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Definitions
Beneficiary
The person, charity, church, or company that receives the benefit payment
when the insured dies (life) or becomes disabled (disability).
Benefit Period
In disability insurance, this is the time frame in which the insured is
guaranteed to receive the payments (ex. 2 years, 5 years, lifetime, etc.)
Cash Value
Permanent life insurance policies have a personal cash value that grows inside
the policy. The owner is free to use this money for whatever he/she
feels necessary. Certain tax advantages may exist as well.
Company Rating
All insurance companies have a company financial rating (usually provided by
Standard & Poor's and/or A.M. Best). A good rating signifies the
insurance company's ability to pay the insurance policy should the time
arrive. Any company with a rating of at
least an "A" is usually very good.
Conversion Option
An important life insurance feature that the majority of people don't
realize exists. A conversion options allows someone to convert a term policy into
a permanent policy WITHOUT proving insurability. In other words, no
medical exams are required, and medical records cannot be reviewed.
Elimination Period
(or Waiting Period)
In disability insurance, this is the time frame between when you are first
disabled, and when you begin to receive your payments (ex. 30 days, 60
days, etc.)
Insured
This is whom the policy is written for. Typically, this is also the
owner. Once this person dies or becomes disabled, the beneficiary will
receive the benefit.
Non-Cancellable
If included in a disability insurance policy, this term does two things.
A) It locks the premium for the entire contract of the policy,
preventing the insurance company from raising the premium at a future date.
B) It allows the policy to "travel" with you, no matter if you change
careers at a future date (even if that future career pays less).
Owner
This person is almost always the insured, and has total control over the
policy. However, this may not be the case for business owners.
Own-Occupation
If included in a disability insurance policy, this term allows an individual
to continue collecting full disability benefits even if they continue to
work at a different job. This assumes that the new job A) pays less
income than your previous career, and B) requires less job duties and/or
educational standards as your previous job.
Premium
The amount of money needed to keep a policy in-force. Usually these
premiums are paid monthly, however, they can be paid quarterly,
semi-annually, annually, or in some cases, a single one-time premium can
established.
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