Glossary of Common
Life Insurance Terms

The most common terms in
the life insurance world.

When purchasing life insurance, it's important to understand the many terms related to life insurance. To better help you understand these terms, we have created a small glossary of common life insurance terms. But first, below are definitions to the three basic types of life insurance:

Term Life Insurance:: Term life insurance provides coverage for a specific period of time, usually from one to 30 years. Term policies provide a death benefit only if the insured dies during the term.
Universal Life Insurance:: Universal life insurance is a permanent policy (covers you for your entire life) that gives the owner the rights to vary premium payments and the death benefit within certain prescribed limits. This type of policy also includes an accumulation account whose rate of return fluctuates according to investment performance but will not fall below a guaranteed minimum rate of return, such as two or three percent.
Whole Life Insurance:: Whole Life insurance is a permanent policy designed to last for life for which premiums and cash values are guaranteed. Generally, this type of life insurance is the most expensive type of life insurance available.

If you would like more detailed definitions of term life, universal life, or whole life insurance, please see our Frequently Asked Questions section.

With an understanding of the three basic types of life insurance, below are some terms related to life insurance that may be helpful to you:

Accidental death benefit: Also known as double indemnity, a provision in a policy that doubles or triples the benefit in the case of death by accidental means.
Beneficiary: The person named in a policy as a recipient of the insurance money in the event of the insured's death.
Cash surrender value: The amount available in cash upon the policy owner's termination of a permanent life insurance policy before it matures or becomes payable by death.
Claim: The demand by an individual to recover the losses covered under an insurance policy.
Contingent beneficiary: The person designated to receive life insurance policy proceeds if the primary beneficiary should die before the person whose life is insured.
Convertible term insurance: A type of policy that allows the policy owner to change a term insurance policy to a permanent policy without providing evidence of insurability. The premium rate for the permanent policy is normally based on the age of the insured at the time of conversion.
Death benefit: The sum of money paid to a beneficiary when a person insured under a policy dies.
Dividend: A refund of excess premium paid to the owner of an individual participating life insurance policy.
Permanent life: Life insurance that is designed to provide lifelong protection with generally level premiums. There are three main types: whole, universal, and variable. All permanent policies accumulate cash value.
Policy: The contract or agreement made between the insurer and the insured.
Premium: The payment to the insurance company for insurance coverage.
Variable life: A permanent policy under which the cash value of the policy may fluctuate according to the investment option performance of a separate account fund. Most variable life policies guarantee that the death benefit will not fall below a specified minimum.