Purchasing a life insurance plan is a very important financial decision. In the case of such a plan, the policyholder’s nominees will receive a lump sum if the insured passes away during the policy tenure. Moreover, some plans also offer maturity benefits.
- Insurer and Insured
The insurer is the insurance company that provides the policy. The Insured is the person who buys the policy.
- Grace period
It is an extended due date for the premium payment. It is offered when you fail to make the payment on time.
- Free-look period
It is one of the most important insurance-related terms. It is a fixed period in which you can return the policy if you feel that the terms and conditions are not suitable. ·
- Lapsed policy
If you are unable to pay the premium even after the grace period, your policy lapses, and you do not receive any benefits.
- Death benefit
It is one of the most common insurance terminologies. You must have heard of this quite frequently. It is the payment, which the insurer pays to the policyholder’s nominees in case the insured passes away during the duration of the policy.
- Accident benefit
This benefit is paid to the nominees of the policyholder in case of an accidental death. Check what kind of accidental deaths are excluded before purchasing a policy.
- Sum assured
This is the lump sum paid by the insurance company when an insurance claim is accepted. The amount is pre-decided by the policyholder while investing in the policy.
- Cash value
Among the many terminologies used in insurance, ‘cash value’ is one of the most important ones. It is the portion of the premium used by insurers to invest in different options. You earn interest from it.
- Claims settlement ratio
It is the ratio of the number of claims received by an insurance company and the number of claims processed by them in a year.
- Reinstatement
If you want to revive the policy after it has lapsed, you can apply for the same to your insurer. The process is known as ‘reinstatement’ and it has to be done within a specific period.
- Rider
You can include an additional paid-up feature in your existing insurance policy for a higher premium. This facility is known as a rider. It comes with added benefits.
- Moral hazard
You must be aware of this basic insurance terminology. It is related to the character and attitude of the insured. Indifference or immorality of the policyholder can result in the insurer’s loss. This condition is known as ‘moral hazard.’
- Vesting age
It is the age when you start receiving insurance benefits if your policy comes with a periodical payment plan.
Knowing the basic insurance terms will help you understand your policy documents more thoroughly. It will save you from claim denial.
