Don't Get Confused When Talking To Life Insurance Agents

They say taxes and death are the only absolute things in life. Whether this is true or not, you can prepare for both. While tax planning is an interesting subject, we are going to look at life insurance in this article.

Life insurance is a fairly simple concept, but it can appear complex to the average person. The complexity comes from the terms used. If you can understand the language, you can make a better determination of what you need. So, let's talk terms!

References to Adjustable Premiums should be examined closely in any policy. This allows the insurance company to change the premiums on a block of policies during the term of the contract.

An Annual Payment Annuity provides you with simplicity. As the name suggests, you can pay the entire premium for the year at one time. Of course, you need to make sure yo have cash on hand to do so.

When you buy an insurance policy, you will be asked to designate a Beneficiary. This is the person that you want to receive the funds that will be paid out from the policy on the death of the life insured.

The Commutation Rights associated with an insurance policy apply to the beneficiary of the policy. Depending on the policy, the beneficiary may elect to convert installment payments to a lump sum payment.

Many modern insurance policies contain a Contestable Clause. This gives the insurance company up to 2 years to void the policy if they find evidence that would have resulted in the rejection of the policy application when originally made.

Although a basic concept, the term Death Benefit needs to be covered. While death may seem to have few benefits, this refers to the amount to be paid to beneficiaries upon the death of the person whose life it is based upon.

There are life insurance polices designed for business obligations. A Credit Life Insurance is taken out on a business owner and used as collateral for some debt. The beneficiary is the creditor providing the loan to the business owner. If the owner dies, the benefits are used to pay off the debt.

For many people, building up cash value in an insurance policy is a smart move. A Dividend Accumulation clause allows you to do just this, to wit, reinvest an dividend paid by the insurer back into the policy.

The most common type of life insurance is Term Insurance. Term policies vary in design, but you basically pay a premium for a death benefit. There is no cash build up in the policy. The policy has a capped term of five, ten or more years.

The Variable Universal Life Insurance Policy is a more recent and popular product. Premiums and benefits are adjustable. Money is accumulated in the policy and can be invested. The flexibility makes the policy attractive.

As with any area of financial planning, there are a vast number of terms used in the life insurance world. If you don't understand a term used by an agent, ask for an explanation. Don't be shy!


Barry Waxler is a financial planner who writes about financial planning for UFCAmerica.com.