Understanding Life Insurance

If you have a spouse or children, you need life insurance. You have heard it before, but it bears repeating. How would they be able to handle things if some drunk driver ran into you tomorrow and you died?

Life insurance is a fairly simple concept, but it can appear complex to the average person. The complexity comes from the terms used. If you can understand the language, you can make a better determination of what you need. So, let’s talk terms!

References to Adjustable Premiums should be examined closely in any policy. This allows the insurance company to change the premiums on a block of policies during the term of the contract.

The Amount At Risk on a policy is something insurers pay close attention to. It is the difference between the face amount of a Whole Life Insurance policy and the cash value. The amount at risk is the difference, to wit, the figure the insurer will have to pay out.

When you buy an insurance policy, you will be asked to designate a Beneficiary. This is the person that you want to receive the funds that will be paid out from the policy on the death of the life insured.

A Cash Refund Annuity is one with a catch up element. If you pass away and the total annuity payments are less than what you have paid in total premiums, the difference is paid to the beneficiary you have designated.

Many modern insurance policies contain a Contestable Clause. This gives the insurance company up to 2 years to void the policy if they find evidence that would have resulted in the rejection of the policy application when originally made.

Although a basic concept, the term Death Benefit needs to be covered. While death may seem to have few benefits, this refers to the amount to be paid to beneficiaries upon the death of the person whose life it is based upon.

A Decreasing Term Policy is a creative product. As time passes, the death benefit decreases until it zeros out. This is often used to match the repayment of a large debt such as a mortgage. As the mortgage is paid off, there is less need for an insurance policy.

Dependent Coverage refers to the people covered by a policy. More often found in health insurance policies, the general rule is the married spouse and unmarried children are covered.

A Universal Life Insurance Policy is another pillar of the insurance industry. It is an adjustable policy with a flexible premium. You can choose what you can afford to pay at a given time and a corresponding death benefit is generated. This can be adjusted from time to time.

Variable Contracts represent another pillar of the life insurance industry. These policies come in the form of annuities or straight life insurance. Cash builds up in the policy and may be invested in stocks or mutual funds and so on.

The important thing to understand about life insurance is that polices differ greatly. This means you must understand exactly how a policy being pitched to you works. If terms are used that you don’t understand, ask for clarification!

Article Source: http://www.realtyreferenceonline.com/articles

Read more information on term life insurance at UFCAmerica.com.
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