Home > Life Insurance Glossary
Written by
Dvir Mosche
|
Licensed Agent (NPN: 18474584)
Life Insurance Glossary: Over 50 Terms You Should Know
Shopping for life insurance means running into words that are easy to mix up. This glossary explains 50 common terms in plain language, so you can read a policy or talk with an agent and know what each word means. Many of these terms come up when you look into final expense insurance, a small whole life policy that helps cover funeral and burial costs.
How to Use This Glossary
This glossary lists common life insurance words in plain language, grouped alphabetically. If a word confuses you while reading a policy, find its letter group and look it up.
The terms here apply to most kinds of coverage, including final expense insurance, which is the small whole life policy many seniors use to cover funeral and burial costs.
You do not need to read this list in order. Skim for the word you need, or read a full group to get comfortable with the language before you talk with an agent.
A few terms mean nearly the same thing but are worded differently by different companies. Where that happens, the definition notes it, so you are not thrown off when one company’s paperwork uses a word another company does not.
Terms A–D
| Term | What it means |
|---|---|
| Accelerated Death Benefit | A feature that lets you take part of your own death benefit early if a doctor confirms you have a qualifying terminal illness. The money you use is subtracted from what your family receives later. Many policies include it at no extra cost. |
| Accidental Death Benefit | An add-on that pays an extra amount if death is caused by a covered accident. It does not pay extra for death from illness or natural causes. |
| Actuary | A math and statistics expert who helps an insurance company set its prices. They study how likely claims are so premiums can be priced fairly. |
| Application | The form you fill out to apply for a policy. It asks about your age, health, and habits, and your answers help decide your price and whether you are approved. |
| Assignment (Funeral Home Assignment) | A signed agreement that lets the insurer pay the funeral home directly out of the death benefit. Any money left over still goes to your beneficiary. This is common with burial insurance because it spares the family from paying the funeral bill up front. |
| Beneficiary | The person or people you name to receive the death benefit when you pass away. You can name more than one and choose how the money is divided. |
| Cash Value | A savings amount that slowly builds inside a whole life policy over the years. You can borrow against it or withdraw from it while you are still living. |
| Claim (Death Claim) | The request your beneficiary files with the insurer to collect the death benefit. It usually requires a claim form and a certified death certificate. |
| Contestability Period | Usually the first two years of a policy, when the insurer can review your application and deny a claim if it finds false or missing health answers. After this window, a valid claim is much harder to refuse. A new period starts over if the policy lapses and is reinstated. |
| Contingent Beneficiary | Your backup beneficiary. This person receives the death benefit only if your first (primary) beneficiary has already died. |
| Death Benefit | The money the insurer pays your beneficiary when you die. On a final expense policy, this amount is often between $5,000 and $35,000. |
| Dividend | A share of the company’s surplus that some whole life policies pay to policyowners. Dividends are not guaranteed and depend on how the insurer performs. |
Terms E–H
| Term | What it means |
|---|---|
| Endowment | A type of policy that pays out either when you reach a set age (its maturity date) or when you die, whichever comes first. It is uncommon today and was built more for savings goals than for end-of-life costs. |
| Exclusion | A situation the policy will not pay for. A common one is the suicide clause, which usually limits the payout if death is by suicide in the first two years. |
| Face Amount | The amount of coverage printed on the policy, also called the face value. It is usually the same as the death benefit before any loans or add-ons change it. |
| Final Expense Insurance | A small whole life policy built to cover funeral, burial, and other end-of-life costs. Coverage usually runs from about $5,000 to $35,000. It is also known as burial insurance or funeral insurance. |
| Free Look Period | A window after you receive the policy — usually 10 to 30 days, depending on your state — when you can cancel it for a full refund. Some states require a longer window for senior buyers. |
| Grace Period | Extra time after a missed premium payment, usually about 30 days, before the policy lapses. If you pay within this window, your coverage keeps going without a break. |
| Graded Death Benefit | A payout structure where the full benefit is not available for natural death during the first two to three years. If you die of natural causes in that window, your family usually gets the premiums paid plus interest (often around 10%), while accidental death is typically paid in full right away. This is common on burial insurance for people with health issues. |
| Guaranteed Issue | A policy you cannot be turned down for, with no health questions and no medical exam. In trade, it always carries a two-year waiting period for natural death and costs more per dollar of coverage. It is a common final expense choice for people with serious health problems. |
Terms I–M
| Term | What it means |
|---|---|
| Insurable Interest | A real stake in the insured person’s life, meaning you would suffer financially or personally if they died. You must have it to take out a policy on someone. |
| Insured | The person whose life the policy covers. When the insured dies, the death benefit is paid. |
| Irrevocable Beneficiary | A beneficiary who cannot be removed or changed without their written permission. This is different from a normal (revocable) beneficiary, whom you can change any time. |
| Lapse | When a policy ends because premiums were not paid within the grace period. Coverage stops, and getting it back may require reinstatement. |
| Level Death Benefit | A death benefit that stays the same for the life of the policy. Most final expense policies use a level benefit so your family knows the exact amount. |
| Level Premium | A premium that does not go up as you age. You pay the same amount for as long as you keep the policy. |
| Living Benefits | Features that let you use part of the policy while you are still alive, such as the accelerated death benefit for a terminal illness. Not every policy includes them. |
| Loan (Policy Loan) | Money you borrow against the cash value of a whole life policy. Any balance you do not pay back is subtracted from the death benefit. |
| Maturity Date | The age or date when a whole life policy is treated as fully paid and may pay out its value, often at age 100 or 121. Most people pass away long before reaching it. |
| Modified Endowment Contract | A cash value policy funded with too much money too fast, which causes the IRS to strip away some tax advantages. This is rarely a concern with small burial policies. |
| Modified Whole Life | In final expense, this usually means a policy with a waiting period: die of natural causes in the first two to three years, and your family receives the premiums paid plus interest instead of the full benefit. The term is sometimes also used for a policy whose premium starts lower and later steps up, so ask which structure a plan uses. |
| Mortality Charge | The part of your premium that pays for the basic cost of insuring your life. It is based on your age, health, and the size of the death benefit. |
Terms N–R
| Term | What it means |
|---|---|
| Non-Forfeiture Options | Choices that let you keep some value if you stop paying on a whole life policy that has built cash value. Common options are taking the cash or switching to a smaller paid-up policy. |
| Paid-Up Additions | Small extra pieces of whole life coverage bought with a policy’s dividends. They raise your cash value and death benefit without raising your premium. |
| Paid-Up Policy | A policy that is fully paid, with no more premiums ever due. Coverage stays in force for the rest of your life. |
| Policy | The written contract between you and the insurer. It lists the coverage, the premium, and the rules both sides agree to. |
| Policyowner | The person who owns and controls the policy. This is often, but not always, the same person as the insured. |
| Premium | The payment you make to keep the policy active, usually monthly. On a final expense plan, the premium is often fixed for life. |
| Proceeds | The money paid out under the policy, most often the death benefit sent to your beneficiary. |
| Rated Policy | A policy offered at a higher price because the insurer views you as a higher risk, often due to health. The rating reflects added risk, not a punishment. |
| Reinstatement | Bringing a lapsed policy back to active status. You usually must pay the missed premiums with interest and answer health questions again, and a new contestability period may start. |
| Renewable Term | A term policy you can renew at the end of its term without a new medical exam, though the premium usually rises at each renewal. |
| Rider | An optional add-on that changes or expands a policy, such as an accidental death benefit or waiver of premium. Some riders cost extra and some are included. |
Terms S–Z
| Term | What it means |
|---|---|
| Simplified Issue | A policy with health questions but no medical exam. If you qualify, coverage usually starts right away with no waiting period, and it is a common, lower-cost type of burial insurance. |
| Single Premium Whole Life | A whole life policy you pay for with one large lump sum instead of monthly payments. It is fully paid from day one, and the IRS usually treats it as a modified endowment contract for tax purposes. |
| Surrender | Canceling a permanent policy in exchange for its cash value. Doing this ends the coverage. |
| Surrender Charge | A fee the insurer keeps if you surrender a policy in its early years. The charge shrinks over time and eventually goes away. |
| Term Life Insurance | Coverage that lasts only for a set number of years, such as 10 or 20. It pays only if you die during that term and builds no cash value. |
| Underwriting | The insurer’s process of reviewing your age, health, and history to decide whether to insure you and at what price. |
| Universal Life Insurance | A permanent policy with flexible premiums and a cash value that earns interest. It is more adjustable than whole life but needs more attention to manage. |
| Waiting Period | A set time at the start of some policies, usually two years, before the full benefit is payable for natural death. Dying of natural causes in this window usually returns the premiums paid plus interest. This is not the same as the contestability period. |
| Waiver of Premium | A rider that pays your premiums for you if you become totally disabled, keeping the policy in force while you cannot work. |
| Whole Life Insurance | Permanent coverage that lasts your whole life, with a level premium and a cash value that grows over time. Final expense policies are a small type of whole life insurance. |
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About the Author
Dvir Mosche is an award-winning independent insurance agent and the founder of Palmetto Mutual, a trusted insurance brokerage specializing in Final Expense Life Insurance. Since entering the industry in 2017, he has been recognized multiple times as a top agent for his dedication to educating and assisting seniors in finding the proper coverage. His mission is to simplify the process, provide honest and personalized guidance, and ensure that every client gets coverage they can depend on for life.
