Life Insurance Terminology
Q. What is “Term Life Insurance”?
A. It is a type of life insurance coverage that lasts for a specific term that can be renewed only to a certain age (usually around age 75). Meaning, a beneficiary receives a death benefit from the insurance company when the insurance establisher dies as long as the policy is still effective.
Q. What is “Permanent Life Insurance”?
A. Unlike term life insurance, permanent life insurance does not expire. The beneficiary receives a death benefit when the establisher dies. The premium for this type is usually much larger than the premium paid for term life insurance.
Q. What is “Single Premium Life Insurance”?
A. This is a form of permanent life insurance that a customer pays for all at once, and will then generate cash value over time. When the establisher dies, the beneficiary will receive the sum amount that has been built up.
Q. What is “Universal Life Insurance”?
A. It is a type of permanent life insurance that is established when the premium is above the cost of insurance. The amount that is above the cost of insurance will then be credited to the cash value which will be credited each month plus interest, while the policy will be debited each month by the insurance charge.
Q. What does the term “1035 Exchange” mean?
A. It means that a life insurance customer can exchange his life insurance policy for an annuity or an endowment without having to pay taxes.
Q. What is “trust-owned life insurance”?
A. This is a type of life insurance that is managed by trustees and not by the survivor family members. A trustee could be a family member, a family friend or a professional trustee.
Q. What does BTID stand for? And what does it mean?
A. BTID stands for: “Buy Term and Invest the Difference”. It means that a life insurance customer can choose to buy a less expensive life insurance and invest the rest of the money in something else.
Q. What is “death benefit”?
A. Death benefit is the amount of money a beneficiary should receive when a life insurance establisher deceases. The death benefit may not be given in full if a loan had not been fully repaid.
Q. What does “guaranteed cash Value” mean?
A. With most permanent insurance plans, a customer could be guaranteed a certain cash value each year that increases over time. The amount of the cash value will be determined by the type and features of the plan.
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