Insurance plans and schemes can be tricky to navigate and understand. While comparing different insurance policies and trying to decide which one is best for you, you need to understand the keywords used. Here are 10 insurance jargons demystified to help you navigate the tricky world of life insurance.
- Maturity Date
The maturity date of your life insurance contract is the pre-agreed date as defined in your policy when your contact matures and your insurance company will pay you the lump sum benefit of your policy. For instance, if you bought your policy on January 1st 2019 with a tenure of 20 years, the maturity date of your life insurance policy will be December 31st 2039.
- Sum Assured
Sum assured also known as the coverage of the policy, is the amount the insurer agrees to pay the nominee of the policy on the death of the insured person. The sum assured of any policy is chosen by the policyholder while purchasing.
Riders are an additional paid-up feature of life insurance policies that increase the coverage offered. There are several types of riders available to you which essentially just help you add new benefits to an existing insurance policy. Examples of riders include Accidental Death Benefit Rider, Accidental Total and Permanent Disability Benefit Rider, Critical Illness Cover
Hospital Cash, Waiver of Premiums, amongst several others.
- Free-look period
A free look period is essentially a time period as defined in your contract during which you can get a full refund of your life insurance plan if you do not like the plan you have signed up for. Look periods vary from insurer to insurer but can vary between 10-30 days.
- Grace Period
Most life insurance policies give you an extension if you miss the payment of a premium. For most policies, if you miss your premium payment under the annual payment plan, you get a grace period of 30 days where you will continue to be insured and entitled to receive death benefits. The grace period is 15 days for monthly premium payment plans, usually.
The underwriting process is when the insurer assesses and classifies the risk of a customer. This is when they determine whether or not to insure a particular individual and how much premium they should be charged. Underwriting is done before the policy is issued, and only after the approval of an underwriter can a policy be issued to an individual.
The premium is the amount you pay to keep your life insurance plan active and enjoy all the benefits of coverage of your policy. You need to ensure that you make premium payments on time, although most companies have a grace period even after the due date to allow you some room for payment. If you fail to make the premium payments during the designated grace period, your policy will be terminated. You can opt to pay for your life insurance policy premium on a monthly basis or as a single lump-sum payment, depending on your policy type and insurer.
The nominee of a policy is essentially the legal heir nominated by the policyholder. He or is will be entitled to receive all the sum assured and other benefits of the life insurance policy in case of the untimely demise of the policyholder. Upon the demise of the policyholder, the nominee needs to claim life insurance.
- Death Benefit
The death benefit is what the life insurance company pays the nominee when the policyholder dies during the policy tenure. It is important to note here that the sum assured and death benefit of a policy are not the same. The death benefit can be higher than the sum assured as it includes any rider and additional benefits as outlined in the policy.
For instance, the Express Term Life Plan is a pure non-linked and non-participating term life insurance plan. The plan has a death sum assured which will be paid as a lump sum either in the case of death or the diagnosis of a terminal illness. In addition to this, it also has an additional life cover option whereby you get a lump sum benefit on death or the diagnosis of a terminal illness. Additionally, in case of accidental total and permanent disability, all future premiums of the policy are also waived off. In this plan, you get the flexibility to choose the period of protection and the period of premium payment.
- Claims Process
The nominee of a policy needs to lodge a claim in case the policyholder dies during the tenure of the policy to receive the death benefits outlined in the same. Once a claim is approved the death benefits are issued to the nominee of the policy.