Gone are those days, where an insurance broker visits your home to give you lengthy explanations about insurance schemes and throws jargons that a common man might not understand. Today it is easy to buy the best life insurance policy online at the comfort of your home, with just a mobile click.
Before you jump to buy an insurance policy, it is crucial to have a clear understanding of each of these commonly used terminologies in insurance, as this will help you in buying the right life insurance policy as well.
Here is a complete guide to your insurance-buying experience, making it easy for the policyholder to understand the basics of insurance and what each of these terminologies mean:
Contents
1. Nominee
If you are the individual who is buying the policy (also known as the policyholder), then the person who stands to receive the sum assured from your policyholder is known as the nominee. Usually, policyholders tend to keep either parent, spouse or children as their nominee.
2. Life Assured
The life assured is the insured person for whom the life insurance policy is purchased to cover the risk of a financial loss and unforeseen event. A life assured may or may not be a policyholder. For instance, if a husband buys a life insurance plan for his wife, and he pays the entire premium, then the husband is the policyholder, and the wife is the life assured.
3. Policyholder
A policyholder is an individual who is the owner of the policy and has taken on his name. The next time you buy a policy in your name, it means you are the policyholder, and it is you who solely decides on how much amount of insurance you want.
4. Insurer
An insurer is nothing but the insurance company, who agrees to compensate or provide financial support to individuals or organizations for their unexpected financial loss. For instance, if you buy an insurance policy from Max Life Insurance, then Max Life Insurance, as a company, is the insurer.
5. Sum Assured
On the sudden demise of the policyholder, the financial loss that arises is generally compensated by the life insurance policy company (insurer), which is paid to the nominee or the beneficiary of the policyholder.
A nominee can be the spouse, child or parents, of the policyholder, whom he/she might have added to the policy contract. In addition, a nominee can claim life insurance if the policyholder dies during the policy period.
6. Policy Tenure
Policy tenure simply refers to the policy duration for which the policy provides lifetime coverage. Generally, the policy tenure will be ranging from 1 year to 100 years, depending on the type of insurance and its guidelines.
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7. Maturity
Maturity year or date is the age of the life assured at which the policy ends. Both policy tenure and maturity are similar. For example, suppose you buy an insurance plan at the age of 30, with a maturity age of 65 years. This means the policy will provide coverage until you are 65 years old. It also indicates that the policy tenure for a 30-year-old is 35 years.
8. Premium
Premium is the amount a policyholder keeps paying to the insurance company to keep the plan active and enjoy continued coverage. If you make any default in the premium payment even after the grace period provided, then there are chances that your policy gets terminated.
9. Policy lapse
If you are unable to make the premium payment on the due date or even after the grace period, then it is called a lapsed policy. However, you can renew your lapsed policy by fulfilling their terms and conditions, as mentioned in the policy contract.
10. Survival benefits
Survival benefits are also known as maturity benefits, implying that the policyholder is entitled to get the amount after he/she successfully outlives the policy tenure. To receive the survival benefits, the policyholder needs to complete a minimum number of years pre-defined by the insurer.
11. Claim settlement ratio (CSR)
When you buy an insurance plan, you need to check for a genuine and trusted insurance provider with a good claim settlement ratio. A claim settlement ratio is the percentage of claims an insurer settles in a year out of the total claims, and that helps you determine which of the policies out there is the best life insurance policy.
Pick an insurance company with the highest CSR, which implies that the company has cleared over maximum claims out of the number of claims that were raised.
12. Riders
A rider is an add-on feature to your existing life insurance policy that helps you enhance the coverage benefits. People mostly take riders on critical illnesses or accidental injuries. A policyholder can either opt for riders at the time of plan purchase or in the middle of the policy tenure.
Now that you know how an insurance policy works, all you need to do is to select the best plan that suits your family needs aptly.
