Whole Life Insurance Glossary: Build Wealth Through Understanding
Why Understanding Whole Life Matters
Whole Life Insurance is more than permanent coverage — it’s a financial foundation for wealth accumulation, protection, and legacy creation. At Insure Your Success, we teach clients how Whole Life can be used strategically for Infinite Banking, Debt Action Planning, and Legacy Transfers. This glossary was created to make the complex world of Whole Life simple, actionable, and aligned with your financial strategy.
Each definition below helps you understand how Whole Life can serve as a powerful financial tool in your journey through Assessment → Financial Analysis → Strategy Design.
Top 3 Trending Terms
1. Cash Value
The guaranteed savings component that grows tax-deferred within your Whole Life policy.
Pro Tip: Cash value isn’t just a safety net — it’s the engine of the Infinite Banking Concept. You can borrow against it, grow it tax-deferred, and use it strategically to pay off debt or fund opportunities.
2. Dividend
A portion of the insurance company’s profits paid to policyholders.
Pro Tip: Dividends can buy Paid-Up Additions (PUAs), reduce premiums, or grow your policy’s cash value faster — creating compounding wealth potential.
3. Paid-Up Additions (PUA)
Small, additional pieces of Whole Life coverage purchased with dividends.
Pro Tip: PUAs accelerate your cash value growth and increase your death benefit — an essential component for Infinite Banking or long-term wealth design.
A - Z Whole Life Insurance Glossary (30 Core Terms)
1. Accelerated Death Benefit: Early access to part of your death benefit if you become terminally ill.
2. Beneficiary: The person(s) or entity that receives the policy’s death benefit.
3. Cash Surrender Value: The amount you receive if you cancel your policy before death.
4. Collateral Assignment: Using your policy’s value as collateral for a loan.
5. Compound Interest: Growth of cash value and dividends over time due to reinvestment.
6. Death Benefit: The guaranteed payout to your beneficiaries when you pass away.
7. Direct Recognition: How a company adjusts dividends on borrowed cash value.
8. Dividend Option: How dividends are used — paid in cash, reduce premiums, or buy PUAs.
9. Face Amount: The original death benefit amount stated in your policy.
10. Grace Period: Extra time after a missed premium before coverage lapses.
11. Guaranteed Cash Value: The minimum value your policy will accumulate regardless of market conditions.
12. Infinite Banking Concept (IBC): A strategy that uses Whole Life policies to create a personal banking system.
13. Insured: The person whose life the policy covers.
14. Lapse: The termination of a policy due to unpaid premiums.
15. Loan Against Cash Value: Borrowing against your policy’s savings component while keeping coverage active.
16. Modified Endowment Contract (MEC): A policy that exceeds IRS limits and loses some tax benefits.
17. Mutual Insurance Company: A company owned by policyholders that pays dividends.
18. Non-Direct Recognition: Dividends continue to grow even if you have a loan against your policy.
19. Paid-Up Policy: A policy that no longer requires premium payments.
20. Participating Policy: A Whole Life policy eligible for dividends.
21. Permanent Life Insurance: Coverage that lasts for your entire lifetime.
22. Policy Loan: A loan taken against the cash value that does not require credit checks.
23. Policyholder: The owner of the insurance policy.
24. Premium: The regular payment required to maintain your coverage.
25. Reduced Paid-Up Option: A feature allowing you to stop paying premiums while keeping a smaller amount of coverage.
26. Rider: An optional benefit that customizes your policy (e.g., waiver of premium, long-term care rider).
27. Surrender Charge: A fee applied when canceling a policy early.
28. Tax-Deferred Growth: Cash value grows without annual taxation.
29. Underwriting: The process used by insurers to assess risk and determine premiums.
30. Whole Life Dividend Scale: The company’s rate used to determine dividend payouts.
Ready to Put Your Knowledge to Work?
Understanding Whole Life Insurance terms is the first step toward mastering your financial foundation. Now it’s time to apply that knowledge through a Financial Assessment to determine whether Whole Life aligns with your wealth, protection, and legacy goals.