Insurance Policy Tips: If you are thinking of buying life insurance or health insurance, then buying a policy based on the company name or premium can be your biggest mistake. Before buying an insurance plan, it is important to understand some very important words and terms, so that you do not get cheated in the future. Let’s learn 8 such insurance words and their meanings that every buyer should understand.
Term vs Endowment Policy: Term insurance is a “protection-only” policy. It offers more cover at a lower premium, but does not provide any payout at maturity. On the other hand, an endowment plan offers a maturity benefit along with life insurance, but you have to pay a much higher premium for this.
Sum Assured vs Total Coverage: Sum Assured is the amount that the policyholder’s nominee will receive after his death. On the other hand, total cover includes bonuses, riders, etc., which may result in a higher total payout amount.
Understand waiting periods and exclusions: Health insurance policies do not cover all illnesses from day one. There is a waiting period of 2 to 4 years for many illnesses like diabetes, blood pressure. Also, some treatments like cosmetic surgery are permanently excluded from insurance.
Choose the right riders: You can add add-ons to your insurance policy, such as critical illness cover, accidental death, premium waiver riders, etc. But each rider means additional premium costs. So add them only if you really need them.
Claim Settlement Ratio (CSR): Insurance companies often boast about high claim settlement ratios (like 98%, 99%). But don’t just rely on CSR. Look at how many high-value claims they have settled and whether they settle claims in a timely manner.
Don’t forget the free-look period: After taking out a policy, you have a free-look period (usually 15 days) during which you can read the policy and if you find any errors, you can cancel it and get your money back.
Premium Payment Term vs Policy Term: Policy term is the number of years the policy will last, while premium payment term is the period for which you have to pay the premium. It is very important to understand the difference between the two.
In health insurance, if you don’t make any claims in a year, the cover may increase or the premium may decrease the next year. This is called a no-claim bonus.
