Life Insurance A–Z
Life Insurance A–Z explains the words you'll run into when you shop for a policy, choose coverage, name beneficiaries and file a claim. These definitions are general information, not financial, insurance, tax or legal advice, and policy terms and state rules vary. For help with your own situation, read your policy, contact your state insurance department, or talk with a licensed professional.
- Accelerated death benefit
- A feature or rider that lets the insured receive part of the death benefit while still living after a qualifying diagnosis, typically a terminal illness and, in some policies, a specified disease or long-term care need. Money paid early reduces what beneficiaries receive later, and IRS Publication 525 (2025 edition) explains when these payments can be excluded from income for terminally or chronically ill insureds.
- Related:RiderLife settlementDeath benefit (face amount)
- Accidental death benefit rider
- A rider that pays an additional amount if the insured dies in an accident; insurers sometimes describe it as double or triple indemnity. The NAIC advises checking how the rider defines an accident, and New York's Department of Financial Services notes that deaths due to sickness are excluded.
- Related:RiderDeath benefit (face amount)
- Beneficiary
- The person(s) or organization(s) you name to receive the death benefit. You can name more than one and state each one's share. The NAIC's Life Insurance Buyer's Guide notes you'll need each beneficiary's Social Security or tax identification number and suggests reviewing your choices every few years and after major life events.
- Related:Contingent beneficiaryMinor as beneficiaryOrder of precedence
- Cash surrender value
- What you would actually receive if you cancel (surrender) a cash value policy: the cash value minus any surrender charge and any outstanding loans and interest. IRS Publication 525 (2025 edition) says the part of the proceeds that exceeds your cost in the policy, generally the premiums you paid with certain adjustments, is taxable income.
- Related:Cash valueNonforfeiture optionsReplacement
- Cash value
- The savings component that builds inside many permanent policies. You may be able to borrow against it, withdraw from it or use it toward premiums. In some policies values are low in the early years and build later, so the NAIC suggests asking for a year-by-year display of values and benefits.
- Related:Cash surrender valuePolicy loanNonforfeiture options
- Contestable period
- A period after a policy takes effect during which the insurer can review the application and deny a claim for incorrect or missing information. The Texas Department of Insurance's guide (last updated December 2025) says Texas policies have a two-year contestable period, that a denial can happen even when the error was a mistake, and that reinstating a lapsed policy starts a new one. An incontestability provision limits challenges after the period ends.
- Related:Suicide clauseReplacementReinstatement
- Contingent beneficiary
- A backup beneficiary who receives the benefit if the person you named first (the primary beneficiary) dies before the insured. Naming one helps keep the money from defaulting elsewhere; the Texas Department of Insurance notes that if no beneficiary is named, or the beneficiary has died, the company pays the death benefit to the insured's estate.
- Related:BeneficiaryOrder of precedence
- Convertible term
- A term policy that lets you exchange it for a permanent policy without answering new health questions, as long as you act within the conversion period stated in the policy. The new policy's premium is higher and is generally based on your age when you convert.
- Related:Term life insurancePermanent life insuranceEvidence of insurability
- Death benefit (face amount)
- The money the policy pays when the insured dies. The face amount is the amount stated in the policy; New York's Department of Financial Services notes it doesn't include extra amounts from riders such as accidental death. The NAIC notes that any unpaid policy loans plus interest are subtracted before beneficiaries are paid.
- Related:Policy loanSettlement optionsTaxes on death benefits
- Death claim
- The request a beneficiary makes to collect the death benefit. Notify the insurer or agent, complete the insurer's claim form (Washington's insurance commissioner notes each beneficiary may need one) and send a copy of the death certificate. If the insured died during the contestable period, the insurer may investigate before paying.
- Related:Contestable periodRetained asset accountLife Insurance Policy Locator
- Decreasing term
- Term insurance whose death benefit shrinks over the term while the premium stays the same. New York's Department of Financial Services notes it is often sold as mortgage protection, with coverage falling as the loan balance falls. Level term, by contrast, keeps the same face amount for the whole term.
- Related:Term life insuranceDeath benefit (face amount)
- Evidence of insurability
- Proof of your health, finances or job that helps an insurer decide whether you're an acceptable risk. Some features let you get or keep coverage without it, such as renewal and conversion rights on term policies and certain enrollment windows for military coverage.
- Related:UnderwritingConvertible termVGLI
- FEGLI
- The Federal Employees' Group Life Insurance program, administered by the U.S. Office of Personnel Management. OPM describes it as group term insurance with no cash value, made up of Basic coverage, which most new federal employees receive automatically unless they waive it, plus three forms of Optional coverage that require Basic and must be elected.
- Related:Group life insuranceOrder of precedence
- Final expense (funeral) insurance
- A small life insurance policy meant to cover funeral costs and final bills. Washington's Office of the Insurance Commissioner notes that some of these small policies have historically had a very high price compared with the death benefit, and the Texas Department of Insurance says prepaid funeral insurance can be expensive compared with other life insurance and the premiums you pay might end up being more than the policy pays.
- Related:Graded death benefitUnderwriting
- Free look period
- A window after you receive a new policy during which you can return it for a full refund. The NAIC's 2026 Life Insurance Buyer's Guide says it is usually 10 days after you receive the policy and is usually stated on the policy's first page. States set their own periods (for example, at least 10 to 20 days in Texas and 10 to 30 days in New York, according to those states' regulators), so check yours.
- Related:ReplacementPolicy illustration
- Grace period
- Extra time after a premium's due date during which you can still pay and keep coverage. In Texas, the Texas Department of Insurance's guide (last updated December 2025) says most policies have a 31-day grace period and that if the insured dies during it, the beneficiary gets the death benefit minus the premium owed; Washington's insurance office says policies sold there must include a 31-day grace period. Check your own policy and state rules.
- Related:LapsePremium
- Graded death benefit
- A feature of some policies sold with little or no underwriting: if the insured dies during the first few policy years, the policy pays only a return of premiums or a reduced benefit. New York's Department of Financial Services describes it in senior life policies issued without a medical exam, so read this section before relying on such a policy.
- Related:Final expense (funeral) insuranceUnderwriting
- Group life insurance
- Coverage offered through an employer, union or other group, usually term insurance. Basic amounts often require no health questions, but the NAIC notes the death benefit usually is less than you need and you may not be able to take the coverage with you if you leave the employer.
- Related:Imputed income (group-term life)FEGLISGLI
- Guaranty association
- A state-based safety net that pays covered claims, up to limits that vary by state, if a licensed insurer fails. The Texas Department of Insurance warns that if you buy from an unlicensed company your beneficiary might not get paid, because licensed companies belong to the guaranty association. New York's Department of Financial Services cautions that coverage is limited, so don't assume you'll be fully protected if an insurer fails.
- Related:State insurance department
- Imputed income (group-term life)
- The taxable value of employer-provided group-term life coverage above a federal limit. For 2026, IRS Publication 15-B says employers can generally exclude the cost of up to $50,000 of coverage; the cost of coverage above that, minus what the employee paid toward it, is added to wages and reported on Form W-2 in box 12 with code C.
- Related:Group life insuranceTaxes on death benefits
- Insurable interest
- A genuine stake in the insured's continued life, such as a close family tie or a lawful financial interest, that a person must have to buy a policy on someone else. The NAIC says a stranger can't buy a policy on your life; immediate family generally qualify, and in some cases an employer, business partner or major creditor may.
- Related:PolicyownerInsured
- Insured
- The person whose life the policy covers; the death benefit becomes payable when this person dies. The insured and the policyowner are often the same person, but they don't have to be.
- Related:PolicyownerDeath benefit (face amount)
- Lapse
- The end of a policy because a required premium wasn't paid. A lapsed policy pays no death benefit; a cash value policy may instead offer nonforfeiture options, and a universal life policy can lapse if its cash value runs out.
- Related:Grace periodReinstatementNonforfeiture options
- Life insurance
- A contract in which an insurance company agrees to pay a death benefit to the beneficiaries you name if the insured person dies while the policy is in force, in exchange for premiums. The NAIC groups policies into two broad classes: term and cash value (permanent).
- Related:Term life insurancePermanent life insuranceBeneficiary
- Life Insurance Policy Locator
- A free online tool from the National Association of Insurance Commissioners that helps beneficiaries find life insurance policies and annuity contracts of a person who has died and connect them with unclaimed death benefits. New York's Department of Financial Services also runs a free Lost Policy Finder. Because these tools are free, be cautious about anyone who asks for a fee to search for a lost policy.
- Related:Unclaimed life insuranceDeath claimBeneficiary
- Life settlement
- Selling a life insurance policy to a third party for a cash payment that is less than the death benefit; the buyer pays future premiums and collects the benefit when the insured dies. New York's Department of Financial Services notes proceeds may be taxable, may affect public benefits such as Medicaid, and the policy may be resold, so compare alternatives first.
- Related:Accelerated death benefitCash surrender valuePolicy loan
- Minor as beneficiary
- Naming a child under the age of majority as beneficiary. The NAIC's Life Insurance Buyer's Guide says insurance companies won't pay a minor and suggests considering leaving the money to your estate or a trust instead. Without such planning, a court-appointed guardian of the child's estate may have to receive the money, as the federal SGLI beneficiary form describes for that program. An attorney can explain the options in your state.
- Related:Trust (as beneficiary)Beneficiary
- Nonforfeiture options
- Choices a cash value policy gives you if you stop paying premiums, so you don't lose the value you've built. New York's Department of Financial Services lists three: take the cash surrender value, use it to buy extended term insurance, or switch to reduced paid-up insurance, a smaller amount of coverage with no further premiums.
- Related:Cash surrender valueLapse
- Order of precedence
- The default payout order used when there is no valid beneficiary designation. For FEGLI, OPM's beneficiary form lists: designated beneficiaries, then the widow or widower, then children (and descendants of deceased children), then parents, then the executor or administrator of the estate, then other next of kin under state law. Private policies follow their own terms.
- Related:FEGLIBeneficiaryContingent beneficiary
- Participating policy (dividends)
- A policy that may pay dividends, which the NAIC describes as a refund of part of your premium when the company collects more than it needs. Dividends aren't guaranteed; they can typically be taken in cash, used to reduce premiums, left to accumulate at interest or used to buy paid-up additional insurance.
- Related:Whole life insurancePremium
- Permanent life insurance
- Coverage designed to last for the insured's lifetime as long as the policy stays in force, usually with a cash value. Whole life, universal life and variable life are common types, and the NAIC notes that premiums tend to be higher than for term because of the savings element.
- Related:Whole life insuranceUniversal life insuranceCash value
- Policy illustration
- A projection, usually a table or chart, of how a policy's premiums, cash values and death benefits might change over time. Illustrations are built on assumptions and aren't a promise; the Texas Department of Insurance notes you could earn less than projected, so ask which values are guaranteed.
- Related:Cash valueUniversal life insuranceFree look period
- Policy loan
- A loan from the insurer that uses your policy's cash value as collateral. Interest is charged, and the NAIC notes that any loan and interest not repaid are subtracted from the death benefit. Taking too much value out can also leave too little to keep the policy in force.
- Related:Cash valueDeath benefit (face amount)Lapse
- Policyowner
- The person or organization that owns a life insurance policy and controls it, including paying premiums and naming or changing beneficiaries. New York's Department of Financial Services notes the owner is usually the insured but can be a relative, a partnership or a corporation.
- Related:InsuredBeneficiaryInsurable interest
- Reinstatement
- Restoring a lapsed policy, typically by paying the overdue premiums with interest and often by showing evidence of insurability. Insurers set a time limit for reinstatement, and the Texas Department of Insurance notes a reinstated policy has a new contestable period.
- Related:LapseEvidence of insurabilityContestable period
- Renewable term
- A term policy that lets you continue coverage for another term when the current one ends, regardless of changes in your health. Premiums go up at renewal because they're based on your age at that time, so the NAIC suggests asking what renewal premiums will be and whether the right to renew ends at a certain age.
- Related:Term life insuranceConvertible term
- Replacement
- Dropping or changing an existing policy to buy a new one. The Texas Department of Insurance notes a new policy restarts the contestable period, may require new health questions or an exam, and surrender charges can cut the old policy's cash value; the NAIC advises not canceling your current policy until you get the new one. Be wary of anyone pressuring you to cash in a policy to buy another product.
- Related:Contestable periodCash surrender valueFree look period
- Retained asset account
- An interest-bearing account an insurer may set up in the beneficiary's name to hold claim proceeds, often with a checkbook. Washington's Office of the Insurance Commissioner notes you can withdraw the full amount at once, take installments, or take interest only, so ask how the account works before leaving money in it.
- Related:Settlement optionsDeath claim
- Rider
- An optional add-on that changes or adds to a policy's benefits, and the NAIC notes that adding one increases your premium. Common examples include waiver of premium, accidental death, accelerated death benefit and term riders covering a spouse or children.
- Related:Waiver of premiumAccidental death benefit riderAccelerated death benefit
- Risk classification
- The category an underwriter places you in, which sets your premium rate. A standard risk meets the criteria the insurer's normal rates are based on; a substandard (or rated) risk pays an extra premium, usually because of impaired health or a hazardous occupation.
- Related:UnderwritingPremium
- Settlement options
- The ways a death benefit can be paid other than a single lump sum, such as leaving it with the insurer at interest, fixed installments, or income for the beneficiary's lifetime. The IRS says proceeds paid because of the insured's death generally aren't taxable income, but interest earned on them is.
- Related:Retained asset accountTaxes on death benefitsDeath claim
- SGLI
- Servicemembers' Group Life Insurance, low-cost group term coverage from the Department of Veterans Affairs for eligible service members, who are generally enrolled automatically. As of October 2026, VA lists coverage up to $500,000 in $50,000 increments and 120 days of free coverage after leaving the military. Family SGLI covers eligible spouses and dependent children.
- Related:VGLIGroup life insurance
- State insurance department
- The state agency that licenses insurers and agents and helps consumers with questions and complaints. It's a free place to check whether a company or agent is licensed, and the NAIC website lists contact information for each state's department. The Texas Department of Insurance warns that the government doesn't sell insurance, so anyone claiming to sell it on behalf of Medicare or Social Security is a red flag.
- Related:Guaranty associationReplacement
- Suicide clause
- A policy provision that limits payment if the insured dies by suicide within a set period after the policy is issued. The Texas Department of Insurance's guide (last updated December 2025) says that in Texas, companies usually won't pay the death benefit in that case during the first two years and must return the premiums to the beneficiary. If you or someone you know is struggling, call or text 988.
- Related:Contestable period
- Taxes on death benefits
- Under federal rules, life insurance proceeds a beneficiary receives because the insured died generally aren't included in income, though interest paid on them is taxable. IRS Publication 525 (2025 edition) notes exceptions, such as a policy that was transferred for a price. Estate and state taxes are separate questions, so ask a tax professional about your situation.
- Related:Settlement optionsImputed income (group-term life)Death benefit (face amount)
- Term life insurance
- Coverage for a set period (the term) that pays only if the insured dies during that period; if the insured outlives the term, no benefit is paid. The NAIC describes term as intended to provide lower-cost coverage for a specific period, and most term policies build no cash value.
- Related:Renewable termConvertible termDecreasing term
- Trust (as beneficiary)
- A legal arrangement that can receive a death benefit and manage it for others, such as children, under terms you set. OPM's FEGLI beneficiary form distinguishes a trust set up during your lifetime (inter vivos) from one created under your will (testamentary); an attorney can help you decide whether a trust fits your situation.
- Related:Minor as beneficiaryBeneficiary
- Unclaimed life insurance
- Death benefits that were never collected, often because the family didn't know a policy existed. State regulators suggest checking bank statements, mail and address books for insurers or agents, asking former employers about group coverage, and searching your state's unclaimed property website, where unpaid benefits can end up.
- Related:Life Insurance Policy LocatorGroup life insurance
- Underwriting
- The process an insurer uses to decide whether to offer you coverage and at what price. It often includes health questions, sometimes a medical exam, and questions about your job and habits. The NAIC notes that a policy that doesn't require detailed health information usually costs more and provides less coverage, and that false statements on an application can lead the insurer to reduce or cancel coverage.
- Related:Risk classificationEvidence of insurabilityContestable period
- Universal life insurance
- Permanent insurance with flexible premiums and an adjustable death benefit. The insurer credits premiums to a cash value account and deducts the cost of insurance and expenses; if payments are too low and the cash value runs out, the policy can lapse, so the Texas Department of Insurance urges reviewing the annual statement carefully.
- Related:Cash valueLapsePolicy illustration
- Variable life insurance
- Permanent insurance whose cash value depends on investments you choose, such as stock and bond funds. The NAIC says these policies have the greatest potential to build cash value but also the greatest risk of losing it. Variable universal life combines this with universal life's flexible premiums.
- Related:Universal life insuranceCash valuePolicy illustration
- VGLI
- Veterans' Group Life Insurance lets former service members keep term coverage after leaving the military for as long as they pay premiums, up to the SGLI amount they had. As of October 2026, VA says you must apply within 1 year and 120 days of leaving service, and applying within 240 days means no health review.
- Related:SGLIEvidence of insurability
- Whole life insurance
- Permanent insurance that you typically pay for on a set premium schedule and that stays in force for life as long as premiums are paid. Traditional whole life states its premiums, death benefits and cash values in the policy, and some whole life policies are participating and may pay dividends.
- Related:Permanent life insuranceParticipating policy (dividends)Cash value