Definitions In Life Insurance

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1. Beneficiary: The person or entity designated to receive the death benefit when the insured person passes away. Beneficiaries can be individuals, such as family members, or organizations, such as a charity.

2. Cash Value: In permanent life insurance policies (such as whole life and universal life), a portion of each premium payment is set aside in a cash-value account. This cash value can be accessed or borrowed against while the policy is in force.

3. Death Benefit: The amount of money paid out to the beneficiary upon the death of the insured.

4. Face Amount: The initial amount of coverage provided by the insurance policy, which is also the amount paid out as the death benefit.

5. Grace Period: A period after the premium due date during which the policy remains in force, even if the premium has not been paid. If the premium is paid during this grace period, the policy continues without interruption.

6. Incontestability Clause: A provision that limits the insurance company's ability to contest the validity of the policy after it has been in force for a certain period, typically two years.

7. Insured: The individual whose life is covered by the insurance policy. This is the person whose death triggers the payout of the death benefit.

8. Lapse: When a policy is terminated due to non-payment of premiums after the grace period has expired.

9. Policyholder: The person who owns the life insurance policy and pays the premiums. 

10. Policy Loan: Borrowing against the cash value of a permanent life insurance policy. This loan must be repaid with interest, or it may reduce the death benefit if not repaid.

11. Premium: The regular payments made by the policyholder to keep the insurance policy in force.

12. Premium Payment Mode: The frequency at which premiums are paid, such as annually, semi-annually, quarterly, or monthly.

13. Rider: An optional add-on to a life insurance policy that provides additional coverage or benefits, such as a critical illness rider or a disability income rider.

14. Surrender Value: The amount of cash value that a policyholder can receive if they choose to surrender or cancel their permanent life insurance policy.

15. Term Life Insurance: A type of life insurance that provides coverage for a specified term, typically 10, 20, or 30 years. It does not have a cash value component.

16. Underwriting: The process by which an insurance company assesses an applicant's risk profile, health, and other factors to determine eligibility and premium rates.

17. Universal Life Insurance: Another type of permanent life insurance with flexibility in premium payments and a cash value component. Policyholders can adjust their premium payments and death benefit within certain limits.

18. Whole Life Insurance: A type of permanent life insurance that provides coverage for the insured's entire life and includes a cash value component that grows over time.

 

 

Understanding these terms is crucial for making informed decisions about life insurance coverage. Policyholders should carefully review their contracts and consult with an insurance professional or financial advisor if they have questions or need clarification on any terms or provisions.