Types of Life Insurance Policies
If you are thinking about taking out a life insurance policy, you might be feeling a bit confused by all of the different terms that are being thrown at you. After all, many things are included within a life insurance policy and understanding the various terms and the sections within one of these policies can be quite difficult for someone who has never had a policy before. To help you gain a better understanding of what you are reading in a life insurance policy, here is a look at the six sections that ever policy contains.
Section 1: Description of Benefits
The first section of a life insurance policy is the Description of Benefits. The Description of Benefits section includes all of the following:
o The name of the person being insured
o The policy number
o The type of policy
o The issuance date and the term of the policy (common terms: 10, 15, 20, 30 years)
o The amount of coverage
o Any riders included with the policy
o Any additional information necessary to describe the benefits
Section 2: Owner Rights
The Owner Rights section of the life insurance policy describes your rights in terms of changing your policy and transferring it to another person or entity.
Section 3: Beneficiary
The Beneficiary section lists the beneficiaries of your life insurance policy. If you have more than one beneficiary, this section will also state percentage of the benefit that each beneficiary is to receive. If your spouse is also listed on your mortgage you may want to name them as the beneficiary to be able to pay off mortgage in the event of your passing. If this is a business insurance policy you may want to name your business partner or name of the company as the primary beneficiary.
Section 4: Cash Value
The fourth section of the life insurance policy is called the Cash Value section. The actual cash value of your policy will be listed here, including the cash surrender value of a whole life insurance policy. This section will also describe what will happen to the value of your policy if you miss a premium payment.
Section 5: Guaranteed
The Guaranteed Payment Tables section describes exactly what your beneficiaries will receive if you should pass. This section is particularly important when purchasing a whole life insurance policy, as it will describe the exact value of the policy at any given time if the premium payments are paid on time.
Section 6: Lapse
The lapse section describes what will happen if you are unable to pay premium costs due to job loss, illness or other factors. Here, you will learn how long your policy will remain in effect after you stop making your premium payments. If the policy ceases to be in effect immediately after you miss a payment, you might want to consider obtaining your life insurance policy from a different company.