Life Insurance 101

• The life insurance company's operating costs are used to calculate dividends and premium rates.
• An accelerated death benefit is available before the death of the insured.
• Accidental Death Insurance is an insurance policy that pays out only if the insured dies as a result of an accident.
• The beneficiary of a life insurance policy is the individual who receives proceeds at the death of the insured.
• The billing date is the day of the month that the life insurance premium bill is due.
• The cash surrender value is the cash value stated in the policy minus a surrender charge, any outstanding loans, and interest on those loans.
• A collateral assignment of life insurance gives a lender claim to a life insurance policy death benefit as collateral for a loan.
• The conversion right is the right granted by some term life insurance policies to change the current policy of an individual to a permanent insurance policy within a certain timeframe, without giving proof of insurability.
• Life insurance is a contract between an insurance company and an insured person.
• The insurance company pays a death benefit to the beneficiary if the policyholder dies.
• The policyholder pays a premium to maintain the policy.
• The insurance company can waive a premium in the event of a disability.
• The direct response is the sale of a policy by an insurance company to the insured, through the company’s own employees.
• The disclosure statement explains the details of the policy for the benefit of the consumer.
• The dividend is the return that some policyholders will receive as part of the distribution of an insurance company’s profits.
• The evidence of insurability is a statement of the prospective policyholder’s physical health and other information, such as assets and income, which helps the insurance company decide whether the applicant is eligible for insurance and what premium the company will charge.
• The Grace Period is the period of time a policy remains valid even after a premium payment is due and goes unpaid.
• Group life insurance is the life insurance that is often offered by an employer (or a large organization) to its employees.
• A life insurance policy is a legal document that outlines the terms of the insurance.
• An insurable interest is proof that a person has a substantial and lawful emotional or financial interest in another person’s continued wellbeing.
• When a person takes out a life insurance policy on someone else, the policy holder must have an insurable interest in the person in order to be eligible.
• A life insurance policy can provide coverage for a term of years or for the life of the insured.
• A life insurance policy can have an interest option, a life expectancy option, or a life income option.
• A life insurance policy can lapse if it is not paid premiums on time. If the policy lapses and is later reinstated, the policy holder may have to pay increased premiums.

Name five factors that determine how much life insurance a person should buy. Direct response, Grace period, interest rates, premiums, evidence of insurability.