Key life insurance terms
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Key life insurance terms

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Key life insurance terms

Before you think about getting life insurance, let's understand the key terms of the contract.

What are "premiums"?

Premiums are the payment you make (monthly or annually) to keep your policy in force or active. You make these payments based on the length and structure of your contract.

For example, if you have a policy that covers you for the term of 20 years, you will pay premiums during that time frame. Your beneficiaries will then receive the death benefit payout if you die within that time frame of 20 years.

What is the "coverage amount"?

The coverage amount (also known as the face amount, death benefit, or payout) is the amount of money that goes to your people (beneficiaries) if you die. You set it in advance when buying a policy, and it passes to your beneficiaries tax-free.

What is the "term"?

The term is the length of time your policy will be in effect for — usually 10, 15, 20, 25 or 30 years, but you can also choose to be covered for your entire life, depending on the type of insurance.

What are "beneficiaries"?

Your beneficiaries are the loved ones you select to receive the death benefit from the insurance contract if you die while your policy is still in force. Typically, they are the ones who are financially dependent on you. Unsure about who should be your beneficiaries, click here

What is "underwriting"?

Underwriting is when life insurance companies assess the risk of insuring you by examining the information you provided them in your application. For example, smoking increases your risk, so underwriters will incorporate that into the cost of the policy (premium) accordingly.

What is "filing a claim?"

Filing a claim refers to the process by which your beneficiaries can claim the coverage amount if you die.

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