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Terms You Should Be Aware of Before Buying Life Insurance

Updated On Sep 11, 2021

 Life insurance has become the utmost necessity in today’s time. But, it does not mean that an individual should buy any life insurance that they find. One must always remember that only a life insurance policy, which serves the purpose well when the need arises is worth the money invested. To avoid disappointment later, it is highly advised to policy buyers to understand life insurance before buying it. 

Terms You Should Be Aware of Before Buying Life Insurance

Below mentioned are some of the key terms that you must be aware of before buying life insurance: 

Must Read: Exploring Term Insurance And Documents Required For Its Purchase

  • Policyholder: A policyholder is an individual who proposes the purchase of a life insurance policy. He or she is the owner of the policy and pays the premium. It must be noted that he or she may not be the person insured. 
  • Life Assured: Life assured is the insured individual. He or she is the person for whom the life insurance plan is purchased so as to gain coverage against the risk of untimely death. In most cases, the life assured is the breadwinner of the family. It must be noted that it is not mandatory for the life assured to be the policyholder. 
  • Sum Assured: Sum assured is the amount that the insurance company agrees to pay on death of the insured individual or on the occurrence of any other event that is insured. The sum assured is chosen at the time of policy purchase. The policyholder chooses the sum assured. 
  • Nominee: The ‘nominee’ is the individual that the policyholder nominates to receive the sum assured as well as other benefits. The nominee could be the wife, child, parents, or any other trustworthy relative of the policyholder. 
  • Policy Tenure: The ‘policy tenure’ is the duration until which the life insurance coverage is provided under the policy. Policy tenure is also referred to as policy term or policy duration.
  • Maturity Age: It is the age of the life assured at which the policy terminates or ends.
  • Premium: It is the amount the policyholder pays to keep the life insurance plan active and avail continuous coverage.
  • Premium Payment Term: Premium payment term is the set of options according to which the policyholder can pay the premium. Premium payment term or PPT is also referred to as premium payment mode or premium payment frequency. Most common options under PPT are single premium payment, regular premium payment and limited premium payment. 
  • Riders: Riders are additional covers that can be bought to extend the coverage under the base policy. It is important to note that riders can be purchased during the policy inception or on policy anniversary. The riders differ based on insurers. 
  • Death Benefit: Death benefit is the amount the insurance company pays to the nominee if the life assured dies during the policy tenure. Note that the death benefit can be sum assured or even higher than that inclusive of the rider benefit (if any), and/or other benefits. 

Final Words

Now that you know the key 10 terms of life insurance, make sure you do not get confused during the policy purchase and instead buy the best one for yourself.      

Also Read:  Term Insurance Plan for All Age Groups

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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