10 Most Commonly Insurance Terms & Jargon: Simplified | ICICI Blogs
Introduction – Availing insurance has never been easier, as the internet has opened up a world of possibilities. Insurance terminology, however, is not always easy to understand and make sense of. Read on to understand what the most common insurance terms mean.
Understanding Insurance Terms and Concepts.
Basic insurance terms and concepts include the following:
- Death Benefit – The term ‘death benefit’ is one that is littered across several insurance policies and can be quite easy to spot, when comparing multiple insurance plans. Death benefit refers to the sum paid by a life insurance company to the nominee in the event that the life assured passes away, during the policy’s tenure. Death benefit must not be confused with the sum assured. The amount of money paid under death benefit can amount to the sum assured or can exceed it, in addition to including a rider benefit (if it exists), along with other benefits.
- Free-Look Period – This is ordinarily applicable to any new insurance policies purchased. This time frame is used to refer to the period during which a newly insured individual can return the policy they have purchased.
- Life Assured – ‘Life assured’ is the term used to address the insured individual. The life assured individual is the one for whom the insurance plan is bought and for which coverage is provided in the unfortunate event of their untimely death. Ordinarily, the breadwinner of a family is identified as the life assured under most insurance policies. The person who is the life assured may or may not be the policyholder.
- Maturity Age – ‘Maturity age’ is the term used to address the age at which the life assured’s policy comes to a close or terminates. While similar to the term policy tenure, it serves as an alternative way of making clear, how long the policy will be in effect. Ordinarily, most insurance companies make clear the maximum age, till which the insurance coverage will be available to the life insured.
- Nominee – The term ‘nominee’, is used to identify the person or legal heir who has been nominated by the policyholder, to whom the sum assured along with any other benefits will be paid to, by the Life Insurance company, in the event that the policyholder dies. The nominee could range from the policyholder’s wife and children to their parents. Should the policyholder die, the nominee is required to claim their life insurance.
- Policy Tenure – The duration for which a policy is active and for which the insurance coverage is provided, is referred to as the policy tenure. This tenure can range from a year to 100 years, or even up to an insured individual’s entire life. This however, is dependent on the insurance plan in question and the terms and conditions that hold true for it.
- Policyholder – A policyholder can be understood to be the person who seeks to purchase a life insurance policy and pays the premium associated with it. They can be understood to be the owner of the policy. It is important to note that the policyholder need not be the life assured.
- Premium – A premium is referred to as the amount of money paid to the insurance company, to keep the insurance plan active, and to be able to access a continued coverage. In the event the premium isn’t paid prior to the payment being due and exceeds the grace period, the policy comes to a close i.e., it is terminated.
- Riders – Riders can be understood to be additionally paid for features that expand the scope of the basic insurance policy. These may be availed of when the plan is first bought, or on its anniversary. The kind of riders available may vary from one insurance company to another.
- Sum Assured – The primary purpose of Life Insurance is to provide a life cover to those that are insured. Sum assured is used to refer to the amount that is agreed upon, that the insurer will pay in the event that the insured individual dies or another insured event occurs.
Conclusion: It is important to understand that the insurance policy that you seek to purchase, and have a thorough understanding of all that it does and doesn’t provide coverage for.
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