Life insurance is a sector which the common man has distanced from knowing about because of the perception that it is a jargonised industry with a lot of complex terminologies. There are various terms used in life insurance which may be difficult for an average buyer to comprehend. Here, we try to explain 9 terms used in the life insurance sector.
Premium: The amount that you pay for getting an insurance policy from the life insurance company is the premium. This can be paid regularly, in a staggered fashion or as a single amount.
Life Insured or Insured: The person whose life is insured by the life insurance contract. In most cases, the Life Insured is the breadwinner of the family. So, in case, the life insured meets with an untimely demise, the designated nominee is paid the full value of the Sum Assured.
Life Insurer or Insurer: The life insurance company that has insured the life of the customer. The life insurance company makes the payment of the Sum Assured to the designated nominees in case an event of death occurs to the Insured.
Sum Assured: It is the guaranteed amount that you or your nominees will receive. This may be the minimum amount or the total amount that they receive, depending on the type of policy.
Riders: An additional benefit attached to the policy to enhance and make the cover more comprehensive. It offers financial protection over and above the Base Sum Assured. Some of the popular Riders like Waiver of premium provides you with the facility of continuously getting the benefits of the policy without having to pay the premium after a particular event.
Term: The tenure of the policy. The time till which the policy remains in force, provided you make timely premium payments.
Bonus: For participating life insurance plans, life insurance companies may announce a bonus or an additional payment that is given to the insured. Bonuses are accumulated and paid at the time of maturity.
Maturity/Survival Benefit: The amount payable by the life insurance company to the Insured on maturity of the policy. This is also called as survival benefit as it is paid to the Insured on his survival till the maturity of the policy. It includes the Sum Assured as well as bonus, if any.
Surrender Value: The amount paid by the life insurance company if you surrender or redeem your policy mid-way through the policy period. You are paid the surrender value and the policy is terminated.