Life insurance has its own vocabulary. Some terms sound familiar, but have a different meaning when used in the life insurance realm. The following glossary provides terms and definitions to help you speak the language of life insurance.
A method for determining the age of the proposed insured for premium calculations. This method uses the proposed insured's actual age in years. For example, a person who is 36 years and 5 months old would be classified as a 36-year old.
The beneficiary of your life insurance policy is the person designated by you to receive the policy benefits upon your death. You may designate that the benefits from your policy be distributed to an individual or institution. Also, you may change this at any time.
The value of the policy to be paid to the insured's beneficiary in the event of the death of the insured while the policy is active. This value does not include adjustments for outstanding policy loans, withdrawals, dividends, paid-up additions or late premium payments.
The premiums that insurance companies charge for life insurance are also based in large part on the health and lifestyle of the proposed insured. Usually individuals in good health who do not use tobacco products or engage in hazardous activities will be able to obtain less expensive coverage. Different insurance companies use different criteria in determining the overall health status and lifestyle of the proposed insured.
An individual who is covered under an existing life insurance policy.
Different term life insurance policies have different durations. 10, 15, 20, and 30-year term life insurance policies are the most common. A 15-year level term policy will have an initial 15-year period in which premiums are level.
A method for determining the age of the proposed insured for premium calculations. This method takes into account if the proposed insured is nearer to their last or next birthday. A person who is 34 years and 7 months old would be classified as a 35-year-old for the premium calculations.
A payment to a life insurance company in exchange for a life insurance policy.
The frequency in which premiums are paid. Typically, the total annual premium is slightly higher when payments are spread out over the course of the year as opposed to being paid all at once. For example, a policy with a $160 annual premium may also offer a $41 quarterly premium.
An individual who is applying for coverage under a life insurance policy.
The state in which the insured or proposed insured resides. It is common for a given insurance company to be licensed to conduct business in some states and not in others. If an insurance company is not licensed to do business in your state, they may not offer any of its products in that state. If an insurance company is licensed to do business in your state, each of the company's products must be individually approved for sale in that state. It is common for a given insurance company to have products that are approved for sale in one state and not approved for sale in others.
Underwriting guidelines are the health and lifestyle criteria for the proposed insured that life insurance companies use to determine the appropriate underwriting classification upon which to base the premiums for the coverage. These criteria typically include age, gender, tobacco use, height/weight build, family history of heart disease or cancer, blood pressure levels, cholesterol levels, specific health conditions, driving record, hazardous occupation or activities, military service, aviation, foreign travel or residency, U.S. citizenship and felony criminal activity. For accurate quoting, all of these underwriting guidelines are taken into consideration when evaluating any premiums quoted for life insurance coverage.
