Important Term Insurance Terminologies

Term insurance is vital for protecting your loved ones’ financial future. It pays your family a lump sum (the sum promised) in case of your untimely death within the policy term. Term insurance plan is one of the most affordable insurance plans (you can always use a term insurance calculator to calculate your expected premium).

To make informed decisions regarding purchasing term insurance, however, it is necessary to understand the key phrases related to it. In this blog post, we’ll look at and explain some key term insurance terminologies for a better understanding of the product.

Contents

1 Understanding Important Term Insurance Terminologies

2 To Conclude

Understanding Important Term Insurance Terminologies

Below is a table of important terms related to the term insurance policy.

(The terms are mentioned in alphabetical order)

Sr. No.	Term	Significance/Meaning
1	Claim Settlement Ratio	The claim settlement ratio is the percentage of claims settled by the insurance provider as a percentage of total claims received. When paying claims, a higher ratio implies a more dependable insurer.
2	Death Benefit	The death benefit is the total amount paid to the nominee by the insurance company in the event of the policyholder’s death during the policy term. In most cases, this is equivalent to the sum assured.
3	Free Look Period	Most insurance products, including term insurance, have a free look period wherein you can evaluate the terms and conditions within this time, typically from 15 to 30 days after getting the policy. If you are displeased with the policy, you can cancel it and receive a return of the money paid.
4	Maturity Age	The maturity age is the age at which the policy expires. The policy no longer provides coverage after this age.
5	Policy Holder	The policyholder is the one who buys a term plan and pays the premium in exchange. The policyholder is the policy’s owner, who may or may not be the life assured.
6	Policy Term	The policy term is the length of time that your term insurance policy exists and provides coverage. It is the period of time in which your family is protected in the case of your death.
7	Premium	The premium is the amount you pay to the insurance provider regularly (often monthly, quarterly, or annually) to keep your term insurance policy active.
8	Revival Period	If the policyholder wants to continue after the policy lapses, the insurance company gives you an option of re-activating the lapsed policy. This re-activation must be done within a stipulated time and is called the “Revival Period”.
9	Rider	A rider is an add-on to your term insurance policy that provides additional coverage or benefits to the core policy.
10	Sum Assured	The sum assured, commonly known as the death benefit, is the amount the insurance company guarantees to pay the beneficiary in case of the policyholder’s death within the policy period.
11	Surrender Value	If you cancel your term insurance policy before it matures, you will receive the surrender value. This amount is often less than the sum assured and is determined by the policy terms.
12	Tax Benefits	Premium paid for your term insurance is eligible for tax deduction under Section 80C of the Income Tax Act 1961, up to a limit of ₹1.5 lakh per annum.

To Conclude

Understanding these important term insurance terminology is critical when purchasing a term insurance plan. These terms will help you better understand the plan and choose the best suited policy for your needs.