Beneficiary

The beneficiary is the person or entity designated to receive the death benefit from the life insurance policy upon the insured’s death. Beneficiaries can be family members, friends, trusts, or organizations. It’s important to keep beneficiary designations up to date to ensure the death benefit goes to the intended recipients.

Convertibility

Convertibility is a feature that allows the policyholder to convert a term life insurance policy into a permanent life insurance policy without undergoing a medical exam. This option provides flexibility if the policyholder’s needs change over time, allowing them to extend their coverage or take advantage of the benefits of permanent life insurance.

Death Benefit

The death benefit is the amount of money paid to the beneficiary when the insured person dies during the policy term. This lump sum payment is typically tax-free and can be used to cover various expenses, such as funeral costs, outstanding debts, mortgage payments, and daily living expenses. The death benefit provides financial security and peace of mind to the insured’s loved ones.

Exclusions

Exclusions are specific conditions or circumstances that are not covered by the life insurance policy. Common exclusions include death due to suicide within the first two years of the policy, death resulting from illegal activities, or death occurring while participating in high-risk activities. It’s important to understand the exclusions in your policy to know what is and isn’t covered.

Face Value

The face value, also known as the coverage amount or death benefit, is the amount of money specified in the policy that will be paid to the beneficiaries upon the insured’s death. This amount is chosen by the policyholder based on their financial needs and goals.

Premium

The premium is the amount of money the policyholder pays for the life insurance policy. Premiums can be paid monthly, quarterly, semi-annually, or annually. The amount of the premium is determined by factors such as the insured’s age, health, lifestyle, and the length and amount of coverage. Fixed premiums mean that the payment amount remains the same throughout the term of the policy.

Renewability

Renewability is a feature that allows the policyholder to renew the term life insurance policy at the end of the term without a medical exam. While premiums may increase upon renewal, this option ensures continued coverage even if the insured’s health has changed. This feature is beneficial for those who may need coverage beyond the initial term but want to avoid the hassle and potential higher costs of obtaining a new policy.

Rider

A rider is an additional provision added to a life insurance policy that provides extra benefits or coverage. Examples of riders include a waiver of premium rider, which waives premium payments if the policyholder becomes disabled, or an accidental death benefit rider, which provides an additional payout if the insured dies as a result of an accident. Riders allow policyholders to customize their coverage to better meet their needs.

Term

The term is the length of time the life insurance policy provides coverage. Common terms include 10, 20, or 30 years. The policyholder selects a term that aligns with their financial goals and obligations, such as covering the years until their children are financially independent or until their mortgage is paid off.

Underwriting

Underwriting is the process by which the insurance company evaluates the risk of insuring the policyholder. This often includes a review of the insured’s health, lifestyle, and medical history. The underwriting process helps determine the premium amount and whether the policy will be approved.