LIFE INSURANCE TERMS-- useful for LIC/General Insurance Exams/Interviews
LIFE
INSURANCE TERMS
Accident
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An event or occurrence causing
damage/injury to an entity, and is unforeseen and unintended.
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Accident Benefit
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Provides for payment of an
additional benefit equal to the sum sum assured in instalments on permanent
total disability and waiver of subsequent premiums payable under the policy.
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Age Limits
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Stipulated minimum and maximum ages
below and above which the company will not accept applications or may not
renew policies.
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Agent
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An insurance company representative
licensed by the state who solicits, negotiates or effects contracts of
insurance, and provides service to the policyholder for the insurer.
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Annuity Plans
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These plans provide for a
"pension" ( or a mix of a lump sum amount and a pension ) to be
paid to the policy holder or his spouse. In the event of death of both of
them during the policy period, a lump sum amount is provided for the next of
kin.
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Application Form
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Supplied by the insurance company,
usually filled in by the agent and medical examiner (if applicable) on the
basis of information received from the applicant. It is signed by the
applicant and is part of the insurance policy if it is issued.
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Assignment
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Assignment means legal transference. A method by which the policy
holder can person on his interest to another person. An assignment can be
made by an endorsement on the policy document or as a separate deed.
Assignment can be of two types
Conditional absolute |
Beneficiary
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The person(s) or entity(ies) (e.g.
corporation, trust, etc.) named in the policy as the recipient of insurance
proceeds upon the death of the insured.
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Business Insurance
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A policy which primarily provides
coverage of benefits to a business as contrasted to an individual. It is
issued to indemnify a business for the loss of services of a key employee or
a partner who becomes disabled.
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A contract of health insurance that
may be cancelled during the policy term by the insurer or insured.
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Coinsurance
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1) A provision under which an
insured who carries less than the stipulated percentage of insurance to
value, will receive a loss payment that is limited to the same ratio which
the amount of insurance bears to the amount required;
2) a policy provision frequently found in medical insurance, by which the insured person and the insurer share the covered losses under a policy in a specified ratio, i.e., 80 per cent by the insurer and 20 per cent by the insured. |
Convertible Whole Life Policy
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A mix of "whole life
policy" and "endowment policy", it provides for very low
insurance premiums with maximum risk cover while the life assured is just
beginning his working career, and the possibility of converting the policy to
an "endowment" policy after five years of commencement.
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Coverage
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The scope of protection provided
under a contract of insurance; any of several risks covered by a policy.
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Policy holders are expected to apy
premium on due dates. a period is 15-30 days is allowed as grace to make
payment of premium; such period is days of grace.
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Deferment Period
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Period between the date of
subscription to an insurance-cum-pension policy and the time at which the
first instalment of pension is received. Such policies generally prescribe a
minimum and maximum limit on the deferment period.
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Depreciation
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A decrease in the value of property
over a period of time due to wear and tear or obsolescence. Depreciation is
used to determine the actual cash value of property at time of loss.
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Double/Triple Cover Plans
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These offer to the beneficiaries
double/triple the sum assured on death of life assured during the term of the
policy. On survival to the date of maturity, the basic sum assured is paid to
the assured. These are low-premium plans, most useful for situations such as
housing.
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Fraudulent use or taking of
another's property or money which has been entrusted to one's care.
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Endowment Policy
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The assured has to pay an annual
premium which is determined on the basis of the assured's age at entry and
the term of the policy. The insured amount is payable either at the end of
specified number of years or upon the death of the insured person, whichever
is earlier.
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Excess And Surplus Insurance
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1) Insurance to cover losses above
a certain amount, with losses below that amount usually covered by a regular
policy.
(2) Insurance to cover an unusual or one-time risk, e.g., damage to a musician's hands or the multiple perils of a convention, for which coverage is unavailable in the normal market. |
Exclusions
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Specific conditions or
circumstances for which the policy will not provide benefits.
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A type of reinsurance in which the
reinsurer can accept or reject any risk presented by an insurance company
seeking reinsurance.
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Family Insurance.
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A life insurance policy providing
insurance on all or several family members in one contract, generally whole
life insurance on the principal breadwinner and small amounts of term
insurance on the other spouse and children, including those born after the
policy is issued
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Fiduciary
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A person who holds something in
trust for another.
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Fire Insurance
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Coverage for losses caused by fire
and lightning, plus resultant damage caused by smoke and water. Flood
insurance Coverage against loss resulting from the flood peril, available at
low cost under a programme developed by the Central government.
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Franchise Insurance
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A form of insurance in which
individual policies are issued to the employees of a common employer or the
members of an association under an arrangement by which the employer or
association agrees to collect the premium and remit them to the insurer.
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A lump sum purchase price is given
to purchase future pensions under the Jeevan Akshay Plan of Life Insurance
Corporation of India. This amount is referred to as GIS. The monthly pension
that is payable one month after payment of first premium is calculated on the
basis of the age at entry.
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Gross Insurance Value Element (GIVE)
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The amount payable on the deferred
date under Jeevan Dhara Life of Life Insurance Corporation of India. An annuity
of 1% of the GIVE is payable per month after the deferment period. And the
entire GIVE is payable on death after deferment period.
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Group Life Insurance
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Life insurance usually without
medical examination, on a group of people under a master policy. It is
typically issued to an employer for the benefit of employees, or to members
of an association, for example a professional membership group. The
individual members of the group hold certificates as evidence of their
insurance
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Guaranteed Policies
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These are policies where the
payment stays fixed.
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Legal principle that specifies an
insured should not collect more than the actual cash value of a loss but
should be restored to approximately the same financial position as existed
before the loss.
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Insurable Interest
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A condition in which the person
applying for insurance and the person who is to receive the policy benefit
will suffer an emotional or financial loss, if any untouched event occurs.
Without insurable interest, an insurance contract is invalid.
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Insurability
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All conditions pertaining to
individuals that affect their health, susceptibility to injury and life
expectancy; an individual's risk profile.
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Insurance
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Social device for minimizing risk
of uncertainty regarding loss by spreading the risk over a large enough
number of similar exposures to predict the individual chance of loss.
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Insured
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The person whose life is covered by
a policy of insurance.
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The sum assured ( plus any accrued bonuses) under this type of policy
is payable on the end of the endowment term or on the first death of the two
lives assured, whichever is earlier. Typically (though not a necessity) taken
out by a couple, a variation is available for couples only. In this case, the
sum assured will be payable on first death and then again on the second death
(along with all vested bonuses) if both deaths occur during the term of the
policy. If one or both lives survive to the maturity date, the sum assured
along with all vested bonuses will be payable on maturity date. Premiums
during this plan cease on the first death or the expiry of the selected term,
whichever is earlier. Another variation provides for annuity to
both/surviving spouse, or a lump sum amount to the legal heirs.
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A life insurance policy taken by a
person on the life of another person who is or was his employee/connected to
his business in any manner whatsoever.
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A policy which has terminated and is no longer in force due to
non-payment of the premium due
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Limited Payment Life Policy
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Premiums need to be paid only for a
certain number of years or until death if it occurs within this period.
Proceeds of the policy are granted to the beneficiaries whenever death of the
policy holder occurs. Again, this policy can also be of the "with
profits " or "without profits" type.
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Loyalty Additions
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The loyalty addition is given upon
the maturity of the policy, and not before. It's a small percentage of the
sum assured. Broadly speaking, loyalty addition is the difference between the
performance, of the insurance company and the guaranteed additions. It is
LICs effort to further share its surplus after valuation with the policy
holders, as LIC is a non-profit organization.
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Life Assured
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The person whose life is insured by
an individual life policy is called life assured.
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The date upon which the face amount
of a life insurance policy , if not previously invoked due to the contingency
covered (death), is paid to the policyholder.
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Maturity Claim
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The Payment to the policy holder at
the end of the stipulated term of the policy is called maturity claim.
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Misrepresentation
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Act of making, issuing, circulating
or causing to be issued or circulated an estimate, an illustration, a
circular or a statement of any kind that does not represent the correct
policy terms, dividends or share of surplus or the name or title for any
policy or class of policies that does not in fact reflect its true nature.
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Money Back Policy
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Unlike endowment plans, in money
back policies, the policy holder gets periodic "survivance
payments" during the term of the policy and a lump sum amount on
surviving its term. In the event of death during the term of the policy, the
beneficiary gets the full sum assured, without any deductions for the amounts
paid till date, and no further premiums are required to be paid. These type
of policies are very popular, since they can be tailored to get large amounts
at specific periods as per the needs of the policy holder.
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Moral Hazard
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Risk depends on the need for
insurance, state of health, personal habits standard of living and income of
insured person. Moral hazard is the
risk factors that affects the decision of the insurance company to accept the
risk.
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An act by which the policy holders
authorises another person to receive the policy moneys. The person so
authorised is called Nominee.
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Non-cancelable policies
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Such policies stay in effect
regardless of whatever that might happen and as long as the premium is paid
from time to time
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The payment, or one of the regular
periodic payments, that a policy holder makes to an insurer in exchange for
the insurer's obligation to pay benefits upon the occurrence of the
contractually-specified contingency (e.g., death).
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Premium Back Term Insurance Plans
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These provide for refund of all the
premiums paid, in the event of th life assured surviving to the end of the
policy term. The total sum assured is paid to the beneficiaries in the event
death occurs during the policy term.
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The restoration of a lapsed policy
to in-force status. Reinstatement can only occur after the expiration of the
grace period. The company may require evidence of insurability (and, if
health status has changed, deny reinstatement), and will always require payment
of the total amount of past due premium.
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Risk
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The obligation assumed by the
insurer when it issues a policy. The spreading of risk across a broad base of
the population, adjusted for statistical probability, and the protection
against catastrophic loss, is the entire purpose of insurance. For risk
assumption purposes, death is viewed as a contingency. That is, although
death is certain, its timing is unknown. The process of evaluating and
selecting risk is known as underwriting.
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This scheme provides for payment of
premiums by money deduction from the salary of the employees by one employer.
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Sub Standard Risk
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Person who is considered an
under-average or impaired insurance risk because of physical condition,
family or personal history of disease, occupation, residence in unhealthy
climate or dangerous habits.
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Surrender Value
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The value payable to the policy
holder in the event of his deciding to terminate the policy before the
maturity of the policy.
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Survival Benefit
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The payment of sum assured to the
insured person which has become due by instalments under a money back policy.
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The age at which the receipt of
pension starts in an insurance-cum-pension plan.
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Premiums are paid throughout the
life time of life assured . This can be with profits or without profits ( A
"with profit" policy is eligible for various bonuses declared by
LIC every year, while a "without profits" policy does not have this
privilege )
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With-Profit policy
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Policies entitled to bonus, which
is paid at the time of claim-death or maturity one with-profit policies.
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Without-Profit policy
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These policies are not entitled to participate
in bonuses.
https://www.licindia.in/glossary.htm
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