Here’s a quick glossary of terms to help simplify life insurance.
A rated – is a grade given to life insurance companies by financial institutions which measure their financial strength.
Back Dating – making the policy’s effective date earlier than the present, usually done to save money.
Beneficiary – the person that will receive the death benefit from your life insurance policy.
Cash Value – the accumulation of interest on a percentage of your premium. Also called the “living benefit” of permanent life insurance policies.
Contingent Beneficiary – is a backup beneficiary if your original beneficiary is unable to receive the funds.
Convertible – the option to convert your term life insurance policy to a permanent coverage, either at the end of the term or age 75 whichever comes first.
Death Benefit – the amount the life insurance company pays your beneficiaries when you pass away.
Face Amount – the amount your beneficiaries will receive when you die.
Final Expense – this includes the expenses that are a result of your death, things like funeral expenses and hospital bills.
Financial Dependents – anyone that depends on your finances to maintain their lifestyle.
Free Look – a period you have to review your new policy without obligation, generally 10 or 20 days depending on the state of residence.
Guaranteed Universal Life – is a permanent life insurance product that focuses more on real protection rather than cash value accumulation.
Health Class – your health class is the category of risk that you fall under based on the underwriting, usually ranging from preferred plus to standard, with table ratings for high-risk cases.
Insured – the person who owns the life insurance policy.
Lapse – when your life insurance “lapses” your policy is no longer active due to lack of premium payment.
Legacy – the amount of money you want to leave behind for your beneficiaries.
Liabilities – the amount of debt that you currently possess.
Premium – the amount you pay the life insurance company monthly or annually to keep your life insurance policy in force.
Proof of Insurability – often refers to taking a medical exam or request of doctor’s records to prove that you are an insurable risk to the life insurance company.
Pure Protection – real protection life insurance is life insurance without any living benefits.
Rider – An ability to make an addition to customizing your life insurance policy to closer fit your needs.
Return of Premium (ROP) – is a type of term life insurance coverage that allows for the refund of every premium paid at the end of the term period.
Table Rating – is a health rating given to clients that have specific or severe health conditions that cause an above average risk to the company.
Term Life Insurance – is a life insurance product that provides you with a coverage for a specified period in our life, from the date of issue, to the end of the term, for example, 10, 20 or 30 years of coverage.
Underwriting – the process the life insurance company goes through to determine at which rate they can insure you. This usually involves a medical exam or a request for medical history.
Waiver of premium – is rider add on to your life insurance policy that allows your premiums to be waived in the case of a disability.
Whole Life Insurance – is a life insurance product that provides you with coverage for your entire life from the date of issue to the point of death.