May 08, 2014,13.44 IST
Key life insurance terms explained
While buying a life insurance policy, we often encounter jargon and a host of new terminologies that leaves us confused. We deconstruct some of the key terms for the layman here. So the next time you are buying a policy, you know what you are getting into.
Terms associated with life insurance:
Proposer is the person who seeks a policy. Thus a policyholder to whom an insurance company issues the policy is a proposer. The benefits of the claim can be accrued to the proposer or the person nominated by him or her.
The sum assured is the gross amount that an insurance policy guarantees to pay. This amount is not always all inclusive, as a number of bonuses and interests get added to the sum assured. This is also known as the coverage amount or the total coverage of the policy. The insurance company pays the sum assured along with the bonuses (if any) to the insurer as and when his policy gets matured. If in case, the policyholder passes away before the policy matures, his beneficiary will get the sum assured along with the bonuses.
Premium is the amount one needs to invest periodically in order to sustain the policy for the specified period. Premium is paid by the policyholder to the company. The premium is often decided on the sum assured and the age of the proposer.
Premium Paying Term
The total number of years either allotted by the company or preferred by the policyholder for the payment of his premiums is commonly known as premium paying terms. In certain cases, policy term is equal to the total premium paying term.
Human Life Value
Human life value or HLV is nothing but an estimation of the total life insurance cover for an individual. Factors such as the total income of the individual, remaining years in employment, a person’s expenses and the depreciating value of the currency are considered while estimating the human life value of an individual for agreeing an insurance cover. Know your right insure amount, Click Here.
Joint life is a type of a life insurance policy designed especially for families looking for a single insurance plan. A joint life policy might cover two or more lives. This type of policy covers a number of family members and the payout is only once at the demise of one of the joint policy members. Joint Life Policy may also apply to business partners.
Annuity – Immediate & Deferred
Immediate annuities have been in practice since the time of Romans, wherein one pays a lump sum amount to the company and get lifetime monthly payments of the same. The amount of monthly payments depends on the size of the amount invested with the company.
Deferred annuity is also known as delayed annuity or longevity annuity. A type of annuity that delays payments of income, installments or a lump sum until the investor elects to receive them.
Principal Financial Planner
Optima Money Managers