A Term Life Insurance Glossary

Term life insurance is the simplest type of life insurance. It is
usually meant to be temporary, covering the insured for a fixed amount
of time, with premiums that often increase as the insured ages. Like
any other type of life insurance, term life insurance represents a
legal contract between the owner of the policy and the insurance
company, and like any type of contract, it has a language of its own.
Knowing the definitions of common terms can help you understand
exactly what you're paying for when you buy term life insurance.

Annual renewable term life Term life insurance that is renewable each
year for a fixed period of time, usually 5, 10, 15, 20 or 30 years.
The annual premium increases each year, based on the chances of the
benefit being paid. In the earliest years, the premium is usually very
affordable, but by the end of the term, it may become financially
unviable.

Beneficiary The person or persons who will be paid if the person
insured by the life insurance policy dies

Cash value The amount of money that is available on the life insurance
policy for loans or withdrawals. Term life insurance has no cash
value, since it only pays off if the insured dies (or under other
conditions named in the insurance policy)

Convertible term insurance Term insurance that can be converted to
whole life insurance by the owner of the policy without providing
evidence of insurability

Dividend A cash payment that is a return on part of the premiums paid
by the owner of the policy based on a number of variables. Term life
insurance does not pay dividends.

Face Value The amount of the death benefit that will be paid, not
including additional amounts that will be payable in the case of
accidental death, or under special provisions

Insurability Acceptability of the insured person to the insurance
company. In term life insurance, insurability is often not an issue,
and proving insurability may not be necessary when converting term
life insurance to whole life insurance.

Insured The person in whose name the policy is issued. The insured may
or may not be the owner of the policy. If the insured dies, term life
insurance pays a benefit to the beneficiary/ies

Insurer The insurance company

Level Term Life Insurance A version of term life insurance where the
premium is guaranteed to remain the same for a certain period of time
– often 10, 15, 20 or 30 years. The longer the level term, the more
expensive the premiums are, since the older years are averaged into
the overall premium.

Policy owner The person who pays the premiums on the insurance policy

Premiums Payments made to the life insurance company to keep a policy in force

Renewable Term Life Insurance that is in force for a stated period,
and can be renewed by the policy holder (or owner) at the end of each
term for a limited number of terms without proving insurability of the
insured