Shopping for life insurance can be challenging, especially if you don’t have a basic comprehension of industry jargon. Without knowing what certain terms mean, it’s likely you will be lost trying to determine how much coverage you need, how long you need it for, and how to get the most affordable rate. The following life insurance lingo will help you make informed decisions and give you a better understanding of your policy.
5 Common Terms Associated With Life Insurance Policies
A beneficiary is someone who is designated to receive the payout from a life insurance policy. Anyone can be named a beneficiary, including a spouse, children, parents, and business partners. It’s also possible to have the money be paid into a trust or gifted to a charity.
2. Death Benefit
This is the amount a policyholder’s beneficiaries will collect from their life insurance should they pass away while a policy is still active. Typically, the more dependents and financial responsibilities a person has, the greater the death benefit they will need.
Underwriting describes the procedure through which an insurer decides whether or not to approve an application for life insurance. This is based on potential risks related to age, medical history, gender, and a host of other factors. The premium — or the amount of money you pay for the policy — is calculated during the underwriting process.
These are benefits that can be added onto a standard life insurance policy. A disability waiver of premium is a common example of a rider policyholders pay extra for, which relieves them of having to make policy payments if they become disabled and can no longer earn a living.
5. A.M. Best Rating
A.M. Best is a credit rating agency that provides all life insurance companies with ratings based on their financial strength and ability to pay claims. An A.M. Best rating allows those shopping for a policy to assess the chances of a company going out of business based on the agency’s rating scale of A++ to D.
When searching for the right life insurance policy, it’s helpful to work with an agent who can explain the terminology you’re unfamiliar with. The professionals at Wilmoth Insurance Agency are not only committed to providing quality products, but also taking the time to ensure their clients are able to make sense of the coverage they purchase. The company has been entrusted to fulfill the insurance needs of Cookeville, TN, residents since 1939 and continues to offer superior service. Call (931) 526-6181 to request a quote, or visit them online for more information on how they can assist you in protecting your family’s future.