Insured and Insurer

When you seek protection against financial risk and make a contract with an insurance provider you become the insured and the insurance company becomes your insurer. In Life Insurance this is the amount of money the insurer promises to pay when the insured dies before the predefined time. This does not include bonuses added in case of non-term insurance. In non-life insurance this guaranteed amount may be called as Insurance Cover.

For the protection against financial risk an insurer provides, the insured must pay compensation. This is known as premium. They may be paid annually, quarterly, monthly or as decided in the contract. Total amount of premiums paid is several times lesser than the insurance cover or it wouldn’t make much sense to seek insurance at all. Factors that determine premium are the cover, number of years for which insurance is sought, age of the insured (individual, vehicle, etc), to name a few.

The beneficiary who is specified by the insured to receive the sum assured and other benefits, if any is the nominee. In case of life insurance it must be another person apart from the insured. The number of years you want protection for is the term of policy. Term is decided by the insured at the time of purchasing the insurance policy. Certain insurance policies may offer additional features as add-ons apart from the actual cover. These can be availed by paying extra premiums. If those features were to be bought separately they would be more expensive. For instance you could add on a personal accident rider with your life insurance.

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