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!
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.
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Glossary LIFE INSURANCE TERMS & DEFINITIONS
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Annuity Plans
Plans wherein the policyholder pays premium either in lump sum or in instalments over a given period, to receive benefits in a combination of lumpsum and periodic payments (for meeting retirement needs) for such period in line with policy terms and conditions.
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
Actuary
An expert trained in the mathematics of insurance, responsible for the calculation of reserves, premiums, risks and other values.
Auto Pay
Auto Pay is an automated facility which enables you to set up auto-debit instructions with your bank account for regular debit of your renewal premium amounts.
Accidental Death
A life insurance benefit that provides additional coverage in case of death or disability resulting from an accident.
Benefits
Amount receivable under an insurance policy as per the policy terms & conditions
Beneficiary
The nominee, or the person who is entitled to receive the benefits under the Life Insurance policy as per the policy terms and conditions.
Bonus Statement
In case of a Participating life insurance plan where bonus is applicable, one can know the accrued bonus in the policy by referring to the bonus statement provided by the life insurance company.
Cash Bonus
Bonus is applicable in case of a life insurance participating plan where a part of profits of the insurance company are shared with the policyholder in the form of bonus. Cash Bonus is a type of bonus which is paid out to the policy holder and not accrued in the policy.
Compound Reversionary Bonus
This is a bonus which is calculated as a percentage of sum assured along with all the previously declared bonuses and is added to the policy at the end of financial year. All these bonuses, as and when declared are accumulated and will be paid in case of death or on maturity of the policy.
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.
Claim settlement ratio
Deferred Annuity
Deferred annuity is a type of annuity where the guaranteed annuity income starts after a certain period of time as chosen by the policyholder as per the product terms and conditions.
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
Date Of Commencement
The date from which a Life Insurance policy is considered to be in force, or active
Death benefit
Endowment Policy
A form of life insurance involving a fixed amount to the insured person on a specified date (on maturity or other periodic intervals) as per the policy terms and conditions.
Endowment Plan
Exclusion
Extended Life Cover
Freelook Period
Period of of 15 days from the date of receipt of the policy document and period of 30 days in case of electronic policies and policies obtained through distance mode by the Policyholder, during which if the Policyholder is not satisfied with the Terms and Conditions of the policy, he/she may return the policy to the insurer for cancellation. The policyholder shall be entitled to a refund of the premium paid subject only to a deduction of a proportionate risk premium for the period of cover and the expenses incurred by the insurer on medical examination of the proposer and stamp duty charges.
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.
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.
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.
Hazard
A condition that increases the likelihood of a loss.
High Sum Assured Rebate
A discount offered on the premium of a life insurance policy when a high sum assured is chosen by the policyholder.
In - force
In-force Policies are valid/active policies for which the full premiums as on date are paid.
Insured
The person whose life is covered by a policy of insurance.
Joint Life
A life insurance policy that covers two individuals, typically spouses, under a single plan.
Lumpsum or Income Benefit
Where Maturity benefit can be received in one go as a lumpsum, the same is called as lumpsum benefit. Where maturity benefit is paid over a period of time as a regular income, the same is called as income benefit.
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.
Life Certificate
A mandatory document that verifies the policyholder is alive, to continue receiving annuity or pension pay-outs.
Maturity Benefit
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, 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
Morbidity Charge
An extra premium to cover the risk associated with critical illness
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
Non-Participating Saving Plans
Policy in which the company does not distribute any surplus or share its profits with the policyholders.
Nomination
An act by which the policy holders authorises another person to receive the policy proceeds in case of death of the life assured. The person so authorised is called Nominee.
Net Asset Value
The value per unit of a fund in a Unit Linked Insurance Plan (ULIP), calculated based on the market value of the fund/s.
Participating Plans
A policy that enables the sharing of profits of the Life Insurance Company with the Policyholder in the form of bonuses.
Policy Term
The duration of the policy or the period in years, as chosen by the Policyholder from the date of commencement of the policy until the date of maturity is known as policy term
Premium Paying Term
Premium paying term is the time period during which the premium is payable under the policy.<br>
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. A policy that enables the sharing of profits of the Life Insurance Company with the Policyholder in the form of bonuses.
Partial Withdrawal
Facility offered by ULIPs that allows you to withdraw money in portions at specific intervals for your needs from the accumulated fund value basis the policy terms and conditions.
Policy Holder
The owner of a life insurance policy. Only the policyholder can make changes to a life insurance contract.
Proposer
Proposer is the one who proposes the policy in the name of the life assured and pays the premium towards the life insurance policy. If the proposer is paying the premium for himself, he will be the life assured cum proposer.
Paid Up value
In case policyholder stops paying the renewal premiums, the benefits under the policy are reduced proportionately to the extent of premium paid. The reduced value of benefit is called reduced paid-up value. This is subject to terms and conditions of each product.
Policy loan
A loan taken on a life insurance policy against the surrender value is called a policy loan and is subject to policy terms & conditions.
Premium Redirection
Premium redirection is changing how your ULIP renewal premiums will be allocated across various types of ULIP funds available under the policy.
PASA
Premium Quote
An estimated amount provided by the insurer, indicating the premium a policyholder would need to pay for life insurance coverage.
Policy Vesting
The stage at which the life insurance policy’s benefits become available to the life assured.
Return of Premium
In few term plans, if life assured survives till the end of policy term, he/she gets back all the premiums paid during the policy term. This feature is known as return of premium(ROP). ROP will be exclusive of extra premiums and any Goods and Services Tax applicable.
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
"Accidental Total Permanent Disabi 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 lity" 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.
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
Revival Period
This period offered by the insurer to revive the lapsedLife Insurance policy and avail benefits pertaining to the policy subject to the terms and conditions of the said policy.
Return of Life Cover Charges
SISO
SISO (Systematic in and systematic out) is an approach where one can invest into an insurance plan systematically over a period of time and receive the maturity benefits also over a period of time as an income.
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.<br>
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
Savings Plan
Savings plans are Insurance plans which help you save for the future and create a corpus to meet long term or short term goals along with life cover.
Solicitation
Solicit generally means to approach with a request or plea. In insurance, solicitation basically means insurance needs to be requested or asked for, by the customer.
Simple reversionary bonus
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
Tax Benefit
Tax benefit refers to the deductions from the taxable income of the individual to the extent of investment in one or more different kinds of insurance products, subject to the provisions of the Income Tax Act, 1961. Further, the Tax benefit also includes tax exemptions on income at the time of pay-outs under the eligible insurance policies, subject to the provisions of Section 10(10D) of the Income Tax Act, 1961.
Unit Linked Insurance Plan
Unit linked insurance plans or ULIPs as they are popularly called provide you with a dual benefit of life insurance coverage & market-linked returns on your investment. Your money is invested in different market-linked funds as per your risk appetite, to help create a corpus to meet your long term goals.
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
Variant
Options available in a life insurance policy offering varying features, benefits, and coverage types.
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.
Waiver of Premium
Waiver Of Premium or WOP is an additional benefit in the form of rider, that you can choose along with your base policy with nominal extra cost. In this case, if you are unable to pay premiums due to any conditions as defined under WOP rider, the Insurer will pay the premiums on your behalf and the benefits under the policy will continue as is depending on the policy terms and conditions.
Waiting Period
Zero Allocation Charges
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