7 Life Insurance Concepts Every Individual Buying A Policy Must Know

7 Life Insurance Concepts Every Individual Buying A Policy Must Know

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The need and importance of having adequate financial cover in the form of life insurance has been talked and written about enough over the last few years in India. While more and more people are realising the importance of securing their families" future, one cannot but help get the feeling that there is still a bit of a gap as far as understanding the fundamentals involved in life insurance products, their structure and terms and conditions are concerned.

Here are 7 key concepts every policy owner (or would be policy owner) must know and understand:

1. Sum Assured/Insured
Life insurance is a contract between the insurance company and the individual buying insurance. Sum Assured refers to the amount of money for which the individual buys insurance. It is the amount that will be paid by the insurer to the nominees/dependents of the life insured in the case of death of the insured provided the premiums associated with the insurance policy have been duly paid on time. Life insurance is a meant to provide financial protection and a means to replace lost income for one"s dependents and can help meet any outstanding liabilities and future financial needs if you are not around. How much Sum Assured to opt for should take into account these needs and factors.

2. Policy Tenor/Tenure/Term
A life insurance policy is typically bought for a defined period of time. This time period is generally referred to as the Policy Term/Tenor/Tenure. Simply put this is the time period for which you wish to purchase a life cover. For e.g. if you take a life insurance policy for a Sum Assured of Rs. 50 lacs with a policy term of 25 years, you agree to pay applicable premiums at regular intervals during this 25 year period.

In return for the payment of premiums, the insurance company will provide a life cover during these 25 years. The policy cover will cease at the end of 25 years.One should try and insure himself for the maximum duration possible and go for the highest tenure available for your age and Sum Assured; if not, at least cover yourself till your "income earning years".

3. Benefits
There are typically two kinds of benefits associated with life insurance policies. Death Benefit is the amount that will be payable to the insured"s dependents if the insured dies during the term of the policy. This is benefit is typically equal to the Sum Assured in most cases while in some products it can be Sum Assured plus any bonuses added on as per the product structure and terms.While death benefit is a common feature across all types of life insurance products, some forms of life insurance also offer a Maturity/Survival Benefit. In such products, the insurer also agrees to pay a lump-sum amount on the completion of the term of the policy upon the non-occurrence of the insured event i.e. on the survival of the policy owner.

to know all the 7 concepts, follow the 'article source' link >>>

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article source: http://www.i-save.com/blog/post/2010/11/16/7-Life-Insurance-concepts-every-individual-buying-a-policy-must-know.aspx



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