What is the difference between a designated beneficiary and a contingent beneficiary?

A designated beneficiary, also known as a heir, is a person named as a party on an issued life insurance policy. There are two types of designated beneficiaries: primary beneficiary and secondary beneficiary. A secondary beneficiary can also be referred to as a contingent beneficiary, but there is a slight distinction. A primary beneficiary isContinue reading “What is the difference between a designated beneficiary and a contingent beneficiary?”

What is cash value?

Cash value, also known as equity, is a living benefit of a permanent life insurance policy with a savings account component. Cash value provides a guaranteed rate of return on the accumulating savings account balance. Therefore, the balance grows through the compounding interest method instead of the simple interest method. The balance is accumulating becauseContinue reading “What is cash value?”

What is a premium, when is the premium due, how is a premium calculated, how do I pay the premium, and what happens if I stop paying the premium?

A premium is a periodic policy payment, also known as an insurance rate, that is paid to keep coverage to an insured party from an insurance policy active. Periodic means the policy payment can be selected to be paid monthly, quarterly, semiannually, or annually. A premium can be fixed or variable depending on the featuresContinue reading “What is a premium, when is the premium due, how is a premium calculated, how do I pay the premium, and what happens if I stop paying the premium?”

What is a coverage limit?

A coverage limit is the minimum to maximum allowable death benefit of an insurance policy. Based on how an insurance policy is underwritten will determine how the coverage limit will vary. Generally, the more time an insurance company takes to underwrite an insurance policy, the higher the amount of death benefit offered, and vice versa.Continue reading “What is a coverage limit?”

What is accelerated underwriting?

Accelerated underwriting, also known as automated underwriting, is a broad term used to classify the two types of non-medically underwritten life insurance: simplified issue and guaranteed issue. Accelerated underwriting helps sell life insurance to more people due to limiting the amount of requirements that restrict an insurance application from being accepted by an insurance company.Continue reading “What is accelerated underwriting?”

What is underwriting?

Underwriting is the process an insurance company follows to help classify the health risk of a person being insured by an insurance policy. Health risk helps to determine the probability an insured person will die prematurely. An insurance company creates their own insuring requirements of an applicant based on their personal, physical, and health characteristicsContinue reading “What is underwriting?”

What parties are involved in an insurance policy?

There are four main parties involved in an insurance policy: insurer, insured, policyowner, and designated beneficiary. The insurer is the insurance company. The insured is the person who must die in order for the death benefit to payout from the insurance company. Therefore, the insured is the person being covered, or protected, by the insuranceContinue reading “What parties are involved in an insurance policy?”