Like many industries, the insurance world has its own unique vocabulary to describe its products. To help you understand the information in a life insurance policy, we have put together some basic terminologies in this easy to refer to. Recipient : The person or party designated by the owner of a life insurance to receive the insurance benefit.
Cash value : The savings element in a permanent life insurance, which represents the policyholder's interest in the insurance. of a life insurance after the death of the insured if the primary beneficiary paid the insured.
Convertible Term Insurance Policy : A term life insurance that entitles the insurer to convert the insurance to a permanent insurance plan
Dividend : Return on part of the premium.
Face amount : The amount of death paid under a life insurance policy. This is the amount of coverage that would be provided if the unthinkable happens; essentially the amount that would be printed on the check provided to the individual (s) listed on the insurance.
Health class: Life insurance is priced based on a number of factors ̵
Irrevocable beneficiary : A life insurance beneficiary who has an interest in the insurance continues even during the life of the insured as the policyholder has the right to change the beneficiary's name only after obtaining the beneficiary's consent.
This concept can be confusing, so let's look at an example … the insured has a financial obligation to someone and they want to be sure that the person / institutions will receive the payment. They can make them an irrevocable beneficiary. Or children will be an irrevocable beneficiary, especially if someone is in a second marriage, that way the children will be guaranteed the stated amount.
Insurable interest : The interest that an insurer has in the risk it is insured. The owner of a life insurance policy has an insurable interest for the insured when the insurance owner is likely to benefit if the insured continues to live and is likely to suffer some loss or disadvantage if the insured dies. … a wife or husband has an insurable interest in each other because they would suffer financial loss if one or the other dies. Another example could be a company that has an insurable interest in a key employee with certain skills as a president or CEO, as they would suffer a financial loss with their passing.
Life insured : The person on whose life the policy is issued.
Original Age Conversion : A conversion of a life insurance policy to a permanent insurance plan at a premium rate, based on the age of the insured when the original futures policy was purchased.
Anyone can use this option if they signed a term policy, but throughout their lives, health problems had arisen that would prevent them from getting a new policy. A policy with a conversion option would allow them to convert to a permanent product that lasts a lifetime before a certain age without signing up. The policy would be based on their current age but would be written as if they had the same health as when they took out the original policy. This option would allow them to continue with coverage when they might not have been able to do so if they had to get a new fully insured insurance policy.
Permanent life insurance : Life insurance that provides coverage throughout the life of the insured and also provides a savings element.
Policy Anniversary : As a rule, the date on which the coverage under an insurance came into force applies.
Premium : The amount paid to the insurance company to buy an insurance and keep it in force.
Renewable life insurance : A term life insurance that can be renewed at the end of the insurance period.
This may be an option for someone who has a health condition. and can not get other coverage. The renewable maturity would enable them to continue with the policy at an increased rate, usually every year. It is not a good option but is used more as a last resort.
Return of premium life insurance: You buy insurance, perhaps for a 20- or 30-year period. If you die during that time, your recipients will receive the death benefit. If you survive the policy, you will get back exactly what you paid in (without interest). The money is not taxable.
- Policy value: Only applies to reimbursement of premium life insurance. The total premium amount paid for the specific insurance during the term of the insurance period.
- Paid insurance: Only applies to repayment of premium life insurance. The amount of coverage that you can choose to put in place at the end of the term of office and this amount of insurance paid will be provided at the time of death, no matter when it happens, and there would be no extra premium that would have to be paid.
Length: How long an insurance would be in place.
Term Life insurance : A life insurance that provides a pronounced benefit in the event of the holder's death, provided that the death occurs within a certain specified period of time. Politics does not build up a cash value.
Universal Life Insurance : A type of flexible permanent life insurance that offers both lifelong insurance and a savings element that is invested to provide a cash value build-up. The death benefit, the savings element and the premiums can be reviewed and changed when the policyholder's circumstances change.
Whole life insurance : A basic type of permanent life insurance. It provides coverage that lasts a lifetime and also builds up a cash value that you can borrow against, take out or use to pay future premiums.
Life insurance and its unique vocabulary can be confusing and we are always here to help. If you have further questions or want to talk to one of the trusted advisors, contact us today.