Life Insurance Terms

Under this benefit, a sum of money is paid over and above the death benefit in the event of death caused due to an accident.

Add-on riders like severe sickness or accidental death coverage may incur an additional premium when choosing additional benefits.

The tendency of persons exposed a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all, as in the case of floods. Adverse selection concentrates risk instead of spreading it. The fact is that insurance works best when risk is shared among large numbers of policyholders.

Age is the key criterion in determining the premium you pay. However, some saving plans are age agnostic. An individual is less prone to an age-related ailment and untimely demise at a young age; therefore, the premiums are lower.

When you start saving at an early age, you can enrol in a solid saving plan at a discounted premium rate. As you get older, the insurer raises your premiums since the chances of filing a claim due to death rise.

The predefined minimum and maximum ages below and above which the insuring company will not accept applications or may not renew policies.

Acronym for Acquired Immune Deficiency Syndrome, a disease.

It means that units are allotted to the Policyholder in the chosen Investment Fund. The allocation is done at the prevailing unit price.

Annualised premium is the sum of all the premiums required to be paid by the Policyholder during the year. For example If the monthly premium to be paid is ₹ 1,000, annualised premium would be ₹ 1,000 (monthly premium) *12(number of months) = ₹ 12,000

Annuitant is the person who receives certain amounts as income at yearly/ half yearly/ quarterly/ monthly intervals from an annuity contract. Usually the owner of the contract or his or her spouse.

A scheme under which a certain amount is paid at regular yearly/ half yearly/ quarterly/ monthly intervals.

Annuity is a series of guaranteed income paid at specified regular intervals throughout the life of the Annuitant until his/her death. It is paid either immediately or after a deferment period.

These plans provide for a "pension" amount (or a mix of a lump sum amount and a pension) to be paid to the insured or his spouse. In the event of death of both of them during the policy period, a lump sum amount is paid to the next of kin.

The person to whom the benefits of a life policy are assigned.

The tendency of persons exposed a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all, as in the case of floods. Adverse selection concentrates risk instead of spreading it. The fact is that insurance works best when risk is shared among large numbers of policyholders.

• Conditional assignment
• Absolute Assignment

 

---Assignment is the legal transfer of rights and interests in an Insurance Policy. It leads to a shift in the ownership of the Insurance Policy.

Assignor is the person who holds the right/ title under the policy and who can make a valid assignment

This option saves the Policyholder from the trouble of remembering the due date of premium as the funds are automatically transferred from his bank account/credit card to the company, as per your instructions.

Auto surrender of a policy happens when the premiums are not paid for a period greater than the period of Revival as specified by the company. For example: If the period of Revival is 2 years, then the policy would surrender automatically after 2 years from the date of unpaid premium. Policyholder will receive the Surrender Value, if any.

The basic plan is the insurance product on which the rider is attached is called Base Plan.

It is a period of negative sentiment in market leading to a fall in the prices of stock markets.

This is the amount added on to the basic sum assured under a with-profit life insurance policy.

A temporary receipt given for a premium payment accompanying the application for insurance. If the policy is approved, this binds the company to make the policy effective from the date of the binding receipt

Bonus is a surplus return on investment of participating policies declared as a percentage of Sum Assured and is shared with the policyholder in the form of bonus payout at the end of the financial year. The bonus rates are decided at the discretion of the insurance company and when declared, it becomes guaranteed. For bonus details pertaining to your policy, please refer the policy document.

-- Life Insurance companies share the profits from the participating fund with the Policyholder in the form of bonuses which are usually declared at the end of every financial year and can be classified as cash bonus, reversionary bonus and terminal bonus. It is only available on participating or with profits Insurance Policy.

This is a type of life insurance marketing system under which the company opens branch offices in various areas. Here the Salaried Branch Managers, who are employees of the company, are responsible for hiring and training new agents.

It is a period of positive sentiment in market during which prices of the stock market increase greatly.

Cash Bonuses are paid in the same year in which the bonus is declared, thus giving the Policyholder cash payouts year after year as opposed to a single payout at the end of policy.

It is the amount payable by the insurer to the insured, or the assignee/ beneficiary under a policy on a claim arising.

Compound Reversionary Bonuses are declared as a percentage rate of Sum Assured & the Reversionary Bonuses already declared. For example, if the policy is of `10 lakhs with the bonus declared last year of `1,00,000 and the rate of bonus being 10%, then the bonus amount this year would be `1,10,000 (as opposed to `1,00,000 under Simple Reversionary Bonus). However, the amount is paid only on maturity or at the time of claim as it is Reversionary Bonus.

Deliberately hiding a material fact from the Insurer is referred to as concealment. Concealment may lead to termination of promised benefits.

It is a debt security issued by a company to borrow money from the public. Corporate bonds are less risky financial assets as compared to equities and provide a better return as compared to Government Bonds. However, there is a risk of default attached to corporate bonds in case the company goes bankrupt.

The amount of protection provided to the Policyholder on the basis of premium amount and the terms of the policy.

It is the date which represents the beginning of Life Cover.

Dating Back or Back Dating is an option to the life assured to get the advantage of lower age wherein the policy is commenced from a date earlier than the actual date of signing of proposal form. However, back dating is limited to one year.

Policyholders are expected to pay regular premium on due dates. A period of 15-30 days from the due date is allowed as grace to make payment of premium. This duration is known as days of grace.

The payment made to a beneficiary upon the death of the insured person.

-- Whenever an unfortunate event happens, there is both emotional as well as financial loss. An insurance company helps you replace the financial/monetary loss through the Death Benefit, which helps maintain your family’s financial stability. This benefit includes both a guaranteed sum of money called as Sum Assured on Death and also the Accrued Bonuses, if applicable.

The process of the insurer refusing to insure an individual after careful evaluation of the application for insurance and any other risk factors.

It is the date on which the deferment period ends.

Deferment Period means the number of years from the Date of Inception of Policy after which the Annuity payout will begin For eg – if the deferment period is 10 years, Annuity payout will start after 10 years of policy inception.

 

Joint Life annuity refers to an annuity policy taken jointly on the lives of Primary Annuitant and Secondary Annuitant. There has be to an insurable interest between the Annuitant(s)

 

Primary Life/ Annuitant (applicable under Joint Life Annuity Option) is the person on whose life this Policy has been taken and who is entitled to receive the annuity benefits

 

Secondary Life/ Annuitant (applicable under Joint Life Annuity Option) is the person entitled to receive the Annuity payment, in the event of death of the Primary Life/ Annuitant. The Secondary Life/ Annuitant must have an insurable interest with the Primary Life/ Annuitant.

 

This is the period from the date of commencement of the policy to the date of commencement of risk on the child's life under a Children's Deferred Endowment Assurance policy.

An annuity plan where the first annuity payment becomes payable after a chosen period that exceeds one year.

A type of group annuity providing for the purchase each year of a paid-up deferred annuity for each member of the group. Here the total amount received by the member at retirement is the sum of these deferred annuities.

A pension plan stating either (1) the benefits to be received by employees after retirement or (2) the method of determining such benefits. The employer's contributions under such a plan are actuarially determined.

A plan under which the contribution rate is fixed and benefits to be received by employees after retirement depend to some extent upon the contributions and their earnings.

A type of group annuity providing for the accumulation of contributions in an undivided fund out of which annuities are purchased as the individual members of the group retire.

The premium deposit paid by a policyholder when an application is made for an insurance policy and is applied toward the actual premium when asked to pay.

This is a form of term insurance, not really involving a "deposit," but one in which the first-year premium is more than subsequent premiums.

The discontinuance charges are levied at the time of surrender or on discontinuance of premium. The charges depend on the year of discontinuance of premium/ surrender.

These plans offer 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.

For smokers that are more likely to get illnesses and have a higher mortality rate than non-smokers, insurance premiums for smokers are often higher than non-smokers. The same can be said for excessive alcohol consumption. Therefore, while acquiring a policy, it is good to tell the insurer about your smoking and drinking habits.

It is the date by which the insurance premium has to be paid to the company. It is calculated from Policy Date and depends on the premium mode chosen. If the insurance premium is not paid within 30 days (grace period) from the due date, the policy lapses or becomes paid up.

If you choose a longer policy duration, you will normally pay a higher premium because the likelihood of filing a claim is higher. The best alternative is to choose a term that ends with your retirement and a policy amount that is sufficient to cover your family's financial needs.

An insurance policy which provides a lump sum amount on a fixed date, either maturity of the policy or upon the death of the life insured, whichever occurs earlier.

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. 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.

Extended Permanent Disability Benefit

It is one of the principal asset classes having high potential of returns as well as high risk. It represents ownership interest in the company and therefore the returns are dependent on the company’s performance.

Special circumstances stated in the policy bond under which no benefits will be provided to the beneficiaries.

Category I: Women with income earned by virtue of their employment in any reputed organisation or institution eligible for Non-Medical Special Schemes. Valid for professionals such as Medicine, Law, Charted Accountancy etc. and lady career agents of LIC.
Category II: Women with unearned income attracting payment on income tax or women holding sizeable personal properties/ investments yielding income attracting assessment for income tax.

A company representative or an intermediary who helps you to understand and buy insurance products based on your needs and requirements.

An Individual is categorised as First Class Life if he/ she is eligible to have insurance coverage at normal rates of premium

First unpaid premium refers to the first default in paying premium by the policyholder. On payment of the due premium, a receipt is issued and this receipt indicates the date of next due. If this due premium is not paid, then that date becomes the date of FUP

A form of insurance in which individual policies are issued to the employees of a common employer or the members of an association. This is done under an arrangement by which the employer or association agrees to collect the premium and remit them to the insurer.

The Policyholder has a period of 30 days from the date of receipt of the policy document to review the terms and conditions of the policy and if Policyholder disagrees with any of the terms and conditions of the Policy, there is an option to return the original Policy along with a letter stating reasons for objection. The Policy will accordingly be cancelled and 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 on cover and the expenses incurred by the Company on medical examination of the proposer and the stamp duty charges. All rights under this Policy shall stand extinguished immediately on cancellation of the Policy under the free look option.

These are the charges for meeting expenses relating to managing the fund. The Fund management charge varies for each fund depending on the type of investments made.

These are the least risky financial instruments as they are issued by the government to borrow money from the public. The rates of interest and time period are predetermined in Government Bonds.

A specified period after a premium payment is due, in which the policyholder may make such payment, and during which the protection of the policy continues

---A period during which the Policyholder can still make the overdue Premium Payment without attracting any interest. Grace period is of 30 days from the original due date as stipulated by regulation and the benefits under the Policy remain unaltered during this period.

A commission scale providing for payment of high first-year commission and lower renewal commissions.

The total premium paid by the policyholder.

The sum of the pure premium and a loading element.

A contract of insurance made with an employer or other entity that covers a group of persons identified as individuals by reference to their relationship with the entity.

Insurance covering a number of people under a single policy, issued to their employer with whom they are working.

These Additions are calculated at a pre-defined rate per every thousand of sum assured. They are added to the basic sum assured and are payable on admittance of claim. This benefit is allowed exclusively for each year for which premiums are paid.

Guaranteed Insurance Sum is equal to purchase price paid for a pension along with final bonus that may be earned on the paid up amount.

The money which is guaranteed to the Policyholder in the event of voluntary termination of the policy before maturity date is called the Guaranteed Surrender Value.

Any situation which increases the probability of a loss is known as a Hazard.

An annuity providing for payment to the beneficiary immediately.

The money paid to the policyholder as regular income at the end of the policy term.

Insurability refers to all conditions pertaining to individuals seeking insurance; that affect their health, susceptibility to injury and life expectancy; an individual's risk profile.

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 unforeseen event occurs. Without insurable interest, an insurance contract is invalid.

---It means that the Policyholder or the owner must have some emotional or financial loss if an unfortunate event happens to the Insured to make the insurance contract valid.

It is the company that collects premiums and provides compensation for financial loss incurred due to an unfortunate event.

Insurance Repository system refers to the conversion of all the policies, from different Insurers, in electronic form to be stored at one single place i.e. the Insurance Repository. This concept is similar to the dematerialisation of shares and saves the trouble of storing physical copies of policy contracts.

This is term that refers to the individual, whose life is covered by a policy of insurance.

It is an individual fund having a certain mix of equity and debt. The company offers a number of Investment Funds, having different debt and equity ratios based on investment instruments like stocks, money market, corporate and government bonds to suit different investment needs and risk appetites.

It is the instruction given by the Policyholder to allocate his premiums towards the purchase of units in the desired Investment Fund.

It is a suite of various kinds of assets like shares, government bonds etc. which have different risk and returns. Portfolio helps in maximizing benefits and at the same time protects against market fluctuations as money is invested in both less risky assets like government bonds and the most risky assets like small company stocks.

The performance of the Investment Fund depends on the financial markets and may increase or decrease. The risk of such fluctuations or uncertainties due to market related factors is called as the Investment Risk.

Insurance Regulatory and Development Authority of India is a statutory body which regulates the insurance industry in India. It was constituted under the Insurance Regulatory and Development Authority Act, 1999.

This refers to a policy which has terminated and is no longer in force due to non-payment of the premium due.

---Lapsed is a policy status under which all benefits of the policy stops due to non-payment of the premium due within the grace period. In case of a lapsed policy, policy holder has an option to either reinstate the policy within 2 years and restore the benefits or surrender the policy and receive the Surrender Value, if any.

Large Cap is a short form for Large Market Capitalization and as a thumb rule includes companies having a market capitalization of ₹10,000 crore or more. Such firms are less risky to invest as they have strong market presence and are well established.

Age at last Birthday

In some cases, extra risk is expected to decrease over a period of time. In such cases proposal is considered and accepted with lien. Lien operates throughout the period, on a decreasing basis. In the event of death, during the lien period the full sum assured is not payable. Eg: If 25% decreasing lien is imposed for 5 years. It is understood that in first year risk cover (sum assured payable) is only up to 75%,second year- 80%, third year-85%, fourth year 90%, fifth year 95%, and from sixth year onwards lien is not operative.

Life Assured refers to the person whose life is being insured.

Life insured is the person whose life is covered by the company. In case of unfortunate death of the Life Insured the death benefits of the policy are received by the nominee or the Policyholder.

Limited Premium Payment Term is suitable if Policyholder wishes to pay premiums only for a limited number of years and reap the benefits and protection of insurance for a longer period, as the Policy Term is more than the number of years for which premiums are paid.

It means the ability to convert a financial asset into cash quickly.

It refers to the number of years for which the funds need to be kept invested in the policy and cannot be withdrawn.

The loyalty addition is given upon the maturity of the policy, and not before. It is 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 the worth of the whole company based on factors like past performance, future prospects and market sentiments of the company. It is calculated by using the simple formula:
Market Capitalization= Market Price of Share X Number of shares outstanding

The date on which the face amount of a life insurance policy, if not previously invoked due to the contingency covered (death), is paid to the policyholder.

It is the amount which the insurance company pays to the policy holder in the manner as specified in the Policy Bond, on the completion of the Policy Term, if the Life Insured has survived the entire duration of the Policy.

It is the amount which the insurance company pays to the policy holder on the completion of the Policy Term, if the Life Insured has survived the entire duration of the Policy. This amount includes the guaranteed sum of money called as Sum Assured on Maturity and also the Accrued Bonuses, if applicable.

The Payment made to the policyholder at the end of the chosen term of the policy is known as Maturity Claim.

It represents the ending (end of term) for an Insurance Plan. On maturity date, the Policyholder will receive the benefits on maturity depending on the plan chosen, and the life cover terminates.

Mid Cap is a short form for Middle Capitalization and as a thumb rule includes companies having market capitalization of ₹ 2,000 to 10,000 crore. The risk is relatively more in such companies as compared to Large Cap firms but they have higher probability of exceptional returns.

The act of misrepresenting any terms, benefits or payments of a policy, deliberately misleading any interested public. It is the 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.

It refers to stating of a wrong fact or not providing complete information. If such information was available to the underwriter it might have led to a different decision.

It is the amount which has to be paid, if the Policyholder has chosen to pay premium using Semi-annual, Quarterly, or Monthly mode. The modal premium may be slightly higher as compared to annual mode if non-annual modes are opted for. This amount is decided using adjusting factors called as Modal Rates.

A money back plan starts giving liquidity from before the end of policy term by giving you periodic payments or monetary benefits at regular intervals of time.

It refers to financial instruments having very high liquidity and short term (from several days to under a year). Examples: Certificate of deposits and Commercial Paper.

Moral Hazard is said to exist in the case where there is an apparent absence of a genuine need for a life insurance or when a proposal for insurance is submitted by an individual beyond his means.
It also indicates increase in probability of loss that results from dishonesty in the character of the insured person. Thus it is the dishonest tendencies on the part of the insured person that may induce that person to attempt to defraud the insurance company.

---It is the risk associated with the life of a person due to factors like position, character, personal reputation, or involvement in illegal and immoral activities. Existence of criminal record is an example of Moral Hazard. Insurance company has to make the decision whether they want to accept the risk or not for cases involving potential moral hazard.

These are the charges for providing Life Insurance Benefit To The Policyholder.

It is the value of a unit of an Investment Fund and is calculated by dividing the total assets of the fund by the number of units. Formula to calculate NAV= Total Assets – Total Liabilities Number of Outstanding Units in the fund

Age on nearest birthday

An act by which the policyholder authorises another person to receive the policy monies. The person so-authorised is called Nominee.

Nominee is the person who is nominated to receive the amount under a policy and to give a valid discharge to the insurer on settlement of claim under a life insurance policy.

-- The person who is nominated to receive the benefits of the policy, in the event of Life Insured’s unfortunate death before maturity date is called the Nominee.

It is also known as surrender benefit or paid-up benefit. This happens when the policy lapses due to the missed payments of the premium or also when the policyholder surrenders the policy.

An insurance plan under which all the benefits are guaranteed at the beginning, regardless of the actual investment performance.

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.

Occupations which expose the insured to greater than normal physical danger by the very nature of the work in which the insured is engaged, and the varying periods of absence from the occupation, due to the disability, that can be expected.

---Occupations where the Life Insured is faced with greater than normal danger due to the nature of work. For example: If a person is working in a coal mine there is more risk to his life as compared to a person working in office.

Some of the insurance companies may charge a higher premium for certain professions or types of work. Therefore, upon signing the insurance, it's critical to provide the insurer with accurate information about your job and income.

If the Policyholder has paid a certain number of prescribed annual premiums and is unable to pay the future premiums, then the policy is converted into paid up status. This takes away the obligation to make future premium payments however the benefits of the policy are reduced. The benefits are typically reduced to the extent of premiums paid to premiums payable.

Insurance policy on which all required premiums have been paid.

Paidup value is the reduced amount of sum assured, paid by the insurer in case of discontinuation of the payment of premiums, after paying the full premiums for the first three years.

Physical examination of an applicant by a trained person other than a physician.

It is a facility that allows the Policyholder to withdraw a part of his funds before the end of the Policy Term. This is usually recommended to be used only in case of an emergency as it may affect the final Investment Value.

An insurance plan which gives the policyholder a share in the profits of the insurance company’s participating fund in the form of bonuses. Apart from bonuses, such insurance plans shall provide some guaranteed benefits also. Participating policy is also referred to as “with profits policy”.

This is the legal hardcopy document that has the conditions of the insurance contract, formally issued by the insurer in the name of the insured. This document has to be produced to the insurer during the term of the policy in case of any changes, claims, etc. made in relation with the policy.

These are the charges for meeting expenses relating to servicing and maintaining the life Insurance Policy. This charge is deducted by cancellation of units on a monthly basis.

It is the date which represents the policy anniversary i.e. the completion of a year from the policy date.

It is the value of the policy fund as on that day. It is calculated by multiplying the number of units in each fund by the respective unit price for that day. For example if the policy holder owns 100 units in Fund A and 100 units in Fund B and the unit price is ₹ 100 and ₹ 200 respectively, the Policy fund value would be

Fund A: 100 units X ₹ 100 = ₹ 10,000
Fund B: 100 units X ₹ 200 = ₹ 20,000
Policy Fund Value ₹ 30,000

Policyholder is the person who buys the Insurance Policy and makes the premium payment. Policyholder can either buy insurance to cover his own life or cover the life of someone else. In the first case he would be called the Life Insured.

Monies set aside by insurers to cover outstanding liabilities to Policyholders. Also known as technical reserves.

Amount over and above liabilities available for an insurer to meet future obligations to its policyholders.

The difference between an insurers' asset and its liabilities divided by its liabilities. This is one measure of an insurer's financial strength.

It means that the policy is active and that the Policyholder is eligible to receive all the benefits under the policy. Premiums have to be paid regularly before the due date to ensure that the Policyholder is protected under the policy.

A loan granted by the Insurer to the Policyholder on the basis of the Policy Value is referred to as policy loan.

It is the cover page of the policy contract; it shows details of the Policyholder, Life Insured and a brief description of the Policy. It is not a standalone document, but forms an integral part of the policy contract.

It refers to the brief summary of all the important features (Maturity Benefit, Life Cover, Sum Assured, Guaranteed and Non-guaranteed Benefits, Tax Benefit etc.) of the Insurance Policy.

It means the number of years for which the Insurance Policy and Life Cover is active. It starts with the issue date and ends with the maturity date.

Period between a Policy's anniversary dates.

The payment, or one of the regular periodic payments, that a policyholder 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).

Premium is defined as the amount paid by the policyholder to secure the benefits under the policy. It is the amount that the insured person pays to his/her insurer. And the frequency of paying the premium differs as well. It can be paid in five different ways. It can either be paid monthly, quarterly, semiannually, annually or you can pay it all at once, in a single payment.

These are the charges for the initial expenses like underwriting, medical tests, etc. incurred by the company to issue the policy.

These provide for refund of all the premiums paid, in the event of the life assured surviving till the end of the policy term. The total sum assured is paid to the beneficiaries in the event death occurs during the policy term.

It is a discount on premium given on high levels of Sum Assured or premium.

Notice of a premium due, sent out by the company or one of its agencies to an insured. It is also referred to as "Renewal Notice".

It means the number of years for which the premiums of your Insurance Plan have to be paid.

Premium rates help in deciding the amount of money that has to be paid as the premium for the benefits received under the insurance product. It is based on various factors like age, Premium Payment Term, and gender etc.

It is an option to direct future premium payments for investment in a fund which is different from the one chosen at the inception of the policy.

Premium waiver benefits are the benefits which can be availed under children's policies, wherein the future premiums payable up to vesting date are waived in the event of death of the proposer.

A family history of diseases and your own health records, and characteristics like height and weight can raise red flags about probable illness or obesity, affecting the amount of premium you pay.

It is a form which is to be completed for securing an insurance policy.

---It is a form through which relevant information including personal, health, financial information of the Life Insured is collected to evaluate the issuance of a Life Insurance Policy.

Proposer is a person who proposes the insurance policy.

Giving a consideration, usually all or part of the commission, to the prospect or insured as an inducement to buy or renew a policy. Rebating is officially prohibited, as it takes away from the earning of the agent.

A form of insurance available as a non-forfeiture option. It provides for continuation of the original insurance plan, but at a reduced amount.

Regular Premium Payment Term is suitable if Policyholder wishes to invest and accumulate money for more number of years, as premiums are to be paid for the entire Policy Term. Regular Premium Payment Term plans may charge lower premium for same level of benefits as a Unit Linked or Limited Premium Payment Term plan.

Term insurance which can be renewed at the end of the term, at the option of the policyholder and without evidence of insurability, for a limited number of successive terms. The rates increase at each renewal as the age of the insured goes up and apparent risk increases.

Premium which is payable after the 1st years premium to ensure the continuation of the benefits of the policy.

Bonus which is declared regularly by the company and accumulated to be paid at the end of the Policy Term or at the time of death is called Reversionary Bonus. Such bonuses can be further classified as simple reversionary bonus and compound reversionary bonus on the basis of difference in the way they are accrued.

The process of the restoration of a lapsed policy to an in-force status. Revival can only occur after the expiration of the grace period. The company may require evidence of insurability (and, if health status has changed, deny Revival), and will always require payment of the total amount of past due premium.

---Revival option helps the Policyholder to restart the policy and get back the benefits which were lost due to non-payment of premium earlier. However, the unpaid premiums have to be paid along with any due interest within a specified time frame to get the policy reinstated. The period of Revival is 2 years as per the regulations in India.

A provision attached to a policy that adds benefits not available in the original policy or that changes the original policy.

Riders help the Policyholder in enhancing the insurance product to meet specific needs by adding protection benefits to the basic Insurance Plan at a lower additional cost. For example, Bharti AXA Life Hospi cash rider provides fixed per day cash benefit to the Policyholder for each day of hospitalisation, thus providing benefits of a health plan along with base Life Insurance plan.

It is the additional cost that has to be paid to attach a rider with a base Insurance Plan.

It is an additional benefit or coverage that you can add to your base insurance policy. These add-ons provide extra protection and coverage beyond what's included in your base policy

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.

This scheme provides for payment of premiums by money deduction from the salary of the employees by the employer.

The several ways, other than immediate payment in cash, which a policyholder or beneficiary may choose to have policy benefits paid.

The period to which the investment period can be extended and the Policyholder can stay invested in the funds even after the end of policy term. At any time during the settlement period Policyholder can withdraw the fund value as on that day. The company only charges for fund management during this period.

Simple Reversionary Bonus is declared as a percentage rate of Sum Assured. For example, if the policy is of `10 lakhs and the bonus declared for the year is `20 per 1000 Sum Assured then bonus amount is `20,000. However, this amount is paid only on maturity or at the time of claim as it is a Reversionary Bonus.

It means that premium needs to be paid only once i.e. at the beginning of your policy.

It requires you to pay the entire payment all at once when you buy the policy. Here, the policyholder has to pay a lump sum as a premium instead of the yearly, quarterly, or monthly form of premium payment.

Small Cap is a short form of Small Capitalization and as a thumb rule includes companies having market capitalization of up to ₹ 2,000 crore. Such stocks have the highest risk but come with a potential of providing with exponential returns.

The Company, from time to time, may declare special Surrender Value, subject to prior approval from IRDA of India, which could be higher than or equal to the Guaranteed Surrender Value.

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 due to reasons like existence of disease/medical condition, high risk to life due to kind of employment, unhealthy habits like smoking etc., is considered as a Sub-Standard Life.

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.

Limitation in life insurance policies to the effect that no death benefits will be paid if the insured commits suicide during a specified initial period, usually the first one year of the policy.

Sum assured is the amount that an insurer agrees to pay on the occurrence of a stated contingency (eg: Death).

Surrender of a policy happens if the Policyholder voluntarily decides to pre-close the policy before the date of maturity. In this case he will receive a Surrender Value, which is decided on the basis of number of premiums paid and is lower than Maturity Value in most cases, and the policy will be terminated.

Surrender Value is the amount payable to the policy holder on his surrendering his right under a policy, and terminating the contract of insurance.

---It is the amount which the Policyholder would get in case of surrender of the policy. It is decided on the basis of number of premiums paid and the terms of the Insurance Plan and is lower than the Maturity Value in most cases.

It is the amount of money a policyholder will be able to receive when they try to access the cash value or the account value of their policy. But this amount can only be accessible when the policyholder decides to terminate the policy before it matures by surrendering it.

The payment of sum assured to the insured person which becomes due in instalments under a money back policy.

Switch is an option to take out money from the existing investment funds and invest in an alternate fund which better suit the Policyholder’s investment needs. It helps the Policyholder to manage his Investment Portfolio better.

This is the amount of pension which one wishes to receive under a pension policy.

Terminal Bonuses are declared at the time of maturity or claim, from the residual profits available in the participating fund.

A basic insurance plan which provides a lump sum amount to the family of the person who is insured in case of his/her unfortunate death.

An endorsement or attachment to a life insurance policy that provides additional term coverage for only a specified, limited period. If the insured dies during this time, the designated beneficiary can receive death benefit proceeds.

A form of life insurance which provides coverage for a specified period of time and does not build cash value.

It is the condition when the person has become completely disabled due to an accident or fatal disease making him physically incapable of being employed in any sort of work.

The process of evaluating risks for insurance and determining in what amounts and on what terms the insurance company will accept the risk.

---Before the issuance of an Insurance Policy, the Life to be Insured is evaluated on different parameters like health status, financial standing, age, occupation etc. to determine whether he can be issued the policy and also decide the amount of money that has to be paid as the Insurance premium. This process is referred to as underwriting.

The portion of a premium that a company has collected but has yet to earn because the policy still has an unexpired time to run.

The contract, though a valid one cannot be enforced in a court of law because of lack of some evidential features.

That which is not acceptable for insurance due to excessive risk.

Unit is a part or portion of the Investment Fund has been purchased from the premiums paid.

An insurance plan which gives benefits both of life insurance as well as investing in different funds consisting of different investment instruments like stocks, money market securities or government bonds. However, the returns are dependent on market performance and the policyholder has to bear the investment risk.

It is the date on which unit price of the investment fund is determined.

It is the Bonus, which the insurer declares after evaluating its assets and liabilities, and that is added to the sum assured under a policy

This is the date from which the life assured i.e., child becomes the absolute owner of the policy.

A contract, which is valid until it is treated as void by the aggrieved party, is a voidable contract. Usually in such an event, the insurer would be the aggrieved party and has the option to repudiate liability.

A contract obtained by fraud is a void contract. It is not a contract at all. Under this there cannot be any action as no rights or obligations are cast on the parties to the contract.

A life insurance plan which provides a cover for your entire life time. Such plans are used to accumulate and pass on the wealth from one generation to another as legacy in a tax efficient manner.