Glossary of Life Insurance Terms

Free term life insurance information using our glossary from Matrix Direct.

The Terms of Term Life: Life Insurance Definitions

Life insurance has its own vocabulary. Some insurance terms sound familiar, but have a different meaning when used in the life insurance world. The following insurance glossary provides insurance terms and life insurance definitions to help you speak the "language of life."

Attained Age (Age Last Birthday)

A method for determining the age of the proposed insured for premium calculations. This method uses the proposed insured's actual age in years. For example, a person who is 34 years and 5 months old would be classified as a 34-year old, as would a person who is 34 years and 7 months old. (See also: Nearest Age)

Beneficiary

The beneficiary of your life insurance policy is the person designated by you to receive the policy benefits upon your death. You may designate that the benefits from your policy be allocated to multiple beneficiaries. And you may change your beneficiary designations at any time.

Coverage Amount / Face Amount

The initial value of the policy to be paid to the insured's beneficiary(ies) in the event of the death of the insured while the policy is in force. This value does not include adjustments for outstanding policy loans, withdrawals, dividends, paid-up additions or late/outstanding premium payments.

Date of Birth

The premiums that insurance companies charge for life insurance are based in large part on the age of the proposed insured. Some companies use the attained age of the insured in this calculation, while other companies use the nearest age of the insured.

Health & Lifestyle Profile

The premiums that insurance companies charge for life insurance are also based in large part on the overall health and lifestyle profile of the proposed insured. Typically, individuals in good health who do not use any kind of tobacco products or engage in any hazardous activities will be able to obtain less expensive coverage than individuals who are in poor health or who use tobacco or who engage in hazardous activities. Different insurance companies use different criteria in determining the health status and lifestyle of the proposed insured.

Insured

An individual who is currently covered under an existing life insurance policy.

Length of Coverage

Different term life insurance policies have different durations.
10, 15, 20, and 30-year term life insurance policies are very common. A 10-year level term policy will have an initial 10-year period in which premiums are level.

Nearest Age

A method for determining the age of the proposed insured for premium calculations. This method takes into account whether the proposed insured is nearer to his/her last birthday or his/her next birthday. For example, a person who is 34 years and 5 months old would be classified as a 34-year old for the premium calculations. In contrast, a person who is 34 years and 7 months old would be classified as a 35-year-old for the premium calculations. (See also: Attained Age)

Premium

A payment to a life insurance company in exchange for a life insurance policy.

Premium Mode

The frequency in which premiums are paid. Typically, the total annual premium is slightly higher when payments are spread out over the course of the year as opposed to being paid all at once. For example, a policy with a $100 annual premium may also offer a $51 semiannual premium ($102 total annual cost), a $26 quarterly premium ($104 annual cost) and a $9 monthly bank draft premium ($108 annual cost).

Proposed Insured

An individual who is applying for coverage under a life insurance policy. (see also: Insured)

Underwriting Classification

(See: Health & Lifestyle Profile, above.)

Sex

The gender (male or female) of the insured or proposed insured.

State of Residence

The state in which the insured or proposed insured resides. It is not unusual for a given insurance company to be licensed to conduct business in some states and not in others. If an insurance company is not licensed to do business in a particular state, the company may not offer any of its products in that state. If an insurance company is licensed to do business in a particular state, each of the company's products must be individually approved for sale in that state. It is not unusual for a given insurance company to have products that are approved for sale in one state and not approved for sale in others.

Underwriting Guidelines

Underwriting guidelines are the health and lifestyle criteria for the proposed insured that life insurance companies use to determine the appropriate underwriting classification upon which to base the premiums for the coverage. These criteria typically include age, gender, tobacco use, height/weight build, family history of heart disease or cancer, cholesterol levels, blood pressure levels, specific health conditions, driving record, hazardous occupation or activities, military service, aviation, foreign travel or residency, U.S. citizenship and felony criminal activity. It is important that all of these underwriting guidelines are taken into consideration when evaluating any premiums quoted for life insurance coverage.

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