They say taxes and death are the only absolute things in life. Whether this is true or not, you can prepare for both. While tax planning is an interesting subject, we are going to look at life insurance in this article.
A classic sketch of a conversation with a life insurance agent would show the person trying to buy a policy with their eyes glazed over. Why? The terminology being used is confusing. Well, let?s change that by discussing some or the common terms used.
An Adjustable Life Insurance Policy is a popular product. As the name suggests, one can adjust the premiums, term, death benefit and time when premiums are paid. Such flexibility lets you coordinate the policy to your current needs as they change.
An Annual Payment Annuity provides you with simplicity. As the name suggests, you can pay the entire premium for the year at one time. Of course, you need to make sure yo have cash on hand to do so.
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.
The Commutation Rights associated with an insurance policy apply to the beneficiary of the policy. Depending on the policy, the beneficiary may elect to convert installment payments to a lump sum payment.
An Adult Provision, often referred to as a Control Provision, appears in life insurance policies for a minor. The clause designates an adult to handle all elements of the policy until the minor reaches a specified age.
To really understand what you are getting into, you need to grasp the Cost of Insurance. This is the amount you pay in premiums minus what you get from the policy. It is a simple calculation with term insurance, but more complex for policies that build up cash.
The insurance phrase Double Benefit or Double Indemnity refers to a policy that pays out double the stated benefit if the person whose life it is based on passes away in a particular way, such as a car crash.
A Waiver of Premium clause is something you should try to include in your policy. The waiver essentially says that if you become disabled, no further premium payments must be made. Coverage, however, continues.
The Whole Life Insurance Policy is one of the staples of the life insurance industry. The policy provides a death benefit, but also accumulates cash within as premiums are paid in over time. There are many different ways to pay the premiums, so make sure to ask.
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!
