Your family’s financial security in the event of your passing away is ensured by term insurance. It is, after all, a crucial aspect of financial planning. Term life insurance is the most common of the various forms of life insurance policies that are available today.
One of the simplest and most affordable insurance products is a Life insurance plan. Despite this, most people find the intricate vocabulary and technical terms used in insurance policy contracts to be overwhelming. A glossary of some of the terms used frequently in term life insurance policies is provided below.
- Policyholder: The individual who owns the policy, sometimes referred to as the policy owner. The person who purchases the insurance and pays the regular premiums is the policyholder.
- Life Assured: This term describes the person who is the subject of the insurance policy. The policyholder may or may not be the same as this. You would be the policyholder, and the life assured, for instance, if you purchased insurance for yourself. However, if you get insurance for your parents and make their monthly premium payments, you will be the policyholder, and your parents will be the life assured.
- Nominee:If the life assured passes away within the policy’s term, the nominee, also known as the beneficiary, will inherit the sum promised. This is typically a family member or close relative whom the policyholder selects.
- Sum Covered: The sum paid to the nominee upon the passing away of the life assured by the insurance provider. Let’s say you purchase term life insurance for yourself and name your wife as the beneficiary, for You’ll need to decide on a sum assured while making the purchase. Let’s assume that the amount promised is 1 crore. The insurance firm will now pay your wife the sum insured of Rs. 1 crore in the terrible event of your passing while the policy is in effect. You can use a term insurance calculatorto calculate the average cost of your term policy based on your needs.
- Policy Term: The duration of the term insurance policy’s validity or active status. This time frame might vary from one policy to the next and can be anything from a year to a lifetime. Let’s say that an insurance policy has a 50-year policy term. The insurance company will now be responsible for paying the sum assured to the nominee in the event that the life assured under the policy passes away within this time. Both policy tenure and policy longevity are other names for this.
- Premium: The policyholder pays a certain sum to the insurance provider in exchange for insurance. You have a variety of payment options, including monthly, quarterly, yearly, etc. An important component of insurance coverage is the premium. Use a term insurance calculatorto know the average rate of premium for a term plan of your choice.
- Payment Term/Mode: The various methods by which you can pay the Life insurance planpremium are referred to as the payment term or mode. Three main categories of payment methods exist
- Regular Pay: The policyholder pays premiums using this method for the duration of the insurance.
- Limited Pay: Under this arrangement, the policyholder may select a specific time frame for the premium payment. For instance, if you select five years, you will only be required to pay premiums for five years, even though the policy would be in effect for the entire term you chose.
- Single Pay: In this procedure, the policyholder pays the premium all at once. Typically, this is paid when the insurance coverage is bought.
- Death Benefit: The death benefit is the entire amount paid by the insurance provider to the designated beneficiary in the event of the policyholder’s passing while the policy is still in effect. Typically, this equates to the sum assured. However, the death benefit may also be greater than the sum assured under insurance policies that include riders.
- Maturity Benefit: Some policies offer a payment to the policyholder should they live past the policy’s term. The maturity benefit is what is meant by this.
- Riders: Riders are supplemental coverage options for your current term life insurance policy. They go beyond the limitations of your coverage. Benefits like an accelerated critical sickness pack or an accidental death benefit pack are examples of what they can be.
- Claim: The insurance company does not pay the nominee directly with the sum insured if the life assured passes away within the policy’s term. Before receiving the coverage, you must submit a claim to the firm.
- Free Look Period: Assume that you purchase term life insurance today but subsequently decide against it. An insurance policy typically has a free look period, during which you can cancel the coverage without incurring any fees. This time frame may vary from one policy to the next.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.