Common Terminologies Under Term Insurance
Before buying any term insurance policy, you should know about term insurance policy. It is necessary to get enough information about Term Insurance Policy. Many types of terminologies are used in term insurance policy, which is necessary for a policy buyer to be aware of. Today in this article we will discuss some common terminologies used in term insurance, with the help of which you can buy a suitable term insurance policy.
- Policy Term :
Every term insurance plan provides insurance cover to the customer for a specific period of time which is known as the policy term or policy term. This is the period for which your term insurance policy will remain active, but you will have to keep paying your term insurance policy premiums on time.
- Premium Amount :
Premium Amount is the fixed amount that a policyholder has to provide in a fixed amount to the insurer in lieu of the life cover provided under the term insurance plan. This fixed amount paid is known as Term Insurance Premium. If for any reason the policyholder does not pay the term insurance premium within the due date, then a grace period is provided to the policyholder by the insurance company. The policyholder has to pay his premiums within this grace period. If he fails in this too, then his term insurance policy lapses.
- Premium Paying Term :
Term insurance offers enough flexibility to the insurance companies for the payment of premium. Multiple premium payment options are provided depending on the terms and conditions of the insurance company, which are discussed further –
Single Premium Payment : In the single premium payment option, the entire premium for a term insurance policy can be paid as a lump sum amount at one go.
Regular Premium Payment: Through the regular premium payment option, term insurance premiums are paid at a regular interval. This interval can be monthly, quarterly, half-yearly or annually. You can choose this as per your convenience.
Limited Premium Payment: In the limited premium payment option, term insurance premiums have to be paid for a specific period of time. Whereas the coverage of term insurance policy is provided to you for a longer period.
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- Riders :
You can get additional coverage through term insurance riders at a little extra cost. Term insurance plans provide you with a variety of riders, some of the common term insurance riders are-
- Critical Illness Rider
- Accidental Death Benefit Rider
- waiver of premium rider
- disability rider
- Grace Period :
If the policyholder fails to pay the premium for the term insurance policy in time, the insurer does not cancel the term insurance policy immediately. For this premium payment, a grace period is provided by the insurer to the policy holder. Normally a grace period of 15 days is provided for paying a monthly premium. While a grace period of about 30 days is provided for policies with annual or other premium payment receipts. The policyholder has to pay his premium within these days, otherwise the term insurance policy of the policyholder is terminated.
- Life Assured :
The person who is covered by the term insurance policy is known as Life Assured. When the life assured ie the policy holder dies, the sum assured is paid by the insurance company to the person nominated by him.
- Death Benefit :
The amount paid to the beneficiary named in the term insurance policy in case of death of the policyholder taking the term insurance policy is known as Death Benefit. For example, if a term insurance policy has a cover of Rs 50 lakhs for the policy holder, then on the death of the policy holder Rs 50 lakhs is given to the nominee as death benefit i.e. Death Benefit is Rs 50 lakhs.
- Maturity Benefit :
Term insurance policy does not provide any kind of maturity benefit to the policy holder. If the policyholder survives beyond the policy term, he gets nothing in return. However now there are many term plan policies available with return of premium benefit in which the total premium paid is paid to you as maturity benefit. Hence, you can choose such term insurance plan as per your convenience.
- Free Look Period :
Today you are provided with a free look period by almost all insurance companies. During this period the policyholder can cancel his term insurance policy without any penalty. Free Look Period is provided by the insurance company to the policyholder to increase transparency. If the policyholder does not agree to the terms and conditions of the insurance company, he can cancel his policy in this free look period. Normally the free look period is of 15 days.