There are so many insurance words that seem like a foreign language. A good insurance agent can help you make sense of all of it. Read on to understand some of the commonly used words in your insurance policy.
An annuity is a contract between you and an insurance company in which you make a lump-sum payment or series of payments and, in return, receive regular disbursements, beginning either immediately or at some point in the future. Annuities are popular among retired people because they offer income for life.
Accelerated Death Benefit
The Accelerated Death Benefit (ADB) is a provision in most life insurance policies that allows a person to receive a portion of their life insurance money early — to use while they are still living. People with certain disabling conditions can also qualify for ADB regardless of life expectancy. This is often written into a policy as a rider.
It’s the money – lump sum or otherwise – that gets paid to your beneficiaries if you die while your life insurance policy is in effect. Your beneficiaries usually do not have to pay taxes on those funds.
The contestability period is a period of one or two years from the date the policy was issued during which the insurer is allowed to review the application answers to make sure no material misrepresentation was made. Its purpose is to protect the life insurance company from fraud.
This type of insurance coverage replaces a portion of your monthly income if injury or illness prevents you from working. Having disability insurance provides financial security for you and any loved ones who may depend on your ability to earn a paycheck. It is more than just for an injury or illness as many companies cover maternity leave or lost wages due to mental illness and complications from drug and alcohol abuse. Make sure to read your policy carefully when you purchase disability coverage to make sure the types that will be covered.
The conversion privilege gives you the option of maintaining some level of long-term disability coverage in the event employment terminates. It is a valuable benefit for you if you wish to take some time in transition from one employer to another. Some term life insurance policies allow you to convert them into permanent life insurance policies at a later date. Permanent life insurance can build wealth.
A beneficiary is the recipient of a life insurance policy’s death benefit and is eligible to file a claim. This can be one person, several people, or an organization, as determined by the life insurance policyholder and is often the main reason people buy coverage.
An insurance grace period is a defined amount of time after the premium is due in which a policyholder can make a premium payment without coverage lapsing. The insurance grace period can vary depending on the insurer and policy type.
A living benefit rider is an additional coverage on your basic life insurance policy that provides supplementary benefits and protection to you, sometimes at an extra cost. For example, accelerated death benefits, long-term care benefits, and policy loans are some of the common living benefits.
Insurable interest exists when an insured person derives a financial or another kind of benefit in the person named in the policy. This means that you would suffer some kind of financial harm if that person were to die.
Long Term Care Insurance
Long-term care insurance is an insurance product, sold in the United States, United Kingdom, and Canada that helps pay for the costs associated with long-term care. Long-term care insurance covers care generally not covered by health insurance, Medicare, or Medicaid. It can cover nursing homes, adult day care, or home healthcare costs.
Term Life insurance premiums are subject to medical underwriting. That means the younger and healthier you are, the cheaper your rates will be. Preferred rates are the lowest available and bestowed upon people in optimum health. Some of the factors considered are smoking habits, gender, lifestyle, and a person’s health history.
A premium is the amount to be paid to an insurance company to keep your policy in force. You can usually pay this amount annually, quarterly, or monthly.
A rider is an insurance policy provision that adds benefits to or amends the terms of a basic insurance policy. Riders provide insured parties with additional coverage options, or they may even restrict or limit coverage. There is an additional cost if a party decides to purchase a rider. Common insurance riders are long-term care and accelerated death benefits.
Term Life Insurance
Term life insurance or term assurance is life insurance that provides coverage at a fixed rate of payments for a limited period of time. It is the most common and affordable type of life insurance. It provides coverage for a specific amount of time such as 10, 20. or 30 years. If you cancel or outlive your term life insurance policy, you don’t get your money back. However, if you have a “return of premium” rider and you outlive the policy, premiums will be refunded. If you have a convertible term life policy, you can sell it instead of canceling it. If you pass away during the term, your beneficiaries would receive a death benefit.
An insurance underwriter evaluates insurance applications in order to decide whether to provide the insurance and, if so, the coverage amounts and premiums. Underwriters act as go-betweens for insurance agents who are eager to sell a policy and insurance companies who want to minimize risk. When it comes to life insurance, the underwriter looks at factors like a person’s age, health, lifestyle, and more to make those decisions.
While there are many more insurance terms than the ones outlined here, these are some of the more common definitions that can help you get on the right track.
Rollins Insurance is an independent insurance agency providing our clients the best prices with the most coverage possible since 2008. We represent multiple A-rated insurance companies to make sure we deliver the most competitive rate packages to our clients in Kentucky and Ohio. We find that most people are under-insured and over-paying when we meet them. We love what we do, and our primary business is Personal Auto, Homeowners, and Life and Health insurance. We are a family-owned and managed business that specializes in providing needs-based insurance services.