Life Insurance Terms Defined

Life Insurance Terms Defined

If you’re like most people, reading an insurance policy can be downright confusing. It’s not the easiest read in the world for me and I’m in the business. Fortunately, all policies include definitions of the terms. Unfortunately, the definitions are often written in “insurance speak,” so now you are left with terms and definitions you don’t understand.

In an effort to assist you in understanding your policy, I offer the following simple definitions:

• Death Benefit – The amount payable to your beneficiary upon your death.
• Beneficiary – the person or persons who will receive the death benefit upon your death. You can name primary and secondary (or contingent) beneficiaries.
• Secondary Beneficiary – the person who receives the death benefit if the primary beneficiary is no longer alive.
• Premiums – the amount of money payable to the insurance company on a regular basis.
• Lapse – the cancellation of your policy when premiums have not been paid.
• Term Insurance – insurance for a specified period of time.
• Permanent Insurance – insurance that is as guaranteed to pay a claim as death is to happen.
• Health Class – a classification system used by insurance companies to determine the risk you present to the company. The better the health, the lesser the risk.
• Insured Person – the person whose life the policy covers.
• Policy Owner – the person who owns the policy. The owner and the insured are not always the same person.

I hope this helps.