Life Insurance
Definitions
Beneficiary
This is the person or entity named in an insurance policy to receive
its benefits. For example, if you have a $10,000 life insurance
and your wife is your beneficiary, this means she will receive $10,000
from the insurance company when you die.
Cash
(Surrender) Value
If you have a whole life insurance policy and not a term policy,
it can build up a cash value over time the way a savings account
does. This is its cash value or surrender value.
Convertible
Term Insurance
Convertible term life insurance can be converted or changed into
a whole life or permanent policy usually without any demonstration
of insurability.
Dividend
Companies pay shareholders a portion of their earnings in the form
of dividends. If you have participating life insurance, you may
receive dividend checks.
Face
Amount
This is the amount of insurance that will be paid to the beneficiary
when the insured dies if there are no special provisions. If you
have a $100,000 policy, that is the face amount.
Insurability
This is the capacity of a person to be insured by an insurance company.
People with terminal illnesses like cancer may not be insurable.
Insured
or Insured Life
If you own a life insurance policy on yourself, you are the "insured"
or the "insured life." If you buy a policy for your wife, she is
the "insured."
Level
Premium (Life Insurance)
If you have a level premium policy, your payments will remain the
same throughout the length of the policy.
Loan
(Policy Loan)
You can borrow money from your life insurance company by using the
cash value of your policy as security for your loan or "policy loan."
Paid-up
Insurance
If you have a paid-up life insurance policy, it means you do not
have to make any more payments and yet your insurance is still in
force.
Participating
Policy
With this kind of policy, you will receive money back from your
company in the form of dividend payments.
Permanent
(Life Insurance)
Permanent or "whole life" insurance is the kind that lasts your
whole life. Unlike term insurance a permanent policy can accumulate
cash value like a savings account.
Policyowner
or Policyholder
Usually the policyowner is the same person who is insured, but it
can be anyone who owns the policy.
Premium
A premium is a payment to an insurance company for the policy. Usually
premiums are paid monthly or quarterly.
Renewable
Term Insurance
You can buy a term insurance policy with the option to renew it
when the term ends. You may not have to provide proof of insurability,
but your rates may increase.
Term
Insurance
Term insurance is a life insurance policy purchased to last only
a specified length of time. For example, if you buy a ten-year policy
and you die within those ten years, your insurance company will
pay your beneficiary if your payments are up to date. Once the ten
years are over, you no longer have coverage.
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