Glossary of Insurance Terms

Term Definition
Accidental Death Benefit This supplemental contract provides benefits in the event of the accidental death of the insured. The benefit doubles the face amount of the base certificate to which it is attached. This benefit may be added to the base life contract from issue ages 0 through 64 at the initial time of purchase and continues in force to the insured's 65th birthday.
Accumulate at interest Dividend option under which a certificate's dividends are left on deposit with the insurer to earn interest. Both the interest and the accumulated dividends are available to the certificate owner for withdrawal at any time. The Face Value of the certificate remains level, but the Cash Value increases faster than other options.
Automatic premium loan A policy loan, secured by the cash value of the certificate, to be used to pay a premium which remains unpaid at the end of a grace period.
Beneficiary The person or persons, or other entity designated to receive certificate proceeds.
Cash dividend option Dividend option under which a certificate's dividends are returned directly to the certificate owner in cash. The Face Value of the certificate remains level.
Cash value The amount of money which the certificate owner will receive as a refund if the certificate owner cancels the coverage and returns the certificate to the insurer. Also known as cash surrender value.
Certificate loan An advance made by the insurer to a certificate owner. The advance is secured by the cash value of the certificate.
Claim A request for payment under the terms of an insurance certificate.
Convertible Gives the certificate owner the right to convert the Term certificate to a Whole Life certificate.
Dividend A refund of excess premium paid to the owner of a participating life insurance certificate.
Estate taxes Taxes on the money and property left by someone who has died.
Electronic funds transfer A premium payment or annuity deposit method under which the certificate owner authorizes their bank to pay premiums or annuity deposits automatically by transferring funds by wire from the bank to the insurer.
Face value Also called Face amount is the amount stated in the certificate as payable at the death of the insured or at the maturity of the certificate.
Grace period The length of time after a premium is due and unpaid during which the certificate, including all supplemental contracts, remains in force. If a premium is paid during this time, the premium is considered to have been paid "on time".
Insured The person whose life is insured under the certificate.
Insurer The party in an insurance certificate that promises to pay a benefit if a specified loss occurs.
Individual Retirement Account (IRA) A savings plan which allows United States citizens to accumulate funds for retirement on a tax sheltered basis. Certain people may also deduct contributions into an IRA from their taxable income.
Issue age The insured's age at nearest birthday.
Interest Money paid for the use of money.
Lapse Termination of a certificate due to non-payment of renewal premiums. If the certificate has cash value, then the certificate's insurance coverage may remain effective through the use of an automatic premium loan.
Paid Addition option Dividend option under which the insurer applies dividends as a net single premium to purchase Paid-in-Full additional coverage. This increases the Face Value and the cash value of your plan.
Premium The payment, or one of a series of payments, required by the insurer to put an insurance policy in force and keep it in force.
Premium Reduction Dividend option similar to Premium Supplementation, but dividends are applied directly to the billed premium. This effectively reduces the billed premium, possibly eliminating them altogether. Any surplus dividend beyond what is needed for the premium is used to buy Paid Additions.
Premium Supplementation Dividend option under which the insurer applies dividends as a net single premium to purchase Paid-in-Full additional coverage until the dividend becomes larger than the billed premium. The dividend is then applied directly to the billed premium thereby reducing the out-of-pocket cost of your plan.
Rated certificate A certificate issued to cover a person classified as having a greater-than-average likelihood of loss. The certificate's premium rate is higher than the rate for a standard certificate.
Renewal provision Gives the certificate owner the right to continue the insurance coverage at the end of the specified term without submitting evidence of continued insurability.
Rider An addition to an insurance certificate that becomes a part of the certificate and which expands or limits the benefits otherwise payable. Also known as endorsement or supplemental contract.
Settlement options Choices given to the certificate owner or beneficiary of a certificate regarding the method by which the insurer will pay the certificate proceeds.
Surrender charge A penalty imposed by the insurer upon withdrawal of funds from an annuity certificate during the surrender period specified in the certificate. The surrender charge generally decreases each year during the surrender period. Also known as Withdrawal charge.
Tax deferred earnings Interest earned on a deferred annuity will accumulate on a tax deferred basis. Taxation of these earnings begins only upon withdrawal from the certificate.
Underwriting The process of identifying and classifying the potential degree of risk represented by a proposed insured.