Unless you’re a life insurance guru, you may encounter some terms you aren’t familiar with, like accidental death benefit or face amount. But what do they mean? And how do you make sense of it all? To help understand your policy options, we have compiled a list of some of the most common life insurance terms and their meanings.
Life Insurance Terms to Know
Accelerated Death Benefits – Also known as “living benefits,” accelerated death benefits can be beneficial in situations of chronic or terminal illness prior to your passing. Your policy may include this type of benefit or may be available at an additional cost.
Accidental Death Benefit – An accidental death benefit will pay a benefit if the insured person dies due to an accident. Accidental death benefits are an addition to your current policy or they can be purchased in a separate policy. Depending on the policy, this can come as blanket coverage or be specific to a type of accident.
Agent – An agent is a licensed individual who sells life insurance on behalf of one or more insurance companies. An agent works with consumers to find a life insurance policy that will be the most beneficial to them. Agents are not to be confused with brokers, whose job is to help consumers find an insurance policy on behalf of themselves, not on behalf of a company.
Beneficiary – This one is pretty easy as far as life insurance terminology goes. The beneficiary of a policy is the person who will receive the death benefit after the insured person passes. You can choose anyone to be a beneficiary. If the named beneficiary is under the age of 18, they must be represented by a legal guardian.
Cash Value Life Insurance – This is an insurance policy that carries a cash value. Universal life insurance and whole life insurance are the two types of life insurance that have a cash value. Also referred to as the cash benefit, the cash value can be borrowed against if you need additional funds.
Coverage Period – A life insurance policy’s coverage period is the amount of time for which the policy will cover the insured person. Some insurance plans like universal and whole life insurance cover the insured for a lifetime, while others, like term life insurance, cover the insured for a set amount of time determined in the policy.
Death Benefit – The death benefit is the payout the beneficiary will receive upon the insured person’s passing. The death benefit is agreed upon by the policy owner and the insurance company. It can vary based on individual insurance coverage needs.
Face Amount – Also referred to as the face value or the death benefit, this is the amount the beneficiary receives upon the insured person’s death.
Final Expense Insurance – A final expense insurance policy typically has a smaller death benefit with the purpose of covering funeral costs and burial expenses. You can buy final expense insurance in a term or whole life insurance policy.
Insured – The “insured” is the person covered by the life insurance policy. For example, if someone buys an insurance policy on their mother, their mother is the “insured.” That same person could buy a life insurance policy on themself which would make themselves the “insured.”
Life Insurance Riders – Riders are established as an added benefit bundled with your main policy and offer additional coverage for you or a loved one. Some of the most common are accidental death, accelerated death, and child (or grandchild) term riders. Depending on the policy, riders may incur an additional cost.
Premium – A premium is the scheduled payment required to keep your policy active. Several factors are considered when determining your premium, including the amount of coverage and the risks the insurance company has to consider when offering coverage.
Policy Loan – This is a loan that’s borrowed against your policy’s cash value. It’s also referred to as a life insurance loan. Policy loans typically have lower interest rates and much higher approval odds since you are essentially taking a loan out against yourself. If repayment is not made in full at the time of the insured’s death, the balance may be deducted from the death benefit.
Policy Owner – The policy owner is precisely what it means; the person who owns the policy and is responsible for paying the monthly premiums. A policy owner may also be the insured or the person who purchased a policy to cover a loved one. The policy owner may also be the beneficiary of a policy or name another individual. Typically, a policy owner is the only person who can make updates to the policy itself.
Term Life Insurance – Just as it sounds, term life insurance covers the policyholder for a set number of years or “terms.” Policies can typically be bought in increments of five, 10, or 20 years. When the term expires, so does the policy. There is no cash value with this type of life insurance policy.
Whole Life Insurance – Whole life insurance is a type of permanent life insurance policy where your rates never increase and the policy never expires as long as you pay your premiums on time. Whole life insurance policies also carry a cash benefit that can be withdrawn from or borrowed against if needed.
Know the Terms With Americo Senior Life
Americo Senior Life can help seniors navigate life insurance. We are determined to bring individuals the coverage they need at a price that is right for them. Get your free online quote today or contact an Americo Senior Life agent with any additional questions you may have.