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Faq

  • How do I understand a life insurance Policy?

    It is necessary to know the following terms in order to understand a life insurance policy:

    Premium - the amount of money you have to pay to continue your insurance coverage.
    The premium amount depends upon
    Your age
    Policy selected
    Mode of premium payment
    Term of premium payment
    Term of the policy

    You could choose to pay premium monthly (as a deduction from your salary), quarterly, half yearly or annually. However, there are Single premium policies where you pay premium once only (hence you do not have the facility to make the effort of paying premium regularly).

    Term - the number of years you choose to insure yourself.
    The longer the term the lower the premium. Policy terms vary from a single year to a maximum of 55 years. Not all policies offer you a range of terms.

    Premium paying term - the number of years you pay premium on your policy.
    The longer the premium paying term, the lower the premium. Usually the premium paying term is the same as the policy term. However, some policies offer you the option of selecting a premium paying term that is lower than the policy term.

    Sum Assured / Face amount - the amount of insurance cover you have or the minimum amount your family receives in the event of your demise.
    Your family could get more than this amount based on the type of policy or riders that you select.

    Bonus / Participating profit - is declared by the insurance company each year as a proportion of the sum assured. This amount could vary; it could be different for different policies and terms.
    Although declared each year, the bonus is a lump sum payment made to the insured person upon maturity or to his family upon death, in addition to the sum assured.

    Bonus is based on an insurance companys assumptions about the future performance. Like any other assumption, actual results will be more or less favourable. The longer the time being projected, the greater the likelihood of variance from the predicted values. Not all companies guarantee the amount of bonus on each policy.

    Guaranteed Addition - is a declaration made by the insurance company; it states that irrespective of the financial results of the company, the company will pay the guaranteed amount of money, to the insured or his nominee.
    Like the bonus amount, this is a lump sum payment made to the insured upon maturity or to his family upon death, in addition to the sum assured.

    Survival Benefit - is the amount of money received at pre-fixed, regular intervals by the insured person, upon survival of the term of the policy.
    Often, money received upon maturity or at the end of the term of the policy is also referred to as Survival benefit.

    Maturity Benefit - is the amount of money received by the insured, upon survival of the term of the policy.
    In case of policies that offer a bonus, the sum assured plus the bonus for the term of the policy is paid to the insured upon maturity. In addition, some policies offer a loyalty addition, which is paid as a proportion of the sum assured and is based on the term of the policy.
    In case of policies that offer no bonus, upon maturity, the sum assured or a refund of the premium or no money is receivable by the insured (depending on the type of policy selected).

    Cover or Death Benefit - is the amount of money the nominee receives from the insurance company upon the insureds death. In addition to the sum assured, this would include the bonus, if any.
    If additional riders such as Accident Death Benefit or Additional Sum Assured have been selected, the amount of money receivable by the nominee could be higher.

    Returns or Pre-tax yields - Interest earned on the premium, on a compounded basis, is the pre-tax yield.

    Post-tax yields - If the premium paid for a life insurance policy is used as a tax deduction under section 80C, then the effective premium paid by the insured is lower. Interest earned on the effective premium, on a compounded basis, is known as the post-tax yield.

    Source: SBI Life Insurance
  • Why do I need Insurance?

    You need insurance for
    Family that is financially dependent on you: If you have a family that is financially dependent on you, then you definitely need to insure yourself. The most common reason to buy life insurance is it provide protection to your family incase of any unforeseen events. The life insurance proceeds can be used to support your family members with the expenses.

    Loans or liabilities: It is very important to insure yourself if you have taken a loan or mortgaged your assets. It not only provides peace of mind but also a steady source of income for your family

    Compulsory saving-cum-investment: A life insurance policy could be used as a compulsory saving-cum-investment avenue. Proceeds from the insurance policy could be used to fund future expenses such as childs higher education or retirement funds or even a well-deserved holiday.

    Partner in a firm or Self-employed: It is highly needed by people who are partners in a firm or have their own proprietor firms. Life insurance can be a critical component for specialized business applications - such as funding a buy-sell agreement. The proceeds of a life insurance policy could be used to provide cash for the purchase of a deceased owners interest in the business or to pay off business liabilities.

    Other than the RBI Bonds, insurance products are the only other investment products that guarantee yields over a range of time - from 5 years to 25 years. Insurance companies offer single premium investment products as well as regular investment-cum-insurance products that guarantee high yields over a period.

    Source: SBI Life Insurance
  • What is an Insurance Repository?

    An Insurance Repository is a facility to help policy holders buy and keep insurance policies in electronic form, rather than as a paper document. Insurance Repositories, like Share Depositories or Mutual Fund Transfer Agencies, will hold electronic records of insurance policies issued to individuals and such policies are called "electronic policies" or "e Policies".
  • What is Fund Value and how it is determined?

    The value of policy is the fund value. In simple terms, it is the total value of units that you hold in funds.
    Fund Value = (Number of equity fund units x NAV of equity fund) + (Number of bond fund units x NAV of bond fund) + (Number of money market fund units x NAV of money market fund)
  • How do I convert my existing paper policy into electronic form?

    On opening an e IA, you just need to write out a request, addressed to the Insurer, for converting your existing paper policy to electronic mode. Request Forms for policy conversion are available in all offices of the respective Insurance Repositories. They can also be downloaded from respective websites. You need to fill out a separate request for each paper policy that you wish to convert to electronic form. These requests, duly signed, can be submitted at the respective Insurance Company or at any Insurance Repository office.

    If you do not have an e IA, you can submit an e IA opening form with the necessary supporting documents along with the request for converting paper policy to electronic mode.
  • What is Group Life Insurance?

    This scheme provides insurance coverage to a group of people under one contract. These schemes are provided for employees, associations, societies, etc. group insurance are more affordable than other individual insurance plans and also beneficial to those who cannot afford individual life insurance.
  • What is "Waiver of Premium"?

    Waiver of premium is an additional clause in an insurance policy which waves the premium of policyholder for the time he is seriously ill or disabled. This feature is however optional and available at an extra cost.
  • What is the difference between "Nomination" & "Assignment"?

    Nomination is an act by which the policy holder authorizes or gives consent to another person to receive the money from the policy. The person authorized by the policy holder is called Nominee.

    Assignment means legal transfer of right from one person to another. It can be transferred for various reasons. The original policy holder is called the assignor and the person to whom it will be transferred is called the assignee. Assignment can be of two types Conditional & Absolute.
  • What is the difference between health insurance plan of General Insurance Companies and Life Insurance Companies?

    Health insurance plan of general insurance company works on the principle of reimbursement. In which hospitalization expenses (provided that of min of 24 hrs hospitalization) is paid upto sum assured.

    Health insurance plan of life insurance companies works on the principle of compensation. In which hospital daily cash benefit (provided that of min 48 hrs hospitalization) and major surgical benefits are paid as per the fixed amount under plan opted irrespective of actual expenses. In this type of plan premium are allocated in two parts one is investments and another is for providing benefits. Generally, premium and expenses are on higher side in such type of plan.
  • What does my family get on my death?

    If death of the policy holder takes place during the term of the insurance policy, then the nominee designated by the policy holder receives the assured sum plus the accrued bonus, if any.
    If the policy is along with the bonus policy or participative profits, the bonus is payable to the nominee in addition to the sum assured but only for the number of years the premium has been paid.
    If the policy has an accident rider and death takes place due to an accident, then nominee may receive double the sum assured.
    However, if death takes place after the policy has matured, then the nominee does not receive anything from the insurance company. There are certain policies which offer to cover the insurer for the sum assured or a part of the sum assured, even after the policy has matured.

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
  • Abstract

    A brief history of title to land
  • Accelerated death benefit

    A percentage of the policy?s face amount, discounted for interest, that can be paid to the insured prior to death, under specified circumstances. This is in lieu of a traditional policy that pays beneficiaries after the insured?s death. Such benefits kick in if the insured becomes terminally ill, needs extreme medical intervention, or must reside in a nursing home. The payments made while the insured is living are deducted from any death benefits paid to beneficiaries.
  • Accident & Accidental Death Benefit

    In the context of life insurance, accident or accidental death is defined as a sudden and unforeseen happening that causes disability or death of the policyholder.
  • Accident and health insurance

    Coverage for acci-dental injury, accidental death, and related health expenses. Benefits will pay for preventative services, medical expenses, and catastrophic care, with limits.
  • Accidental death benefit

    An endorsement that pays the beneficiary an additional benefit if the insured dies from an accident.
  • Accidental Death Insurance

    Accidental Death Insurance provides coverage in the event of death due to accidental injuries, but not illness. In the event of death, payment is made to the insured\'s beneficiary. And most of these covers provide for cases for bodily injury (e.g., the loss of a limb), where the insured receives a specificed sum.
  • Accounts receivable (debtors) insurance

    Indemnifies for losses that are due to an inability to collect from open commercial account debtors because records have been destroyed by an insured peril.
  • Accumulation Period

    The time interval between the commencement of the policy and the time when benefits are paid out. It is established by the insured.
  • Activities of daily living

    Activities-such as eating, bathing, toileting, dressing, and continence-that trig-ger payment in a long-term care insurance policy, if at least some of them cannot be performed by the insured.
  • Acts of god

    Perils that cannot reasonably be guarded against, such as floods and earthquakes.
  • Actual cash value

    A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation.
  • Actual loss ratio

    The ratio of losses incurred to premiums earned actually experienced in a given line of insurance activity in a previous time period.
  • Actuarial cost assumptions

    Assumptions about rates of investment earnings, mortality, turnover, salpatterns, probable expenses, and distribution or actual ages at which employees are likely to retire.
  • Actuarial Cost Method

    A method that determines contributions that would be made under an insurance plan.
  • Actuary

    An insurance professional skilled in the analysis, evaluation, and management of statistical information. Evaluates insurance firms? reserves, determines rates and rating methods, and determines other business and financial risks.
  • AD&D

    Accidental Death and Dismemberment Benefits
  • Additional insureds

    Persons who have an insurable interest in the property/person covered in a policy and who are covered against the losses outlined in the policy. They usually receive less coverage than the pri-mary named insured.
  • Additional living expenses

    Extra charges covered by homeowners policies over and above the policy-holder?s customary living expenses. They kick in when the insured requires temporary shelter due to damage by a covered peril that makes the home temporarily uninhabitable.
  • Adjustable Life Insurance

    A facility allowing a life insurance policy owner to change the insurance plan, increase or decrease the premium and make changes in the protection period.
  • Adjuster

    An individual employed by a property/cas-ualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyhold-ers, and receive a portion of a claims settlement. Inde-pendent adjusters are independent contractors who adjust claims for different insurance companies.
  • Admitted company

    An insurance company licensed and authorized to do business in a particular state or country.
  • Adverse selection

    The tendency of those exposed to 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. In the case of natural disasters, such as earthquakes, adverse selection concentrates risk instead of spreading it. Insurance. works best when risk is shared among large numbers of policyholders.
  • Affinity sales

    Selling insurance through groups such as professional and business associations.
  • Affirmative warranty

    An agreement between an insurance company and an agent, granting the agent authority to write insurance from that company. It specifies the duties, rights, and obligations of both parties.
  • After Tax Rupees

    This refers to the disposable income that the policy holder has in his hands after paying all tax dues during a particular financial year under the Income Tax Act.
  • Age Limits

    The maximum and minimum ages above or below which an insurance company will not accept applications for insurance from or will not renew a policy with a person.
  • Agent

    Insurance is sold by two types of agents: inde-pendent agents, who are self-employed, represent several insurance companies and are paid on commission, and exclusive or captive agents, who represent only one insurance company and are either salaried or work on commission. Insurance companies that use exclusive or captive agents are called direct writers.
  • Agent (Life Advisor)

    A representative of an insurance company authorized to sell insurance policies.
  • Aggregate deductible

    A type of deductible that applies for an entire year in which the insured absorbs all losses until the deductible level is reached, at which point the insurer pays for all loses over the specified amount.
  • Aggregate limits

    A yearly limit, rather than a ?per occurrence? limit. Once an insurance company has paid up to the limit, it will pay no more during that year.
  • Aleatory contract

    A legal contract in which the outcome depends on an uncertain event. Insurance contracts are aleatory in nature.
  • All-risk agreement

    A property or liability insur-ance contract in which all risks of loss are covered except those specifically excluded; also called ?open perils policy.?
  • Alternative dispute resolution (ADR)

    Alternative to going to court to settle disputes. Methods include arbitration, where disputing parties agree to be bound to the decision of an independent third party, and mediation, where a third party tries to arrange a settlement between the two sides.
  • Alternative markets

    Mechanisms used to fund self-insurance. This includes captives, which are insurers owned by one or more non-insurers to provide owners with coverage. Risk-retention groups, formed by members of similar professions or businesses to obtain liability insurance, are also a form of self-insurance.
  • Ancillary charges

    In hospital insurance, covered charges other than room and board.
  • Annual statement

    Summary of an insurer?s or rein-surer?s financial operations for a particular year, including a balance sheet.
  • Annual-premium annuity

    An annuity whose purchase price is paid in annual installments.
  • Annuitant

    : An individual receiving benefits under an annuity.
  • Annuity Certain

    An insurance contract that provides an annuity for a certain number of years, irrespective of whether the insured is alive or dead.
  • Annuity Consideration

    The payment that an annuitant makes for an annuity.
  • Annuity units

    A measure used in valuing a variable annuity during the time it is being paid to the annui-tant. Each unit?s value fluctuates with the performance of an investment portfolio.
  • Apportionment

    The dividing of a loss proportion-ately among two or more insurers that cover the same loss.
  • Appraisal

    A survey to determine a property?s insura-ble value, or the amount of a loss.
  • Arbitration

    Procedure in which an insurance company and the insured or a vendor agree to settle a claim dispute by accepting a decision made by a third party.
  • Arson

    The deliberate setting of a fire
  • Assessable policy

    A policy subject to additional charges, or assessments, on all policyholders in the company.
  • Asset-backed securities

    Bonds that represent pools of loans of similar types, duration and interest rates. Almost any loan with regular repayments of principal and interest can be securitized, from auto loans and equipment leases to credit card receivables and mortgages.
  • Assign

    To use life insurance policy benefits as collat-eral for a loan.
  • Assignee

    Assignee is the person to whom the title, rights and benefits under a life policy are assigned.
  • Assignor

    Assignor is the policyholder who transfers the title, beneficial interest and rights under the policy to another individual.
  • Asymmetric information

    An insured?s knowledge of likely losses that is unavailable to insurers.
  • Attained Age

    It is your current age.Your attained age is one of the factors life insurance companies use to determine your premiums. As the older you are, the probability of death during the period of insurance cover i.e life insurance risk increases and so does the premium. Higher the risk, higher the premium.
  • Authority

    The Insurance Regulatory and Development authority, IRDA established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 is the regulator for the insurance sector.
  • Auto insurance premium

    The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses.
  • Automatic coverage

    An insurer agrees to cover accidents from all machinery of the same type as that specifically listed in the endorsement.
  • Automatic treaty

    An agreement whereby the ceding company is required to cede some certain amounts of business and the reinsurer is required to accept them.
  • Average adjusters

    A name applied to claims adjusters in the field of marine insurance.
  • Aviation insurance

    Commercial airlines hold prop-erty insurance on aeroplanes and liability insurance for negligent acts that result in injury or property damage to passengers or others. Damage is covered on the ground and in the air. The policy limits the geographical area and individual pilots covered.