Shopping around for life insurance can be time-consuming and challenging. Even with a good agent helping you, there may be terminology you don't understand if this is your first time shopping for life insurance. The more familiar you are with the following terms, the easier time you'll have choosing the policy that best fits your needs.
Term Insurance: Term life insurance is one of the two most popular types of life insurance. You pay over a specified period of time, say every month for 10 years. If you pass away during those 10 years (the term) the policy pays out. Once the term is over, however, the policy won't do anything for you.
Whole Life Insurance: The other common kind of life insurance, whole life insurance, is a type of policy that covers you for, as the name suggests, your entire life. The money you put towards such a policy is invested, and you can actually borrow against the policy or take the money out as cash value while you are alive if needed. Whole life insurance is more expensive but also more flexible than term insurance.
Underwriting: Your agent may tell you they can give you a quote after the underwriting process. What this means is that experts will examine your risk—based on your age, occupation, health history, and other factors—and then determine whether to insure you (and how much to charge) based on those factors.
Twisting: Twisting is a term used to describe a situation in which a dishonest insurer describes an insurance policy to you in a way that makes it seem enticing while citing advantages that are not actually true. The best way to avoid twisting is to work only with reputable, licensed life insurance companies, such as USAlliance.
Term Conversion: If you currently have a term life policy, your life insurance company might be able to convert it to a whole life policy. This process is known as term conversion.
Surrender: Surrender is a fancy term for "cancel." Your agent should describe to you what will happen if you decide to surrender your policy at some point during its active term. If they do not bring this up, be sure to ask!
Standard Risk: When your policy request goes to the underwriter, you want them to find that you are a standard risk. This means you have the average risk of death and are, therefore, affordable to insure.