Term Insurance Terminology you need to Know
Everybody understands the importance of having insurance. However, navigating the insurance world can often feel like deciphering a complex code due to the jargon used. Thankfully, we’re here to help you make sense of everything. Our comprehensive guide provides a clear understanding of important term insurance words.
What Is Term Insurance?
Term insurance is a life insurance product that offers coverage for a specified period or term. It provides financial protection to your loved ones in the unfortunate event of your demise during the policy tenure. To help you better understand term insurance; let’s look at the key terms insurance companies use.
Decoding the Jargon: Key Terms Explained
Free Look Period:
Claim Settlement Ratio:
The policyholder or policy owner is the individual who purchases the policy and pays the premiums.
The person who receives the insurance coverage is the insured or life assured. Very often, the policyholder and life assured is the same person. However, that is not always the case.
The policy term or tenure refers to the length of time that the life assured receives insurance coverage. It defines the timeframe during which the insured’s beneficiaries can receive the death benefit.
The premium is the amount the policyholder pays the insurance company in exchange for the term insurance coverage. It can be paid annually, semi-annually, quarterly, or monthly, depending on your financial preferences and policy terms.
Term plan offerings come with different premium payment options. In a regular pay policy, the policyholder must pay annual premiums for the entire policy term. For limited pay plans, the policyholder pays premiums for fewer years than the policy term. Always check your policy documents to understand your plan’s payment mode.
The sum assured or coverage amount is the predetermined minimum sum the life assured’s beneficiaries will receive as the life insurance benefit. It’s the financial protection provided to loved ones.
The death benefit is the primary purpose of term insurance. It refers to the payment the insurance company makes to the life assured’s beneficiaries in the event of their passing during the policy term. It includes the sum assured and any other bonus amounts.
A rider is an optional add-on to a term insurance policy. It offers additional benefits beyond the basic coverage. Riders can include critical illness coverage, accidental death benefits, waiver of premium in case of disability, and more.
The free look period is a small window that starts right after the policy is issued. During this time, you can choose not to continue the policy and cancel it.
The claim is the formal request that the policyholder or their family members need to make to the insurance company to receive the benefits of the policy in the event of the demise of the life assured.
The nominee is the person the policyholder designates to receive the death benefit. It could be a family member or any other person.
The claim settlement ratio represents the percentage of claims an insurance company has paid in a specific period. It lets you know how many claims the company has settled as a percentage against all claim requests received.
The grace period is a specific duration after the premium due date. It provides the policyholder additional time to pay the premium without losing coverage. It’s a buffer that prevents immediate policy termination due to missed payments.
A policy lapse occurs when policyholders fail to pay the required premium within the grace period. It can lead to the termination of the policy and the loss of coverage.
These terms hold the key to understanding the intricacies of your term insurance policy. By understanding these terms, you can make informed decisions about your term plan and your family’s financial future. Before purchasing term insurance, read the policy documents carefully. Evaluate the terms and conditions and select a plan that meets your needs.
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ARN - ED/09/23/4736
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##Individual death claim settlement ratio by number of policies as per audited annual statistics for FY 2021-22.
#Provided we have received all the relevant and required documents and no further investigation is required. Claim settlement process would be completed within stipulated timelines once the claim request is approved