Life Insurance Terminology

Term life insurance provides life insurance coverage for a designated period of time. Benefits are paid only if something happens to you within that specified period, known as a “term.” This type of insurance costs less than whole life insurance, and so, in general, pays the highest immediate benefit for your premium dollar.

Gerber Life Term Life Insurance offers terms of 10, 20 and 30 years.

Some term policies are “renewable” after your initial term period ends for one or more additional terms, even if your health changes. Gerber Life Term Life insurance can be renewed annually following the initial term, and in accordance with the conditions of your initial policy. Your premium – the amount you would pay – would be based on your age at the time of renewal (which is generally a higher premium since premiums are based on age.)

Some term life policies also can be convertible. This means that before the end of the term, and during the specified conversion period, you may choose to convert the term life policy to a whole life policy — even if your health has changed. Premiums for the new policy will be higher than for the term policy, since you would pay based on your age at the time of the conversion and because whole life insurance costs more than term life. Again, your term policy will spell out the conditions for conversion.

Whole life insurance provides coverage for as long as you live, as long as you keep paying the premium. The most common type of whole life insurance is “ordinary” life. With this kind of whole life insurance, your premium rate never changes. It is important to note that ordinary life premiums can be much higher than term life insurance premiums, but are smaller than the premiums you’d eventually pay if you kept renewing a term policy later on.

Although whole life premiums are initially higher than term life premiums, whole life policies develop a “cash value.” Technically speaking, these are called “non-forfeiture benefits” because you do not lose the cash value if you stop paying the premiums.

For example, if you are not able to continue paying for the policy, you could use the cash value to pay your premiums or to reduce the coverage amount of the policy. Or, you could surrender the policy and receive the cash value that has accumulated until that time. If you choose to surrender the policy, you will no longer be covered by life insurance.

Also, you could borrow against the cash value*. However, any money owned in the form of a policy loan plus interest will be deducted from the benefit paid to your beneficiary after you die, or from the accumulated cash value if you had stopped paying premiums.

*The Gerber Life Insurance policy loan interest rate is 8%. Loans may impact cash value and death benefit.

The Insured is the person whose life is covered by the insurance policy. If the insured person dies, the coverage amount of the policy will be paid to the beneficiary or beneficiaries specified in the policy by the Insured.

The Policy owner is the person who is able to make decisions about the policy, such as making payments or updating information. Generally, for child life insurance such as the Grow-Up^® Plan, the policy owner – also called the policyholder – is not the insured person. In this instance, the Insured is the child and the policy owner is the adult (parent, grandparent or permanent legal guardian) who bought the policy.

The death benefit is the face amount or coverage amount of the policy. That’s the amount 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 or persons named in the policy, as specified by the policy owner, to receive the full benefit payment amount in the event that the insured dies.

Riders are coverage options that can be added to an insurance policy, sometimes for a fee. These benefits are subject to limitations and exclusions as detailed in the riders.

This optional rider on our Grow Up policy allows you to buy additional life insurance coverage at certain anniversary dates or events in your life – regardless of your health. An example of a guaranteed purchase option is one that entitles you to be able to buy additional insurance when you get married, have a child, or reach a specific age or policy anniversary date.

The Gerber Life Grow-Up^® Plan offers a Payment Protection Option (PPO) Rider that will cover premium payments in the event you, the policy owner, cannot pay the monthly premium due to disability or death. The rider will cover the premiums until the insured child’s 21st birthday.

The Accelerated Death Benefit (ADB) Rider is included at no additional cost with the Gerber Life Whole Life Policy and Term Life Policy.  This rider allows you to request a one-time advance of up to 50% of the death benefit amount if you are diagnosed with a terminal illness with a life expectancy of 12 months or less.  The money can be used to offset costs associated with your illness or for any other need. Additional riders may be available for the type of policy you choose. Please review the product carefully before you choose.

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

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