Securing insurance has become more accessible with the convenience of the Internet. Yet, insurance comes with its own set of linguistic complexities. These complexities leave many perplexed. Fear not, as you're not alone in grappling with insurance jargon. The terminology associated with insurance can be confusing, but it need not be an insurmountable challenge. 

Acquiring a foundational understanding of these terms helps you confidently navigate the insurance landscape and make informed choices tailored to your needs. Remember, when you plan to get an insurance policy, don't hesitate to seek clarification from your agent or broker[PM1] . 

Some Insurance Jargon

Here are some key concepts to help navigate the complex landscape of insurance:

• Endorsements: An insurance endorsement is like a legal update to your insurance plan. It's a change or addition to the original policy that can happen while the policy is active, when you first get the insurance, or when you renew it. These changes can stick around until the policy ends, and they might continue if you renew the policy.
• Death Benefit: This term refers to the sum paid by a life insurance company to the nominee if the insured person passes away during the policy period. It's essential to differentiate it from the sum assured, as the death benefit may include additional rider benefits and other perks.
• Free-Look Period: When you buy a new insurance policy, you typically have a free-look period. This timeframe allows you to review the policy and return it if needed. It's a safety net for the insured individual to ensure satisfaction with the chosen plan.
• Life Assured: The 'life assured' is the person for whom the insurance plan is purchased. Usually, it's the family breadwinner, but not necessarily the policyholder. The life assured receives coverage in the unfortunate event of their untimely death.
• Maturity Age: This term indicates the age at which the insurance policy concludes. It's another way of expressing the policy tenure, highlighting how long the coverage will remain in effect. Insurance companies specify the maximum age for coverage.
• Nominee: The 'nominee' is the person or legal heir chosen by the policyholder to receive the sum assured and other benefits if the policyholder passes away. The nominee can be a spouse, child, parent, or another chosen individual.
• Policy Tenure: The policy tenure is the duration for which the policy remains active. It can range from one year to a lifetime, depending on the insurance plan and its terms and conditions.
• Policyholder: The policyholder is the person who buys the life insurance policy, pays the premium and is considered the owner of the policy. Importantly, the policyholder may not necessarily be the life that is assured.
• Premium: The premium is the amount paid to the insurance company to maintain an active insurance plan and ensure continuous coverage. Missing premium payments within the grace period can lead to policy termination.
• Riders: Riders are additional features that can be added to the basic insurance policy for extra coverage. These may be chosen when buying the plan or on its anniversary, and they vary between insurance companies.
• Sum Assured: The core purpose of life insurance is to provide financial coverage. The 'sum assured' is the agreed-upon amount that the insurer pays in the event of the insured person's death or another covered event.
• Named Peril Policy: This policy outlines specific perils for which coverage is provided. In contrast, an open peril policy covers all causes of loss except those explicitly excluded.
• Policy Jacket: In insurance documentation, the policy jacket is a comprehensive record containing intricate details specific to the policy. This encompasses terms, conditions, coverages, perils, exclusions, and other pertinent information. It's important to note that endorsements and a declarations page are not included in the policy jacket.
• Replacement Cost Coverage: Replacement cost coverage guarantees reimbursement for the full cost of replacing belongings, disregarding any depreciation. This proves particularly valuable for high-value items that may not retain a substantial resale value.

Conclusion

Grasping insurance jargon is a key step toward making informed decisions about coverage. Understanding terms like death benefit, free-look period, and policy tenure helps you understand the complexities of insurance. Knowing the roles of policyholders and nominees and the significance of premiums enhances clarity. Knowledge about concepts such as riders and sum assured ensures a comprehensive understanding of the insurance landscape. 

If you are trying to understand insurance or seeking a policy, Aviva Life Insurance offers a wide range of insurance plans. You can explore the options they provide here.

AN Jan 31/24

Talk to an Expert

SHARE WITH