Insurance terms
1. Premium
This is the amount you pay to the insurance company to buy a policy.
A single premium policy will need you to pay just one lump-sum amount.
The annual premium policy will require you to pay every year. This will go on for a fixed period of time. The exact number of years will depend on the scheme in question.
2. Insurer and Insured
The person in whose name the insurance policy is made is referred to as the policy holder or the insured. So, if you have taken an insurance policy, you are the policy holder, the one who is insured.
The person whom you name as the nominee is the one who will get the insured amount if you die. The nominee is referred to as the beneficiary.
The insurer is the insurance company that offers the policy.
3. Sum Assured and Maturity Value
Sum assured is the amount of money an insurance policy guarantees to pay before any bonuses are added. In other words, sum assured is the guaranteed amount you will receive.
This is also known as the cover or the coverage and is the total amount you are insured for.
Maturity value is the amount the insurance company has to pay you when the policy matures. This would include the sum assured and the bonuses.
Let's take an example of an endowment policy.
Age of policy holder - 30 years
Cover - Rs 2,00,000
Term - 20 years
Annual premium - Rs 9,000
If the policy holder passes away before the policy matures, the beneficiary gets Rs 2,00,000 along with the bonus too (if any).
If he is alive when the policy matures, he will get Rs 2,00,000 as well as any bonuses declared during the tenure of the policy.
Let's say the bonuses amounted to Rs 1,00,000. His maturity value would be Rs 3,00,000 (sum assured + bonuses).
4. Bonus
This is the amount given in addition to the sum assured.
Reversionary bonus is a bonus that is added to policies throughout the term of the policy. It may or may not be declared every year. When it is declared, it will not be given to you immediately.
It will be payable as a guaranteed sum to the policyholder either at the end of the policy, or, if death occurs before that, to the nominee.
This bonus can either be a with-profit bonus or a guaranteed bonus.
A with-profit bonus is linked to the profit of the company. If the company makes a profit, it declares a bonus in accordance with the profits. The profits are added to your insurance policy and given to you either on maturity of the policy or to your nominee if death occurs before that.
This bonus will be flexible as it is dependent on the performance of the company. However, once it is declared, it becomes part of your sum assured.
This is offered purely at the discretion of the insurer and depends on the profits made that year.
As opposed to a with-profit bonus, there is a guaranteed bonus.
This is part of the sum assured. It will be paid to you irrespective of the profits of the company.
5 things your insurance agent won't tell you
5. Term and Term insurance
The term is the number of years you bought the policy for. So, if your policy lasts for 10 years (the number of years is your choice), it is referred to as one with a 10-year term.
Term insurance, on the other hand, is a type of insurance policy.
It provides policyholder with protection only. If the policyholder dies within the specified number of years (the term), his nominee gets the sum insured. If he lives beyond the specified period, the policyholder gets nothing.
This is the cheapest and most basic type of life insurance.
6. Endowment Insurance
You are given a life cover just like term insurance. If you die during this period, your beneficary will get whatever amount you are insured for.
Unlike a term insurance cover, if you live, an amount will be paid to you on maturity of the plan.
This kind of policy combines saving (because money is given to you on maturity) with some protection (your nominee gets an amount if you die).
7. Rider
It is an optional feature that can be added to a policy.
For instance, you may take a life insurance policy and an add on accident insurance as a rider. You will have to pay an additional premium to avail this benefit.
8. Annuity
Annuities refer to the regular payments the insurance company will guarantee at some future date. So, say, after you cross 55, the insurance company will start giving you a monthly or quarterly return. This is known as an annuity (premium is what you pay them).
This is often done to supplement income after retirement.
9. Surrender Value & Paid-up value
Halfway through the policy, you might want to discontinue it and take whatever money is due to you.
The amount the insurance company then pays is known as the surrender value. The policy ceases to exist after this payment has been made. Do remember, you will lose out on returns if you withdraw your policy before time.
Paid-up value is different. If you stop paying the premiums, but do not withdraw the money from your policy, the policy is referred to as paid up.
The sum assured is reduced proportionately, depending on when you stopped. You then get the amount at the end of the term.
10. Survival Benefit
This is the amount payable at the end of specified durations. These amounts are fixed and predetermined.
Let's take an example.
Age of policy holder - 30 years
Cover - Rs 2,00,000
Term - 15 years
Annual premium - Rs 18,000
Now the policy promised to give back a portion of the sum assured (10%, 15%, 20%, 25%) every three years.
After 3 years: Rs 20,000
After 6 years: Rs 30,000
After 9 years: Rs 40,000
After 12 years: Rs 50,000
On maturity: Rs 60,000
Should you die during this tenure, your beneficiary will get the entire Rs 2,00,000. Irrespective of whether or not you have been paid any amount till date.
This is the amount you pay to the insurance company to buy a policy.
A single premium policy will need you to pay just one lump-sum amount.
The annual premium policy will require you to pay every year. This will go on for a fixed period of time. The exact number of years will depend on the scheme in question.
2. Insurer and Insured
The person in whose name the insurance policy is made is referred to as the policy holder or the insured. So, if you have taken an insurance policy, you are the policy holder, the one who is insured.
The person whom you name as the nominee is the one who will get the insured amount if you die. The nominee is referred to as the beneficiary.
The insurer is the insurance company that offers the policy.
3. Sum Assured and Maturity Value
Sum assured is the amount of money an insurance policy guarantees to pay before any bonuses are added. In other words, sum assured is the guaranteed amount you will receive.
This is also known as the cover or the coverage and is the total amount you are insured for.
Maturity value is the amount the insurance company has to pay you when the policy matures. This would include the sum assured and the bonuses.
Let's take an example of an endowment policy.
Age of policy holder - 30 years
Cover - Rs 2,00,000
Term - 20 years
Annual premium - Rs 9,000
If the policy holder passes away before the policy matures, the beneficiary gets Rs 2,00,000 along with the bonus too (if any).
If he is alive when the policy matures, he will get Rs 2,00,000 as well as any bonuses declared during the tenure of the policy.
Let's say the bonuses amounted to Rs 1,00,000. His maturity value would be Rs 3,00,000 (sum assured + bonuses).
4. Bonus
This is the amount given in addition to the sum assured.
Reversionary bonus is a bonus that is added to policies throughout the term of the policy. It may or may not be declared every year. When it is declared, it will not be given to you immediately.
It will be payable as a guaranteed sum to the policyholder either at the end of the policy, or, if death occurs before that, to the nominee.
This bonus can either be a with-profit bonus or a guaranteed bonus.
A with-profit bonus is linked to the profit of the company. If the company makes a profit, it declares a bonus in accordance with the profits. The profits are added to your insurance policy and given to you either on maturity of the policy or to your nominee if death occurs before that.
This bonus will be flexible as it is dependent on the performance of the company. However, once it is declared, it becomes part of your sum assured.
This is offered purely at the discretion of the insurer and depends on the profits made that year.
As opposed to a with-profit bonus, there is a guaranteed bonus.
This is part of the sum assured. It will be paid to you irrespective of the profits of the company.
5 things your insurance agent won't tell you
5. Term and Term insurance
The term is the number of years you bought the policy for. So, if your policy lasts for 10 years (the number of years is your choice), it is referred to as one with a 10-year term.
Term insurance, on the other hand, is a type of insurance policy.
It provides policyholder with protection only. If the policyholder dies within the specified number of years (the term), his nominee gets the sum insured. If he lives beyond the specified period, the policyholder gets nothing.
This is the cheapest and most basic type of life insurance.
6. Endowment Insurance
You are given a life cover just like term insurance. If you die during this period, your beneficary will get whatever amount you are insured for.
Unlike a term insurance cover, if you live, an amount will be paid to you on maturity of the plan.
This kind of policy combines saving (because money is given to you on maturity) with some protection (your nominee gets an amount if you die).
7. Rider
It is an optional feature that can be added to a policy.
For instance, you may take a life insurance policy and an add on accident insurance as a rider. You will have to pay an additional premium to avail this benefit.
8. Annuity
Annuities refer to the regular payments the insurance company will guarantee at some future date. So, say, after you cross 55, the insurance company will start giving you a monthly or quarterly return. This is known as an annuity (premium is what you pay them).
This is often done to supplement income after retirement.
9. Surrender Value & Paid-up value
Halfway through the policy, you might want to discontinue it and take whatever money is due to you.
The amount the insurance company then pays is known as the surrender value. The policy ceases to exist after this payment has been made. Do remember, you will lose out on returns if you withdraw your policy before time.
Paid-up value is different. If you stop paying the premiums, but do not withdraw the money from your policy, the policy is referred to as paid up.
The sum assured is reduced proportionately, depending on when you stopped. You then get the amount at the end of the term.
10. Survival Benefit
This is the amount payable at the end of specified durations. These amounts are fixed and predetermined.
Let's take an example.
Age of policy holder - 30 years
Cover - Rs 2,00,000
Term - 15 years
Annual premium - Rs 18,000
Now the policy promised to give back a portion of the sum assured (10%, 15%, 20%, 25%) every three years.
After 3 years: Rs 20,000
After 6 years: Rs 30,000
After 9 years: Rs 40,000
After 12 years: Rs 50,000
On maturity: Rs 60,000
Should you die during this tenure, your beneficiary will get the entire Rs 2,00,000. Irrespective of whether or not you have been paid any amount till date.
Life Insurance Terms
Accident An event or occurrence causing damage/injury to an entity, and is unforeseen and unintended.
Accident Benefit Provides for payment of an additional benefit equal to the sum sum assured in instalments on permanent total disability and waiver of subsequent premiums payable under the policy.
Age Limits Stipulated minimum and maximum ages below and above which the company will not accept applications or may not renew policies.
Agent An insurance company representative licensed by the state who solicits, negotiates or effects contracts of insurance, and provides service to the policyholder for the insurer.
Annuity Plans These plans provide for a "pension" ( or a mix of a lumpsum amount and a pension ) to be paid to the policy holder or his spouse. In the event of death of both of them during the policy period, a lumpsum amount is provided for the next of kin.
Application Form Supplied by the insurance company, usually filled in by the agent and medical examiner (if applicable) on the basis of information received from the applicant. It is signed by the applicant and is part of the insurance policy if it is issued.
Assignment Assignment means legal transference. A method by which the policy holder can person on his interest to another person. An assignment can be made by an endorsement on the policy document or as a seperate deed. Assignment can be of two types
Conditional
absolute
Beneficiary The person(s) or entity(ies) (e.g. corporation, trust, etc.) named in the policy as the recipient of insurance proceeds upon the death of the insured.
Business Insurance A policy which primarily provides coverage of benefits to a business as contrasted to an individual. It is issued to indemnify a business for the loss of services of a key employee or a partner who becomes disabled.
Cancelable A contract of health insurance that may be cancelled during the policy term by the insurer or insured.
Coinsurance 1) A provision under which an insured who carries less than the stipulated percentage of insurance to value, will receive a loss payment that is limited to the same ratio which the amount of insurance bears to the amount required;
2) a policy provision frequently found in medical insurance, by which the insured person and the insurer share the covered losses under a policy in a specified ratio, i.e., 80 per cent by the insurer and 20 per cent by the insured.
Convertible Whole Life Policy A mix of "whole life policy" and "endowment policy", it provides for very low insurance premiums with maximum risk cover while the life assured is just beginning his working career, and the possibiliy of converting the policy to an "endowment" policy after five years of commencement.
Coverage The scope of protection provided under a contract of insurance; any of several risks covered by a policy.
Days Of Grace Policy holders are expected to apy premium on due dates. a period is 15-30 days is allowed as grace to make payment of premium; such period is days of grace.
Deferment Period Period between the date of subscription to an insurance-cum-pension policy and the time at which the first instalment of pension is received. Such policies generally prescribe a minimum and maximum limit on the deferment period.
Depreciation A decrease in the value of property over a period of time due to wear and tear or obsolescence. Depreciation is used to determine the actual cash value of property at time of loss.
Double/Triple Cover Plans These offer to the beneficiaries double/triple the sum assured on death of life assured during the term of the policy. On survival to the date of maturity, the basic sum assured is paid to the assured. These are low-premium plans, most useful for situations such as housing.
Embezzlement Fraudulent use or taking of another's property or money which has been entrusted to one's care.
Endowment Policy The assured has to pay an annual premium which is determined on the basis of the assured's age at entry and the term of the policy. The insured amount is payable either at the end of specified number of years or upon the death of the insured person, whichever is earlier.
Excess And Surplus Insurance 1) Insurance to cover losses above a certain amount, with losses below that amount usually covered by a regular policy.
(2) Insurance to cover an unusual or one-time risk, e.g., damage to a musician's hands or the multiple perils of a convention, for which coverage is unavailable in the normal market.
Exclusions Specific conditions or circumstances for which the policy will not provide benefits.
Facultative Reinsurance A type of reinsurance in which the reinsurer can accept or reject any risk presented by an insurance company seeking reinsurance.
Family Insurance .A life insurance policy providing insurance on all or several family members in one contract, generally whole life insurance on the principal breadwinner and small amounts of term insurance on the other spouse and children, including those born after the policy is issued
FiduciaryA person who holds something in trust for another.
Fire Insurance Coverage for losses caused by fire and lightning, plus resultant damage caused by smoke and water. Flood insurance Coverage against loss resulting from the flood peril, available at low cost under a programme developed by the Central government.
Franchise Insurance A form of insurance in which individual policies are issued to the employees of a common employer or the members of an association under an arrangement by which the employer or association agrees to collect the premium and remit them to the insurer.
Guaranteed Insurance Sum (GIS) A lump sum purchase price is given to purchase future pensions under the Jeevan Akshay Plan of Life Insurance Corporation of India. This amount is referred to as GIS. The monthly pension that is payable one month after payment of first premium is calculated on the basis of the age at entry.
Gross Insurance Value Element (GIVE) The amount payable on the deferred date under Jeevan Dhara Life of Life Insurance Corporation of India. An annutiy of 1% of the GIVE is payable per month after the deferment period. And the entire GIVE is payable on death after deferment period.
Group Life Insurance Life insurance usually without medical examination, on a group of people under a master policy. It is typically issued to an employer for the benefit of employees, or to members of an association, for example a professional membership group. The individual members of the group hold certificates as evidence of their insurance
Guaranteed Policies These are policies where the payment stays fixed.
Indemnity Legal principle that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position as existed before the loss.
Insurable Interest A condition in which the person applying for insurance and the person who is to receive the policy benefit will suffer an emotional or financial loss, if any untouched event occurs. Without insurable interest, an insurance contract is invalid.
Insurability All conditions pertaining to individuals that affect their health, susceptibility to injury and life expectancy; an individual's risk profile.
Insurance Social device for minimizing risk of uncertainty regarding loss by spreading the risk over a large enough number of similar exposures to predict the individual chance of loss.
InsuredThe person whose life is covered by a policy of insurance.
Joint Life Endowment Assurance Plans The sum assured ( plus any accrued bonuses) under this type of policy is payable on the end of the endowment term or on the first death of the two lives assured, whichever is earlier. Typically (though not a necessity) taken out by a couple, a variation is available for couples only. In this case, the sum assured will be payable on first death and then again on the second death (along with all vested bonuses) if both deaths occur during the term of the policy. If one or both lives survive to the maturity date, the sum assured along with all vested bonuses will be payable on maturity date. Premiums during this plan cease on the first death or the expiry of the selected term, whichever is earlier. Another variation provides for annuity to both/surviving spouse, or a lumpsum amount to the legal heirs.
Keyman Insurance Policy A life insurance policy taken by a person on the life of another person who is or was his employee/connected to his business in any manner whatsoever.
Lapsed Policy A policy which has terminated and is no longer in force due to non-payment of the premium due
Limited Payment Life Policy Premiums need to be paid only for a certain number of years or until death if it occurs within this period. Proceeds of the policy are granted to the beneficiaries whenever death of the policy holder occurs. Again, this policy can also be of the "with profits " or "without profits" type.
Loyalty Additions The loyalty addition is given upon the maturity of the policy, and not before. It's a small percentage of the sum assured. Broadly speaking, loyalty addition is the difference between the performance, of the insurance company and the guaranteed additions. It is LICs effort to further share its surplus after valuation with the policy holders, as LIC is a non-profit organization.
Life Assured The person whose life is insured by an individual life policy is called life assured.
Maturity The date upon which the face amount of a life insurance policy , if not previously invoked due to the contingency covered (death), is paid to the policyholder.
Maturity Claim The Payment to the policy holder at the end of the stipulated term of the policy is called maturity claim.
Misrepresentation Act of making, issuing, circulating or causing to be issued or circulated an estimate, an illustration, a circular or a statement of any kind that does not represent the correct policy terms, dividends or share of surplus or the name or title for any policy or class of policies that does not in fact reflect its true nature.
Money Back Policy Unlike endowment plans, in money back policies, the policy holder gets periodic "survivance payments" during the term of the policy and a lumpsum amount on surviving its term. In the event of death during the term of the policy, the beneficiary gets the full sum assured, without any deductions for the amounts paid till date, and no further premiums are required to be paid.These type of policies are very popular, since they can be tailored to get large amounts at specific periods as per the needs of the policy holder.
Moral Hazard Risk depends on the need for insurance, state of health, personal habits standard of living and income of insured peson. Moral hazard is the risk factors that affects the decesion of the insurance company to accept the risk.
Nomination An act by which the policy holders authorises another person to receive the policy moneys. The person so authorised is called Nominee.
Non-cancelable policies Such policies stay in effect regardless of whatever that might happen and as long as the premium is paid from time to time
Premium The payment, or one of the regular periodic payments, that a policy holder makes to an insurer in exchange for the insurer's obligation to pay benefits upon the occurrence of the contractually-specified contingency (e.g., death).
Premium Back Term Insurance Plans These provide for refund of all the premiums paid, in the event of th life assured surviving to the end of the policy term. The total sum assured is paid to the beneficiaries in the event death occurs during the policy term.
Reinstatement The restoration of a lapsed policy to in-force status. Reinstatement can only occur after the expiration of the grace period. The company may require evidence of insurability (and, if health status has changed, deny reinstatement), and will always require payment of the total amount of past due premium.
Risk The obligation assumed by the insurer when it issues a policy. The spreading of risk across a broad base of the population, adjusted for statistical probability, and the protection against catastrophic loss, is the entire purpose of insurance. For risk assumption purposes, death is viewed as a contingency. That is, although death is certain, its timing is unknown. The process of evaluating and selecting risk is known as underwriting.
Salary Saving Scheme This scheme provides for payment of premiums by money deduction from the salary of the employees by one employer.
Sub Standard Risk Person who is considered an under-average or impaired insurance risk because of physical condition, family or personal history of disease, occupation, residence in unhealthy climate or dangerous habits.
Surrender Value The value payable to the policy holder in the event of his deciding to terminate the policy before the maturity of the policy.
Survival Benefit The payment of sum assured to the incured person which has become due by instalments under a money back policy.
Vesting Age The age at which the receipt of pension starts in an insurance-cum-pension plan.
Whole Life Policy Premiums are paid throughout the life time of life assured . This can be with profits or without profits ( A "with profit" policy is eligible for various bonuses declared by LIC every year, while a "without profits" policy does not have this privilege )
With-Profit policy Policies entitled to bonus, which is paid at the time of claim-death or maturity one with-profit policies.
Without-Profit policy These policies are not entitled to particiapte in bonuses.
Accident Benefit Provides for payment of an additional benefit equal to the sum sum assured in instalments on permanent total disability and waiver of subsequent premiums payable under the policy.
Age Limits Stipulated minimum and maximum ages below and above which the company will not accept applications or may not renew policies.
Agent An insurance company representative licensed by the state who solicits, negotiates or effects contracts of insurance, and provides service to the policyholder for the insurer.
Annuity Plans These plans provide for a "pension" ( or a mix of a lumpsum amount and a pension ) to be paid to the policy holder or his spouse. In the event of death of both of them during the policy period, a lumpsum amount is provided for the next of kin.
Application Form Supplied by the insurance company, usually filled in by the agent and medical examiner (if applicable) on the basis of information received from the applicant. It is signed by the applicant and is part of the insurance policy if it is issued.
Assignment Assignment means legal transference. A method by which the policy holder can person on his interest to another person. An assignment can be made by an endorsement on the policy document or as a seperate deed. Assignment can be of two types
Conditional
absolute
Beneficiary The person(s) or entity(ies) (e.g. corporation, trust, etc.) named in the policy as the recipient of insurance proceeds upon the death of the insured.
Business Insurance A policy which primarily provides coverage of benefits to a business as contrasted to an individual. It is issued to indemnify a business for the loss of services of a key employee or a partner who becomes disabled.
Cancelable A contract of health insurance that may be cancelled during the policy term by the insurer or insured.
Coinsurance 1) A provision under which an insured who carries less than the stipulated percentage of insurance to value, will receive a loss payment that is limited to the same ratio which the amount of insurance bears to the amount required;
2) a policy provision frequently found in medical insurance, by which the insured person and the insurer share the covered losses under a policy in a specified ratio, i.e., 80 per cent by the insurer and 20 per cent by the insured.
Convertible Whole Life Policy A mix of "whole life policy" and "endowment policy", it provides for very low insurance premiums with maximum risk cover while the life assured is just beginning his working career, and the possibiliy of converting the policy to an "endowment" policy after five years of commencement.
Coverage The scope of protection provided under a contract of insurance; any of several risks covered by a policy.
Days Of Grace Policy holders are expected to apy premium on due dates. a period is 15-30 days is allowed as grace to make payment of premium; such period is days of grace.
Deferment Period Period between the date of subscription to an insurance-cum-pension policy and the time at which the first instalment of pension is received. Such policies generally prescribe a minimum and maximum limit on the deferment period.
Depreciation A decrease in the value of property over a period of time due to wear and tear or obsolescence. Depreciation is used to determine the actual cash value of property at time of loss.
Double/Triple Cover Plans These offer to the beneficiaries double/triple the sum assured on death of life assured during the term of the policy. On survival to the date of maturity, the basic sum assured is paid to the assured. These are low-premium plans, most useful for situations such as housing.
Embezzlement Fraudulent use or taking of another's property or money which has been entrusted to one's care.
Endowment Policy The assured has to pay an annual premium which is determined on the basis of the assured's age at entry and the term of the policy. The insured amount is payable either at the end of specified number of years or upon the death of the insured person, whichever is earlier.
Excess And Surplus Insurance 1) Insurance to cover losses above a certain amount, with losses below that amount usually covered by a regular policy.
(2) Insurance to cover an unusual or one-time risk, e.g., damage to a musician's hands or the multiple perils of a convention, for which coverage is unavailable in the normal market.
Exclusions Specific conditions or circumstances for which the policy will not provide benefits.
Facultative Reinsurance A type of reinsurance in which the reinsurer can accept or reject any risk presented by an insurance company seeking reinsurance.
Family Insurance .A life insurance policy providing insurance on all or several family members in one contract, generally whole life insurance on the principal breadwinner and small amounts of term insurance on the other spouse and children, including those born after the policy is issued
FiduciaryA person who holds something in trust for another.
Fire Insurance Coverage for losses caused by fire and lightning, plus resultant damage caused by smoke and water. Flood insurance Coverage against loss resulting from the flood peril, available at low cost under a programme developed by the Central government.
Franchise Insurance A form of insurance in which individual policies are issued to the employees of a common employer or the members of an association under an arrangement by which the employer or association agrees to collect the premium and remit them to the insurer.
Guaranteed Insurance Sum (GIS) A lump sum purchase price is given to purchase future pensions under the Jeevan Akshay Plan of Life Insurance Corporation of India. This amount is referred to as GIS. The monthly pension that is payable one month after payment of first premium is calculated on the basis of the age at entry.
Gross Insurance Value Element (GIVE) The amount payable on the deferred date under Jeevan Dhara Life of Life Insurance Corporation of India. An annutiy of 1% of the GIVE is payable per month after the deferment period. And the entire GIVE is payable on death after deferment period.
Group Life Insurance Life insurance usually without medical examination, on a group of people under a master policy. It is typically issued to an employer for the benefit of employees, or to members of an association, for example a professional membership group. The individual members of the group hold certificates as evidence of their insurance
Guaranteed Policies These are policies where the payment stays fixed.
Indemnity Legal principle that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position as existed before the loss.
Insurable Interest A condition in which the person applying for insurance and the person who is to receive the policy benefit will suffer an emotional or financial loss, if any untouched event occurs. Without insurable interest, an insurance contract is invalid.
Insurability All conditions pertaining to individuals that affect their health, susceptibility to injury and life expectancy; an individual's risk profile.
Insurance Social device for minimizing risk of uncertainty regarding loss by spreading the risk over a large enough number of similar exposures to predict the individual chance of loss.
InsuredThe person whose life is covered by a policy of insurance.
Joint Life Endowment Assurance Plans The sum assured ( plus any accrued bonuses) under this type of policy is payable on the end of the endowment term or on the first death of the two lives assured, whichever is earlier. Typically (though not a necessity) taken out by a couple, a variation is available for couples only. In this case, the sum assured will be payable on first death and then again on the second death (along with all vested bonuses) if both deaths occur during the term of the policy. If one or both lives survive to the maturity date, the sum assured along with all vested bonuses will be payable on maturity date. Premiums during this plan cease on the first death or the expiry of the selected term, whichever is earlier. Another variation provides for annuity to both/surviving spouse, or a lumpsum amount to the legal heirs.
Keyman Insurance Policy A life insurance policy taken by a person on the life of another person who is or was his employee/connected to his business in any manner whatsoever.
Lapsed Policy A policy which has terminated and is no longer in force due to non-payment of the premium due
Limited Payment Life Policy Premiums need to be paid only for a certain number of years or until death if it occurs within this period. Proceeds of the policy are granted to the beneficiaries whenever death of the policy holder occurs. Again, this policy can also be of the "with profits " or "without profits" type.
Loyalty Additions The loyalty addition is given upon the maturity of the policy, and not before. It's a small percentage of the sum assured. Broadly speaking, loyalty addition is the difference between the performance, of the insurance company and the guaranteed additions. It is LICs effort to further share its surplus after valuation with the policy holders, as LIC is a non-profit organization.
Life Assured The person whose life is insured by an individual life policy is called life assured.
Maturity The date upon which the face amount of a life insurance policy , if not previously invoked due to the contingency covered (death), is paid to the policyholder.
Maturity Claim The Payment to the policy holder at the end of the stipulated term of the policy is called maturity claim.
Misrepresentation Act of making, issuing, circulating or causing to be issued or circulated an estimate, an illustration, a circular or a statement of any kind that does not represent the correct policy terms, dividends or share of surplus or the name or title for any policy or class of policies that does not in fact reflect its true nature.
Money Back Policy Unlike endowment plans, in money back policies, the policy holder gets periodic "survivance payments" during the term of the policy and a lumpsum amount on surviving its term. In the event of death during the term of the policy, the beneficiary gets the full sum assured, without any deductions for the amounts paid till date, and no further premiums are required to be paid.These type of policies are very popular, since they can be tailored to get large amounts at specific periods as per the needs of the policy holder.
Moral Hazard Risk depends on the need for insurance, state of health, personal habits standard of living and income of insured peson. Moral hazard is the risk factors that affects the decesion of the insurance company to accept the risk.
Nomination An act by which the policy holders authorises another person to receive the policy moneys. The person so authorised is called Nominee.
Non-cancelable policies Such policies stay in effect regardless of whatever that might happen and as long as the premium is paid from time to time
Premium The payment, or one of the regular periodic payments, that a policy holder makes to an insurer in exchange for the insurer's obligation to pay benefits upon the occurrence of the contractually-specified contingency (e.g., death).
Premium Back Term Insurance Plans These provide for refund of all the premiums paid, in the event of th life assured surviving to the end of the policy term. The total sum assured is paid to the beneficiaries in the event death occurs during the policy term.
Reinstatement The restoration of a lapsed policy to in-force status. Reinstatement can only occur after the expiration of the grace period. The company may require evidence of insurability (and, if health status has changed, deny reinstatement), and will always require payment of the total amount of past due premium.
Risk The obligation assumed by the insurer when it issues a policy. The spreading of risk across a broad base of the population, adjusted for statistical probability, and the protection against catastrophic loss, is the entire purpose of insurance. For risk assumption purposes, death is viewed as a contingency. That is, although death is certain, its timing is unknown. The process of evaluating and selecting risk is known as underwriting.
Salary Saving Scheme This scheme provides for payment of premiums by money deduction from the salary of the employees by one employer.
Sub Standard Risk Person who is considered an under-average or impaired insurance risk because of physical condition, family or personal history of disease, occupation, residence in unhealthy climate or dangerous habits.
Surrender Value The value payable to the policy holder in the event of his deciding to terminate the policy before the maturity of the policy.
Survival Benefit The payment of sum assured to the incured person which has become due by instalments under a money back policy.
Vesting Age The age at which the receipt of pension starts in an insurance-cum-pension plan.
Whole Life Policy Premiums are paid throughout the life time of life assured . This can be with profits or without profits ( A "with profit" policy is eligible for various bonuses declared by LIC every year, while a "without profits" policy does not have this privilege )
With-Profit policy Policies entitled to bonus, which is paid at the time of claim-death or maturity one with-profit policies.
Without-Profit policy These policies are not entitled to particiapte in bonuses.
Motor Insurance
Collision Coverage - Optional insurance covers the damage to your car caused by collision with another car or object. Is frequently required if you have a car loan.
Comprehensive physical damage coverage - Optional insurance covering damage to your car caused by something other than a collision or the car rolling over, such as fire, theft, vandalism, flood or hail. Is frequently required if you have a car loan. Conditions - These are part of an insurance policy that states the obligations of the insurance owner and those of the insurance company in order for the policy to be in effect.
Insured Declared Value (IDV) - The premium is calculated on the basis of the IDV of the vehicle, which is basically the depreciated value of the vehicle agreed upon by the insurer and the policyholder. The IDV of a vehicle reduces with age.
Liability coverage - Offers you and any other party involved in an accident a significant sum to cover mainly the medical expenses. Normally these figures are divided into three parts, first one represents the maximum your insurance will pay an individual, second represents a cover to all individuals and third one covers damage to another car or property at the time of collision.
No Claim Bonus (NCB) - If you do not make a claim during the policy period, a No Claim Bonus is offered on renewals. Insurers reward policyholders by giving them substantial discounts on the Own Damage Premium. However the NCB is applicable only if the policy is renewed within 90 days of the expiry date of the previous policy.
Own Damage Premium (OD) - Payment of OD premium entitles you to claim compensation in case of theft or damage of your vehicle due to fire, earthquake, etc.
Personal Accident Cover – It covers you not only against Accidental Death and Permanent Total Disablement (PTD), but also against terrorism and acts of terrorism.
Depreciation: It is the wear and tear a vehicle goes though during the normal course of usage.
Survey: It is verification of the vehicle to identify the magnitude of claims
Proof of loss – Documents you provide to the insurer to support your request for payment of losses. The company uses these documents to determine whether and how much it will pay. For example written repair estimates from auto body shops, police reports, etc.
Liability Only Policy: This covers Third Party Liability for bodily injury and/ or death and Property Damage .Personal Accident Cover for Owner-Driver is also included.
Package Policy: This covers loss or damage to the vehicle insured in addition to Liability Only Policy
Uninsured motorist coverage – Uninsured motorist coverage can pay for the injuries caused to you and damage to your property following an accident and the driver at fault does not own a valid insurance
Comprehensive physical damage coverage - Optional insurance covering damage to your car caused by something other than a collision or the car rolling over, such as fire, theft, vandalism, flood or hail. Is frequently required if you have a car loan. Conditions - These are part of an insurance policy that states the obligations of the insurance owner and those of the insurance company in order for the policy to be in effect.
Insured Declared Value (IDV) - The premium is calculated on the basis of the IDV of the vehicle, which is basically the depreciated value of the vehicle agreed upon by the insurer and the policyholder. The IDV of a vehicle reduces with age.
Liability coverage - Offers you and any other party involved in an accident a significant sum to cover mainly the medical expenses. Normally these figures are divided into three parts, first one represents the maximum your insurance will pay an individual, second represents a cover to all individuals and third one covers damage to another car or property at the time of collision.
No Claim Bonus (NCB) - If you do not make a claim during the policy period, a No Claim Bonus is offered on renewals. Insurers reward policyholders by giving them substantial discounts on the Own Damage Premium. However the NCB is applicable only if the policy is renewed within 90 days of the expiry date of the previous policy.
Own Damage Premium (OD) - Payment of OD premium entitles you to claim compensation in case of theft or damage of your vehicle due to fire, earthquake, etc.
Personal Accident Cover – It covers you not only against Accidental Death and Permanent Total Disablement (PTD), but also against terrorism and acts of terrorism.
Depreciation: It is the wear and tear a vehicle goes though during the normal course of usage.
Survey: It is verification of the vehicle to identify the magnitude of claims
Proof of loss – Documents you provide to the insurer to support your request for payment of losses. The company uses these documents to determine whether and how much it will pay. For example written repair estimates from auto body shops, police reports, etc.
Liability Only Policy: This covers Third Party Liability for bodily injury and/ or death and Property Damage .Personal Accident Cover for Owner-Driver is also included.
Package Policy: This covers loss or damage to the vehicle insured in addition to Liability Only Policy
Uninsured motorist coverage – Uninsured motorist coverage can pay for the injuries caused to you and damage to your property following an accident and the driver at fault does not own a valid insurance