Life Insurance - Key Terms You Need To Know

Most of us took a foreign language in high school. I can still remember my French teacher rolling his eyes when I spoke. Alas, I think I can say with some certainty that not a single one of us took the language of life insurance as an elective. That’s too bad as it certainly would help me more than my French does.



Life insurance is not what you would call a romance language. That being said, learning even the basic terms can really make dealing with the subject matter a far easier proposition. With that in mind, let’s take a look at a few.



Policy



This is pretty much what it sounds like – the life insurance you are buying reduced to writing. It is sometimes referred to as the "product" by agents as well. There are different types including term, variable, whole life and so on.



Insured



This is the person whose life the policy is based on. In English, this simply means that when they die, the policy must pay out the amount owed to the beneficiaries.



Face Value



The face value is the set amount paid when the insured passes away. It was formerly known as the death benefit, but the marketing minds at the insurance companies thought that sounded a bit grim so now we call it a face value. A $500,000 term policy would have a face value of $500,000.



Beneficiary



The beneficiary is the person the face value is paid to. It can be one person, many people or even a business. A business? Yep. Many businesses will buy life insurance on their critically important employees to provide a pool of money they can use should that person pass on. Strange, but true.



Owner



The owner is, well, the owner. Most people assume the insured is the owner, but this is not always the case. Your ex-spouse could by an insurance policy based on your life that pays off to them should die. They own it and are the beneficiaries. You are the insured. Don’t let them work on your brakes. Trust me on this.



This represents the simplest of introductions to the language of life insurance. It isn’t very romantic, but known the basics can help you navigate the field without too much stress.



Barry Milton writes for UFCAmerica.com - where you can get professional help with equity indexed insurance.