Life Insurance Terms to Know

Do you find the terminology involved with life insurance confusing? Here’s a guide to the different life insurance terms to help you make sense of all the jargon.

• Policyholder: This person has bought the insurance policy. The policyholder may or may not be the one whose life is insured.
• Life Assured/Insured: The person whose life the plan protects. If you have bought a policy for yourself, then you are both the policyholder and the insured person.
• Premium: The sum you have to pay to the insurance provider to obtain life cover.
• Sum Assured (SA): The insurer guarantees to pay this amount as your life coverage.
• Policy Tenure : Your life is insured for this duration.
• Premium payment term : It is the period through which you have to pay the premium. This term may not be equal to the policy tenure.
• Premium payment frequency : It is the number of times you have to pay the premium in a year. It can be monthly, quarterly, half-yearly, annually, or only once during the entire tenure.
• Nominee/Beneficiary : This person collects the payout when an unfortunate event takes place.
• Death Benefit: Your nominee receives this amount when an eventuality occurs. It may be higher than the SA, depending upon the terms of the policy.
• Maturity Benefit: You receive this sum as the policyholder if you survive the tenure of the policy. The amount is usually higher than the SA.
• Surrender Value: If you discontinue your life coverage before the maturity date, the insurer pays you this amount.
• Paid-up Value: If you stop paying the premiums after a certain period, your life cover continues at a reduced amount. At maturity, you receive a sum lesser than the SA, known as the paid-up value. It depends on the number of premiums you paid.
• Rider: You can add extra benefits to your policy and take care of every emergency by purchasing riders at a nominal cost.
• Free-look period: You can cancel your plan free of charge during this time.
• Grace period: After the due date, during this interval, you can pay the premium to keep your policy active.
• Revival period: If your policy lapses due to missed premiums, you can re-activate it within the revival period.

Life insurance acts as protection, savings, and investment all rolled into one. A better understanding of the different life insurance terms will ensure that you make informed decisions about selecting the right product.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.