Demystifying Life Insurance in India: A Handy Glossary for Beginners
Life insurance is a crucial aspect of financial planning, providing a safety net for your loved ones in unforeseen circumstances. If you’re new to the world of life insurance in India, the terminology might seem a bit overwhelming. Fear not! We’ve compiled a handy glossary to help you navigate the basics of life insurance with confidence.
1. Premium:
The amount you pay at regular intervals (monthly, quarterly, annually) to maintain your life insurance policy.
2. Sum Assured:
The predetermined amount that your beneficiaries receive in the event of your demise during the policy term.
3. Policy Term:
The duration for which your life insurance policy is active. It can range from a few years to several decades.
4. Death Benefit:
The amount paid to the beneficiaries when the policyholder passes away during the policy term.
5. Nominee:
The person nominated by the policyholder to receive the death benefit in the event of the policyholder’s demise.
6. Maturity Benefit:
The amount paid to the policyholder if they survive the entire policy term. It is the sum assured plus any bonuses or returns as per the policy terms.
7. Rider:
Additional benefits can be added to a basic life insurance policy for enhanced coverage, such as critical illness coverage or accidental death benefits.
8. Policyholder:
The individual who owns the life insurance policy.
9. Surrender Value:
The amount payable to the policyholder if they choose to terminate the policy before its maturity date.
10. Premium Payment Term:
The period during which the policyholder is required to pay the premiums.
11. Grace Period:
A specified duration after the premium due date during which the policyholder can make the payment without the policy lapsing.
12. Lapse:
When a policyholder fails to pay the premium within the grace period, and the policy becomes inactive.
13. Underwriting:
The process insurers use to assess the risk associated with a potential policyholder and determine the premium.
14. Claim:
A formal request made by the nominee or beneficiary to the insurance company to receive the death or maturity benefit.
15. Cash Value:
The amount available to the policyholder if they surrender the policy before maturity. It includes the sum assured and any accumulated bonuses.
Understanding these key terms will empower you to make informed decisions when exploring life insurance options in India. Always read the policy documents carefully, and consider consulting a financial advisor for personalized guidance on choosing the right life insurance plan for your needs. Life insurance is not just a financial tool; it’s a crucial step towards securing your family’s future.
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