Having insurance coverage is crucial to protect you and your family against uncertainties in life. However, most people rely on their agents or brokers to avail of insurance policies.
It is important that you read the policy document to understand the various technical terms. Here are 13 frequently used terms and their meanings:
- Life assured
The life assured is the person who is covered under the life insurance policy.
It is the amount you must pay to avail of the insurance coverage. The premium depends on thetypes of life insurancepolicies. It is based on factors, like age, the sum assured, policy duration, and lifestyle.
- Policy premium term (PPT)
It is the duration during which you must pay the premium. Policy term refers to the total period when the insurance coverage is available.
- Sum assured (SA)
SA is the policy benefit that your nominee will get if something untoward happens to you. In case you survive the policy duration, the benefits are paid to you on maturity, depending on the types of life insurance that you select.
Differentlife policies provide distinct coverage. Exclusions in the policy document list those conditions wherein the insurance benefits will not be available.
- Free-look period
When you first buy the policy, insurers offer a tenure of around 30 days to review the terms and conditions. In case you find any discrepancy, you can exit from the life insurance plan during this period.
Insurers provide additional riders to enhance the coverage under the base policy. Such riders are optional, and some of these include accidental disability, critical illness, and waiver of premium.
When you buy a life insurance policy, you must provide the details of the nominee. Your nominee is the person who will receive the benefits if anything unfortunate happens to you before the end of the policy duration.
- Lapsed policy
To ensure you receive the policy benefits, you must pay the premium on or before its due date. The policy lapses if you do not pay the premium on time. You may revive a lapsed policy by paying the pending premium and the applicable penalty.
- Surrender a policy
Most insurers allow you to surrender the policy after three years from the commencement date. The insurer will compute the surrender value that you will receive after the applicable deductions. The coverage is discontinued when you surrender the policy.
- Policy tenure
It is the duration during which the insurer will continue offering the risk coverage. In the case of a whole life plan, the coverage continues for your entire lifetime.
- Claims process
If an unfortunate event occurs during the policy term, your nominee will make a claim with the insurer to avail of the benefits.
- Waiting period
It is the period where you will have to wait from the commencement date before the benefits under the insurance policy are available. This tenure varies among insurers.You must check the same before you make your purchase decision.
These are some commonly found terms, which give you an overview of what is life insurance. However, it is advisable that you take some time to do your research and speak with your agent or broker to understand more about such policies. In case you need any clarification, you may also contact the insurance company to ensure that you have all the necessary information to make an informed decision.
Having an in-depth understanding of these essential terms related to life insurance will help you in choosing a suitable plan. Moreover, knowing about the inclusions and exclusions will prove useful. You can also make your nominees aware of these aspects so that they do not face any difficulty while filing a claim.