Common Life Insurance terms and definitions.

Accelerated Death Benefits- The benefits or amount of insurance available before the insured's death. Sometimes called Living Benefits, they are usually accessible in cases of a chronic or terminal illness.

Amount of Insurance- The coverage that a life insurance company issues. Also called the Coverage amount or face amount

Application- A statement of information made by a person applying for life insurance. Life insurance companies use the information from applications to determine the risk of each would-be policy-owner. Companies then determine an applicant's underwriting classification and premium rates.

Beneficiary- The person who receives proceeds from a life insurance policy at the insured's death. Anyone can be the beneficiary.

Cash Surrender Value- The cash amount you would get if you voluntarily terminate coverage before a policy becomes payable by death or maturity. The amount is the cash value stated in the policy, minus a surrender charge, any outstanding loans, and interest on those loans. The cash value represents the savings component of a life insurance policy since you can access the money relatively quickly if you need to.

Cost of Insurance- The amount an individual must pay for their life insurance policy, also known as a premium. The monthly charge for a life insurance policy fluctuates depending on the insured person's health, age, sex, and other considerations such as lifestyle and the nature of the person's profession. Poor health is likely to increase the cost of insurance or may even lead to denial of coverage altogether.

Death Benefit- The amount of money the beneficiary will be when the policyholder dies. If there is a loan on the policy, the payable amount will decrease by that amount. The benefit amount might also increase if there are more benefits payable when certain conditions.

Final Expense- It is a whole life policy tailored for seniors. It is a Simplified Issue, a permanent life policy, where the premium stays the same, offering lower coverage at lower premiums. Policies are available from $5,000 to $30,000. The policies generally have additional benefits called living Benefits. It allows a policyholder to take a percentage of the benefit while they are still alive. Certain conditions must apply.

Fully Underwritten Life Insurance- A fully underwritten life insurance policy generally requires a medical exam to establish the premium rate you'll pay based on the results. In addition to the life insurance application, a fully underwritten life insurance policy typically includes a blood and urine sample and checking your height and weight. There generally is no cost to you for the exam - whether you accept the policy or not.

In most instances, lab results are processed relatively quickly - typically within a few weeks. However, this depends on your overall health. Once your lab results are processed, the life insurance company may offer you a policy based on your medical exam findings, as well as other factors such as your family health history, occupation, and age.

Insurance Policy- The contract that the life insurance company issues to the policyholder. It explains all the terms of the policy.

Living Benefits- An advance cash payment of a portion of the insurance before the insured person dies. It allows for financial assistance to the insured individual while they are still alive.

Medical Information Bureau (MIB)- Provides medical conditions and prescription drug information to Insurance Companies. Insurance companies utilize this information to uncover mistakes or misrepresentations made on insurance applications. In addition, it is how Insurance companies approve or deny simplified issue applications.

Permanent Life Insurance or "Perm"- A life insurance policy provides coverage until the insured person's death.

Policy Loan- A loan a life insurance company makes to a policy owner. The security for the loan is the cash value of the owner's policy.

Rider- An addition to the insurance policy provides further benefits beyond those included in the original policy at additional cost.

Simplified Issue Life Insurance- As the name suggests, Simplified Issue is the simplest form of underwriting. Applicants must answer some questions about their health but not take a medical exam. Insurers will then use third-party sources to gather additional information about applicants, such as their prescription drug history. As a result, simplified Issue, in most cases, receives instant decisions by the insurance company, unlike the Fully Underwritten process, which can take months.

Term Life Insurance- For a specific period of time, a life insurance policy stipulates the insurance company must deliver a tax-free payment if the insured person dies within that timeframe. For example, many term policies only cover 5, 10, or 20 years but can be renewed, usually for a higher cost, at the end of the policy.

Universal Life Insurance- Universal life (UL) insurance is permanent life insurance with an investment savings element, plus low premiums. The universal life (UL) insurance price tag is the minimum premium payment required to keep the policy. In addition, beneficiaries only receive the death benefit.

Underwriting- The procedure a life insurance company uses to decide whether to insure an applicant and at what rate.

Whole Life Insurance- This is a permanent life insurance policy. The premiums never change. Upon the death of the insured person, the life insurance company makes a payment to the beneficiary. It also has a cash value component. The policy owner can borrow against the amount.