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15 basic Life Insurance terms that everyone should be familiar with

One of the most basic needs for a person today is to develop a financial foundation that will support them not just now but also in the future. Life insurance plans are one of the ways to accomplish that security, in which a person can choose to insure themselves in the event of their death or illness, so ensuring the protection of those who rely on them.

Life insurance plans are described as an insurance instrument that provides coverage for the needs of the insured and their dependents in the event of the policyholder’s death through an assured benefit sum. In India, a basic life insurance policy is considered to be one of the most cost-effective ways of safeguarding one’s future, with inexpensive premiums and the ability to customise coverage by comparing life insurance quotes.

There are many online resources that are evolving with measurement metrics to help policyholders compare life insurance quotes across insurance providers and their best life insurance customisable plans; from what is a personal term plan to what is group term life insurance, there are many online resources that are evolving with measurement metrics to help policyholders compare life insurance quotes across insurance providers and their best life insurance customisable plans. A term life insurance calculator is an example of this, which a person may use by entering their needs to get an approximate sense of which plan is best for a given salary and lifestyle.

Because life insurance is such an important process and need, it can be difficult for first-time policyholders to make an informed decision and locate the finest life insurance rates for their needs and budget. As a result, let us have a look at some basic life insurance terminology that everyone should be familiar with before selecting the best life insurance plan:

  • Premiums: A recurring component in most life insurance and term plans in India, premiums are the nominal payments made by the policyholder to the insurance provider on a regular basis throughout the policy term. This payment keeps the insurance provider’s coverage in place and contributes to the payout that the recipient will receive at the conclusion of the policy term. This value is used to calculate life insurance quotes.
  • Policy Tenure: The policyholder determines and decides on the duration of coverage after consulting with the insurance provider. A life insurance policy often has a longer policy term than most other types of insurance. The finest life insurance in India could last somewhere between 25 and 30 years. When the tenure is over, the plan gains maturity.
  • Sum Assured: This is the guaranteed payout amount to the policy’s beneficiary in the case of the insured person’s death. This sum, which is commonly included in life insurance quotations, serves as a financial resource for the beneficiary to meet their financial commitments in the event of a change in income patterns.
  • Policyholder: The policyholder is the person who signs the insurance contracts and is responsible for periodic premium payments as well as any additional policy charges.
  • Insured: The insured is the person whose life is covered by a term life insurance policy. In the event of this person’s death, the insurance company is responsible for distributing the guaranteed payout amount to their dependant dependents.
  • Beneficiary/Nominee: The beneficiary or nominee is the person who is specified to receive the assured sum payout in the case of the insured person’s death. These are frequently wives, children, or other family members that rely on the insured financially.
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  • Death Benefit: If the insured passes away during the policy’s term, the death benefit is paid to the nominee. Death benefits and sum assured are not the same thing, as the latter may be larger or even equivalent to some rider benefits.
  • Maturity Benefit: This is the amount paid to the policy’s beneficiaries at the end of the policy’s term or maturity.
  • Riders: A policyholder can expect to acquire additional cover under various riders that are meant to protect the policyholder from situations other than death for a modest sum paid above the existing premium plan.
    Term insurance riders are available for cases including accidental death, critical illness, and disability.
  • Free-Look Period: If a potential policyholder is not satisfied or certain about the policy terms and conditions, they have a certain amount of time to return the insurance and get a refund. The free-look period is a period during which the risk premium is repaid or incidental charges such as stamp duty and medical exams can be reimbursed.
  • Claim Procedure: If the insured passes away, the beneficiary can file a claim with the insurance company for the sum assured/death benefit.
  • Lapsed Policy: After the grace period expires, if a policyholder is unable to keep up with premium payments, the policy will lapse. This implies the policyholder loses all coverage as well as the plan’s best life insurance payouts.
  • Grace Period: The grace period is the amount of time offered by the insurance provider to the policyholder to make any outstanding premium payments before the policy expires.
  • Revival Period: After a policy lapses due to non-payment of premiums and the grace period, the policyholder is given the option to revive their policy within a certain time frame, known as the revival period.
  • Exclusions: Exclusions are scenarios in which an insurance provider may deny a benefit claim or refuse to provide coverage. In some long-term plans, it may be any illness or injury, or even suicide.
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