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:: HOME :: CREDIT CARDS :: LONG DISTANCE :: INTERNET SERVICE :: LOANS :: CELL PHONES :: INSURANCE · Main Page · Auto Insurance  Compare Quotes Search by State Tips and Advice· Health Insurance Compare Quotes Tips and Advice· Life Insurance Compare Quotes Tips and Advice Life Ins. Calculator· Home Insurance Compare Quotes Tips and Advice· Business Insurance Compare Quotes Tips and Advice· Other Insurance · Info & Resources :: ONLINE BANKING :: KNOWLEDGE :: MORE |
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Life Insurance Tips and Advice Center Topic: Life Insurance Terminology See the subtopics menu for definition of and explanations about common life insurance terms. For additional information about life insurance, see the topic list directly below.
 Term Life InsuranceWhat is term life insurance? Term life insurance is the most basic type of life insurance, and it only pays if the insured dies during the term of the policy. Terms can last for any length of time, but common terms are one year, 5-year, 10-year, 15-year, 20-year, 25-year, or 30-year policies or a term that ends when the insured reaches a specific age, usually 65. Most term life insurance policies are renewable at the end of the term, although insurance companies will typically not sell term insurance for a term that ends after the insured's 80th birthday. Renewable term policies mean that the insured can renew at the end of the term, without having to prove health status. The option to renew is important for individuals whose health might disqualify them from getting a new policy. A convertible term life insurance policy is one that can be changed to a permanent policy without having to prove health status or insurability. The two types of term life insurance are level term and decreasing term. Level term is the most common type of term insurance. This is insurance with a fixed benefit, one that is the same throughout the length of the term of the policy. Decreasing term is rarely purchased, but is insurance with a benefit that drops by a certain percentage, usually once each year, over the term of the policy. For most term insurance policies, if the insured is alive at the end of the term, there is no refund of premiums paid. A return of premium term insurance policy will refund premiums, but this is usually a much more expensive option. ^ Back to top Whole Life / Permanent Life InsuranceWhat is whole or permament life insurance? Whole life insurance, also known as permanent life insurance, is a type of life insurance that pays benefits whenever the insured dies, whether it is one day or seventy years from the date of purchase of the policy. The three types of whole life insurance are traditional whole life, universal life, and variable universal life. Traditional whole, or ordinary, life is insurance is the most common type of permanent life insurance. This policy has death benefits and premiums that remain the same throughout the life of the policy. In order to keep the premiums lower toward the end of the policy, the early premium payments are a bit more than they strictly need to be to pay claims at that point. These are considered overpayments and at a certain time in the life of the policy, these are available to the insured if the original plan is cancelled. Universal, or adjustable, life insurance provides the opportunity to increase death benefits, and even alter the premiums, using the cash value of the savings in the account. This is useful for paying the premiums if an insured's financial conditions changes. However, it is risky, so it's important to understand how much the cash value is worth, and how many premiums that will pay, or the policy could lapse. Variable life insurance provides a combination of death benefits and a savings account, for which the insured can plan the investments in stocks and bonds. This is a riskier coverage, as death benefits will be tied to the performance of the investments in the market, although some policies do guarantee a minimum benefit level. ^ Back to top BeneficiariesWhat is a beneficiary? Life insurance is specifically designed to pay money to someone other than the insured. A beneficiary is the person or entity, such as a trust, charity, or estate that an insured designates to receive the money from the policy. If the insured does not identify a beneficiary, the benefit is paid to the insured's estate. Primary beneficiaries are the individuals or entities who receive the death benefit if they can be located after the insured's death. Contingent beneficiaries get the death benefits only if the primary beneficiaries cannot be found. If neither type of beneficiary can be found after an insured's death, the benefits will be paid to the insured's estate. Instructions for beneficiaries are helpful. For example, if two primary beneficiaries are named, but one of them has died, what will happen to that beneficiary's share? Will the other primary beneficiary receive it all, or will a dependent of the deceased beneficiary get that share? Naming beneficiaries, and keeping the information up to date, is an important task. Beneficiaries should be identified as clearly as possible, with their relationship to the insured, their social security numbers, addresses, and any other information that will help the insurance company find them, and confirm their identity, upon the insured's death. ^ Back to top Premiums ExplainedWhat is a life insurance premium? Premiums are the payments for the life insurance policy, paid to the insurance company. Payments are made, usually monthly, throughout the life of the policy—stopping at the end of the term for term life insurance and not stopping until the death of the insured for whole life insurance policies. For term life insurance policies, if the insured stops paying the premium, the coverage stops. In some cases, the insured may need to reapply or requalify health status to reinstate the coverage. For whole life insurance policies, there are a couple of different outcomes if the insured stops paying the premiums. For some policies, the life insurance coverage ceases, but the insured can cash out the policy and collect the money. Taxes may be due on the cash value if it exceeds the dollar amount of the premiums paid to date. For other life insurance policies, with non-forfeiture options, life insurance coverage will continue, but the death benefit will be reduced. For other life insurance policies, coverage will simply lapse. Some insurers allow consumers to reinstate a whole life insurance policy that has lapsed within five years, although proof of health status and insurability may be required, even if it wasn't when the policy was originally purchased. ^ Back to top Individual PoliciesWhat is an individual life insurance policy? Purchasing an individual policy is one way that someone can buy a life insurance policy. This entails finding the policy, selecting the benefits that work best, usually working with an insurance agent or broker directly, and researching and deciding from many life insurance quotes. Often an individual can purchase a life insurance policy from the same insurance agent or broker who managed the purchase of other insurance policies, such as home or automobile. However bundled discounts are rarely offered for life insurance premiums. When working with an insurance agent or broker, there is often a fee involved. This fee is called a load, and is built into the premium rate. It is designed to compensate the insurance professional for the time spent working with the insured, advising the insured about the proper type of insurance and coverage, and for customer service offered throughout the life of the policy. Consumers can also purchase insurance from a fee-only financial advisor. This is considered a no-load insurance, meaning that the advisor receives payment directly from the consumer, not via an addition to the premium. Consumers may also purchase life insurance directly from an insurance company. In New York, Massachusetts, and Connecticut, individuals can purchase individual life insurance from a saving bank. ^ Back to top Group PoliciesWhat is a group life insurance policy? Purchasing a group policy is one way that someone can buy a life insurance policy. Group policies are traditionally available from employers, unions, trade associations, or other groups such as an automobile club or alumni association. There are several benefits to purchasing group insurance instead of an individual policy. One benefit to purchasing life insurance through a group is ease for the consumer. All the hard work of finding the policy and selecting the benefits that work best is taken care of, and the consumer does not need to obtain a life insurance quote. Another benefit is that group insurance is often offered at a lower rate than an equivalent individual policy, either because the group is subsidizing the insurance or the risk profile of the group is less than for the individual insured. Often health requirements are waived for anyone purchasing a group policy, as well. A benefit of group insurance purchased through an employer is that it can be paid for via a payroll deduction. Most group insurance policies are term life insurance policies—with coverage that ends once the term of the policy is reached. However, in many states, consumers can convert the insurance to whole life insurance coverage with the same insurance company, and pay the premiums directly. If a policy is converted like this, the insured does not have to meet a health requirement or prove insurability. ^ Back to top Special Life Insurance ConsiderationsWhat are some special considerations for buying life insurance? Life insurance is something to consider for individuals in all stages of life, and for many different reasons. Individuals should consider purchasing life insurance if they have dependents—children, disabled adult children, or others who depend on them for financial support. Two-income households, even without dependents, should also consider life insurance, as financial commitments are usually made with both incomes in mind and the survivor may not be able to meet obligations with just one salary. Life insurance is typically purchased to replace lost income or earning power, and traditionally, this is not something that children contribute to a family. However, some individuals purchase life insurance policies for their children, to cover costs associated with burial expenses. Others purchase whole life insurance for their children to ensure that they are covered by an insurance policy, even if they suffer an illness that would otherwise prevent them from qualifying for coverage later in life. In addition to the basics of life insurance coverage, consumers who purchase whole life insurance can also buy burial insurance. This is a policy that pays a small amount, usually between $5,000 and $25,000 to pay for funeral expenses, either for the insured or everyone in a family. This type of policy does not require a certain health status. The amount of the death benefit is tied directly to the amount of the premium, which is often paid weekly, but can be paid monthly, and is also based on the current age of the insured individual. This insurance can be purchased through a life insurance agent or company, but in some states is also sold by funeral homes. Instead of burial insurance, some people choose to pre-pay funeral expenses. ^ Back to top
How much life insurance do you need? Simply enter your current assets, expenses, income to get started. You can also adjust the inflation rate and your expected rate of return. Estimate how much life insurance you need quickly and easily. · Calculate how much life insurance you need
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