Life Insurance

8 Terms Used in Life Insurance

1)Policyholder

The person who buys the life insurance policy and pays the premiums.

2) Insured

The person whose life is covered by the policy provides personal details for eligibility and premium rates.

3) Beneficiary

The person or entity receiving the death benefit upon the insured’s death is named at purchase and changeable by the policyholder.

4) Death Benefit

The payment is made to beneficiaries or the estate when the insured dies.

5) Premium

The payment made to the insurer for coverage, payable monthly, quarterly, semi-annually, or annually.

6) Riders

Add-on benefits for extra coverage, offering additional financial protection against events like accidental death or disability.

7) Nominee

The person, usually a family member, receives the sum assured if the insured dies during the policy term.

8) Free Look Period

A period after purchasing life insurance during which you can cancel the policy without penalties, varying by policy.

4 Types of life Insurance

1) Term Life Insurance

Provides affordable coverage for a specified period, protecting your family’s financial future and potentially offering security against critical illness and disability.

2) Whole Life Insurance

Offers lifetime coverage with fixed premiums and a fixed death benefit, as long as premiums are paid.

3) Universal Life Insurance

Provides lifetime coverage with adjustable premiums and a growing cash value component, offering flexibility.

4) Variable Life Insurance

Permanent life insurance with cash value tied to investment accounts like bonds and mutual funds, featuring fixed premiums and a fixed death benefit.

6 Importance of Life Insurance

1) Financial Protection

Life insurance safeguards your family’s financial future, alleviating stress and burdens during difficult times. It provides essential risk coverage, ensuring your family’s well-being for many years.

2) Income Replacement

Life insurance coverage becomes the income replacement if your loved ones pass away. The life insurance becomes the core income for a family member.

3) Supplementary Savings and Investment

Many insurance policies offer cashback with bonuses, aiding in your savings plan or investment purposes.

4) Financial Stability

Life insurance provides security and peace of mind when managing your finances.

5) Gets Tax Benefit

Life insurance can offer tax benefits. High-income earners can reduce their tax burden by taking out life insurance policies.

6) Secure Retirement

In old age, when we can no longer work and need financial support, life insurance can provide the necessary funds. It helps secure our retirement period.

Life Insurance in Nepal

Life Insurance Riders

Life insurance riders are additional benefits added to the policy which can be customized. The tailored insurance policy can cover according to your needs and is more secure.

Some of the riders are discussed below:

1) Accidental Death Benefit Rider

This rider provides an additional payout if you die as a result of an accident, offering extra financial protection beyond the base policy.

2) Critical Illness Rider

This rider offers a lump sum payment if you’re diagnosed with a serious illness such as cancer, heart attack, or stroke, helping to cover treatment costs and other expenses.

3) Disability Income Rider

With this rider, your premium payments are waived if you become disabled and unable to work. Additionally, it provides a regular income to help cover living expenses and offers bonuses based on your plan.

4) Long-Term Care Rider

This rider provides financial support for long-term care services if you need assistance with daily activities due to a prolonged illness or injury, covering the costs of extended medical care.

5) Waiver of Premium Rider

This rider waives your premium payments if you become disabled and are unable to work, ensuring your coverage remains active without additional financial burden.

6) Child Rider

This rider offers a death benefit if your child passes away or provides coverage if your child becomes critically ill, helping to alleviate financial strain during difficult times.