VUL? Annuities? Cash Value? We have the definitions!
Accelerated Benefit RiderA type of rider that can be added to a life insurance policy. It typically allows the policyholder to access a portion of the death benefit while they are still alive if they meet certain requirements in the rider regarding a terminal or chronic illness or are expected to have a life expectancy of less than 12 months.
AgentA professional who helps individuals and families purchase life insurance policies.
AmplifyFounded in 2019 by industry veterans, Amplify is an Insurance Brokerage whose mission is to help consumers build tax-efficient wealth through their life insurance policies in a simple and streamlined customer experience.
ApplicationTo apply for life insurance, an individual typically completes an application that includes information about their personal and medical history, as well as their coverage needs and preferences.
BeneficiaryA person or entity designated to receive the death benefit from a life insurance policy. The policyholder, or the person who owns the policy if it is not the policyholder, chooses the beneficiary when they purchase the policy. The beneficiary can be changed at any time by the policyholder. Upon the death of the policyholder, the death benefit is paid to the designated beneficiary. This can be a single person, multiple people, or an organization.
Body Mass Index (BMI)A measure of body fat based on an individual's weight and height. It is calculated by dividing a person's weight in kilograms by their height in meters squared (kg/m^2). BMI is used as a screening tool to indicate whether an individual is underweight, overweight, or obese during the life insurance application process.
CarrierA life insurance company that sells life insurance policies to individuals.
Cash Value Life InsuranceA type of permanent life insurance that includes both a death benefit and a savings component. The policyholder pays premiums, which are directed into the savings component, also known as the cash value. The cash value may accrue interest over time and can be accessed by the policyholder through loans or withdrawals. Unlike term life insurance, which provides coverage for a limited period of time, cash value life insurance provides coverage for the policyholder's entire lifetime, as long as premiums are paid. Some common types of cash value life insurance are whole life, universal life, and variable life insurance.
Chronic Illness RiderA type of insurance policy rider that provides additional coverage for individuals with chronic illnesses. This type of rider is often added to a life insurance policy and can provide benefits for care and treatment related to the insured’s chronic condition. The benefits provided by a chronic illness rider can include in-home care, assisted living, and nursing home care, as well as other types of care and treatment. The specific benefits and requirements for a chronic illness rider will vary depending on the insurance company and the policy.
ClaimA request for payment from an insurance company, made by the beneficiary or beneficiaries of a deceased policyholder. The claim is typically made after the death of the policyholder and is used to collect the death benefit provided by the policy.
Combination PolicyA designed insurance portfolio that provides the long-term protection and cash accumulation benefits of permanent life insurance policy with the large temporary coverage of term insurance.
Contestable PeriodA specified time frame, typically two years from the policy's effective date, during which the insurance company can investigate and potentially deny a death benefit claim if it finds that the policyholder made material misstatements on their application for coverage. This period allows the company to ensure that the policy was issued based on accurate information and that the policyholder did not die from a pre-existing condition that was not disclosed.
Contingent BeneficiaryThe secondary beneficiary designated to receive the benefits of a policy in the event that the primary beneficiary is unable or unwilling to do so. For example, in a life insurance policy, the primary beneficiary may be the insured person's spouse, while the contingent beneficiary may be their child. This ensures that the assets or benefits will be passed on to someone the insured person trusts, even if the primary beneficiary predeceases them or is unable to accept the benefits.
Critical Illness RiderAn optional add-on to a life insurance policy that typically provides an acceleration of part or the entire death benefit upon the diagnosis of a specified critical illness, such as cancer, heart attack, or stroke. This benefit can be used to cover medical expenses, lost income, or other expenses associated with the illness. The specific terms and conditions of a critical illness rider, including the illnesses covered and the benefit amount, will vary depending on the policy and the insurer.
Death BenefitThe payment made by a life insurance policy to the designated beneficiary(s) upon the death of the insured person.
DependentA person who is financially dependent on the policyholder and would suffer a financial loss in the event of their death. Dependents may include a spouse, children, or other family members who are financially dependent on the policyholder.
Disability Income RiderA type of rider that can be added to a life insurance policy that provides a source of income for the policyholder in the event that they become disabled and unable to work. The rider pays a specified amount of money, typically a percentage of the insured's income, to the policyholder for a specified period of time, such as until the policyholder reaches retirement age or until they are able to return to work. The amount of income and the duration of payments will vary depending on the terms of the rider. The premium for this rider is usually based on the insured's occupation, age and the benefit amount. The rider can be added as an option to a term, whole or universal life insurance policy.
Effective DateThe date on which the coverage provided by the policy begins. This date is established when the policy is first issued and can be found in the policy's declarations page. The effective date is also known as the "in force" date.
ExclusionsCertain conditions or circumstances in which the insurer will not pay out a death benefit to the policyholder's beneficiaries. These can include, but are not limited to, suicide, death resulting from a criminal act, death resulting from participation in a dangerous activity, and death resulting from a pre-existing medical condition that was not disclosed to the insurer at the time the policy was issued.
Expiry DateThe date on which the policy will no longer be in force and will no longer provide coverage to the policyholder. It's the date on which the policy will expire and the insurance company will no longer be responsible for paying out any death benefits.
Face ValueAlso known as the death benefit, is the amount of money that the life insurance policy will pay out to the beneficiaries of the policyholder upon the policyholder's death. It is the amount of coverage that the policyholder has purchased and is specified in the policy documentation. The face value is typically chosen by the policyholder when the policy is purchased, and the premium is calculated based on the face value, the policyholder's age, and other factors such as their health and lifestyle.
Final ExpenseA type of life insurance that is specifically designed to cover the costs of a person's final expenses, such as funeral costs and outstanding medical bills. It is usually a smaller face value, usually $5,000 - $50,000, coverage that can be purchased by people of all ages, including seniors. The death benefit is paid out to the policyholder's beneficiaries, who can use the money to pay for the policyholder's funeral and other final expenses.
Grace PeriodA specific period of time after the due date of a premium payment during which the policyholder can still pay their premium without the policy lapsing. If the policyholder pays the premium within the grace period, their coverage will continue and the policy will not be canceled.
Guaranteed IssueA type of life insurance that is designed for individuals who may have difficulty obtaining coverage through traditional means due to their age or health. It is typically offered to people who are over the age of 50 or who have pre-existing medical conditions. Guaranteed issue policies do not require a medical exam or any health-related questions, and the coverage is guaranteed to be issued to the applicant, regardless of their health status.
Guaranteed Universal Life InsuranceA type of permanent life insurance that provides coverage for the entire lifetime of the insured, as long as the policy is in force and premiums are paid. It is designed to provide a death benefit to the beneficiaries of the policyholder and also accumulate cash value over time. One of the main features of GUL is that it guarantees a level premium and a fixed death benefit for a specific period of time, usually to age 90, 95, 100, or even 121. The premium remains level throughout the guaranteed period even if interest rates decrease, this means the policy will not be canceled due to the inability to pay increased premiums.
HazardIn life insurance, a hazard refers to any situation or condition that increases the risk of the insured person dying during the term of the policy. Hazards can include factors such as an individual's occupation, hobbies, and lifestyle choices. Insurance companies use hazards as a way to assess the risk of insuring an individual, and they can use that information to determine the premium for a policy or to deny coverage.
Indexed Universal Life Insurance (IUL)A type of permanent life insurance that provides coverage for the entire lifetime of the insured, as long as the policy is in force and premiums are paid. It is similar to traditional Universal Life insurance in that it also provides a death benefit to the beneficiaries of the policy and also accumulates cash value over time. One of the main differences between IUL and traditional universal life insurance is that the cash value of an IUL policy is tied to a stock market index, such as the S&P 500, rather than earning a fixed interest rate. Usually, the cash value of the policy will increase when the stock market index increases, but will not decrease when the stock market index decreases. This means that the cash value of the policy has the potential to increase (up to a cap stated in the policy) at a faster rate than traditional universal life insurance. IUL policies also have a minimum guaranteed interest rate, which means that the cash value will not decrease below a certain level.
Insurable InterestA financial or emotional stake that an individual has in something that they are insuring. In the context of life insurance, insurable interest means that the policyholder has a financial or emotional stake in the life of the person they are insuring and would suffer a financial loss if that person were to die.
Insurance PolicyA legal contract between an insurance company and a policyholder. The policy outlines the terms and conditions of the insurance coverage, including the type of coverage, the length of the coverage, the premium, and the exclusions. It also specifies the benefits that will be paid out in the event of a loss or claim.
InsuredThe person that is covered by the policy in the event of a loss or claim. The insured may also be referred to as the policyholder.
InsurerA business that provides insurance coverage to individuals and organizations. Insurers are responsible for underwriting, issuing, and administering insurance policies. They assess the risk of insuring an individual or organization and determine the premium that will be charged for the policy. In the event of a claim, insurers are responsible for evaluating the claim and determining if it is covered under the policy, and if so, for paying out the benefits.
Joint Life InsuranceA type of life insurance policy that covers two people, usually a married couple or partners. The policy is designed to provide a death benefit to the beneficiaries of both policyholders in the event of the death of either person. The policy typically pays out the death benefit only once, to the first person who dies, and the policy ends.
Lapsed PolicyAn insurance policy that is no longer in force because the policyholder has failed to pay the premium. This can happen if the policyholder misses a payment or if the policyholder cancels the policy. Once a policy has lapsed, it can no longer provide coverage for the policyholder. In some cases, the policyholder may be able to reinstate a lapsed policy by paying the past due premium, but this is not always possible.
Level TermA type of term life insurance that provides a death benefit that remains constant over the term of the policy. The death benefit is guaranteed to stay the same, regardless of changes in the policyholder's age or health.
Life InsuranceA contract between an individual and an insurance company in which the individual pays premiums and, in the event of their death, the insurance company pays a death benefit to the named beneficiaries. There are two main types of life insurance: term life insurance and permanent life insurance.
Life Insurance BrokerageA business that specializes in selling life insurance policies. These brokers work as intermediaries between life insurance companies and customers, helping customers find and purchase the right life insurance policy to meet their needs and budget. They can provide customers with information and advice on different types of life insurance policies.
Living BenefitsAdditional features that some life insurance policies offer that allow policyholders to access a portion of their death benefit while they are still alive. These benefits can be used to cover certain expenses, such as long-term care, terminal illness, or chronic illness. They can also provide a source of income during retirement.
Long-Term Care RiderA type of insurance rider that can be added to a life insurance policy or an annuity contract. It allows policyholders to access a portion of the death benefit while they are still alive, if they require long-term care due to a chronic illness or disability. The funds can be used to pay for expenses related to long-term care, such as in-home care, assisted living, or nursing home care.
MisstatementA misstatement in life insurance refers to providing false or inaccurate information on a life insurance application. This can include things like failing to disclose a pre-existing medical condition, misstating one's occupation or hobbies, or providing false information about one's age or gender. Misstatements on a life insurance application can have serious consequences. If an insurer discovers a misstatement after a policy has been issued, they may void the policy and refuse to pay out any death benefits. In some cases, the policyholder may also face legal action. It's important to be honest and transparent when filling out a life insurance application to avoid any potential issues.
Paramedical ExamA medical examination that is conducted by a trained professional, typically a nurse or a paramedic, as part of the underwriting process for a life insurance policy. The exam usually includes measuring the applicant's height, weight, blood pressure and pulse, as well as collecting blood and urine samples. The samples will be analyzed to check for any material health issues such as diabetes, cholesterol level, and other health problems. The exam is conducted to verify the information provided by the applicant on the insurance application and to assess the applicant's overall health status.
Permanent Life InsuranceA type of insurance that provides coverage for the entirety of the policyholder's life, as long as premiums are paid. It typically includes a savings component, known as the cash value, that grows over time and can be borrowed against or used to pay premiums. Unlike term life insurance, which provides coverage for a specific period of time, permanent life insurance does not expire as long as the policy is in force. Some examples of permanent life insurance policies include whole life, universal life, and indexed universal life.
PolicyA legal contract between an insurance company and a policyholder, in which the insurer agrees to pay a specified sum of money (the "benefit") in the event of a specified loss or event (the "covered peril"). Policies can cover a wide range of risks, including loss of life, property damage, liability, and more.
PolicyholderA person or entity that owns an insurance policy. They are the one who pays the premium to the insurer and in return the insurer agrees to pay a specified sum of money (the "benefit") in the event of a specified loss or event (the "covered peril"). Policyholders can be individuals, groups of individuals, or organizations. Policyholders have certain rights and responsibilities under the terms of their insurance policy, such as the right to file a claim in the event of a covered loss.
Policy LoanA loan that a policyholder can take against the cash value of their life insurance policy. The cash value of a life insurance policy is the amount of money that has accumulated in the policy over time as a result of premiums paid, minus any fees or charges assessed by the insurance company.
Policy PeriodThe length of time for which a life insurance policy is in effect. The policy period is typically specified in the policy contract and can range from a specific number of years to the entire lifetime of the insured individual depending on the type of life insurance policy you have.
Policy ScheduleA document that outlines the details of a life insurance policy, including the policyholder's name, the coverage amount, the premium, and the terms and conditions of the policy. It also includes information on the beneficiaries of the policy and any riders or endorsements that have been added to the policy. The schedule is provided to the policyholder by the insurance company at the time of policy issuance.
PremiumThe amount of money that a policyholder must pay to the insurance company in exchange for coverage under a life insurance policy. The premium is typically paid on a regular basis, such as monthly or annually, and is calculated based on a variety of factors, including the policyholder's age, health, and coverage amount.
Primary BeneficiaryThe person or entity that is first in line to receive the death benefit from a life insurance policy. The primary beneficiary is designated by the policyholder at the time the policy is purchased, and their name and contact information is listed on the policy.
QuoteAn estimate of the cost of a life insurance policy based on the information provided by the potential policyholder. The quote typically includes the coverage amount, the premium, and the terms and conditions of the policy. Keep in mind that a quote is not a guarantee of the final premium and the actual price may vary depending on the underwriting process and the final policy issued.
RidersAdditional features or options that can be added to a life insurance policy for an additional cost. Riders allow policyholders to customize their coverage to meet their specific needs and provide additional benefits beyond the basic coverage provided by the policy.
SettlementThe process of receiving the death benefit from a life insurance policy after the policyholder has died. Once the death of the policyholder is confirmed and the insurance company has received the necessary death certificates and other required documentation, the settlement process begins.
Standard RiskRefers to an individual who is considered to be in good health and does not have any major risk factors that would affect their life expectancy. Standard risks are typically considered to be the lowest risk category and as a result, they usually pay lower premiums than individuals who are considered to be higher risk. Factors that can be considered when determining standard risk include age, gender, occupation, medical history, and lifestyle.
Suicide ClauseA provision that is typically included in life insurance policies that limits or excludes coverage in the event of suicide. The clause typically states that the insurance company will not pay the death benefit if the policyholder dies as a result of suicide within a certain period of time after the policy is issued.
SurrenderThe process of canceling a life insurance policy before its maturity date and receiving the cash value of the policy. Surrendering a policy means giving up the death benefit and any other benefits provided by the policy in exchange for the cash value.
TermThe length of time for which the coverage of your life insurance policy is in effect.
Term Life InsuranceA type of life insurance that provides coverage for a specific period of time, known as the term. The policyholder pays a premium for the coverage during the term of the policy, and if the policyholder dies during the term, the death benefit will be paid to the beneficiaries. Term life insurance is the most basic and most affordable type of life insurance. Term life insurance policies come in different terms, such as 10, 20, 25, or 30 years, and policyholders can choose the term that best suits their needs. The premium for a term life insurance policy is generally lower than that of a permanent life insurance policy, such as whole life or universal life, because the coverage is for a specific period of time.
UnderwriterA professional who assesses the risk associated with insuring an individual or organization and determines the terms and conditions of a policy.
UnderwritingThe process by which an insurance company evaluates the risk associated with insuring an individual and determines the terms and conditions of a policy.
Universal Life InsuranceA type of permanent life insurance that provides a death benefit to the beneficiaries of the policy, similar to other types of permanent life insurance like whole life. However, unlike whole life, universal life insurance allows policyholders more flexibility in terms of premium payments and death benefit options. One of the main advantages of universal life insurance is that it allows policyholders to change their premium payments and death benefit amounts within certain limits, providing more flexibility than traditional whole life policies. The cash value of a universal life policy can also be invested in a variety of options, such as bonds, stocks and other securities, which can provide the potential for higher returns than traditional whole life insurance policies.
Variable Universal Life Insurance (VUL)A type of permanent life insurance that provides both a death benefit and a savings or investment component. It is similar to universal life insurance but with the added feature of allowing policyholders to allocate their cash value into different investment options, such as mutual funds. One of the main advantages of variable universal life insurance is that it allows policyholders to participate in the potential growth of the stock market or other securities, and also allows them to have more control over the investment options of their cash value.
Waiting PeriodA specific period of time after the policy is issued during which the policyholder is not eligible to receive the death benefit if they die.
Whole Life InsuranceA type of life insurance that provides coverage for the policyholder's entire life, as long as the premiums are paid. This type of policy guarantees a death benefit to the beneficiaries of the policy, regardless of when the policyholder dies. Whole life policies also have a savings component, where a portion of the premium is set aside in a cash value account which accumulates over time, and can be accessed by the policyholder. One of the main advantages of whole life insurance is that it provides lifelong coverage and the death benefit is guaranteed as long as the premiums are paid. The cash value component can also provide policyholders with a source of savings that they can access through policy loans or withdrawals.
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