5 Insurance Terms You Need To Know

Insurance is an essential life requirement. There are many forms of insurance that you get nowadays, and most of them are necessary for you. While life and health insurance are indispensable, other insurance covers, such as motor and travel insurance, are widely popular. Are you aware of how an insurance plan works? If you are a novice, we are here to help! Take a look at this article and learn about five of the most basic insurance terms that everyone should know.

Insurance Terminology

1.Premium

An insurance policy is a contract between the insurer and the policyholder - the former promises to cover specific financial losses the latter may incur for various reasons. However, to honour the promise, the insurer charges a sum of money known as the premium. The insurance premium is a fixed amount of money that you, the policyholder, pay your insurance provider regularly to keep the insurance policy active. If you encounter a problem and need to make a claim, you can do so only on an active policy. Hence, the premium is a crucial component of insurance.

2. Nominee

Life insurance is a financial cover for your loved ones. After you die, your family gets an assured sum of money with which they address their financial requirements. When buying the life insurance plan, you need to mention a name(s) who will receive the sum assured after your demise. This person(s) is the nominee. A life insurance nominee is usually the policyholder’s closest family member, such as the spouse, child, parent, or sibling. Choose your nominee carefully as that person(s) will receive the proceeds from your life cover.

3. Sum insured/assured

Every insurance policy offers coverage of a fixed amount. This is known as the sum insured (in general insurance) and the sum assured (in life insurance). You need to choose the coverage amount very carefully. Assess your requirements and then arrive at the correct amount.

4. Exclusions

Every insurance policy has a list of exclusions. You cannot make a claim if the loss happened due to an exclusion. For example, in health insurance, cosmetic surgery is an exclusion. If you have lip surgery done to enhance your looks, you cannot get reimbursed under the health insurance cover. Read the list of exclusions carefully to understand the exact scope of the insurance cover.

5. Claim

When you face an unfortunate event and incur a financial loss, you can ask your insurance provider to reimburse the amount of money you spent. This is known as getting an insurance claim. The claim is nothing but the payout that is given to the policyholder when he needs it. It is paid to the nominee in life insurance after the policyholder's death.

Now that you know the most basic insurance terminology, go ahead and explore your options. See the insurance products available to you and then see which ones you need. If you haven't done so already, get a life insurance plan and a health insurance plan on priority. An insurance cover is a guarantee and protection that you can significantly benefit from, so don't deprive yourself of this benefit.