Monthly, quarterly, or yearly payments required to maintain coverage
The original death benefit amount
Option to convert from one type of policy (term) to another (whole life)
The savings portion of a policy that can be borrowed against or cashed in
The individual(s) or entity (e.g., trust) that is designated as benefit recipient
A policy requiring no further premium payments due to prepayment or earnings
A: The beneficiary is the person or entity named as the recipient of your policy’s death benefit. It can be a family member, a person unrelated to you, or even a business or other organization. You choose the beneficiary on your own—you don’t need permission from the insurer or the beneficiary. You can also choose more than one beneficiary, and designate how you want the death benefit to be split among them.
Your insurer will automatically disburse the death benefit if you die, but it’s still a good idea to tell any beneficiary about the policy so he or she will be prepared to take action should a problem arise. For this same reason it’s also a good idea to provide the beneficiary with access to the contract.
A: Technically a beneficiary does not have to do anything to receive your policy’s death benefit, but it’s a good idea to make sure he or she is aware that the policy exists in case there are any delays or complications on the insurer’s side.
The insurer will require proof of death and a copy of the contract in order to disburse the benefit.
A: Many employers offer life insurance as part of a benefits package. Usually, the amount is a multiple of your salary, up to a limit (usually one or two times your salary). Whether this is enough protection for your needs depends on your financial situation.
Life insurance is more expensive for those who are older or in poor health, so employer-offered life insurance can be a great way to obtain coverage if you can’t otherwise afford it.
A: The premiums you pay for your life insurance policy are not tax deductible.
A: Term is basic life insurance, the kind you’d probably think of if someone asked you to describe the concept. You pay a premium and in return the insurer guarantees to pay your beneficiary a lump sum of money if you die while the policy is in effect.
Term policies are sold for specific lengths of time, usually between 10 and 30 years. Once the term expires, you stop paying premiums and the policy is no longer in effect.
A: Permanent life insurance never expires, and it includes a “cash value” component that grows (or in some cases shrinks) over the life of the policy.
This cash value means you can do things like borrow against your policy or cancel the policy for part of the cash value after a period of time.
A: Whole life is a type of permanent life insurance with the following characteristics:
Know your benefits
Understanding different types