Insurance is a promise of compensation for specified potential future losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of a person, business, or other entity in the event of an unexpected loss.
We all know about insurance, but many times we ignore some basic characteristics of insurance policies.
Here we will try to explain some of the words that your agent normally uses when explaining any insurance policy.
In explaining the terms below, we want you to become familiar with your insurance policy.
Sum Insured (also known as Coverage): refers to the amount paid in a policy if you die within the term of the insurance plan. In the case of an endowment policy, the sum insured can be paid at maturity together with the bonus and, in the case of money back policies, a part of the sum insured is paid at regular intervals and at maturity together with bonus at regular intervals. Endowment Policy It is the guaranteed amount to be paid at maturity with or without Bonus (Depends on the policy).
Premium: The owner usually pays a fixed premium in exchange for the insurance company’s guarantee to cover economic losses suffered under the insurance contract.
Christmas bonus – It is the amount that is added to the basic sum insured under a for-profit life insurance policy.
Surrender Value – The amount to be paid by the insurer to the holder of an investment-based plan if he chooses to cancel the policy after three years (the mandatory lock-in period) but before its expiration date. The outstanding surrender value will be the premium paid to date less surrender fees and past-due loans.
Endowment Policy – In this plan, the amount is paid to the insured if he survives the term even after the validity of the insurance contract or to the beneficiary if the insured dies before the expiration date of the policy.
Term Insurance: Term life insurance is a life insurance plan in which the person can get a lot of insurance coverage with a lower premium. In this plan, the beneficiary will get the coverage amount only if the insured person dies within the policy term. Unlike the endowment policy, the policyholder does not receive any amount if the insured person lives even after the policy expires. One must have at least one term insurance policy. A financial planner can be consulted to get the best possible insurance solution.
Whole Life Insurance – A life insurance policy where benefits are payable to a beneficiary in the event of the insured’s death, whenever it occurs. The premium payment can occur for a specific number of years or for a lifetime.
ULIP – It is an abbreviation for Unit Linked Insurance Policy. A ULIP is life insurance that offers a combination of risk and investment coverage. A portion of the amount invested in ULIP is used to provide insurance coverage and the remainder is invested in equity and debt investments and expressed as units.
Money Back Scheme – A plan in which part of the sum insured is returned to the policyholder at regular intervals and a part of the sum insured is paid at maturity along with bonuses.
Rider – An additional benefit available at the option of policyholders that can alter certain features of a policy by increasing or restricting benefits.
Survivorship Benefit – The amount payable to a policyholder under an investment-based plan if they survive the term of the policy. Usually it is the sum insured plus the returns (additions / guaranteed bonds) increased.