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Ref. No. KLI/22-23/E-BB/492
Understanding the insurance terminology is essential whether you are a policyholder or an insurance professional. Learn the important life insurance terms with this comprehensive blog.
A life insurance policy offers financial support and helps any individual to prepare for an unforeseen future. It comes with its own set of crucial terms and concepts. To navigate this essential aspect of financial well-being effectively, it is imperative to familiarize yourself with the key life insurance terms.
Buying a life insurance policy is a part of preparing for a financially safe future. Before you decide to buy a policy, it is essential to grasp some key life insurance terms and ideas. Knowing these terms can help you avoid unnecessary confusion and protect yourself from any kind of fraud. But first, take a quick look at what a life insurance policy is and what are its basic types.
Life insurance is not just another financial product; it is like a safety blanket for your loved ones when you are no longer with them. You make a deal with an insurance company whereby you pay them regular amounts (called premiums). In return, they promise to provide a lump sum of money to your family if something happens to you. This cash can be a huge help for your family to handle things like funeral expenses, bills, and other costs that might come up in your absence.
There are different types of life insurance policies, but the two main ones are term life and whole life.
It is like renting coverage for a particular period. If you pass away during that time, your beneficiaries get the payout. If not, the policy ends, and you do not get any money back.
Whole life insurance is a permanent plan that offers protection for the duration of your life. Although the premiums for this insurance are typically higher than those for a term plan, getting it may be worthwhile in the long run.
When seeking to purchase a life plan, one must navigate through a multitude of technical terms. These confusing terminologies often act as a barrier for many individuals, leading them to shy away from acquiring insurance coverage. Understanding this insurance terminology can help anyone looking for an insurance plan without getting confused with this insurance jargon.
The amount of money an individual or entity pays annually to an insurance company to maintain an insurance policy.
An accident is an unforeseen and unplanned event or incident that occurs suddenly, typically resulting in unintended and often harmful consequences.
They act as the representatives of the insurance company to sell its products and are an intermediary between you and the insurer.
The person or entity specified to receive the proceeds of an insurance policy or financial account in the event of the policyholder’s death or another qualifying event.
The savings or investment component of a permanent life insurance policy that stockpiles over time and can be accessed by the policyholder under certain conditions.
This is one of the most common insurance-related terms; it is the amount that the insurer pays to your nominees in case of an unfortunate event during the policy term.
These are the specific conditions or circumstances that are not covered by an insurance policy and for which benefits will not be paid.
The initial amount of coverage specified in a life insurance policy represents the death benefit payable to the beneficiary.
This is one of the essentials of a life insurance contract and is the time during which you may return the policy if you are uncomfortable with the terms and conditions.
A defined period after a premium payment due date during which the insured or policyholder can make the payment without the policy lapsing.
A medical assessment is conducted by an insurer to evaluate an applicant’s health for insurance coverage. Some policies require you to take a health examination before approval. It is like a check-up for your policy.
A provision in an insurance policy that determines the insurer’s ability to question the validity of the policy after a certain period. A typical incontestability clause stipulates that a contract won’t be voidable due to a misstatement after two or three years.
A type of policy that covers two or more individuals, with the death benefit payable upon the first insured person’s death.
It is a policy taken by a business to protect against the financial impact of the demise or disability of a key employee or owner.
The termination of an insurance plan due to non-payment of premiums or other specified reasons.
It is the premium that is payable only for a limited pre-determined period.
It is when a life insurance policy ends and the policyholder receives the policy’s cash value or other agreed-upon benefits.
When the amount of insurance coverage exceeds the actual financial needs or insurable interest of the policyholder.
The periodic payment made by the policyholder to the insurance company to maintain insurance coverage.
The insurance proposal form is an essential document that includes information about the proposer and the life assured. It serves as a foundation for determining whether or not a person is insurable.
The insurers offer multiple options, such as regular, limited, and singular, to ensure you make timely payment of the premium.
It is an estimate provided by an insurer detailing the cost of insurance coverage based on the applicant’s information.
A supplementary document or provision attached to an insurance policy to modify or add coverage options or conditions.
A provision in an insurance policy that limits or excludes coverage for suicide during the policy’s initial period, typically two years.
This is the maximum amount the insurer agrees to pay in case of the demise of the life assured or on the occurrence of any insured event.
One of the other important insurance terminologies is the surrender value; it is the amount that you will receive if you discontinue the policy before its maturity.
The insurance companies pay this amount if you survive the policy duration; however, these benefits are not available with a term plan.
The process insurers use to evaluate your risk and determine your premium. It is like the insurance company’s interview with you.
A type of permanent life insurance that offers coverage for the entire duration of the insured’s life and includes a cash value element that grows over time.
A type of life insurance policy in which the policyholder pays a single premium upfront, and the policy gradually accumulates cash value over time without the need for additional premium payments.
Knowing your insurance policy from top to bottom can be a game changer. These terms form the foundation of your policy, and a thorough understanding of them will enable you to make decisions that will protect your loved ones and your financial future. You are taking a big step towards ensuring a better and more financially secure future by taking the time to familiarize yourself with these crucial life insurance terms.
2.Term Insurance vs Life Insurance: Understand the Difference and Benefits
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
Features
Ref. No. KLI/22-23/E-BB/2435
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
