They say taxes and death are the only absolute things in life. Whether this is true or not, you can prepare for both. While tax planning is an interesting subject, we are going to look at life insurance in this article.

A classic sketch of a conversation with a life insurance agent would show the person trying to buy a policy with their eyes glazed over. Why? The terminology being used is confusing. Well, let’s change that by discussing some or the common terms used.

References to Adjustable Premiums should be examined closely in any policy. This allows the insurance company to change the premiums on a block of policies during the term of the contract.

An Annual Payment Annuity provides you with simplicity. As the name suggests, you can pay the entire premium for the year at one time. Of course, you need to make sure yo have cash on hand to do so.

The Cash Surrender Value of a policy is often misunderstood. It refers to the amount due a person who terminates a policy holding a vested cash reserve in it. There is often an arbitrary charge deducted by the insurer as well.

The Commutation Rights associated with an insurance policy apply to the beneficiary of the policy. Depending on the policy, the beneficiary may elect to convert installment payments to a lump sum payment.

Many modern insurance policies contain a Contestable Clause. This gives the insurance company up to 2 years to void the policy if they find evidence that would have resulted in the rejection of the policy application when originally made.

Although a basic concept, the term Death Benefit needs to be covered. While death may seem to have few benefits, this refers to the amount to be paid to beneficiaries upon the death of the person whose life it is based upon.

A Decreasing Term Policy is a creative product. As time passes, the death benefit decreases until it zeros out. This is often used to match the repayment of a large debt such as a mortgage. As the mortgage is paid off, there is less need for an insurance policy.

For many people, building up cash value in an insurance policy is a smart move. A Dividend Accumulation clause allows you to do just this, to wit, reinvest an dividend paid by the insurer back into the policy.

The Whole Life Insurance Policy is one of the staples of the life insurance industry. The policy provides a death benefit, but also accumulates cash within as premiums are paid in over time. There are many different ways to pay the premiums, so make sure to ask.

Variable Contracts represent another pillar of the life insurance industry. These policies come in the form of annuities or straight life insurance. Cash builds up in the policy and may be invested in stocks or mutual funds and so on.

The important thing to understand about life insurance is that polices differ greatly. This means you must understand exactly how a policy being pitched to you works. If terms are used that you don’t understand, ask for clarification!

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