While choosing the right insurance is a task in itself, understanding all the terms and jargon related to it can be quite overwhelming. Since most people have no prior experience before getting their first insurance policy, it is easy to misunderstand some of the insurance-related terms.
Below are some of the common terms related to insurance and their meaning.
- Insurable Interest: You must have an insurable interest in the person named in your life insurance policy which means if the person dies, you will suffer some kind of financial harm.
- Long-term Care Insurance: This policy covers you when you are no longer capable of taking care of yourself for a long period of time. It offers you financial protection by covering the expenses for a nursing home, adult day care, or home health care, depending on the one you choose.
- Premium: It is the amount you need to pay to your insurer to keep your insurance policy active. You can pay it annually, quarterly, or monthly, depending on the type of policy you sign up for.
- Underwriting: It is the process in which a prospective insurer decides whether or not you should be offered a policy and the rate at which it should be offered to you. The professional in charge of the process is called an underwriter, and multiple factors are considered before setting the terms of the policy, such as your age, gender, residence, etc.
- Annuities: These are financial instruments offered by some insurance companies to help you save money on a tax-favored basis, thus creating an income for life. You can select the ones best suited for your needs, depending on how you want to pay for them and when you want to start receiving your payments.
- Contestability Period: This is a specific duration in which your application is reviewed to ensure there isn’t any misrepresentation in your policy. It can last from one to two years and the review is meant to protect the insurer from potential frauds.
- Death Benefit: It is the money received after your death by the person named in your life insurance policy as the beneficiary. There is no need to pay tax on the death benefit.
- Accelerated Death Benefit: Also related to life insurance policy, the accelerated death benefit can serve as a rider to your policy and let you use a part of the death benefit while you are still alive. You have the option of using this option if you’re terminally ill, although some people use it to pay off debts, cover hospital bills or take family vacations.
These are some of the common insurance-related terms that you need to be aware of. If you have more questions related to your insurance policy or are looking for a new one, contact the experts at Scautub Agency in Scotia, New York. We are ready to help you with all your coverage needs.