Important life insurance terms that everyone should know
Are you buying a life insurance plan? Before you go ahead, understand some important life insurance terms and features of a term policy. You might get confused about what various insurance terminologies like “premium” or “claim process” mean. Knowing these will allow you to identify the best plan for your needs.
Here are some common insurance terms that everyone should be familiar with:
- Policy tenure
Policy tenure is the duration for the life insurance plan under which a policyholder is being provided with life cover. The policy tenures vary in time durations along with the terms and conditions.
Annually or monthly charges you submit for the insurance policy that you hold. Your premium varies as per your plan duration and at what age you have bought it. Policy buyers can use a life insurance premium calculator to identify their plan fee.
- Life assured
The life insurance-covered person is known as the life assured. During any unfortunate incident, such as the death of an insured individual, the nominee gets the life insurance amount.
To better understand the difference between a policyholder and life assured, consider this example – When a son buys an insurance policy for his mother, the son is the policyholder, and his mother is the life assured.
- Term insurance
A term insurance policy provides you with a life cover from any unfortunate and sudden lethal accident. You pay a fee known as a premium to an insurer for a specific number of years, and in return, in case you meet with an early demise, your insurer will pay the pegged amount to the nominee or your family. Term insurance offers a higher assured sum against other life insurance plans at a lesser premium.
It is an insurance policy service that provides add-on benefits to the policyholder. For instance, if you have purchased a term insurance plan, you can also add an accidental death assurance rider.
Now, post your demise because of an accident, the nominee will receive the amount promised for the accidental demise benefits (rider) along with the term policy assured amount.
6. No claim bonus
No claim bonus (NCB) is a provision by which insurance companies provide a reward annually to the policyholders for not claiming anything throughout one year. If a policyholder has a claim-free year, individuals can have a higher insured amount at the primary premium fee.
The part of the insured amount can rise between 5% and 50%. This way, you can collect more NCB to improve your sum insured along with the initial amount assured by the insurance company.
While opting for any life insurance policy, you should name your partner, kids, parent, and kins as your policy nominee. If you meet a deadly unnatural event during the life insurance duration, your nominee will get the amount assured for the term plan.
- Claim process
If the life assured passes away during the policy tenure, the nominee files a claim to obtain the covered benefits. This procedure is called the claim process.
Before filing any claim, the nominee should be ready with all the proof and documents regarding the life assured’s demise.
- Revival period
A term policy lapses if a policyholder does not pay a monthly or annual premium during the grace period. In such a case, if the policyholder wishes to continue the same plan, they have the option of resuming their lapsed policy. But, this must be done within a specific time frame post the grace period. This duration is called a revival period.
- Death benefit
Death benefit is the sum that a nominee receives in case of the demise of the life insured under the term policy. It is not similar to sum assured because death benefit could be more than the amount assured as it could also contain the rider sum.
We hope you’ll be able to now select a life insurance policy plan with a better understanding of all the terms and concepts related to it.