GLOSSARY – LIFE INSURANCE TERMS

GLOSSARY – LIFE INSURANCE TERMS ABSOLUTE ASSIGNMENT: If absolute assignment is done then there can be no reversion of the assignment to the assignor or his estate. ACCIDENT BENEFIT: If you pay a small additional premium, your nominee will receive twice the sum assured upon your death by accident. If you suffer a permanent disability due to the accident, then the amount is paid to you in installments, and subsequent premiums under the policy are waived. AGENT: Is the person authorised by Insurance Regulatory & Development Authority (IRDA) to sell its policies. ANNUITY: (RETIREMENT BENEFIT) Is a periodic payment (usually monthly) payable by the insurer to the life assured. Generally, it is used in context of retirement benefits. Under this type of insurance contracts, the life assured pays a fixed premium (which could be a lumpsum or a staggered payment) and the insurer, in return, provides the life assured a fixed amount of income throughout his/her lifetime. ANNUITY CERTAIN: (Annual Payments) These annuities are payable for a certain minimum period and if the policyholder dies during this period, the remaining instalments are paid to the beneficiary of the policy. These annuities operate as any normal annuity after the end of the certain period, i.e. payments will be made throughout the life of the life assured. No payments are made to the beneficiary after the death of the life assured, if he outlives the certain period. ASSIGNMENT: Is the transfer of the rights, titles and interest of the policy by the assignor to the assignee. The assignor is the absolute owner of the policy. He/She could be the proposer, the life assured or the absolute assignee. Nomination is automatically cancelled by Assignment . BANKERS ORDERS: Bank is instructed to pay premium on due date on behalf of the insured. BENEFIT POLICY: In some cases the extent of loss cannot be quantified in monetary terms (in life insurance for instance), and hence the amount payable under a life policy is a benefit and not an indemnity. It also means that the extent of compensation need not be restricted to the sum assured under one specific policy and that payment under other policies if they exist can be collected too. BONUS: The insurance company periodically values its assets and liabilities. The premium payments that it receives from you are used for three purposes: to settle claims, to make investments, and to pay expenses. If the insurance company makes profits, it declares a bonus for a certain period for its policyholders. It can disburse this bonus to you in three ways: the bonus is added to the value of the policy;the bonus is distributed to you physically; or your future premium payments are reduced. In India, generally the first method is adopted for with profit policies, and is paid to you upon maturity of the policy. CHILDRENS DEFERRED ASSURANCE PLANS: Are schemes under which a minor child is the beneficiary. The parent proposes for insurance on the life of the minor and pays premiums. The risk on life of child begins at a specified age. The period before the specified age is attained is called Deferment Period. CLAIM: An insurance contract is a promise to pay certain sums under certain conditions. Making a claim is invoking that promise and if it is in accordance with what is set out in the contract then it is admissible and can be payable if all other terms and conditions of the contract are met. CLAIM AMOUNT: It is the amount payable by the insurer under a policy on a claim arising. DEATH BENEFIT: is the benefit payable in the event of death during the term of the policy. DEATH CLAIM: is the claim that arises if the life assured dies during the term of the policy. DEATH RISK COVER: Is the person authorised by Insurance Regulatory & Development Authority (IRDA) to sell its policies. DEBIT TO PROVIDENT FUND Rules permit payment of premium by withdrawal from Provident Fund PF authority sends cheque to policyholder Policyholder forwards the premium and sends the receipt to Provident Fund. DECREASING (SUM ASSURED) TERM POLICY/ MORTGAGE REDEMPTION POLICY: The Sum Assured decreases during the term of the policy to match the outstanding principal. DEFERMENT DATE: is the date on which the risk cover commences after the deferment period has elapsed. DEFERMENT PERIOD: is the period between the date the policy is bought and the risk cover commences. DEFERRED ANNUITY (ANNUAL PAYMENTS) : plans are recommended for young persons. The premium is paid during the deferment period and annuities start at the end of the deferment period. The premiums are returned to the nominee/heirs if the policyholder dies during the deferment period along with interest. These policies come with an option to convert the policy for a reduced paid up amount or receive cash based on the Surrender Value, in case insured is unable to meet future premium payments. DISABILITY PLANS: These come as add-ons to basic insurance covers. Higher premiums are charged to cover the risks associated with sickness, death caused by accident and permanent disability caused by accident. The benefits include payment of an extra amount (equal to Sum Assured but not exceeding Rs 5 lakh in most cases) along with compensation for loss of employment due to sickness/disability and reimbursement of medical expenses among others. DOUBLE ACCIDENT BENEFIT: If an individual has bought double accident benefit he is entitled to double the Sum Assured in case of death due to accident. The death should occur within 120 days of the accident and due to injuries sustained in the accident. The maximum benefit payable is Rs 5 lakh. The insured must not be over 70. EDUCATION ANNUITY PLANS pay the sum assured in installments spread over a specified period to match the estimated financial expenses on higher education. ENDOWMENT POLICIES: are a combination of risk cover and savings instrument. The Sum Assured is payable on death of the life assured or at the end of the term whichever is earlier. EXCEPTION/EXCLUSION: A peril that is specifically excluded under an insurance policy. Exclusions can be general, or applicable across all insurance policies or applicable to a specific policy. Loss due to war or warlike conditions, or due to nuclear weapons is a general exclusion. No policy covers these losses. If you have heart disease your health insurance policy could exclude hospitalisation for that condition and those arising out of it. This is a specific exclusion EXCESS: The amount of loss agreed under an insurance policy, to be borne by the insured himself. FORECLOSURE: is the action taken by the insurer when the policyholder fails to pay up the interest on his loan. The insurer writes off the policy before its maturity date and the surrender value is adjusted against the loan. FORFEITURE OF PREMIUM: The laws and principles of insurance do not allow forfeiture of premium if the insured is unable to pay future premium leading to lapse of policy. GENERAL INSURANCE COMPANIES: Insurance companies which offer risk (insurance) cover on non-life entities, such as Crop insurance, Fire Insurance, etc are known as General Insurance Companies. They cover human life only for Mediclaim Policies. GRACE PERIOD: is the period during which the policyholder can renew his policy. The policy remains in force, i.e. the risk continues to be covered during this period and claims will be serviced in case of death during this period. For yearly, half yearly and quarterly premium payments the grace period is 30 days. For monthly mode of payment- 15 days. GROUP GRATUITY SCHEME: The Payment of Gratuity Act 1972 makes it compulsory for employers, who have 10 or more employees, to set up a Gratuity Scheme. The Group Gratuity Scheme operates as follows: Employer sets up Gratuity fund as an irrevocable trust fund Trustees enter into a contract with an insurance company to manage funds Insurance company manages fund by diversifying risk The MAIN BENEFIT is to the families of employees who die at an early age since the gratuity is paid on the basis of completed service. GROUP INSURANCE provides cover for a group of people who satisfy the following conditions: The group must be formed for reasons other than to take a policy Members enter and exit a group for reasons other than to take a policy Should consist of more than 25 members The Master policy covers all group members and there is no mandatory requirement for all members have to apply for equal cover. At inception of the policy, all members have an option to join, but members who join later cannot be covered immediately. Members appoint a specified authority to represent the group and premiums vary depending on performance of the group. The surplus if any may be shared among members in case of good performance (PROFIT SHARING SYSTEM). GROUP INSURANCE SCHEME: This is a term insurance type of contract, simple and cheap. The specified amount is payable by the insurer on death of a member. GROUP SAVINGS LINKED INSURANCE SCHEME: this provides both death and savings benefit. It normally requires the group to consist of at least 50 members. The scheme is administered through the employer, with the first charge on salary for life insurance cover. The balance in this account is utilized for earning interest. The premium for providing risk cover is based on the age distribution of members of the group and balance amount of the premium after deducting for risk cover is used for savings (endowment). GROUP SUPERANNUATION SCHEME: This operates like a Pension scheme where the payments made at the end of each period Employers set up trust fund. Trustees enter into a Superannuating scheme. Fund managed by insurer. Insurer provides actuarial, legal and tax assistance to trustees. GUARANTEED SURRENDER VALUE: You can obtain this minimum amount in case you decide to foreclose the policy, after payment of premium for a stipulated minimum period. GUARANTEED ADDITION: In case of certain policies, the insurance company adds a certain sum every year to the sum assured of a policy (guaranteed additions). This sum is calculated at a rate per every thousand of sum assured. It is payable upon the maturity of the policy or when the claim is made. The guaranteed addition take place only for every year the premium is paid. IMMEDIATE ANNUITY/STRAIGHT LIFE ANNUITY: are single-premium policies. The life assured pays a lump sum and the insurer pays him/her a specified amount throughout his/her lifetime. The word immediate denotes that the annuities start from the day on which the single premium is paid, providing immediate income to the insured. INCREASING (SUM ASSURED) TERM POLICY: In some money-back plans, a fixed percentage of the Sum Assured is paid to the insured at the end of specified periods during the term of the policy. However, notwithstanding the periodical payouts, the sum assured at risk (payable on death) continues to be same during the term of the policy; that is if the life assured dies during the policy term the entire sum assured will be paid to him. These policies are called increasing term policies. INCREASING TERM INSURANCE: Under certain policies, you death benefit increases periodically over the term of the policy. INDEMNITY: is a reimbursement or compensation for the actual monetary loss suffered and is made by the insurer to the insured. It has to match the extent of the loss. Indemnity policies make good the monetary loss due to the occurrence of an insured risk due to operation of an insured peril to the extent of such monetary loss. INSTALMENT REVIVAL SCHEME: is a facility for defaulting policyholders, who cannot to settle their arrears in one lump sum and avail the Special Revival Scheme. The Policyholder can revive his lapsed policy by paying the arrears in installments. INSURABLE INTEREST: The person who is buying the insurance must have an insurable interest in the thing being insured. If the purchaser will lose monetarily if the object being insured is lost or damaged then he is said to have insurable interest. The main insurable interest is ownership in the case of property insurance. Someone who has lent against that property also has an insurable interest in that property to the extent of his loan. In the case of life insurance, any person is said to have an insurable interest over his or her own life to in indefinite extent. A wife has insurable interest over the life of her husband and a husband over that of his wife. Insurable interest also exists in some business arrangements like between creditor and debtor or between business partners. A parent has NO insurable interest in the life of his child in the capacity of a child and vice versa, and similarly neither do siblings have insurable interest in each other's lives. INSURANCE: A method of managing risk by spreading it. Specifically it is done by transferring the responsibility for bearing the monetary loss due to the risk to another entity (an insurance company) for a consideration. This transfer is called subrogation and includes the transfer of allied rights to the insurer. INSURABILITY: All conditions pertaining to individuals that affect their health, life expectancy, susceptibility to injuries and diseases. INSURER: The company that provides insurance cover by issuing contract (policy) of insurance. JOINT LIFE ANNUITY PLANS: are Annuity plans available for 2 or more persons, normally couples and the annuity is payable till the death of the both. JOINT LIFE INURANCE PLANS: As the name suggests these policies provide insurance on two lives under one contract. The Sum Assured is payable at the end of the term or on death of either life whichever is earlier. These policies are recommended for working. LAST BIRTH DAY: The age as on the last birthday of the Policyholder (used for calculating premium). LIFE ASSURED: is the individual on whose life the policy is taken. LIFE INSURANCE: is the risk cover an individual can take to mitigate the financial problems that may arise if he/she dies too young or lives too long. LIMITED PAYMENT WHOLE LIFE PLAN: provide for a fixed premium paying term. The benefit, however, is payable only on death of the life assured. The policy remains in force during the entire lifetime of the life assured. LOAN-CUM-REVIVAL SCHEME: can be used by policyholders to pay off premium arrears by taking a loan against the policy. LOAN: against insurance policies gives liquidity to the policyholder. Generally, insurance policies offer the facility of loan being availed against the premium payments made. It may happen that some products may not offer loan facility. LOYALTY ADDITIONS: In case of some life policies, the Policyholder will be eligible for Additional Bonus alongwith the Sum assured at the time of Maturity of the policy, for having continued the policy till the end successfully.
MARRIAGE ENDOWMENT PLAN:	The term of these plans is fixed in relation to the likely time of the child's marriage. The sum assured is payable only at the end of term. Even if the life assured dies during the term of the policy, the sum assured will be paid only at end of term. Premium payment, however, ceases on death of life assured.
MATERIAL FACT:	Facts that may have a bearing on the decision by the insurer to give or not to give insurance in a particular case, and what premium to charge.
MATURITY BENEFIT:	is the benefit amount payable to policyholder if he survives until the policy matures, in other words, if he survives till the end of the term of the policy.
MATURITY CLAIM:	is the amount payable at the end of the term of the policy.
MONEY-BACK PLANS:	are a type of endowment plan where a part of the sum assured is payable during the term of the policy. Generally there are 4-6 payouts during the term of the policy. However, notwithstanding the periodical payouts, the sum assured at risk (payable on death) continues to be same during the term of the policy; that is if the life assured dies during the policy term the entire sum assured will be paid to him. No deductions will be made for a payout that might have been made.
MORAL HAZARD:	A situation where insurance is being taken with the ulterior motive of staking a (false) claim. This could be where the loss has already taken place, or where there is a pre-existing condition that is left undisclosed, or a situation where the insured is facing heavy losses from other activities and is seeking to buy insurance with a view to collecting a claim and offsetting his losses.
MORTALITY:	The probability of death of a typical person at various ages in a given group of people.
NATIONAL INSURANCE COMPANY LIMITED:	This GIC subsidiary was set up in and is headquartered in Calcutta.
NEAR BIRTH DAY:	The age on the nearest birthday (used for calculating premium).
NEW INDIA ASSURANCE COMPANY LIMITED:	A subsidiary of GIC, the company was set up in and is headquartered in Mumbai.
NOMINEE:	is the person nominated by the life assured to receive the policy money in case of the death of the life assured. However, nomination does not indicate any transfer of rights, titles and interest of the policy during the lifetime of the life assured. Nomination can be changed either through a will or by an endorsement on the policy. Nomination is normally not required in the case of a Joint Life Policy. However to protect their interests in case of a natural calamity where it is hard to establish the proof of the earlier death, it is recommended that the joint policy holders appoint a common nominee
NON-MEDICAL:	Policies issued without a medical examination, normally permitted to persons below a certain age, employed in certain institutions and for sums assured below a certain amount.
NON-PARTICIPATING / WITHOUT PROFIT POLICIES	In these plans the policyholder is only paid the Sum Assured. He has no claim over the surplus generated by the insurer.
NON-STANDARD LIFE:	Any individual, who cannot be granted a policy under normal rates of premiums but can be granted with an extra premium over normal rates of premium, is considered as a Non-Standard Life.
ORDINARY REVIVAL REQUIRING DECLARATION OF GOOD HEALTH IN A SIMPLE FORM	can be effected if: Premium arrears are cleared within seven months from the date of lapse( policy issued at ordinary rates) The policy is an endowment scheme and the premium arrears have been cleared in the 12 - 24 months prior to maturity date The new proposal can be considered under non-medical scheme In arrears are cleared in the 12 months prior to the date of maturity in case of high-risk plans like money-back scheme. The arrears are paid after 12 months but before 18 months from the date of lapse and the policy has been in force for greater of at least 10 years or half the total term of the policy, whichever is more.
ORDINARY REVIVAL WITHOUT PRODUCING EVIDENCE OF GOOD HEALTH:	can be effected if premium is paid within six months of due date of first unpaid premium. This facility, however, is extended only to pure survival benefit policies. Schemes that carry a death cover cannot be revived this way. If the policy has been in force for at least five years, ordinary revival can be effected if arrears are paid within 12 months of the date of first unpaid premium. In the case of endowment type policies, ordinary revival can be effected if the arrears are paid during the last 12 months prior to the date of maturity.
PAID UP POLICY:	Generally, a policy under which the premiums have been paid for the full paying term or premiums are not being paid upto a certain period. The value of insurance coverage will be reduced to a sum that is worked out based on a pre-defined formula which has a relation to the period for which premiums have been paid and remain payable.
PAID UP VALUE:	When premium payment is stopped by the proposer during the term of the policy paying period, and does not or cannot make further payments, the policy can become 'paid up', that is, it can be frozen in terms of benefits which will be a portion of the sum assured and no further premiums need be paid for that benefit level.
PARTICIPATING /WITH PROFIT POLICIES:	Policies where the policyholder 'participates' in the surplus generated by the insurer are called participating or with profit policies.
PERIL:	is a contingency or an accidental happening, which may be covered or excluded under a policy of insurance.
PERMANENT DISABILTY:	Irrevocable loss of entire sight of both eyes. Amputation of both hands at/above the wrists. Amputation at or above both ankles. Amputation of one hand and one foot.
POLICY:	is a stamped document, which provides evidence of the contract of insurance between the insurer and the insured.
POLICY REVIVAL:	A lapsed policy can be revived before the date of maturity within five years from the date of first unpaid premium. The policyholder needs to submit proof of his ability to pay future premium. All premium arrears, with interest, have to be cleared. SBILife reserves the right to accept the offer for revival. Evidence of good health may be required.
PREMIUM:	is the monetary consideration paid by the insured to the insurer for an insurance cover. The premium can be for the entire policy period (as in the case of annual policies) or payable periodically (as in life policies). In India premiums have to be paid before coverage can begin and the insurer can be 'at risk', a provision under section 64 V B of the Insurance Act.
PREMIUM PAYING TERM (PPT):	is the term for which premium has to be paid. In some policies, the term for which premium is to be paid by the insured is less than the term of the policy.
PREMIUM PERIODICITY:	For life policies premium are payable periodically. They are payable annually, half-yearly, quarterly and monthly. Rebates are usually offered on annual and half-yearly premium payments and loadings on monthly payments.
PREMIUM WAIVER BENEFIT (PWB):	Children’s policies provide this benefit where the future premiums payable upto the vesting date are waived in the event of your death.
PROPOSAL FORM:	The Application in the required format sent by the proposer (person who wants to buy the contract) is the Proposal Form.
PROPOSER:	is the person who buys the insurance policy.
PURE ENDOWMENT PLANS:	are policies where the amount is payable by the insurer to the policyholder only at the end of the specified term. They serve as savings instruments.
REBATES:	are the discounts offered on the premium levied by Insurance Companies. The rebates could be based on the Premium Payment Frequency, Term or the amount of Insurance Cover (sum assured).
REVIVAL OF A LAPSED POLICY:	In case your policy has lapsed due to non-payment of premium, you can revive the lapsed policy by paying arrears with interest and providing new documentation. This can be done only within a stipulated period of time from the date of lapse, and before the date of maturity of the policy.
RISK:	is the probability of a loss. This chance of something happening (a factory catching fire for instance) is what is the subject matter of insurance as far as it is a quantifiable financial loss.
SALARY SAVING SCHEME (SSS):	comes into operation when the employee makes a written request to the employer for direct deduction of the premium due to the insurer from the monthly salary payable and remittance to the insurer.
SPECIAL REVIVAL SCHEME:	is available for policyholders who cannot afford full settlement of arrears. Arrears of premium have to be paid only for two years.
STANDARD LIFE:	Any person who, according to the insurer's underwriting standards, is eligible for insurance at the normal rates of premium, as a result of meeting the normal health standards.
SUBROGATION:	Since insurance is a method of transferring risk from the insured to the insurer, the insurer is said to step into the shoes of the insured to take care of the monetary obligations arising out of the loss. In the same way the rights of the insured under the circumstances, say to receive compensation for the loss from some other authority, or to proceed legally against a third party that has caused the loss will be subrogated to the insurance company so that it can pursue all methods of getting back some of the money it pays as claims.
SUB-STANDARD LIFE:	Any person considered as under-average for granting insurance cover due to reasons such as occupation, dangerous lifestyle or personal or family history of some disease. The insurance company can accept insurance proposal of such a person with increased premium or restrictions on coverage. In some cases, the proposal can be rejected.
SUICIDE CLAUSE:	The insurance company will not pay the benefits under the policy if the insured person commits suicide or dies due to attempted suicide within a certain period from the date of the issue of the policy document.
SUM ASSURED:	is the amount payable on occurrence of the specified event for which the policy is taken, such as death or completion of term.
SUM INSURED:	is the monetary limit of liability of insurers under a policy.
SURCHARGE:	is the extra loading on the normal premium, due to any cause, such as monthly premium payments, etc.
SURRENDER:	is the voluntary termination of the policy contract by the policyholder before it matures into a claim. The insurer pays the policyholder a surrender value for his policy. This value is normally calculated as a percentage of the premium paid or as a percentage of the paid up value.
SURRENDER VALUE:	The amount payable by the insurance company if you foreclose a policy after the premium is paid for a minimum period as stipulated.
SPECIAL SURRENDER VALUE:	The surrender value calculated as per a formula announced by the insurer from time to time, which will be paid if it is more than the guaranteed surrender value on foreclosing the policy.
SURVIVAL BENEFIT:	is the benefit payable to the life assured if he survives up to a specified date during the term of the policy.
TERM:	is the period during which the policy remains in force. The sum assured is payable only if the specified event occurs during this period.
TERM INSURANCE:	Under this scheme, you pay premium for a certain number of years, and your nominee will receive the money upon your death; however, you will not receive anything if you survive the term.
TERM INSURANCE PLANS:	provide only a death risk cover. These policies do not have any savings element built into them. The Sum Assured is receivable only in case of death during the term of the policy. If the insured survives the term the entire sum assured may not be payable but a smaller maturity benefit may be payable.
THE ORIENTAL INSURANCE COMPANY LIMITED:	This GIC subsidiary was set up in and is headquartered in Delhi.
UNIT LINKED INSURANCE PLAN:	is designed to compensate for inflation. The premium is split into two parts, one part is used to provide risk cover and the second component is converted into units and invested in equities or other markets.
UNITED INDIA INSURANCE COMPANY LIMITED:	This GIC subsidiary was set up in and is headquartered in Chennai.
UTMOST GOOD FAITH:	All insurance contracts are on the basis of the concept of 'Uberrima Fides', or Utmost Good Faith. Since the insured has the advantage over the insurer as far as the conditions under which insurance is being bought - say the true state of his health, or the dangers that his house faces from fire - the insurer has the obligation to declare all such material facts with utmost good faith to the insurer so that he may sell you the policy while in possession of the required information.
VESTING AGE:	is the age at which life assured becomes absolute owner of the policy, which in the case of minors is 18 years (minimum age for a valid contract).
WHOLE LIFE INSURANCE:	remains in force through out the lifetime of the life assured. The sum assured is payable in case of the insured's death. Premiums too are payable till death.
WITH PROFIT:	A policy of insurance can be of the 'with profit' kind or 'without profit'. In the first case, the policyholder is eligible to have a share in the profits of the insurance company at the cost of a higher premium.
WITHOUT PROFIT:	A 'without profit' policyholder is not eligible to have a share in the profits of the insurance company and only the sum assured under the policy will be paid on the maturity of the policy or on death as the case may be.

            ******************************************************************