demistifies life insurance for you!
ACCIDENT: An unfortunate, unforeseen event without deliberate intent
ACTUARY: A person with expertise in the numerical and technical aspects of Insurance, specifically premium, reserve calculations.
AGGREGATE: The total amount payable during a policy period or on a single project, for single or multiple losses.
ARBITRAGE FUNDS: A fund that tries to gain out of the price inconsistencies, of the same asset in different markets.
AML: Anti Money Laundering(AML) is a set of procedures, laws or regulations designed to deter the practice of Money Laundering
ANNUITY: A contractual agreement providing Income for a specific period, or duration of an individual/s life
ANNUITANT: The beneficiary of an annuity payment
ASSIGNMENT: Transfer of interests in a policy to another individual. It is a shift in the ownership of the insurance policy
BENEFICIARY: Individual/s who is eligible to receive payment from an insurance policy
BENEFIT PERIOD: The number of days for which benefits are paid to the named insured and his/ her dependents
BLANKET COVER: A single policy that provides a cover to multiple properties or people extending across multiple locations, within the terms of the policy.
BODY MASS INDEX (BMI): It is the body mass divided by the square of body height, and is universally expressed in units of kg/m2, where mass is in kilograms and height is in metres. A person with BMI of 25 or more is overweight.
BONUS: The additional sum a policyholder gets either during the policy term or at maturity, provided he has paid all due premium for a specified minimum number of years. It is classified into 3 categories, viz. Cash bonus, Reversionary bonus and Terminal bonus
BONUS UNITS: These are issued by some funds instead of distributed income.
CAPITAL GAIN: This signifies the increase in the value of a Capital Asset’s / Investments. Difference between the Current Price/Sale Price and the appropriately indexed Cost of Acquisition.
CAPTIVE AGENT: One who works exclusively for an insurance company and is paid either a commission or both commission and salary.
CASUALTY: Liability or loss resulting from an accident
CLAIM: A request to the insurance company made by the insurer for payment covered under the policy agreement.
COLLATERAL: An asset (Tangible/Intangible) pledged as security against a loan, to be forfeited in the event of a default.
COMPOUND INTEREST: Interest computed on the initial principal as well as the accumulated interest of previous periods.
COST OF ACQUISITION: A cost that also includes all costs associated with buying goods, services, or assets. This means the cost of the asset, plus all costs incurred to put the asset to use, but excludes sales tax.
COVERAGE: Amount of protection provided to the policyholder subject to premium amount and policy terms and conditions.
CRITICAL ILLNESS: An illness which even after treatment/cure, drastically alters the lifestyle of the patient.
DATE OF COMMENCEMENT: Date after which the policy becomes effective.
DATE OF ISSUE: Date when insurance policy is issued
DEFERRED ANNUITY: Annuity payment made as a single payment or a series of payments to begin at a future date. Example: In a specified number of years or at a specified age.
DEFERRED PERIOD: Refers to the period between an investment and when you start receiving regular returns on the annuity. Longer the deferred period, lower the premium.
DEPENDANT: Any person who is financially dependent on the provider, it could be a child below the age of 18 or parents/grandparents.
ELECTRONIC CLEARING SYSTEM (ECS):ECS is an auto debit facility via which premiums can be automatically debited from the policyholder’s bank account, once the policyholder has consented to it.
ELECTRONIC FUND TRANSFER (EFT): One of the many ways of paying renewal premium, it is a system of transferring money from one bank account directly to another without any paper money changing hands.
ENDOWMENT PLAN: Insurance plan that provides a death benefit and maturity benefit in form of lumpsum amount on a fixed date either on maturity of policy or on death of life insured whichever is earlier
EQUITY OR GROWTH FUNDS: A growth fund is a diversified portfolio of stocks with the objective of capital appreciation, with little or no dividend payouts. They are meant for people with a high-risk appetite.
EXCLUSIONS: Exceptional circumstances stated in the policy bond under which no benefits will be provided to the beneficiaries
EX – GRATIA: Refers to a payment made due to a sense of moral obligation, and not a legal one.
FUND PERFORMANCE: The measure of a fund’s performance is a sum total of, a change in its net asset value (NAV), its dividends and its capital gains distributions over a given period of time.
FUND VALUE: The existing value of your investment with respect to ULIP. These are market linked investments and fluctuate accordingly
GUARANTEED SURRENDER VALUE: The money which is guaranteed to the policyholder in the event of voluntary termination of the policy before maturity date
GROUP LIFE INSURANCE: Group life insurance provides cover to a group of individuals under a single contract
GRACE PERIOD: Period during which the policyholder can still pay overdue premium without attracting interest. Benefits of the policy remain unchanged during this period.
INSURER: Company or party providing the insurance against premium
INSURED: Individual/group of individuals covered by an insurance policy
IRDAI: Insurance Regulatory and Development Authority of India, the apex body which regulates the insurance industry in India.
LAPSE: Termination of a policy due to failure to pay the required premium.
LIMITED PREMIUM PAYMENT TERM: Policy in which premium is paid for limited number of years but policy term is longer and hence insurance cover is availed for longer period.
LIFE INSURED: Person whose life is covered by the insurance company.
MONEY BACK PLAN: Insurance plan that issues periodic payments at regular intervals even before the end of the policy term.
MATURITY DATE: The end date of an insurance plan.
MATURITY VALUE: The amount you receive when your policy matures.
MONEY LAUNDERING: Process of concealing the origin of illegally obtained money
NON-PARTICIPATING PLAN: An insurance plan under which all the benefits are guaranteed at the beginning irrespective of the actual investment performance.
NOMINEE: Person nominated to receive the benefits of the policy, in the event of the insured individual’s untimely death
PARTICIPATING PLAN: An insurance plan under which the insured individual gets the sum assured and can also share or participate in the surplus earnings and profits of the insurance company
PREMIUM: The amount that must be paid for an insurance policy
PREMIUM PAYMENT TERM: Number of years for which the premiums must be paid.
PREMIUM ALLOCATION CHARGES: Charges for underwriting expenses, medical tests incurred by the insurer to issue the policy
PROPOSER: The person who pays the premium under the policy, not necessarily life assured under the policy
POLICY TERM: Number of years for which the insurance policy is active.
POLICY HOLDER: Individual who buys the policy and pays the premium. Policy holder can hold a policy for himself or buy cover for someone else
REVERSIONARY BONUS: On payment of all due premiums, they form a part of the Company Fund and as a result earn a share in the Profits of the Company. This share is declared at regular intervals and paid at the end of the term as a Reversionary Bonus. On declaration, they form a part of the guaranteed benefits.
RIDER: Riders add benefits to the insurance product to meet specific requirements at a lower additional cost.
RISK APPETITE: The extent and class of risk a person is willing to take, to meet their objective.
SUM ASSURED: It is the guaranteed amount that the policy holder will receive
SURRENDER: Circumstance wherein the policyholder decides to voluntarily pre-close the policy before maturity date.
SURRENDER VALUE: Amount which the policyholder gets if the policy is surrendered. Value is based on number of premiums paid and the policy terms and conditions
TAX REBATE: A tax relaxation provided by the government on meeting of prescribed criteria
TERM INSURANCE: A simple insurance plan providing lump sum amount as death benefit to the family of the Life Insured upon his/her demise.
TERMINAL BONUS: Bonus paid at Maturity / Death, on payment of all due premiums and cannot be cashed in during the life of the policy and are not payable on surrender of a policy. These are not guaranteed.
TRADITIONAL PLAN: Oldest of the lot, traditional plans offer multiple benefits like risk cover, fixed income return, safety and tax benefit and essentially cater to individuals with a low risk appetite.
UNIT LINKED INSURANCE: A ULIP provides benefits of protection and wealth creation by investing part of the premium in different stocks and bonds. Returns are dependent on market performance and the policyholder bears the investment risk.
WHOLE LIFE PLAN: Insurance plan which provides protection for an individual’s entire lifetime.