Understanding Life Insurance Language

One of the most important tools for choosing the best life insurance policy for you is a grasp of life insurance terms and language. Become an expert on understanding life insurance policy language so you can make informed coverage choices.

Basic Life Insurance Policy Language

If life insurance is completely new to you, here are some very basic insurance policy terms to help you understand life insurance policy language:

• Beneficiary: This is the person, people or organization that will receive payment when the insured person dies. Common beneficiaries are children, spouses and charities.
• Cash Surrender Value: This is the amount of money available to the policy owner if he or she terminates the policy for any reason other than death.
• Death Benefit or Face Amount: This is the amount of money paid to the beneficiaries when the insured person dies.
• Owner: This is the person or organization controlling the policy and paying the premiums. The owner is often, but not always, the person who is insured. At times the policy owner may be a corporation or trust.
• Permanent Life Insurance: Available under many different names, including whole life and universal life, this type of insurance protects you for your entire life, as long as you keep paying your premiums, or the cash value of your policy covers its monthly maintenance.
• Term Life Insurance: This type of life insurance covers you only during a specific, defined time frame such as 10 or 20 years.

A Few More Life Insurance Policy Terms

As you become comfortable with basic life insurance jargon, you can add a few more terms to your vocabulary:

• Grace Period: This is the time period after your monthly policy anniversary during which your policy stays in force if your net cash value dips below your monthly expense charge.
• Irrevocable Beneficiary: A beneficiary that cannot be changed or removed from the policy without his or her consent.
• Maturity Date: This is the date that signals the end of the contract policy term.
• Rider: A rider is a written attachment to a life insurance policy that reduces or increases the policy's coverage or terms. Riders may increase your premium amount.