In order to protect your family financially even if you are not there, many families choose to opt for investment and savings options. Term insurance for housewife is an excellent option in case your family depends upon your income and even if it doesn’t, it still makes an ideal choice to have one. You can be rest assured that your loved ones will be financially protected in the event of your unfortunate death. Term insurance is popular among various types of insurance plans since it provides a significant amount of life insurance coverage at a very reasonable price. However, while purchasing it, certain technical terminology in a policy may appear confusing. To ensure you get the best term insurance plan, it is important to be aware of certain terms used in the insurance policy. Continue reading to learn about the terminologies used in insurance and their meaning.
List of Important Terms in Term Insurance
- Policyholder: A policyholder is an individual who purchases a life insurance policy and pays the premium. It is not required for the policyholder to be the one insured. For example, a husband can purchase term insurance for housewife and he will become the policyholder for the person being insured.
- Life Assured: The term “life assured” refers to an insured individual or entity for whom a term insurance policy has been bought. Typically, the earning member of any household has life insurance but with time term insurance for housewife is also coming into existence. This ensures that the other members are not financially pressured if one of the spouses passes away unexpectedly.
- Nominee: A nominee is a beneficiary or somebody who receives the sum assured if the insured person unfortunately passes away within the ‘term’ of the policy. Typically, the policyholder selects their nominee, which is usually a family member or close relative.
- Sum Assured: The word “sum assured” refers to the amount that the insurance company agrees to pay to the nominee in the event of the insured person’s unfortunate demise. For example, you purchased term insurance for housewife and named your children as the beneficiary. In this situation, your children will receive the sum assured amount in case of untimely death. When purchasing insurance, the policyholder must decide on the sum insured. Let’s assume the amount is ₹2 crore. If the policyholder passes away before the end of the term, the insurer will pay ₹2 crores to their beneficiary. The sum assured is also known as the cover amount.
- Policy Term: Also known as policy tenure, it refers to how long your best term insurance plan is valid. In other words, if the policyholder unfortunately passes away during the term, the insurance company will pay out the sum assured amount to the nominee. However, if the policyholder outlives the policy tenure, the nominee will not get anything.
- Premium: The premium amount is the fixed sum that a policyholder must pay to their insurance company on a regular basis in order for their term insurance for housewife policy to be active. It is up to the plan and individual decision on which payment module they select. It could be monthly, quarterly, or yearly.
- Payment Mode/Term: This refers to the method by which a policyholder chooses to pay the premium to their insurance company. In general, payment methods are divided into three groups. They are as follows:
Regular Pay: It requires the policyholder to pay premiums throughout the policy period.
Limited Pay: With this plan, policyholders can choose when they will pay the premium to the insurance provider. For example, if you choose a 6-year period, you will only have to pay premiums for that time period, yet the best term insurance plan of yours will be active for the entire term you specify at the time of purchase.
Single Pay: With the single pay method, a policyholder pays the premium in one go. Typically, this payment is made while purchasing insurance coverage.
- Death Benefit: The total sum received by the nominee from an insurance company is known as a death benefit which is given in case the policyholder passes away within the policy period. This amount is usually equal to the sum assured. However, if an insurance policy has riders, the death benefit amount may exceed the sum assured amount.
- Riders: Riders are additional benefits to your existing term insurance for housewife. In other words, riders offer additional protection against particular risks. These add-ons could include benefits for accidental death or critical illness, among other things. The policyholder must pay more for riders while acquiring the insurance coverage.
- Claim: An insurance claim is a formal request made to an insurer by a nominee to reimburse for risks covered by an insurance policy. When a policyholder, unfortunately, passes during the policy term, their nominee will not immediately get the sum assured amount. To receive the money, they must make a claim with their insurance company.
- Free Look Period: In general, every insurance policy has a free look period, which is the time period during which you can cancel the coverage without paying any penalties. However, this time frame may differ from one policy to the next.
- Grace Period: The grace period is the time extension provided by an insurance provider if the policyholder or the insured is unable to pay their renewal premium on the due date. If you pay your premiums monthly, the ‘Grace Period’ is normally 15 days. In addition, the annual premium payment mode includes a 30-day grace period. Even after the grace period, if you do not pay the premiums, your policy will lapse.
- Surrender Value: If a policyholder intends to surrender the insurance policy before maturity, the insurance provider gives them a specific amount known as the Surrender Value. As a result, before purchasing an insurance policy, you should verify the terms and conditions to see if it includes a surrender value, as not all insurance companies offer this feature. Check to see how much the surrender value will be.
- Paid-up Value: If you stop paying your premiums after a certain amount of time, the insurer will allow you to convert your best term insurance plan into a lower paid-up plan. In this option, the sum promised is reduced based on the number of paid-up premiums. If a policyholder stops paying premiums after three years, they may be eligible for this opportunity, as long as the policy has accumulated significant insurance value.
At last,
Knowing the terminology used in insurance can allow you to make an informed decision when buying the best term insurance plan. If you are unsure about anything, you should always consult with an insurance representative.