Sometimes jargon can be confusing and wrong assumption of the term can lead you to lot of trouble. Here are few terms which you should be aware if you are planning for a policy or planning to opt one.
Insured is the person who's life is being covered by insurance.
Insurer is the entity or company from whom you have brought the policy, and who will be paying the amount at the time of event. Insurer can be say for example, LIC, Birla Sunlife, ICICI Prudential, HDFC Standard Life, SBI Life are all insurers.
The person who will receive the policy amount in case of event of the insured. Nominee is appointed by insurer during buying policy. However, the name of the nominee can be changed during the policy.
4) Policy Holder:
The person who buys the policy or one who owns the policy means one who is going to pay the premium. One can buy policy for himself or they can buy it for family members.
Premium is periodic or single amount payable to the insurance company.
6) Sum assured:
This is the minimum amount of money to the nominee in case of the insured's death or any the insured event. 7) Free look period:
This is the initial period ( mostly 15 days) after buying the policy, to go through the policy before going for long term commitment. In case of any doubt one can change with valid reason.
Each policy comes with certain period, when the period expires, the policy is said to have reached maturity. At maturity stage the complete insured amount is received.
If one fails to pay premium during the grace period also, the policy is said to have lapsed. However, one can revise if certain terms are met.
Let us take simple example to make you understand better.
Say, Arnab is sole breadwinner in the family. To make his wife Anusha and 2 kids financial secure, he plans to buy an insurance policy, from LIC for a coverage of Rs 10 lakhs. The annual premium to be paid every year is Rs 3000 per annum for a period of 10 years. In case of an event, he wants Anusha to receive the amount. After applying for this insurance policy. He received the policy document on 26 December 2013.
Policy holder: Arnab
Sum assured: Rs 10 lakhs
Premium: Rs 3000 annually
Free look period: 15 days from 26 December, 2013
Maturity: 26 December 2023
Consider, another scenario where Arnab and Anusha both are earning members and Arnab decides to take policy on Anusha.
Policy holder: Arnab