What are some basic life insurance terms I should know?
The policy owner is the person who owns the life insurance policy. In many cases, the policy owner is also the person who is insured by the policy. However, the policy owner may also be a relative of the insured, a trust, partnership, or a corporation.
A beneficiary is the person(s) selected by the policy owner to receive the life insurance payments upon the death of the insured.
Premiums are the payments made to the insurance company to purchase and keep a policy active.
A death benefit is the amount paid to the beneficiary at the time of the death of the insured.
The face amount of the policy is the amount of the death benefit as stated in the policy. This does not include additional amounts that the policy may provide.
Insurability refers to how likely an applicant is to be offered coverage based on current health, medical background, family history and other factors.
What are the benefits of term life insurance?
Term life insurance is life insurance coverage designed to be purchased for a specific time period, typically between 10 and 30 years. Term life insurance is an affordable way to get maximum coverage throughout that time frame, and so is great for helping to cover specific financial responsibilities, such as paying for a mortgage or saving for college expenses.
What is life insurance?
Life insurance is a contract between an insurance policy holder (you) and an insurer where the insurer will pay a designated beneficiary a sum of money upon the death of the insured person. There are different types of life insurance depending on your specific needs, including term life insurance, permanent life insurance, accidental death insurance, and more.
Why do I need life insurance?
A death in the family is not only emotionally tragic; it can also take a tremendous toll on the future financial security of a family. Suddenly, paying the mortgage or providing for a child’s college education may become much more difficult. Those who make the decision to buy life insurance do so to help ensure their loved ones are taken care of financially.
What is the Right Kind of Life Insurance?
All policies are not the same. Some give coverage for your lifetime and other cover you for a specific number of years. Some build up cash values and others do not. Some policies combine different kinds of insurance, and others let you change from one kind of insurance to another. Some policies may offer other benefits while you are still living. There are two basic types of life insurance: term insurance and permanent insurance.
How Much Life Insurance Do I Need?
Ask yourself the following questions:
• How much of the family income do I provide?
• If I were to die, how would my survivors, especially my children, get by?
• Does anyone else depend on me financially, such as a parent, grandparent, brother or sister?
• Do I have children for whom I would like to set aside money to finish their education in the event of my death?
• How will my family pay final expenses and repay debts after my death?
• Do I have family members or organizations to whom I would like to leave money?
• Will there be estate taxes to pay after my death?
I understand my permanent policy would be “fully paid up” at age 65. What does that mean?
“Fully paid up” means just that. You have made enough premium payments to cover the cost of insurance for the rest of your life.