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Awarded by
Atlanta Magazine October 2008
Atlanta Magazine October 2009 |
Life Insurance
In the simplest of terms, life insurance is cash payment from an insurance company provided to a beneficiary in the event of the insured's death. Your beneficiary will not owe federal income tax on the death benefit. Two basic types of life insurance exist:
- Term insurance provides benefits and premium payments for a set amount of time. Benefits are only paid if you die within that set period of time. At the end of each term, the policy can be renewed at a higher premium, normally without showing insurability.
- Permanent insurance provides protection for a longer period of time, even a lifetime. The two most popular types of permanent insurance are:
- Whole life offers coverage as long as you pay the stated premiums rather than for a stated period of time. Whole life insurance also features a savings element (cash value). You can borrow from the cash value of the policy for emergency cash, or use the cash value for retirement.
- Universal life is very similar to whole life in that coverage can be life long rather than for a stated period of time, and this policy features a savings element (cash value). However, this policy also offers flexibility to change the premium, add cash contributions, and change the death benefit as the insured's situation changes.
Policy benefits can vary, so it's important to understand what your coverage options are. Read your proposed policy carefully and don't be afraid to ask your agent questions. Agents want you to make an informed decision. Here are some terms you'll want to familiarize yourself with:
- Beneficiary is the person or entity named to receive the policy proceeds at the insured's death.
- Cash Value is the amount of "savings" accumulation in the policy.
- Conversion is the right to replace term insurance with permanent insurance without giving proof of insurability.
- Face Value or Death Benefit Payable is the amount of the benefit payable at death.
- Guaranteed Interest Rate is the minimum interest rate paid on the cash value of a permanent life policy.
- Insured is the person who is being covered by the policy.
- Riders are additional benefits that you can purchase with your policy.
- Accelerated Death Benefit allows a terminally ill policyholder to use a portion of the policy's death benefit before death.
- Return of Premium returns all premiums paid if you are living at the end of the term.
For a complete list of life insurance terms, click here
For an interactive Term vs. Permanent insurance decision guide, click here.
The National Association of Insurance Commissioners suggests you read the Life Insurance Buyer's Guide before you shop for life insurance.
Learn more about how life insurance can help ensure the security of your family's financial future by reading What You Need To Know About Life Insurance.
For free Term and Return of Premium life insurance quotes, click here.
For free Whole Life and Universal Life insurance quotes, click here.
If you have additional questions, please feel free to contact us. |
