Life Insurance Terms

Agent: A registered and licensed professional who is able to solicit and sell insurance products to the public in each state that he/she is licensed.

Beneficiary (Primary): The person or entity designated to receive policy proceeds from an insurance policy when the insured dies.

Beneficiary (Contingent): The person designated to receive policy proceeds from an insurance policy, if the Primary Beneficiary dies before the Insured dies.

Benefit: The amount of money paid when a claim is issued against an insurance policy.

Cash Value: Funds that accumulate in a separate account within a Permanent life insurance policy. Depending on the policy you have, these monies can be invested in the insurance company’s accounts or in securities. The funds within these accounts grow tax–deferred and can be used on a tax–free basis in some circumstances.

Conditional Receipt: Allows an applicant to have temporary insurance once an application has been submitted along with at least 1 month’s premium and a completed paramedical exam, providing that the insurer subsequently determines the applicant to be insurable as applied for.

Contestability Period: Insurance companies reserve the right to contest or defend against a claim if any answer or representation on the Application for insurance is falsified. The insurance issued under a policy will no longer be contestable after it has been in force for two years from the date of issue.

Conversion Option: During a specified conversion period declared in the policy, you are able to convert your policy, while it is in force with all premiums paid, to a new policy on another plan of insurance, usually a permanent policy. This privilege is included in most Term Life insurance policies, however a company may limit the type of contract you can convert to.

Grace Period: In each life insurance contract there is a grace period of 31 days following each premium due date, after the first, in which you can pay a premium without interest and without the policy lapsing.

Insurance Policy: A contract between an insured and an insurance company, which agrees to pay the insured or beneficiary for loss caused by specific events.

Insured: The person covered by the insurance policy.

Lapse: When premiums are not paid within the grace period allowed and a policy is no longer in force.

Loan: When a policy owner borrows funds from the policy’s cash values. An interest rate will be charged on loans that are not repaid. Taking a loan against a policy may cause a reduction in the policy’s Death Benefit.

Policy Risk/Health Class: The risk/health class represents the risk level an insurance company considers you. With most companies, there are six standard classes and about fifteen substandard policy classes. The better your policy class, the lower your premium will be. The health class of an applicant will not change once a policy is issued and paid for, assuming that premiums are paid on time.

Policy Owner: The person or entity that has discretionary authority over an insurance policy.

Premium: The money paid to an insurance company for the insurance policy.

Reinstatement: If your policy lapses because a premium is unpaid before the end of its grace period the Policy and riders can be reinstated under certain circumstances: The insured must be alive, application for reinstatement must be within a specified number of years following the defaulted premium’s due date, evidence of insurability must be satisfied and payment must be made on each unpaid premium plus annually compounded interest.

Rider: Enhancements that can be added to an insurance policy, normally for an additional premium.

Underwriting: The process in which an insurance company reviews an application and all needed medical records in order to determines whether or not a particular applicant is insurable, and if so, what risk level he/she should be eligible for.

Underwriter: An employee of an insurance company who reviews and completes the underwriting process for each application submitted to that insurance company.

If anything is unclear or if you would like clarification of any specific Life Insurance Term, call 1-800-817-4522 or Contact us.

NOTE: Since the purpose of the descriptions on this website is to be educational, the terminology used is not the exact terminology used in an actual Life insurance contract. Every Life insurance contract is different from the next. These explanations are solely intended to help you understand what each type of coverage is intended to do. Not all types of coverage will be available with every insurance company. In no way does MR Insurance Consultants provide guarantees through this website. Prior to purchasing Life insurance, it is very important for you to review the exact wording used by each company with a specialist.