A wise man said that you should always know where and what you are investing your money into. This is the reason why I always suggest my friends to meet up with their financial advisors before signing an insurance policy. As financial and insurance advisors, we should be responsible and accountable for letting our clients know everything about the policy they are getting.
I know some terms may be hard to understand, especially for first-time policyholders. That is why we want to share this article with you.
Here are ten of the basic life insurance terms you should know before getting that policy:
It is the contract between a person and an insurance company where the company promises to pay the person’s listed beneficiaries a sum of money upon the death of the insured person. Diseases or critical illnesses may also be covered depending on the type of insurance. There are also some insurance policies that offer investment features.
It is the amount an insurance provider charges the policyholder to manage the risks related to the policy. In layman’s term, this is the amount of money the policy holder’s pay to the insurance company to keep his policy intact.
Term Life Insurance
It is an affordable or low-budget insurance policy that provides coverage for a certain number of years. Thus it was called term. It provides benefits as long as the death of the insured person occurs within the term of the policy. Once the policy expires, it is up to the policyholder whether to renew it or not.
It is a type of insurance which provides benefits both when death occurs within the term of the policy, and when the insured person is still alive at the end of his/her given term.
Variable Universal Life Insurance (VUL)
It is another type of life insurance that offers both death benefit and living benefits that comes in the form of investment. Unlike term life insurance, the premium for VUL is flexible and maybe change as needed by the policyholder or insured person.
This is the lump sum amount that the beneficiary will receive when an insured individual dies. Upon submitting the death claim, the insurance company delivers the cheque to the beneficiaries in 3 to 5 working days.
This refers to the individual/s who are entitled to receive the benefits of an insurance policy. It is the policyholder who declares the beneficiaries upon signing of the insurance contract.
It refers to the point when the life insurance contract expires, or upon the death of the insured person.
Insurance, like any kind of investments, have some risks that the policyholder should know of. The insurance advisor usually calculates these risks based on factors such as age or medical history. Higher risks may entail higher and more expensive coverage.
It refers to an individual who helps people decide which policy is best for their needs, depending on the person’s financial goals and his/her current situation.