Common life insurance definitions explained

Insurance phrases and terms explainedLife insurance terminology can be confusing. Here we have put together a short guide explaining the most common life insurance definitions you are likely to encounter.

Agent

A licensed person who has access to one or more insurance providers and can assist you in choosing the right product. They will also liaise with the insurance provider on your behalf and ensure that you get the best coverage and value for money.

Beneficiary / ies

This is the person or persons named in the policy who will receive payment from the insurance company, in the event of your death.

Coverage

This is the value of the policy. If, for example, you were to buy $250,000 worth of life insurance, then the level of coverage or value would be $250,000.

Death benefit

This is the net cash value paid to your beneficiaries in the event of your death. This can also be referred to as the “face amount” of coverage.

Lapse

When a policy comes to its natural end and no more premiums are paid, it is said to lapse. For example, a ten-year term life insurance policy would lapse at the end of the tenth year if there were no further agreement or monies paid and you were still living.

Maturity

In the case of life insurance, a policy will mature – pay out any cash benefit – either at the end of the agreed term (if there is a cash value added to the policy) or upon your death.

Policy

This is the document which details your exact amount of coverage along with any terms, restrictions or requirements. In addition, it will contain details of your insurance provider along with general guidance and advice.

Premium

This is the monetary amount that you pay (usually monthly) to your insurance provider.

Policyowner

This is usually you. The person who owns the policy.

Standard Risk

A person is a standard risk if they fit into the ‘standards’ on which normal premiums are based. This includes a person’s physical and occupational situation.

Underwriter

An underwriter is a person who represents your insurance provider and is responsible for assessing your suitability for the product on behalf of the provider. It is their job to ensure that the correct premium amount is charged and that any appropriate conditions and/or restrictions are applied to your coverage.

We hope that this short glossary has been of benefit, however, should you require any further advice or information, then please contact us so that we may help you find the right coverage.