Terms About Life Insurance
Life insurance can provide much-needed financial protection for your family in the event of your death, paying benefits for them to live on and funding things such as a college education for your children. But the process of buying life insurance can be complicated, in no small part because of the terminology surrounding it. When you know what common life insurance terms mean, you stand a better chance of buying the right coverage at a reasonable price.
Other People Are Reading
-
Benefit
-
One of the most important terms in a life insurance policy is the benefit, which refers to the payment that the insurance company will make in the event of your death. The benefit is also known as the death benefit. An accidental death benefit is a larger amount that the insurance company will pay if you fall victim to certain types of accidents that cause your death. The beneficiary is the person or group that you want to receive the benefit from your policy. If you have an irrevocable beneficiary, it means you can't change the beneficiary for your policy.
Premium
-
A life insurance policy's premium is the amount you must pay to keep the policy in effect. Most life insurance premiums are annual, semiannual or monthly charges that you must continue to pay unless you receive a premium waiver, which some policies will issue if you become disabled. Premium rates depend on your age and health status when you purchased the policy, as well as the amount of your benefit.
-
Annuity
-
An annuity is a specific type of life insurance policy that makes periodic payments based on a predetermined schedule. Some annuities are fixed, which means they offer a guaranteed payment over a specific amount of time. Others, known as immediate annuities, begin making payments soon after purchase. An annuity may take the form of a deferred annuity, which means it includes a waiting period after the annuitant, or person named in the annuity, reaches a certain age before it begins to issue payments. Joint annuities pay until both annuitants, usually the policy buyer and a spouse, are deceased.
Surrender
-
Most life insurance policies will continue to gain value until you die, but you may find yourself wanting to cash in a life insurance policy if you no longer need it or have more immediate use for the money. You can only cash in life insurance when your policy agreement gives you the right to surrender, or cash in, the policy. In these cases you will receive an amount of money known as the net cash surrender value, which represents the predetermined surrender value minus a surrender charge that the insurance company deducts to terminate your policy.
-
