company that collects information about medical conditions and risky hobbies for life and health insurers. It shares it only with your permission, and you can get a free copy of your file every 12 months. [Source](https://www.consumerfinance.gov/consumer-tools/credit-reports-and-scores/consumer-reporting-companies/companies-list/mib-inc/) Modified endowment contract : A policy that gets more money paid in during its first 7 years than a federal tax test allows. Tax law then treats money you take out of it differently. [Source](https://www.law.cornell.edu/uscode/text/26/7702A) ## N NAIC : The National Association of Insurance Commissioners. It is the standard setting group made and run by the top insurance regulators of each state. [Source](https://content.naic.org/glossary-insurance-terms) ## O Owner : The person who owns the policy. They can use the policy values and make changes while the insured is alive. [Source](https://www.ncdoi.gov/consumers/life-insurance/faqs-about-life-insurance) ## P Paid up additions : Extra insurance you buy with your dividends. It is fully paid for when you buy it. [Source](https://benefits.va.gov/INSURANCE/docs/life-insurance-programs-booklet.pdf) Paramedical exam : A health exam some companies require when you apply. It can come with blood, urine, or saliva tests. [Source](https://content.naic.org/sites/default/files/inline-files/AUWG%20DRAFT%203-4-22%20for%20SNM_0.pdf) Participating policy : A policy where the company shares part of its extra money with policy owners as dividends. [Source](https://www.dfs.ny.gov/consumers/life_insurance/glossary_terms) Participation rate : The share of an index's gain that gets credited to you. With a 75 percent rate, you get 75 percent of the index's gain. [Source](https://www.finra.org/investors/insights/complicated-risks-and-rewards-indexed-annuities) Policy illustration : A chart from the company that shows how a policy might work over the years. It shows what is guaranteed and what is not. [Source](https://insurance.ohio.gov/wps/wcm/connect/gov/d2a3692b-c0ae-4463-b2c6-d121c7c60a7a/LifeandAnnuityInsuranceGuide.pdf?CACHEID=ROOTWORKSPACE.Z18_79GCH8013HMOA06A2E16IV2082-d2a3692b-c0ae-4463-b2c6-d121c7c60a7a-pfwN-II&CONVERT_TO=url&MOD=AJPERES) Policy loan : Money you borrow from your policy's cash value. If you do not pay it back with interest, it is taken out of the death benefit. [Source](https://insurance.ohio.gov/wps/wcm/connect/gov/d2a3692b-c0ae-4463-b2c6-d121c7c60a7a/LifeandAnnuityInsuranceGuide.pdf?CACHEID=ROOTWORKSPACE.Z18_79GCH8013HMOA06A2E16IV2082-d2a3692b-c0ae-4463-b2c6-d121c7c60a7a-pfwN-II&CONVERT_TO=url&MOD=AJPERES) Portability : An option to keep group life coverage that would otherwise end, like when you leave a job. It is offered in addition to conversion. [Source](https://www.dfs.ny.gov/industry_guidance/circular_letters/cl1996_03) Preferred rate class : A risk class name a company may use when it quotes a price, such as "Preferred, non smoking." The class you get changes your premium. [Source](https://content.naic.org/sites/default/files/inline-files/Term%20Life%20Sample%20(at%20application).pdf) Premium : The amount you pay an insurance company for your policy. [Source](https://www.opic.texas.gov/life/the-basics/) Preneed : Insurance that lets you pay for your funeral ahead of time. It pays the funeral provider you choose and can lock in today's prices. [Source](https://www.insurance.wa.gov/insurance-resources/life-insurance/funeral-insurance) Probate : The court process for passing on a person's property after they die. [Source](https://selfhelp.courts.ca.gov/probate) ## R Rating class : The group a company puts you in to set your price. It is based on things like age, job, sex, and health. [Source](https://www.dfs.ny.gov/consumers/life_insurance/glossary_terms) Reduced paid up : An option if you stop paying a cash value policy. You keep a smaller death benefit and owe no more premiums. [Source](https://www.myfloridacfo.com/division/consumers/understanding-insurance/lifeinsuranceoverview) Reinstatement : Bringing a lapsed policy back. You usually pay the past due premium with interest and may need to answer health questions. [Source](https://www.tdi.texas.gov/pubs/consumer/cb018.html) Return of premium : A term policy that refunds all your premiums if you are still alive at the end of the term. It costs much more than plain term. [Source](https://www.myfloridacfo.com/division/consumers/understanding-insurance/lifeinsuranceoverview) Rider : An add on to a policy that changes what it covers. It can add benefits, lower them, or leave some things out. [Source](https://www.insurance.wa.gov/insurance-resources/consumers-insurance-glossary) ## S SGLI : Servicemembers' Group Life Insurance. Low cost term life for eligible service members, up to $500,000. [Source](https://www.va.gov/life-insurance/options-eligibility/sgli/) Simplified issue : A policy with a short application and limited health information. It usually costs less than guaranteed issue, but more than fully underwritten coverage. [Source](https://www.soa.org/resources/experience-studies/2017/2017-simplified-issue-definition/) Suicide clause : In the first two years, companies usually will not pay the death benefit if the cause of death is suicide. The company returns the premiums instead. [Source](https://www.tdi.texas.gov/pubs/consumer/cb018.html) Surrender charge : A fee you pay for canceling a policy or contract early. [Source](https://www.insurance.wa.gov/sites/default/files/2025-03/life-insurance-guide.pdf) Surrender value : The cash you get if you cancel your policy early. Charges and any loans are taken out first. [Source](https://www.dfs.ny.gov/consumers/life_insurance/glossary_terms) ## T Table rating : An extra charge for people the company sees as higher risk. Policies can use a table rating, a flat extra, or both. [Source](https://www.dfs.ny.gov/system/files/documents/2023/12/ind_ul_outline_20231213_updt.pdf) ## U Underwriting : How a company decides whether to sell you a policy and what to charge. It may include a medical exam and questions about your health, job, and habits. [Source](https://www.tdi.texas.gov/pubs/consumer/cb018.html) Universal life : Permanent life insurance with flexible premiums and a cash value. If the cash value runs out, the policy can lapse. [Source](https://www.tdi.texas.gov/pubs/consumer/cb018.html) ## V VALife : Veterans Affairs Life Insurance. Whole life coverage up to $40,000 for veterans with a service connected disability, with guaranteed acceptance. [Source](https://www.va.gov/life-insurance/options-eligibility/valife/) Variable life : Life insurance with a cash value that goes up or down based on investments you pick, usually mutual funds. You can lose money. [Source](https://www.investor.gov/introduction-investing/investing-basics/investment-products/variable-life) VGLI : Veterans' Group Life Insurance. It lets you keep coverage after you leave the military, from $10,000 to $500,000, as long as you pay. [Source](https://www.va.gov/life-insurance/options-eligibility/vgli/) ## W Waiver of premium : A rider that pays your premiums if you become disabled. You usually must be disabled for at least 6 months. [Source](https://www.myfloridacfo.com/division/consumers/understanding-insurance/lifeinsuranceoverview) Whole life : Permanent insurance that lasts your whole life as long as you pay. Premiums, death benefit, and cash value are guaranteed. [Source](https://www.tdi.texas.gov/pubs/consumer/cb018.html) ## Questions about life insurance words What is a beneficiary? The person or people who get the money when you die. What is a premium? The amount you pay, usually each month, to keep the policy. What is a rider? An add on to a policy that gives extra benefits, like waiving payments if you become disabled.