Here are a few definitions of Insurance industry jargon. Some of the terms may be helpful when you buy your policy.

The beneficiary is the person or organization to whom the Life Insurance proceeds are payable at the death of the person insured. It could be a spouse, your children, a sibling, or a favorite charity. Every Life Insurance policy covering you—both those you buy and those at work—should name two beneficiaries: a primary beneficiary and a contingent beneficiary. The contingent beneficiary is the person or organization to whom the Life Insurance proceeds are paid if the primary beneficiary is dead or no longer in existence.

The face amount (also known as the death benefit) of a Life Insurance policy is the amount of money payable at the time of death.

The owner of a Life Insurance policy may or may not be the person whose life is insured. The owner is the person or organization who controls the policy, pays the bills, chooses the beneficiary, and so on. Here are two examples of when the owner would be different from the person insured:

• A corporation owner insuring the life of a key scientist whose talents are vital to the company's survival.
• A family trust owner insuring an aging parent in order to pay estate taxes due at death.

There are really only two types of Life Insurance, although the two types come in many shapes, sizes, and colors. The biggest difference between them is how long the coverage lasts. Permanent Life Insurance covers you for your entire life. Term Life Insurance covers only a part of your lifetime. When that part or Term ends, so does the coverage. It only pays a death benefit if you die within the designated term.

> Visit the Insurance for Dummies website.

From Insurance for Dummies © 2001 by Wiley Publishing, Inc. © 2000 Text and Author Created Materials Copyright Jack Hungelmann. Used by arrangement with John Wiley & Sons, Inc.

<< Back