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.

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!

References to Adjustable Premiums should be examined closely in any policy. This allows the insurance company to change the premiums on a block of policies during the term of the contract.

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.

When you buy an insurance policy, you will be asked to designate a Beneficiary. This is the person that you want to receive the funds that will be paid out from the policy on the death of the life insured.

The Commutation Rights associated with an insurance policy apply to the beneficiary of the policy. Depending on the policy, the beneficiary may elect to convert installment payments to a lump sum payment.

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.

The insurance phrase Double Benefit or Double Indemnity refers to a policy that pays out double the stated benefit if the person whose life it is based on passes away in a particular way, such as a car crash.

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 most common type of life insurance is Term Insurance. Term policies vary in design, but you basically pay a premium for a death benefit. There is no cash build up in the policy. The policy has a capped term of five, ten or more years.

The Variable Universal Life Insurance Policy is a more recent and popular product. Premiums and benefits are adjustable. Money is accumulated in the policy and can be invested. The flexibility makes the policy attractive.

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!

Read more information on term life insurance at UFCAmerica.com.
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