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