Understanding the basic life insurance terminology helps us to understand the various benefits and features of a policy. When you look at a brochure or sales literature there are many insurance terms like “Maturity Benefit” or “Grace Period”. Often, such confusing terminologies prevent individuals from buying life insurance and even if people do buy the insurance, they don’t necessarily understand the meaning of various terminologies used. If you have ever wondered about these terminologies, then read on.

Therefore, to help you understand these terminologies, given below is the list of 15 important life insurance terminologies and their explanations.

1. Policyholder: An individual who buys the life insurance policy as well as pays its premium is known as the policyholder. He/she may own the policy but may or may not be the life assured.
2. Life Assured:The insured or protected individual is known as the life assured. In case of any unfortunate event such as the death of the Life Assured, the nominee will receive the insurance coverage amount. ItÂ’s vital to understand the difference between a policyholder and life assured. For instance, when a husband buys an insurance policy for his wife, the husband is the policyholder whereas his wife is the life assured.
3. Premium:It is the sum you pay to keep your life insurance policy active. In case if you are unable to pay the premium amount either before its due date or within the grace period (see term #8), your policy may lapse (see term #7).Age of the Life Assured.Type of policy chosen.Sum Assured selected.The Policy Tenure.Lifestyle habits such as Smoking / Drinking
4. Sum Assured: Sum Assured is the guaranteed amount the nominee will receive in case of the unfortunate death of the life assured. The policyholder chooses this amount at the time of purchasing the policy. It is paid to the nominee (see term #6) in case of Life insured demise during the policy tenure.
5. Policy Tenure: It is the duration for which the life insurance policy provides insurance coverage or the time period for which the policy is bought.
6. Nominee:The Nominee is a person nominated by the policyholder, who receives the life insurance proceeds in case of an unfortunate eventuality. Nominee is also known as the beneficiary. The nominee must be declared at the time of purchasing the policy or can be added into the policy any time during the policy term before the policy matures, if not declared earlier.Policyholder can choose anyone as a nominee, it can be an individual from his/her family or even someone outside their family. However, you have to inform your insurance company to appoint such a nominee. Since this person is expected to get the death benefit in case of the unfortunate demise of the life assured, it is advised to pay close attention to who you choose as a nominee. A point to remember is that if your nominees are minors (i.e. below 18 years) you would have to appoint a guardian, called appointee to overlook the affairs of the claim and receive the proceeds under the policy on behalf of the minor nominee, in case of any unwanted eventuality before the nominee becomes major.
7. Lapsed Policy:A policy will get terminated due to non-payment of the premium amount. The policy gets lapsed when the due premium is not paid even after the grace period. Life Insurance companies offer the facility to revive the lapsed policy within the revival period, if outstanding premiums are paid by the policyholder.
8. Grace Period:The extension given by the insurance company to the policyholder after the premium payment due date is known as the grace period. If the policyholder pays the outstanding premium amount within the grace period, then protection cover of the policy continues.
9. Death Benefit:It is the amount that is paid to the nominee in case of death of the life assured during the policy period. Remember, death benefit and sum assured are not similar terms. The death benefit can be equal to or higher than the sum assured as it may include the rider (see term #15) benefit as well.
10. Maturity Benefit:Maturity benefit is the amount paid to the policyholder upon completion of the policy tenure.
11. Free-look Period:If you do not agree or are not comfortable with the terms and conditions of your purchased policy, you can return the same within a specific time period as mentioned in the policy document. This period is known as the free-look period. The premium will be refunded after deducting the proportionate risk premium, stamp duty charges and cost of medical examination incurred if any.
12. Exclusions: These are certain things which are not covered under a life insurance policy. If the claim made is based on these exclusions, the insurance company does not need to pay any benefit.For instance, Suicide is an exclusion in a life insurance plan. E.g., usually in life insurance, if life assured commits suicide within a year from the policy inception date or reinstatement, the plan will be void and only a limited amount is paid. The nominee may not be able to avail the benefit of getting the full sum assured. It also depends on the terms of the policy.
13. Revival Period:If you do not pay premium during the grace period, your policy gets lapsed. However, if you wish to continue the policy, you are given an option of re-activating your lapsed policy. The re-activation process must be completed within a specific period of time after the grace period ends. This period is known as a revival period.
14. Claim process:In case of the life assuredÂ’s demise during the policy tenure, the nominee lodges a claim in order to receive the death benefit. This process is known as the claim process.
15. Rider:Riders are additional benefits that enhance the coverage of your plan. There are optional riders to enhance your financial protection and to secure yourself/your family against accidental disability or demise, which you can add as additional protection.

So here are 15 life insurance terms explained briefly. We hope this guide will simplify your understanding of insurance. Happy Learning!