As a life insurance agent, it's important to have a solid understanding of the terminology used in the industry. To help you prepare for your life insurance exam, we've compiled a list of the 50 most common terms you'll encounter. From accidental death benefit to whole life insurance, these terms cover a wide range of topics and will help you become a more informed and effective agent.
Here are the 50 most common terms found on the life insurance exam, along with their definitions:
ACCIDENTAL DEATH BENEFIT: An additional benefit provided by some life insurance policies that pays a benefit in the event of the policyholder's death due to an accident.
ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE: Insurance that pays a benefit in the event of the policyholder's death or loss of limb due to an accident.
ACCIDENTAL DEATH RIDER: An amendment to a life insurance policy that adds accidental death coverage to the policy.
ANNUITANT: The person for whom an annuity is purchased.
ANNUITIZATION: The process of converting an annuity into a series of payments.\
ANNUITY: A financial product that provides a regular income stream, either for a fixed period of time or for the remainder of the annuitant's life.
ANNUITY CERTAIN: An annuity that pays a guaranteed number of payments, regardless of the annuitant's lifespan.
ANNUITY DUE: An annuity that begins payment immediately rather than at the end of the first period.
BENEFICIARY: The person or entity designated to receive the benefits of a life insurance policy or annuity contract.
CASH VALUE: The portion of a permanent life insurance policy's face amount that is available to the policyholder in the form of cash or as a loan.
CONTINGENT BENEFICIARY: A beneficiary of a life insurance policy or annuity contract who is only entitled to receive the benefits if the primary beneficiary predeceases the policyholder or annuit
CONVERTIBLE TERM LIFE INSURANCE: A type of term life insurance that can be converted to a permanent policy at the policyholder's option, typically without the need for additional underwriting.
DEATH BENEFIT: The amount paid by a life insurance policy to the beneficiary upon the policyholder's death.
ENDOWMENT POLICY: A type of life insurance policy that pays a death benefit if the policyholder dies during the policy term, or a cash value if the policyholder lives to the end of the term.
EXCLUSION: A condition or circumstance that is not covered by a life insurance policy.
GRACE PERIOD: A period of time after the premium due date during which a policyholder can pay the premium without lapsing the policy.
INSURED: The person whose life is insured under a life insurance policy.
INSURER: The company that issues a life insurance policy.
IRREVOCABLE BENEFICIARY: A beneficiary of a life insurance policy whose designation cannot be changed without their consent.
JOINT LIFE INSURANCE: A life insurance policy that covers two people, typically a married couple, with a single death benefit that is paid upon the death of either individual.
LEVEL PREMIUM: A type of premium that remains the same throughout the policy term.
LIFE INSURANCE AGENT: A professional who sells and represents life insurance policies.
LIFE SETTLEMENT: The sale of a life insurance policy by the policyholder to a third party for a price that is greater than the policy's cash surrender value but less than the death benefit.
LONG-TERM CARE INSURANCE: Insurance that covers the cost of long-term medical care, such as nursing home care or in-home care.
LOSS OF INCOME INSURANCE: Insurance that provides a replacement income to the policyholder or their family in the event of the policyholder's disability or death.
MODAL PREMIUM: A premium payment frequency option, such as annually, semi-annually, or monthly.
NONFORFEITURE OPTION: A provision in a life insurance policy that allows the policyholder to receive the cash value of the policy in the event of policy lapse or surrender.
PAID-UP POLICY: A life insurance policy that has reached a point where no further premiums are due and the policy remains in force.
PARTICIPATING POLICY: A type of life insurance policy that allows the policyholder to share in the profits of the insurance company through dividends.
PERMANENT LIFE INSURANCE: A type of life insurance that provides coverage for the entire lifetime of the insured and has a cash value component.
POLICY: A written contract between an insurer and a policyholder that outlines the terms and conditions of the insurance coverage.
POLICYHOLDER: The person who owns a life insurance policy.
PREMIUM: The periodic payment made by the policyholder to the insurer in exchange for the insurance coverage.
PREMIUM WAIVER: A provision in a life insurance policy that waives the payment of premiums in the event of the policyholder's disability.
PRIMARY INSURED: The person whose life is primarily insured under a life insurance policy.
PROOF OF INSURANCE: Documentation provided by the insurer that verifies the existence of an insurance policy
RIDER: An amendment to a life insurance policy that adds or modifies the coverage provided by the policy.
SECONDARY INSURED: A person who is insured under a life insurance policy in addition to the primary insured.
SURRENDER CHARGE: A fee that is charged when a policyholder surrenders their life insurance policy for its cash value.
TERM LIFE INSURANCE: A type of life insurance that provides coverage for a specified period of time, after which the coverage expires unless the policy is renewed.
TERM TO AGE 100: A type of term life insurance that provides coverage until the insured reaches the age of 100.
TESTAMENTARY TRUST: A trust created by a will that becomes effective upon the testator's death.
TRUST: A legal entity that holds assets on behalf of a beneficiary.
UNIVERSAL LIFE INSURANCE: A type of permanent life insurance that combines death benefits with a cash value component and flexible premium payments.
VALID CONTRACT: A legally binding agreement that meets all the necessary requirements for enforceability.
WAIVER OF PREMIUM: A provision in a life insurance policy that waives the payment of premiums in the event of the policyholder's disability.
WHOLE LIFE INSURANCE: A type of permanent life insurance that provides coverage for the entire lifetime of the insured and has a fixed premium.
By familiarizing yourself with these 50 common terms, you'll be well on your way to passing your life insurance exam and becoming a knowledgeable and competent agent. Remember to study and review these terms carefully, as a strong understanding of the language used in the industry is crucial to your success. Good luck on your exam!