A term life insurance policy is an effective plan that helps you ensure the financial safety of your family. Here, we aim at explaining important term plan jargon to help you get a better idea about the policy. However, first, let us understand what is term insurance. It is a simple form of life insurance policy that provides financial cover to the policyholder’s nominees in case of an unfortunate event leading to the insured’s absence. A term plan is affordable, but it offers considerable benefits.
Before you buy the policy, learn the vocabulary associated with a term plan. Here is a list to help you:
The insurance provider pays a lump sum to the family members of the policyholder when they make a successful policy claim. The policyholder requires to assign the people, who will get the money. They are known as the beneficiaries. Usually, parents, spouse, or children are the beneficiaries.
When you purchase a term policy, the beneficiaries get a lump sum if an unavoidable incident results in your absence. This lump sum is known as the benefit. You and the insurance company need to decide the benefit at the time of policy initiation.
The coverage of a term plan is its sum assured. It is the benefit, which the insurer pays to the nominees of a policyholder when their claim is approved. In case of a term plan, the insurer pays the coverage only in case of an unfortunate incident.
When you are buying a term plan, it is essential to assign at least one person from your family who will be eligible to claim your term life insurance policy’s benefit. The insurance company calls this person as a claimant. There can be multiple claimants.
- Death benefit
A term policy is an insurance plan that offers a sum assured only in case of the policyholder’s absence due to any unfortunate event. In the life insurance industry, the death benefit is the total sum assured offered to your nominees.
- Death claim
To get the death benefit, your nominees need to apply to the insurance provider for the same. They can submit the request only if you are not present due to an ill-fated turn of events. Death claim is the process of making the request.
- Grace period
You need to regularly pay the premium on the due date to ensure that the term plan stays active. Failing to do so results in policy lapse, which means the insurance provider is not entitled to pay the sum assured any longer. To avoid this situation, they offer an additional few days after the due date when you can still pay the premium. The insurer calls these extra days as the grace period.
If you have a term policy, the insurance provider pays a lump sum in case of your absence because of an unfortunate incident during the policy duration. The people who receive the lump sum are the ones whom you chose while purchasing the policy. The insurer refers to them as nominees.
- Policy tenure
When purchasing an online term plan, you have to choose a duration during which the policy stays active. Policy tenure is the period of the term plan. The insurance provider pays the death benefit if something unfortunate happens to you during this tenure.
A rider is an additional coverage that you can add to your existing term plan and enhance the overall coverage. You have to pay a higher premium to buy riders, but they make the term plan more comprehensive.
To purchase the term life insurance policy, you have to pay a fixed amount to the insurer, either at once or periodically. This amount is known as premium.
Now that you know these important terminologies, you can purchase an online term plan without any confusion, and get the best policy for your family.