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Life Insurance Terms: You Should Know About

Financial planning can get confusing when it comes to specific terms and nomenclature especially relating to insurance. If you're just starting your career, you've recently got married or your family is growing up – you know you need to reconsider your financial plan.

Sometimes the language used by life insurance companies can be difficult to comprehend. But don't let industry terminology prevent you from securing financial protection for your family's needs.

12 Important Life Insurance Terms

Here's a beginner’s guide to basic life insurance terms to help you break through the terminology:

1. Policyholders

The person who owns a policy of insurance. It is important to remember that the person who owns the policy is not a person who is insured by the policy.

2. Premiums

The amount you are paying to buy insurance. The premium is usually paid on a monthly, quarterly or annual basis. Your premium amount may change over time.

3. Term Life

A type of life insurance that provides coverage for a specified period. The period (or duration) of coverage may be either a fixed number of years (e.g. 10 years) or a fixed age (e.g., age 65). The policy does not have any cash value.

4. Sum Assured

Sum Assured is the guaranteed amount that the nominee will receive in the event of an unfortunate death of life. In most cases, the decision to arrive at the guaranteed sum is based on the financial loss that may arise as a result of the loss of life. The policyholder selects this number at the time of purchase of the policy. It shall be billed to the nominee in the event of an demise of the life insured.

5. Nominee

The candidate is a person selected by the policyholder who, in the case of a tragic event, collects life insurance premiums and other benefits. (also referred to as the beneficiary). The candidate must be announced at the time of procurement of the policy. The spouse of the policyholder, the children, and the parents can be declared as nominees who may have an immediate financial dependency on you.

6. Lapsed Policy

The scheme would be terminated due to non-payment of the premium number. The scheme would expire if the due premium is not charged even after the grace period. Any Life Insurance providers are promising the facility to restore the lapsed policy if the remaining premiums are charged by the policyholder.

7. Grace Period

The extension extended to the policyholder by the insurance provider after the date of settlement of the premium is known as the grace period. If the policy manager pays the unpaid premium amount, the benefit cover shall proceed.

8. Death Benefit

This is the sum payable to the candidate in the event of the death of a life insured during the insurance period. Note, that there are no comparable terms to the death benefit and the sum assured. The death payment may be equal to or greater than the amount guaranteed, as it may also provide the benefit of the rider.

9. Maturity Benefit

The maturity benefit shall be the amount paid to the policyholder upon expiration of the policy duration.

10. Beneficiary

The beneficiary is the individual or individuals in your family, such as your partner, children and/or friends, who will be compensated under the term of protection if you die within the term of the policy.

11. Rider

A rider is a feature of an insurance programme that provides extra benefits. As if you purchased a term insurance policy, you will purchase an accidental death benefit rider along with it. If you die prematurely of an injury, you will be paid the amounts insured for the unintentional death value of the passenger along with the amount insured for the term insurance.

12. Revival Period

If you do not pay the premium during the grace period, the policy will be cancelled. However, if you wish to proceed with the scheme, you will be given the option of re-activating your lapsed programme. However, the re-activation process must be done within a fixed amount of time after the grace period has expired. This era is known as the revival period.

Takeaway

Given the semantics and the jargon of the industry, it is not always easy to decipher the insurance contract word by word. But if you try to decipher the insurance contract that holds this glossary as a guide, reading the policy language will be much better than you expected.        


You May Also Like To Read:

Do’s And Don’ts of Buying A Life Insurance Policy

Does Life Insurance Term Policy Cover Disability?

 

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

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