The life insurance terms can be strange when hearing it, and it is also called basic terminologies, which involve life insurance.
Insurance is comprehensive, and there are many factors under it if you don’t know anything about life insurance terms. No worries too much! Start by learning about some basic terminologies.
9 Life Insurance Terms You Should Know
Basically, the life assured refer to the one for whom a life insurance plan is purchased to guide the risk of untimely death. The life assured is also the insured person, and the breadwinner of that family is assured.
There is a probability that life assured may be the policyholder and may not due to some circumstance surrounding it.
A policyholder is a person that aims for the purchase of the life insurance terms policy and also pays the premium at the end of the whole process.
Beware that the policyholder is the policyholder’s actual owner and likely that he may not be the life assured.
Sum assured (coverage):
Life insurance terms are essential to know and are meant to create a life cover for the insured.
Most of the things in life cover when buying a life insurance plan is the financial loss that may arise due to the death of the life assured.
But technical terms, sum assured, are the insurance terms utilized for an amount that the insurer agrees to pay on the insured person’s death.
Either you have come across the term ‘sum assured’ when comparing policies online when purchasing a insurance plan and in the policy document.
The ‘nominee’ is the individual (legal heir) suggested by the policyholder to whom the sum assured and other advantages will be paid by the life insurance company just in case of an unfortunate eventuality.
However, the nominee could be the child, wife, parents, etc., of the policyholder. And the nominee also needs to claim life insurance if the life assured eventually dies during the policy tenure.
Policy tenure serves as the duration for which the policy creates life insurance coverage. Then policy tenure can be any period ranging from 1 year to 100 years or for whole life, but that depends on the types of life insurance plan and its terms and conditions on the ground.
We can equally call policy tenure policy term or policy duration. The terms decide for how long the company is providing the risk coverage.
This is the specific age of the life assured at which the insurance policy ends or terminates. It is similar to policy tenure but various ways to say how long the plan will be forced.
Typically, most of the life insurance firm declares up the maximum age until the life insurance coverage will be available to the life insured.
Insurance terms include premium and is the amount an individual pays to hold the life insurance plan active and enjoy continued coverage for an extended period.
And one thing about premium is that if you are unable to pay before the due date and even during the grace period, the policy will terminate immediately.
There are many ways to pay the premium through regular payment, limited payment terms, and single payment.
Premium payment term/mode:
One of the benefits of paying your premium is that you can pay at your convenience.
Regular premium payment – Pay your premium regularly throughout the policy term, either monthly, quarterly, half-yearly, or yearly.
Limited premium payment – You can equally choose to pay the premiums for a limited amount of time. While you don’t have to pay till the end of the policy term, but for a certain pre-fixed number of years. Like 15 years, 20 years, etc.
Single-Premium Payment – This single premium payment can allow you to choose to pay the premium for the whole duration of the plan as a lump sum in one single go.
Riders are an extra paid-up feature to broaden up the scope of the base life insurance policy. It is bought at the time of purchase or no policy anniversary.
There are various types of riders that can buy with the base plan. Here is the list of some riders offered by life insurance firms.
- Critical illness Cover
- Hospital Cash
- Accidental Total and Permanent Disability Benefit Rider
- Waiver of Premiums
- Accidental Death Benefit Rider
These eight insurance terms will enlighten you more on the terminologies of insurance.
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