Buying Life Insurance - What Are They Talking About?
Life insurance is one of those things you need, but probably not something you look forward to buying. Make half an effort and you can save money by getting the best product for your situation.
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.
The Accumulated Value is a phrase used in a Universal Life Insurance Policy to describe the total premiums paid and interest credited to the policy before deductions for any expenses, loans or surrender charges.
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years to void the policy if they find evidence that would have resulted in the rejection of the policy application when originally made.
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.
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.
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.
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.
Many people make the mistake of assuming their agent will suggest the best policy. Agents will try, but how intimately do they know you? Make sure you take an active role in the selection process to avoid getting stuck with something you don't want.
See Also
Life Insurance Settlements in Canada
What are Life Insurance Quotes?
Canadian Term Life insurance quotes Canada
External Links
Nationwide.com
Today.msnbc.msn.com
Getrichslowly.org
