The Life Insurance Glossary

Do you know what the difference between term life insurance and whole life insurance is? In addition to different types life insurance, some of the terminology around insurance can be confusing. September is Life Insurance Awareness Month, so it’s a good time to get a better understanding of life insurance with this explainer of common terms, from annuity to whole life. 

Beneficiary 

In life insurance, a beneficiary is the person or entity that will receive the death benefit of your policy when the insured passes away. It’s common for people to name family members or a trust as their beneficiary. 

Cash Value  

Cash value is the amount of money you are entitled to if you “surrender” (or give up) the policy minus any surrender fees.  

Claim 

A request for payment based on the terms of the policy. With a life insurance policy, beneficiaries file a claim with the insurance company after the insured passes away. 

Death Benefit 

The amount of money beneficiaries receive when a claim is paid out after the insured person passes away.  

Effective Date

The date when the insurance coverage is in place. 

Key Person Insurance

Life insurance that covers people who are crucial to the way a business operates. Key person insurance is purchased by the business, and the business is the beneficiary. 

Lapse 

When a life insurance policy ends because the premiums weren’t paid. 

Limited Payment Life Insurance 

 A type of whole life insurance you can pay for in a set number of premium payments. 

Named Insured 

The person who is covered under a life insurance policy. 

Mortality Table 

A chart that shows the death rates of certain groups, such as men or women, at a specific age. This is a factor used to set premiums. 

Permanent Life Insurance 

A life insurance policy that remains in effect for your lifetime. 

Premium 

The amount that the owner of the policy needs to pay to keep the policy active. 

Renewable Term Life Insurance 

Term life insurance that you can renew year-to-year without needing a new medical exam. 

Term Life Insurance 

Term life insurance is life insurance that covers you for a period of time (the term). You may want term life insurance to cover the time when you are providing for your children or paying a mortgage. At the end of the term, you can continue your coverage, usually at a higher rate, or let it end. 

Universal Life Insurance 

 A type of permanent life insurance that offers the purchaser flexibility in two things: the amount of premium that can be paid and the possibility to adjust the death benefit. These can be adjusted up or down within limits as your needs change. 

Variable Life Insurance 

 Is a permanent life insurance policy with an investment component.  

Variable Universal Life Insurance 

Same as Universal Life Insurance with the extra benefit of being able to select how to invest the cash value between a variety of subaccounts. The performance of the cash value depends on how the subaccounts do in the market.  

Whole Life Insurance 

Whole life insurance is a type of permanent life insurance with fixed premiums and death benefit that includes the accumulation of cash value.  

Navigate Your Life Insurance Options With a Pro 

At Farm Bureau, we are here to help you determine what life insurance protection makes the most sense for you, your family and your goals. We’re here to help. Reach out to a Farm Bureau agent.