Frequently Asked Questions

Term Life Insurance — a policy that gives protection for only a definite period of time (e.g., 1, 3, or 5 years). If death occurs during the term for which the policy is written, proceeds are payable to the beneficiary. If the insured survives the term, the policy expires. There is no cash value build-up in a term policy. Guaranteed renewable term insurance can be renewed without proof of insurability. Under other types of term insurance, the insured must once again undergo an underwriting process (e.g., a medical examination).

Whole Life Insurance — permanent Life Insurance that provides for the payment of the face value upon death of the insured, regardless of when it may occur. This contrasts with term insurance, which pays benefits only if death takes place during the limited term of the policy. Under Whole Life policies, the insured pays a level premium rate all of his or her life. This approach results in an overpayment of premiums in the early years of the policy and an underpayment in the latter years, which averages out over the life of the policy. Whole Life Insurance also accumulates a cash value that the insured may borrow or otherwise use.

Whole Life Insurance — permanent Life Insurance that provides for the payment of the face value upon death of the insured, regardless of when it may occur. This contrasts with Term Life Insurance, which pays benefits only if death takes place during the limited term of the policy. Under Whole life policies, the insured pays a level premium rate all of his or her life. This approach results in an overpayment of premiums in the early years of the policy and an underpayment in the latter years, which averages out over the life of the policy. Whole life insurance also accumulates a cash value that the insured may borrow or otherwise use.

Annuity — a stream of periodic payments made over a specified period.

Living Benefits — an option under some life insurance policies by which the insurer provides discounted policy proceeds (face amount, cash value, and dividends, if any) to a terminally ill insured. This permits the insured to meet extraordinary living, medical, or hospice expenses. Also known as accelerated death benefits.

Beneficiary — a person named by the insured to receive the proceeds or benefits accruing under a life policy.

Contingent Beneficiary — secondary beneficiary who receives policy benefits if the primary beneficiary predeceases the named insured under a life insurance policy.

Underwriting — the process of determining whether to accept a risk and, if so, what amount of insurance the company will write on the acceptable risk, and at what rate. Underwriters are companies, individuals, or insurance companies that carry on this critical activity for their own account or for that of others. 

A provision that an insurer attaches to a policy to expand or restrict the benefits of the policy.