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Important Life Insurance Terms You Must Know

Important Life Insurance Terms You Must Know
  • 10th Oct 2019 |
  • 1,601

Often when you want to buy a life plan, you need to go through several technical terms. Such confusing terms are deterrent to several people who then avoid buying an insurance cover.

Even when you buy a life insurance plan, you may not be aware of all the terms. To ensure you purchase the right policy, it is crucial to understand some basics.

Important life insurance terms you must understand before making your buying decision:

1. Accident

It is an unforeseen occurrence, which results in an injury

2. Age limit

These are the minimum and maximum ages wherein the insurance company does not accept new or renewal proposals

3. Agent

He acts as the representative of the insurance company to sell its products and is an intermediary between you and the insurer

4. Application or Proposal Form

The form includes all your information; it is often by the agent or a medical examiner when medical tests are required; it must be signed by you

5. Policyholder

He proposes to buy the life insurance policy and pays the premium; he may or may not be the life assured

6. Life assured

He is the one who is covered under the policy and may or may not be the policyholder

7. Sum assured

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

8. Nominee

In case of any untoward incident, the policy benefits are paid to your legal heirs known as nominees, who may be your spouse, parents, or children

9. Policy tenure

This is the total duration, during which the life cover is available and varies depending on the type of policy

10. Maturity age

This insurance term determines the age when the policy benefits end

11. Premium

It is the amount you pay at periodic intervals to ensure that the policy remains active and you are eligible to receive the benefits under the same

12. Premium payment mode/frequency/term

The insurers offer multiple options as follows to ensure you make timely payment of the premium:

Regular premium

The premium is paid during the policy duration either monthly, quarterly, semi-annually, or annually

Limited premium

The premium is payable only for a limited pre-determined period

Single premium

Insurance companies also provide single premium plans wherein you pay a lump sum amount to avail of coverage for the entire duration

13. Death benefit

This is one of the most common insurance-related terms; it is the amount, which the insurer pays your nominees in case of an unfortunate event during the policy term

14. Maturity/survival benefit

The insurance companies pay this amount if you survive the policy duration; however, these benefits are not available with a term plan

15. Free-look period

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

16. Grace period

It is the additional time available to pay the renewal premium if you are unable to pay it on or before its due date

17. Surrender value

One of the other important insurance terminologies is the surrender value; it is the amount, which you will receive if you discontinue the policy before its maturity

If you do not understand the terms related to insurance, it is likely you may buy incorrect coverage. Hence, you must understand these terminologies to make a wise investment decision.

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Ref. No. KLI/22-23/E-BB/492

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