An element of risk is involved in every area of our lives. The financial implications of these life risks can be significant. Insurance is an excellent risk management tool that protects you and your loved ones from the financial risks of unforeseen situations. To understand what insurance is, think of it as a contract between two parties – the insurer and the insured.
In some cases, the former has promised financial compensation to the latter in return for a certain premium fee. It is a transfer of risk between the insurer and the insurance provider.
When we talk about insurance, there is a whole range of expressions and technical terms associated with it. Without knowing the meaning behind this jargon, it can be intimidating for anyone looking to buy insurance. Some of these are commonly used:
These costs will be borne by you as the insured party for your insurance claim. When you have invested in an insurance policy, it may confuse you as to why you should bear the cost of the claim amount. The idea behind establishing a deductible clause in an insurance policy is to limit small claims made by the insured parties. This is the discipline that insured parties follow to file the correct claims and limit small, unnecessary claims.
Note, the deductible varies between contracts and has an inverse relationship with the insurance premium. If you set a higher deductible, the insurance premium comes down.
It is a category of insurance that is closely linked to your pension. One of the primary concerns of retirees is to eliminate their regular income stream through salary. With annuity insurance, a contract is established between you and the insurance company. This contract issues a steady stream of payments to your insurance provider throughout the tenure at specified intervals.
However, to get this range of equal payments, you need to first invest together with your insurance provider. This amount is further invested by the insurance company, and you get the returns generated.
You usually get this under life insurance. It is the person or entity that will receive the life insurance proceeds in the event of the policyholder’s death.
It is an important term in the insurance market. Exclusions refer to conditions whose presence may invalidate an insurance claim. You should read the specifics of your insurance exclusions online to avoid any surprises later.
Period of free appearance
You may have encountered this in life and health insurance policies. This refers to a 15-day window starting from the inception date of your policy, in which you can return your policy free of charge. Some companies also provide a 30-day window for those who have purchased insurance online.
Premature payment of your insurance premium may lead to a lapse in coverage. However, insurance companies offer a certain grace period, which means a timeline after your premium due date during which your policy coverage remains intact. You must meet the premium requirement within this grace period to continue your insurance benefits.
There may be situations in which you decide to cancel your insurance before the expiry of the term. The term surrender value means what you will receive if you complete your policy contract before maturity. This is especially the case for endowment policies in which the savings component is embedded with life cover.
Type of insurance
There are many categories of insurance, which serve different purposes. Some of the most common insurance policies are:
Motor Insurance (Car and Two Wheeler)
Also Read: Does life insurance in India cover death due to coronavirus?
The insurance market is huge. When you think about purchasing any type of insurance, you should do your due diligence and research. You must understand these terms used in the context of your policy to avoid rude shocks later.
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