Insurance have many terms or words that are unique to it and hence one should know these term first before venturing further into the subject of insurance
1. Insurance – It can be defined as guarantee which is given by insurance company to the policyholder to compensate him against risk of loss covered in the policy.
2. Policy – Any insurance contract sold by the insurance companies is called policy. It is any type of contract of insurance that is liable to be paid by the insurance company on falling due.
3. Premium – It can be defined as contribution that is to be paid by the insured in order to continue the policy.
4. Sum insured – It is amount that is promised by the insurance company in the event of loss or on maturity whichever happen early.
5. Surrender Value – It can be defined as the amount which the insurance company is willing to pay to the person who has taken the insurance, if he or she wants to discontinue the policy. Surrender value can be taken only after some specified year and it will always be less than the premium paid by the insured.
6. Life of the policy – It is the time period during which the insurance policy is valid, after it expires insured cannot claim any amount from the insurance company in the event of loss.
7. Assurance and Insurance – Though both the words are used interchangeably, but there is difference between the two. Insurance refers to the protection against a loss due to an event which may or may not happen but assurance refers to the protection against loss due to an event which will happen for sure. That’s why there can never be theft assurance or fire assurance however there can be life assurance.