New to life insurance or not able to decode a term? Here’s a simplified guide to help you understand the world of life insurance better.
Glossary Details
Title
Accidental Death Benefit
Description
An additional amount is paid to the nominee if the insured dies specifically due to an accident. This is usually included as a clause or rider in the life insurance policy.
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Title
Annuity
Description
This is a life insurance product that provides a regular income, mostly after retirement. This is when the insurer agrees to make uniform payments or a lump sum payment to the customer.
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Title
Appointee
Description
The person legally designated to receive policy benefits for a minor nominee.
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Title
Authority (IRDAI)
Description
The Insurance Regulatory and Development Authority of India, responsible for regulating and overseeing the insurance industry.
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Title
Age Limit
Description
The minimum and maximum age required to buy or continue a life insurance policy.
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Title
Agent
Description
A trustworthy, licensed professional who sells and promotes life insurance by helping customers pick and manage policies.
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Title
Assignment
Description
The act of transferring the ownership rights of a life insurance policy to another person or entity.
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Title
Application Form
Description
A form filled out by the proposer that collects personal, financial, nominee, and health-related details while applying for a life insurance policy.
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Title
Beneficiary
Description
The person or entity entitled to receive the benefits of the policy in case of the life assured’s death or on policy maturity.
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Business Insurance
Description
A life insurance solution to protect a business against financial loss due to the accidental or sudden death of the owner or key personnel.
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Business Insurance
Description
This is a life insurance product that provides a regular income, mostly after retirement. This is when the insurer agrees to make uniform payments or a lump sum payment to the contractor.
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Title
Claim Process
Description
The journey of a nominee filing a claim after the life assured’s death during the policy term to receive policy benefits. There are two types of claims: a maturity claim and a death claim.
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Title
Claim Settlement Ratio
Description
This ratio represents the number of claims settled by the insurer against the number of claims filed. A higher claim settlement ratio increases users’ trust in a life insurance company.
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Title
Coverage
Description
The financial protection offered by an insurance policy. It includes the death benefit, also known as the sum assured, which the insurer pays to the nominee or beneficiary.
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Title
Critical Illness Policy
Description
It refers to the insurance provided for life-threatening health conditions like cancer, heart attack, etc. At the time of diagnosis of a covered illness, the insurer is liable to pay a lump sum as coverage.
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Title
Coinsurance
Description
A type of clause where a fraction of the insured amount or risk is shared by the policyholder with the insurer.
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Title
Convertible Whole Life Policy
Description
A life insurance policy that can be transferred or converted into any other type of life insurance policy within a specified period, without a medical test.
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Title
Death Benefit
Description
The amount paid by the insurance company to the nominee if the life assured passes away during the policy term. This includes the sum assured or additional payout from riders or added benefits.
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Title
Deferment Period
Description
The time period between the purchase of the policy and the start of benefits or payouts.
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Title
Depreciation
Description
The reduction in the value of an asset over time due to non-conditional reasons such as usage or wear, and age.
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Title
Double/Triple Cover Plans
Description
Life insurance plans that pay two or three times the sum assured in case of death due to specific causes like accidents.
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Title
Days of Grace
Description
A short period of time after the due date of the premium, wherein a policyholder is given an extension to make the payment without losing policy benefits.
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Title
Effective Date
Description
The date on which the insurance policy is considered active.
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Title
Endowment Policy
Description
A type of life insurance policy that provides life cover and builds a savings pool. If the policyholder survives the policy term, they receive a lump sum amount on maturity.
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Title
Entry Age
Description
The entry age, as the name suggests, is the legal age after which an individual can buy a life insurance policy. This age is usually 18 years.
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Title
Exclusions
Description
These are conditions that your life insurance policy does not cover. If a claim arises due to these situations, the insurance company is not liable to pay any benefit.
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Title
Extra Life Option
Description
Some insurance companies provide an extra life option wherein the life insured gets twice the sum assured in case of the unfortunate demise of the life assured due to any accident.
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Title
Embezzlement
Description
Fraudulently taking money or property that has been entrusted to you, usually for personal use.
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Title
Excess and Surplus Insurance
Description
A type of life insurance policy that offers coverage beyond standard policy terms. Usually, for rare high-risk or high-value cases where regular coverage does not suffice.
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Title
Free-look Period
Description
Applicable to all new buyers of life insurance policies, this refers to a specific period during which the policyholder can return the policy if unsatisfied. In such cases, the insurance company refunds the premium after deducting medical and stamp duty charges.
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Title
Family Insurance
Description
A type of life insurance policy that offers financial protection to multiple family members within a single policy.
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Title
Fiduciary
Description
A professional or entity, legally responsible for managing a person’s money or assets for their best interest.
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Title
Grace Period
Description
The extra time given by the life insurance company after the premium due date to pay your premium without losing policy benefits. It is usually 15 days for monthly premium payments and 30 days for annual payments.
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Title
Group Life Insurance
Description
Usually chosen by employers or organisations, this is a type of life insurance where a single policy provides coverage to a group of people under one plan.
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Title
Guaranteed Policy
Description
A type of life insurance policy where the benefits or returns promised by the insurer are fixed and not affected by market fluctuations.
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Title
Insurable Interest
Description
A valid financial or legal relationship between the policyholder and the life assured, where the policyholder stands to suffer a genuine financial loss if the insured person passes away.
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Title
Issue Date
Description
The issue date is typically the date on which the insurance company approves and accepts an application to issue life insurance.
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Title
Insured/Life Assured
Description
Refers to a person who is the insured under the insurance policy, and on whose death, the sum assured is received.
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Title
Insurability
Description
The ability of an individual to qualify for a life insurance policy, based on factors such as health, age, medical history, lifestyle, etc.
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Title
Insurance
Description
A financial arrangement where a person pays regular premiums to an insurer in return for financial protection against specific risks, such as death or disability.
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Title
Joint Life
Description
A type of life insurance policy where both, policyholder and their partner can be the owner and beneficiary. In case of an unfortunate incident with one, the other gets the coverage benefit.
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Title
Keyman Insurance
Description
Life insurance purchased for a key person of a business. The insured is usually the owner or the founder of the business, in the absence of whom, the company could sink.
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Title
Lapse
Description
Situation when the policy is terminated, along with its associated benefits, due to the failure to pay the premium on the due date or during the grace period.
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Title
Life Expectancy
Description
The average number of years a person is expected to live, based on factors such as age, health, lifestyle, environment, etc.
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Title
Limited Payment Life Policy
Description
A type of life insurance where premiums are paid for a limited number of years, but the life cover continues until maturity or death.
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Title
Loyalty Additions
Description
Extra bonuses paid by the insurer for staying invested in the policy for a long period, usually added to the maturity or death benefit.
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Title
Life Assured
Description
Life assured is the person whose life is insured under a Life Insurance Policy. The life assured may or may not be the owner of the policy.
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Title
Maturity
Description
Maturity benefit is the amount that the life insurance company pays when the life assured outlives their policy tenure.
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Maturity Age
Description
The specific age agreed upon in the policy when the life insurance cover ends, and the maturity benefit becomes payable.
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Money Back Plans
Description
Type of life insurance plan where the insured receives a fixed percentage of the sum assured at regular intervals during the policy term, while the remaining amount and life cover continue till maturity.
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Title
Mortality
Description
The statistical prediction of the number of deaths within a certain population over a given period.
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Title
Maturity Claim
Description
A request issued by the policyholder to receive the maturity benefit after the policy meets its term period.
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Moral Hazard
Description
Behavioural situations where the insured acts carelessly because of the cover and protection provided by the insurance.
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Title
Misrepresentation
Description
Giving incorrect, incomplete, or false information while buying a life insurance policy, especially about health, habits, or income.
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Title
Nominee
Description
The person chosen by the policyholder to receive the sum assured and benefits if the life assured passes away.
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Title
Non-participating Plan
Description
A type of policy plan where the policyholder will not receive a share of profits in case of term or permanent life plans.
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Title
Noncancellable Policies
Description
A type of policy plan where the insurer cannot cancel or make any changes to the terms as long as the premiums are paid.
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Title
Occupational Hazard
Description
Occupational hazards are usually referred to risky or dangerous conditions associated with a job or work environment that could increase the probability of death, disability, or illness to its workers.
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Title
Paid-up Value
Description
In case of a halt on premium payments, the policy converts to a reduced paid-up policy. The sum assured and other benefits reduce proportionally to the premiums already paid, and this reduced amount is called the paid-up value.
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Title
Participating Plan
Description
A type of life insurance plan that shares the insurer’s profits through dividends with the policyholder. These are also called ‘with-profits’ policies.
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Title
Policy Anniversary
Description
The annual date marking the start of the policy, used for calculating premiums, riders, and all other benefits.
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Title
Policy Issuance
Description
The process of life insurance policy activation after document verification and risk assessment.
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Title
Policy Loan
Description
A loan offered by the insurer using the policy’s cash value as collateral. If unpaid, the loan amount is deducted from the policy’s death benefit.
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Title
Policy Tenure / Policy Term
Description
The time period of the life insurance policy till maturity, after which the insurance provides coverage. It depends on the plan chosen by the policyholder.
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Title
Policyholder
Description
Refers to the person who owns the insurance policy and pays the premiums. But this person may or may not be the life assured.
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Title
Premium
Description
The amount paid by the policyholder to keep the life insurance policy active on a timely basis. Non-payment can lead to policy termination.
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Title
Premium Payment Mode / Term / Frequency
Description
The method and schedule of paying premiums. Options include single premium (one-time payment) or limited premium (paid for a fixed number of years).
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Title
Partial Withdrawal
Description
An option in some policies, especially ULIPs, to withdraw a portion of the policy’s accumulated value before maturity.
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Persistency
Description
The uniform habit of the policyholder to pay premiums and maintain an active policy over time.
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Title
Policy Administration Charges
Description
Fees charged by the insurer to manage and service the policy, usually deducted from premiums or fund value.
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Title
Premium Waiver Benefit
Description
A conditional benefit under which future premiums are waived if the life assured suffers an accidental disability or any other specified condition during the policy term.
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Title
Proposal Form
Description
The form submitted by the applicant to apply for a life insurance policy, containing personal, medical, and financial details used for underwriting.
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Title
Return Of Purchase Price
Description
A return of purchase price, usually present in annuity plans, is when the payouts are paid for the lifetime of the policyholder. On his or her passing away, the policy stops, and the purchase price is returned to the nominee.
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Title
Revival Period
Description
Time period allowed by the insurance company to reactivate a lapsed policy due to a lack of premium payment.
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Riders
Description
Additional, paid benefits and features that one can add to their life policy. However, they differ from insurer to insurer. Some common ones are death benefit, critical illness cover, hospital cash, premium waiver, etc.
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Title
Reinstatement
Description
The act of reactivating a life insurance policy within the revival period by paying the pending premium amount and meeting the insurer’s requirements.
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Title
Risk
Description
In life insurance, risk refers to the possibility of the death of the life assured during the policy term, or diagnosis of a critical illness, etc.
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Title
Settlement
Description
The transfer of a life insurance policy to a third party for a one-time cash payment. In such cases, the purchaser becomes the new policyholder and beneficiary and must pay the liable premiums.
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Title
Settlement Option
Description
The maturity amount entitled to a life insurance policyholder is paid in structured periodic instalments (up to a certain period post maturity) instead of a 'lump-sum' payout. Such a payout needs to be intimated to the insurer in advance by the insured. The primary objective of the settlement option is to generate regular streams of income for the insured.
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Title
Suicide Clause
Description
A provision in most life insurance policies that states that the policy becomes void if the policyholder commits suicide within a specified period of time from the policy start date.
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Title
Sum Assured / Coverage
Description
The amount received by the family of the life assured upon their death. For a life insurance company, it is the amount that the company agrees to pay on account of the insured’s death.
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Title
Surrender Value
Description
The agreed amount paid by the insurance company to the policyholder in case of discontinuation of the policy, before its maturity. However, not all plans offer surrender value.
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Title
Solvency Ratio
Description
The measure of an insurer’s ability to meet future claim obligations. The higher the ratio, the more financially stable the insurer.
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Title
Sub-Standard Risk
Description
A life assured who is prone to higher risk due to occupation, heath conditions, or lifestyle choices and may also be charged a higher premium.
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Survival Benefit
Description
A predefined amount paid by the insurer to the policyholder at specific intervals during the policy, if the life assured is alive.
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Title
Tax Benefits
Description
All premiums paid towards a life insurance plan are eligible for deductions under Section 80 (C) of the Income Tax Act, 1961. The maximum amount that can be claimed as deductible is Rs 1.5 lakh. The benefits paid to the policyholder/nominee are tax-free under Section 10 (10D) of the Income Tax Act, 1961.
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Title
ULIPs
Description
A Unit Linked Insurance Plan (ULIP) is a type of product offered by insurance companies that gives users life protection as well as an investment option, under one integrated plan. A part of the premium paid is invested in capital products, such as equities, bonds, etc.
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Title
Underwriting
Description
The process through which an insurer assesses an applicant’s risk profile to decide on how much coverage to offer, on what terms and premiums.
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Title
Vesting Age
Description
Vesting age is the age when you start receiving a pension from your insurance-cum-pension plan.
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Title
Waiver Of Premium
Description
A clause that states the conditions under which the insurer will not receive the premium fee from the policyholder to keep the policy active. Most commonly, these conditions are the death or disability of the person paying the insurance premiums. The insurance company may, however, charge a higher premium to include this waiver in the policy to compensate for the additional risks presented with this clause.
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Title
Whole Life Policy
Description
A life insurance plan that provides lifetime coverage along with a savings component (cash value) that grows over time. This policy is also known as a traditional or permanent life insurance policy.
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Title
With-Profit Policy
Description
A life insurance policy where the policyholder is entitled to receive a share of the insurer’s profits in the form of bonuses, in addition to the guaranteed sum assured.
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Title
Without-Profit Policy
Description
A life insurance policy that has fixed benefits only, with no profit or bonus participation. The payout is limited to the guaranteed sum assured.
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