If you have a spouse or children, you need life insurance. You have heard it before, but it bears repeating. How would they be able to handle things if some drunk driver ran into you tomorrow and you died?
Life insurance is a fairly simple concept, but it can appear complex to the average person. The complexity comes from the terms used. If you can understand the language, you can make a better determination of what you need. So, let’s talk terms!
An Adjustable Life Insurance Policy is a popular product. As the name suggests, one can adjust the premiums, term, death benefit and time when premiums are paid. Such flexibility lets you coordinate the policy to your current needs as they change.
The Amount At Risk on a policy is something insurers pay close attention to. It is the difference between the face amount of a Whole Life Insurance policy and the cash value. The amount at risk is the difference, to wit, the figure the insurer will have to pay out.
The Cash Surrender Value of a policy is often misunderstood. It refers to the amount due a person who terminates a policy holding a vested cash reserve in it. There is often an arbitrary charge deducted by the insurer as well.
A Cash Refund Annuity is one with a catch up element. If you pass away and the total annuity payments are less than what you have paid in total premiums, the difference is paid to the beneficiary you have designated.
Many modern insurance policies contain a Contestable Clause. This gives the insurance company up to 2 years to void the policy if they find evidence that would have resulted in the rejection of the policy application when originally made.
The Right of Conversion refers to an individual’s right to convert a policy held as part of a group into an individual policy if the person ceases to be part of the group.
A Decreasing Term Policy is a creative product. As time passes, the death benefit decreases until it zeros out. This is often used to match the repayment of a large debt such as a mortgage. As the mortgage is paid off, there is less need for an insurance policy.
Dependent Coverage refers to the people covered by a policy. More often found in health insurance policies, the general rule is the married spouse and unmarried children are covered.
The Whole Life Insurance Policy is one of the staples of the life insurance industry. The policy provides a death benefit, but also accumulates cash within as premiums are paid in over time. There are many different ways to pay the premiums, so make sure to ask.
A Variable Life Insurance Policy is used both as a financial safety net and investment vehicle. The policy builds up cash value that can be invested. Depending on the policy, the premiums and death benefit will change as the cash value grows.
The important thing to understand about life insurance is that polices differ greatly. This means you must understand exactly how a policy being pitched to you works. If terms are used that you don’t understand, ask for clarification!
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