life insurance. However before buying one, it is essential for you to
know some important life insurance terms. Why? So that you can choose
the insurance policy that offers a life insurance protection suitable
for you. Understanding these life insurance terms will help you choose
the best life insurance cover for you, with the optimum level of ;life
insurance protection.
* Beneficiary: Person(s) whose names have been mentioned in the policy
to be eligible to get the proceeds of your policy, in case of your
death.
* Cash/Surrender Value: The cash amount available for obtaining loans
and which can be withdrawn in case of emergencies. If you use this
value, your death benefit will reduce death benefit and increase the
chance of policy lapse.
* Sum assured: This is the minimum amount guaranteed to the policy
owner. It determines the amount you will pay towards premium.
* Premium: This is the amount you to the insurance company in order to
enjoy life insurance protection. The amount is decided by your age,
type of insurance policy chosen and your health situation. If you are
young, healthy and opting for a plain term plan, your premium will
lower than if you are older, have some debilitating condition and
opting for a unit link insurance plan.
* Endowment policy: A policy that provides life insurance protection as
well as an investment avenue. It invests its corpus in debt instrument.
The life cover lasts for the term of policy selected.
* Policy term: This is the duration for which you are paying premiums
to avail of life insurance protection.
* Term policy: A policy that offers only the life cover without any
investment option. Usually, this is the cheapest policy.
* Whole life policy: A policy that offers life insurance protection for
as long as you are alive, along with returns on the premiums paid. The
corpus is invested in various debt instruments.
* Unit link insurance policy: A policy that provides life insurance
protection as well as returns on the premiums paid. This policy can
invest across debt, equity or a mixture of both.
* Policy holder: The person on whose name the policy is purchased. It
could the person who pays the premiums or another person who has been
gifted an insurance policy.
* Paid-up policy: A policy that is in force but without having to pay
further premiums.
* With profits policy: A policy in which the insurance company pays the
policy holder a share of its profits in form of bonus. This can be
either annually or when the policy expires.
* Policy loan: A loan offered by the insurance company to the policy
holder from its general funds, by using the policy's cash value as a
security for the loan.
These are some of the common life insurance terms
you will find being used by the insurance brokers as well as insurance
companies. These terms will definitely help you in short listing the
most suitable insurance policy for you.
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Term life
insurance provides coverage for a limited period of time, the relevant
term. After that period, the insured can either drop the policy or pay
annually increasing premiums to continue the coverage. If the insured
dies during the term, the death benefit will be paid to the
beneficiary, So that before buying life insurance, it is essential for
you to know some important life insurance terms.
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