Life insurance can be confusing and overwhelming enough as a general concept. Never mind trying to define the terminology associated with this subject matter. Take advantage of our list of life insurance terms so that you’re not left in the dark when it comes to learning about and understanding everything that you need to know.
Some Life Insurance Terms
Person or persons covered under a particular term life or whole life insurance policy. Once the insured passes on, his or her policy is paid out to pre-determined person, named beneficiaries. For example if I take a life insurance policy in my name, I am the Insured. I am also the “Insurance Policy Holder”.
In regard to life insurance, Beneficiary is the person or persons that will receive the funds and benefits of the insured person’s policy once the insured person passes away. For example if I take a life insurance policy and name you as the person who will receive the insured amount in case of my death, then you are the Beneficiary.
Sometimes it is also known as the ‘Surrender Value’. It refers to the amount of money that accrues or accumulates in an insurance policy. Depending upon the terms of the policy, this value can be withdrawn, borrowed or used as collateral, if necessary.
This is the amount of money paid out to the beneficiary when the insured passes away. Policies will generally boast a guaranteed death benefit, which will increase in investment over time.
Generally, this term refers to the amount of money that is paid to insurance policy holders as based upon the earnings of the company. The concept can be equated to receiving rewards, bonuses or incentives.
A specific coverage plan that acts as both a contract and agreement between a particular individual or group of individuals and a specific insurance company. There are several different policy types available, including term life and whole life insurance policies.
Additional or inflated costs intended to compensate for potential risks associated with a policy or policy holder. If I am in a high risk profession then I may have to pay higher premium for taking out a life insurance policy.
Term Life Insurance
Insurance policies that can be purchased for specified, designated periods of time with lower premiums. Policies are generally available for spans ranging from between one and thirty years. Policy holders generally have the option to renew the policy once the term has ended. If at the end of the term the policy holder is alive, he gets the money back as per the terms and conditions of the policy..
Universal Life Insurance
A type of permanent or whole life insurance that is based on cash value. With such a policy, the insured has the ability to manipulate the terms of premiums or investment amounts, including the timing and frequency.
Variable Life Insurance
Differs from universal life insurance in that the value of the policy will alter depending upon the dollar or the status of the policy holder’s other accounts. Insurance type boasts investment components and death benefits.
Whole Life Insurance
Long term insurance policy, also known as permanent life insurance. Such policies generally maintain constant premiums that are to be paid annually throughout the life of the insured. These policies build cash value and typically feature a built-in savings component. Entire amount is to be paid out to the beneficiary upon the death of the insured.