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IRDA Reg. No: IRDA/ONL/ATI/MAH/MUMBAI/001       
 
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Life Insurance Glossary
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
 

A

Awards
Decision/judgment given by Insurance Ombudsmen on the complaints received by them.

B

Bonds
Bonds are issued by the Govt., companies and other institutions to raise money from public. They provide regular income to the investors in the form of interest. Bonds also can be traded between buyers and sellers.

Brokers
Brokers can sell the products of a number of like insurance companies. Broker represents the clients. They compare the product of various insurance companies and offer the best plan suitable to the client.

C

Code of Conduct
Every agent must adhere to the code of conduct specified by IRDA. It states as to what an agent shall and shall not do.

Commission
A life insurance agent receives his remuneration by way of commission. This commission is a certain percentage of premium that is collected by the insurance company.

Cooling-off period (Free Lock-in period)
As per IRDA regulation, the proposer has a right to withdraw from the contract within a period of 15 days from the date of receipt of policy documents if he disagrees with the term and conditions of the policy. This period is known as cooling-off period..

D

Deferred Annuity
An annuity is a series of regular payment from an insurance company to the policy holder who is known as annuitant. The purchase price for deferred annuity may be lump sum paid at commencement or in installments for a certain period before the vesting date.

Disposable Income
The amount of the regular investment also depends upon the surplus amount or the disposable income that the individual has. The surplus amount is the spare amount of money left over after an individual has paid all their monthly liabilities.


E

Exchange Traded Fund (ETF)
This is like mutual fund in which gold units can be traded in electronic format on a stock exchange. In gold ETF, one unit represents one gram or half a gram of gold.

F

Flexible premium plan
Under this plan the policy holder can pay the premium amount as their convenience. They can choose to pay the same premium throughout the term or to change the amount based on affordability. The premium amount can generally increased by 5% annually.

Foreign Direct Investment (FDI)
When the Government wanted to open up the insurance industry to private participation, in the year 2000 the prospective participants had neither the technical expertise nor the required capital for insurance business. Therefore, the Government allowed 26% foreign direct investment in the insurance Sector to facilitate the smooth opening up of the insurance market to private participation.

G

Grievance redressal
Due to fast growth of insurance sector there has been an increase in complaints from customers about settlement of claims and service. The IRDA has asked insurance companies to set up internal customer grievance redressal cells/departments, and an Insurance Ombudsman has been established to protect the interest of the policy holder.

Group Insurance Plan
This plan provides insurance protection to a group of people who are brought together for a common objective like employees of an organization. In the group insurance policy the insurance company issues one master policy covering all the members of the group. The contract of insurance is between the master policy holder and the insurance company. Group insurance schemes are used by the government as instruments of social welfare to provide insurance cover to the masses.

H

Health Insurance
A health insurance plan pays the individual and their family for expenses incurred in the event of hospitalization. It covers doctors’ fees, room rent, medicines and other related costs as specified in the policy terms and conditions.

I

Insurable Interest
Insurable interest is very important and necessary to create a valid insurance contract. Insurable interest is said to exist when an individual stands to gain from the continued existence or well-being of another individual(s) or property, and at the same time the individual would suffer a financial loss or inconvenience if there is damage to the other individual(s) or property.

J

Joint life insurance plans
This plan offers insurance coverage for two or more persons under one policy. This plan is ideal for married couples or partners in a business firm.

L

Listening skills
Developing good listening skills is important for an insurance agent. Agent should record the client’s answers and their body language should also be studied by the agent, as this will help in determining their level of interest in financial planning.

M

Micro-insurance
Micro-insurance policy provide insurance protection to people in lower income groups, such as self-help group members, farmers, rickshaw pullers and others. The premiums for these products may be as low as Rs. 15 and are collected on a weekly basis and minimum insurance cover as specified by the Regulator is Rs. 5,000 and the maximum is Rs. 50,000.


N

Needs-based selling
A professional market ensures that the customer gets what they are looking for rather than what the company wishes to sell them. This is called needs-based selling.

Notices
Notices are issued for information and to remind the policyholder about the premium due date, payment of benefits, status of the policy etc.

 

O

Open-ended questions
This type of question encourages the client to talk freely and highlight issues which are most important to them.

P

Penalties
Penalties are associated with the premature withdrawal of funds from fixed term contracts. This is an important consideration which needs to be evaluated before investing in such products.

Persistency
Persistency refers to the amount of business that insurance companies are successful in retaining without lapse or surrender of the policy.

Physical characteristics
The physical characteristics of a person are used to determine the health of the proposer. Data regarding their height, weight, size etc. can determine how healthy the individual is.

Pooling of risks
Pooling of risks is one of the fundamental principles of insurance. An insurance company pools the premium collected from several individuals to insure them against similar risks. The insurance company maintains different sets of pools for different risks.


Q

Quotations
A quotation is simply that – a quotation as to how much the policy will cost and on what terms.


R


Riders
Riders are additional benefits that can be added to insurance policies. A rider is a condition or a clause that is added to the base plan by paying extra premium.

T

Terminal bonus
This bonus is given by the insurance company as an incentive to the insured to continue with the company long-term until the end of the policy.

 

U

Underselling of insurance policies
In order to achieve their sales targets, insurance agents may compromise on the insurance cover and suggest a lower sum insured to clients. This is done because an insurance policy with a lower cover and hence a lower premium is more attractive to the client and enables a higher success rate for the agent. This is known as underselling.

V

Voidable claims
A claim may become voidable and hense rejected by an insurance company because the original contract has been found to be invalid, or void, or has become voidable. This may be due to breach of good faith or breach of warranty.





W

Waiver of premium rider
This rider waives future premiums in the event of the disability of the policyholder due to illness or accident resulting in their inability to work. The insurance company continues paying the premiums on behalf of the policyholder and the policy continues normally. This rider is ideal for helping to prevent a policy lapsing due to non-payment of premiums arising from the disability or death of the policyholder.


With Profit Policies
Plans where a policyholder is entitled to participate in the profit of the insurance company are known as with profit plans or participating plans. Most endowment, money-back and whole life plans are participating plans.

 
 
     


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