The important insurance terms to be aware of in India
Buying insurance in India is often a matter of navigating a lot of jargon before understanding the policy's true benefits. Consider the following 10 most commonly used life insurance
Age limits:
These are minimum and maximum age limits set by insurers, below and above which the company does not accept new applications or renew the matured policy. It is normally 18 years and 65 years respectively for most insurance products, though it may differ for some insurers.
Beneficiary:
This is a person that is set to receive the benefits of the insurance policy in case the policy holder passes away before maturity of the plan. The beneficiary is appointed by the policy holder in writing.
Grace period:
This is a period of time (in days) immediately succeeding the premium payment date, and in which the policy holder may still pay the premium without inviting penalties or the possibility of the policy lapsing. (See 'Policy lapse' in Point No. 6 below)
Deferment:
This applies to retirement plans and is the period of time from the date of purchase to the date on which the first pension is paid.
Death benefit:
This refers to the sum of money that is paid by the insurer to the nominated beneficiary upon the policy holder's demise before the maturity of life insurance. (See 'Beneficiary' in Point No. 2 above).
Lapsed insurance:
This refers to an insurance policy that has expired and cannot be renewed. This is a result of not paying the premium within the due date and defaulting on the grace period as well. Once the policy lapses, a new one may have to be purchased, while the benefits of the older one are lost.
Maturity date:
This is the date at which the face amount of the policy is paid to the policy holder as stipulated when taking the policy. The money may be collected prior to the maturity date in case the policy holder passes away.
Nomination:
This is a process by which the policy holder authorises another person to receive the benefits of the insurance plan in case of their demise before maturity date.
Surrender value:
This is a sum of money that the policy holder must pay in case they wish to terminate the policy before maturity. The surrender value is retained by the insurer and the remaining monies (from the premiums paid) are returned.
Vesting age:
This term refers to insurance-cum-retirement plans. It is the age at which the policy holder starts receiving the pay-out of the plan.
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