16 Commonly Misunderstood Insurance Words
Accelerated death benefit:
An accelerated death benefit, often as a rider (see below) to a policy, allows you to use some of the life insurance death benefit before you die. This is an option if you are terminally ill.
Annuity:
Annuities are financial instruments offered by some insurance companies that allow you to save money on a tax-favored basis and create an income for life.
Contestability period:
A contestability period is a set amount of time after a life insurance company issues your policy. Its purpose is to protect the life insurance company from fraud.
Conversion right:
Some term life insurance policies allow you to convert them into permanent life insurance policies later on.
Death benefit:
The death benefit is the amount of money your beneficiaries receive from the life insurance policy.
Disability:
Disability insurance covers more than just injuries or illnesses; it can also include lost wages due to various conditions.
Grace period:
A grace period is the amount of time your policy remains in force if you do not pay your premium before the due date.
Insurable interest:
Life insurance policies require you to have a financial interest in the person named in the policy.
Living benefits:
Some life insurance policies provide benefits while you are still alive.
Long-term care insurance:
Long-term care insurance steps in if you can no longer care for yourself for an extended period of time.
Permanent life insurance:
Permanent life insurance provides lifelong protection as long as you pay the premiums.
Preferred rates:
Preferred rates are offered to applicants who are at a lower risk of dying.
Premium:
A premium is the payment required to keep your insurance policy in force.
Rider:
A rider is an additional amount of coverage you can add to your main insurance policy.
Term life insurance:
Term life insurance provides coverage for a specific amount of time.
Underwriting:
Underwriting is the process an insurance company uses to decide if they want to offer you a policy and at what rate.
