Having insurance is extremely important but not having proper knowledge of it can be dangerous. There are numerous important insurance term you should know to understand thep olicy paper better. In this blog, we will talk about some widely used insurance terminology to save you from misselling your insurance policy.
Key Insurance Terms Explained
Some of the common terms are:
● Policyholder
The policyholder is the individual who owns the insurance policy. This person is responsible for purchasing the insurance and paying the premiums. Understanding your role as a policyholders is vital, as it determines your rights and responsibilities under the policy.
● Life Assured
The life assured refers to the individual whose life is covered by the insurance policy. This may differ from the policyholder; for instance, if you buy a policy for your parent, you are the policyholder while your parent is the life assured. Knowing this distinction is important when considering who will benefit from the policy.
● Nominee
A nominee or beneficiary is designated by the policyholder to receive the sum assured in case of the life assured's death during the policy term. Typically, nominees are family members or close relatives, making it essential to choose someone trustworthy.
● Sum Assured
The sum assured is the amount payable to the nominee upon the death of the life assured. For example, if a term life insurance policy has a sum assured of ₹1 crore, this amount will be paid to the nominee in case of an unfortunate event.
● Policy Term
The policy term defines how long the insurance coverage lasts, which can range from one year to a lifetime. It is critical to understand this duration as it impacts both coverage and premium payments.
● Premium
The premium is a fixed amount paid by the policyholder to maintain coverage. This can be paid monthly, quarterly, or annually and varies based on factors like age, health, and coverage amount.
● Death Benefit
The death benefit refers to the total sum paid to the nominee upon the death of the life assured during the policy term. This amount typically equals the sum assured but can be higher if additional riders are included.
● Maturity Benefit
Some policies provide a maturity benefit, which is an amount paid to the policyholder if they survive until the end of the policy term. This feature can add significant value to certain policies.
● Riders
Riders are optional add-ons that enhance coverage beyond standard terms. They may include benefits for critical illnesses or accidental death but come with additional costs.
● Free Look Period
The free look period allows policyholders to review their purchased insurance within a specified timeframe and cancel it without penalties if they change their mind. This feature provides an opportunity for reconsideration.
Avoiding Hidden Traps
Understanding these terms helps mitigate risks associated with mis-selling of insurance policies.
Mis-sold insurance policies often lead to dissatisfaction and financial loss. Being informed empowers you to ask pertinent questions and ensure that you are getting what you need from your insurance provider.
If you encounter issues such as dissatisfaction with your policy or believe you've been mis-sold an insurance product, consider consulting an expert who can guide you through complaints about insurance companies and help resolve any disputes effectively.
By familiarizing yourself with these terms and their implications, you can understand your insurance journey better and avoid hidden traps that could lead to financial distress.
