One of the most fundamental necessities for a person today, is to build their finances in a way that sustains them not only in the present but also in the future. Life insurance plans are one of the ways to achieve that security, where a person is able to ensure the protection of those dependent them; by choosing to insure themselves in the event of their death or illness.
Life insurance plans can be defined as an insurance instrument which enable the coverage of the needs of the insured and their dependents through an assured benefit sum in the event of the policyholder’s demise. A standard life insurance policy in India is considered to be one of the most affordable means of securing one’s future where premiums are low and one can customise their coverage by comparing life insurance quotes.
There are several combinations and types of life insurance policies available for a policyholder to choose from; 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 compare life insurance quotes across insurance providers and their best life insurance customisable plans. An example of the same is a term life insurance calculator that a person can use these by adding their requirements to get an approximate idea of the plan that is the most suitable for a certain income and lifestyle.
Since life insurance is an important process and requirement, it helps for first-time policyholders to make an informed choice and find life insurance quotes best suited for their needs and budget. Therefore, let us look at the basic life insurance terms everyone needs to know about before choosing best life insurance plan:
- Premiums: A feature that is recurrent in most life insurance and term plans in India, it is the nominal payment that is paid to the insurance provider by the policyholder on a regular basis throughout the policy tenure. This payment maintains the coverage provided by the insurance provider and adds to the payout that is assured to the beneficiary at the end of the policy term. Life insurance quotes are dependent on this figure.
- Policy Tenure: it is the tenure of coverage determined and decided upon by the policyholder after consultation with the insurance provider. The policy tenure for a life insurance plan is usually longer than most standard insurance plans. The duration for the best life insurance in India may range somewhere between 25-30 years. The plan reaches maturity once the tenure is completed.
- Sum Assured: It is the promised payout amount promised to the beneficiary of the policy in the event of the insured person’s passing. This amount given within the life insurance quotes is usually a financial resource for the beneficiary to maintain their financial obligations after a disturbance in the income patterns.
- Policyholder: The person who signs the insurance documents and maintains the recurrent premium payments and any additional policy costs is the policyholder.
- Insured: The individual whose life is insured under the term plan is called the insured. It is in the event of this person that the insurance provider is liable to process the assured payout amount to their dependent beneficiaries.
- Beneficiary/Nominee: The individual who is designated as the person to receive the assured sum payout in the event of the insured person’s passing is called the beneficiary or nominee. These are usually spouses, children or other family members who may be financially dependent on the insured.
Image Source: Shutterstock - Death Benefit: It is the payout sum paid to the nominee if the insured passes away during the policy tenure. Sum assured and death benefits are not the same, as the latter may be higher than the sum assured or even be equal with some rider benefits.
- Maturity Benefit: It is the sum paid to the beneficiaries of the policy at the time of its tenure or maturity.
- Riders: With a nominal amount paid over the existing premium plan, a policyholder can expect to secure the additional cover provided under various riders that are made to protect the policyholder from situations apart from death.
There are riders available in term insurance for situations such as Accidental Death, Critical Illness, and Disability.
- Free-Look Period: If a potential policyholder is not satisfied or sure about the policy terms and conditions, they have a stipulated time period within which they can return the purchased policy and claim a refund. This time period is called the free-look period, where their risk premium is refunded or incidental costs such as those for stamp duty and medical tests can be compensated for.
- Claim Process: In the event the insured passes away, the beneficiary can lodge a claim for the sum assured/death benefit to the respective insurance provider.
- Lapsed Policy: If a policyholder is unable to maintain the premium payments, the policy lapses after the grace period is over. This means the policyholder loses all coverage and the best life insurance benefits under the plan.
- Grace Period: The time period given by the insurance provider to the policyholder to fulfil their outstanding premium payments before lapse is called the grace period.
- Revival Period: After a policy lapses after non-payment of premiums and the grace period, the policyholder is given the option to revive their policy within a specific time period, which is called the revival period.
- Exclusions: Certain situations where the insurance provider can deny benefit claims or not provide coverage are called exclusions. It may be any particular illness/injury or death by suicide in some term plans.
Source:
https://www.pwc.in/assets/pdfs/publications/2017/india-insurance-perspective.pdf
