Glossary of Life Insurance Terms
Life insurance addresses critical needs of families in distress. Unfortunately for some, claims aren’t always honored in a timely fashion or fully paid, and some claims are altogether denied for one reason or another. Life insurance claims occur at precisely the time when beneficiaries are most vulnerable and ill-equipped to deal with pushback from insurers, which is why letting a team of skilled insurance lawyers take up your case on your behalf can be so helpful.
Understanding the complex terms and jargon associated with life insurance policies can be crucial for policyholders and beneficiaries, especially when facing a denied claim. This glossary provides clear definitions of key life insurance terms to help you navigate your policy and protect your rights. If your California life insurance claim has been unreasonably delayed or denied, contact Gianelli & Morris to discuss your situation with an experienced California bad faith insurance law attorney.
Accelerated Death Benefit
An accelerated death benefit is a rider on a life insurance policy that allows the policyholder to receive a portion of the death benefit while still alive if diagnosed with a terminal illness. This benefit can help cover medical expenses and other costs associated with the illness.
Beneficiary
A beneficiary is a person or entity designated by the policyholder to receive the death benefit upon the policyholder’s passing. There are two main types of beneficiaries: primary and contingent. The primary beneficiary is the first in line to receive the death benefit, while the contingent beneficiary will receive the benefit if the primary beneficiary is unable to do so.
Cash Surrender Value
The cash surrender value is the amount the policyholder receives if they cancel a whole life or universal life insurance policy before it matures or the insured passes away. This value is typically the accumulated cash value minus any surrender charges or outstanding loans.
Contestability Period
The contestability period is a specific time frame, usually two years from the policy’s inception, during which the insurance company can investigate and deny claims due to misrepresentation or fraud by the policyholder.
Death Benefit
The death benefit is the amount paid to the beneficiary upon the death of the insured. This benefit is typically tax-free and can be used to cover funeral expenses, debts, and other financial obligations.
Grace Period
A grace period is the additional time given to the policyholder to pay a missed premium without losing coverage. This period usually lasts 30 to 31 days from the due date of the premium. In California, however, the grace period is 60 days. Insurance companies that operate in many different states often misapply the grace period in California, which has many provisions in place to protect policyholders and beneficiaries.
Incontestability Clause
The incontestability clause is a provision in life insurance policies that prevents the insurer from voiding the policy after it has been in force for a specified period, typically two years, except in cases of fraud.
Irrevocable Beneficiary
An irrevocable beneficiary is a beneficiary whose designation cannot be changed without their consent. This type of beneficiary has a guaranteed right to the death benefit, and the policyholder cannot alter this designation or take certain actions, such as borrowing against the policy, without the beneficiary’s approval.
Lapse
A lapse occurs when a life insurance policy terminates due to non-payment of premiums. Once a policy lapses, the coverage ceases, and the death benefit is no longer payable. Some policies may offer reinstatement options under certain conditions. California law favors the insured and has many provisions that must be followed before an insurance company can lawfully allow a policy to lapse.
Nonforfeiture Benefit
A nonforfeiture benefit is a feature of certain life insurance policies that provides the policyholder with options, such as a reduced paid-up policy or extended term insurance, if they stop paying premiums. This ensures that the policyholder does not lose the entire value of the policy.
Policy Loan
A policy loan is a loan taken by the policyholder against the cash value of a permanent life insurance policy. The loan accrues interest, and any unpaid loan amounts and interest will reduce the death benefit.
Premium
A premium is the amount paid by the policyholder to the insurance company to keep the life insurance policy active. Premiums can be paid monthly, quarterly, annually, or as a lump sum.
Retained Asset Account
A retained asset account is an account set up by the insurance company for the beneficiary of a life insurance policy. Instead of receiving a lump sum payment, the beneficiary is given a checkbook or other means to draw funds from the account, which earns interest.
Rider
A rider is an additional provision added to a life insurance policy that provides extra benefits or modifies the coverage. Common riders include accidental death, waiver of premium, and accelerated death benefits.
Underwriting
Underwriting is the process used by insurance companies to assess the risk of insuring an individual. This process involves evaluating the applicant’s health, lifestyle, and other factors to determine the premiums and terms of coverage.
Contact Gianelli & Morris for Help With California Life Insurance Claims Delayed or Denied in Bad Faith
Understanding these terms can empower policyholders and beneficiaries to make informed decisions and effectively address issues related to denied life insurance claims. If you believe your claim has been wrongfully denied, our law firm is here to navigate the complexities of California insurance law on your behalf and secure the benefits you are entitled to. Call our office at 213-489-1600 for a free consultation to talk about your claim and find out how we can help.
