Must know terms of Life Insurance


Term	Book definitions	In other words
Insured	A person or company covered by an insurance policy. In some policies that cover death, the alternative word assured may be used for the person who receives the payment in the event of the assured’s death.	The insured is the person who life is being insured
Nominee / Beneficiary	An individual who receives, or may become eligible to receive, benefits under an insurance policy.	The person who will receive the policy proceeds in case of death of the insured. The owner of the policy designates the nominee. The nominee is not a part of the insurance contract thus he/she is not required to pay any premium. The name of the nominee can be changed, unless the policy says otherwise.
Insurer	A person, company, syndicate or other organization that underwrites an insurance risk.	For example, LIC, Birla Sunlife, ICICI Prudential, HDFC Standard Life, SBI Life and so on.
Policy holder	The owner of an insurance policy; usually, but not always, the insured.	Person who buys the policy or the one who owns the policy. The insured and the policy holder may or may not be the same person. The policy owner is the person who undertakes the guarantee to pay the premiums. The insured is a part in the contract, but not legally bound to it to follow its terms.
Sum assured	The minimum amount the insurers will pay in the event of a claim.	The minimum amount of money that the policy will pay out to the nominee in case of the insured’s death or the occurrence of the insured event.
Premium	The consideration payable for the contract of insurance or life assurance.	A periodic or a single payment that a policy holder makes to the insurance company in exchange for the insurance company’s obligation to pay out the sum assured.
Maturity	The date on which the insurance policy becomes due for payment.	Some insurance policies are valid up to a certain period of time only. When this period expires, the policy is said to have reached maturity.
Lapse	A period during which a right, privilege, or insurance policy is not in effect due to a failure to act.	When the policy holder is unable to or does not pay the premium any more, within the specified grace period, the policy is said to have lapsed. If certain conditions are met, a revival of a lapsed policy might be possible.
Free look period	Typically a 10-day period during which a new-policy owner is allowed to review and return the policy for full refund of the paid premium, while enjoying the insurance cover. Also called free examination period.	An insurance policy rules offers 10-15 days within which one can revisit the purchase decision thus giving time to go through the policy’s fine print, understand how the policy is going to work and be convinced of the policy feasibility.

Avi and Soha are a newly married couple. Avi is the sole breadwinner in the family. Avi plans to buy an insurance policy on his life so that in case of his untimely death Soha’s financial future can be secure. He decides to take a policy from LIC for a coverage of Rs 8 lakh. He agrees to pay an annual premium of Rs 2,400 per annum for a period of 10 years. Going ahead with his plans, he applied for a policy and received the policy document on 15th December, 2009. Avi’s Father, Keshav decides to buy another policy for Avi. In the above case, the following are the relevant details: Insured: Avi (for both the policies) Policy holder: Avi and Keshav (two holders for two policies) Nominee: Soha Insurer: LIC Sum assured: Rs 8 lakh Premium: Rs 2,400 annually Free look period: 15 days from 15th December, 2009

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Tags: Beneficiary, Free examination period, Free look period, Insurance, INSURED, INSURER, Lapse, Maturity, Nominee, Policy holder, PREMIUM, Sum assured