Insurance is a promise of compensation for specific potential future loss in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss.
We all know about insurance but many times we ignore some basic features of insurance policy.
Here we will try to explain some of the words which your agent normally use while explaining any insurance policy.
By explaining the below terms we want to make you familiar with your insurance policy.
Sum assured (also known as Cover) - This refers to the amount paid out on a policy if you die within the Term of insurance plan. In case of an endowment policy Sum Assured can be paid out on maturity along with the bonus and in case of Money back policies a part of Sum Assured is paid out on regular intervals and on maturity along with the bonus. On regular intervals. Endowment policy It is the guaranteed amount to be paid out at maturity with or without Bonus (Depend upon the policy).
Premium - The owner usually pays a fixed premium amount in exchange for the insurance company's guarantee to cover any economic losses incurred under the scope of the agreement of insurance.
Bonus - It is the amount added to the basic sum assured under a with-profit life insurance policy.
Surrender value - The amount payable by the insurer to the owner of an investment-based plan in case he opts to terminate the policy after three years (the mandatory lock-in period) but before its maturity date. The surrender value will be the premium paid till date minus surrender charges and any outstanding loans due.
Endowment Policy - In this plan the amount is paid to a policyholder if he lives survives the term even after the tenure of the insurance contract or to the beneficiary if the insured person dies before the date on which the policy matures.
Term Insurance - Term life insurance is a life insurance plan in which person can get the huge insurance coverage with fewer lower premiums. In this plan beneficiary will get the cover amount only if the insured person dies within the policy term. Unlike Endowment policy policyholder don't get any amount if insured person lives even after the policy expires. One should have at least one Term Insurance policy. One can consult a financial planner for the best possible insurance solution.
Whole Life Insurance - A life insurance policy where benefits are payable to a beneficiary on death of the insured, whenever that occurs. The premium payment can happen for a specified number of years or throughout life.
ULIP - It is an abbreviation for Unit Linked Insurance Policy. A ULIP is a life insurance policy which provides a combination of risk cover and investment. Some part of the amount invested in Best Ulip Insurance plan is used to provide the insurance cover and the remaining is invested in equity and debt investments and denoted as units.
Money Back Plan - A plan in which part of the sum assured is paid back to the policyholder at regular intervals and a part of sum assured is paid at maturity along with bonuses.
Rider - An add-on benefit available at the option of the policyholders that may alter certain features of a policy by increasing or restricting benefits.
Survival benefits - The amount payable to a policyholder under an investment-based plan if he survives the policy term. Typically, it is the sum assured plus returns (guaranteed additions / bonus) accrued.