Did you know that a life insurance plan can help you cover your child’s tuition fee or pay off the mortgage on your house and even cover outstanding car loans? There are many valuable aspects of Life Insurance that most people either misunderstand or are not aware of. In this edition, we will break down 6 of the most important life insurance terms and help you to understand how you can apply them in real life. Have you heard anyone ask the question, “why is Life Insurance critical?” To answer that, consider this similar question, “Why do we fuel up the car before we take a trip? Because no one wants a situation where fuel runs out and they are stuck on the road with the next filling station several miles away. Think of Life Insurance as the fuel you fill up your car with so that everyone in your vehicle can conveniently get to the desired destination even if you get off the vehicle at some point.
With this in mind, the first Life Insurance fact that you should know is Life Insurance itself.
- Life Insurance:
This is a policy or plan that makes sure that your family will be okay in the case that you pass away. Think of it this way, if from time to time you find yourself worried about your child’s next tuition fee for the next couple of years, your housing cost or your family’s general wellbeing, then you really should consider getting a life insurance policy. With the policy, you can create a safety net over your family and ensure that their wellbeing is secure while you are with them and even after.
A policyholder is someone or a company that buys an insurance plan to protect itself or another person from risk. This means that the policyholder can be the Insured or purchase the policy to insure another person i.e. the Insured but regardless of who is being insured, the policyholder is responsible for paying the Premium to the insurance company. The policyholder owns the insurance policy, can make adjustments to it and is responsible for paying the Premium. A policyholder doesn’t necessarily have to be a person, an organization can also be one.
- Life assured or Beneficiary:
This is the person for whom the life insurance plan is bought. For example, if a father buys a life insurance plan to protect his children in case of an untimely death, the father becomes the policyholder while the children who are entitled to receive payouts from the life insurance policy are the Life Assured or Beneficiaries.
- Sum assured:
When someone purchases a life insurance plan, the insurance company receives the responsibility of paying a certain amount to the Life Assured or Beneficiary if the Insured passes away. This ‘certain amount’ is what is called Sum Assured in Life Insurance terms. It is one of the most important terms to note when you are considering buying a Life Insurance policy because it represents what your beneficiaries can expect if any illness or demise occurs during the policy tenure.
- Policy tenure:
This describes for how long your insurance company will provide the life insurance coverage. You can customize the tenure of your Life Insurance policy based on your wishes. It can range from 1 year to 60 years and can even extend for your entire lifetime if you desire. When selecting a tenure for your policy, make sure you consider the terms, conditions, Sum Assured and Premium associated with it before making your decision.
Do you remember the part in #2 where the policyholder pays a certain amount to the Insurance company so that his beneficiary can enjoy the benefits later on? Well, that ‘certain amount’ that is paid to the Insurance company is what is called Premium. The amount will depend on how long your policy is for as well as how much you want your beneficiaries to receive from the Insurance company. Premiums are paid in exchange for coverage.
With these 6 terms that we’ve simplified for you, you can have a conversation about Life Insurance policies with your insurance company and consider the options based on your wishes.
If you want to know more about AXA Mansard plans and offerings, please visit AXA Mansard website at www.axamansard.com to get started.