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Life Insurance Glossary

Here are the most common life insurance terminologies and jargons you will find in a life insurance policy which have been simplified just for you!

Life Insurance Glossary

GLOSSARY OF LIFE INSURANCE TERMS

Life insurance is a contract between an individual and a life insurance company under which the insurance company is legally bound to pay out an amount to the person nominated by the policyholder in the event of his/her death. The death benefit is paid to the nominee of the policyholder provided all premiums have been paid on time. The premiums can be paid as a lump sum or in equal instalments, depending on the policy terms and conditions and the chosen premium payment frequency. There are variety of life insurance plans available in India, where some term plans provide death benefits while some also offer maturity benefit as return of premium depending on the feature available in that policy along with the life insurance cover.

Having the basic understanding of Life Insurance terminology helps us understand various features and benefits of a life insurance policy better. Often there are life insurance terminologies or jargons used in a policy that might confuse you. Therefore, to help you understand these terms here are a few definitions that may help you understand life insurance better.

LIFE INSURANCE TERMS & DEFINITIONS

Annualized Premium

“Annualised Premium” means the total amount of Regular Premiums payable in a Policy Year, after due consideration of applicable premium factors for various Premium Payment Frequency. In this calculation, any extra premium, Rider Premium or applicable taxes are excluded.

Accident

"Accident" means a sudden unforeseen and involuntary event caused by external and visible means.

Accidental Total Permanent Disability

"Accidental Total Permanent Disability" means the occurrence of a disability of the life of the Life Assured solely and directly due to an Accident as per the definitions and subject to the exclusions as specified in the policy document.

ATPD

"ATPD" means Accidental Total Permanent Disability

Benefits

Amount receivable under an insurance policy as per the policy terms & conditions

Claim

A customer/nominee request to the Insurance Company for payment of dues as per the policy terms and conditions which helps keep the Policyholder’s #LifeGoals uninterrupted

Critical Illness

"Critical Illness" means any Illness or condition specified in Annexure K of the policy document and shall include either the first diagnosis of any of the listed Illnesses or first performance of any of the covered surgeries and subject to exclusions as specified in the policy document

CI Benefit

"CI Benefit" means the benefit payable on the first diagnosis of the Life Assured with any specified Critical Illness. Please refer to Section 4 below for details.

Deferment Period

The period commencing from the end of the maturity period up to the agreed extended term as may be applicable in an Insurance annuity-pension plan.

Deferment Period in Pension

The period between the start date of policy and the time at which the first instalment of annuity is received, in an m-pension policy.

Discontinuance Charges

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

Fund Switch

An option that allows the policyholder to switch/move from one fund to another fund, either wholly or partly, amongst the funds offered within the policy.

Fund Value

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

Fund Management Charges

These are charges deducted towards meeting expenses related to fund management. These are charged as a percentage of the Fund Value and deducted before calculating the Net Asset Value (NAV) of the fund.

Fund Switch

Switching between funds is allowed under the Investor Selectable Portfolio Strategy. Policyholders can opt for this Portfolio Strategy at the commencement of the policy or can switch to this Portfolio Strategy at any subsequent policy anniversary. You have the flexibility to switch units between your investment funds according to your risk appetite and investment decisions, by giving written notice to the Company. Fund as on that date will be switched to the other Fund/s, as specified by the Policyholder. You can make unlimited free switches during the policy term.

Grace Period

An extension after the due date wherein one can still make payment of premium to keep the insurance policy active

Grace Period

“Grace Period” means a period of fifteen (15) days for a monthly Premium Payment Frequency and thirty (30) days for other than monthly Premium Payment Frequency, from the due date of the Regular Premium payment.

In - force

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

Lapsed Policy

Benefits under the policy ceases due to non-payment of due premium

Lapse

The termination of an insurance policy due to non-payment of premium.

Life Assured

“Claimant” means the Life Assured (if alive) or Policyholder (if different from the Life Assured) or the assignee or the Nominee or the legal heirs of Policyholder/Nominee(s) to whom the Policy Benefit will be payable.

Maturity

When the policy matures, and the policyholder (or the insured) gets an amount as per policy terms & conditions

Mortality Charge

Mortality charge is the amount charged by the Insurance Company to provide the life cover to the policyholder.

Mortality Charges

Depending upon the age and the amount of cover, the charges levied towards providing life insurance cover to the insured are called as Mortality Charges

Maturity Date

“Maturity Date” means the date specified in the Schedule on which the Maturity Benefit as per policy document shall become payable to the Policyholder

Nominee

“Nominee” means the person who has been nominated in writing to the Company by the Policyholder, who is entitled to receive the Death Benefits under the Policy as mentioned in Policy Document

Premiums

The amount payable as per the policy terms & conditions to keep your insurance policy active and enjoy the benefits under the policy to make your #LifeGoals secure

Portfolio Strategy

Varying investment plans to help the customer get the best from his ULIP plan and help keep your #LifeGoals on track.

Policy Administration Charges

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

Premium Allocation Charges

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.

Paid up Sum Assured on Death

“Paid-up Sum Assured on Death” is the reduced value of the Sum Assured on Death arrived at by multiplying the Sum Assured on Death with the proportion of the number of Regular Premiums paid to the total number of Regular Premiums payable under the Policy.

Paid up Sum Assured on Maturity

If the Regular Premiums due for first three (3) Policy Years are paid and subsequent Regular Premiums are not paid, the Policy will, immediately and automatically, be converted to a paid-up Policy on the expiry of the Grace Period as per the conditions stated in the policy document.

Paid up Sum Assured

“Paid-up Sum Assured” is the reduced value of the Sum Assured arrived at by multiplying the Sum Assured with the proportion of the number of Regular Premiums paid to the total number of Regular Premiums payable under the Policy

Policyholder

“Policyholder” means the adult person named in the Schedule who has concluded the Policy with the Company

Riders

Rider is an add-on benefit purchased separately in addition to the basic benefits as mentioned in the Policy Document to ensure that the policyholder and their family’s #LifeGoals are secured.

Regular Premium

The amount payable by the policyholder at regular intervals during the Premium Paying Term, and at the Premium Payment Frequency

Regular Premium Fund Value

The total number of Units pertaining to the Regular/ Limited Premium existing in each Fund under this Policy, multiplied by their respective Unit Price on the relevant date

Reinstatement

To restore the policy after the life insurance policy has lapsed.

Revival Period

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.

Rider Sum Assured

"Rider Sum Assured" means the sum assured as mentioned in the Schedule. For more details, please refer respective rider sales literature.

Rider Life Assured

"Rider Life Assured" means the person named as the Rider Life Assured in the Schedule whose life is assured under this Rider. For more details, please refer respective rider sales literature.

Rider Premium Charge

"Rider Premium Charge" means the charge deducted to provide the Rider benefit. For more details, please refer respective rider sales literature.

Rider Term

"Rider Term" means the period between the Date of Commencement of Rider and the Rider Maturity Date, as mentioned in the schedule. For more details, please refer respective rider sales literature.

Rider Benefit

“Rider Benefit” means the benefit payable under the Rider on the happening of the contingent event covered under the Rider. For more details, refer to the Policy Document

Rider Life Assured

“Rider Life Assured” means the person named as the Rider Life Assured in the Schedule whose life is assured under this Rider

Rider Premium

“Rider Premium” means the amount exclusive of applicable taxes, if any, payable by the Policyholder at regular intervals during the Rider Premium Paying Term, in amount (along with and as part of the Regular Premium) and at the Premium Payment Frequency.

Rider Premium Paying Term

“Rider Premium Paying Term” means the period specified in the Schedule during which the Rider Premium is payable.

Rider Term

"Rider Term” means the period between the Date of Commencement of Rider and the Rider Maturity Date, as mentioned in the Schedule

Sum Assured(Life Cover)

An absolute amount of benefit which is payable on the death of the life assured in accordance with the policy terms and conditions which helps policyholders family get their #LifeGoalsDone.

Sum Assured

"Sum Assured" is the amount as specified in the Schedule for the Life Assured under the Policy.

Survival Benefit

"Survival Benefit" means any benefit that is payable under the Policy during the Policy Term based on the survival of the Life Assured to a specified date. There is no Survival Benefit under the Policy.

Survival Period

"Survival Period" means a period of thirty (30) days from the date of diagnosis of the Critical Illness as listed in the policy document.

Surrender Value

A value payable if you want to surrender the plan before a claim arises.

Settlement Option

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 5 years after maturity. This is known as the Settlement Option.

Surrender Benefit

“Surrender Benefit” means the benefit, if any, payable on the surrender of the Policy. For more details refer to the Policy Document

Term

Policy term is the duration for which the policy provides the life cover.

Top Up Premium

The amount of additional premium paid over and above the Regular/ Limited Premium payable under this Policy

Top Up Premium Fund Value

The number of Units pertaining to Top Up Premium under a policy, multiplied by the respective Unit Price on the relevant valuation date

Underwriting

Underwriting is the process undertaken by the insurance company to assess risk and ensure that the cover opted for is proportionate to the risks faced by the individual concerned.

Unit Price

Market value of investment held by the fund plus value of current assets less value of current liabilities and provisions, if any, divided by number of units existing on Valuation Date. This calculation will be done before creation / redemption of units.

Vested Bonus

“Vested Bonus” is the amount of compound reversionary bonus already attached with the Policy, based on the rates of compound reversionary bonus declared by the Company in the past for this plan at the end of each Financial Year

WOP Benefit

"WOP Benefit" means the Waiver of Premium Benefit, which if applicable in the Variant chosen in the Policy, is a waiver of the future Regular Premium due, on the first occurrence of any death, CI and/or ATPD (as applicable) of the Life Assured who is also the Policyholder. Please refer to Section 4 below for more details.

 

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Bajaj Allianz Life Insurance Company Ltd.

Bajaj Allianz House, Airport Road, Yerawada, Pune - 411 006, Maharashtra

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