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No insurance resource would be complete without a helpful menu of terms and concepts. This information-rich list will help you make sense of the solutions you are considering.
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Used to save a person's younger age, making premiums lower since they'll be based on the younger age. State laws generally prohibit backdating beyond six months. Most often when backdating, the policy date determines the date subsequent payments are due.
The person or entity chosen by the policy owner to receive death benefit proceeds from an insurance policy. There may be more than one beneficiary and there are many types of beneficiary designations.
The person or entity in line to receive death benefit proceeds in case the primary beneficiary pre-deceases or simultaneously dies with the insured. There can be more than one contingent beneficiary.
To carry out a policy owner's intentions effectively so that the correct individual(s)/entity(ies) receive the death benefit proceeds, policy language must be detailed and unambiguous. Here are a few beneficiary designations to avoid:
Minor children: this does not take into account the fact that the children will eventually reach adulthood Children: when undefined, this could mean many things: children from the current marriage, a previous marriage, adopted children, step-children, illegitimate children Dependents: this limits beneficiaries to those actually dependent upon the policy owner for support
A life insurance policy beneficiary who has a vested interest in the death benefits. The policy owner can't make any changes to the policy without obtaining the beneficiary's consent.
Minors cannot receive or control life insurance proceeds. State laws determine when children are entitled to receive the insurance proceeds, some as young as 16 or as old as 18. The solution: establish a trust to receive the life insurance proceeds. The advantages: the applicant establishes the trust, selects the trustee, and determines the terms under which assets can be used and distributed from the trust.
Life insurance benefits are divided among a class of beneficiaries. For example, children of the insured. The living members of the class and the descendants of any deceased members of the class share in the benefits equally.
The first person or entity in line to receive death benefits. There can be more than one primary beneficiary.
The length of time disability insurance or long term care insurance benefits will continue once they have begun. Policies with longer benefit periods are more costly than those with shorter benefit periods.
Build Factors (Height and Weight Ratios)
The height and weight recorded on the paramedical exam is a factor used in determining underwriting class. (For long term care insurance, it's the height and weight that appears in your medical records.)
According to the U.S. Census Bureau, blended families outnumber traditional nuclear families. These blended families pose particular estate planning challenges. Typical estate plans are designed to benefit the surviving spouse and minimize estate taxes. In this scenario, children from a prior marriage will inherit assets only upon the death of that surviving spouse, not necessarily of their parent, which causes conflict and disharmony within families. One way to alleviate such tension is through the use of life insurance. Insuring the life of the spouse with children from a previous marriage offers protection to that spouse's children (distributed in the manner the insured wishes), and, at the same time, preserves the estate for the surviving spouse.
Business owners have employees depending on them, family members, and sometimes entire industries. Business insurance can reimburse the business for the loss of a valuable employee, offer benefits to help retain key employees, fund retirement benefits, and more.