Understand Essential Insurance Terms

Purchasing insurance is crucial, whether it's for health or life, but it's equally important to know what it includes and excludes. But in order to comprehend it completely, we must be familiar with common insurance jargon and expressions.

In order to help you better understand insurance policies the next time you read one, we will explain common terminology like health and term insurance below. The following list of insurance phrases is crucial to know because each one relates to the policy.

• Policyholder: The person whose name appears on the insurance policy is the policyholder. An individual whose name appears in the official documentation is now considered a policyholder. A policyholder might not always be the life-insured. The individual whose life is protected by the plan or policy is known as the life assured or insured.

• Assignment: Transferring an insurance policy from the original policyholder to a new individual is known as assignment. This typically occurs when the original policyholder used the policy as collateral for a debt and has a lien on their name. In the event that the original insured dies before the assignment is finished, the benefits will be given to the new policyholder.

• Nominee: In the event of an insured person's passing, the nominee may designate a person to receive benefits from the policy. We refer to this person as the candidate.

• Beneficiary: An individual with a monetary interest in the policyholder's life is a beneficiary. They could be an entity that the policyholder owes money to, or they could be a legal successor. A life insurance policy may name a nominee, or a beneficiary.

• Death benefit: This is the sum that the life insurance provider gives to the designated beneficiary in the event that the policyholder dies while the policy is in effect.

• Claim: A claim is essentially a notification sent to the insurance company by the policyholder, life insured, or nominee informing them of conditions that may require the company to pay particular benefits to the beneficiary or nominee.

• Coverage: Every insurance provides a certain amount of protection to the policyholder or life guarantee. This could include protection against specific diseases, protection against accidents, life insurance for the duration of the policy, etc. Various plans may have different coverage.

• Exclusions: Not every circumstance has to be protected by insurance. There can be circumstances in which insurance is not offered. We refer to these circumstances as exclusions. Since suicide is a typical exclusion, the insured will not receive any money, or would receive less, if they commit suicide.

• Premium: A predetermined sum must be paid in order to access a plan's benefits. We refer to it as the premium. The amount of the premium varies based on the policyholder's or insured's age, the level of coverage chosen, etc.

• Maturity/Death Benefit: Should the insured person live out the duration of the policy, they will get the maturity benefit. A maturity benefit is not a feature of every policy. The money awarded to the nominee or beneficiary upon the policyholder's death within the policy's term is known as the death benefit.

• Free-look period: This is the window of opportunity where you can choose to return the coverage you bought. Let's say you have the option to opt out of the policy if you are unhappy with its terms and conditions.

• Tax Advantages: Section 80 C of the Income Tax Act allows you to deduct the premiums you pay for life insurance. A maximum of Rs. 1.5 lakh may be claimed. Additionally, section 10(10D) of the Income Tax Act exempts the benefits of a life insurance policy from taxes.

• Rider: An optional coverage that raises the amount of coverage available in a base plan. The only way to do this is to get a rider, which is only an extra that the insurance offers.

• Grace Period: This is an extension provided by life insurance providers in the event that you are unable to pay the renewal premium by the deadline.  

• Surrender Value: The amount paid by a life insurance company to the policyholder in the event that they choose to cancel the policy prior to its maturity.

• Health Insurance: Those who require frequent medical visits or who have persistent health issues ought to seek health insurance policies with reduced deductibles. Even though the annual premium is more than that of a comparable plan with a larger deductible, the year-round availability of inexpensive medical treatment may outweigh the extra expense.

• Home insurance: It protects your possessions and home from damage and theft. The majority of mortgage lenders need insurance coverage for the entire or fair market value of a home, which is typically the purchase price, and they won't provide financing for a residential real estate transaction without it.

• Car Insurance: Protecting your investment is crucial when buying or renting a car. In the event of an accident, theft, or vandalism, auto insurance can provide you with peace of mind. Rather than paying for auto accidents out of pocket, people pay an annual premium to a motor insurance company.

• Life Insurance: Life insurance is defined as the agreement between an insurer and an insured person. Life insurance conditions ensure that the insurer will pay a specific sum of money to the policyholder's beneficiaries upon the policyholder's death in exchange for the premiums the policyholder pays throughout their lifetime.

• Travel Insurance: Travel insurance  protects against costs and losses associated with travel. Both domestic and international travellers can travel safely thanks to it.A health insurance plan is quite flexible because it may be tailored to the policyholder's specific medical needs. Conversely, Mediclaim is non-flexible yet can still be helpful.

In summary

Insurance is a way to manage the monetary risks that face people and businesses. When people need money, insurance policies are meant to assist them in recovering the money they have lost or the damage they have sustained. Occasionally, the insured individual receives benefits from their savings when they are in need of assistance. You'll have a better understanding of insurance as a financial instrument after reading the terms mentioned above.