Whole life insurance covers you from the minute you pick up the insurance to the day of your death. That’s why they call it “whole life”– it covers your entire life. Whole life insurance never expires. Let’s take a look at a few terms you should know before you pick up whole life insurance coverage.
- Ordinary level premium whole life insurance
Ordinary level premium whole life insurance is just a fancy way of saying whole life insurance. Insurance agents may also call whole insurance “straight life” or “traditional whole life.”
- Death benefit
The death benefit is the amount that your family will receive if you die. The death benefit is the most important part of your life insurance, so be sure that you are okay with this amount before you agree. If you think that the death benefit amount is too low, your insurance agent will work with you to come up with a better number.
The premium is the amount you have to pay each month to keep your whole life insurance coverage active. If you don’t pay your premium, your insurance company won’t pay your death benefit if you pass away– so be sure to keep up with your bills.
- Level premium
Insurers know that most people like to know exactly what their premium will be each month. So, they invented “level” or “fixed” premiums– premiums that stay the same no matter how old you get. If the premium isn’t fixed, that means that it may increase if you get sick or after you get old.
- Cash value
The insurance company expects that you will live a long, healthy life. While policyholders are alive, the premiums that they pay each month go into a giant pot of money held by the insurance company. The insurance company refers to this money as a policy’s cash value. Some policies allow policyholders to cash in their life insurance policies to help pay for terminal diseases or traumatic injuries.
An indemnity is any kind of payout that you may receive from an insurance company. A death benefit is a specific kind of indemnity that your family will receive if you purchase a whole life insurance policy.
- Probate estate
The term probate estate refers to all the property and money your family will receive after you die.
The beneficiary is the person who receives the death benefit. When you purchase a whole life insurance policy, you have to identify at least one beneficiary.
Any property or sum of money that you can use to show a bank that you are able to pay for a loan is called collateral. If your whole life insurance policy can be used to help secure a loan, that means that you can use your policy as collateral.