Life Insurance is highly important in terms of having your financial future secured. It is important that you opt for a policy or a plan that meets your needs. When you visit a life insurance advisor, it is quite likely that he will introduce you to certain terms that may be unfamiliar to you. It is very important you acquaint yourself with some important life insurance terms, so that no unscrupulous broker can take you for ride. It will also allow you to choose the most appropriate life insurance protection to fulfill your needs.
Following are some important basic terms that will help you in understanding Life Insurance better:
1) Beneficiary: People who have been named in the policy to be eligible for getting the earnings of your policy, after your death.
2) Cash or Surrender Value: The cash amount against which you can get a loan and which is available for withdrawal in case of urgency. If you choose to use this value, your death benefit goes down and increases the likelihood of policy lapsing.
3) Sum assured: It is the smallest amount assured to the policy owner. It plays an important part in deciding the amount paid as premium. In case of your death, the policy holder gets minimum of this amount.
4) Premium: The amount you have to pay to the insurer so as to avail life insurance protection. It depends on your age, kind of insurance policy selected and your health status.
5) Endowment policy: A policy which is a combination of life insurance protection as well as investment. It invests money in debt instruments. The life cover is in vogue till the policy matures.
6) Policy term: Period during which you have to pay premiums to enjoy life insurance protection.
7) Term policy: A policy providing just the life covers without any investment aspect. There are no returns on this policy, making it the cheapest policy.
Whole life policy: A policy providing life insurance protection till your death, as well as returns on the premiums paid. The premiums are invested in different debt instruments.
9) Unit link insurance policy: A policy with life insurance protection and returns on the premiums paid. Here you invest in debt, equity or a mixture of both. Policy holder has the option of deciding where his premiums are invested. This is one of the most expensive insurance plans in the market.
10) Policy holder: The person named on the policy bought. It may be the person paying the premiums or a person who receives an insurance policy as gift.
11)Paid-up policy: A policy that is in vogue but there are no more premiums paid.
12) With profits policy: A policy where the insurance company awards the policy holder a part of its profits as bonus. Bonuses can be either yearly or on the expiry of the policy.
13) Policy loan: A loan given by the insurer to the policy holder from its general funds. It uses the policy’s cash value as collateral for the loan.
Know these common life insurance terms and you will get the best insurance policy for your need. The Above terms are the most important terms related to Life Insurance and knowing them properly will make things better for you.