Let’s start with a few definitions, so we are on the same (web) page. There are basically two types of life insurance. “Term life” or temporary and “permanent life” which lasts for the whole life of the insured person. “Face amount, or death benefit” is the amount of insurance you buy and what your beneficiary will get should you die. “Premium” is the payment you have to pay every month, or quarterly or annually in order to buy and maintain the insurance contract. “Cash value” is the amount of money, or a “savings” account that grows while a permanent policy is in force. For the most part, it is not a guaranteed amount, although there are policies that will guarantee a minimum and a maximum amount.
“Beneficiary” is the person named in the policy to receive the insurance proceeds at the death of the insured. Anyone can be named as a beneficiary. An “insurable interest” is required when purchasing life insurance on another person. For persons related by blood, a substantial interest established through love and affection, and for all other persons, a lawful and substantial economic interest in having the life of the insured continue. Bottom line, you can not buy insurance on a stranger. The “policy owner” is the person who owns a life insurance policy. This is usually the insured person, but it may also be a relative of the insured, a partnership or a corporation. A “rider” is an endorsement to an insurance policy that modifies clauses and provisions of the policy, including or excluding coverage. There are many popular riders such as return of premium, waiver of premium, disability rider, child rider and many more. A “rating” is the basis for an additional charge to the standard premium because the person insured is classified as a greater than normal risk usually resulting from impaired health or a hazardous occupation. There is a myriad of other terms but realistically most people will come across just those few when buying life insurance.