Within the world of insurance, there are many different terms that come up. These terms may be simple speech to those that work in the industry, but to you and many others who do not work with these types of policies every day, it can seem completely foreign.
With many words seemingly covering separate topics, or two seemingly unrelated words being closely tied together, we have compiled a list and compilation of some common and not so common insurance terms. Although they will not make you an expert when it comes to life insurance policies, it is a good starting point to help you understand what you are signing up for, and what you will have to deal with in the long run. These are listed in order of what will most likely come up first and foremost, and will hopefully help you tie them into each other at a faster pace:
- Policy. The contract that you are reading. It encompasses the paperwork and all stipulations, as well as any signed forms that may have been brought up.
- Insured. The life that is being insured by the policy. Not necessarily the one that owns the policy itself.
- Owner. The one that controls all proceedings with the policy itself. This is during and up until the death of the insured. They are able to control, change, and edit the rights of the owner, the beneficiaries, and the methods of the payout system that is selected throughout the entirety of the active periods of the policy.
- Beneficiary. One(s) who will benefit and be able to make a claim to the insurance company, in hopes that they will be able to reap the savings and money that was granted by the life insurance policy. If there are more than a single beneficiary, it is broken into Primary, and Secondary. Secondary, or Contingent, beneficiaries will receive the benefits of the policy if the Primary beneficiary listed is dead, unable to receive the benefits, or their status was revoked under law.
- Premium. The payments made towards the policy period. These can be seen as regular payments, installments, or however you wish to describe it. It is the regular amount paid out to keep the policy active.
- Contestability. This refers to the investigation, or diving, into the information in regards to the death of the insured. This will usually occur within the first two years, as having someone die in that short of a time span will raise some flags. The insurance company will usually be looking into whether or not there was misrepresentation in the original paperwork.
- Policy date. This is the effective starting period as to when the insurance becomes active. This can be immediate, or stalled out at a later period. It is important to make note of when the policy date is, so that there is no mix up of when it is active, as well as for when the insured passes away.
- Right to examine period. The set period of time where the insured member is able to go over the policy, read it through, examine it, and decide whether or not they wish to cancel and refund their initial payments on the policy. This will usually be around 30-90 days.
- Grace Period. The period in time after the last premium payment has been made where the policy is still active. This will usually be around 30-60 days after the premium payment.