Glossary of Life Insurance Terms

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The insurance world is loaded with obscure and complicated terminology. Understanding these terms is important in making an informed decision about your insurance coverage. To help you translate insurance to English, 1stQuote has compiled this brief list of commonly used insurance terms:

Accelerated Benefits Rider
Accidental Death and Dismemberment
Accidental Death Benefit Rider
Annually Renewable Term
Beneficiary Best's Insurance Report
Conditional Receipt
Contingent Beneficiary
Conversion Privilege
Convertible Term
Decreasing Term Insurance
Disability Income Rider
Insurance Company Ratings
Increasing Term Insurance
Level Term Insurance
Medical Examination
Medical
Offer and Acceptance
Other Insured Rider
Preferred Risk
Premium
Primary Beneficiary
Proceeds
Rider
Secondary Beneficiary
Smoker Ratings
Standard Risk
Sub-Standard Risk
Suicide Clause
Term Insurance
Term of Policy
Underwriter
Uninsurable Risk
Waiver of Premium

A free life insurance rider that allows for the early payment of some portion of the policy's face amount should the insured suffer from a terminal illness or injury. Not all states have approved this benefit at the present time.

Insurance providing payment if the insured's death results from an accident or if the insured accidentally severs a limb above the wrist or ankle joints or totally and irreversibly loses his or her eyesight.

Accidental Death Benefit Rider

A life insurance policy rider providing for payment of an additional benefit related to the face amount of the base policy when death occurs by accidental means. Also often know as "double indemnity."

A form of renewable term insurance that provides coverage for one year and allows the policy owner to renew his or her coverage each year, without evidence of insurability. Also called Yearly Renewable Term (YRT).

Beneficiary

Person to whom the proceeds of a life policy are payable when the insured dies. The various types of beneficiaries are: primary beneficiaries (those first entitled to proceeds); secondary beneficiaries (those entitled to proceeds if no primary beneficiary is living when the insured dies); and tertiary beneficiaries (those entitled to proceeds if no primary or secondary beneficiaries are alive when the insured dies).

A guide, published by A.M. Best, Inc., that rates insurers' financial integrity and managerial and operational strengths.

Given to policy owners when they pay a premium at time of application. Such receipts bind the insurance company if the risk is approved as applied for, subject to any other conditions stated on the receipt.

Person or persons named to receive proceeds in case the original beneficiary is not alive. Also referred to as secondary or tertiary beneficiary.

Allows the policy-owner, before an original insurance policy expires, to elect to have a new policy issued that will continue the insurance coverage. Conversion may be effected at attained age (premiums based on the age attained at time of conversion) or at original age (premiums based on age at time of original issue).

Contract that may be converted to a permanent form of insurance without medical examination.

Term life insurance on which the face value slowly decreases in scheduled steps from the date the policy comes into force to the date the policy expires, while the premium remains level. The intervals between decreases are usually monthly or annually.

A type of health insurance coverage, it provides for the payment of regular, periodic income should the insured become disabled from illness or injury.

There are four major insurance industry ratings services; A.M. Best, Standard & Poor's, Moody's, and Duff & Phelps. These services provide information on insurance company financial performance, stability, claims paying ability, and more. The top ratings are: A.M. Best= A++, Standard & Poor's=AAA, Moody's=Aaa, Duff& Phelps=AAA,. Generally, 1stQuote recommends companies that carry at least an A rating from A.M. Best.

Term life insurance in which the death benefit increases periodically over the policy's term. Usually purchased as a cost of living rider to a whole life policy.

Term coverage on which the face value and premiums remain unchanged from the date the policy comes into force to the date the policy expires.

Medical Examination

Usually conducted by a licensed physician, paramedic or nurse; the medical report is part of the application, becomes part of the policy contract and is attached to the policy. A "non-medical" is a short-form medical report filled out by the agent. Various company rules, such as amount of insurance applied for or already in force; applicant's age, sex, past physical history; data revealed by inspection report, etc., determine whether the examination will be "medical" or "non-medical."

Medical

A document completed by a physician or another approved examiner and submitted to an insurer to supply medical evidence of insurability (or lack of insurability) or in relation to a claim.

Offer and Acceptance

The offer may be made by the applicant by signing the application, paying the first premium and, if necessary, submitting to physical examination. Policy issuance, as applied for, constitutes acceptance by the company. Or the offer may be made by the company when no premium payment is submitted with the application. Premium payment on the offered policy then constitutes acceptance by the applicant.

Other Insured Rider

A term rider covering a family member other than the insured that is attached to the base policy covering the insured.

Preferred Risk

A risk whose physical condition, occupation, mode of living and other characteristics indicate a prospect for longevity superior to that of the average longevity of unimpaired lives of the same age. (See standard risk.)

Premium

The periodic payment required to keep and insurance policy in force.

In life insurance, the beneficiary designated by the insured as the first to receive policy benefits.

Proceeds

Net amount of money payable by the company at the insured's death or at policy maturity.

Rider

Strictly speaking, a rider adds something to a policy. However, the term is used loosely to refer to any supplemental agreement attached to and made a part of the policy, whether the policy's conditions are expanded and additional coverage's added, or a coverage or condition is waived.

Secondary Beneficiary

An alternate beneficiary designated to receive payment, usually in the event the original beneficiary predeceases the insured.

Smoker Ratings

Insurers will give a lower premium rate to buyers who do not smoke or use tobacco. If you smoked in the past, most carriers will consider you a standard risk (although not preferred risk) non-smoker if you have not smoked for one year prior to applying for coverage. Consumers should be aware that nicotine can be detected in a variety of routine screenings tests that are now commonly required by most insurance companies.

Standard Risk

Person who, according to a company's underwriting standards, is entitled to insurance protection without extra rating or special restrictions.

Sub-Standard Risk

Person who is considered an under-average or impaired insurance risk because of physical condition, family or personal history of disease, occupation, residence in unhealthy climate or dangerous habits.

Suicide Clause

Most life insurance policies provide that if the insured commits suicide within a specified period, usually two years, after the issue date, the company's liability will be limited to a return of premiums paid.

Term Insurance

Protection during limited number of years (the "term"); expiring without value if the insured survives the stated period, which may be one or more years but usually is five to twenty years, because such periods usually cover the needs for temporary protection.

Term of Policy

Period for which the policy runs or the intitial premium is guaranteed. In life insurance, this is to the end of the term period for term insurance.

Underwriter

Company receiving premiums and accepting responsibility for fulfilling the policy contract. Also, an insurance company employee who decides whether the company should assume a particular risk; or the agent who sells the policy.

Uninsurable Risk

One not acceptable for insurance due to excessive risk.

Waiver of Premium

Rider or provision available in most life insurance policies exempting the insured from paying premiums after he or she has been disabled for a specified period of time, usually six months.