How to Read Your Life Insurance Policy

January 11, 2024 |read icon 5 min read
Young couple reading over a life insurance policy.

Life insurance is a vital part of your financial picture. It’s important to know how to read your life insurance policy and understand the life insurance policy definitions to make sure you and your loved ones are protected.

You can expect your life insurance policy to contain the details of the plan you purchased, the death benefit amount, your premium, and other key details like policy number, issue date and the name of the insured and beneficiaries. It’s important to note the policy owner may not be the same person as the insured. Additionally, your life insurance policy might also contain a free-look period.

What does the death benefit amount mean?

The death benefit amount refers to the amount of money that will be paid to your beneficiary when your policy expires. A beneficiary is the person named in your policy to receive the insurance proceeds at the death of the insured. Anyone or any place can be named as a beneficiary.

How would you like to leave your legacy? If a cause is important to you or your family, philanthropies can also be named as a beneficiary of your life insurance policy. Beneficiaries are changeable and should be reviewed with every major life event.

What is a premium?

A premium is the payment you agree to make for a life insurance policy. Depending on the terms of the policy, the premium may be paid in one payment or a series of regular payments. Your life insurance policy should detail the amount paid and how often you should pay. If a premium goes unpaid, your life insurance policy could lapse (depending on your type of insurance it could lapse immediately).

My life insurance policy includes riders or endorsements

Riders and endorsements are additional coverage options you can select for your life insurance policy.

Optional riders at Ameritas could include a(n):

  • Children’s Insurance.
  • Accelerated Benefit for Terminal Illness or Accelerated Death Benefit.
  • Paid-up Insurance Benefit.
  • Waiver of Monthly Deduction.

Look closely to see if riders and endorsements can be added at any time or only within a specific time. Some are not available in all 50 states.

What is a free-look period, and how long do I have to use it?

A free-look period is offered to give the insured time to look over their policy. If the policy is returned within the free-look period, you will be refunded in full. If the policy is not returned after the free-look period, the premium is allocated according to the instructions given on the application.

What type of life insurance do I have and what are the different types?

Term life insurance protects your loved ones for the number of years you choose. When your term ends, so does your insurance coverage unless you convert or have renewable term option. It’s the most affordable type of life insurance and makes sense when your need for coverage disappears at some point. Is your policy ending soon or do you need more insurance? Get an instant quote to see how affordable term can be for you.

Whole life insurance is a type of permanent life insurance, which means it protects for a lifetime. It’s known for its guarantees.1 You know how much you’re going to pay and how much your beneficiaries will receive. It can also build cash value.2 Universal life insurance is also a form of permanent life insurance. It offers more flexibility. You can raise or lower your premium or coverage amount throughout your lifetime. It also can build cash value. Read more about the differences between permanent and term life insurance in our blog.

Learn more about term insurance from Ameritas and our offerings for permanent life insurance.

I’m still not sure how to read my life insurance policy

Contact a financial professional today to answer any specific questions you still have regarding your life insurance policy. If you need a policy review, read our life insurance policy review checklist to evaluate what you should know before meeting with a financial professional who can help you.

Once you learn how to read your life insurance policy, don’t forget to check if you have enough life insurance.

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Sources and References:
1 Guarantees are based on the claims paying ability of the issuing company.
2 Loans and withdrawals will reduce the policy’s death benefit and available cash value. Excessive loans or withdrawals may cause the policy to lapse. Unpaid loans are treated as a distribution for tax purposes and may result in taxable income.

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While you can learn more about our products on this website, this information is no substitute for the guidance of a qualified professional. If you’re serious about assessing your financial wellness, contact a financial professional.

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