Glossary

Life insurance, in plain English.

Every term you'll encounter shopping for life insurance — defined by a licensed independent broker. 52 entries across 7 categories.

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52 terms

Coverage types

Term life insurance: Pure death-benefit coverage that lasts a fixed number of years (10, 15, 20, 25, 30). Cheapest type; pays only if you die during the term. No cash value.
Whole life insurance: Permanent coverage that lasts your entire life and builds tax-deferred cash value. Premiums are higher than term but level for life and the cash value can be borrowed against.
Universal life (UL): Permanent coverage with flexible premiums and an interest-credited cash value. The premium and death benefit can be adjusted within limits.
Indexed universal life (IUL): A UL variant where cash value growth is tied to a stock-market index (typically S&P 500) with a floor (often 0%) and a cap. More upside than fixed UL, more complexity.
Variable universal life (VUL): A UL variant where cash value is invested in sub-accounts (similar to mutual funds). Highest upside, highest downside risk — the cash value can lose money.
No-exam (simplified-issue) life insurance: A policy issued without a paramedical exam. Usually approved or denied within minutes based on questionnaire + database checks. Slightly higher premiums; lower face amounts (usually ≤ $500K).
Guaranteed-issue life insurance: Coverage with no health questions and no exam — guaranteed acceptance up to a low face amount (usually ≤ $25K) for older applicants. Highest cost per $1K of coverage; usually has a 2-year graded death benefit.
Final expense insurance: Small whole life or guaranteed-issue policies designed to cover funeral and burial costs. Typically $5K–$25K face amounts.
Mortgage protection insurance: Term life insurance specifically sized to pay off your mortgage. Sometimes sold as a decreasing-term policy where the face amount drops alongside the mortgage balance.

Veteran-specific

VGLI (Veterans' Group Life Insurance): Federal program that lets you continue SGLI coverage after separating from active duty, up to $500K. No medical underwriting if elected within 240 days of separation; premiums increase with age.
SGLI (Servicemembers' Group Life Insurance): Active-duty group term life insurance, up to $500K, automatic at coverage start. Costs $0.06 per $1K of coverage. Ends with separation from service.
S-DVI (Service-Disabled Veterans Insurance): VA program for veterans rated for service-connected disabilities, providing limited coverage (typically $10K). Replaced by VALife in 2023.
VALife: VA life insurance program (replaces S-DVI as of January 2023) — guaranteed-issue whole life up to $40K for veterans rated for service-connected disabilities.
TSGLI (Traumatic SGLI): SGLI rider that pays a lump sum if a service member suffers a covered traumatic injury. Not a death benefit.

Underwriting

Underwriting: The carrier's process of evaluating your application — health, lifestyle, finances — to decide whether to issue a policy and at what premium.
Preferred Plus / Preferred Best: The lowest-cost rate class, reserved for the healthiest applicants (low BMI, no nicotine, no family-history red flags, optimal labs).
Preferred: Second-best rate class — very healthy but with one or two minor factors that prevent Preferred Plus.
Standard Plus / Standard Non-Smoker: Average-health rate class — most applicants land here or close to it.
Substandard / Table-rated: Above-standard premium because of a health condition. Tables are usually labeled 1–10 (or A–J), each adding ~25% to the standard premium.
Paramedical exam: 30-minute home or office visit by a contract nurse: height, weight, blood pressure, blood draw, urine sample, sometimes EKG. Used by carriers for fully underwritten policies.
Accelerated underwriting: Underwriting that uses electronic data sources (Rx history, MIB, MVR, health records) instead of a paramedical exam. Faster decision; usually capped at certain face amounts and ages.
Medical Information Bureau (MIB): Industry data clearinghouse where carriers report and check application history. Helps detect non-disclosure across applications to multiple carriers.
Attending Physician Statement (APS): Formal record request from your doctor's office for medical history. Common when the application discloses a meaningful medical condition.

Policy mechanics

Face amount (or face value): The death benefit — the amount the policy pays to beneficiaries when the insured dies.
Beneficiary (primary / contingent): Person(s) or entity (trust, charity) you name to receive the death benefit. Primary gets paid first; contingent gets paid only if primary is deceased or unavailable.
Premium: What you pay (monthly, quarterly, annually) to keep the policy in force.
Cash value: The savings component inside permanent (whole, UL, IUL, VUL) policies. Grows tax-deferred; can be borrowed against.
Surrender value: Cash value minus surrender charges — what you actually receive if you cancel a permanent policy in its early years.
Free look period: Typically 10–30 days after policy delivery during which you can cancel for a full refund. Required by state law.
Contestability period: Usually the first 2 years of a policy. Carrier can rescind for material misrepresentation on the application.
Suicide clause: Standard 2-year exclusion for death by suicide. After 2 years, suicide is fully covered.
Lapse: Policy termination because premiums weren't paid. Most policies have a 30–60-day grace period before official lapse.
Reinstatement: Putting a lapsed policy back in force, typically requires back premiums + interest + new evidence of insurability.

Riders

Rider: An add-on to a base policy that modifies its terms — additional benefits or restrictions.
Accelerated death benefit (ADB) rider: Lets you access part of the death benefit early if diagnosed with a terminal illness. Usually free.
Chronic illness rider: Lets you access part of the death benefit early if you can't perform 2 of 6 activities of daily living. Sometimes called a long-term care accelerator.
Critical illness rider: Pays a portion of the death benefit upon diagnosis of a covered critical illness (cancer, heart attack, stroke).
Waiver of premium rider: Waives your premiums if you become disabled and can't work.
Return of premium (ROP) rider: Term life rider — if you outlive the term, the carrier returns your premiums (no interest). Significantly raises premium cost.
Child rider: Adds a small term-life benefit on each of your children for one flat fee. Often convertible to permanent at age 25 without underwriting.
Conversion option: Term-life feature that lets you convert to permanent coverage with the same carrier without new underwriting. Window is typically 10 years or to age 65–75.

Tax & estate

1035 exchange: Tax-free exchange of one life insurance or annuity policy for another (similar to a 1031 in real estate). Lets you upgrade carriers or products without triggering tax.
Modified Endowment Contract (MEC): A permanent policy funded too quickly under IRS rules. Loses some tax advantages — withdrawals taxed as income before basis. Avoid unintentional MEC status.
Irrevocable Life Insurance Trust (ILIT): Trust that owns the policy so the death benefit is outside your estate for federal estate-tax purposes. Used by high-net-worth households.
Estate-tax exemption: Federal threshold above which estates owe estate tax (currently ~$13M per person, scheduled to drop in 2026). Life insurance death benefits paid to a non-spouse beneficiary are tax-free income but are included in your estate unless held in an ILIT.

Industry & regulatory

NAIC: National Association of Insurance Commissioners — the standard-setting body for state insurance regulators.
NPN (National Producer Number): Unique national ID for licensed insurance agents. Use it to verify any agent's credentials at niprfintech.com.
Captive agent: An agent who can only sell one carrier's products (e.g., a State Farm or Northwestern Mutual agent).
Independent broker: An agent appointed with multiple carriers who can quote and place business with whichever fits the client best. We're an independent brokerage.
Replacement form: Required disclosure when a new policy replaces an existing one. Carriers track replacements to discourage churning.
AM Best rating: A.M. Best Company's rating of an insurer's financial strength. A++ is the highest, A- is generally the floor for major-carrier appetite. Use as a baseline for who'll be around to pay your claim in 30 years.
Comdex score: Composite score (0–100) averaging financial-strength ratings from AM Best, Moody's, S&P, and Fitch. Quick comparable across carriers.

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