1. Premium
This is the amount you pay to the insurance company every year for a fixed period of time. Where as, A single premium policy will need you to pay just one lump-sum amount.
This is the amount you pay to the insurance company every year for a fixed period of time. Where as, A single premium policy will need you to pay just one lump-sum amount.
2. Insurer
The insurer is the insurance company that offers the policy.
3. Insured or Policy holder
The person in whose name the
insurance policy is made is referred to as the policy holder or the insured.
4. Nominee or Beneficiary
The person whom you name as the
nominee is the one who will get the insured amount if you die. The nominee is
referred to as the beneficiary.
5. Sum Assured
5. Sum Assured
Sum assured is the amount of money an insurance
policy guarantees to pay to the nominee in case of untimely death of the policy holder during the policy duration. This is also known as your life risk coverage and is the total amount you are insured for.
6. Maturity Value
Maturity value is the
amount the insurance company will pay you when the policy matures. This would
include the sum assured and the bonuses.
Let's take an example
Age of policy holder
|
30 years
|
Cover
|
Rs 1,00,000
|
Term
|
20 years
|
Annual premium
|
Rs 6,000
|
If the policy holder is alive when the policy matures, he/she will get Rs 1,00,000 as well as any bonuses declared during the tenure of the policy.
Let's say the bonuses amounted to Rs 1,00,000. His/her maturity value would be Rs 2,00,000 (sum assured + bonuses)
7.
Bonus
This is the amount given
in addition to the sum assured.
Reversionary bonus is a
bonus that is added to policies throughout the term of the policy. It may
or may not be declared every year. When it is declared, it will not be given to
you immediately. It will be payable to the policyholder either at the end of the policy, or, if
death occurs before that, to the nominee.
The bonus can either be
a with-profit bonus or a guaranteed bonus.
A with-profit bonus is
linked to the profit of the company. If the company makes a profit, it declares
a bonus in accordance with the profits. The profits are added to your insurance
policy and given to you either on maturity of the policy or to your nominee if
death occurs before that.
As opposed to a with-profit bonus, there is a guaranteed bonus.This is part of the sum
assured. It will be paid irrespective of the profits of the company8. Term
The term is the number of years your Life risk is covered. So, if your policy lasts for 20 years, it is referred as Policy with a 20 year term.
9. Term Insurance
10. Endowment Insurance
This is similar to Term Insurance except that, if you live beyond the policy term, an amount will be paid to you on maturity of the plan including bonuses if any. This kind of
policy combines saving (because money is given to you on maturity) with
some protection (your nominee gets an amount if you die).
11. Rider
It is an optional
feature that can be added to a policy. For instance, you may take
a life insurance policy and add on accident insurance as a rider. You will
have to pay an additional premium to avail this benefit
12. Annuity
Annuities refer to the
regular payments the insurance company will guarantee at some future date.
Say, after you cross 55, the insurance company will start giving you a
monthly or quarterly return. This is known as an annuity (premium is what you
pay them). This is often done to
supplement income after retirement.
13. Surrender Value
Halfway through the
policy, you might want to discontinue it and take whatever money is due to you. The amount the insurance
company then pays is known as the surrender value. The policy ceases to exist
after this payment has been made. You will lose out on
returns if you withdraw your policy before time.
14. Paid-up value
If you stop paying the premiums, but do not withdraw the money from
your policy, the policy is referred to as paid up. The sum assured is reduced
proportionately, depending on when you stopped. You then get the amount at the
end of the term
15. Survival Benefit
This is the amount
payable at the end of policy term.
Let's take an example.
Age of policy holder
|
30 years
|
Cover
|
Rs 2,00,000
|
Term
|
15 years
|
Annual premium
|
Rs 18,000
|
After 3 years: Rs 20,000
After 6 years: Rs 30,000
After 9 years: Rs 40,000
After 12 years: Rs 50,000
On maturity: Rs 60,000 + Bonuses, if any
After 6 years: Rs 30,000
After 9 years: Rs 40,000
After 12 years: Rs 50,000
On maturity: Rs 60,000 + Bonuses, if any
If the policyholder dies during
the term, the beneficiary will get the entire Rs 2,00,000. Irrespective of
whether or not the survival benefit has been paid.
