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Common Term Insurance Terminologies Explained

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Term insurance is one of the most popular types of life insurance policy that keeps your family financially protected in case, god forbid, you are not around them anymore in the future. This makes term insurance an integral part of financial planning. However, there are several terminologies that often make it difficult for the layman to understand his/her term insurance policy. Some of these terms are explained in this article, which you must read so as to understand your term insurance policy better.

Must Read: Reasons That Make Term Insurance a Smart Investment

  1. Policyholder: The policyholder is also the policy owner, who buys a term insurance policy and pays the required premium at regular intervals.
  2. Life Assured: Life assured is the person for whom a term insurance policy is bought. The life assured and the policyholder may or may not be the same person.
  3. Nominee: A nominee is a beneficiary who gets the sum assured in case of a misfortunate event of death of the sum assured. Usually, the policyholder selects the nominee who is usually a family member of a close relative.
  4. Sum Assured: It is the amount that an insurance company pays the nominee in case of death of the life assured. The sum assured is sometimes also known as cover.
  5. Policy Term: It is the period for which a term insurance policy is active or valid. The policy term can be different for every policy and is usually between one year and a lifetime. For instance, the policy term of a term insurance policy is 50 years, and the life assured for the policy dies during this period, then the insurance company will be required to pay the nominee the sum assured. Policy term is also known as policy tenure or policy duration.
  6. Premium: It is a fixed amount that the policyholder is required to pay to the insurance company in order to avail the policy benefits. The premium can be paid on a monthly, quarterly, or annual basis.
  7. Death Benefit: It is the total amount that an insurance company pays to the nominee in case of a misfortunate event of the death of a policyholder during the policy term. Usually, the death benefit is equal to the sum assured. But term insurance plans come with riders, and if you choose them, then the death benefit can be higher than the sum assured as well.
  8. Maturity Benefit: Some term insurance plans pay the policyholder an amount if he/she survives the policy tenure. This is called maturity benefit.
  9. Riders: Riders are optional add-ons that offer you additional coverage along with other benefits. There are different types of riders that you can include in your term insurance policy by paying an extra premium at the time of policy purchase. For instance, accelerated critical illness pack, accidental death benefit pack, etc.
  10. Claim: If the life assured passes away during the policy term, then the nominee does not get the sum assured directly from the insurance company. You are required to file a claim with the insurance company, after which you will get the coverage benefits.
  11. Free-look Period: Free look period is the duration within which you can go through the policy benefits in order to understand your term insurance policy better. You can also cancel your policy if you do not find it beneficial, during this period, and you will not be charged any penalty for the same.

Bottom Line

The aforementioned glossary of some commonly used terms in term insurance is easy to understand and can be useful to understand the policy better. In case you still have a doubt in understanding any of these terms or your term insurance policy, then you can get in touch with the customer care executives at InsuranceDekho and share your doubts. They will provide you with the required help.

Read More: Term Insurance: Exploring the Features

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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