The policyholder is the one who proposes the purchase of the life insurance policy and pays the premium The policyholder is the owner of the policy and s/he may or may not be the life assured.
Life assured is the insured person. Life assured is the one for whom the life insurance plan is purchased
to cover the risk of untimely death.
Life assured may or may not be the policyholder. For instance, a husband buys a life insurance plan for
his wife. As the wife is a homemaker, husband pays the premium, thus the husband is the policyholder, and
wife is the life assured.
Life insurance is meant to provide a life cover to the insured.
Sum Assured’ is the term used for an amount that the insurer agrees to pay on death of the insured person
or occurrence of any other insured event, as per terms of the policy.
The sum assured is chosen by the policyholder at the time of purchase.
The ‘nominee’ is the person nominated by the policyholder to whom the sum assured and other benefits will
be paid by the life insurance company in case of an unfortunate death. The nominee could be the wife,
child, parents, etc. of the policyholder. The nominee needs to claim life insurance, if the life assured
dies during the policy term.
The nomination is to be done at the time of taking the policy. He can change the nomination at any point
of time during his life time. When nominee is a minor, it shall be lawful for the policy-holder to appoint
an appointee in the prescribed manner any person to receive the money secured by the policy in the event
of his death during the minority of the nominee. Now there is a new concept called beneficial nominee as
per IRDA.
In the new insurance law, if an immediate family member such as spouse is made the nominee, then the death
benefit will be paid to that person and other legal heirs will not have a claim on the money. This is good
because it makes the nomination process more meaningful and clear. A policyholder knows that the immediate
family member nominated by him will get the benefit. This will be applicable for all insurances that have
a maturity date after March 2015
The ‘policy term’ is the duration for which the policy provides life insurance coverage. The policy term
can be any period ranging from 1 year to 100 years or whole life, depending on the type of life insurance
plan and its terms and conditions. Many a times, it is also referred to as policy term or policy
duration.
The policy tenure decides for how long the company is providing the risk coverage. However, in the case of
whole life insurance plans, the life coverage is till the time life assured is alive.
Maturity age is the age of the life assured at which the policy ends or terminates. This is similar to policy term, but a different way to say how long the plan will be in force. Basically, the life insurance company declares up front the maximum age till which the life insurance coverage will be provided to the life insured..
The premium is the amount you pay to keep the life insurance plan in force and enjoy continued insurance cover. There are various options on how you can pay the premium – regular payment, limited payment term, single payment.
You can pay the life insurance premium as per your convenience.
Regular Premium Payment - premium can be paid regularly throughout the policy term, monthly, quarterly,
half-yearly or yearly.
Limited Premium Payment – You can choose to pay the premiums for a limited period of time. In this option,
you do not pay till the end of the policy term, but for a certain pre-fixed number of years. For example,
10 years, 15 years, 20 years, and so on.
Single Premium Payment – You can also choose to pay the premium for the entire duration of the plan as a
lumpsum in one single go.
Riders are the additional optional features that enhance the base policy coverage. There are many riders
that you can attach to your base term plan. Most companies also offer a few riders as an in-built feature
of a term plan. Before buying a term insurance plan, one must see that rider is available as an in-built
feature in the same or as an add-on to the policy.
On paying a small amount of additional premium, you can opt for such riders. These riders are highly
beneficial as they come with their own standalone coverage amount
For instance, if the life assured dies due to a road accident, under a standard term plan only the death
benefit will be paid to the nominee. But, if there’s an Accidental Death Benefit Rider attached to the
base term policy, the insurance company will pay the death benefit plus the rider benefit attached to the
accidental death benefit rider.
The ‘Death Benefit’ is what life insurance company pays to the nominee in case the life assured dies during the term of the policy. The sum assured along with the bonus if any would be paid.
Maturity benefit is the amount that the life insurance company pays when the life assured outlives the
policy term. Maturity benefit is sum assured plus accrued bonus and terminal bonus. Survival benefit is
paid when the life assured completes the pre-defined number of years under the policy.
There is no survival or maturity benefit in term plans. However, in other life insurance policies you may
find survival benefit or the maturity benefit paid under the plan.
It is applicable to all new life insurance policies purchased. Free-look period is a time frame during
which one may choose to cancel the purchased policy.
If you are not comfortable with the terms and conditions, you can return the policy within the Free-look
period. The insurance company will cancel the policy after deducting the expenses incurred on medical
examination, stamp duty charges and other charges will refund the remaining premium.
IRDA specifies free-look period in life insurance is 15 days after receiving the policy document.
If the policyholder decides to discontinue the plan before the maturity age, the life insurance company pays certain percentage amount to the policyholder, this is called Surrender Value provided premiums are paid at least for three years. Not all life insurance plans have surrender value.
In case the policyholder discontinues to pay the premium after a specified period of time, Insurance companies will offer the policyholder an option to convert his policy into a reduced paid-up policy. Under this option the sum insured is reduced in proportion to the number of premiums paid. If other benefits related to the sum insured are payable, these benefits will now be related to the reduced sum insured, which is the paid-up value. This paid up value is paid at the end of the term or at the time of death which is earlier.
IIf the policyholder does not pay the premium during the grace period, the policy lapses.
However, if the policyholder still wants to continue, the insurance company provides an option of
re-activating the lapsed policy. This is called revival of lapsed policy. Lapsed policy can not be revived
after five years from the date of first unpaid premium. The revival will be done after obtaining evidence
of health and certain underwriting requirements.
Underwriters evaluate the risk involved in insurance. It is a process of risk evaluation before the issuance of insurance policy. The underwriter decides whether to undertake the risk or not. Only with the approval of Underwriters, policy is issued to the policyholder.
All the premiums paid towards the life insurance plan are eligible for deductions under Section 80 (C) of
Income Tax Act, 1961. The maximum amount that one can claim as deductible is Rs.1.5 lakh.
The benefits paid to the policyholder/nominee are tax-free under Section 10 (10D) of Income Tax Act, 1961.
Before you buy any life insurance, read ‘Exclusions’ carefully. These are things that are not covered
under a life insurance policy, and against which if claimed, insurance company wouldn’t pay any
benefit.
For instance, Suicide, is an exclusion in any life insurance plan.
This is a rider applicable in child plans. During the term of the policy if the policy holder (mother or father) dies, the insurer pays the sum assured immediately, and future premiums are paid by the insurance company as and when they fall due
Assignment of a life insurance policy means transfer of rights from one person to another. You can
transfer the rights on your insurance policy to another person / entity for various reasons. This process
is referred to as ‘Assignment
The person who assigns the insurance policy is called the Assignor (policyholder) and the one to whom the
policy has been assigned, i.e. the person to whom the policy rights have been transferred is called the
Assignee.
On payment of some extra premium, most insurers offer to pay double the sum insured, if the insured dies in an accident. The benefit is popularly known as ‘Double Accident Benefit’. In order to be eligible for this benefit, the death must be caused directly and independently of all other causes, by an accidental bodily injury. Another condition that has to be met is that death must follow within a specified period of the injury, which is typically 90-180 days. Usually, the compensation due to this benefit is subject to an upper limit which is stated in the policy.
Under this act, Section 6 highlights it’s importance: "a policy of insurance effected by any married man on his own life and expressed on the face of it to be for the benefit of his wife, or of his wife and children, or any of them, shall ensure and be deemed to be a trust for the benefit of his wife, or of his wife and children, or any of them according to the interests so expressed, and shall not, so long as any object of the trust remains, be subject to the control of the husband, or to his creditors, or form part of his estate."
Covers only legal liability for the damage caused to a third party bodily injury, death and damage to property while using the vehicle. Third-party insurance is compulsory for all vehicle-owners as per the Motor Vehicles Act. It does not pay for repair of damage to the vehicle.
Any event that occurs outside of human control and that can't be predicted or prevented. Examples: Earthquakes, floods etc.
By paying little extra premium, you can avail some additional benefits under the Policy. These additional covers are called add on covers and are optional.
An insurance contract under which the insurer agrees to pay the insured a stated amount in the event of the total loss of the property insured without any adjustment for depreciation or appreciation.
Air freight allows the transport of goods quickly by air.
Offers coverage and protection from all risks or perils that could damage the property except those risks which are specifically excluded.
Is a Process that allows the transfer ownership rights of your policy to a third party.
A condition set by an insurer that a claim for damage or loss will be paid in proportion to the value insured.
Refer to all the costs of defending a lawsuit. These expenses include the cost of hiring a lawyer, court fees, investigations, gathering facts, filing legal paperwork etc.
A person from a group of managers who leads or supervises a particular area of a company.
A form of insurance that protects the insured against liability for committing an error or omission in performance of their professional duties.
Is a policy provision that eliminates coverage for some types of risks which the insurer is unwilling to insure.
A type of insurance that will protect a business owner or employer from any loss due to employee dishonesty like theft of money, property, forgery or fraud etc.
Hull & Machinery insurance provides cover for loss or damage to the hull of a ship & also propulsion machinery and equipment.
Means compensation against loss or damage. The principle of indemnity ensures that an insured is not compensated by the Insurer in excess of the insured's economic loss.
An insurable interest is an object which, if damaged or destroyed, would result in financial loss to the owner. Insurable interest is an essential requirement for issuing an insurance policy People not subject to financial loss do not have an insurable interest.
A company that underwrites an insurance risk; the party in an insurance contract undertaking to pay compensation.
Certain treatments do not require Hospitalization because of technological advancements. Day care procedures include such treatments, and are covered by health insurance Policies.
The time period for which indemnity or compensation is payable under a business interruption policy.
If there is an admissible claim of an Insured Machine under the Marine Policy, the sum payable shall not be exceed the cost of replacement or repair of such Part Plus charges for forwarding and refitting if incurred.
unlawful taking and carrying away of the property of another person, with the intent to permanently deprive them of its use.
Under this act, Section 6 highlights it’s importance: "a policy of insurance effected by any married man on his own life and expressed on the face of it to be for the benefit of his wife, or of his wife and children, or any of them, shall ensure and be deemed to be a trust for the benefit of his wife, or of his wife and children, or any of them according to the interests so expressed, and shall not, so long as any object of the trust remains, be subject to the control of the husband, or to his creditors, or form part of his estate."
loss of or damage to the subject-matter insured caused by war civil war revolution insurrection, or civil strife arising therefrom etc."
Covers general average and salvage charges, adjusted or determined according to the contract of affreightment and/or the governing law and practice, incurred to avoid or in connection with the avoidance of loss from a risk covered under.
unlawful taking and carrying away of the property of another person, with the intent to permanently deprive them of its use.
This covers loss/ damage to the vehicle insured (own damage) along with third party liability cover which includes bodily injury and/or death and property damage, personal accident cover for owner driver.
The maximum amount for which an insurer will be liable in the event of a claim event whilst the goods are in the ordinary course of transit..
Permanent total disability (PTD) is a condition in which an individual is no longer able to work due to injuries
An obligation to pay money to another party arising from a legal action.
the act of attacking ships in order to steal from them
Is the amount you have to pay if you make a claim on your policy. The amount of the excess is specified in your policy
Period of time that occurs before a policy's retroactive date, which is the day that the policy starts providing coverage for admissible claims. It is a period of time during which an insurance company will not provide coverage for claims.
The action or crime of making a false spoken statement damaging to a person's reputation.
The ignition of organic matter (e.g. hay or coal) without apparent cause, typically through heat generated internally by rapid oxidation.
A responsibility imposed on an individual or business by a law.
Term used to describe a legal right the insurance company to legally pursue a third-party responsible for the damages caused to the insured.
Any property located on, or adjacent to, the construction site, which is held in custody or control by the Contractor. Loss or damage to property located on or adjacent to the site and belonging to or held in care, custody or control of the principal(s) or the contractor(s) shall only be covered if occurring in direct connection with the erection, construction or testing of the items insured and happening during the period of cover. This cover does not apply to construction / erection machinery and construction or erection plant and equipment
An injury that does not result in death or permanent disability, but makes the injured person unable to perform regular duties or activities.
It covers legal liability for the damage caused to a third party bodily injury, death and party property
A deductible provision used in business interruption Policies. The insurer is not responsible for loss suffered during a specified period immediately following a direct damage loss.
Refers to a situation in which the sum insured is lower than the value of the insured property. In the case of a loss, compensation will be in proportion to the underinsurance.
Written pledge by the insured that a specified condition exists or does not exist. Breach of warranty entitles the insurer to treat the insurance contract as void even if the actual loss is unaffected by the breach.