Life Insurance Dictionary: 55 Qs by Quility

Last updated: November 16, 2020

Life insurance can seem complicated. We get it. But at Quility, our goal is to make it simple and easy. Whether you’re shopping around for your best-fit plan or diving straight into our ten-minute online application, here are 55 life insurance terms you need to know.

A

Advisor

Quility’s insurance advisors are licensed insurance agents. This means that all of our advisors have passed their respective state’s insurance exam and are currently maintaining their licenses as mandated by their state’s education requirements. In addition, we formed our nationwide network of insurance advisors by combining our partner companies, Symmetry Financial Group and Asurea Insurance Services. Our advisors undergo extensive in-house training, receive ongoing mentoring and uphold Quility’s core values. In short, our trusted advisors are certified and have years of experience sharing their expertise with clients.

Alternate Payor
When filling out an insurance application, you may be asked if you, the “primary insured,” are paying for your own policy, or if you have an “alternate payor,” such as a spouse or loved one, paying for the policy in question.
Annuity
An annuity is a contract between a company and an individual which safeguards the individual’s finances and provides them with tax-deferred savings as guaranteed income in retirement. How it works: when the contract is “annuitized,” the individual will receive regular payments from the company.
Immediate annuity pays in one year and a deferred annuity pays on the date you choose
Two popular types of annuities: immediate and deferred.

B

Beneficiary
The beneficiary of your life insurance policy is the person(s) who will receive the death benefit when you pass away. You can choose more than one beneficiary (so long as the sum equivalent of the allocation share adds up to 100%) and you can also name secondary and tertiary beneficiaries.
Burial Insurance
Also known as final expense insurance, burial insurance is a type of life insurance designed to cover the costs associated with a funeral or burial. As long as premiums are paid, you are guaranteed a death benefit.

C

Carrier

An insurance carrier is the company that provides your insurance coverage. This is interchangeable with insurer, insurance company or insurance provider. While you can buy a policy through an insurance broker (like Quility), you will pay premiums to your carrier, submit claims to your carrier and reach out to your carrier if you have any issues with your active policy. 

Cash Accumulation
When shopping for a permanent life insurance policy, you may read about a policy offering cash accumulation – which simply put means that your policy has a cash value component.
Cash Surrender Value

The cash surrender value is how much money you would receive if you no longer needed your permanent life insurance policy. With some types of life insurance, you can surrender your policy and receive a sum of funds equivalent to the surrender cash value.

Cash Value

With cash value life insurance, a portion of your policy’s premium payment is put towards an account where funds grow tax-deferred for the duration of your policy. This cash value can be used to fund your children’s education, pay off debts and build retirement savings.

Child Protection Rider
This rider – or policy “add-on” – provides a death benefit if the insured’s child passes away.
Claim

A beneficiary would submit a life insurance claim to the insurance company in order to receive the death benefit of the insured’s life insurance policy. Typically, the beneficiary would do this soon after the insured passes away and would need to include an official death certificate.

Contingent Beneficiary

When designating your beneficiary, you should also think about choosing a contingent beneficiary – the person(s) who will receive the death benefit should your primary beneficiary pass away. For example, you might choose your spouse to be your primary beneficiary and therefore receive 100% of the death benefit. But you can also select your son and daughter as your contingent beneficiaries, who will each receive 50% of the death benefit if your spouse dies.

Coverage

When selecting how much life insurance coverage is right for you, consider any outstanding loans or debts, as well as the amount of income needed if you pass away unexpectedly. Being “covered” means that your life insurance policy is active, and that your beneficiary(ies) will receive a death benefit if you pass away.

How to calculate your term life insurance coverage amount
Critical Illness Insurance
Critical illness insurance is a type of life insurance that protects against serious medical conditions. It provides a lump sum to cover medical bills and treatments not covered by your health insurance.
Critical Illness Rider
This rider – or policy “add-on” – pays out benefits if the insured is diagnosed with a medical condition, such as cancer, stroke, kidney failure or heart attack. Specific medical conditions will be spelled out in your policy’s terms.
Read More on Critical Illness and Disability Insurance
Critical illness and disability insurance are often considered “paycheck protection insurance.” Learn more about how a life insurance policy can help you protect your income.

D

Death Benefit

A death benefit is the amount of money your insurance company will pay to your chosen beneficiary(ies) if you pass away while your policy is in force.

Debt
Many Americans are dealing with household debts, such as mortgages, auto loans, credit card bills, and student loan debt. The Debt Free Life program can help you eliminate all of these debts by harnessing the power of a permanent life insurance policy.
Deferred Annuity
A deferred income annuity is an annuity that provides income later in life. After you pay premiums, your income stream will begin on a date of your choosing.
Dependent
Many individuals consider purchasing life insurance because they have dependents: a person or multiple people who are financially dependent on them. If you were to die, a life insurance policy would ensure that your dependents don’t face financial hardship.
Disability Insurance
Disability insurance is a type of life insurance that protects against illness or injury. If you are unable to work, your policy provides payouts to help make up for lost income.
Read More on Living a Debt Free Life
Learn more about the Debt Free Life program and how you can harness the power of your permanent life insurance policy to get of out of debt. For good.

E

Existing Policies

When filling out an insurance application, you may be asked if you have any existing policies (I.e. active life insurance or annuity contracts). Existing policies only apply to the proposed insured.

F

Face Value

For life insurance policies, the face value is the death benefit – the amount of money your insurance company will pay your beneficiary. It is tax-free.

Final Expense
Final expense insurance is a whole life insurance policy that covers your end-of-life expenses. By planning ahead for your memorial or funeral service, you can have lifelong peace of mind knowing that everything’s covered.
Fully Underwritten

A fully underwritten life insurance policy requires a medical exam and typically a blood and urine sample in order to establish your rate. Not all policies are fully underwritten – with Quility, you can apply online for term life insurance in less than 10 minutes with no need for a medical exam.

G

Guaranteed Issue

A guaranteed issue life insurance policy does not require a medical exam for you to qualify for coverage. Your application will not be rejected based on your medical history or other factors that would typically warrant a rejection. Guaranteed issue policies are designed for people with serious health conditions.

I

Immediate Annuity

An immediate annuity begins paying income immediately. If you purchase an immediate annuity with a lump sum and schedule future payments, you will usually start receiving income less than a year after you start making your premium payments.

In Force
Your life insurance policy is “in force”  during the time in which you make premium payments. If you pass away during this time, your beneficiary receives a death benefit.
Indexed Universal Life (IUL)

While similar to other kinds of life insurance, indexed universal life insurance policies (IULs) include both a death benefit and a cash value savings component. Your cash value account can be tied to a market index, so you have the potential upside that comes from investing in the stock market without the financial risk. Many people purchase IULs to save for retirement

Insurance Broker

Quility is an insurance broker – an intermediary between clients and insurers. We partner with over 80 major insurance companies so that we can shop on your behalf to ensure you get the best coverage at the best price.

Insurance Company

An insurance company (carrier) is the company that provides your insurance coverage. Even if you purchase a policy through an insurance broker, your company will underwrite your policy and issue the death benefit to your loved ones. Quility partners with 80+ insurance companies.

L

Laddering

This is a strategy that allows you to “ladder” policies (you would purchase several term life insurance policies with different term lengths) to cover different stages of life – leading to more affordable rates and ensuring you are paying for the right amount of coverage throughout your life.

Laddering life insurance can save you $8k or more over the course of a 30 year policy
An example of projected monthly savings when you ladder life insurance policies rather than purchase a single policy.
Licensed Agent

At Quility, all of our advisors are licensed insurance agents. In order to become a licensed agent, you must pass a state insurance exam and maintain an active license.

Life Insurance

Life insurance is a contract with an insurer. You make monthly or annual payments to keep your policy active. If you pass away while your policy is in force, your insurance company will provide your beneficiary(ies) with a death benefit. While there are many benefits to securing a life insurance policy, one of the greatest is the peace of mind you’ll gain in knowing that your loved ones are taken care of should tragedy strike.

Long-term Care Rider
This rider – or policy “add-on” – provides a payout if the insured is no longer able to perform basic daily activities such as mobility, personal hygiene and self-feeding; therefore, the policy payout would cover long-term care expenses. The insured also usually needs to be admitted to a skilled nursing facility.
Read More on Life Insurance Riders
If you’re interested in adding riders to your policy, learn more about popular options and reach out to an advisor to get started.

M

Medical Condition

When applying for life insurance, it’s important to keep your medical conditions in mind. While you can still qualify for coverage with a medical condition, rates are partially based on your health at the time of your application. Some common preexisting medical conditions that insurance companies inquire about in their underwriting processes include cancer, diabetes, high blood pressure, heart disease, and high cholesterol.

Mortgage Protection
Mortgage protection insurance is a term policy for homeowners who want to safeguard their mortgage payments should they pass away during their chosen term.

Get a mortgage protection policy in place in just a few simple steps.

P

Policy

A life insurance policy is the contract between the insured and their insurance company. Policies spell out important terms and conditions, including the insured’s premium payments and the death benefit the insurance company will pay to the beneficiary(ies).

Policyholder

A policyholder is the owner of a life insurance policy. While often interchangeable with the “insured” – the individual covered by the life insurance policy – you can also be a policyholder of a policy that names another individual as the insured.

Premium

Premiums are monthly or annual payments made by the insured to keep their policy intact.

Primary Beneficiary

The primary beneficiary of a policy is the person who receives the policy’s death benefit when the insured passes away.

Proposed Insured

When filling out an insurance application, the proposed insured refers to the person who will be covered under that life insurance policy.

Q

Quility

Quility is an insurance broker. We partner with over 80 insurance companies and offer a network of thousands of insurance advisors as well as both an online application for term life insurance and expert consultations. Our products range from term and permanent life insurance policies to debt and retirement solutions. Get to know our story!

Quote
A life insurance quote is the preliminary estimated cost of your life insurance coverage, which is usually a monthly payment you make to the insurance company. Exact rates can change throughout the underwriting process. Get your customized free quote for term life insurance in seconds.

R

Return of Premium Rider
This rider – or policy “add-on” – is a popular cash-back option. It can enable you to receive a refund of your premium payments if you do not need to use your life insurance coverage by the time your term expires.
Rider
A rider is a policy “add-on.” Riders can help safeguard your income, cover long-term care costs or refund your premiums if you do not need to use your life insurance coverage.

Pros and Cons of Life Insurance with Living Benefits

Chart explaining pros and cons of cash value life insurance, return of premium rider and living benefits riders

S

Secondary Beneficiary
Also called a contingent beneficiary, a secondary beneficiary receives the death benefit from a life insurance policy if the primary beneficiary passes away. For example, you could name your spouse your primary beneficiary; therefore, they would receive 100% of the death benefit. But you can also name your child as a secondary beneficiary so in the case that your spouse passes away before you, your child would receive the death benefit from your policy. You can also name multiple secondary beneficiaries on your life insurance policy.
Share Allocation

When naming your beneficiary(ies), you can allocate how much of the death benefit each person would receive. Whether you are naming one person to be your primary beneficiary or multiple people (such as your children), the share allocation must always add up to 100%.

Simplified Issue

Simplified issue insurance is a type of life insurance policy that you can purchase without undergoing a medical exam. Typically, this involves answering a series of medical questions within an insurance application. Most people choose this type of insurance because they want coverage fast, they do not need a complex type of policy, or they prefer to not go through the process of submitting a medical exam. 

T

Tax-deferred

Cash value life insurance and deferred annuities grow tax-deferred funds – meaning you will postpone paying taxes until you withdraw your invested money.

Term

Your term is how long your life insurance policy will be in force. When determining your term, you may consider how long you will have dependents or if your loved ones would face a financial burden should you pass away. 

Term Life Insurance
Term life insurance is a temporary life insurance policy that remains intact for a set number of years. It is generally the most affordable type of life insurance as it only covers a specified time period.
Read More on Term Life Insurance

With Quility, you can apply for a term life policy online in less than 10 minutes or schedule a one-on-one consultation with a licensed agent to find your best-fit plan.

U

Underwriting

Underwriting is a process that insurance companies use to determine the risk of insuring the individual who has applied for coverage. When applying for life insurance coverage, you will be asked to answer some questions about your health, medical history and family history – which are all part of the underwriting process.

Universal Life Insurance
Universal life insurance is a type of permanent life insurance. It is more affordable than whole life insurance and provides coverage for the average lifespan.

W

Waiver of Premium Rider
This rider – or policy “add-on” – can provide payment flexibility if the insured is unable to work due to a critical illness, injury or disability. With this rider, you can skip a certain number of premium payments and your policy will remain in force.
Whole Life Insurance
Whole life insurance is a type of permanent life insurance with fixed premiums. Coverage can range from enough to cover end-of-life expenses to a wide range of values. As long as premiums are paid, you are guaranteed a death benefit.

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Please Note: The definitions are for educational purposes only – they are not meant to be used in lieu of professional, legal or financial advice. For more information, reach out to one of our licensed insurance agents.