Life insurance terms everyone should know before buying policy

  1. Life assured/Insured : Life assured or insured means a person whose life is covered in insurance policy.
  2. Insurer : It means insurance company.
  3. Policyholder : It means a person who takes an insurance policy in which either he covers himself or his family members. Ex, A person can buy a life insurance policy with his Son as life assured.
  4. Beneficiary/Nominee : A person who gets benefit if Life assured dies.
  5. Appointee : If Beneficiary is minor then appointee is required.
  6. Premium : Amount of money paid by insured to keep his plan active. It depends on Age, gender, Smoker/Non smoker and pre-existing illness.
  7. Sum Assured : Sum assured is the amount of money insurance company pays on death.
  8. Policy term : It means tenure of a policy for which insurer provides coverage.
  9. Premium payment term : Term for which an insured will pay premium. It can be Regular,Limited,single. Regular means policy term and premium payment term is equal. For ex.plan in which both policy term and premium payment term is 10. Limited means both policy term and premium payment term are different. For Ex. Plan in which policy term is 15 and premium payment term is 10. Single means plan in which life assured pays premium only once
  10. Mode/Frequency : Insurance premium can be paid by opting certain Frequency. Frequency can be yearly, half yearly, quarterly or monthly. A policyholder decides to pay premium as per his convenience.
  11. Maturity age : Maturity is the stage when policy ends or terminated.
  12. Rider : Rider is the additional benefit on policy provided that life assured has to pay premium unless it is an inbuilt rider. There are various type of rider like Accidental Death Benefit, Accidental Death and Disability, Accidental Death and Disability plus, Waiver of premium, Critical Illness, etc.
  13. Death benefit : Death benefit is the benefit given by insurance company in case of death. In Term plan, it is sum assured of policy, while in endowment plans it may be higher than Sum Assured.
  14. Grace period : Grace period is extra time given to policyholder, if he missed paying premium on due date. For yearly, half yearly and quarterly policies grace period is for month while for monthly policy, it is for 15 days.
  15. Lapse : Policy turns to lapse if policyholder stops paying premium . A life assured does not receive any benefit for lapse policy.
  16. Paid up : Policy turns to paid up if Surrender value gets generated which is usually after 2 or 3 annual premium has been paid by policyholder.
  17. Bonus : Bonus is an extra mount given by insurance company. There are three types of bonus i.e Reversionary bonus, interim bonus and Terminal bonus.
  18. Loading : If life assured has pre-existing illness, loading is applied and his premium increases.
  19. Freelook period : A person can cancel his policy in this period. This is within 40 days from the day you buy a policy.
  20. Revival period : Once policy turns to lapse or paid up. A policyholder can revive his policy within 5 years from date of first unpaid premium.
  21. Claim : Asking Insurance company for desired benefit. It can be death claim, maturity claim or surrender claim.
  22. Surrender value : Surrender value is generated once policyholder pays premium for 3 years. Based on surrender value, Loan is giver on Insurance policy. Loan amount is around 80-85 percent of surrender value.

Disclaimer :

This article is not sponsored and not meant for endorsing any particular insurance company. Please Check Terms and Condition of respective organization along with inclusion and exclusion before buying insurance policy.

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