Life insurance is not just a contract between the policyholder and the insurer, but it is a security for the family in the absence of the primary bread earner. On the death of the insured the insurance company hands over a lump sum to the nominee. Let’s check the facts about life insurance that every adults should know in 2021.
Life insurance is the agreement between the insured and the insurer where the insurer pays an agreed sum to the nominee on the death of the insured. To avail this financial coverage the policy holder pays a fixed premium either periodically or one at a time. The policyholder can also avail coverage for critical illness that requires paying a higher premium.
There are few life insurance terminologies that every adult should be aware of before availing a life insurance policy.
Policyholder: The person who buys the life insurance policy and pays the premium toward the policy is the policyholder.
Life Assured: The person whose life is protected with the life insurance policy is the life assured. The policyholder and the life assured could be 2 different people. For instance, the husband buys a life insurance policy for his wife, so his wife becomes the life assured and the husband is the policyholder.
Nominee: The nominee is the person who receives the payouts after the death of the insured. Generally, a nominee is the closest relative or the immediate family member of the insured. During the policy purchase, the nominee is declared.
Policy Tenure: Policy term or tenure is the time period up to which the policy provides coverage. The tenure of the life insurance policy differs basis the terms and conditions and type of the plan.
Premium: The amount paid to keep the policy active is the premium. The amount of premium depends on the type of plan, lifestyle habits, age of the insured and the policy term.
Sum Assured: The amount that the beneficiary or the nominee receives after the death of the insured is the assured sum. Generally, the policyholder arrives at the sum depending upon the financial loss that a family may have to face due to the death of the insured.
Death Benefit: In case the life assured dies during the policy tenure, then sum received by the nominee is the death benefit. The sum assured and the death benefit may differ in terms of the amount. The death benefit may be higher than assured benefit as the death benefit may include rider benefit too.
Grace period: This is the extension of the period given by the insurance company after the due date of the premium. If the policyholder pays the premium within the grace period the policy continues.
Maturity Benefit: The amount received by the policyholder on completion of the policy tenure is known as the Maturity benefit.
Rider: The rider is the additional coverage that is provided on the insurance plan over and above the assured sum.
Claim process: The process of filing the claim after the death of the insured is known as the claim process.
Lapsed policy: When the policy terminates due to non-payment of the premium amount even after the grace period is lapsed policy. At times insurance companies allow you to revive the policy after paying the outstanding premium.
Exclusions: Exclusions are certain situations under which the claim is not settled. Generally, the exclusions are mentioned in the terms and conditions during purchase of the policy.