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‘Glossary’ section is an alphabetical
listing of special insurance terms, which will give you an in-depth explanation
of the terms. These terminologies are supported with accompanying definitions,
meanings and interpretation in various contexts. This section will help
you to have a handle on various insurance terms.
Scroll down for a complete list of insurance terms. Click on the respective
‘alphabet’ below to have its meaning or definition displayed.
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| A |
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| Accident: |
| An unforeseen and unintended event or occurrence causing
damage/injury to an entity. |
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| Accident Benefit: |
| Provides for payment of an additional benefit equal to
the sum assured in installments on permanent total disability and waiver
of subsequent premiums payable under the policy. |
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| Age Limits: |
| Stipulated minimum and maximum age limit stated by the
company. Based on the age limit, the company will accept/reject applications
or renew policies. |
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| Agent: |
| An insurance company representative licensed by the state
that solicits, negotiates or effects contracts of insurance, and provides
service to the policyholder on behalf of the insurer. |
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| Annuity Plans: |
| These plans provide for a ‘pension’ (or a
mix of a lumpsum amount and a pension) to be paid to the policyholder or
his spouse. In the event of the death of both the spouses during the policy
period, a lumpsum amount is provided to the next of kin. |
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| 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. |
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| Assignment: |
| Assignment means legal transference. It is a means whereby
the beneficial interest, right and title under a policy gets transferred
from Assignor to Assignee. ‘Assignor’ is the policyholder who
transfers the title and ‘Assignee’ is the person who derives
the title from the Assignor. |
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| Annuitant: |
| The person receiving annuity benefits at fixed intervals
of time. (Which is on a yearly / half yearly/ quarterly or monthly basis).
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| B |
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| 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. |
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| 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 |
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| C |
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| Cancelable: |
| A contract of health insurance that may be cancelled
during the policy term by the insurer or insured. |
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| 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. |
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| 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 possibility of converting the policy to an ‘endowment’
policy after five years of commencement. |
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| Coverage: |
| The scope of protection provided under a contract of
insurance; any of several risks covered by a policy. |
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| Cooling off period: |
| The 15-day period during which a new policyholder can
cancel an insurance/assurance policy. This is referred to in the cancellation
notice, which is sent to people entering into long-term policies. The 15-day
period starts from receipt of the cancellation notice. |
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| D |
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| Deferment Period: |
| Period between the date of subscription to an insurance-cum-pension
policy and the time at which the first installment of pension is received.
Such policies generally prescribe a minimum and maximum limit on the deferment
period. |
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| 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. |
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| 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 the maturity, the basic sum assured is paid to
the assured. These are low-premium plans, most useful for situations such
as housing. |
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| Deferred annuity: |
| An annuity contract that is purchased either with a single
tax-deferred premium or with periodic tax-deferred premiums over time. Payments
begin at a predetermined point in time, such as retirement. |
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| E |
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| Embezzlement: |
| Fraudulent use or taking of another's property or money
which has been entrusted to one's care. |
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| Endowment Policy: |
| The assured has to pay an annual premium, which is determined
on the basis of the insured'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. |
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| 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. |
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| F |
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| Facultative Reinsurance: |
| A type of reinsurance in which the reinsurer can accept
or reject any risk presented by an insurance company seeking reinsurance. |
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| 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. |
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| Fiduciary: |
| A person who holds something in trust for another. |
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| 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. |
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| 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. |
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| G |
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| Grace Period: |
| Policy holders are expected to pay premium on due dates.
A period is 15-30 days is allowed as grace to make payment of premium; such
period is referred to days of grace. |
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| 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. |
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| Gross Insurance Value Element (GIVE): |
| The amount payable on the deferred date under Jeevan
Dhara Life of Life Insurance Corporation of India. An annuity of 1% of the
GIVE is payable per month after the deferment period. And the entire GIVE
is payable on death after deferment period. |
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| 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. |
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| Guaranteed Policies: |
| These are policies where the payment stays fixed. |
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| Guarantee period: |
| Period during which the level of interest specified under
a fixed annuity is guaranteed. |
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| Guaranteed death benefit: |
| Basic death benefits guaranteed under variable annuity
contracts. |
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| H |
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| Homeowners’ insurance policy: |
| The typical homeowners insurance policy covers the house,
the garage and other structures on the property, as well as personal possessions
inside the house such as furniture, appliances and clothing, against a wide
variety of perils including windstorms, fire and theft. The extent of the
perils covered depends on the type of policy. An all-risk policy offers
the broadest coverage. This covers all perils except those specifically
excluded in the policy. |
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| I |
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| 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.
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| 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. |
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| Insurability: |
| All conditions pertaining to individuals that affect
their health, susceptibility to injury and life expectancy of an individual's
risk profile. |
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| 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. |
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| Insured: |
| The person whose life is covered by a policy of insurance.
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| Insurance pool: |
| A group of insurance companies that pool assets, enabling
them to provide an amount of insurance substantially more than can be provided
by individual companies to ensure large risks such as nuclear power stations.
Pools may be formed voluntarily or mandated by the state to cover risks
that can’t obtain coverage in the voluntary market such as coastal
properties subject to hurricanes. |
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| J |
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| 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. |
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| K |
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| 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. |
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| L |
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| Lapsed Policy: |
| A policy, which has terminated and is no longer in force
due to non-payment of the premium due. |
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| 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 policyholder occurs.
Again, this policy can also be of the ‘with profits’ or ‘without
profits’ type. |
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| 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 LIC’s effort
to further share its surplus after valuation with the policyholders, as
LIC is a non-profit organization. |
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| Life Assured: |
| The person whose life is insured by an individual life
policy is called life assured. |
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| Liability insurance: |
| Insurance for what the policyholder is legally obligated
to pay because of bodily injury or property damage caused to another person. |
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| M |
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| 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. |
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| Maturity Claim: |
| The Payment to the policyholder at the end of the stipulated
term of the policy is called maturity claim. |
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| 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 reflect its true nature. |
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| Money Back Policy: |
| Unlike endowment plans, in money back policies, the policyholder
gets periodic ‘survival 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 types of policies are very popular, since they
can be tailored to get large amounts at specific periods as per the needs
of the policyholder. |
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| Moral Hazard: |
| Risk depends on the need for insurance, state of health,
personal habits standard of living and income of insured person. Moral hazard
is the risk factors that affect the decision of the insurance company to
accept the risk. |
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| N |
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| Nomination: |
| An act by which the policyholders authorises another
person to receive the policy proceeds. The authorised person is called Nominee. |
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| 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. |
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| P |
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| Premium: |
| The payment, or one of the regular periodic payments,
that a policyholder 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). |
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| Premium Back Term Insurance Plans: |
| These provide for refund of all the premiums paid, in
the event of the life assured surviving to the end of the policy term. The
total sum assured is paid to the beneficiaries in the event of death occurrence
during the policy term. |
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| Q |
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| Qualification Period: |
| That period of time, as stated in an insurance policy,
during which benefits are not payable to the insured following a claim.
This period is to enable the insurance company to confirm that the claim
is genuine and is usual in health insurance |
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| R |
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| Reinstatement: |
| The restoration of a lapsed policy to in-force status.
Reinstatement can only occur after the end of the grace period. The company
may require evidence of insurability (and if health status has changed reinstatement
is denied) and will always require payment of the total amount of past due
premiums. |
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| 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 i.e. although death is certain, its timing is
unknown. The process of evaluating and selecting risk is known as ‘underwriting’. |
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| Reinsurance: |
| Insurance bought by insurers. A reinsurer assumes part
of the risk and part of the premium originally taken by the insurer, known
as the primary company. Reinsurance effectively increases an insurer's capital
and therefore its capacity to sell more coverage. The business is global
and some of the largest reinsurers are based abroad. Reinsurers have their
own reinsurers, called retrocessionaires. Reinsurers don’t pay policyholder
claims. Instead, they reimburse insurers for claims paid. |
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| S |
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| Salary Saving Scheme: |
| This scheme provides for payment of premiums by money
deduction from the salary of the employees by one employer. |
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| Sub Standard Risk: |
| Person who is considered as 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. |
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| Surrender Value: |
| The value payable to the policyholder in the event of
his decision to terminate the policy before the maturity of the policy. |
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| Survival Benefit: |
| The payment of sum assured to the incurred person, which
has become due by installments under a money back policy. |
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| T |
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| Term insurance: |
| A form of life insurance that covers the insured person
for a certain period of time, the ‘term’ selected by the policyholder.
It pays benefit to a designated beneficiary only when the insured dies within
that specified period which can be 1, 5, 10 or even 20 years. Term life
policies are renewable but premiums increase with age. |
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| Travel insurance: |
| Insurance to cover problems associated with traveling,
generally including trip cancellation due to illness, lost luggage and other
incidents. |
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| U |
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| Underwriting: |
| Examining, accepting, or rejecting insurance risks and
classifying the ones that are accepted, in order to charge appropriate premiums
for them. |
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| V |
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| Vesting Age: |
| The age at which the receipt of pension starts in an
insurance-cum-pension plan. |
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| W |
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| Whole Life Policy: |
| Premiums are paid throughout the lifetime 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) |
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| With-Profit policy: |
| Policies entitled to bonus, which is paid at the time
of claim-death or maturity one with-profit policies. |
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| Without-Profit policy: |
| These policies are not entitled to participate in bonus
announced by the insurer. |
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