Navigating Life Insurance Terminology

Navigating life insurance terminology can be a daunting task because there are so many product names. To make matters worse, some product names are not official names of a product. For instance, burial insurance and final expense insurance are merely marketing buzz words used instead of the actual product name: simplified issue whole life. Another example is guaranteed acceptance life insurance, which is known by it’s real name as modified whole life. I can understand why these marketing terms are used. In the case of burial insurance or final expense insurance, the marketing terms help clarify the purpose of the insurance. Using the marketing term “guaranteed acceptance life insurance” is devious, however, because it draws attention away from the product’s negative aspects. If you have any questions, you are always welcome to contact us.

Accelerated death benefit riders allow a policyowner to receive all or a portion of the death benefit early if certain conditions are met. A recent article said accelerated death benefit riders are synonymous with critical illness riders and terminal illness riders. This is incorrect. Accelerated death benefit riders will pay out for a terminal illness, but not a critical illness. Terminal illness is defined as a non-curable medical condition that, within reasonable medical certainty, will result in death in 12 months or less. Critical illness is defined as a heart attack, stroke, or cancer. Notice there is no prediction of life expectancy with critical illness. Critical illness riders only pay out for a critical illness.

Some accelerated death benefit riders pay out if there is permanent confinement to a nursing home. Critical illness might indirectly lead to a pay out if someone had a bad stroke that led to permanent confinement. In every policy I’ve seen, this rider is automatic and free of charge. If fact, if you don’t want the rider, your only option is to make a written request to the insurance company. I don’t see the point in refusing the rider because the benefit payments are not automatic (you have to make a written request to receive payments).

Author: ctopping

Licensed life insurance agent serving Houston and surrounding cities for over 8 years.

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