Not sure where to start when it comes to purchasing a life insurance policy? If you’re not very familiar, life insurance terminology can seem overwhelming. The good news is your local Farm Bureau agent can help you understand what it all means and help you get the coverage you need. Keep reading to learn more about eight common life insurance terms you’ll hear and what they mean.
7 Life Insurance Terms to Know
When you purchase a life insurance policy, you’ll be asked to name at least one beneficiary. A beneficiary is someone you’ve named to the policy to receive your policy’s death benefits. A beneficiary can also be a nonprofit organization you want your life insurance proceeds to benefit. When you choose a recipient or recipients of your policy’s death benefit you can also pick the percentage each recipient will receive.
2. Death Benefit
In life insurance terminology, death benefit refers to the amount your policy will pay your beneficiary or beneficiaries upon your death.
The premium is the cost of purchasing the life insurance policy. Depending on your policy type and contract terms, you may have multiple options to pay your premium — monthly, quarterly, semi-annually, annually or in a lump sum.
Riders are commonly known as optional, additional features you can choose to add on to your life insurance policy to help enhance and customize your coverage. One popular rider we offer on most of our term and permanent life insurance policies is the Daily Living Rider. With this optional feature, you’ll have the option to accelerate a portion of your policy’s death benefit if you have been chronically ill for a certain number of days and are expected to remain ill for an additional time. It can help pay for needs resulting from chronic illness. However, it’s not recommended to use this rider to replace long-term care coverage.
If you purchase a term life insurance policy, the term is the length of time your policy is in effect. For example, a 20-year term policy will offer coverage for 20 years. You can choose to convert your term policy to a permanent policy to secure coverage.
6. Term and Whole Life Insurance
A term life policy offers coverage for a certain number of years. A permanent life insurance policy ensures coverage throughout your life as long as premiums are paid.
When you apply for a life insurance policy, an underwriter will put your application through the underwriting process to determine what the risk is of insuring you. The underwriting process determines your premium rate and whether or not the company will insure you.
Gain Peace of Mind
Don’t let the jargon scare you. Now that you understand life insurance terminology, getting the coverage you need to provide peace of mind and protect your family’s financial future doesn’t have to be daunting. Your local Farm Bureau agent is available to help you understand your policy options.