Life Insurance in a Nutshell

There are 3 main types of life insurance:

  1. Term life insurance: This type of policy covers you for a specific period or term.  This is usually the lowest priced life insurance policy.
  2. Universal life insurance: This policy is similar to whole life instead it does not accumulate the amount of cash value that whole life collects.  The policy cancels typically at age 120.
  3. Whole life insurance: This policy is usually the most expensive of the three, but it also accumulates cash value faster than universal and it lasts your “whole” life.

Life Insurance Terms

  • Beneficiary: This is who you designate to receive the face amount of your policy.  The beneficiary can be more than one person with different percentages, and there is usually a contingent beneficiary who will receive the funds if your first choice for beneficiary is no longer around.  When applying for life insurance you will need the beneficiary’s social security number and date of birth for the insurance carrier.
  • Face Amount: This is the amount of insurance your beneficiary will receive if something were to happen to you.  If you have a term life insurance policy with a death benefit of $200,000, your face amount is $200,000.
  • Policy Owner: This is the person who owns the policy and is usually the one paying the premiums.  The policy owner has the rights to make changes to the policy.
  • Proposed Insured: This is the individual who is insured under the life insurance contract.  The health questions on the application are to be answered by the proposed insured not the owner of the policy.
  • Application: This is the form you fill out to submit your request for insurance to the carrier.
  • Cash Value: The cash value in an insurance contract, also called the cash surrender value, is the cash amount offered to the policy owner the life carrier upon cancellation of the contract.   The cash value can also be drawn against and even used as collateral while the life insurance is in force.

This article was written to be informative and help you navigate some of the basics of life insurance.

senior division manager Article added 08/30/2017 by Ryan Eaton
Senior Division Manager: Morgan White Group

For more info about Term Life Insurance, please feel free to contact me.
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