Life Insurance Terms Explained: A Quick & Clear Guide
Life insurance can feel like a confusing mix of jargon — especially if you’re just starting to explore your options. What’s a rider? Why does “underwriting” sound intimidating? And what on earth is a contestability period?
Whether you’re applying for your first policy or just want to understand your coverage better, this simple glossary will walk you through the most important life insurance terms — no dictionary required.
Quick Guide to Life Insurance Terms
Beneficiary
The person (or people) who will receive the payout (called a death benefit) when you pass away.
Premium
The amount you pay regularly (monthly or annually) to keep your policy active.
Death Benefit
The tax-free lump sum your beneficiary receives when you die.
Policyholder
The person who owns the policy and is responsible for paying the premiums.
Rider
An optional add-on to your policy for extra features or benefits — like coverage for critical illness or children.
Underwriting
The process the insurance company uses to evaluate your health, lifestyle, and risk before approving your policy.
Cash Value
A savings-like feature included in some permanent life insurance policies that grows over time and can be borrowed from.
Face Value
The total dollar amount your policy will pay out upon your death (not including any cash value).
Grace Period
A short period (usually 30 days) after a missed premium payment when your policy won’t lapse yet.
Lapse
When your policy ends because you missed payments and didn’t pay within the grace period.
Exclusion
Specific things your policy won’t cover — like suicide in the first two years or risky activities.
Term Life Insurance
Coverage for a specific period, like 10, 20, or 30 years. It’s generally more affordable and straightforward.
Whole Life Insurance
A permanent policy that lasts your entire life and builds cash value.
No Medical Insurance
Life insurance that doesn’t require a medical exam — just a few health questions (or none at all).
Contestability Period
The first two years of your policy when the insurer can investigate your application for any inaccuracies.
Living Benefits
A feature that allows you to access part of your death benefit early if you’re diagnosed with a serious illness.
Conversion Option
Lets you convert your term policy into a permanent one without taking a new medical exam.
Renewable Term
A term policy you can renew at the end of its term without redoing health checks — though premiums may rise.
Policy Maturity
The point when a permanent life policy automatically pays out, typically around age 100.
Surrender Value
The amount of cash you’ll get if you cancel a permanent life insurance policy early.
Evidence of Insurability
Proof of your health and risk level — like medical records or a questionnaire — needed to qualify for certain policies or coverage increases.
Final Thoughts
Life insurance doesn’t have to be intimidating — and understanding the terminology is a great first step. Whether you’re shopping for a new policy, reviewing an existing one, or helping a loved one navigate their options, this quick guide can help you speak the language of life insurance with confidence.
Still have questions? Our team at Maple Bay Financial is here to explain your options in plain English — no pressure, just friendly advice.
