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Term life insurance

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Term life insurance Glossary

Most of the common questions and answers are here

  • Accelerated Benefits/Living Benefits Riders: These riders let policyholders, which may be terminally ill or critically ill, draw upon a percentage of the face value of their life insurance policies. Conditions under which this option can be exercised and the amount available to the policyholder can vary with each insurance company.
  • Accidental Death Benefit: An extra feature of a life insurance policy that provides an additional benefit if the insured dies in an accident. Because the face amount of the policy is often doubled under this proportion.
  • Adverse Selection: Selection against the insurance company. It is the tendency for those who know that they are highly vulnerable to specific pure risks to be most likely to acquire and to retain insurance to cover that loss.
  • Life Insurance Agent: Consumers' primary link to an insurance company. Agents work with consumers to assess their needs and plan for long-term financial stability. Agents may also be referred to as insurance advisors, financial advisors, financial representatives, associates, life underwriters, and field underwriters.
  • Annual Exclusion: The amount of a gift exempt from federal transfer taxation. Currently it is $10,000 annually for gifts to any one person. This can be increased to $20,000 if the donor is married and the donor's spouse elects to split the gift on a timely filed gift tax return.
  • Application for insurance: A form that furnishes the insurance company with necessary information on the applicant's age, sex, address, occupation, earnings, height, weight, medical history and other facts. The company uses this information to determine whether or not to insure the applicant.
    Beneficiary:  The person, persons, or entity that is entitled to receive a term life insurance benefit upon death of the insured party
  • Backdating:  Ability sometimes offered to choose effective date prior to application date in order to lock in lower rates.
  • Buy-sell Agreement: A contract binding the owner of a business interest to sell the business interest for a specified or determinable price at his or her death or disability and a designated purchaser to buy at that time.
  • Cancelable: A contract in which the insurance company reserves the right to terminate the coverage at any time (and perhaps for any reason) during the term of coverage by providing notice to the insured.
  • Capital Needs Analysis: A system for determining how much life insurance a client needs if the principal sum is to be preserved in the process of meeting the financial objectives for his or her survivors.
  • Captive Agent:  An agent or agency that primarily transact life insurance for one particular life insurance agency.  Etermlifeinsurancequote.com is a Independent Agent (see Independent Agent)
  • Conditional Receipt: A receipt given to an applicant of life insurance in exchange for the payment of the first premium in which the insurer, through its agent, specifies that the coverage will be effective as of the date of the receipt, subject to the condition that the proposed insured later be found to have been insurable as of the date the receipt was issued.
  • Contestability Period: Usually a specific time frame, commonly two years, during which the insurer may deny coverage, void a contract or question the validity of a claim.
  • Contingent Beneficiary: The person designated to receive the death proceeds of a life insurance policy if the primary beneficiary predeceases the insured.
  • Cross-purchase Agreement: A business buy-sell agreement in which the surviving co-owners will be the purchasers of the business interest of a deceased owner.
  • Convertibility: A feature in term life insurance that allows the insured to replace the term coverage with permanent individual life insurance without having to show evidence of insurability. In group insurance, the right is available only at certain times, including termination of the insured from the group or from an eligible class within the group.
  • Cost of Waiting:  The extra cost or premium that results from waiting to purchase term life insurance over the length of the term.
  • Endowment: A type of life insurance policy that pays the face amount if the insured dies during a specific period of time and also pays the face amount if he or she lives to end of that period.
  • Estate Tax: A tax imposed upon the right of a person to transfer property at death. The federal government and many states levy such taxes.
  • Exclusions: This term refers to losses or risks that a policy does not cover.
  • Face amount: The amount stated on the policy that will be paid at death or maturity. It does not include additional amounts payable under accidental death or other special provisions, or acquired through the use of policy dividends.
  • Final Expense:  Costs associated with end of life issues such as funeral, taxes, debts, medical expenses, etc. 
  • Free-look period: Time during which the policyholder may return the policy if he/she is not completely satisfied and receive a complete refund. The customary length of time for a "free look" is 10 days but may be longer.
  • Grace Period: An additional period of time, usually 31 days, granted in some types of insurance for the policyowner to pay the premium after it has become due. During the grace period, the coverage remains in force.
  • Guaranteed Renewable: A policy that is renewable at the policyholder's option and cannot be terminated by the insurance company.
  • Health Class:  Term life rate tiers based on health status and history according to life carrier's underwriting guidelines.
  • Independent Agent: An agent or agency who transact life insurance but is not employed or "captive" by one insurance carrier.  Etermlifeinsurancequote.com!
  • Insurable Interest: A right or relationship with regard to the subject matter of an insurance contract such that the insured will suffer financial loss from damage, loss, or destruction to that subject matter.
  • Joint-Life Policy: A type of life insurance policy covering two or more persons in which the proceeds are payable on the death of the first one to die.
  • Level TermA form of term life insurance where benefits, premium, and length of coverage are fixed.
  • MIB Medical Information Bureau:  Repository of medical information shared by life and health companies to avoid fraud.
  • Mutual Life Company:  structure of life insurance company where excess premium is paid back to policy owners who are essentially the partners or owners of the company in the form of dividends.
  • Net Payment Cost Index: A method of estimating the net cost of life insurance on a time-value-adjusted basis if the policy's death benefit is paid at the end of a specified time period.
  • Noncancelable: An insurance contract in which the insured has the right to renew the coverage at each policy anniversary date, usually up to some stated age, and the coverage may not be terminated by the insurer during the term of coverage. Also the rates for the coverage are guaranteed in the contract, though they are not necessarily level.
  • Nonforfeiture Value: The savings element in permanent life insurance policies. Also sometimes called the cash value.
  • Paramedical Exam: A physical exam as part of term life insurance enrollment process.  See Term life Paramedical Exam article.
  • Participating Party: A life insurance policy that distributes company surplus funds to policyholders as dividends.
  • Permanent life insurance policy: Type of life insurance (other than term insurance) that accrues cash value and is designed for long-term, or permanent, needs of a policyholder. Includes whole, universal and variable life, among others.
  • Policyowner: The person or organization that owns an insurance policy. The policyowner generally has the right to change, renew, or cancel the policy and the obligation to comply with policy conditions, such as premium payments.
  • Preexisting Condition: An illness or condition of health that originated prior to the issuing of the policy.
  • Premium: The price charged for a period of coverage provided by an insurance policy and found by multiplying the rate by the number of units of coverage.
  • Premium Bands Price points that each carrier have where the cost per dollar of coverage decreases with increasing amounts of term.
  • Primary Beneficiary: The beneficiary in a life insurance policy who is first entitled to receive the policy proceeds upon the insured's death.
  • Real Property: Land and anything that is growing on it, erected on it, or affixed to it, and the bundle of rights inherent in the ownership.
  • Rescission:  The act of cancelling a life insurance policy by the company based on certain established requirements. 
  • Replacement: The replacing of one life insurance policy with another. To prevent financial harm to the policyowner, agents and insurers must follow prescribed procedures.  It's best to contact us regarding replacement as there are many variables.
  • Rider: The term used in life insurance which augments, adds to, or provides further options to core life insurance policy usually for an additional premium
  • Settlement Options: The ways that policyholders or beneficiaries may choose to have benefits paid other than a lump sum.
  • Standard Risk:  Usually lowest (most expensive) health class available.
  • State Guarantee Funds:  State funds set up to insure up to a certain amount of life insurance benefit
  • Split-Dollar Life Insurance: A plan under which two parties, usually an employer and an insured employee, share the premium costs, death proceeds, and perhaps cash value of a life insurance policy pursuant to a prearranged agreement.
  • Stock Life insurance company:  Structure of life insurance company where excess premium is paid to stockholders in the company.
  • Suicide Clause: A life insurance policy provision that specifies that if the insured, whether sane or insane, commits suicide during the first one or 2 years of the policy, the insurer will be liable only for a return of the premium.
  • Term Insurance: Life insurance written for a specific time period and payable only if the policyholder dies within that time period.
  • Underwriting:  The process of qualification for term life according to the life companies guidelines and requirements. 
  • Waiver of Premium:  Rider typically found with whole life plans to address inability to pay premium in the future.
  • Whole Life: Life insurance coverage that remains in force during the insured's entire lifetime, provided premiums are paid as specified in the policy.



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