9 insurance terms you should know about before buying a policy

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If you think tax is the most complicated subject then insurance does not fall far behind. Policy documents come loaded with different jargon making us wonder what we have signed up for. Here is a list of  frequently used insurance jargon you should know about before buying a policy:

Pre-existing illness

People can have existing illnesses at the time of buying a policy. These illnesses are termed pre-existing illnesses. You can get full coverage even if after having a pre-existing illness, assuming you don’t hide any disease that you are suffering with at the time of signing up for the policy as this can make things difficult at the time of claim. Therefore, mention every disease that you are suffering with at the time of buying a policy. Remember, coverage for pre-existing illnesses come with a waiting period of 2-4 years. Check with your insurer how long is the waiting period for pre-existing illnesses in your policy.

Free-look period

The insurance company gives a policyholder a time period of 15 days from receiving the policy documents during a policy can be cancelled. If after going through the terms and conditions policyholder does not want a policy he/she can approach the insurer within 15 days and get rid of the policy. Remember, while calculating days, your insurer might consider calendar and not business days, which means Saturdays and Sundays can also get included while calculating the free-look period.

Sub-limits

Sub-limits mean your insurer will pay only up to the specified limit of sum insured for certain expenses such as room rent and ambulance. It is usually 1 % of your sum assured. For example. If your cover is Rs 5 lakh then the insurance company will reimburse you only for Rs 5000 for room rent. Any expense above Rs 5000 has to be met out of your pocket. Besides room rent insurers also put sub-limits on pre-planned treatments such as cataract surgery, dental treatment, hernia, among others.

Co-payment

Co-payment is the percentage of hospital bill which you have to pay from their own pocket in the event of a claim. If your hospital bill is Rs 1 lakh,  then in case of 10% of co-payment, you have to pay Rs 10,000 from your pocket. Do not go for a very high co-payment clause as this is the amount you have to pay of the total bill at the time of claim.

Riders

If you want to widen the scope of your insurance policy, you can opt for additional covers such as personal accidents and critical illness. These additional covers, which you buy over and above the in-built features, are known as riders and come with an additional cost.

Deductible

The deductible term is often used with motor insurance policies. Here you have a bear certain cost from your pocket in case of a claim. There are two types of deductibles-voluntary and compulsory. In the case of voluntary deductibles, the threshold limit is decided by the policyholder while for compulsory deductibles it is decided by the insurance company.

Grace period

The insurance company offers a 15-30-day window in case you fail to renew the policy. If a premium is paid within this time, then the policy does not lapse and the continuity benefits such as the no claim bonus (NCB) and waiting period for pre-existing diseases do not change.

Annuity

Another name for an annuity is pension. The annuity plans assure you a regular pension amount for the lifetime or the fixed period of time chosen by you. There are two types of annuity plans-deferred and immediate. Deferred annuity plans start paying pension after you invest regularly for a certain number of years. Immediate annuity plans start immediately after you invest a lumpsum amount in the plan.

Nominee

Nomination enables the policyholder to nominate an individual to claim the proceeds upon death. In case of death of the policyholder, the claim amount is payable either to the nominee unless directed otherwise by a court.