Life insurance is a safety valve that ensures your family's financial security in the event of your death. It is, after all, an important element of financial planning.
The purchasers mostly face a challenge during this process i.e they must go through a bush of language that has been used by the insurance industry for decades. The complicated vocabulary and technical terms used in insurance policy contracts overwhelm the majority of consumers. An "accelerated death benefit," for example, may not seem attractive, but it is essential to be aware of such terminology in order to make an educated selection when purchasing an insurance.
Let us understand some basic life insurance terms in detail.
Policyholder
The policyholder is the person who purchases the life insurance policy and pays the premiums. He/she may or may not be the person whose life is covered under the policy.
Amount Assured
The sum assured is the sum guaranteed to the nominee in the event of the life assured's untimely death. In most situations, the decision to calculate the sum promised is based on the potential financial loss resulting from the death of the life assured.This amount is determined by the policyholder at the time of purchase.
Life Assured
The life assured is the person who is insured or protected. The nominee will get the insurance sum in the event of an unfortunate occurrence, such as the death of the Life Assured.
It's critical to know the distinction between a policyholder and a life assured. When a husband purchases an insurance policy for his children, for example, he is the policyholder and his children are the life assured.
Tenure of Policy
It is the amount of time that a life insurance policy will cover you for. The policy duration of life insurance plans varies depending on the kind of policy and the insurance company's terms and conditions.
Premium
The amount you pay to the insurer for life insurance and related services is known as the premium. It's the fixed fee you pay to keep your insurance policy active and enjoy the coverage's additional advantages.
Nominee
The nominee is the person named by the policyholder to receive life insurance payouts and other benefits in the event of a tragic occurrence. The nominee must be declared when the insurance is purchased. Children, spouses and parents of policyholders can be named as nominees if they are financially dependent on you right away.
Death benefit
It is the sum paid to the nominee in the event of the life assured's death during the policy's term. It should be understood that the phrases death benefit and sum guaranteed are not interchangeable. Because the death benefit, which can include the rider benefit, might be equal to or greater than the sum assured.
Grace period
The grace period is an extension provided by the insurance provider to the policyholder after the premium payment due date. The insurance's protective cover remains if the policyholder pays the overdue premium amount.
Lapsed Policy
Non-payment of premiums will result in the cancellation of an insurance. When the due premium is not paid even after the grace period, the policy will lapse. Some life insurance companies may allow a lapsed policy to be revived if the policyholder pays the due premiums.
Free Look period
If you do not agree with or are uncomfortable with the terms and conditions of your bought insurance, you have the option to return it within the time frame specified in the policy document. The free-look period is the term given to this period. After subtracting the proportionate risk premium, stamp duty costs, and, if applicable, the cost of a medical examination, the premium will be reimbursed.
Revival period
Your insurance will lapse if you do not pay your premium during the grace period. However, you have the option of reactivating your expired insurance if you want to keep it. However, when the grace period expires, the re-activation process must be performed within a certain amount of time. This is referred to as a revival period.
Maturity benefit
The sum paid to the policyholder at the end of the policy term is known as the maturity benefit.
Claim process
In the event that the life guaranteed passes away within the policy term, the nominee files a claim to collect the death benefit. The claim process is the term used for this procedure.
Exclusions
There are several things that a life insurance policy does not cover. The insurance provider will not pay any compensation if the claim is grounded on these exclusions.
Riders
Riders are optional perks that supplement your plan's coverage. There are extra riders that you may add to your policy to increase your financial security and safeguard yourself/your family against accidental disability or death.
Whether you're just commencing your search for an insurance or have already been approved for one, there are a few key phrases to understand while buying or researching life insurance online.
Knowing these phrases and terminology for life insurance will assist you in making fair comparisons between choices and obtaining the coverage you require.