The policy holder is the one who proposes to purchase the life insurance policy and also pays the premium. So, if you buy an insurance plan you are the policy holder and your life is protected.
Life assured is the insured person whose life is covered in the insurance plan. Primarily it is the breadwinner of the family done to safeguard his family if he/she meets untimely death.
Life assured may or may not be the policy holder. For instance, a husband buys a life insurance plan for his wife. As his wife is a homemaker, husband pays the premium, thus the husband is the policy holder and wife are the life assured.
Sum Assured (Coverage)
The sum assured is the amount of money an insurance company guarantees to pay up on the maturity of the term or the death of the life assured or on occurrence of any other insured event during the policy tenure. It does not include the amount of bonus received.
You may come across the term “sum assured” at the time of comparing policies online, when buying, and in the policy document. The sum assured is the amount that the insurer agrees to pay on the death of insured person or occurrence of any insured event.
The nominee is the person or legal representative of the policy holder nominated by policy holder himself, to whom the sum assured and other benefits will be paid by the insurance company in case of an unfortunate eventuality. The nominee could be parents, wife, children etc. of the policy holder. The nominee needs to claim life insurance, if the life assured dies during the policy tenure.
The policy tenure is the time period in which the insurance company provides coverage to the life assured. The policy tenure can be ranged from 1 year to 100 years or whole life depending upon the type of plan, its terms and conditions and according to the need of the policy holder.
It can also be referred as policy term or policy duration.
The policy tenure decides for how long the company is providing the risk coverage. However, in the case of whole life insurance plans, the life coverage is till the time life assured is alive.
Maturity age is the age of the life assured at which the policy terminates. It is similar to policy tenure, but a different way to say how long a plan will be in force. Basically, the life insurance company declares the maximum age till which the life coverage will be provided to the life insured.
For instance, you are 30 year-old, you opt for a term plan with a maturity age of 65 years. That means the policy will have coverage till you are 65 years old, which implies the maximum policy tenure for a 30-year-old is 35 years.
The premium is the amount charged by the insurance company for the policy you have chosen. It is usually paid on a yearly basis but can be paid by number of ways. If the policy holder is unable to pay the premium before the due date some amount of fine is charged and if he does not pay between the grace period given to him/her the policy terminates.
Premium payment term/mode/frequency
You can pay life insurance premium as per your convenience. We offer Yearly, Semi Annually, Quarterly, Monthly depending upon the plan type
Regular Premium Payment- You can pay the premium regularly throughout the policy term either monthly, quarterly, half-yearly or yearly.
Limited Premium Payment- You can choose to pay the premiums for a limited amount of time. In this option, you do not pay till the end of the end of the policy term, but for a certain pre-fixed number of years. For example, 10 years, 15 years, 20 years and so on.
Single-Premium Payment- The policy holder can also choose to pay the premium for the entire duration of the plan as a lump sum in one single go.
Riders are an additional paid-up feature to widen-up the scope of base life insurance policy. Riders are bought at the time of purchase or on policy anniversary. There are different types of rider that can be bought along with the base plan. However, number and type of riders will differ from insurer to insurer.
Plus, the terms and conditions may differ from one insurance policy to another. However, here’s the list some well known riders offered by life insurance companies.
- Accidental Death Benefit Rider
- Accidental Total and Permanent Disability Benefit Rider
- Critical Illness Cover
- Waiver of premiums
Death Benefit is a payout to the nominee in case the life assured dies during the policy tenure. You will come across the term ‘Death Benefit’ quite frequently whenever you are planning to buy a life insurance plan or comparing plans online. If you are now thinking that the sum assured and death benefit are one or the same then do not be confused because the death benefit can be sum assured or even higher than that, which may include rider benefit (if any), and other benefits except in the case of term insurance where there is no accrued bonus or guaranteed additions.
Survival Maturity Benefit
It is the amount the life insurance company pays when the life assured outlives the policy tenure. Survival benefit is paid when the life assured completes the pre-defined number of years under the policy.
There is no survival or maturity benefit under term plan. However, in other life insurance policies may find survival benefit or the maturity benefit under the plan.
It is a length of time after the due date during which the payment should be made without penalty. A grace period can be a period of 15 days in case of monthly premium payment mode and 30 days in case of annual premium payment mode. If the policy holder does not pay within this period the policy gets terminated.
It is the amount payable to the policy holder when he surrenders the insurance policy before the maturity date.
But you must clearly read the terms and conditions whether a plan offers a surrender value or not. And if it offers then what is its value because all insurance plans do not have surrender value.
It is the reduced sum assured paid by the insurance company if a policy holder fails to pay premiums after a certain period. Under this option provided by the insurance companies the sum assured is reduced in portion to the number of premiums paid. If other benefits related to sum assured are payable, these benefits will now be related to the reduced sum insured, which is the paid-up value.
If the policy holder does not pay during the grace period the policy lapses. However if the policy holder still wants to continue then the insurance company provides an option for reactivating the insurance policy within a specific period of time after the grace period end. This period is known as revival period. To reinstate the policy approval of the underwriters are required.
Underwriters are the ones who evaluate risk involved in the policies. The process of risk evaluation starts before the issuance of the policy and ends with settlement of the claims. Only with the approval of an underwriter a policy is issued. They analyze the risk of a future event and also with their approvals claims are paid to the nominee.
While calculating taxable income, Life Insurance premium paid by a resident natural person is deductible up to the limit of 25,000. Where both husband and wife have opted as couple, the insurance paid can be clubbed to claim for the deduction, subject to maximum of Rs 25,000.
An item or eventuality specifically not covered by the insurance policy is known as exclusions. Before you buy an insurance policy it is necessary to read the exclusions carefully. If any of the things mentioned under exclusions occurs then the insurance company will not pay any benefit.
For instance, Suicide (within 2 years of insurance start date) is an exclusion in every insurance plan.
In case the assured passes away during the policy tenure, nominee needs to file a claim to receive the death benefit as mentioned in the policy. This process is known as claim process