How to Read a Life Insurance Policy

Shawn Plummer

CEO, The Annuity Expert

One of the most important things to understand when shopping for life insurance is its policy. What does it cover? What are the exclusions? These are all essential questions that can be answered by reading the policy thoroughly. In this guide, we will guide you in reading a life insurance policy to feel confident in what you are buying.

What are the five parts of an insurance policy?

The five parts of a life insurance policy are:

  • Declarations Page
    • Summarizes the policy.
    • Includes your name, policy number, and coverage dates.
  • Insuring Agreement
  • Exclusions
    • Specifies events that are not covered by the policy.
  • Conditions
    • Details the rules to be followed to keep the policy in force.
  • Definitions
    • Explains terms used in the policy with specific meanings.

All of these parts work together to make up your insurance policy. Therefore, reading and understanding all of them is important to know what is not covered by your insurance.

Related Reading: Life insurance quotes

How To Read Life Insurance Policy

How do you read a term life insurance policy?

  • Coverage Amount
    • Understand the death benefit that will be paid to beneficiaries.
    • Ensure the amount is adequate to cover final expenses and outstanding debts.
  • Policy Exclusions
    • Identify events not covered by the policy.
    • Ensure understanding of these exclusions to confirm the policy will be applicable when needed.
  • Term of the Policy
    • Determine the duration for which the policy will pay out after death.
    • Note that many policies have a standard term of 20 years, but variations can be found based on individual needs.
  • Additional Tips
    • Ensure a thorough understanding of what your term insurance policy covers.
    • Do not hesitate to ask questions to your agent or broker for clarity and to maximize policy benefits.

How do you read a permanent life insurance policy?

  • No Set Term
    • Permanent policies do not expire as long as premiums are paid.
    • Understanding policy functioning and coverage is vital before purchase.
  • Death Benefit
    • Identify the amount to be paid to beneficiaries upon death.
    • Ensure adequacy to cover final expenses and outstanding debts.
  • Policy Exclusions
    • Understand events and scenarios not covered by the policy.
    • Ensure the policy provides needed coverage in various circumstances.
  • Cash Value
    • Recognize the accumulated money within the policy, accessible via loans or lump-sum withdrawals.
    • Understand the functioning to know options for accessing funds.
  • Premiums
    • Acknowledge that permanent policies typically have higher premiums than term policies due to their ongoing nature.
    • Ensure affordability of premiums before policy purchase.

How do I know if my life insurance policy has cash value?

Most life insurance policies do not have cash value, but some whole-life and universal life policies do. If your policy has cash value, it will be listed in the policy documents. This cash value can be used to pay premiums or borrow against financial needs.

If you’re unsure whether your policy has cash value, you can check with the insurance company or your agent or broker. They should be able to tell you whether or not your particular policy has a cash value.

Related Reading: Cash value life insurance

Life Insurance Guide

Who is the owner of a life insurance policy?

The owner of a life insurance policy is the person who pays the premiums and is typically the insured person. The owner also has the right to change the policy, including changing the beneficiaries or canceling the policy. If you are the owner of a life insurance policy, it is important to keep your contact information up to date with the insurance company so that they can reach you if there is ever a need.

Who are the beneficiaries?

The beneficiaries are the people who will receive the death benefit in the event of your death. You can name one or more beneficiaries in your life insurance policy. If you have a spouse, they will typically be the primary beneficiary. However, you can also name children, other family members, or even friends as beneficiaries.

It is important to keep your beneficiary information current so the death benefit will go to the people you want it to. You can update your beneficiary information by contacting your insurance company or agent.

How long is the free look period for life insurance?

Most life insurance policies have a free look period of 30 days. This means that you can cancel the policy within that time frame and get a full refund of the premium if you are not satisfied with it. However, after the free look period, you will still be able to cancel the policy, but you will not receive a refund. Therefore, it is important to read the fine print of your policy to see what the free look period is to know how long you have to decide if it is right for you.

Next Steps

Reading a life insurance policy can be daunting, but it’s important to know what you are buying. You want to feel confident that your family will be taken care of if something happens to you. Contact us today, and we would be happy to help walk you through choosing a life insurance policy that is right for you and your family. We offer a variety of policies with different coverage levels to find one that fits your needs. Don’t wait – get a quote today!

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed insurance agent and annuity broker with over a decade of first-hand experience. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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