Life Insurance Terms

This list is intended to provide a general understanding of life insurance terms. These definitions should not be used as a sole resource in interpreting your policy terms. Please contact your agent or the Company with questions regarding a Columbian policy.

Accelerated Death Benefit
Benefits payable under a life insurance contract to a policyowner or certificateholder, during the lifetime of the insured, in anticipation of death or upon the occurrence of specified life-threatening or catastrophic conditions specified in the policy or rider. Also known as a Living Benefit Option.
Accidental Death Benefit
An additional benefit payable to the policy beneficiary if the insured dies from a covered accident.
Assignment
The transfer of rights or benefits under a policy or certificate to another party. Assignments can be revocable or irrevocable. An irrevocable assignment cannot be changed or canceled.
Automatic Premium Loan Provision
A provision in a life insurance contract that allows for the payment of premiums from the cash value of the policy if premiums are not paid when due.
Beneficiary
The party named in the insurance contract to receive the proceeds of the policy upon death of the insured. Also known as Primary Beneficiary. A beneficiary can be revocable or irrevocable. An irrevocable beneficiary cannot be changed.
Cash Value
The savings element that accumulates with some life insurance policies. The policyowner can borrow against the cash value of a policy while it is in force. The cash value is used to determine the amount of money that the policyowner will receive if the policy is surrendered.
Contingent Beneficiary
A party named in the insurance contract to receive the proceeds of the policy upon the death of the insured if the primary beneficiary predeceases the insured.
Decreasing Term Insurance
Term life insurance with a death benefit that decreases during the term period.
Dividend
A share in the profits of a mutual life insurance company that is paid to owners of participating policies.
Face Amount
The amount specified in the life insurance contract that will be paid to the policy beneficiary upon the death of the insured. The face amount does not include any amounts added by dividend additions, rider benefits or other provisions.
Free-Look Period
A specified initial period after policy issue, during which the policyowner has the right to examine the policy and cancel the coverage if not satisfied. Any premium that has been paid is returned and the policy is considered void from the beginning.
Grace Period
A specified number of days after the premium due date in which a past due premium may be paid without penalty or lapse in coverage.
Home Service Distribution
A system used to sell and service Monthly Debit Ordinary (MDO) policies, in which the agent calls at the customer's home to sell the policy and to collect the subsequent premiums.
Increasing Term Insurance
Term life insurance with a death benefit that increases during the term period.
Insurable Interest
A close family relationship, by blood or by law, and/or a substantial economic interest in the continued life, health, or bodily safety of the insured.
Insurance
The transfer of a risk from an individual to an insurer. In exchange for a premium, the insurer agrees to pay the policyowner a benefit upon the occurrence of a specified loss.
Lapse
Termination of a policy due to nonpayment of premiums within the specified time period.
Level Premiums
Premiums that remain the same throughout the lifetime of the policy.
Level Term Insurance
Term life insurance with a death benefit that remains the same throughout the term period.
Mode of Premium Payment
The payment method (i.e., check, automatic electronic funds transfer, etc.) and the frequency with which payments are made (i.e., annually, semi-annually, quarterly or monthly).
NAIC
National Association of Insurance Commissioners. An organization of insurance regulators that provides a forum for the development of uniform policy among states when uniformity is appropriate.
Nonforfeiture Options
The choices available to a policyowner regarding application of a policy's cash value when the policy lapses.
Policy Term
The period of time for which an insurance policy provides coverage.
Premium
Payment(s) required to purchase and keep a policy in force.
Rate
The cost of a unit of insurance coverage. Rates usually vary by the age and health of the insured at the time of policy issue.
Reinstatement
Restoration of coverage under a policy that has lapsed.
Renewable Term Insurance
A term life insurance policy which can be renewed at the end of the initial term period.
Rider
An additional benefit that, when issued, becomes a part of the policy to which it is attached. Common riders are Accidental Death Benefit Rider, which pays an additional benefit for the accidental death of the insured, and Waiver of Premium Rider, which waives premium payments if the insured becomes disabled for a specified period of time. Riders may also be used to purchase additional term insurance on the primary insured, or to provide term coverage for the spouse and/or children of the primary insured.
Settlement Options
Alternative methods for paying the cash value or death benefit of a policy.
Substandard Insurance
Insurance issued at a higher premium rate or special restriction to those who do not qualify for standard rates due to higher risks.
Term Life Insurance
A life insurance policy that remains in effect for a specified period of time. Term life insurance does not build cash value.
Universal Life Insurance
A life insurance contract that allows the policyholder to change the amount of the death benefit and the amount and timing of the premium payments.
Whole Life Insurance
A life insurance policy that remains in effect for the lifetime of the insured, provided premium payments are made as scheduled. Whole life insurance policies build cash value.