Life Insurance Terminologies You Must Know About

Life insurance is a contract between the policyholder and the insurance company in which the insurance company pays a certain sum to the insured individual's family in the event of his death. In exchange for a particular amount of premium, the life insurance sum is paid. Life is lovely, but it is also a gamble. You never know what life has in store for you no matter what you do, no matter how smart or hard you work.

As a result, nothing should be left to chance, particularly 'life insurance.' Apart from taxes, death is the only thing that is certain in life, thus it is prudent to plan ahead and insure it.

Life Insurance Terminologies You Must Know About

• Policyholder

The policyholder is the person who purchases and pays the life insurance policy's premium. He or she may possess the policy, but life insurance may or may not be guaranteed.

• Assured Life

The insured or protected person is known as the life assured. The nominee will get the insurance sum in the event of an unfortunate occurrence such as the death of the Life Assured.It's critical to know the distinction between a policyholder and a life assured. When a husband purchases an insurance policy for his wife, for example, the husband is the policyholder, while his wife is the life assured.

Premium

It's the monthly payment you make to keep your life insurance policy current. If you do not pay your premium on time or during the grace period (see term #8), your insurance may lapse.

The premium amount is determined by a number of factors, including the insured's age.

The policy that was chosen

Sum Assured was chosen.

The Policy's Duration

Smoking and drinking are two examples of unhealthy lifestyle behaviours.

• Sum Assured
  

The sum assured is the amount guaranteed to the nominee in the event of the life assured's untimely death. Most of the time, the choice to calculate the sum assured is based on the financial loss that could result from the death of the life assured.At the time of purchase, the policyholder selects this amount. It is paid to the nominee in the event of the death of the Life insured individual during the policy term.

• Policy Tenure
  

It is the amount of time that the life insurance policy will cover you for. The policy tenure of life insurance policies varies depending on the type of policy and the terms and conditions of the insurance company.

• Nominee
  

The Nominee is the person named by the policyholder to receive life insurance payouts and other benefits in the event of a tragic event. (Also known as the recipient.) The nominee must be declared when the policy is purchased. Spouses, children, and parents of policyholders can be named as nominees if they are financially dependent on you right away.

• Lapsed Policy
  

Because of non-payment of premiums, a policy will be terminated. If the due premium is not paid during the grace period, the policy will lapse. If the policyholder pays the outstanding premiums, certain life insurance companies will allow the lapsed policy to be revived.

• Grace Period

The grace period is an extension granted by the insurance provider to the policyholder after the premium payment due date. If the policyholder pays the outstanding premium, the policy's protective cover is maintained.

• Death Benefit

It's the sum paid to the nominee if the life assured dies during the policy period. It's important to remember that the words death benefit and sum assured aren't interchangeable. Because the death benefit, which may include the rider benefit, may be equal to or greater than the sum assured.

Take Away

When the insured person dies, the policy owner receives a death benefit. A policyholder must either pay a single payment up front or pay regular premiums over time in order for their life insurance policy to stay in existence.

The policy's named beneficiaries will receive the face value, or death benefit, of the insurance when the insured passes away.

Term life insurance policies have a certain number of years before they expire. Permanent life insurance policies continue to pay premiums until the insured dies, stops paying premiums, or surrenders the policy.

Also read: Which Are The Best Investment Avenues In India In 2022?

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.