Term Life Insurance Terms: What You Need To Know

If you are important to your family or your business then it is a wise idea to take out term life insurance. For a family, having this kind of insurance on all members means that if something happens to one person that while there will be an emotional toll, the financial burden is eased through a financial payout. From a business perspective, having protection often means that the business can continue and isn't forced into closing because one of the principals is no longer around to help carry the load. But as you may already know, insurance can be confusing and it pays to know what it is all about before you settle on your arrangement of choice.

A term life policy grants its beneficiary a specified dollar amount upon the death of the insured. It does not accrue cash value. Usually the payment amounts for this type of insurance increase as the insured ages; however, many of these kinds of policies offer locked in premiums for an agreed period of time.

A renewable term arrangement refers to a setup which can be renewed upon the expiration of its set end date without any further evidence of insurability. In most cases, the renewal can take place a limited amount of times and each time it is renewed the amount payable increases.

Evidence of insurability means that the insured meets the health requirement set by the insuring company.

The person that receives the financial payout from a life policy after the death of the insured is known as the primary beneficiary. Of course, this person will have to prove their credentials to make sure they are who they say they are and have written evidence that the policy holder has actually passed on, usually a death certificate will be sufficient.

The amount on the life insurance statement, that is the amount that the agreement was written for, is known as the face value of the policy and may not be the payout that is received on the death of the insured. This depends on the number and details of limited liability clauses and riders in the remainder of the policy.

Riders are attachments to a policy which may increase the value of the policy or, in some cases, waive certain types of coverage.

Limited liability clauses may be in affect for a term life guarantee to protect the insurance company from death by suicide during the first two years of the policy or from certain prohibited activities throughout the life of the policy.

Level term life insurance policies have premiums and death benefits which remain the same throughout the period of time covered by the original policy.

If you are concerned about rising premiums then a decreasing term life insurance policy maybe right for you. With this type of insurance, the payments remain the same over the length of the policy but the value of the policy declines.

Increasing term life insurance is a policy in which the benefit increases during the term of the policy. Term life insurance of this sort is generally organised via a rider to the original arrangement.

An underwriter is the company which guarantees the payment of benefits to the beneficiary. The underwriter also accepts the term life insurance premiums during the life of the policy.

Each insurance company is given a rating to reflect how financially stable the company is, its general performance and its track record of paying out on its policies. The ratings for companies are out of 5. A good rule of thumb is not to take out a policy with a company if its rating is less than an A.