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Getting a Grip on Life Insurance Terminology

They say taxes and death are the only absolute things in life. Whether this is true or not, you can prepare for both. While tax planning is an interesting subject, we are going to look at life insurance in this article.

A classic sketch of a conversation with a life insurance agent would show the person trying to buy a policy with their eyes glazed over. Why? The terminology being used is confusing. Well, let’s change that by discussing some or the common terms used.

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.

An Annual Payment Annuity provides you with simplicity. As the name suggests, you can pay the entire premium for the year at one time. Of course, you need to make sure yo have cash on hand to do so.

An Automatic Premium Loan is something you need to check for in your policy. It allows the insurance company to make a premium payment from the cash value in your policy should you miss the payment.

What happens if the beneficiary listed in an insurance policy pre-deceases the owner of the policy? It can be a nightmare, so insurance companies require you to designate a Secondary Beneficiary. If the primary beneficiary is deceased, this person receives the funds.

Much like a secondary beneficiary, a Contingent Beneficiary is a person other than the primary beneficiary who will receive the death benefit. Some policies limit the beneficiaries at two people, but there can be more depending on your needs.

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.

There are life insurance polices designed for business obligations. A Credit Life Insurance is taken out on a business owner and used as collateral for some debt. The beneficiary is the creditor providing the loan to the business owner. If the owner dies, the benefits are used to pay off the debt.

A Waiver of Premium clause is something you should try to include in your policy. The waiver essentially says that if you become disabled, no further premium payments must be made. Coverage, however, continues.

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.

Variable Contracts represent another pillar of the life insurance industry. These policies come in the form of annuities or straight life insurance. Cash builds up in the policy and may be invested in stocks or mutual funds and so on.

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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