Scheduling a meeting with your life insurance agent can be intimidating. It can be hard to keep up with all the jargon and life insurance terms being thrown around. But if you go in prepared, by knowing your life insurance terms and definitions, you will be able to keep up and ask the right questions to help you get the best life insurance policy for your needs.
Before talking to your agent, know the life insurance lingo your agent will be throwing around. Here to help you is a list of the most prominent, and often confusing, life insurance terms you should be familiar with.
To begin the list, let’s start by differentiating between the main types of Life Insurance:
Permanent Life Insurance
Permanent life insurance is the most popular, and most supportive life insurance policy. With a permanent life insurance policy, you will get coverage for the remainder of your life, as long as your premiums are consistently paid. Also, you may be able to borrow money from your policy if needed, as a living benefit of the account.
There are three main types of permanent life insurance: whole life, universal, and variable. Whole life is another term for permanent life insurance, while universal insurance a flexible policy in which you have more freedom paying premiums and taking out of the savings in your account. A variable life insurance policy also allows more flexibility, in which you are able to invest and change the value of your policy, yet still receive lifelong coverage with your constant payment of premiums.
Term Life Insurance
With a term life insurance policy, you are able to get life coverage that typically comes with lower premium rates, however, it is only for a certain fixed period of time. Beyond that period, you may buy more insurance, but your rates will typically get higher. If you feel confident that you will only need insurance for a certain amount of time, then that is when life insurance will be the best option.
Non-Medical Life Insurance
If you have poor health records, yet still need life insurance, you may hear the life insurance term of non-medical insurance being brought up in conversation with your life insurance agent. Non-medical life insurance can be more costly, but is a guaranteed form of life insurance which is available to almost everyone.
Final Expense Insurance
Final expense insurance is a form of life insurance that you can get late in life, and helps you prepare for your death by providing for the cost of your death expenses, as well as providing a small sum of money to your beneficiaries. Your insurance agent may bring up this life insurance term if you have had a hard time purchasing life insurance, or if your health records are in poor shape and you are likely to get denied from other life insurance policies. Final expense insurance policies are smaller than most other life insurance policies, but still provide you with the means to help your family after your death.
If you are older, and less likely to qualify for other types of insurance, burial insurance is a life insurance term you should get familiar with. While it is quite similar to final expense insurance, burial insurance only provide for the cost of your funeral, but comes with cheap premiums and is easy to obtain. If your family is stable, and you are low on funds, or have money saved up elsewhere, then burial insurance is something your life insurance agent may suggest.
Now that you are familiar with the basic types of policies, let’s touch on the life insurance terms you need to know:
The death benefit of your life insurance policy is the sum that will be paid out to your beneficiary after you pass away. This is a predetermined amount, which you as the insured will pick based on your income and the amount of money your beneficiaries will need upon your death. With a higher death benefit, higher premiums will typically be required to support the funds.
Upon purchasing your life insurance policy, you will need to decide who will be your beneficiary, or beneficiaries, if you choose more than one individual. Your beneficiary will be the person who receives the payment of the death benefit after you pass away. Picking your beneficiaries can be a hard choice, so think about who you support financially, and who will need it the most after your passing, like your spouse or children.
Cash value is something that is available with certain types of whole or permanent insurance policies. You may take out a cash value form your policy if you wish, that comes out of your policy’s death benefit. Depending on your policy, you cash value can accumulate and you may be able to invest it to achieve a higher payback for your premiums. If you find a time when paying off your premiums gets hard, you can even borrow from your cash value to help sustain your policy and pay your premiums until you can get back on your feet.
Your premiums, are what you pay over periods of time to support your coverage. These payments can come monthly, quarterly, semi-annually, or annually, and the cost of your premiums are due to the amount of risk you have that is determined during the underwriting process.
The underwriting process can be a confusing deal, but the gist of it is that it determines your risk so that the underwriter can figure out if you should receive insurance with the carrier, and what your premium rates should be.
While the idea behind it is simple, the process can be confusing, so check out Understanding The Underwriting Process of Life Insurance (http://www.firstlife.insure/blog/understanding-the-underwriting-process-of-life-insurance ) to find out how your premiums are determined.
By educating yourself about these life insurance terms, you’ll be able to enter your agent’s office with more confidence, and leave with a more suitable insurance policy for your needs.
By: Mollie McDonnell, http://www.firstlife.insure/blog