Life Insurance and Annuities: Policy Types, Riders, and Contract Provisions

Increasing term life

Term life insurance with a death benefit that increases on a contract schedule, often to keep up with inflation or growing needs. It has no cash value.

Level term life

Term life insurance with a death benefit that stays the same throughout the stated term. Premiums are usually level during that term. It has no cash value.

Decreasing term life

Term life insurance whose death benefit decreases on a stated schedule, often while premiums stay level. Commonly used to cover declining mortgage or loan balances. It has no cash value.

Renewable term / annual renewable term (ART)

Renewable term can be renewed without new evidence of insurability, usually at higher premiums based on age. ART is renewable one year at a time, with premiums generally rising each year.

Convertible term life

Term insurance that may be changed to an eligible permanent life policy during a specified period without new proof of insurability. Premiums on the new policy generally reflect the insured's age at conversion.

Term life insurance / temporary protection

Life insurance that pays a death benefit only if the insured dies during the covered term. It generally has no cash value and expires unless renewed or converted under contract rights.

Whole life insurance

Permanent life insurance with a guaranteed death benefit, scheduled premiums and guaranteed cash values, provided required premiums are paid.

Limited-pay whole life

Permanent whole life coverage paid up after a limited number of years or by a specified age. Life coverage continues after payments end.

Single-premium whole life

Permanent whole life policy funded with one lump-sum premium. May become a modified endowment contract (MEC), which changes withdrawal and loan taxation.

Modified vs. graded premium whole life

Modified-premium whole life starts with low premiums that increase once to a higher level. Graded-premium whole life increases premiums in several steps, then levels off.

Indeterminate-premium whole life

Whole life policy whose insurer can adjust premiums based on its experience, but never above the maximum premium stated in the contract.

Adjustable life insurance

Life coverage allowing changes to premium, face amount and protection period, subject to policy terms and sometimes evidence of insurability.

Universal life (UL) and its charges

Permanent life with flexible premiums and an interest-credited cash-value account. Premiums (less any front-end load) fund the account. The insurer separately shows interest credits, cost-of-insurance/mortality charges and expense deductions. A back-end load is charged on withdrawal or surrender. The target premium is only a suggested payment, not a guarantee that coverage stays active.

UL death benefit options A and B

Option A pays a level death benefit. As cash value grows, the insurer needs to cover less of the death benefit. Option B pays the face amount PLUS the cash value, so the death benefit increases as cash value grows. The insurer continues covering the full face amount, which generally makes insurance charges higher.

UL corridor

The minimum death benefit a universal life policy must maintain compared with its cash value to keep its favorable life-insurance tax treatment.

UL no-lapse guarantee

Keeps universal life coverage in force even when account value is insufficient, but only if the specific required premium amount and payment timing conditions are met.

Interest-sensitive whole life and excess interest

Whole life policy whose cash-value growth reflects the insurer's current interest-crediting assumptions, with contractual minimum guarantees. An excess-interest provision allows credits above the guaranteed minimum when declared by the insurer.

Variable life / separate account

Permanent life with fixed scheduled premiums. Cash value is invested in a separate account and can rise or fall, with investment risk borne by the owner. Variable life generally guarantees a minimum death benefit despite market losses.

Variable universal life (VUL)

Universal life's flexible premiums combined with separate-account investments. Owner bears market risk, so cash value and death benefit can fluctuate subject to policy guarantees and terms.

FINRA registration and prospectus

FINRA (Financial Industry Regulatory Authority)

Variable life and variable annuities are securities products: selling them generally requires appropriate securities registration as well as an insurance license. FINRA oversees registered securities representatives. A prospectus discloses investment objectives, risks, charges and fees.

Endowment policy

Life policy that pays the face amount if the insured dies before maturity OR if the insured survives to the policy's stated maturity date.

Accidental death rider / double or triple indemnity

Pays an additional death benefit for a qualifying accidental death, subject to limits, timing and exclusions. Double or triple indemnity may make total payment two or three times the base death benefit.

Term rider

Adds temporary term-life coverage to a permanent life insurance policy.

Family / other-insured rider

Adds life coverage for another person—commonly a spouse or children—to the primary insured's policy.

Return-of-premium rider / death benefit

Returns eligible premiums if the policy's specified survival or death conditions are met. Depending on design, refunded premiums may be part of or added to the death benefit. It is not the same as surrendering a policy for cash value.

Joint life and survivorship life

Joint life (first-to-die) insures two lives and pays after the FIRST death. Survivorship (second/last-to-die) pays only after the SECOND death and is often used in estate planning.

Juvenile / jumping juvenile life

Juvenile life insures a child, often with parent or guardian as owner. A jumping juvenile policy automatically increases the face amount at a stated age, usually without new underwriting.

Limited-benefit life

Policy that restricts benefits under stated conditions, often in the early years. A graded death-benefit contract may initially pay less than the full face amount.

Graded death benefit vs graded premium

A graded DEATH BENEFIT pays limited death benefits in early policy years under the contract. A graded PREMIUM starts with premiums that rise in steps before becoming level. They describe different policy features.

Credit life / mortgage protection life

Credit life generally uses decreasing term insurance to pay covered outstanding debt if the debtor dies, often to the lender. Mortgage protection life aims to cover the remaining mortgage balance and also often uses decreasing term.

Annuity / annuitant / owner

An annuity is an insurance contract used to accumulate money and/or produce income, often for retirement and longevity protection. The OWNER controls withdrawals and beneficiary choices. The ANNUITANT is the person whose life determines any life-contingent payout and need not be the owner.

Annuity accumulation and annuitization

During ACCUMULATION, money grows and the owner may withdraw or surrender under contract rules. Death generally gives the beneficiary the contract's death benefit/value. During ANNUITIZATION, accumulated money converts to income. What is left after death depends on the selected payout option (pure life has no refund).

Annuity funding methods

Single-premium annuity = one lump-sum payment. Flexible-premium = multiple payments at optional amounts/times. Periodic or fixed-installment premium = regular scheduled contributions.

Fixed annuity

An annuity where the insurance company invests your money in its general account and takes the investment risk. Your money earns at least a guaranteed minimum interest rate, and you can receive guaranteed payments when you retire. The company may pay higher interest, but your payments may lose buying power because of inflation.

Variable annuity

Annuity whose account value or payments depend on separate-account investment performance. The owner bears market risk.

Equity-indexed annuity

Annuity crediting interest by a market-index formula rather than direct stock ownership. Caps, spreads or participation rates can limit growth, and contract guarantees apply.

Immediate vs. deferred annuity

Immediate annuity starts income soon after purchase, generally within 12 months. Deferred annuity begins income later and may have an accumulation period.

Single-life / joint-life / joint-and-survivor annuity

Single-life bases lifetime payments on ONE person. Joint-life covers TWO and may stop after the first death under a joint-life-only design. Joint-and-survivor continues while EITHER annuitant remains alive, sometimes at a reduced amount after the first death.

Straight life (pure life) annuity

Pays income for one person's lifetime, stops immediately at death even after one payment, and pays no remaining amount to a beneficiary. Generally offers the highest life-only monthly payout for comparable terms.

Life annuity with period certain

Pays for life but guarantees at least a stated number of years of payments. If the annuitant dies within that period, the beneficiary receives payments for the rest of the period.

Cash refund / installment refund life annuity

Both pay lifetime income and guarantee the purchase amount is returned overall. If the annuitant dies before payments equal the original investment, CASH REFUND pays the difference as a lump sum. INSTALLMENT REFUND pays the difference in installments.

Fixed-period / fixed-amount annuity payout

Fixed PERIOD chooses how long payments last, and the installment amount is calculated. Fixed AMOUNT chooses each installment's dollar amount, and payments continue until the funds run out.

Annuity surrender / surrender charge

Surrender ends the annuity in exchange for available contract cash/surrender value. Surrender charges can apply during the stated early-withdrawal period, and taxes may apply.

Guaranteed minimum annuity benefit

An annuity rider or guarantee promising a defined minimum benefit, such as an income or withdrawal amount, regardless of certain investment outcomes. Exact benefit depends on the rider.

Guaranteed minimum accumulation benefit (GMAB)

Variable annuity guarantee that provides a minimum account or contract value at a specified future date if the rider conditions are satisfied, even if investment performance is poor.

Guaranteed minimum withdrawal benefit (GMWB)

Annuity rider guaranteeing a defined amount of withdrawals over time, subject to withdrawal limits and rider rules, even if market performance reduces the investment account.

Guaranteed minimum income benefit (GMIB)

An annuity rider that guarantees a minimum amount of lifetime income, even if investments lose value, when the owner converts the annuity into regular payments (annuitization) under the rider's rules.

Insuring clause

The insurer's contractual promise to pay covered benefits when the stated conditions are met.

Ownership clause

Defines the owner's rights to change beneficiaries, assign ownership, borrow or surrender, subject to policy restrictions.

Entire contract clause

The policy plus attached application and riders make up the complete contract. Other representations are not part of it unless included.

Incontestability clause (NC)

After a life policy has been in force generally TWO YEARS, the insurer usually cannot contest it for application misstatements, except nonpayment and applicable legal exceptions.

Grace period / nonpayment (NC)

Individual and group life policies generally allow a 31-DAY grace period for premiums after the first premium. Coverage continues during grace. If death occurs, unpaid premium can be deducted. Unpaid premiums after grace may cause lapse unless an automatic premium loan or nonforfeiture option applies. Group rules include any applicable notice requirements.

Reinstatement of lapsed life policy (NC)

Generally available within FIVE YEARS after premium default if the policy was not surrendered or cash value exhausted. Requires satisfactory proof of insurability and payment of overdue premiums plus interest.

Misstatement of age or sex

Incorrect age or sex usually leads to adjusting policy benefits or premiums to what the correct information would have purchased, not automatically voiding coverage.

Absolute assignment / collateral assignment

ABSOLUTE assignment transfers all policy ownership rights. COLLATERAL assignment transfers only enough rights to secure a loan. The creditor is entitled to the unpaid debt from proceeds and the balance goes to the beneficiary.

Conversion provision

Allows changing a policy to another eligible policy form, commonly term to permanent life, under set conditions often without new evidence of insurability.

Free-look provision (NC)

Allows the owner to return a newly issued policy within the legally applicable review period for a refund. The exact period depends on the policy and circumstances. There is NOT one universal NC free-look period in this source.

Cash-value withdrawal

Taking part of the cash value without fully surrendering the policy. Can reduce cash value and death benefit and may cause a tax liability.

Suicide clause (NC)

Life insurance may exclude suicide occurring within the first TWO YEARS under the policy's terms. If excluded, the insurer generally refunds premiums as required rather than paying the death benefit.

War and aviation exclusions

War RESULTS exclusion applies when death is CAUSED by war, whether or not the insured served. War STATUS exclusion can exclude a person because of military status even for unrelated deaths. Aviation exclusions may apply to specified hazardous/noncommercial flight activities. Exact wording controls.

Three nonforfeiture options

If a cash-value policy lapses, CASH SURRENDER pays available cash value and ends coverage. REDUCED PAID-UP uses cash value to buy a smaller permanent paid-up policy. EXTENDED TERM uses cash value to keep the SAME face amount for a limited term. If no selection is made, the policy's stated DEFAULT option applies.

Policy loans / automatic premium loan (APL)

A policy loan borrows against cash value. Any unpaid loan plus interest reduces death proceeds. FIXED loan interest uses a rate set by policy. VARIABLE interest can change under contract rules. If elected, APL automatically borrows against available cash value to pay an overdue premium.

Deferral of cash-value payment

Policy provision allowing the insurer to delay certain cash-value payments for a limited period permitted by the policy and applicable law.

Participating policy dividends and options

PARTICIPATING life policies may pay non-guaranteed dividends based on insurer experience. NONPARTICIPATING policies do not. Dividends may be taken as CASH, used to REDUCE PREMIUM, purchase PAID-UP ADDITIONS, ACCUMULATE AT INTEREST, or buy ONE-YEAR TERM insurance if offered. Dividends generally return excess premium (not taxable until they exceed cost basis). Interest earned on retained dividends is taxable.

Life insurance settlement options

Death proceeds can be paid as LIFE INCOME (payments for beneficiary's life. Unused principal may not remain), FIXED PERIOD (over chosen time, calculated amount), FIXED AMOUNT (chosen installments until funds run out), or INTEREST ONLY (principal held by insurer, interest paid). Owner may select the method. Beneficiary may choose if policy allows.

Life insurance beneficiaries

PRIMARY receives proceeds first. CONTINGENT receives if primary cannot. TERTIARY if both prior levels cannot. REVOCABLE can be changed by owner. IRREVOCABLE generally requires beneficiary consent to change or impair rights. Beneficiary may be designated BY NAME or BY CLASS (such as 'children'). Designating the ESTATE can trigger probate and claims of estate creditors. Changes are usually made by proper filing and may be recorded through insurer endorsement under policy rules.

Minor child as life insurance beneficiary

A minor may be named as beneficiary, but insurers typically cannot pay substantial death proceeds directly to the child. A court-appointed guardian, custodian arrangement, or trust may be needed to manage the money.

Per stirpes and per capita beneficiary distributions

PER STIRPES gives a deceased beneficiary's share to that beneficiary's descendants by family branch. PER CAPITA divides proceeds equally among eligible surviving beneficiaries in the designated group.

Common disaster / Uniform Simultaneous Death Act

A common-disaster provision sets survival requirements when insured and beneficiary die close together. When death order cannot be determined, the Uniform Simultaneous Death Act generally treats the insured as surviving the beneficiary for distributing the life policy proceeds.

Premium mode / modal factor

Premium mode is how often premiums are paid: annually, semiannually, quarterly or monthly. Paying more often can increase total yearly cost through a modal factor.

Accidental death and dismemberment (AD&D)

Pays stated benefits for covered accidental death OR qualifying bodily losses (such as loss of limb or sight), subject to policy definitions.

Guaranteed insurability rider

Lets the insured purchase specified additional life coverage at stated dates or life events without new evidence of insurability, usually at rates for current age.

Waiver of premium rider

Waives life premiums after qualifying disability and a required waiting period, keeping coverage in force under rider conditions.

Waiver of monthly deduction (UL)

After qualifying disability, waives UL's monthly insurance and expense deductions as the rider specifies. Different from waiving a fixed premium.

Payor benefit rider

On juvenile coverage, waives premiums if the person paying them dies or becomes disabled as the rider states.

Cost-of-living rider

Increases benefits according to a specified inflation index or scheduled adjustment to help offset rising costs.

Group life insurance / master policy / certificate

Group term offers temporary insurance, and group permanent offers lifetime-type coverage when available. A MASTER POLICY is issued to employer/association. Individual members receive CERTIFICATES describing coverage. Underwriting emphasizes group characteristics/participation rather than full examination of every member. Group CREDIT/MORTGAGE life protects covered debts, generally benefiting lender to amount owed.

Group life eligibility and employer-employee group

Group life typically covers eligible members of a genuine employer or other qualifying group under one master policy. Employer group eligibility generally depends on membership or employment, not individual health underwriting for everyone.

Contributory / noncontributory group plan

CONTRIBUTORY group insurance requires employees to contribute premiums, so minimum participation rules often apply. NONCONTRIBUTORY is fully employer-paid and typically requires all eligible members to participate.

NC group life conversion

After leaving eligible group coverage, an insured generally has 31 DAYS to APPLY AND PAY for individual life conversion without new proof of insurability. If they DIE within that period, the applicable death benefit can still be paid even without applying. When the whole group policy/class ends, conversion may require five prior years of coverage and is subject to statutory limits, including $10,000 under the cited provision.

Traditional IRA

Individual retirement account with tax-deferred growth. Contributions may be deductible depending on eligibility and withdrawals are generally taxable.

Roth IRA

IRA funded with after-tax contributions. Qualified distributions are tax-free.

403(b) / tax-sheltered annuity (TSA)

Tax-advantaged retirement plan available to eligible public-school employees and certain tax-exempt organization employees.

Keogh plan

Tax-qualified retirement arrangement for self-employed people and eligible employees.

SEP IRA

Simplified Employee Pension plan under which an employer makes contributions to employee IRAs.

401(k)

An employer-offered retirement plan where employees invest part of their paycheck, sometimes with employer contributions. Retirement savings depend on contributions and investment performance, not guaranteed payments.

Qualified retirement plans / required distributions / early penalty

A QUALIFIED plan meets tax-law rules for favorable treatment. Many retirement accounts require MINIMUM DISTRIBUTIONS at the statutory age, while Roth IRA owners generally have no lifetime RMDs. Many taxable retirement withdrawals before age 59½ incur an extra 10% tax unless an exception applies.

ERISA

Federal law that protects employees' retirement and benefit plans. Requires private-employer plan managers to act in employees' best interests, share plan information, and protect their benefits. Does not require employers to offer a plan.

SIMPLE IRA

A retirement plan generally for businesses with 100 or fewer employees, funded through employee paycheck contributions and mandatory employer contributions.

457(b) plan

Tax-advantaged deferred compensation plan generally available through state or local governments and certain tax-exempt employers.

Retirement transfer / 60-day rollover

DIRECT trustee-to-trustee transfer moves funds between custodians without payment to owner. A 60-DAY ROLLOVER requires an eligible distribution to be redeposited in an eligible retirement account within 60 days. Restrictions and exceptions apply.

Key person life insurance

Business owns and is generally beneficiary of a life policy on a crucial employee, providing cash if the employee dies.

Buy-sell agreements (cross-purchase vs. entity-purchase)

Buy-sell contract arranges transfer of business ownership when an owner dies or another stated trigger occurs. CROSS-PURCHASE: other owners own policies on each other and purchase the deceased owner's share. ENTITY-PURCHASE: the business owns policies on its owners and buys the deceased owner's share.

Social Security OASDI, PIA and SSDI waiting period

OASDI is federal OLD-AGE, SURVIVORS and DISABILITY insurance. PIA is the basic retirement benefit payable at FULL RETIREMENT AGE before reductions/increases. SSDI generally has a FIVE FULL CALENDAR MONTH waiting period before cash benefits begin, subject to exceptions.

Social Security fully insured / quarters of coverage

A worker generally becomes fully insured for Social Security retirement benefits with 40 work credits, roughly 10 years of covered work. Up to four credits may be earned per year. In 2026 one credit requires $1,890 in covered earnings.

Social Security survivor benefits

Eligible surviving spouses, divorced spouses, children, and dependent parents may receive monthly benefits based on the deceased worker's earnings record. A widow or widower may generally begin at age 60, or 50 if disabled, with special rules for caring for eligible children.

Social Security lump-sum death benefit

A one-time $255 payment to an eligible surviving spouse or certain eligible children. The application must be made within TWO YEARS of the worker's death.

Social Security family maximum

The maximum total monthly Social Security benefits payable to eligible family members on one worker's earnings record. Some dependent benefits are reduced if the combined amount exceeds this limit.

Social Security blackout period

A period when a surviving spouse who was receiving child-in-care survivor benefits may not receive widow or widower benefits after the youngest eligible child ages out, until the spouse reaches the age for survivor benefits, generally 60 or 50 if disabled.

Social Security AIME and PIA

AVERAGE INDEXED MONTHLY EARNINGS (AIME) is an earnings measure that accounts for wage growth. PRIMARY INSURANCE AMOUNT (PIA) is the basic monthly retirement benefit at full retirement age, calculated using AIME.