Buying a life insurance policy is one of the first things any financially independent adult with dependants should look into. A life insurance policy requires the insured to pay regular premiums to the insurance company paid out to their financial dependents in case of their untimely death. As important as buying a life insurance policy, you cannot do it without being 100% in the light about what you’re getting yourself into. It is a big decision, and inadequate knowledge of the various key terms used in important documents and contracts can further complicate matters. To make this process an easier one for you, here’s a quick guide of the key terms you should know before buying a life insurance policy:
- Life Assured: This is one of the most common terms you’re going to hear all the time. The person whose life is covered in the life insurance contract is known as the life assured.
- Policyholder: This is often mistaken to be the same as the life assured, but it is not. The person who owns and pays the premium for any life insurance policy is known as the policyholder. The policyholder’s life is not covered in the contract.
- Sum Assured: Also known as the coverage, the sum assured is the amount of money your insurer (insurance company) will pay your nominee if the life assured’s death. The sum assured is chosen by the policyholder at the time of purchase.
- Nominee: A nominee is a person who has been nominated to receive the insured money if the life assured passes away. Anyone can be the nominee.
- Premium: Premiums are the regular, periodic payments you make to your insurer to ensure the policy does not get terminated. This happens if you fail to pay your premiums through any available modes like regular payment, limited payment and single payment.
- Riders: Riders are additional customisable features you can use to personalise your policy according to your needs. Standard riders include accidental death benefits, critical illness benefits, etc.
- Grace Period: This is the extended period your company offers you to pay your premium if you fail to do so on time. The grace period differs as per your policy.
- Surrender Value: If by any chance, one wishes to discontinue their life insurance policy before maturity, the surrender value is what the insurers pay the policyholder.
- Exclusions: This includes everything that’s excluded from your policy, so don’t skip reading this.
- Maturity or Survival Benefit: This is the amount paid to the policyholder by the insurance company if the life assured lives more extended than the policy tenure (no. of days covered in the policy).
- Free Look Period: This is the period offered by every company to new policyholders when one can return the purchased life insurance policy.
These are the basic life insurance terms that will help you along the way. For more information about such terms and popular life insurance policies, don’t forget to take a look at ICICI Prudential Life’s plans!