When you’re shopping for life insurance protection, you might quickly feel overwhelmed with all the different types of policies on the market. Once you add in all of the confusing industry jargon, you might feel as though you’re in over your head!
Before you can make a sound decision, it will help to understand all of this new terminology. So we’ve put together a list of common life insurance terms that everyone should know. Once you learn the basics, shopping for a life insurance policy should be much simpler and provoke less anxiety.
Policy Owner. This is the person who purchases the policy, but is not necessarily the person who is insured by the policy. For example, you can purchase a life insurance policy on yourself, or on your spouse. In both cases you are the policy owner.
Death benefit. This doesn’t sound very appealing, but it simply refers to the payout of the insurance policy. Upon the death of the insured person, a beneficiary will receive a “death benefit” in the amount stated by the policy.
Beneficiary. This is the person who receives the life insurance policy payout, in the event of the insured person’s death. The policy owner names one or more beneficiaries, can change them at any time, and can even designate a percentage of the payout to each beneficiary.
Accelerated death benefit. Generally speaking, your beneficiary will receive your death benefit after you pass away. But policies that include an accelerated death benefit will make a payout if you are diagnosed with a terminal illness. Also called a “living benefit”, this feature of a life insurance policy can help you ensure that heirs are provided with the income they need in the event that you become seriously ill.
Term life insurance. This type of life insurance policy only lasts for a particular number of years. You can buy a term life insurance for ten years, twenty years, and so on. After that particular length of time, the policy expires.
Permanent life insurance. Unlike term life insurance, this policy covers the insured person until the end of their life. Different types of permanent life insurance include whole life, variable life, universal life, and variable universal life. It’s important to consult carefully with your life insurance broker to make sure you understand all of the different options available to you.
Rider. Riders are additional features or coverage that you can add onto your policy at an additional cost. These features provide extra benefits which apply in particular situations. For example, if you add a “waiver of premium” rider to your policy, you won’t have to make premium payments if you become unemployed due to disability.
Like any other important life decision, you should know what you’re buying before you’re buying it! If you’re in the market for a life insurance policy and need help understanding all of the options in front of you, call our office for an appointment. We can explain the different types of life insurance policies available to you, and help you make the decision that best suits your needs.