Life Insurance Glossary

Learn the terminology, you will be one step ahead.

  • Admitted Company
    An insurance company authorized to do business in California.
  • Agent
    A licensed person or organization authorized to sell insurance by or on behalf of an insurance company.
  • Binder
    A temporary or preliminary agreement which provides coverage until a policy can be written or delivered.
  • Broker
    A licensed person or organization paid by you to look for insurance on your behalf.
  • Cancellation
    The termination of insurance coverage during the policy period. Flat cancellation is the cancellation of a policy as of its effective date, without any premium charge.
  • Claim
    Notice to an insurer that under the terms of a policy, a loss maybe covered.
  • Claimant
    The first or third party. That is any person who asserts right of recovery.
  • Credit Life Insurance
    Insurance issued to a creditor (lender) to cover the life of a debtor (borrower) for an outstanding loan.
  • Decline
    The company refuses to accept the request for insurance coverage.
  • Endorsement
    Amendment to the policy used to add or delete coverage. Also referred to as a “rider.”
  • Exclusion
    Certain causes and conditions, listed in the policy, which are not covered. Expiration Date
    The date on which the policy ends.
  • Face Amount
    The dollar amount to be paid to the beneficiary when the insured dies. It does not include other amounts that may be paid from insurance purchased with dividends or any policy riders.
  • Grace Period
    A period (usually 31 days) after the premium due date, during which an overdue premium may be paid without penalty. The policy remains in force throughout this period.
  • Guaranteed Insurability
    An option that permits the policy holder to buy additional stated amounts of life insurance at stated times in the future without evidence of insurability.
  • Health Insurance
    A policy that will pay specifies sums for medical expenses or treatments. Health policies can offer many options and vary in their approaches to coverage. Incontestable Clause A policy provision in which the company agrees not to contest the validity of the contract after it has been in force for a certain period of time, usually two years.
  • Insured
    The policyholder – the person(s) protected in case of a loss or claim.
  • Insurer
    The insurance company.
  • Legal Insurance
    Prepaid legal insurance coverage plan sold on a group basis.
  • Life Insurance
    A policy that will pay a specified sum to beneficiaries upon the death of the insured.
  • Limit
    Maximum amount a policy will pay either overall or under a particular coverage.
  • Material Misrepresentation
    The policyholder / applicant makes a false statement of any material (important) fact on his/her application. For instance, the policyholder provides false information regarding the location where the vehicle is garaged.
  • Misquote
    An incorrect estimate of the insurance premium.
  • Peril
    The cause of a possible loss. For example, fire, theft, or hail.
  • Policy
    The written contract of insurance.
  • Policy Limit
    The maximum amount a policy will pay, either overall or under a particular coverage.
  • Premium
    The amount of money an insurance company charges for insurance coverage.
  • Premium Financing
    A a policyholder contracts with a lender to pay the insurance premium on his/her behalf. The policyholder agrees to repay the lender for the cost of the premium, plus interest and fees.
  • Pro-Rata Cancellation
    When the policy is terminated midterm by the insurance company, the earned premium is calculated only for the period coverage was provided. For example: an annual policy with premium of $1,000 is canceled after 40 days of coverage at the company’s election. The earned premium would be calculated as follows: 40/365 days X $1,000=.110 X $1,000=$110.
  • Quote
    An estimate of the cost of insurance, based on information supplied to the insurance company by the applicant.
  • Reinstatement
    The restoring of a lapsed policy to full force and effect. The reinstatement may be effective after the cancellation date, creating a lapse of coverage. Some companies require evidence of insurability and payment of past due premiums plus interest.
  • Rider
    Usually known as an endorsement, a rider is an amendment to the policy used to add or delete coverage.
  • Solicitor
    A licensed employee of a fire and casualty agent or broker who may act for the agent or broker in some circumstances.
  • Surrender
    To terminate or cancel a life insurance policy before the maturity date. In the case of a cash value policy, the policyholder may exercise one of the non-forfeiture options at the time of surrender.
  • Team and Vehicle Insurance
    Includes insurance against loss through damage or legal liability for damage, to property caused by the use of teams or vehicles other than ships, boats, or railroad rolling stock, whether by accident or collision or by explosion of engine, tank, boiler, pipe, or tire of the vehicle, and insurance against the theft of the whole or part of such vehicle (California Insurance Code, Section 115).
  • Term Life
    Is life insurance which provides coverage at a fixed rate of payments for a limited period of time, the relevant term.
  • Underwriting
    The process of selecting applicants for insurance and classifying them according to their degrees of insurability so that the appropriate premium rates may be charged. The process includes rejection of unacceptable risks.
  • Waiting Period
    A period of time set forth in a policy which must pass before some or all coverages begin.
  • Whole Life
    Is a life insurance policy that remains in force for the insured’s whole life and requires (in most cases) premiums to be paid every year into the policy.
  • Workers Compensation Insurance
    Coverage providing four types of benefits (medical care, death, disability, and rehabilitation) for employee job-related injuries or diseases as a matter of right (without regard to fault).