Life Insurance Guide and Glossary
Author: Christina Costa
Life insurance has a vocabulary all its own. Some
insurance terms might sound familiar, but have a
different meaning when used in the life insurance world.
The following glossary provides insurance terms and life
insurance definitions to help you speak the "language of
life."
There are basically two types of life insurance,
Universal Life and Term Life.
Term Life
This is the simplest form of life and the most popular.
It is intended to provide large amount insurance for a
fixed period of time, but for those on a budget.
Payments are fixed for the term of the policy which can
last, 5, 10, 20, or 30 years.
Universal Life
Universal Life Insurance lasts for the duration of your
life and has a cash value. The premium payments are
above the cost of the insurance and the extra payment
amount is credited towards the cash value in addition to
interest paid.
The amount of interest credit by the insurer is often
tied to a financial index, so it is possible to see
gains or losses of the overall cash value depending on
how the indexes perform. The potential benefit of
Universal Life is as a stable investment vehicle.
Beneficiary
The beneficiary of your insurance policy is the person
designated by you to receive the policy benefits upon
your death. You may designate that the benefits from
your policy be allocated to multiple beneficiaries. And
you may change your beneficiary designations at any
time.
Coverage Amount / Face Amount
The initial value of the policy to be paid to the
insured's beneficiary or beneficiaries in the event of
the death of the insured while the policy is in force.
This value does not include adjustments for outstanding
policy loans, withdrawals, dividends, paid-up additions
or late/outstanding premium payments.
Health & Lifestyle Profile
The premiums that insurance companies charge for life
insurance are also based in large part on the overall
health and lifestyle profile of the proposed insured.
Typically, individuals in good health who do not use any
kind of tobacco products or engage in any hazardous
activities will be able to obtain less expensive
coverage than individuals who are in poor health or who
use tobacco or who engage in hazardous activities.
Different insurance companies use different criteria in
determining the health status and lifestyle of the
proposed insured.
Date of Birth
The premiums that insurance companies charge for life
insurance are based in large part on the age of the
proposed insured. Some companies use the attained age of
the insured in this calculation, while other companies
use the nearest age of the insured.
Insured
An individual who is currently covered under an existing
life insurance policy.
Length of Coverage
Different term life insurance policies have different
durations.
10, 15, 20, and 30-year term life insurance policies are
very common. A 10-year level term policy will have an
initial 10-year period in which premiums are level.
Premium
This is a payment to a life insurance company in
exchange for a life insurance policy. The payment
typically does not change on term life for the length of
the policy.
Premium Mode
The frequency in which premiums are paid. Typically, the
total annual premium is slightly higher when payments
are spread out over the course of the year as opposed to
being paid all at once.
For example, a policy with a $200 annual premium may
also offer a $101 semiannual premium ($202 total annual
cost), a $52 quarterly premium ($208 annual cost) and an
$18 monthly bank draft premium ($216 annual cost).
Proposed Insured
An individual who is applying for coverage under a life
insurance policy. (See also: Insured).
Underwriting Classification
(See: Health & Lifestyle Profile, above).
Sex
The gender (male or female) of the insured or proposed
insured.
Underwriting Guidelines
Underwriting guidelines are the health and lifestyle
criteria for the proposed insured that insurance
companies use to determine the appropriate underwriting
classification upon which to base the premiums for the
coverage.
These criteria typically include age, gender, tobacco
use, height/weight build, and family history of heart
disease or cancer, cholesterol levels, blood pressure
levels, specific health conditions, driving record,
hazardous occupation or activities.
Also, military service, aviation, foreign travel or
residency, U.S. citizenship and felony criminal
activity. It is important that all of these underwriting
guidelines are taken into consideration when evaluating
any premiums quoted for life insurance coverage.
State of Residence
The state in which the insured or proposed insured
resides. It is not unusual for a given insurance company
to be licensed to conduct business in some states and
not in others depending on their licensing.
If an insurance company is not licensed to do business
in a particular state, the company may not offer any of
its products in that state.
If an insurance company is licensed to do business in a
particular state, each of the company's products must be
individually approved for sale in that state. It is not
unusual for a given insurance company to have products
that are approved for sale in one state and not approved
for sale in others.
Article Source: http://www.articlesbase.com/insurance-articles/life-insurance-guide-and-glossary-437391.html
About the Author:
Christina Costa, a freelance insurance writer,
recommends Equotegrabber - where you can get free
insurance quotes online in seconds! Visit
Equotegrabber.com
|
