Insurance explained

2014-10-28 | 08:44:54

Insurance explained

Get familiar with the basics

It’s easy to protect you and your loved ones with the right insurance products, provided you understand the details of your policy. Here are a few basic insurance terms explained.

Face amount:

Face amount is the amount of coverage stated on an insurance policy and, unless stated otherwise, is the amount payable on death.

Whole life:

Whole life insurance, also known as permanent life insurance, remains in force for the entire policyholder’s life. The premium amount is normally payable for life, but can be paid over a shortened period such as 20 years or until age 65.

Term life:

For term life insurance, the insured person is covered for the term specified in the policy, and the benefit is paid to the beneficiary if the insured passes away within that specific period. The term period is commonly 10 or 20 years, or to a specific age such as 75 or 80. The premium for a term life policy is payable while coverage is in force. Term life is the least expensive type of life insurance available.

Cash value

Cash value is money that accumulates under some insurance plans and can be borrowed, withdrawn, or used as loan collateral. Available on many whole life policies, cash value can be used as a savings vehicle. If the policy is cancelled, which is referred to as surrendering the policy, the net cash value would then be payable*.

* Insurance terms from cpp.ca