Whether you're a policyholder or a beneficiary, understanding the complex jargon of a legal insurance document can be overwhelming. But it's essential to ensure that you make informed and reasonable decisions for your coverage or death benefit payouts. A better understanding of these terms means better protection for you, your family, and your finances.
Although legal contracts may vary from one insurance company to another, some standard terms remain the same. Not sure where to start? Don't worry. This blog has got you covered! Here's a list of the 14 most common terminologies and expressions involved in life insurance policies that can help you get some clarity.
A person who has been authorized permission to sell insurance by the state. There are two types of insurance agents: independent agents selling insurance for multiple companies and direct writers representing a single insurer.
The policyholder is the owner of the policy, the person who purchases and pays for the procurement of a life insurance policy.
The individual whose life is insured by the life insurance policy.
The premium is the regular payment the policyholder makes to the insurance provider. You may pick from an assortment of payment options, such as monthly, quarterly, yearly, etc. It's the essential component of an insurance policy.
The person or organization you designate to receive the money (death benefit) in the event of your passing. Also known as the nominee.
The first person designated to receive the death benefit after the insured's death.
Secondary or Contingent Beneficiary
This person is entitled to receive the death benefits after the insured's death, but only if the primary beneficiary is dead.
If the insured person passes away within the first two years of the policy's effective date, the insurance company can open an investigation to verify that the information provided on the application for coverage had no false statements made.
This period determines how long coverage will continue in force (often 30 or 60 days) after the most recent premium payment was made.
The reinstatement restores a lapsed policy. It requires the insured to prove their insurability and pay any outstanding premiums or loans on the policy, plus interest.
A financial agreement with an insurance provider designed to provide retirement income. When you purchase an annuity with a lump amount or make periodic payments over time, your insurer commits to provide you with installments for the rest of your life.
Accelerated Death Benefits
An element of a life insurance policy that permits the policyholder to receive the death benefit while they're still alive, typically to pay for medical expenses associated with a fatal illness.
The individual is responsible for underwriting, evaluating insurance applications, and determining eligibility and premium rates.
These items are excluded from coverage under a life insurance policy. The insurance provider will reject the claim if the claim is premised on these exclusions.
The Last Note
Even though the legal language is hard to understand, once you get the hang of it, it can be much easier to make informed financial decisions regarding your life insurance policy.
In this blog, we explained a few basic life insurance terms briefly. We hope it helps provide clarity for your understanding of insurance. Best of luck!