Sum Assured
The sum assured is the amount of money that the insurance company guarantees to pay to the nominee in the event of the policyholder’s death. It is the core benefit of a life insurance policy and is chosen by the policyholder at the time of purchasing the policy. The sum assured should be carefully determined, considering factors such as your financial liabilities, future expenses, and the financial needs of your dependents.
Premium
The premium is the amount of money that you pay to the insurance company to keep your life insurance policy active. It is usually paid on a regular basis, such as monthly, quarterly, or annually. The premium amount is determined by various factors, including your age, health condition, occupation, and the sum assured. It is important to pay your premiums on time to ensure that your policy remains in force and your loved ones are protected.
Policy Term
The policy term refers to the duration for which your life insurance policy remains in force. It is the period during which you are covered by the insurance company. The policy term can vary from a few years to several decades, depending on your needs and preferences. It is crucial to choose a policy term that aligns with your financial goals and the time frame in which you anticipate your dependents will need financial protection.
Death Benefit
The death benefit is the amount of money that the insurance company pays to the nominee upon the death of the policyholder. It is equal to the sum assured and is tax-free in most cases. The death benefit provides financial support to your family in your absence and can help them maintain their standard of living, pay off debts, and meet other financial obligations.
Survival Benefit
Some traditional life insurance plans offer a survival benefit or maturity benefit. This benefit is payable to the policyholder if they survive the policy term. The survival benefit is usually a percentage of the sum assured and provides a lump sum payout to the policyholder, which can be used for various purposes such as retirement planning, funding your child’s education, or fulfilling other financial goals.
Bonus
In traditional life insurance plans, the insurance company may declare bonuses from time to time. These bonuses are a share of the company’s profits and are added to the policyholder’s account. The bonus amount accumulates over the years and is paid out either upon the policyholder’s death or at the end of the policy term. Bonuses enhance the overall value of the policy and can significantly increase the final payout.
Surrender Value
If you decide to discontinue your life insurance policy before the completion of the policy term, you can surrender the policy and receive a surrender value. The surrender value is the amount of money that the insurance company pays to the policyholder upon surrendering the policy. It is calculated based on the premiums paid, the policy term, and the bonuses accrued. Surrendering a policy should be considered as a last resort, as it may result in financial losses.
Riders
Riders are additional benefits that can be attached to your life insurance policy to enhance its coverage. Common riders include critical illness rider, accidental death benefit rider, and waiver of premium rider. Riders provide extra protection and can be customized as per your specific needs. However, it is important to carefully evaluate the need for riders and consider their cost before adding them to your policy.
SUMMARY
Disclaimer: The information provided in this blog post is for educational purposes only and should not be considered as financial advice. It is recommended to consult with a qualified financial advisor before making any investment or insurance decisions.
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