Insurance can be a complex world, filled with terminology that may sound unfamiliar to those outside the industry. To help you navigate the intricacies of life insurance policies, we have compiled a comprehensive list of common terms. While this won't make you an expert overnight, it will provide a solid foundation for understanding the terms you encounter throughout your policy journey.
- Policy: The contractual agreement you are currently reviewing. It includes all the necessary paperwork, stipulations, and any signed forms relevant to the policy.
- Insured: The individual whose life is being covered by the policy. It's important to note that this may not necessarily be the policy owner.
- Owner: The person who has control over the policy proceedings until the insured's death. They have the authority to modify the rights of the owner, beneficiaries, and the chosen payout method throughout the policy's active period.
- Beneficiary: The person(s) entitled to claim the insurance benefits. In the event of multiple beneficiaries, there are primary and secondary designations. Secondary beneficiaries, also known as contingent beneficiaries, receive the benefits if the primary beneficiary is deceased, unable to claim the benefits, or legally disqualified.
- Premium: The regular payments required to keep the policy active. These payments can be made periodically or in installments, depending on the agreement.
- Contestability: The process of investigating the circumstances surrounding the insured's death. This typically occurs within the first two years, as a death during this period may raise suspicions. The insurance company examines whether there was any misrepresentation in the original policy application.
- Policy date: The effective start date when the insurance coverage begins. It can be immediate or delayed to a later date. Knowing the policy date is crucial to avoid confusion regarding the active period and the insured's passing.
- Right to examine period: The designated timeframe during which the insured can thoroughly review the policy, assess its terms, and decide whether to cancel and receive a refund of the initial payments. Typically, this period lasts between 30 to 90 days.
- Grace period: The period of time after the last premium payment has been made, during which the policy remains active. This grace period usually ranges from 30 to 60 days.
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