Common Insurance Terms

When shopping for life insurance you may discover a set of terms that may be unfamiliar. To help you, we have put together this handy life insurance glossary to assist you in understanding all of the terminology you will encounter.

Annual Premium
The annual premium is one of the four modes of premium you can select to pay your policy. 
Annuity
Payment of a fixed sum of money to a specified person at regular intervals.
ART (Annual Renewable Term)
This is a type of term life coverage where the premium usually increases gradually every year, but the coverage amount stays the same.
Beneficiary
This is the individual or entity (such as a trust or estate) that life insurance funds are paid to when an insured dies.
Bequest
Bequest is an old legal term for a will provision in which the deceased is leaving personal property to a designated person or organization. This is also known as a "gift."
Contingent Beneficiary
This is the individual or entity that a life insurance benefit would pay to if the primary beneficiary is deceased before the insured.
Contestability Period
In most cases the life insurance company has two years to find any material misrepresentations in a contract.
Conditional Receipt
This allows you to bind your life insurance coverage by submitting your first two months premiums with your life insurance application and medical exam.
Cash Surrender Value
Within some policies, this is defined as the amount of money you can receive if you surrender or cancel your life insurance policy or annuity. If there is a policy loan, the cash surrender value is the difference between the cash value printed in the policy and the loan value to pay the premiums.
Death Taxes
Death taxes are usually taxes placed on the property of a person who died. Federal death taxes are called "Estate Taxes." State death taxes (if any) go by various names, including "inheritance tax."
Evidence of Insurability
This is proof that you are an acceptable risk. You have to meet the standards of the insurer regarding age, health, occupation and such other standards as the insurer feels necessary to be eligible for coverage.
Final Beneficiaries
People or institutions designated to receive life estate trust property outright upon the death of the life beneficiary.
Generation Skipping Trust
Estate Tax savings trust where the principal left in trust is for grandchildren, with one's children only to receive the income from the trust.
Gift Taxes
Taxes levied by governments on gifts made during a person's lifetime.
Heirs
Persons who are entitled by law to inherit one's estate if you don't leave a will or other device to pass property at your death.
Irrevocable Trust
A type of trust that once established cannot be changed.
Joint Tenancy
Two or more people own property as joint tenants, and one of the owners dies, the other owners will automatically become owners of the deceased owner's share.
Living Trusts
A trust set up while a person is alive and which remains under the control of that person until death.
Net Taxable Estate
The value of all your property at death less all encumbrances and your other liabilities.
Ongoing Trust
A trust that is designed to be irrevocable and be operational for an extended amount of time.
Premium
The payments you make on a life insurance contract. Premiums can be paid monthly, quarterly, semi-annually, or annually.
Permanent Life Insurance
A life insurance contract that is designed to go to age 100. These policies build cash value.
Right of Survivorship
The right of a surviving joint tenant to take ownership of a deceased joint tenant's share of the property.
Suicide Clause
This clause is an exclusion in many policies. While each policy is unique, this clause essentially states that if the insured commits suicide after being insured for less the policy-specified time, the beneficiaries will receive only a refund of the premiums that were paid. If you have questions about this clause, you could check your policy or talk with your agent about specific details.
Surrender
You surrender a life insurance policy when you either let it lapse or tell the company that you want to drop it. If a policy has a cash surrender value, you can receive such value in cash minus any penalties if you return the policy to the company with a written request.
Term Life Insurance
Insurance coverage that has no cash value and is designed for a specified period of time - generally ranging from 5 to 30 years.
Will
A legal document where a person states various binding intentions about what he or she wants done with his or her property after death.

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