Disclaimer: This glossary has been painstakingly prepared after consulting multiple resources, to help you understand various facets, terms and jargons associated with insurance. We do not claim exactness and veracity of the information. These are for general education purposes, and you should consult your insurance provider for any understanding or query.
insurance for unforeseen bodily injury.
A general insurance cover is for an unintentional one-off incident that causes damage to your property or its contents. For example, accidentally breaking your new phone. It doesn’t cover general wear and tear, or damage that occurs over time.
Accidental Death and Dismemberment Benefit
An additional/supplementary benefit in a life insurance policy that provides an additional amount of money on top of the policy's basic death benefit, in case of the insured person’s death in an accident or if the insured loses any two limbs or sight in both eyes due to an accident.
An actuary is a specialized person who uses mathematics and statistics to evaluate the risk of something happening, how much it costs to finance that risk, and how much your premium should cost. They help insurance companies design insurance cover, and advise them on the level of financial reserves needed to meet claims.
It’s a contract that provides income for a specified term, or duration of life of a person or group.
The person who receives the annuity amount.
The process to settle insurance related disputes without actually going to court. The insurer and the complainant agree upon a third party to look into the case and decide on the claim.
When a claim is made, the assessor appointed by the insurance company, helps approve the claim verifying it against the T&Cs of the concerned policy.
The item being insured since it has a monetary value is the Asset.
The person or entity to whom the benefits under a policy are transferred to.
The legal transference of the title, rights and benefits of a policy by the policyholder to another person or entity. An example case could be when a policy is pledged as collateral towards a loan.
The name given to insurance policies distributed by banks.
Same as Nominee. The person whom the insurance company names as the one who would get the insurance benefits should the insurer meet with his/her demise.
There are certain policies defined as ‘with profits’. Bonus is the amount paid as returns and expressed as a percentage of the sum assured. It is generally declared every year, as linked to the profits earned by the insurance company. There are two kinds of bonus: reversionary and cash. A reversionary bonus can be encashed only on maturity of the policy; a cash bonus can be withdrawn when declared by the insurance company.
A licensed agent of an insurance company who advises you and helps you buy your insurance policy. Also known as Insurance advisor or insurance agent.
The official working days of a week, excluding public holidays
It’s a mode of claim settlement wherein the insurance company (generally via designated Third Party Administrators/TPAs) settles the claim directly with the entity whom the insured is supposed to pay, for example a hospital in case of medical insurance, and upon vehicle repair in case of motor insurance.
Compensation is what you receive for a loss or as a result of a loss. It could be in the form of money, services, a replacement item or repairs. To receive compensation from your insurer for your loss, the assessor must decide it is a valid claim that falls under your policy.
Allows you to cancel your policy if you change your mind about your purchase and have any money you have paid refunded. You have a minimum 14-day cooling-off period for most general insurance products. You are advised to carefully read your policy document regarding the relevant cooling-off period.
When the insured needs to ‘claim’ the benefits of the insurance policy she/he is supposed to file a written request with the insurance company. This request is known as the ‘Claim’.
In general a scenario wherein the benefits are accrued to another beneficiary apart from the main beneficiary of an insurance policy
Convertible Term Policy
Sometimes an insured person may want to convert her/his term policy to an investment based plan. Insurance companies have an option wherein the insured can do so without incurring a new health check-up at the time of switching the policy, and pay premiums for the new policy, considering their age when they initially bought the term plan. Thus it offers the insured a clear age benefit for insurance premium. However there may be conditions attached to this switch. Users are advised to clearly read about these terms and conditions.
It refers to the amount insured for in a policy.
It’s the document issued by insurers in general/non-life insurance, giving temporary cover till the formal policy document is issued.
Critical Illness Rider
A rider (also see ‘Rider’)/additional benefit generally accrued upon additional payment, that provides the insured financial protection in the event of a critical illness.
Cubic Capacity (Cc)
The volumetric capacity of a vehicle’, generally considered for the engine. It is one of the variables that determine the price of motor insurance.
A reduction in premium that an insurance company may offer in certain cases, such as having linked policies, more than one policy with the same company, customer loyalty or a history of not making claims
Defined events or insured events are the ones that are specifically mentioned in the policy and are the ones that the said policy covers.
The amount payable to the nominee on death of the insured. The amount paid is the sum Assured/cover plus benefits applicable (if any) less outstanding loans.
Many insurance policies pay only part of the cover upon claim. Rest is borne directly by the insured, and is known as the deductible.
An annuity plan where the first annuity payment becomes payable after a chosen period that exceeds one year.
A decrease in the value of any object or property over a period of time due to age, wear & tear, or obsolescence. Depreciable items like vehicles are insured on the basis of their depreciated value, not their original price or replacement value.
Disability / Dismemberment Benefit Rider
A rider that provides for additional cover in the event of a disability or dismemberment due to an accident.
Double/Triple Cover Plans
Certain investment based insurance plans offer beneficiaries double/triple the base sum assured on death of the insured during the policy term. If the insured survives the term, he/she gets only the base sum assured, plus other benefits if applicable.
An insurance plan that provides the insured a risk cover and some return on investment basis the investment vehicles decided and declared by the insurance company..
Exposure is defined as the amount of loss an insured person may might experience under various scenarios that lead to claims. For example, in case of a motor insurance policy, Exposure could be the cost of own car, other cars, 3rd party lives, , injury to self etc.
Same as ‘deductible’.
Certain risks and cases are not covered by a policy. These are declared beforehand.
Fraud is when an insured person willingly lies or exaggerates details in a claim to get the insurance benefit. Insurance companies have complex data-driven processes and policies to identify and deal with frauds.
Period of time, after the due date of a premium, during which the premium can be paid, and the policy prevented from lapsing. Generally there’s a grace period of one month on the yearly, half-yearly and quarterly modes of premium payment, and 15 days on the monthly mode. The insured is advised go closely read the details on their policy.
An insurance policy for a group of people but paid for by one entity. Generally, a term insurance policy taken out by employers to provide life cover to their employees.
The amount paid as returns in assured-return insurance plans. Guaranteed additions are expressed as a percentage of the sum assured, with the amount payable being stated by the insurer at the outset.
Guaranteed Insurability Option Rider
A rider that gives the policyholder the right to purchase additional cover at different stages of his life, at the original premium rate, without having to undergo fresh medical examination.
General insurance (also known as non-life insurance) refers to insurance policies that do not deal with lives, but possessions and other incendiaries which have a financial impact on the insured in case of damage or loss. It excludes all life insurance and health insurance plans.
Hospital Cash Benefit Rider
A rider that provides cover for hospitalization, as part of a non-health policy
A hazard is something that makes your situation more risky, and could lead to insurance premiums being very high, or it being denied altogether. For example, if you store explosives at home, that’s a hazard that increases the risk of an explosion and subsequent devastation.
An annuity that starts payments right after the first premium is paid.
A property characteristic of an article that leads to its self-destruction—for example fruits and vegetables are perishable by nature. Insurance contracts typically exclude these from the cover or agreed upon benefits.
A person can buy insurance only for what they have a financial interest, also known as insurable interest. So you can buy insurance for your car, but not your friend’s.
The policyholder, the person who gets the cover.
The insurance company that underwrites and issues an insurance policy.
Insured’s Declared Value (IDV)
The declared value of a vehicle for which it’s insured. It is the depreciated value of the vehicle at the time of insurance, based on original price, as well as type and price of accessories included and covered.
IRDAI (Insurance Regulatory and Development Authority of India)
The government authorized insurance regulator in the country - it regulates the insurance sector, oversees policy matters and issues licenses. It also acts as the nodal authority in case of policy and corporate governance related matters of insurance companies.
Joint Life Insurance
An insurance policy taken out on two names. On the death of one of the insured, the death benefit is paid to the surviving insured, and the policy gets terminated. The surviving insured, though, has the option to purchase a new policy of the same amount without providing fresh evidence of insurability.
Level Term Cover Rider
A rider that increases the life cover in non-term life plans, up to a maximum of the sum assured on the base policy. The rider offers death benefit only.
An annuity that makes regular income payments till the insured is alive. Upon the insured’s demise, all income payments cease and there are no beneficiary/nominee benefits.
Additional benefits (other than guaranteed additions/bonus declared) paid to the insured upon maturity of certain investment-based insurance plans for staying subscribed through the full term. Loyalty additions are generally paid as a percentage of the sum assured, with the amount depending on the insurance company’s financial performance.
Loss is what triggers claim. It is the occurrence that you have precisely bought the policy for. For example in case of motor insurance, loss can refer to the damage caused due to an accident. For life insurance, it’s the insured’s life.
Major Surgical Assistance Rider
A rider that provides financial support to a policyholder in the event of surgery.
Major Surgical Assistance Rider
A rider that provides financial support to a policyholder in the event of surgery.
The monetary value an object or property will fetch if sold in the market on the given day.
When buying an insurance policy, the insurance company asks for and expects correct facts as required from the insured. Any such fact which determines the decisions (claim settlement, premium, cover etc.) taken by the insurance company are known as ‘material facts’. Generally a misrepresentation by the insured will make the policy null and void.
The date on which a policy term comes to an end or when the policyholder dies, whichever is earlier.
Market value refers to the amount of money your insured item/possession is worth, right before the claim situation. For motor insurance, it’s the amount the insurer will pay out if your car is written off, based on the state of the car immediately before the accident. This can be different to the agreed value.
The discount that an insured person can get for owning more than one policy with the same insurance company.
A variant of endowment plans in which survival benefits are disbursed through the policy term, rather than in a lumpsum at the end.
A discount given upon renewal of cover in some non-life insurance categories like motor, health and house) to policyholders for not making a claim in the previous year.
The person(s) nominated by the insured to receive the policy benefits in the event of his/her death.
Negligence is when the insured person is found to have not exercised reasonable and expected care in a situation where they have an obligation to another person. Negligence, if proved, may lead to the claim getting rejected outright. For example, if the insured person engages in rash driving, or under the influence of alcohol and an accident happens leading to say injury to a 3rd party. Even if the insured has 3rd party insurance, the claim may get rejected on account of negligence.
Online purchase discount
These days, many insurance companies offer a discount for purchasing a policy online without involving staff time, or insurance agents. Since the company saves time, resources and/or commission money, it passes some of it to the insured, making it a win-win situation.
When an item, article or possession is insured for a value exceeding its fair valuation.
Permanent Partial Disability
Permanent loss of any body part, one eye, one limb or one or more digits but not all (finger or a toe), or injuries that render the insured incapable of earning a professional income from the date of the accident. In these cases, physical loss of the body part is permanent, but its impact on the insured’s life is partial.
Permanent Total Disability
Permanent loss of usability of any two limbs, or permanent and complete loss of sight in both eyes, wherein the impact is near total on the insured, and the injuries/losses render the insured incapable of earning an income.
The legal document issued by an insurance company to an insured policyholder that lays out the terms and conditions of an insurance contract.
The person who buys an insurance policy. Also referred to as the ‘insured’.
The period for which an insurance policy stays in effect and provides cover.
The amount paid by the insured to the insurer to buy cover, generally at the beginning of each pre-decided term
The premium expressed as a percentage of the sum insured. It is determined as per the policies of the insurance company.
The person or entity who is designated by the insured as the first to receive policy benefits in case of his/her death. Also called the ‘first nominee’.
A qualifying event is something that happens which is covered by your insurance policy.
An option in a term plan under which the insured is guaranteed at the end of the term a renewal of his cover without having to provide evidence of insurability, and without undergoing a new health check-up
The process by which an insurance company reinstates a terminated/lapsed policy back into force
A provision in some non-life/general insurance policies that gives the insurance policy the option to make good a loss rather than pay compensation for it. For example, a house that is destroyed by fire or earthquake can be rebuilt to original condition by the insurance company rather than paying compensation for the same.
A reversionary bonus can be encashed only on maturity of the policy.
Reinsurance is insurance for insurance companies. An insurance company may spread its risk further by selling part or all of its insurance policies to a B-2-B insurance entity. In such cases they buy ‘Reinsurance’ against their own underwritten insurance policies.
Renewal is when the insured agrees to continue their existing insurance policy for a further term by paying the premium.
Replacement cost is the amount you need to replace damaged, stolen or lost property by buying new items.
In insurance parlance, Risk primarily refers to one or more of:
- The probability of something happening that might cause injury or financial loss. An insurance policy helps the insured mitigate that risk with an assigned monetary value or cover.
- The exposure to a specific threat, danger or hazard
- Uncertainty as to the outcome of an event
Premiums that insurance companies calculate to reflect the relative risk of each potential or existing insured person/policyholder. A ‘higher risk’ policyholder may be asked to pay a proportionally higher premium. Risk pricing provides an incentive to the policyholder to manage risks and avoid losses where possible.
Additional covers that can be added to a life policy, for an additional cost.
Person(s) named by the policyholder to receive death claim proceeds in case the original nominee is not alive. Also referred to as the ‘second nominee’.
A stipulation in life policies according to which no death benefit will be paid if the policyholder commits suicide during a specified policy period.
A life insurance policy that required paying a one-time premium for the whole duration of the policy, and provides cover through its term.
The amount of cover taken under a life insurance policy.
The amount payable by the insurance company to the owner of an investment-based plan in case she/he opts to terminate the policy after three years (the mandatory lock-in period), but before its maturity date. The surrender value will be the premiums paid till date minus surrender charges and any other outstanding loans due. The insured is advised to clearly understand the calculation for surrender value for their specific policy.
The amount payable to the insured person under an investment-based plan if she/he survives the policy term. Generally it is the sum assured plus returns (guaranteed additions/bonus) accrued.
A signatory is someone who has the capacity or authority to sign and/or has signed a contract as acceptance of its terms. Generally, the policyholder is the signatory to an insurance policy, unless a power of attorney by the insured transfers that right to a 3rd person.
The sum insured or Coverage is the maximum amount that your insurer will pay for a claim in a particular policy.
Union or state governments impose charges on certain documents and transactions. An insurance policy may attract stamp duty.
Temporary Total Disability
An injury that results from an accident and renders a person immobile or affects his earning capacity temporarily. For instance, a fracture in the arm or leg that keeps you from work: you may be mobile but the injury may prevent you from working.
A life plan that provides life cover for a specified period of time, but no return on the premiums paid. It’s the purest form of life insurance and has not additional features and benefits. As a result costs are also lower than other kinds of plans.
A one-time bonus paid on maturity of an investment based profit oriented plan.
In an insurance contract, the insured is the first party, the insurance company the second party, and everyone else if included, the third party.
Third - Party Administrators (TPA)
Licensed intermediaries who process claims on behalf of the insured in cashless modes of settlement.
A loss of such magnitude that it can be said there is nothing left of value with respect to the concerned entity—for example, the complete destruction of a house or building, or vehicle
When an object or property is covered for less than its fair value. Opposite of Over-Insurance.
Underwriting is the process of an insurance company that helps work out how much risk exposure it has and then helps calculate the premiums it will need to charge to insure that risk.
Is a risk that is identifiable but not easily quantifiable, such as a storm or earthquake. It can’t be predicted with much accuracy and its impact in terms of damage is almost impossible to predict.
Generally used in the context of pension plans and children plans, it is a date that signifies a milestone in a policy. In pension plans, it is the date from which the insured starts receiving pension. In children plans, it is the date from which the child becomes the owner of a policy taken out in its name (generally, around its 18th birthday).
The period from the date a life policy is bought (that is, payment is initiated) till the date of commencement of cover (as stated in the policy; generally, the date on which the payment is received by the insurance company). No benefits will be paid in case of death during the waiting period. In the context of health insurance, it refers to the specified initial period of the policy term when sickness claims (not accidents) are not covered. This protects the insurer against claims where the disease or ailment might have set in prior to the commencement of the policy.
A rider that waives the premiums payable on the base policy and other riders in certain circumstances, mostly related to death, disability or injury.
An insurance plan in which the insured gets a share of the insurance company’s profits (in the form of guaranteed additions/bonus), along with the sum assured. These are investment-oriented plans. Also known as participative plan.
An insurance plan in which the policyholder does not get any share of the insurance company’s profits. Also known as non-participative plan.
A life insurance policy that provides cover for the whole life.