Are you ready to get a life insurance policy for the very first time? If so, your insurance agent may be throwing around a lot of terms that you likely have not heard before. Here are some common terms that you need to become familiar with as you are shopping around for a life insurance policy.
Premium
The premium is the amount that you pay each term for your life insurance policy. It is essentially the bill that you receive for holding a life insurance policy. While many premiums are paid on a monthly basis, there may be some cost savings by paying a premium on a quarterly, semi-annual, or annual basis.
Death Benefit
If you were to pass away while holding a life insurance policy, there would be a death benefit that is awarded to those that are set to receive it. This is a fancy way of saying how much money the life insurance policy will pay out when you pass away. The death benefit will only pay out if the policy is still active and in good standing.
Beneficiary
Any time you buy a life insurance policy, you need to designate who the beneficiary is. This is the person that would receive the death benefit of the life insurance policy after you pass away. The beneficiary can be a single person or multiple people, with a set percentage of the policy's death benefit going to each person as per your decision.
The nice thing about using a beneficiary is that they will receive the death benefit of the policy immediately after you pass away. There is no need for a life insurance policy to go through the probate process to settle your estate.
Settlement Options
The settlement options define how the death benefit of the policy will be paid out to your beneficiaries. Some people prefer for this to be paid out as a large lump sum so that all the money is received immediately. However, others prefer that the policy pays out in monthly or annual payments. This prevents someone from having a sudden windfall of cash, which may be a good idea if they are not good with handling money and you want it to last.
Surrender
If you were to cancel your policy because you do not want it anymore, then you would be surrendering that policy. You would no longer be entitled to any of the death benefits if you were to pass away after surrendering the policy.
Keep these tips in mind when looking for indexed universal life insurance from a local company.
Share21 March 2022
Ten years ago, I married my best friend in a beautiful, intimate ceremony. My husband and I have been nearly inseparable and we’ve enjoyed this special time in our lives where it has been just the two of us. However, we’re finally ready to have a baby. Because I only work part-time, my husband is the primary financial provider in the family. If something ever happened to him, I wouldn’t be able to instantly support myself and a child. Because my husband worries about an uncertain future, he is considering purchasing a larger life insurance policy. On this blog, I hope you will discover the best types of life insurance policies for young parents to invest in. Enjoy!
