Life Insurance Terms Defined

There are a few basic life insurance terms that every policy owner should be familiar with. These terms include insured, beneficiary, contract benefits or face amount. There are many other terms that are used in association with life insurance, but these are the basic definitions of any policy.

Insured

The insured is the person buying the policy. They are covering the life for the benefit of others. The insured determines the amount of benefits that the life insurance policy is for since it is the insured’s life that establishes the policy’s value. Often, the insured is the same as the policy owner and premium payer, although that is not always the case. For example, an insurance policy insuring the life of a child will have a parent as an owner and premium payer.

Beneficiary

The beneficiary is the person that receives the proceeds from the life insurance policy. When the insured dies, the death benefit is paid to the beneficiary, by order of succession. The primary beneficiary is entitled to all of the benefits of the life insurance policy. If the primary beneficiary dies before the insured, the named contingent beneficiary is next in line for the life insurance proceeds.

Contract Benefits or Face Amount

The contract benefit, or face amount, is the value of the life insurance policy. This is the amount that is based on the insured’s life and is payable to the beneficiary upon death of the insured. The terms of the contract are usually detailed as lump sum payments or monthly stipends.

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