14 Important Life Insurance Terms – Explained

Underwritten by United of Omaha Life Insurance Company

09.14.2026 | ~ 9 min read

1. Life insurance

Life insurance is a contract where you pay premiums to an insurer. In return, it pays a death benefit to your beneficiaries if you die while the insurance policy is in effect.

The policyholder designates a beneficiary to receive a sum of money, called the death benefit, upon the insured's death. Life insurance can help replace your income in the event of your death. It can also fund final expenses, pay federal and state death taxes, make charitable contributions, and more.¹

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2. Life insurance premium

A life insurance premium is the amount you pay to the insurance company to keep your policy active.

Insurance companies may give you the option to pay your premium monthly, quarterly, semiannually, or annually. Level premiums can help make budgeting easier. A level premium is a fixed amount that remains the same either for a specified period or for the life of the policy.

Multiple factors may influence how much you pay for your insurance premiums. Depending on the type of policy you buy, the factors may include:

Age
Health
Lifestyle habits
Occupation
Term length
Policy type

3. Life insurance agents and producers

Agents and producers work with life insurance companies to sell life insurance policies. Their job is to help people choose the right policies and coverage.

Agents and producers review their clients’ financial goals, explain policy options, and find the best solutions. They also help with policy changes, renewals, and claims support.

4. Life insurance costs

The payments you make to an insurance company for your policy are called premiums.

Part of your premium goes toward the death benefit. The rest goes toward covering costs for underwriting, record keeping, and other expenses that help manage your policy.

Underwriters analyze different types of data, including your medical data and application information. That data is used to help determine whether to approve your policy and how much your premium will be. Some policies are more complex than others and may require more services, which can lead to higher premiums. When exploring options, consider all life insurance costs, as well as the policy type and premium.

5. Life insurance policy

A life insurance policy is the actual contract between you and the insurance company.

In addition to the issue date and the insured person's name, you will also typically find the following information included in your life insurance policy:

Death benefit: The amount your beneficiaries will receive upon your death
Premium: The amount you pay for your insurance
Riders: Add-on coverages that can enhance your policy
Beneficiaries: Entities or individuals you choose to receive the death benefit

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6. Life insurance rider

A rider is an add-on to your policy that provides extra benefits or expands your coverage. Some riders are included. You may have to pay for others.

One example of a rider is a waiver of premium rider, which waives the premium if you can't work because of a serious illness or disability to lessen your financial burden. This benefit is only applied to disability prior to the age of 60, age when the disability ends, the elimination period, and any limitations regarding what qualifies as a disability.

Another common rider is the accelerated death benefit rider*, which provides living benefits to the insured. For qualified long term care services, you can receive part of the death benefit for your medical care. The death benefit will be reduced accordingly.

7. Beneficiary

A beneficiary is the person or entity that receives the death benefit after you die.

You can name an individual, a group of individuals, or an entity, such as a trust or charity, as the beneficiary. You can also name contingent beneficiaries who would receive the death benefit if the primary beneficiary dies. It’s important to keep your beneficiaries updated, so the benefit goes to the intended party.

8. Life insurance underwriter

Underwriters are people who review data to decide whether you qualify for your life insurance policy.

The underwriting process is designed to assess the insurance company's risk and predict how much longer you might live.

You must show evidence of insurability to qualify for some policies and the coverage level you want. An underwriter will look at your medical records, medical exam, and answers to health questions before deciding to approve you.

9. Cash value

Permanent life insurance policies offer a cash value account. This is a long-term savings feature in addition to the death benefit.

The insurance company contributes a part of your premium to the cash value account, which grows over the life of the policy. If you decide to cancel your life insurance policy, you are entitled to the cash surrender value, which is the cash value minus surrender charges, fees, and outstanding loans. Also, the length of time that payments can be deferred may vary**.

After the cash value grows for a few years, you can withdraw it or take a loan against it, although doing so may reduce the death benefit***.

10. Tax-deferred growth

Life insurance can be an important part of estate planning, especially considering the potential tax advantages. Permanent and universal life insurance policies allow you to grow the cash value on a tax-deferred basis. That can mean you don’t have to pay taxes on interest, dividends, or investment gains, but you may be taxed on money you withdraw. The tax advantages of permanent life insurance policies can allow your funds to compound faster compared to taxable accounts.

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11. Term life insurance

Term life insurance is a policy that lasts for a fixed term, which ranges from 10 to 30 years. The beneficiaries receive the death benefit when the insured dies.

Unlike permanent insurance policies, term life insurance policies don’t have a cash value account. Because term life insurance policies only offer the death benefit for a set period, they can be budget-friendly for most people.

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12. Permanent life insurance

A permanent life insurance policy lasts for your entire lifetime. Unlike term policies, permanent insurance policies can include a cash value component and offer lifetime coverage.

Common types of permanent insurance policies can include whole life, universal life, and variable life. The differences among these policy types are typically how the cash value grows, the degree of risk, and whether the premiums are fixed.² The cash value of some types of permanent policies can fluctuate based on interest rates or market‑based performance.

13. Whole life insurance

Whole life insurance is a type of permanent insurance. It offers a death benefit and a cash value account.

Whole life policies offer a guaranteed death benefit for the life of the policy. Premiums are generally fixed at a level premium. With a whole life insurance policy, your cash value will grow at a guaranteed rate. Whole life insurance policies can be popular with those who want permanent protection with a low level of risk. The cash value component makes whole life more complex than term policies, so they cost more.

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14. Universal life insurance

Universal life insurance policies are a type of permanent life insurance with a death benefit and a cash value account.

What makes universal life insurance policies unique is their flexibility. Within certain stated limits, you can adjust your premium payments as your financial needs change. Unlike other life insurance policies, you can also modify the death benefit. Universal life insurance policies may typically offer greater cash growth potential, but the financial risk can be higher than that of other policy types. Premium and credited interest rates may not keep up with universal life insurance costs over time, causing a drop in cash value or a policy lapse.

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Putting life insurance knowledge into action

Understanding life insurance terms can help you ask the right questions as you compare options and make an informed choice that will meet your goals and needs. United of Omaha Life Insurance Company, a Mutual of Omaha company, offers multiple policy types to help you meet your financial goals and give you some peace of mind.

You can use this knowledge to take the next step to help protect your family’s future.

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Frequently asked questions (FAQs)

1. Can I change my beneficiary on my life insurance policy?

Yes. You can typically change your beneficiary at any time by contacting your agent or producer. It can be valuable to review your beneficiaries at least annually to ensure the death benefit goes to the intended party.

2. What happens if I miss a premium payment?

Your policy may lapse if you miss a premium payment. Depending on the policy, there may be a grace period, or your payment could be paid from the cash value account. Contact your agent or producer as soon as possible after a missed payment to explore your options.

3. Can I convert a term life policy to a permanent policy?

Often, yes. Many term life insurance policies include a provision that allows you to switch to permanent coverage without having to take a medical examination. Your agent or producer can help you make the change.