Do the jargons and the language of the insurance industry sound confusing? Have you ever wanted to buy term insurance but the heavy, scary words keep you away from doing so? The technical terms and legal phrases used in insurance policies can intimidate people and cause them to delay their plan to buy term insurance. However, you cannot deny the fact that term insurance is an extremely important part of your financial plan and should be bought at the earliest.
Here are some basic term life insurance jargons explained in simple words to help you understand the details of a policy:
Let us begin with the policy itself. Term insurance is an insurance policy that provides coverage over the life of the insurance bearer and provides a guaranteed amount called sum assured to the dependents or the nominees in case of the unfortunate demise of the life insured. It is the most economical insurance policy with a minimal premium amount.
Term insurance must not be considered as an investment but as a cover over the life insured, which in turn serves as financial aid to the grieving family in case of an unfortunate demise of a family member.
When you buy term insurance, one of the first few words that stand out is the premium. The insurance premium is the amount you pay to the insurance company in lieu of the promised benefits in the form of sum assured in case of your unfortunate demise. The benefits are availed by the dependents of the insured person. Depending upon your policy type, different insurance companies offer different premium rates which can be checked beforehand when you buy a term plan online.
The next most commonly used term in an insurance policy is the sum assured. The sum assured is the promised amount that the insurance company will pay against your term plan to your dependents. It is a guaranteed amount that your legal heirs and dependents will receive in to help them with their financial needs.
Life insured is a term used to address the person who is covered under the policy – the policyholder. You can buy the policy for yourself or for your near and dear ones, such as spouse, children, or parents.
Proposer refers to the person who owns the insurance policy and pays the premium. The insured and proposer are the same for an individual policy. For a joint policy, the primary policyholder (one who enters into the contract with the insurer), is the proposer.
Nominee in an insurance policy is the death benefit receiver. In case of the demise of the life insured, the person entitled to receive the benefits is a nominee.
When you buy a term plan online, you come across several term plan policies offered by different insurance companies. One of which is a ‘with profit’ policy that offers a bonus addition to the sum assured on an annual basis. Not all the insurance policies offer a bonus, so you must check for this facility before you buy term insurance.
ULIP stands for Unit Linked Insurance Plans that combine the benefits of insurance and investment. ULIPs are long term investment tools that account for both wealth appreciation and life cover under the same policy. However, the premium for ULIPs can be nearly 10 times the premium of a simple term insurance plan. You can compare the premium rates of ULIPS when you buy a term plan online.
Term insurance is a necessary tool to safeguard the interests of your family. The sooner you get one, the better it is. Don’t let these terms confuse you and insure the interests of your loved ones at the earliest.