Insurance contracts are written in a specific vocabulary, and the difference between two policies often lives in the definitions. These are the terms that come up most often in final expense policies and the conversations around them.
A – C
Accelerated death benefit. A provision allowing the insured to receive part of the death benefit while still living, on a qualifying event such as a terminal diagnosis. Any amount taken reduces what the beneficiary receives. Often included at no additional premium.
Accidental death benefit. A rider paying an additional amount if death results from an accident as the contract defines it. Definitions are narrower than most people assume.
Assignment of benefits. A document by which a beneficiary directs part of the policy proceeds to a third party, most often a funeral home, so the provider is paid directly from the claim.
Beneficiary. The person or entity named to receive the death benefit. A primary beneficiary is first in line; a contingent beneficiary receives the proceeds if the primary does not survive the insured. An irrevocable beneficiary cannot be changed without their consent.
Cash value. The savings component that accumulates in a permanent policy. It can generally be borrowed against or received by surrendering the policy, and it is not paid in addition to the death benefit.
Contestability period. A window, usually two years from issue, during which the insurer may investigate a claim and rescind the policy or deny the claim for a material misstatement on the application. After it ends, the policy generally cannot be contested except for fraud.
D – G
Death benefit. The amount payable to the beneficiary on the insured's death, reduced by any outstanding policy loans and unpaid premiums. Also called the face amount.
Elimination period. See waiting period.
Face amount. The stated coverage amount of the policy. Note that the face amount and the amount actually paid can differ — because of a loan, a waiting period, or a graded benefit schedule.
Free look period. A state-mandated window after policy delivery, frequently ten days, in which the policy can be returned for a full premium refund.
Grace period. Time after a missed premium during which the policy stays in force, commonly around 30 days.
Graded benefit. A structure in which the death benefit is reduced during an initial period, typically two or three years, then rises to the full face amount.
Guaranteed issue. A policy issued without health questions or a medical exam within a stated age range. Nearly always includes a waiting period and the highest cost per dollar of coverage.
I – N
Insured. The person whose life the policy covers, who may or may not be the person paying for it.
Lapse. Termination of coverage for nonpayment of premium after the grace period ends.
Level premium. A premium that does not change over the life of the policy. Whether it is contractually guaranteed to stay level is a separate question worth asking.
MIB Group. An industry information exchange that records prior insurance applications. Insurers commonly check it during simplified issue underwriting.
Modified benefit. Depending on the insurer, either a graded death benefit structure or a premium that changes after an initial period. The label alone does not tell you which.
Modified endowment contract (MEC). A life insurance policy that has been funded beyond federal limits and consequently loses some of the tax advantages that apply to distributions and loans.
Nonforfeiture options. Contractual choices preserving some value if you stop paying premiums after cash value has built up — typically taking the cash surrender value, converting to a smaller paid-up policy, or continuing full coverage for a limited term.
O – R
Outer burial container. A grave liner or vault surrounding the casket. Not required by state law, but required by most cemeteries.
Paid-up policy. A policy requiring no further premiums while coverage remains in force.
Policy loan. Borrowing against cash value. Interest accrues, and any unpaid balance reduces the death benefit.
Preneed contract. An agreement with a funeral provider for specified goods and services, funded by insurance or a trust. Distinct from a life insurance policy in what it buys, who is paid, and how it is regulated.
Premium. The payment that keeps the policy in force, payable monthly, quarterly, or annually. Paying annually is often slightly cheaper in total.
Producer. The regulatory term for a licensed insurance agent or broker.
Reinstatement. Restoring a lapsed policy, usually requiring back premiums with interest and evidence of insurability, within a limited window.
Replacement. Buying a new policy to take the place of an existing one. Regulated by states, and requiring specific disclosure forms.
Rider. An optional addition modifying the base policy, sometimes at extra cost.
S – W
Simplified issue. Underwriting based on health questions and database checks, without a medical exam.
Suicide clause. A provision, typically two years, under which the insurer returns premiums rather than paying the death benefit.
Surrender. Voluntarily ending a policy in exchange for its cash surrender value, terminating the coverage.
Underwriting. The insurer's process of evaluating risk to decide whether to issue a policy and at what price.
Waiting period. A period after issue during which death from natural causes does not produce the full death benefit. Contracts typically return premiums, often with interest, or pay a stated percentage instead. Commonly two years on guaranteed issue policies.
Whole life insurance. Permanent life insurance with a level premium and a death benefit that does not expire with age, provided premiums are paid.
General information only
These definitions describe common industry usage. Insurance contracts define their own terms, and a contract's definition governs over any general description — including this one. Terms and their application vary by insurer and by state.