The world of life insurance has a lot of terms that you might not have heard before, and that’s ok! Here are some basic terms you will probably come across while you research life insurance. Add them to your vocabulary to better understand your policy!
Beneficiary– The person or persons named in the policy to receive the benefits upon the death of the insured. For example, if you purchase a policy you might choose to have your spouse, children, or other family member or friend to be the beneficiary. This person would collect the insurance proceeds after you pass. You may list anyone as a beneficiary on your policy.
Cash Value– The amount that may be borrowed or withdraw from a policy. This is a feature of certain permanent life insurance policies.
Death Benefit– The amount a policy will pay out in the event of death of the insured individual.
Evidence of Insurability– A statement or proof regarding a person’s physical condition, occupation, and so forth, affecting acceptance of the applicant for insurance.
Premium– This is the amount you pay periodically to retain your policy. These payments may be collected monthly, quarterly, or annually depending on the policy.
Rider– Any supplemental agreement attached to and made a part of the policy, whether the policy’s conditions are expanded and additional coverages added or a coverage of condition is waived.
Term Life Policy– A policy that has a limited term (for example, 30 years).
Universal Life– Flexible premium, two-part contract containing renewable term insurance and a cash value account that generally earns interest at a higher rate than a traditional policy. The interest rate varies.
Whole Life Policy– A policy that does not have a limited term and is valid from the start date until death.
These are just the basics of Life Insurance Lingo. For any questions, contact an agent today!