Insurance Glossary

Annualized Premium shall be the premium amount payable in a year excluding taxes, rider premiums, underwriting extra premiums and loadings for modal premiums, if any as specified in the Schedule.

The person receiving annuity benefits from an annuity contract at regular intervals (yearly/half-yearly/quarterly or monthly basis and based on the annuity option selected) is called as an Annuitant.

An agreement under which the Insurance Company makes periodic payments during the survival of the annuitant(s), till death or for a specified period. Annuities are paid in different ways, for example, Annuity for Life, Joint Life Annuity, Annuity with Return of Corpus, etc.

Assignee is the person to whom the rights and benefits are transferred by virtue of an Assignment, in accordance with the provisions of Section 38 of Insurance Act, 1938, as amended from time to time.

Assignment is the process of transferring the rights and benefits to an Assignee, in accordance with the provisions of Section 38 of the Insurance Act, 1938, as amended from time to time.

Assignor is the person whose rights and benefits are transferred by virtue of an Assignment, in accordance with the provisions of Section 38 of the Insurance Act, 1938, as amended from time to time.

A beneficiary is a person or a legal entity which receives money or other benefits from the policy. For example: The beneficiary of a life insurance policy is the nominee who receives the payment of the amount of insurance after the death of the Life Assured.

It is a request for payment made by the beneficiary of a life insurance policy to the Life Insurance Company.

It is the amount which the beneficiary claims from the Insurance Company.

Commission is the remuneration paid by the insurance company to its agent or intermediary as a percentage of the premium for procuring and servicing insurance business.

A 'contract' is an agreement between two or more entities that creates a legal obligation. For example, life insurance is a contract between the Insurance Company and the policyholder in which the Life Insurance Company agrees to pay a certain amount of money if the policyholder fulfils all his obligations under the policy.

The amount and scope of protection provided under a contract of insurance.

It is the date on which the life insurance cover starts.

Life insurance amount paid to the nominee or the beneficiary on the death of the life insured.

A formal request submitted by the nominee or beneficiary to the insurance company for the payment of death benefits following the death of the life assured, in accordance with the terms and conditions of the policy.

A deferred annuity is a type of annuity plan in which there is an accumulation phase up to the vesting age, during which the annuitant pays premiums to build a corpus. At vesting, the accumulated corpus is used to purchase an annuity of choice, and regular annuity payments begin from the vesting age in the selected payment mode.

These charges are deducted from the policyholder's account/fund if the life insurance policy is surrendered by the policyholder. This is also called as the Surrender Charge.

When a policyholder is not able to pay premium within the due dates, it is called as Discontinuance of Premium.

In case of a Unit Linked Life Insurance Policy, if the policyholder chooses to withdraw the policy completely, before the completion of 5 years, then the Fund Value after deducting the applicable surrender charges are transferred to the Discontinued Policy Fund. The policyholder will earn an interest rate, as applicable. No other charges other than Fund Management Charges will be deduced from the fund. Life cover and rider cover (if any) will cease to exist.

An Endowment Plan is a savings life insurance plan with a specific maturity date. In case of death of the life assured during the period, the death benefit will be paid to nominees. If the life assured survives the term, the maturity benefit of the policy become payable.

Exclusions are specific conditions or circumstances listed in the policy under which no benefit is payable. In life insurance, common exclusions include death due to suicide within a specified period, participation in hazardous activities, or acts of war.

The policyholder has an option of returning the policy if he or she is not satisfied after reviewing the terms and conditions as well as the features. The policy can be returned within 15 or 30 days from the date of receipt of the policy document stating the reasons for his/her objection. In case the policyholder returns the policy during this period, the Insurance Company will refund the premium after deducting the expenses incurred on medical examination, stamp duty charges and other charges.

These are fees deducted by the insurer to cover expenses related to managing the investment funds of a Unit Linked Insurance Policy. They are charged as a percentage of the fund value and are adjusted before calculating the Net Asset Value (NAV).

It is the total value of units that a policyholder holds in funds. Fund Value = Number of Units x Net Asset Value

Grace Period means the time granted by the insurer from the due date of payment of premium, without any penalty or late fee, during which time the policy is considered to be in-force with the risk cover without any interruption, as per the terms & conditions of the policy. The grace period for payment of the premium for all types of life insurance policies shall be fifteen days, where the policyholder pays the premium on a monthly basis and 30 days in all other cases.

The total amount of premium payable by the policyholder, including all applicable taxes and charges, before deduction of any expenses or commissions.

Guaranteed Survival Benefits are fixed amounts payable to the policyholder at specified intervals during the policy term, provided the policy is in force, and all due premiums have been paid. These benefits are guaranteed and defined in advance under the plan.

An annuity in which benefits begin soon after the annuity is purchased by paying a one-time lump sum amount.

In-force Policies are valid/active policies for which the full premiums as on date are paid.

Insurability refers to the overall eligibility of an individual to be insured, based on factors such as age, health, lifestyle, occupation, and risk profile that influence the likelihood of a claim or loss.

It is the Insurance Company which provides the life insured with protection in the form of a monetary payout as per the insurance policy selected.

It is the termination of an insurance policy because of non-payment of renewal premium by the policyholder.

This refers to those policies that have been terminated and are no longer in force due to non-payment of the due premium.

Life Assured is the person whose life is insured by the Life Insurance Company. On death of the life insured during the Policy Term, the Death Benefits are paid to the nominee provided the terms and conditions of the policy are fulfilled.

Policies in which premium payment term is less than the Policy Term.

The benefits received after the completion of the Policy Term are called Maturity Benefits.

It is the date on which the Policy Term ends.

In Money Back Plans a certain percent of the sum assured/ money is returned periodically as survival benefit. On the expiry of the term, the balance amount, as per the policy is paid as maturity value.

Mortality Charges are the costs deducted by the insurer to provide life cover under the policy. The amount depends on factors such as the life assured’s age, sum at risk, and mortality rates.

In Unit Linked Insurance Policies, the premium is invested in equity or debt markets or both. The premium is allocated in the fund chosen by the policyholder. The fund has a particular value associated to it which is known as Net Asset Value (NAV). The NAV can change on a daily basis and is calculated once every business day.

Nomination is where the life insured proposes the name of the person(s) to whom the sum insured should be paid by the Insurance Company after his/her death.

Nominee is the person nominated by the policyholder to receive the benefit under a life insurance policy during settlement of claim.

A participating plan is one in which bonuses are declared at the discretion of the insurer. In the case of a non-participating plan, the benefits of the policy are clearly defined. For example, in an Endowment Plan, premiums are invested by the Insurance Company and profit earned on it is again distributed back to the policyholders in the form of bonuses, whereas in a pure Term Plan, the policyholders are not entitled to participate in the profit of the Insurance Company.

Occupations which expose the insured person to greater than normal physical danger by the very nature of the work in which the insured is engaged.

It is an insurance policy that requires no further premium payments but continues to provide coverage as per the reduced paid up value calculated.

Insurance companies will offer the policyholder the right to convert a normal policy into a reduced paid-up policy if they have already paid premiums for a minimum of two/three years, as per the policy. Instead, the sum insured is reduced in proportion to the number of premiums paid. If other benefits related to the sum insured are payable, the benefit will now be related to the reduced sum insured, which is the paid-up value.

In Unit Linked Policies or Variable Linked Policies, the policyholder can withdraw some amount from the Fund Value of his/her life insurance policy. This feature can be availed only after five years from the commencement of the policy.

Pension plans (also referred to as retirement plans) are offered to help individuals build a retirement corpus. On maturity, this corpus is invested for generating a regular income stream, which is referred to as pension or annuity.

These are the charges deducted on a monthly basis to recover the expenses of maintaining the policy including record keeping, paper work, services, etc.

Policy Anniversary Date is the same date each year as the initial policy date.

A document issued to the policyholder by the Insurance Company stating the terms and conditions, product information and benefits, premium schedule, etc., which every policyholder should read carefully, is called a Policy Document (Insurance Policy Document).

Policyholder is the person who owns a life insurance policy. Policyholder is usually the insured person, but in some cases, it may also be a proposer of the policy such as spouse, a partner or a company.

When a policy lapses, the insured loses the life insurance cover for the full amount, insurance companies make it possible for lapsed policies to be brought back into full force. This process is called 'Revival'.

It is the period for which a life insurance policy provides life insurance coverage.

The amount customer pays towards life insurance policy to provide life insurance cover.

These charges are deducted upfront from the premium paid by the policyholder as a percentage of premium. These charges account for the initial expenses incurred by the company in issuing the policy, e.g., cost of underwriting, medicals and expenses related to distributor fees. After these charges are deducted, the money gets invested in the chosen fund.

It is the specific period after which the policyholder needs to pay premiums regularly to keep the life insurance policy in force and avail its benefits. Usually, a life insurance policy has the premium paying frequency as - Annually, Half-Yearly, Quarterly and Monthly.

The number of years a policyholder has to pay premium for the life insurance policy.

A life insurance policy is offered based on a proposal form completed by the proposer. It is essential for initiating the life insurance contract between the proposer and the insurance company.

Proposer is a person who proposes for the life insurance policy.

In a Unit Linked Policy the policyholder may change the allocation percentages to different funds for future premiums and future top-up premiums.

When the policyholder chooses to pay premium at regular intervals for a defined period as per the insurance policy, to keep the policy in force and avail its benefits, the mode of premium payment is called Regular Premium Payment Mode.

The restoration of a lapsed policy to in force status is called Reinstatement. Reinstatement can only occur after the end of the grace period. The company may require the evidence of insurability (if the health status has changed, reinstatement may be denied) and will always require payment of the total amount of past due premiums.

After the payment of first initial premium, subsequent premium payments made periodically to keep the policy in force and avail policy benefits.

As long as the policyholder pays premium on time, the policy remains in force. The policy lapses when premiums are not paid even after the completion of the grace period. Thereafter, the Life Insurance Company provides an option to the policyholder wherein he/she can make the policy in force only during a specific period after the grace period. The process is called Revival of the Life Insurance Policy or Policy Revival and the period is called Revival Period.

In Unit Linked Polices instead of taking a lump sum amount at maturity, some plans provide policyholders with the option to receive the Maturity Benefits as a structured payout (periodic instalments) over a period of time (say, 5 years or any time up to 5 years) after maturity. This is known as the Settlement Option. If the policyholder wishes to opt for the Settlement Option they need to inform the Insurance Company well in advance.

When the policyholder has to pay premium only once, during the term of the life insurance policy, the mode of premium payment chosen is called as Single Premium Payment Mode.

Limitation in life insurance policies to the effect that no Death Benefits will be paid if the life insured commits suicide during one year since inception or revival of the policy.

Sum Assured is the amount that an insurer agrees to pay on the occurrence of a stated contingency (e.g. death).

A type of retirement plan set up by a company for the benefit of its employees. These types of plans use funds deposited by the company (defined benefit plan) or by the employee (defined contribution plan) with the funds growing in value until the employee retires.

If the policyholder terminates the policy before its maturity, it is called surrender of the life insurance policy. The charges levied while terminating the policy during the surrender period are called Surrender Charges.

The value payable to the policyholder in the event of his/her decision to terminate the policy before its maturity is called as Surrender Value.

Benefits received by the policyholder on the completion or during the Policy Term are called Survival Benefits.

Switching is the option in which a customer can move some or all of his units from an existing fund into one or more funds at the respective Unit Price on the day the switch comes into effect.

Term is the period for which insurance coverage is given. It is also called as the tenure of the life insurance policy.

A life insurance policy which provides an insurance cover upon the death of the life insured within the Policy Term as per the terms and conditions of the contract. These types of plans only cover the risk of death and on expiry of the Policy Term the policyholder does not get anything in return on survival.

Top-up is an additional amount over and above the premium that the policyholder can invest to gain from the performing market.

Traditional insurance plans offer multiple benefits in terms of risk cover, return, safety and tax benefit. Traditional policies are considered risk-free, as they provide fixed income returns in case of death of the Life Assured or maturity of the policy.

Underwriting is the methodology applied by life insurers to examine or assess the insurance risks before accepting or rejecting coverage and determining the appropriate premiums for them.

It is a component of the fund in a Unit Linked Policy. Unit Linked Life Insurance Plans (ULIPS) are plans linked to the stock market. ULIPs offer a combination of investment and protection with flexibility and choice to policyholder on how premiums are invested.

Life insurance products in which the policy’s premiums are invested in various investment funds, and the Death or Maturity Benefits depend on the value of the policy account. The Death Benefit may include a guaranteed sum assured, while the Maturity Benefit equals the policy account balance.

It is the bonus, which the insurer declares after evaluating its assets and liabilities, and that is added to the policy. Once it is attached to the policy, it becomes the guaranteed benefit to be paid to the policyholder.

The age at which the receipt of pension starts in an insurance-cum-pension plan or annuity is called the Vesting Age.

A period set forth in a policy which must pass before some or all coverage begins. Incidents that occur during this time are not claimable.