When someone uses a negative or insulting term in place of a neutral or positive term, it is called dysphemism. Epithets are a type of dysphemism.
Using "Looney Bin" in place of mental hospital.
Using "Faggot" in place of homosexual.
Using the term "Nutcase" for someone with a mental illness.
Using "Tub of Lard" for someone who is overweight.
Examples of Dysphemism in Literature
From Shakespeare's Othello:
When convinced that she has been adulterous, Othello refers to his wife as strumpet:
Out, strumpet! weep'st thou for him to my face?
Also from Shakespeare's Othello-Iago substitutes negative terms for Othello (black ram) and Desdemona (white ewe) when talking of their relationship to Desdemona's father:
Even now, now, very now, an old black ram
Is tupping your white ewe.
In To Kill a Mockingbird, Scout asks her father Atticus about a very derogatory term that she has heard at school, and he instructs her:
"Scout," said Atticus, "nigger-lover is just one of those terms that don't mean anything-like snot-nose. It's hard to explain-ignorant, trashy people use it when they think somebody's favoring Negroes over and above themselves. It's slipped into usage with some people like ourselves, when they want a common, ugly term to label somebody."
"You aren't really a nigger-lover, then, are you?"
"I certainly am. I do my best to love everybody... I'm hard put, sometimes-baby, it's never an insult to be called what somebody thinks is a bad name. It just shows you how poor that person is, it doesn't hurt you."
Literary Terms Examples