These days, many people come across videos, posts, or ads about life insurance on social media and other platforms. Even when they consult a financial advisor for guidance, they may still find it difficult to fully understand the advice. The main reason behind that is many people don't fully understand the common terms used in life insurance. Words like premium, maturity, claim, or nominee may sound complicated at first, but in reality, they are simple once explained clearly.
In this blog, we will guide you through the Top 12 Most Common Life Insurance terms you will often see or hear:
1. Premium:
A premium is the amount of money you pay regularly (monthly, quarterly, half-yearly, or yearly) to keep your life insurance policy active. Think of it as the cost of protecting your future.
2. Maturity:
Maturity refers to the date when your life insurance policy ends. Upon reaching this period, you will receive the assured benefits (lump sum payout) from the company.
3. Claim:
A claim is a request made by the policyholder or nominee to the insurance company to receive the policy benefits, either after maturity, survival, or in case of the policyholder’s unfortunate demise.
4. Sum Assured:
It is this amount which is assured by the insurance company to you when the policy comes to a close or in case something unexpected (Death) happens to insured within the policy duration. It is the basic guarantee of the policy.
5. Underwriting:
Underwriting is the process in which the insurance company checks your details, including age, health, occupation, and lifestyle, before issuing you a policy. This analysis helps in setting up your premium and right coverage.
6. Reinsurance:
Just like you take insurance for your life, insurance companies also protect themselves through reinsurance. Nepal Life shares part of risk to greater reinsurance companies so as to remain financially stable even for huge claims.
7. Surrender Value:
In case you decide to cancel or stop the policy before it matures, you are guaranteed you do not lose everything. Surrender value is the amount you will get after some certain charges are deducted. However, it is normally lower than the complete maturity benefit.
8. Lapsed Policy:
When you fail to pay premiums on time, your policy gets inactive or lapsed. That is when you no longer get the protection or benefits until you renew or restore it.
9. Nominee / Beneficiary:
A nominee or a beneficiary is an individual you choose to receive policy benefits in case something unexpected happens to you. These are usually close members of a nominee's family like their partner, children, or parents.
10. Insured:
The insured is the person whose life is protected by the insurance policy. If something happens to the insured, the insurance company provides financial support in accordance with the policy’s rules and terms.
11. Policyholder:
The individual who purchases and owns the insurance policy is known as the policyholder. The premiums are their responsibility. Although, the policyholder and the life insured may be the same individual, but in some cases they may also be different.
12. Survival/Maturity Benefit:
If the individual whose life is assured remains alive beyond the policy tenure, the insurer pays the survival/maturity benefit. Life insurance products that include investment components generally provide this benefit. For instance, In an endowment Life insurance policy, you may receive part of the benefit periodically as a survival benefit, and the full maturity benefit at the end of the policy term.
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Conclusion
Life insurance is not only about money; it is also about safety, hope, and comfort for you and your family. The terms may seem hard to understand at first, but once you know what they mean, it gets easier for you to make the right decision and get the right plan. At Nepal Life Insurance, we believe financial security begins with the right knowledge, so you can feel sure about keeping your family's future safe.
Most Asked Question on Life Insurance in Nepal:
1. Why is it important to understand life insurance terms?
✓ Because it helps you make the right choice and ensures you know exactly what benefits you and your family will receive.
2. Is the policyholder always the insured?
✓ Not always. For example, a parent can buy a policy for their child. In this case, the parent is the policyholder, and the child is the insured.
3. What happens if my policy lapses?
✓ If your policy lapses due to missed premium payments, you can usually revive it by paying the due premiums and penalties within a certain period.
4. What is the difference between sum assured and maturity value?
✓ Sum assured is the amount guaranteed under the policy. The maturity value on the other hand, is the total amount you will receive at the end of the insurance contract, which may include bonuses, profits, or any
additional premiums depending on the insurance contract.
5. How safe is my insurance with Nepal Life Insurance?
✓ Nepal Life Insurance is supported and backup by reliable reinsurance partners, such as Hannover Re Life (Germany), Nepal Reinsurance, and Himalayan Reinsurance Company. This provides a level of financial security that is guaranteed to all policyholders.