A policyholder is a person who owns the life insurance policy. Usually, they are the one insured under the policy. However, sometimes, the policyholder may be a relative of the insured, a corporation or a partnership. The policyholder has the right to exercise all privileges that are provided in the life insurance contract.
Sum assured is a predetermined fixed amount that policyholder’s family receives in case of policyholder’s death. It is basically the total sum policyholder is covered for. Sum assured is chosen by the policyholder and is always mentioned by the company in the policy details.
In life insurance parlance, a nominee is a person who receives the sum assured and other benefits in case of an insured person’s death. The choice of nominee depends totally on the policyholder and the name is usually mentioned while buying the life insurance policy. In most cases, the nominee is someone from the family.
A policy term is the time period for which you are covered. A premium paying term is the duration for which you have to pay the premium of the policy. For instance, the policy term as a whole can be of 50 years but the premium paying term can be of 25 years. This means that you need to pay a premium for 25 years but you are covered for 25 additional years.
Let’s say Mr X has a 1 crore ICICI Pru iProtect Smart life insurance policy in place. He has paid insurance premiums for three years. In this example, we will take the premium as ₹ 490^^ per month which comes to ₹ 17,640 in total premiums paid. Now if he passes away in the third year, his family will get an insurance payout of ₹ 1 crore. In other words, the insurance payout will be as per the policy cover regardless of when the insured passes away in the period covered.
If you buy life insurance, you qualify for a tax deduction up to ₹ 1.5 lakh annually under section 80C of the Income Tax Act, 1961. -The payout received at the time of maturity will be tax free subject to the conditions given in Section 10(10D) of the Income Tax Act, 1961. Tax laws are subject to amendment from time to time.