LIFE INSURANCE TERMINOLOGIES | LIFE INSURANCE TERMS SHOULD KNOW

LIFE INSURANCE TERMINOLOGIES FOR NEWBIES

As we all should know insurance have some terminologies that are very necessary in order to understand how you handle or take cover for insurance. Novice can never understand the full dept of insurance without knowing some of these terminologies. What are terminologies “Terminologies are words used in a particular field or subject of study. 

Terminologies is the combination of specific words within a specialized discipline or profession. Every profession has its terms when practicing like the Doctors, Lawyers, and even the insurance companies (Insurers). Terminologies or terms are words or expressions used in the perspective from which the writer, speaker (person) is trying or introducing a particular topic or field.

 Having an idea of what terminologies are, let’s now relate it to our topic of study which now relate it to our topic of study which is “Life Insurance Terms”. Life insurance terms are words used in the insurance world. In much broader explanation, life insurance terms are expressions or words used in relating to life insurance that vividly explains what an insurance expert, insurance company or broker may likely use speaking or carrying out its duties, functions, or responsibilities to a second party who might likely not understand it. Never to worry, the purpose of this article is to widely explain some life insurance terms you ought to know in case you want to opt in for any life insurance policy or just want to have a knowledge of it but first, in any case you don’t have an idea of what insurance is check here “What is Insurance”

Yes, you now understand what insurance is and what we mean by life insurance terms so let’s kick this article rolling by explaining the common life insurance terms you should know about and why you should know them. Thus:

1)    Policy Holder: Who is a policy holder? A policy holder is the person who comes up with the idea of having a life insurance policy and pays the premium. Yea, guess you aren’t confused on what premium is, we shall be discussing that as you read on. the policy holder as rightly said is the person who purchased the life insurance policy and in most cases, this person is not the life assured as the life assured is the third party. 

     For example a policy holder can be a father of three children on a wife then he decides to take up a life insurance cover for his children and name them as his beneficiaries, when he eventually dies, payments based on premium purchased will be paid to the beneficiaries.

2)    The Insured Person: If you noticed, we made mention of life assured, yea, life assured is also referred to as the insured person. The life assured or the insured person is for whom the life insurance policy is expected to cover in case of untimely death. Life assured at most cases is not the policy holder as the life assured is the bread winner. Let’s take for example a man purchases a life insurance cover and pays the premium, he then makes the insurance company to understand that if he dies, his wife should be the beneficiary legally, he has made his wife the “Life Assured”

3)    Nominee:This is the legal heir in which the sum assured and the benefits attached to the premium is been paid by the insurance company when death finally occurred on the policy holder. The policy holder specifically stipulates or nominates who will be paid the sum assured, it could be his wife or children or just a person on all his children. So when he finally dies all payments are made to the nominee without any default by law.

4)    Sum Assured:The sum assured is the amount of money the insurance company will pay to the nominee or the insured person. In other words, sum assured is the amount of money that the insurer (Insurance Company) agrees to pay on death of the insured person. When carrying out a life insurance coverage, there will definitely be a place where you will be asked the amount for purchase of the premium, so it is left for you as the policyholder to choose the amount based on your purchased premium . In technical terms, sum assured is the term used for the total amount that the insurer (insurance company) agrees to pay on death of the insured person (as the case may be)

5   The duration of the policy:  In case of life insurance coverage, it is expected to last for the period of 1-100years or probably a whole life (unto death) but this depends on the type of life insurance plan. When entering an agreement with the insurance company, you should check where the duration period is been stipulated. N normal basis, it is not expected to fall below the age of 80 years.

6    Premium: Premium is the amount the policy holder pays in order to make claims against the policy holder for payments to be made to the nominee peradventure a death occur is known as premium. In other words you need to pay certain amount of money either monthly, quarterly, or whole some to the insurance company will pay certain amounts to the beneficiaries or nominee. Premium differs as policy also differs, the higher your premium the higher the coverage/claims to be made.

7    Rider: What is a rider? In case where there may be addition al cost then coverage’s will be added so in other words a rider is a provision of an insurance policy that amends the coverage or items. Riders help policyholders create insurance products that will meet specific areas of their needs. For example in the case of illness, an accelerated death benefit on a life insurance policy would ensure the insured dies, the beneficiary receives a reduced benefits. Some policy holders have special desires that are not necessarily covered by standard insurance policies. Insurance company offers insurance riders to customize policies by adding similar types of additional coverage. The similar types of additional overage include:

1 hospital cash

2 Premium wavers

3 Cover for critical illness

4 Accidental death benefit Rider

5 Accidental total and permanent disability benefit order

8) Death benefit: This is very common when it comes to life insurance plan. You must have heard about death benefit when trying to purchase life insurance plan or making enquiries on life insurance plan or probably comparing life insurance quotes. Death benefit is what the insurance company pays to the beneficiary or the nominee incase the life assured eventually dies within the duration of the policy. Don’t be confused or rather don’t get it twisted ; you might be wondering if the death and sum assured are similar or different, both death benefit and sum assured are the same but in the case of death benefit you get the sum assured and likely get extra benefits which may include rider benefit that is if there is any.

9    There’s what we call the grace period: Grace period is also called the renewal period. If you were unable to pay the renewal premium for your policy before it expires, the life insurance company gives the policyholder certain number of days in other to pay for the renewal premium. The premium renewal is usually an estimated period of 15 days for a monthly premium and 30 days for an annual premium of which if the policyholder could not pay or refused to pay within this grace period, then the policy is forfeited. Some life insurance company may offer more extension period or renewal period above 15 days for monthly and 30 days for yearly period. So you should always try and get notified of the actual periods when such occurs.

10 Surrender Value: This is when the policyholder informs the life insurance company that he/she will no longer be able to carry on with the plan. This is most effective when the policyholder informs the insurance company before the maturity age of the plan. Upon a notification relieved by the insurance company pays a certain amount to the policyholder, this amount paid is called surrender value. So read the terms and conditions of the insurance company most especially the plan you opt in for, okay, let’s say you have read the terms and conditions and the plan you opt in for offers surrender value another thing you should take note of is how much will it be when you opt out of the plan or discontinue with the plan.

11 Paid-up Value: Perhaps you as the policyholder have decided to discontinue the plan by refusing to pay the premium after the grace period. There will be an option offered by the insurance company to convert your policy into what is called reduce paid-up policy. In this policy, the sum insured are payable to the amount of premiums paid. If there are other benefits attached the sum insured payable then these benefits will be attached to the reduced sum insured which is now the paid-up value.

12 Revival Period: This period is quite similar and a little bit different from the grace period. In the grace period, the insurance company offers extensional time for which the policyholder should be able to renew his/her plan after the original time period has expired but the revival period is an additional period after the grace period in which the policyholder decides to continue with the plans, the insurance company will provide an option of re-activating the expired policy. This revival period is not just done anytime the policyholder desires but an interest to continue with the plan must be a specific period after the grace period expires. That period in which the policyholder decides to continue with the plan is called revival period. In order to continue with the lapsed policy, the insurance company will send a request to a team of underwriters (see below for underwriters) for approval and only when such approval is accepted then the policy begins to run again.

13 Underwriters: before any issuance of insurance policy, there are certain team members called underwriters who evaluate the risk involved in insurance. After risk evaluation then it ends with settlement of claim which is the claim process. So before re-instating your lapse policy, these underwriters evaluate your plan and in return inform the insurance company to re-issue the plan to the policyholder.

14 Exclusions: if there are anything not covered by the insurance company based on your plan, it will be well written in the statement of the policy. That is upon buying a life insurance plan; you should read the “Exclusions” section of the plan. “Exclusion means not covered by this plan”, so if certain things written in the exclusion section was what happened, then the insurance company will not pay any benefit. Some things like this are found in the Exclusion section e.g suicide, intentional hazards which later led to death.

15 Tax Benefits: All life insurance premiums are eligible for deductions. It also depends on the legal system of the country. In some countries, tax are not deducted from any payments to the nominee on life insurance policy while in some countries payments are tax deductibles only the benefits are tax free.

16 Claim Process: When a death occurs on the life assured or the life assured dies during the policy period, the nominee or beneficiary needs to make a claim in order to receive the death benefit as mentioned in the policy.

     

   

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