Know The Important Terminologies Of Life Insurance

2024-08-02

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Life insurance is proving to be one of the most essential financial tools for the modern Indian family. It provides a financial cover to one’s family in case of the unfortunate death of the life insured. In India, the importance of life insurance cannot be overstated. As per recent reports, 75% of the Indian population, i.e. nearly 988 million individuals do not have a life cover. This can largely be attributed to a lack of awareness of its primary features and distinct benefits. Thus, in order to increase life insurance penetration in India, the aim should be to promulgate the key concepts and features associated with life insurance.

For a beginner, to understand all about life insurance could be a task, owing to a large number of technical terms and insurance-related jargon. Here are the most basic life insurance key terms for one to begin with.

Life insurance key terms

Sum assured

The sum assured, also known as the life cover, lies at the heart of a life insurance policy.

The sum assured is the amount of money promised to the policyholder’s nominee upon their death, as per the terms of the policy.
The general rule of thumb is to opt for a sum assured that is 10-15 times your current annual income.

Premium

The premium is another life insurance key term.

The amount that you pay your insurer for continued policy coverage is called the premium.
The premium-paying frequency can differ as per your financial needs. It can usually be paid monthly, annually or bi-annually.
If you fail to pay your premium as the terms of the policy require you to, your policy might terminate after factoring in the applicable grace period.

Maturity

You may have heard of the phrase, ‘once your policy reaches maturity’. This merely implies that your policy period is over.
In certain cases, you might receive a lump sum amount upon maturity, if you outlive the policy term. This is called the maturity benefit.
In case of traditional life insurance policies, you can renew the policy upon maturity and continue enjoying the life cover.

Death benefit

In case of your unfortunate demise within policy term, the person you had nominated while acquiring the policy will receive an amount which could include sum assured, bonuses, premiums paid, or any other amount as per policy terms. This amount is called the death benefit.

Nominee

The nominee is a person appointed by you while opting for the policy.
The death benefit is paid to this nominee.
It could be your spouse, child, parents, etc. There is usually a separate procedure in case you want to name a friend

Riders

These are additional benefits that you can add to your policy to enhance your coverage. They can be bought while buying the policy or even afterwards. They save you the hassle of opting for another policy. Some of the most common riders offered by life insurance firms are

Accidental Death Benefit
Accidental Total and Permanent Disability Benefit
Critical illness Cover
Child Support Benefit
Waiver of Premiums (in case of a certain incident such as accident, further premiums are waived off and policy remains active)

Grace period

If you fail to pay your premium, the insurer will offer you a buffer time called the grace period. However, if you fail to clear your dues even after the grace period, your policy might lapse. It is advisable to choose a premium amount and mode that fits well into your budget to avoid lapse of policy.

Surrender value

If your policy term hasn't ended and you still wish to discontinue your policy, you surrender it. You might receive an amount from your life insurance company, which depends on policy terms. It would be best to check this while buying the policy itself.

Claim

In case of one’s death during the policy term, their nominee would have to make a claim with the insurance company. It is also necessary for your nominee to know all about life insurance in order to carry out this process smoothly and receive the proper amount to help your family.

Conclusion: Now that you’re acquainted with the various benefits a life insurance policy can provide, here’s a look at a policy that packs them all in. Canara HSBC iSelect Smart360 Term Plan. The iSelect Smart360 Term Plan is a highly flexible plan that can be molded as per your financial goals and requirements with various options for coverage, premium payment, and payout as well. It also offers lucrative options like spouse cover, accidental death benefit and child support riders, return of premiums option, and much more.

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