Term Meaning in insurance industry
Important for LIC AAO/ADO and ASSISTENT
1. Policy Holder A person or company that buys an insurance
plan to protect itself from risk.
2. Insurer The Insurance company that sells the insurance
product is known as the insurer.
3. Premium It is the payment that a policyholder makes to an
insurer in exchange for the insurer’s obligation to pay benefits upon the
occurrence of a specific event.
4. Sum assured/ Coverage It is the amount that the insurer
agrees to pay on an occurrence of an insured event like death.
5. Policy Tenure The duration for which the insurance policy
is valid.
6. Life assured It is the person for whom the Life Insurance
plan is bought. Suppose a husband buys a life insurance product for his wife,
then the wife here is the Life Assured.
7. Maturity Age : it is the age of the life assured at which
the policy ends or terminates.
8. Nominee He/she is the person (legal heir) nominated by the
policyholder to whom the sum assured under the insurance plan will be paid by
the life insurance company in case of an unfortunate eventuality.
9. Proposal Form A proposal form is the form completed by the
policyholder when applying for insurance. The insurer has a duty to furnish
free of charge a copy of the proposal form within 30 days of the acceptance of
the proposal.
10. Free-look Period Free-look period is a time frame during
which one may choose to return the purchased policy. Free-look period for
normal policy- 15 days; Free-look period for Policy bought from distance mode-
30 days
11. Grace Period If you couldn’t pay the renewal premium for
your policy on time, the life insurance company gives you an extension in the
number of days after the premium payment due date. Grace Period for annual
premium- 30 days; For other duration- 15 days.
12. Mortality Charge It is the actual cost of insurance in a
life policy for the insurer. It is a part of the premium.
13. Lapse in insurance It is the termination of an insurance
policy due to non-payment of premium by insured to the insurer.
14. Policy not in Force If an insurance policy has lapsed due
to non-payment of premium then it is termed as Policy not in force.
15. Surrender Value The value payable to the policyholder in
the event of his deciding to terminate the policy before the maturity of the
policy. In this case, the policyholder stops paying the premium and gets the
money at that time.
16. Paid-up Value If the policyholder stops paying the
premium but does not withdraw the money from his policy, the policy is said to
be paid up. In this case, he will get at the end, the paid-up value.
17. Underwriter professionals who evaluate and analyse the
risks involved in insuring people and assets. They decide whether or not a
person should be provided insurance.
18. Agent Licensed representatives of an insurance company.
19. AD&D Accidental Death & Dismemberment – It is a
type of insurance policy that pays benefits to the beneficiary if the cause of
death is an accident.
20 Annuity It is a type of insurance plan that pays out
regular income to the policyholder at a specific interval usually after
retirement.
21. Coinsurance the sharing of risks between two or more title insurance companies.
22. Solicitation approaching a client by an insurer
or an intermediary with a view to convince the client to purchase an insurance
policy.
23. Deferment Period The period between the date of
subscription to an insurance-cum-pension policy and the time at which the first
installment of pension is received.
24. Exclusions Specific conditions or circumstances for which
the policy will not provide benefits.
25. Keyman Insurance Policy Keyman insurance can be defined
as an insurance policy where the proposer, as well as the premium payer, is the
employer, the life to be insured is that of the same employer’s key employee
(Keyman) and the benefit, in case of a claim.
26. Reinstatement The restoration of a lapsed policy to
in-force status. Reinstatement can only occur after the expiration of the grace
period.
27. Vesting Age The age at which the receipt of pension
starts in an insurance-cum-pension plan.
28. Burning Ratio The ratio of losses suffered to the amount
of insurance in effect.
29. Lapse Ratio The ratio of the number of policies that
lapse during a period to the total number of policies in force at the beginning
of that period.
30. Loss Ratio The ratio between incurred losses to earned
premiums expressed as a percentage.
31. Reinsurance it is a form of insurance purchased by
insurance companies in order to mitigate risk. Companies providing reinsurance
facility is known as Reinsurer.
32. Cession refers to the portions of the obligations in an
insurance company’s policy portfolio that are transferred to a reinsurer.
33. Commission It is the fee paid by the insurer to agents
and brokers for the sale of insurance policies.
34. Waiting Period A concept in health insurance. It is the
minimum time which must pass before some or all of your health care coverage
can begin.
35. Indemnity Insurance This is a type of insurance to
protect the working professionals like architects, engineers, doctors, lawyers
and medical practitioners, and services such as medical establishments against
legal claims for error, omissions, professional neglect for both the principles
and their employees.
36. Double insurance It is a type of insurance where the same
thing is insured more than once but with different insurers.
37. Penetration Rate It indicates the level of success of
insurance in a country. It is measured as the ratio of premium underwritten in
a particular year to the GDP.
38. Compulsory Insurance Type of insurance that is compulsory
under the law. Example: Motor third party
insurance is compulsory in India.
39. Under-insurance It refers to inadequate insurance
coverage held by a policyholder i.e when something is insured for less than its
true value.
40. Self-insurance It is a risk management technique in which a company or individual sets aside a pool of money to be used to remedy an unexpected loss in place of buying an insurance policy from a third party.
41. Bancassurance Selling of the insurance products by the banks.
42. Proposer The one who buys the insurance policy.
Principles of Insurance.
