Policy Owner/Insured/Beneficiary

Most people confuse the policy owner with the insured individual and beneficiary, but in reality, they can all be different people.

The policy owner is the individual who has the rights to the policy, meaning they make the major decisions. The policy owner can designate a beneficiary, transfer ownership of the policy, surrender the policy, and (in most cases) is responsible for paying for the policy.

The insured is the person who is insured by the insurance company. When the insured passes away, the insurance company pays out the death benefit to the beneficiary.

It is possible to be both the policy owner and the insured. For example, you may have purchased a policy on yourself and then designated a beneficiary. It's also possible for the policy owner to not be the insured, such as a parent purchasing the policy for their child or spouse.

Whole/Term Life

Other terms that seem to confuse people refer to the type of insurance policies. Whole and term are the most common policy options to consider.

As the name suggests, whole life policies insure you for your whole life. They are also known as permanent life insurance.

Even though they are more expensive than term policies with the same factors, whole life policies accumulate cash value over time, making them a good investment. With whole life, you also never have to worry about your premiums increasing because of your age.

Term policies insure you for a specific term, which is usually between 20 and 30 years. This type of insurance does not accumulate cash value, but these policies are more affordable.

At the end of the term, you can usually either renew for a new term, which will have a higher premium cost because of your higher age, or convert to a whole life policy.

Premium/Death Benefit

Finally, you need to understand the differences between a premium and a death benefit. Both involve money but they are two entirely different things.

Life insurance premiums are what you pay to the insurance company to start and maintain coverage. The premium cost is usually based on a few factors including the following:

• Age
• Health
• Policy type
• Death benefits
• Hobbies/occupation
• Riders

The above factors are not the only considerations taken when calculating premium costs though. The way you pay your life insurance premiums can also affect your premium costs. Most people pay the premiums monthly, but certain insurance companies will offer discounts of up to 8 percent if you pay a lump sum premium annually.

The death benefit is the amount of money paid to a beneficiary upon the insured's death. And determining how much of a death benefit you should leave your beneficiary can be complicated.

Make sure the death benefit will be enough to cover the cost of your final expenses, such as any leftover medical bills and funeral/burial/cremation costs. The death benefit can also be enough to cover the cost of paying off your debt and providing your children with the funds to cover educational costs.



For more information on life insurance or for a quote to secure coverage, contact us at American Quality Assurance Group today. We can help you with your insurance needs.