Life Insurance - Undestanding the Phrases Used
Barry Waxller
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.
Life insurance is the great safety net against all that life can throw you. That being said, it is hard to imagine another area of financial planning that uses such odd terminology. Well, let's take some of the mystery out of the more common 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.
An Assignment refers to the transfer of the ownership of an insurance policy from one person to another person. The actual document required to do this is also called the same thing.
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.
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.
The Variable Universal Life Insurance Policy is a more recent and popular product. Premiums and benefits are adjustable. Money is accumulated in the policy and can be invested. The flexibility makes the policy attractive.
As with any area of financial planning, there are a vast number of terms used in the life insurance world. If you don't understand a term used by an agent, ask for an explanation. Don't be shy!
Barry Waxler is a financial planner who writes about http://www.ufcamerica.com/ financial planning for UFCAmerica.com. This article is available as a http://www.uberarticles.com/?id=16826&b=79 unique content article with free reprint rights.
|
