Life insurance plays a crucial role in providing financial protection and peace of mind to individuals and their families. However, navigating the world of life insurance can be daunting, especially with the myriad of terminologies involved. Understanding the life insurance glossary is essential for choosing the right plan that meets your needs and preferences. Let us delve into some common life insurance terminologies and their explanations.
Life insurance glossary: Different types of basic terminologies that you need to know
Here is a quick life insurance glossary for you to know the commonly used terms in the life insurance policy. Understand the meaning of these terms:
- Policyholder: The policyholder is the individual who owns the life insurance policy and pays the premiums to the insurance company.
- Life assured: The life assured is the person whose life is insured under the policy. In the event of their death, the insurer pays out the death cover to the designated beneficiary.
- Nominee: The nominee is the person chosen by the policyholder to receive the death cover in case of the life assured's demise.
- Sum assured: The sum assured is the guaranteed amount of money that the insurer pays out to the nominee upon the life assured's death.
- Policy term: The policy term is the duration for which the life insurance policy remains in force. It defines the period during which the insurer provides coverage to the policyholder.
- Premium: The premium is the amount paid by the policyholder to the insurance company to keep the policy active. It can be paid monthly, quarterly, annually, or as a lump sum.
- Death cover: The death cover is the amount payable to the nominee upon the death of the life assured during the policy term.
- Maturity benefit: In some life insurance policies, if the life assured survives the policy term, the insurer pays out a maturity benefit to the policyholder.
- Riders: Riders are additional benefits that policyholders can add to their base life insurance policy for enhanced coverage. Common riders include critical illness cover, accidental death cover, and waiver of premium.
- Claim: A claim is a formal request made by the nominee or the policyholder to the insurance company to receive the death cover or maturity benefit as per the terms of the policy.
- Free look period: The free look period is a specified period after purchasing the policy during which the policyholder can review the terms and conditions. If dissatisfied, they can cancel the policy and receive a refund of premiums paid.
Explore the different types of life insurance policies.
Conclusion
Understanding life insurance terminologies is essential for making informed decisions when selecting a policy. By grasping the meanings of these terms, individuals can navigate the complexities of life insurance and choose the right plan to protect themselves and their loved ones financially.
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