Life Insurance - Undestanding the Phrases Used

By: Barry Waxller.

If you have a spouse or children, you need life insurance. You have heard it before, but it bears repeating. How would they be able to handle things if some drunk driver ran into you tomorrow and you died?

Life insurance is a fairly simple concept, but it can appear complex to the average person. The complexity comes from the terms used. If you can understand the language, you can make a better determination of what you need. So, let's talk terms!

References to Adjustable Premiums should be examined closely in any policy. This allows the insurance company to change the premiums on a block of policies during the term of the contract.

The Amount At Risk on a policy is something insurers pay close attention to. It is the difference between the face amount of a Whole Life Insurance policy and the cash value. The amount at risk is the difference, to wit, the figure the insurer will have to pay out.

An Automatic Premium Loan is something you need to check for in your policy. It allows the insurance company to make a premium payment from the cash value in your policy should you miss the payment.

The Commutation Rights associated with an insurance policy apply to the beneficiary of the policy. Depending on the policy, the beneficiary may elect to convert installment payments to a lump sum payment.

Much like a secondary beneficiary, a Contingent Beneficiary is a person other than the primary beneficiary who will receive the death benefit. Some policies limit the beneficiaries at two people, but there can be more depending on your needs.

Although a basic concept, the term Death Benefit needs to be covered. While death may seem to have few benefits, this refers to the amount to be paid to beneficiaries upon the death of the person whose life it is based upon.

The insurance phrase Double Benefit or Double Indemnity refers to a policy that pays out double the stated benefit if the person whose life it is based on passes away in a particular way, such as a car crash.

For many people, building up cash value in an insurance policy is a smart move. A Dividend Accumulation clause allows you to do just this, to wit, reinvest an dividend paid by the insurer back into the policy.

The most common type of life insurance is Term Insurance. Term policies vary in design, but you basically pay a premium for a death benefit. There is no cash build up in the policy. The policy has a capped term of five, ten or more years.

Variable Contracts represent another pillar of the life insurance industry. These policies come in the form of annuities or straight life insurance. Cash builds up in the policy and may be invested in stocks or mutual funds and so on.

As with any area of financial planning, there are a vast number of terms used in the life insurance world. If you don't understand a term used by an agent, ask for an explanation. Don't be shy!

Article Source: http://www.bigfreearticles.com

About the Author:
Barry Waxler is a financial advisor with UFCAmerica.com. This article is available as a unique content article with free reprint rights.

Tags: death, life insurance, term, whole, variable, universal, financial, death, planning, plan

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