Accident
The term accident is sometimes defined in the policy document as follows - the accident must be caused by violent, external and visible means and cause of the injury or injuries solely and independently of any other means.
Accidental death benefit
Benefit, which provides for the payment of an additional sum (usually equal to the sum insured of the basic policy) in the event of death by an accident.
Amount Payable
This refers to the amount that is payable according to the terms and conditions of the insurance policy to the legal owner of the insurance policy.
Assignment
Complete transfer of title/rights/liability under the policy to another person or institution including as a security for repayment of loans is called assignment of a life insurance policy. Section 38 of the Insurance Act 1938, regulate all transfers or assignment of life insurance polices.
Beneficiary The person or entity (e.g. corporation, trust, etc.) named in the policy as the recipient of insurance proceeds upon the death of the life assured.
Claim Written request by an insured for the insurance company to cover an incurred loss, usually submitted on the company's standard form.
Claimant Person who has as interest in the policy and making a claim on the policy. Critical illness cover A life insurance policy with the benefits payable on diagnosis of one of a number of specified medical conditions.
Date of commencement The date on which cover begins, following acceptance of the risk by the insurer.
Death Benefit Payable The amount payable, as stated in a life insurance policy, to the designated beneficiary (ies) upon the death of the insured. The amount paid is the face value, plus any riders that are applicable, less any outstanding loans.
Declaration This is the statement or section of the form where the person is required to declare that the statements or answers are given fully and truthfully and that if it were not so, there would be legal consequences.
Doctrine of Utmost Good Faith Insurance contract is issued on the basis that the applicant truthfully and fully discloses everything he or she knows about his or her health. This arises from the recognition that the insurance company is in a disadvantageous position, as the insurer does not know anything about the applicant. Similarly, the insurance company should deal with the applicant with honesty and integrity.
Endowment A type of insurance policy which provides for the face amount stated in the contract to be payable in a fixed date or on the life insured's earlier death.
Exclusion A condition under which the benefit is not paid is referred to as exclusion. This is to avoid any misunderstanding. For example, for accidental policies, there is usually exclusion for suicide or self-inflicted injuries by the life insured.
Free Look Provision required in most states whereby policy owners have either 10 or 20 days to examine their new policies at no obligation.
Hazardous occupation An occupation that has high risk for insurance purposes. Example: a window cleaner on high - rise buildings.
Invalid contract Life insurance is a contract and the law provides that there must be an insurable interest between the life insured and the insured. If it is subsequently proven that this did not exist when the insurance contract was effected, it can be declared as not valid and set aside.
Insurable Interest 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.
Insurance 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.
Insured The person whose life is covered by a policy of
insurance.
Lapse Termination of a life insurance contract because of non-payment of premiums. If there are non forfeiture values, the policy lapses but may remain effective reduced paid-up insurance.
Life Assured Person whose life is covered under a
life insurance policy.
Maturity date The date on which an
endowment insurance policy's face amount will be paid to the policy-owner if the life insured is still living.
Misrepresentation of material facts Providing the wrong facts or not giving the entire truth of a matter. This is more serious that non-disclosure. It refers to the applicant stating wrong facts or giving half-truths. They are material because if the underwriter knew of it this information, the decision might be different.
Moral hazard Underwriting the risk affecting an application based on factors such as the personal reputation and character of the applicant, business ethics or the existence of a criminal record. It concerns the intention or motivation behind the buying of a life insurance policy.
Morbidity The probability of disability of a life or group of lives.
Mortality The probability of death of a life or group of lives.
Non-disclosure of material facts An applicant fails to disclose facts that have an impact on the decision of the underwriter (had the underwriter known of this fact, the decision would have been different)
Non - medical cases Cases where a medical examination is not necessary. Large number of cases are straightforward and do not have any medical problems. For cases within limits on age and the amount on cover, a medical examination is not necessary.
Non-participating policy Non-participating policy is also known as a without-profit or non-par policy. The policy owner does not share in any divisible surplus made by the life insurance company. No bonus is paid on this policy.
Nomination Section 39 of the Indian Insurance Act 1938 provides for nomination of a person who receives the benefits of the claim on the death of the life assured. Nomination establishes a clear title to the policy. This prevents delay in settlement of a death claim.
Nominee Someone nominated to act on your behalf. For example, traders often hold securities in a nominee name as this makes settlement easier.
Paid-up Value Paid-up Value is the reduced amount of sum assured paid by the Insurer, in case the Insured discontinues payment of premiums. This is applicable only when the Insured has paid the premiums in full for the first three years.
Participating Policy A participating policy is also known as a with-profits or par policy. A participating policy charges a higher premium than a non-participating policy. In return, the policy owner shares in the life insurance company's divisible surplus, in the form of bonus allotted to the policy. The bonus is allotted in addition to the guaranteed sum assured. This bonus is paid along with the basic sum assured.
Physical hazards Features or facts that can be observed or evaluated. This includes reports from agents, medical consultants or through investigations.
Policy Bonus In participating policies the company gives the policyholders a share in the profits of the company in the form of bonuses.
Generally, there are two types of bonuses for insurance policies. Reversionary bonus is a guaranteed addition to your insured amount and is paid when the policy matures (i.e. when the sum assured becomes payable) or when the life assured dies. Cash Bonuses are paid out at periodical intervals.
Policy Document A booklet that details the full product information and terms and conditions of an insurance policy, and the policy schedule(s) which provides the specific benefits/premiums/payment conditions covered. It provides evidence that a contract exists between the insured and insurer.
Policy face amount This refers to the amount stated in the policy payable in the event of death or maturity.
Policy loans Loans are granted on the security of the surrender value if a policy. The amount is usually restricted to a certain percentage of the surrender value and interest is payable. Loans can be repaid at any time before the policy becomes a claim, when the total indebtness is deducted and the balance is paid. If the total indebt ness exceeds the surrender value, then the policy is declared as terminated and the indebt-ness is written off.
Policy Term The period of coverage provided by an insurance policy.
Premium This is the contribution / payment that a policyholder makes to a life insurance company to obtain insurance cover. He or she has a responsibility to ensure that the correct amount states is paid as and when it falls due as stated in the policy document.
Premium waiver This refers to all premiums due after the incident of claim is waived without any loss of benefits whatsoever unless specifically stated.
Reinstatement / Revival This refers to the process where the policy that has terminated for example due to a lapse of non-payment of premium and the owner has applied for the policy to be reinstated and the company has agreed to do so on certain conditions.
Renewal Premiums Premiums that are payable after the initial premium and that are a condition for the continuation of the policy.
Repudiation of a claim This process takes place when the claims examiner looks at the policy document and the evidence submitted to him or her and makes a decision to reject it.
Riders The additional benefits, over and above the benefits available under the insurance policy that a policyholder may be entitled to an extra cost are called Add-on benefits or Riders.
Surrender The act of cancelling or cashing in the proceeds of an insurance contract before it becomes payable or reaches its maturity date for a surrender value.
Surrender value The surrender or cash value is the amount payable to the policyholder should the policyholder decide to discontinue the policy. However, the insurance protection provided under the policy will also cease. Not all insurance policies have surrender or cash values.
Terminal Bonus This part of the surplus distributed is added only when the policy becomes a claim in most cases by maturity or death. It is usually expressed as a percentage of the reversionary bonuses.
Utmost good faith The principle of utmost good faith requires the applicant to disclose all material facts.
Wavier of Premium benefits The waiver of premium benefits gives an option to waive off all the future premiums both on the basic cover and on all add-on benefits during the disability of the life assured. This benefit can be availed only unto the disability period of the life assured. All benefits of the original insurance plan would remain valid until maturity, without being required to continue to pay the premiums for the base policy or the Add-ons.
Without Profit Policies
These are policies which do not participate in the profits of the company.
With Profit Policies These are policies that are issued on the basis that they participate in the profits of the company and are entitled to receive bonuses as a result. The actuary determines profits after valuing the assets and liabilities if the company and setting aside the necessary reserves and expenses. The profits are then shared by the shareholders and with the profit policyholders.
Withdrawal To redeem shares of a fund or stock. In a mutual fund, partial or full redemptions may be made. Some funds may impose an extra redemption fee to discourage market timers from pulling their money immediately after investing. If this is a fund's policy, it will stated in the prospectus.
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