In the world of insurance, every word counts. To make sure you know your rights as a consumer, it's worth learning some basic insurance vocabulary.

Would you like to buy life insurance, that is, insurance that pays a benefit in the event of the insured person's death? Well, once you have properly identified your needs, the first thing you do is complete an insurance application. Thus, you inform an insurance company that you wish to insure your life, and you specify the type of insurance you would like, the amount of insurance, the names of the insured person and the beneficiary, and so on. The application is what the company uses to assess the risk you represent.

If your application is approved, it will become one of the documents in your insurance contract. This contract is an agreement that defines the obligations of both the insurer and the policyholder. It also includes the insurance policy, which is a written document containing the terms and conditions of the agreement between the policyholder and the insurance company.

The contract may also include evidence of insurability, which is information (medical data or certain habits like tobacco use, for instance) that enables the insurer to determine if the insurance application can be approved and under which conditions. Finally, the contract may include riders, which are written documents that amend the contract after it has taken effect.

When you complete an application form, you must designate a beneficiary. Upon your death, this person will receive the insurance amount stipulated in your policy. If the beneficiary designation is revocable, you can change beneficiary without conditions. If it is irrevocable, you cannot change a beneficiary without written consent of the original beneficiary you chose.

From the moment your insurance contract takes effect, you must pay premiums on a regular basis, in exchange for which the insurer agrees to honour the contract. Upon your death, the money paid to your beneficiary is called a benefit.

Did you forget to pay your annual premium? As a rule, you have a 31-day grace period, during which time a premium that is due can be paid without penalty. However, if you do not pay the premium during that period, your policy will lapse, which means that it will terminate.