INSURANCE . RETIREMENT . INVESTMENTS
Life Insurance Terms – 5 Life Insurance Terms Everyone Should Know!
It’s the second week of Guardian Group’s 3-part segment on Insurance terminology and today we are exploring popular Life Insurance Terms.
Life Insurance is arguably one of the most popular forms of Insurance and is highly sought after due to the benefits to the beneficiaries. We all want that peace of mind that our loved ones are well-taken care of when we pass on, and a strong Life Insurance Policy can guarantee that. As with our previous Blog on General Insurance, we have selected 5 Life Insurance Terms that everyone should know when in the market for Life Insurance.
1. Beneficiary – A beneficiary is the recipient of the proceeds from a Life Insurance Policy. That is, the person or persons who receive the full payment from the policy. You may select anyone to be a beneficiary of a Life Insurance Policy, but beneficiaries who are under 18 years of age must be represented by a legal guardian or a public official when accepting pay-outs.
2. Estate – According to financial and legal terminology, an estate refers to anything of value that an individual owns. Additionally, the estate consists of the individual’s total assets minus any liabilities. In the field of Life Insurance, should an individual pass on, his or her estate will pass on and must be executed by those signified as the Beneficiaries.
3. Critical Illness Insurance V.S Health Insurance – Critical Illness Insurance is often used interchangeably with Health Insurance, but they are two completely different policies. Critical Illness Insurance is a policy whereby a lump sum payment is made to the insured in the event that he/she is diagnosed with a critical illness that is listed on Insurance Company’s predetermined list. Health Insurance, however, is a policy that covers the cost of insured’s medical and surgical expenses. Unlike Critical Illness Insurance, which is a one-time lump sum payment, Health Insurance is on-going and can provide coverage for as long as the policyholder remains insured.
4. Life Insurance vs Term Insurance – Life Insurance and Term Life Insurance are sometimes confused and may be incorrectly used interchangeably as they both fall under the bracket of Life Insurance. However, there is a key difference between these policies. Life Insurance policies cover the span of the insured’s life, after which the payment in the form of the money-value of the premiums made during the course of their life is given to the beneficiaries. Term Life Insurance is similar but is done strictly for a specific period of time; if the insured dies during this period of time, then a death benefit is paid to the beneficiaries. If the insured does not die during this period of time, then no death benefits are paid to beneficiaries.
5. Sum-Assured – Sum-assured in the field of Life Insurance refers to the specific amount of money an insurer is guaranteed to pay to beneficiaries at the time of the insured’s death. That is, the guaranteed amount of money a beneficiary is expected to collect from an Insurance Company on completion of a Life Insurance Policy. Sum-assured is also referred to as “coverage amount” and is the total amount for which a client is insured.
This concludes Part 2 of our insurance education series. If you haven’t read Part 1 or if you would like to read it again, CLICK HERE General Insurance: 5 General Insurance Terms.
We hope this was informative for you and join us next week for our next installment!