Understanding Life Insurance

If you have a spouse or children, you need life insurance. You have heard it before, but it bears repeating. How would they be able to handle things if some drunk driver ran into you tomorrow and you died?

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!

An Adjustable Life Insurance Policy is a popular product. As the name suggests, one can adjust the premiums, term, death benefit and time when premiums are paid. Such flexibility lets you coordinate the policy to your current needs as they change.

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.

The Cash Surrender Value of a policy is often misunderstood. It refers to the amount due a person who terminates a policy holding a vested cash reserve in it. There is often an arbitrary charge deducted by the insurer as well.

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.

Much like a secondary beneficiary, a Contingent Beneficiary is a person other than the primary beneficiary who will receive the death benefit. Some policies limit the beneficiaries at two people, but there can be more depending on your needs.

The Right of Conversion refers to an individual's right to convert a policy held as part of a group into an individual policy if the person ceases to be part of the group.

The insurance phrase Double Benefit or Double Indemnity refers to a policy that pays out double the stated benefit if the person whose life it is based on passes away in a particular way, such as a car crash.

Dependent Coverage refers to the people covered by a policy. More often found in health insurance policies, the general rule is the married spouse and unmarried children are covered.

A Universal Life Insurance Policy is another pillar of the insurance industry. It is an adjustable policy with a flexible premium. You can choose what you can afford to pay at a given time and a corresponding death benefit is generated. This can be adjusted from time to time.

A Variable Life Insurance Policy is used both as a financial safety net and investment vehicle. The policy builds up cash value that can be invested. Depending on the policy, the premiums and death benefit will change as the cash value grows.

The important thing to understand about life insurance is that polices differ greatly. This means you must understand exactly how a policy being pitched to you works. If terms are used that you don't understand, ask for clarification!