Life Insurance - Demystifying Jargons Part I

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A life insurance policy for ordinary folks can be confusing because it contains a lot of words or terms that may mean the same or differently from other words floating around in insurance jargons.

When presented with a life insurance proposal, one would hear words like premiums, cash value, living benefits, cash benefits, sum insured, face amount, death benefits, etc.  It gets confusing when one sees those words and trying to grasp the meaning of words which would be the basis when planning to buy life insurance.

For starters "premium" means the payment or consideration made to an insurance company, who in turn is bound to pay the the death benefits at the time of the insured's death.  Premiums are usually paid annually and thereafter renewed yearly.  It can also be paid monthly, quarterly or semi-annual, but the annual premium will be multiplied to a conversion table depending upon the frequency within the year.

More importantly, the insurance policy only becomes binding once the initial premium is paid.


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