Beneficiary – The person or entity named in the policy to receive the death benefit. A policy can have more than one beneficiary.
Cash Value – The amount of money that the policyholder of a permanent (whole life, universal, etc.) life insurance policy receives if he or she were to surrender or “cash in” the policy.
Death Benefit – The amount of money the insurance company pays to the beneficiary or beneficiaries if the insured dies while the policy is in effect.
Face Value – This is the stated amount that upon death or maturity is paid out by the insurance company.
Insurability – The capacity of a person to purchase life insurance based on his or her health and other risk factors as determined by the insurance company. People with serious or terminal diseases are often non-insurable.
Insured – The person whose life is insured by the policy.
Life Insurance Policy – A contract between an insurance company and the policyholder to pay a death benefit if the insured dies while the policy is in effect.
Paid-up Policy – A policy that remains in force although the policyholder no longer has to pay premiums.
Policyholder – The person who owns the insurance policy. This person may or may not be the insured.
Policy Loan – A loan secured by the cash value of a life insurance policy. It must be less than the amount of the cash value.
Premium – The agreed upon amount of money paid on a regular basis by the policyholder to the insurance company to keep the policy in force.
Renewable Term Life Insurance – Term life insurance that allows the policy to be renewed usually without requiring evidence of the insured’s insurability.
Risk Factors – Lifestyle choices, health conditions and other considerations that insurance company underwriters must take into consideration to determine a person’s insurability.
Suicide Clause – A section in some life insurance policies that cancels the death benefit if the insured commits suicide, usually within the first few years of the policy.
Surrender Penalty – The amount of money that you may lose if you cash in your policy early.
Surrender Value – The amount of cash that the policyholder of a life insurance policy receives if he or she surrenders or “cashes in” the policy. The amount paid is less any outstanding surrender charges/ penalties.
Term Life Insurance – A simple form of life insurance without a savings component that is designed to last a temporary period of time. Policyholders pay for “death benefit” coverage only.
Whole Life Insurance – A form of life insurance designed to last a person’s “whole life” and includes a tax-deferred, life/cash value savings component. This type of policy accumulates cash value.