In this article I have aggregated all the common acronyms used in life insurance policies and applications. As licensed agents we go through multiple phases of initial training, then continuing education where we acclimate to speaking the insurance language. But you don't need to memorize and know every term or word by heart. This is a guide for you, next time you are shopping for a Life Insurance Policy or assessing a quote. Learning and understanding the meaning of the acronyms used in the Life Insurance policy and application is pivotal for the insured to determine their coverage needs, policy features, and other legal elements.
Policy: The insurance document provided by the Insurance Company or insurance carrier to the insured. The policy is a a document represents the insured coverage, premium, and beneficiary information.
Insured: The person who is protected or covered by the life insurance policy. In case of their death, the beneficiary will be paid the death benefit.
Beneficiary: The person(s) who will be paid the death benefit upon the death of the insured. Only the policy owner can assign or change Beneficiaries during his/her life.
Contingents: Person(s) who the death benefit would be paid to in case of death of the Beneficiary and the Insured. Contingents are only paid in case of the death of the primary beneficiary.
Level: Usually it reference to the coverage amount or death benefit. A level death benefit means that coverage remains the same during the validity of the policy and life of the insured.
Graded: The coverage would vary in coverage based on when the insured death happens. For instance: John has a graded policy of $20,000. The policy pays premium back the 1st and 2nd year, full coverage at 3rd year. In case John dies within the first two years of the policy issue date, his beneficiary will be paid the premiums that Johns had paid by then only.
Riders: Are additional features to the policy that vary in cost between one carrier and another. Some rider are: Accidental Death Benefit Rider, Children Rider, Return of Premium Rider, Waiver of Premium Rider, In come Term Rider, Disability Income Rider.
Death Benefit: The total amount an insurance company would pay to the Beneficiary when the insured dies.
Premiums: Money value paid by the policy owner to the insurance company. Premiums have different modes of payments, Monthly, Quarterly, Semi-annually, and annually. Premiums are rated by the insurance company at the time of the application.
Free Look Period: A period of time where a policy owner is allowed to terminate their policy and have their premium paid back with no penalties. The free look period is mandates by the Department of Insurance and it differs in each state. It is usually 10, 15, or 20 days.