Keywords to look for while buying an insurance policy

Purchasing a particular insurance policy might sound like a tedious or confusing task. Generally, a layman might get confused by the complexity of the terms used and might not know the hidden meaning and aspects before signing the paperwork.

So, to give a basic insight into the policy world, here is a complete guide of the most crucial keywords generally used while buying an insurance policy:-

Traditional plans vs. Investment-linked plans

While Traditional Plans are just conventional contracts which include insurance policies for a lifetime based on termed life and endowment funds. On the other hand, Investment Linked Plans (ILPs) allow you to attach various investment funds with your insurance contracts. The latter provides you with better flexibility options and returns in longer runs, depending on market situations.

Life insurance

Life Insurance is an agreement between the insurance provider and policyholder, as per which the latter pays a yearly fee to the former for a certain period. When the policyholder dies, the insurance provider is liable to pay a certain assured amount to the concerned beneficiaries of the former, depending on the contract. If a person dies during the contract in existence, the beneficiaries get an exponential amount of money. However, if not, the policyholder receives the money he invested in returned with interest at the termination of the contract.

Endowment plans

The Endowment Plans are short-term contracts, as per which the policyholder gets a certain amount at the time when the policy ends. These plans usually have higher premiums, because they are for shorter periods.

Medical cards

Worried about the towering hospital and medical bills at the time of an emergency? Medical cards cover up all the hospitalisation costs until a certain age. In Malaysia, most of the medical cards cover up the benefits until the age of 70.

Annuity plans

Basically used for planning post-retirement, the Annuity Plans allow the policyholder to pay a single or series of payments over a period of time. This plan allows the policyholder to then withdraw a certain fixed amount in the future, just in case of an emergency.

Sum assured

The sum assured is the amount decided between the policyholder and provider, which the former or the beneficiary will get in case of death or a certain permanent disability, by the latter.

Maturity

The term “maturity” is used to denote the completion of a certain period decided mutually between the policyholder and provider for the insurance policy cover. A policy “matures” (completes) only if the policyholder pays the premiums with due punctuality and in full amount.

Annual limit

This term is usually mentioned in respect of the medical cards. Basically, the ‘annual limit’ is the amount, which a policyholder can claim as hospitalisation fees from the medical cards yearly, at the time of emergency.

Lifetime limit

This term is also associated with medical cards and is quite similar to the annual limit. However, the only difference here is that it is the maximum limit which can be retrieved in the entire duration of the policy.

Co-insurance

The term “Co-insurance” means that the policyholder will have to pay a certain percentage of the hospitalisation fees covered under the medical cards by himself. It is advisable to go for a medical card which doesn’t come with the co-insurance clause, even if it demands a higher premium.

Insurance funds

The insurance funds comprise of high growth funds, balanced funds, bond funds and fixed income funds, which are looked after by fund managers and provide the benefits of mutual funds to the policyholder. These funds are usually incorporated within the Investment Linked Plans.

Riders

To avail certain added benefits over the regular plans and processes, the “Riders” provide additional features for an added charge over the regular premium one pays. These riders might prove essential in some cases.