Chapter 2. Life Insurance Basics: Terms to Know

Adverse selection

tendency of individuals with higher probability of loss to purchase insurance more often than those who present a lower risk

Death benefit

the amount paid upon the death of the insured in a life insurance policy

Cash value

equity amount accumulated in permanent life insurance

Estate

a person's net worth

Illustrations

presentation or depiction of nonguaranteed elements of a life insurance policy

Life insurance

coverage on human lives

Liquidation

selling assets in order to raise capital

Lump-sum

payment of the entire benefit in one sum

Minor

a person under legal age

Solvency

ability to meet financial obligations (e.g., an insurance company maintains enough assets to pay claims)