(Could also be called Death Benefit, Policy Value, Payout Amount, Face, Proceeds)
Face amount is the amount of money those you designate as beneficiaries will receive when you die. You select how much coverage you want your policy to provide by selecting a face amount.
(Could also be called Duration of Coverage, Length of Coverage, Policy Term)
Term is a guaranteed length of time. When referring to life insurance, it is the length of time your policy will stay in force to protect your loved ones as long as you continue making the payments.
(Could also be called Payment, Cost, Price)
Premium is the amount of money you will have to pay for your insurance policy. Premiums can be paid in multiple frequencies such as monthly, quarterly, semi-annually, or annually.
Beneficiary is the word used for the entity or person that will receive the payout of your face amount if you died. Beneficiary can be one person, like a spouse or child, or multiple people, given different percentages of the face amount until 100% of the death benefit is accounted for. Beneficiary can also be an organization or a charity that would receive the money from your life insurance policy when you die.
(Could also be called Secondary Beneficiary, Other Beneficiary)
Contingent beneficiary is the second person or entity you name to receive your life insurance payout when you die.
(Could also be called Rate Class, Classification, UW Class, Health Classification)
Risk Class is the health classification the insurance companies put you in for pricing purposes based on your height and weight, tobacco use, family health history, and your personal medical history.
Risk Classes from Best to Last
Each insurance company has their own name for each classification. Below are examples of different ways the carriers name their classifications.
(Best) Preferred Plus Non Tobacco , Preferred Best Non Tobacco, Super Preferred Non Tobacco, Preferred Elite Non Tobacco, Select Preferred Non Tobacco, Premier Non Tobacco
(Second Best) Preferred NT, Preferred Best NT, Super Preferred NT, Elite NT
(Third Best) Standard Plus NT, Preferred NT, Select NT, Super Standard NT
(Fourth Best) Standard Non Tobacco, Non Tobacco
(Fifth Best) Preferred Tobacco
(Sixth Best) Standard Tobacco, Tobacco, Tobacco Standard
Rider is a term used for any additional benefits or options you can add on to your policy. For example, a waiver of premium rider is an additional feature you can add to your policy to relieve you of your payments if you become disabled and can’t work.
Table rating is a price increase applied on top of a risk classification based on your health and medical exam results (example: Standard + Table 2).
Underwriting is the process of reviewing your application based on guidelines set by each insurance company, ultimately to determine your final price and risk to the insurance company you choose. Underwriting for life insurance usually consists of reviewing your answers to health questions, your height and weight, the results from a medical exam, driving record, and financial history.
Photo credit to: Casey Fleser