How to understand your life insurance policy?

How to read a life insurance policy and what are the main points?We advocate "Learn Before You Buy". Before you sign a contract, it is best to have a certain understanding of the insurance policy in advance.

A life insurance policy is a legal contract signed between you and the insurance company. Once you sign the policy, it means that you have understood your choice and agreed with this agreement.But if you have already purchased an insurance policy, you still have doubts.American Life InsuranceThe policy 101 knowledge column of Guide.com may help you interpret it.

Your insurance policy is a legal document with many professional terms.Through the study of this article, we will help you gradually understand and master it.

The layout, format or terminology adopted by each insurance company's policy may be different, but the core parts are uniform and unchanged.Next are the key points of this article:

• Declaration part
• Policy terms and explanations
• Policy protection details

Declaration part

The declaration section is also called "Introduction to Policy" or "Insurance Catalog", but they are actually the same thing: This section summarizes important information about you and your policy, and usually includes the following:

• Names of the insured and policy holder: This is usually the same person-you, but you can also insure other people. In this case, you are the policy holder and the other person is the insured.For example, the mother, as the policy holder, insures the children.
• Policy type:YesTerm life insurance(Term), orwhole life.UL .FLOWEROrIULAnd other whole life insurance.
• Policy number: The number that marks your policy's validity
• Effective date of the policy: The date your policy is activated or effective
• User rating or premium level：The premium level given by the insurance company based on your physical examination, medical history and age
• Term policy term: The time limit of your policy (only for term insurance)
• Attached contractRider): All your attached contracts will be listed here, and then the specific details will be listed in the section at the back of the policy

Policy terms and explanations

This part explains some professional terms used in the insurance policy.Learning the terminology in the insurance policy, and reading the explanation part in the policy content on this basis, can help you figure out the more complex terminology that you will encounter in the policy.

The following professional terms usually appear in the insurance policy:

• Death Benefit: The amount compensated to your beneficiary(s) after your death
• Beneficiary/Beneficiary: The recipient of the death benefit of your insurance policy.Your beneficiary can be one person, or even a group of people.You can choose where your death compensation goes and the proportion of each beneficiary's benefit.
• Policy Effective Date/ Coverage Period: Your policy is officially effective from a certain moment and is valid during the coverage period.If you die during the validity period of the policy, or if a compensation clause is triggered, the insurance company will pay you the claim.
• Insured age: Your age when the policy is in effect
• Premium/Premium: What you paid for your insurance
• Non-participating/Non-participating: It means that your policy will not receive dividends from the insurance company

For more basic knowledge, please click here

Policy protection details

This part is also called the insurance agreement. This part will use the professional terms and definitions mentioned above to explain the content of the insurance company's commitment to you.

Premium and payment information

This section will list your premiums.For term life insurance policies with fixed premiums, this part will include monthly and annual fees.For life-long life insurance policies whose premiums may change for financial planning purposes, this section will show a premium schedule that changes over time.

This part also includes information aboutGrace period(Grace period) information, the grace period refers to the length of a period of time.When you have not paid the premium after the date of the premium bill, the policy will still be valid within this grace period.This part may also includeReinstatement(Reinstatement terms), this part will answer you how to reinstate the policy after it expires.This section usually has exception clauses, such as suicide clauses, which are used to indicate that if you commit suicide within two years of the effective date of the policy, you will not be compensated.

Transfer of ownership and rights

This section will explain in detail the right to change the ownership of a policy or the right to convert an ordinary policy to a lifetime type policy, and how to convert a lifetime type policy from one company to another.This section will let you know what options you have.

Beneficiary

This section lists the individuals, groups, and groups that you choose to receive compensation for your death after your death.It will also provide your beneficiaries with a summary of the details of the claim, including the option they can choose to pay in a lump sum or in installments.

Rider

This section details the riders listed on the policy description page.Each side contract will be listed here in its entirety, including explanations, exceptions, and guidelines.The following are some common riders that may appear in your insurance policy:

• Disabled income supplement: If you become disabled and cannot continue to work, the policy will provide you with income
• Disabled premium waiver rider: If you become a disabled person, your premium will be waived
• Term life insurance conversion rider: Allows you to convert term life insurance to whole life insurance at the end of the term
• Payment of Death Compensation in Advance: If you are diagnosed with a terminal illness, the insurance company can pay all or part of the death compensation in advance.
• Long-term care rider: As in the previous article, if you are a critically ill patient, the insurance company can choose to pay all or part of the death compensation in advance to support your long-term care expenses
• Critical disease addendum: If you are confirmed to have a major illness, the insurance company will pay a lump sum compensation (deducted from your death compensation).

Company transfer

This section describes how the insurance policy initiates the 1035 exchange. The 1035 exchange is a provision in the tax law that allows you, as the policyholder, to transfer funds from life insurance to a new insurance company without paying taxes.For specific instructions on 1035 conversion, pleaseClick on the columnTo understanding.