Enable accessibility Types of Insurance Types of Riders Life Insurance Terms cfglife.com >> Consumers >>Understanding Life Insurance Understanding Life Insurance Types of Insurance Whole Life Insurance is permanent insurance providing coverage for the insured's entire life, as long as premiums are paid as specified in the policy contract. Whole life insurance builds cash value, which the policyowner can access through a loan or partial surrender. With some policies, the cash value can be used to purchase a fully paid-up policy with a reduced face amount. Term Life Insurance provides coverage on the insured for a set number of years. There are two types of term policies – level term and decreasing term. With a level term policy, the death benefit stays the same throughout the policy term; with a decreasing term policy, the death benefit is reduced throughout the policy term. Because term insurance does not build a cash value, premiums are lower than those of a whole life policy. Some term policies expire at the end of the term, while others can be renewed to a specified age. Renewal premiums may be higher than the premiums for the initial term. Some term policies are “convertible,” which means that they can be converted to a permanent policy without additional health requirements or underwriting. Universal Life Insurance is permanent insurance with a savings element. Most universal life policies have a flexible premium option, allowing the policyholder to increase or decrease premiums, or to make lump-sum deposits. Other universal life policies require a single premium or scheduled fixed premiums. Universal life premiums consist of a cost of insurance amount and a savings component, also known as the cash value. The cost of insurance includes mortality charges and the expenses associated with keeping the policy in force. Premiums in excess of the cost of insurance accumulate within the cash value of the policy. The cash value earns interest based on the current market or a minimum interest rate, whichever is greater. As the cash value accumulates, the policyholder may access a portion of the cash value without affecting the guaranteed death benefit. Types of Riders A rider is an additional benefit offered by the insurance company. Some riders have an additional cost associated with their purchase. Accelerated Benefit Rider or Living Benefit Rider allows the policy owner to receive advance payment of a part or all of the policy death benefit if the insured is diagnosed with a covered condition, such as a terminal illness, critical illness or chronic illness. Receipt of accelerated benefit may affect eligibility for public assistance and may be taxable. Accidental Death Benefit pays an additional benefit if the insured dies as the result of an accident. Children's Insurance Rider provides term insurance coverage on the insured's children. Some riders also allow a grandparent or great grandparent to add rider coverage on their grandchildren. A children’s insurance rider may be convertible to permanent insurance, subject to the terms of the rider. Guaranteed Purchase Option Rider allows the policyowner to increase the amount of coverage on specified dates without additional underwriting. Other Insured Rider provides term insurance on an additional person in whom the primary insured has an insurable interest. Primary Insurance Rider provides additional insurance on the primary insured for a specific number of years. A Level Term Rider provides a benefit amount that stays the same during the term of the rider. A Decreasing Term Rider provides a benefit amount that decreases each year during the term of the rider. A primary insurance rider may be convertible to permanent insurance, subject to the terms of the rider. Spouse Insurance Rider provides term insurance on the insured's spouse. In states where allowed, spouse coverage includes registered domestic partners/civil union partners. A spouse insurance rider may be convertible to permanent insurance, subject to the terms of the rider. Waiver of Premium Rider waives premium payments under certain circumstances, such as the disability or nursing home confinement of insured, thereby avoiding cancellation of the policy due to nonpayment of premiums. 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. 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. 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. 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 payable 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. Nonforfeiture Options The choices available to a policyowner regarding application of a policy's cash value when a policy lapses. Policy Term The period of time for which an insurance policy provides coverage. Premium The payment(s) required to purchase and keep a policy in force. Premium Mode The payment method and the frequency with which payments are due. Rate The cost of a unit of insurance coverage. Rates usually vary by the anticipated mortality 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. Settlement Options Alternative methods for paying the cash value or death benefit of a policy. Substandard Rating A higher premium rate or special restriction for 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 includes a savings element, which can allow the policyholder to change the amount 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. COLUMBIAN MUTUAL LIFE INSURANCE COMPANY Home Office: Binghamton, NY COLUMBIAN LIFE INSURANCE COMPANY Home Office: Chicago, IL Administrative Service Offices: Binghamton, NY • Syracuse, NY 800-423-9765 Columbian Life Insurance Company is not licensed in every state. Product availability may vary by state. 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