| There are many forms of life insurance policies | | | | policyholder should he or she cancel an existing |
| available to a potential policyholder but all life | | | | permanent life insurance policy early. It is |
| insurance policies will always fall under two | | | | important to note that Term Insurance premiums |
| different categories: | | | | increase with the policy holder's age but they will |
| Term Life Insurance - these types of policies are | | | | never accrue a "cash value". When a Term |
| only active for a specified amount of time of | | | | Insurance policy is terminated early, there is no |
| your life, called a "term". When the term ends, so | | | | refund for overpayment due from the insurer. |
| does the policy. Payout only occurs should the | | | | Additional life insurance terms you should know: |
| insured die sometime within the policies defined | | | | Beneficiary - This is the person or organization to |
| term. This type of life insurance is best used for | | | | whom the insurer will pay proceeds to should the |
| temporary or shorter term needs: 20-year | | | | insured die. This could be your husband/wife, or |
| mortgage, college education costs for children, and | | | | your spouse. It could also be your children or a |
| helping to support children and assist with family | | | | perhaps your favorite charity. |
| income needs should one of the parents die. | | | | Primary Beneficiary - This is the person or |
| Permanent Life Insurance - this type of policy | | | | organization that will be paid upon the insurer's |
| covers you for your entire life and will pay death | | | | death. |
| benefits when you eventually die. This type of | | | | Contingent Beneficiary - This is the person or |
| insurance policy is best for "permanent" related | | | | organization to which the proceeds will be paid to |
| needs: burial fees, estate taxes, providing income | | | | should the Primary Beneficiary be dead or no |
| for a spouse, etc. | | | | longer exist (such as a company or corporation |
| Whichever type of insurance policy you choose, | | | | named as the Primary Beneficiary). If no |
| there are two factors that determine its cost: | | | | Contingent Beneficiary was named in the policy, |
| Mortality Cost and Policy Expense Cost. | | | | proceeds will be paid to the Primary Beneficiary's |
| Policy Expense Cost is the cost of insurance | | | | estate. |
| company expenses such as office rent, utilities, | | | | Face Amount - This is the amount of money |
| general staff, and agent commissions. Depending | | | | payable at time of death. It is usually found on |
| on the type of policy you purchase, this fee can | | | | the first page of every Life Insurance policy, |
| either remain constant or fluctuate throughout | | | | whether it's a Term or Permanent policy. |
| your policy's lifespan. | | | | Purchase Options - These are options that can be |
| Mortality Cost is determined by the odds of the | | | | purchased throughout the life of the policy |
| insured dying at that particular moment. Obviously, | | | | regardless of the insured's health. A good example |
| the odds of the insured dying increase | | | | of a purchase option is allowing the policyholder to |
| exponentially with age. To avoid an ever | | | | increase the amount of the policy without having |
| increasing insurance premium that correlates | | | | to re-evaluate the health of the insured. |
| directly with the insured's aging, insurance | | | | Waiver of Premium - This is an optional coverage |
| companies average the increase and adjust the | | | | that permanently suspends your premium in the |
| early premium payments accordingly. Essentially, | | | | event that you are disabled. However, you must |
| you are paying an inflated premium when the | | | | first be disabled for six months before the waiver |
| insured is younger and a much lower premium as | | | | takes effect. Additionally, this option is quite |
| the insured individual ages, but the actual payment | | | | expensive and may not be necessary should the |
| remains constant. This overpayment is called | | | | insured have substantial disability coverage. |
| "cash value" and must be reimbursed to the | | | | |