Life Insurance Terminology

  • Term life insurance is coverage for a designated period of time. Benefits are paid only if something happens to you within that specified term. In general, this type of insurance pays the highest immediate benefit for your premium dollar.

    Gerber Life Term Life Insurance offers term periods of 10, 15, 20 and 30 years.

  • Some term policies are “renewable” for one or more additional terms, even if your health changes. Each time you renew, premiums increase. Before choosing term insurance, check premium rates for older ages and find out how long the policy can be continued. This is usually stated as “renewable until age _____.”

    Gerber Life Term Life Insurance can be renewed annually following the initial term.  Your premium, or amount you would pay, would be based on your age at the time of renewal.

  • Some term policies are also convertible. This means that before the end of the specified conversion period, you may choose to trade the term policy for a whole life policy — even if your health changes. Premiums for the new policy will be higher than the term policy rates since you would pay based on your current age at the time of converting your policy and because whole life costs more than term life.

  • Whole life insurance provides benefits for as long as you live. The most common type of whole life insurance is “ordinary” life. With this kind of whole life insurance, your premium rates never change. It is important to note that ordinary life premiums can be much higher than term life insurance premiums, but they are smaller than the premiums you’d eventually pay if you kept renewing term policies in your later years.

  • Although whole life premiums are initially higher than term premiums, whole life policies develop “cash values”. Technically speaking, these are called “non-forfeiture benefits”. That means you do not lose the cash value if you stop paying premiums. If you are not able to continue paying for the policy, you can pay your premiums using the cash value, reduce the amount of the policy, or surrender the policy and take the cash value. If you choose to surrender the policy, you will no longer be covered with life insurance.

    You may also borrow against the cash value with a loan*. Any money owned in the form of a policy loan is deducted from the benefit paid when you die, or from the total cash value if you stop paying premiums.

    *loan interest amount is 8%

  • The insured is the person whose life is covered by the insurance policy. The death benefit will be paid to the beneficiary named by the insured, if they die.

  • A Policyowner is someone other than the Insured, who is able to make decisions on a policy such as making payments or updates to the policy. The most common situation where you would have a policy owner is for children’s life insurance. For the Grow-Up® Plan, the owner is the adult who purchased the policy (parent or grandparent) and the insured is the child.

  • The death benefit is the face amount or coverage amount of the policy that will be paid to the named beneficiary upon death of the insured (less any outstanding policy loans and interest).

  • The beneficiary is the person named to receive the full benefit payment amount in the event the insured dies.

  • A guaranteed purchase option allows you to purchase additional coverage at certain anniversary or events in your life – regardless of your health. An example of a guaranteed purchase option is having the ability to purchase additional insurance when you get married, have a child, or reach a specific age or policy anniversary.

  • Riders are additional coverage options that can be added to an insurance policy. For example, the Grow-Up® Plan offers a Payment Protection Option Rider. 

    Payment Protection Option is an insurance rider available on the Grow-Up® Plan that will cover premium payments in the event you, the policyowner, cannot pay the monthly premium due to disability or death. The rider will cover premiums until the insured child’s 21st birthday. This benefit is subject to limitations and exclusions as detailed in the rider.

  • A policy loan can be taken from a whole life insurance policy that has cash value. This loan must be repaid with interest, at the rate noted in your policy. If you die with outstanding policy loans, the death benefit paid would be reduced by your outstanding loan amount.

    If there are other life insurance definitions you are not sure about, please contact your Gerber Life Insurance representative. We are here to assist you with all your life insurance needs.