Install
Buying Life Insurance terms
Deciding how much cover to buy, what it costs and who to buy it from.
Buy-sell agreementA contract among business owners that sets who buys a departing or deceased owner's share and at what price, often funded with life insurance.Captive agentAn insurance agent who sells mainly or only one company's policies, usually with training and support from that company in return.Cross-purchase agreementA buy-sell arrangement in which each business owner buys and owns life insurance on the others and uses the payout to buy a deceased owner's share.Dependent coverageLife insurance on a spouse, domestic partner or children, added through an employer plan or a rider, that pays the employee if a covered dependent dies.EndorsementA written change attached to an insurance policy that adds, removes or modifies its terms, either when it is issued or later.Entire contract clauseA required policy provision stating that the policy, the attached application and any riders or endorsements are the whole agreement.Entity-redemption agreementA buy-sell arrangement in which the business itself owns life insurance on each owner and uses the payout to buy back a deceased owner's share.Executive bonus planAn employer benefit in which a company pays a bonus to cover premiums on a life insurance policy the executive owns, deducting it as compensation.Face amountThe dollar amount of coverage shown on a life insurance policy's specifications page, the base death benefit before loans, riders or dividends.Free-look periodA window after a policy is delivered when the owner can cancel it and get a refund of premiums paid, set by state law and printed on the policy.General agent and BGAA firm or person holding direct insurer contracts that supplies agents with products, case help and commission processing, earning an override.Grace periodThe window after a missed premium due date, usually 30 or 31 days, when life insurance stays in force and the overdue premium can still be paid.Group life insuranceCoverage issued under one master contract to members of a group, usually employees, often at one or two times salary with little or no underwriting.Guaranteed insurability optionA rider that lets you buy more coverage on set dates or after life events such as marriage or a birth, without new medical underwriting.Imputed incomeThe taxable value the IRS assigns to employer-paid group-term life insurance above $50,000, added to your W-2 wages though you receive no cash.Independent agentA licensed agent who holds contracts with several insurers and can compare their products, rather than selling for a single company.Insurance brokerA licensed insurance professional who can shop policies from many insurers on a buyer's behalf, typically paid by commission from the chosen insurer.Key person insuranceA policy a business buys on an owner or essential employee, naming itself beneficiary, to cover losses and replacement costs if that person dies.LapseThe end of coverage because a premium went unpaid past the grace period or, in universal life, because cash value could no longer cover the charges.Needs analysisA structured estimate of how much coverage a family would need, adding debts, income replacement and future goals, then subtracting existing assets.Policy anniversaryThe yearly return of a policy's starting date, when many contract features, such as dividends, rate changes and options, take effect.Policy dateThe date printed in a life insurance contract from which premium due dates, anniversaries and usually the insured's rating age are measured.ProducerThe legal term for a person licensed by a state to sell, solicit or negotiate insurance, covering agents and brokers alike.ReinstatementRestoring a lapsed life insurance policy to force, usually by paying overdue premiums with interest and proving the insured is still insurable.RiderAn optional provision attached to a life insurance policy that adds, limits or changes benefits, usually for an extra charge.Social Security lump-sum death paymentA one-time $255 payment from Social Security to an eligible surviving spouse or child when an insured worker dies.Voluntary life insuranceGroup life coverage offered through an employer that employees choose to buy and pay for themselves, usually by payroll deduction.Waiver of premiumA rider that keeps a policy in force without further payments if the insured becomes totally disabled, usually after a waiting period.Free withdrawal provisionAn annuity clause that lets you take out a set share of the contract value each year, often 10%, without paying a surrender charge.Lapse-supported pricingPricing that counts on many owners dropping coverage before it pays out, letting the insurer charge less than if everyone kept the policy.Modal premiumThe amount due per installment when you pay monthly, quarterly or semiannually instead of yearly, which usually costs more in total over a year.Mortality and expense (M&E) chargeAn annual variable annuity fee, charged as a percentage of account value, that pays for the insurer's guarantees, sales costs and administration.Multi-year guaranteed annuity (MYGA)A fixed deferred annuity that locks in one interest rate for a set term, often three to 10 years, much like a bank CD but issued by an insurer.PremiumThe amount a policy owner pays an insurer, monthly, quarterly, yearly or in one sum, to keep life insurance coverage in force.Surrender chargeA fee deducted from a policy's or annuity's value if you cancel or withdraw too much in its early years, usually shrinking each year.Embedded insuranceCoverage offered inside another purchase or app — at checkout, during a loan application or on a benefits platform — rather than bought separately.InsurtechTechnology companies and tools that change how insurance is sold, underwritten or serviced, such as online applications and data-driven instant decisions.ComdexA 1-to-100 composite that converts an insurer's ratings from several agencies into percentiles and averages them into one strength score.Financial strength ratingAn independent agency's letter-grade opinion of an insurer's ability to pay claims and meet its policy obligations over time.