15 Basic  Insurance Policies Everyone Should Have know 2024

Gaining an understanding of the fundamental terms used in life insurance allows us to better comprehend the features and benefits of each policy. You may be curious in the meaning of terms used in insurance, such as "Grace Period" or "Maturity Benefit." Many times, people are deterred from purchasing life insurance by these perplexing jargon, and even those who do may not fully comprehend what is meant by the various terms.

Consequently, a list of 15 important life insurance terms along with definitions is provided below to aid in your understanding of these terms. 

Policyholder

The policyholder is the person who purchases the life insurance policy and pays the premiums. Although they might not be the life assured, they might be the policyholder.

Life Guaranteed

The term "life assured" refers to the person who is covered or protected. The nominee will get the insurance amount in the event of any unfavorable circumstance, like the death of the life assured.

It's critical to recognize the distinction between a life assured and a policyholder. When a husband purchases an insurance policy for his spouse, for example, the husband is the policyholder and the spouse is the life assured.

Superior

The amount you must pay to maintain the status of your life insurance policy. Should you be unable to make the premium payment on time or during the grace period (refer to term #8), your policy may expire.

The premium amount is determined by a number of factors, including

•     The life assured's age
•     The kind of policy selected
•     chosen Sum Assured
•     The Tenure of Policy
•     Lifestyle choices like drinking and smoking

Total Guaranteed

The guaranteed sum that the nominee will get in the unfortunate event that the life assured passes away is known as the Sum Assured. The decision to determine the sum assured is typically made in light of the potential financial loss resulting from the death of the life assured.

This sum is decided upon by the policyholder when they buy the policy. In the event that the life insured person passes away within the duration of the policy, it is paid to the nominee.

Tenure of Policy

It is the time frame for which coverage is provided by the life insurance policy. The policy tenure of life insurance policies varies depending on the type of policy and the terms and conditions set forth by the insurance company.

Nominee

The individual designated by the policyholder to receive life insurance payouts and other benefits in the event of an unfavorable occurrence is known as the Nominee. (Also called the recipient). Declaring the nominee at the time of policy purchase is required. The policyholder's parents, children, and spouse may be designated as nominees if they are likely to be financially dependent on you right away.

Policy Lapsed

A policy will be cancelled if premiums are not paid on time. When the required premium is not paid, even after the grace period, the policy lapses. Certain life insurance providers provide the option to reinstate a cancelled policy provided the policyholder pays any unpaid premiums.

Grace Duration

The grace period is the amount of time that the insurance company extends to the policyholder after the premium payment deadline. The policy's protection cover will continue as long as the policy holder pays the outstanding premium amount.

Benefit of Death

It is the sum that, in the event that the life assured dies during the policy period, is paid to the nominee. Recall that the terms "sum assured" and "death benefit" are not synonymous. Because the rider benefit may also be included, the death benefit may be the same as or greater than the sum assured.

Benefit of Maturity

The sum that the policyholder receives at the end of the policy's term is known as the maturity benefit.

Free-look Term

You have a specified amount of time to return your policy, as stated in the policy document, if you do not agree with its terms and conditions or find it uncomfortable. The term "free-look period" refers to this time frame. Once the proportionate risk premium, stamp duty, and any associated medical examination costs have been subtracted, the premium will be reimbursed.

Exclusions

There are specific items that an insurance policy does not cover. The insurance company does not provide any benefits in the event that the claim is founded on these exclusions.

Suicide, for example, is not covered by a term insurance policy. For instance, the policy will be void and only 80% of the premiums paid will be payable as a death benefit if the insured commits suicide within a year of the policy's inception date.

Period of Revival

Your policy lapses if you fail to pay the premiums during the grace period. You have the option to reactivate your lapsed policy, though, if you would like to keep the coverage going. However, after the grace period expires, the reactivation procedure needs to be finished within a certain amount of time. We refer to this time as the "revival period."

Procedure for claims

If the life assured passes away within the term of the policy, the nominee files a claim to be eligible for the death benefit. We refer to this procedure as the claim process.

Traveler

Riders are extra benefits that expand your plan's coverage. You can add optional riders as an extra layer of protection to strengthen your financial security and protect yourself and your family against unintentional disability or death.

Here are a brief explanation of 15 terms related to life insurance. We hope that this guide will make understanding insurance easier for you.