Facebook F YouTube Facebook Square Info Circle Twitter Instagram old-typical-phone Chevron Down Phone

Insurance 101

Policy

a written document that contains the terms of the contract agreement between the insurance company and the owner of the policy

Policy owner / Payor

the person who pays for and owns the policy

Insured

the person whose life is covered under a life insurance policy or the person who is given the insurance protection

Beneficiary

the person named in the life insurance contract who will receive the benefits when the insured dies

Primary Beneficiary

the beneficiary/party given the first priority to receive the death proceeds of the policy if the insured dies

Contingent Beneficary

the beneficiary/party who receives the death proceeds if the primary beneficiary pre-deceased the insured

Face Amount

the amount payable to the beneficiary, as stated in the life insurance policy, upon the death of the insured

Premium

Payment or series of payments, made by the insured to put the policy in force and to keep it in force until maturity

Premium Payment Provision

States that for as long as the insured is paying his premiums, his policy will remain in-force and protection will continue.

Grace Period

a specified length of time, usually 30 days after premium is due, within which a premium may be paid without penalty. During the grace period, the policy remains in-force.

Cash Values

Part of the premiums you pay that is set aside as savings under an insurance policy

Policy Loan Provision

Grants the policy owner the right to take a loan agains the cash values of the policy. A policy loan may be repaid anytime, in whole or in part. However, a policy loan interest is charged against the loan and is compounded annually.

Maturity

the date when the policy coverage matures / ends

Dividends

are return of excess premiums which are paid to policyholders at the end of each policy year if the company has favorable claims and high earnings from investments. Dividends are not guaranteed because these would depend on the actual experience of the company

Dividend Options Provisions

A provision which allows the policy owner to choose whichever way he wants to utilize his earned dividends. There are five ways:

  • Cash Payment Option – the simplest option wherein the insurance company will send the policy owner a check each year (provided that the insurance company has a good experience each year).
  • Premium Reduction Option – the dividends earned is applied towards the premium due, thus, reducing the total amount of premium to be paid by the insured for a specific period.
  • Interest Option – the dividends are left to the company to accumulate. Accumulated dividends are available for withdrawal at any time.
  • Paid-Up Additions Option – the earned dividend are automatically used to purchase additional coverage
  • Buy Yearly Renewable Term – the earned dividend are automatically used to purchase a yearly - renewable term insurance – meaning the extra coverage bought by the dividends is good for one year only.
INSULAR LIFE uses third-party services to monitor and analyze web traffic data for us. These services use temporary cookies during user sessions which are automatically deleted after session termination. Data generated is not shared with any other party. For more info, please see our Privacy Policy