Knowing the Lingo.
The first time you buy life insurance, it can seem like someone wrote the application and policy in a foreign language. You may have never heard of some of the terms. Below, we use everyday language to explain the 10 most common terms that you’re likely to see when buying life insurance.
Beneficiaries: Beneficiaries are the people who receive the death benefit payout from your life insurance policy after you die. You should name both primary and secondary beneficiaries. The primary beneficiary is usually the spouse for married policyholders. In some states, you need the written permission of your husband or wife not to name him or her as primary beneficiary on your life insurance policy.
A secondary or contingent beneficiary is someone who would receive your death benefit if the primary beneficiary that you name passes away before you do. Secondary beneficiaries could be your adult children, grandchildren, or anyone else who you choose. However, it’s important for them to understand that they would not receive any money if the primary beneficiary outlives you.
Claim: When you pass away, the beneficiary of your policy is eligible to collect your death benefit. He or she will need to file what’s known as a claim to do so. Your beneficiary will need a certified copy of your death certificate to make a claim and the original life insurance contract if still available.
Death Benefit: A death benefit is the amount of money that the life insurance company pays to the beneficiary. If you don’t name anyone to receive the death benefit from your policy, the money will go into your estate.
The Insured: You are the insured on a life insurance policy if you are the one who the insurance company will pay death benefits to your beneficiaries. The insured and the policyholder are usually the same person, but not always. For example, a couple could decide to purchase a life insurance policy for each of their minor children. The couple would be the policyholder in this case and each child would be the insured.
Underwriter: A life insurance underwriter is the person who collects and reviews your application for life insurance. It is his or her job to consider the level of risk the company takes to insure you. Some of the things an underwriter considers include your age, health, occupation and hobbies.
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