Insurance

97 terms · each links to a full explanation with a worked example and the exam traps

Accelerated sum insuredA critical-illness or disability rider that pays out of the same sum assured as the life cover, so a claim reduces the death benefit — cheaper than a rider that pays an amount over and above the life cover.
Accrued bonusThe bonus a participating investment-cum-insurance policy earns each year after its guaranteed-bonus period ends — declared annually at the insurer's discretion but paid only with the sum assured, at maturity or death.
Annuity finalityThe rule that once an annuity is bought, it is locked in for good — the principal cannot be redeemed and the type of annuity chosen cannot be changed.
Asset protection needThe need to protect assets already built up from theft or destruction — the third of the workbook's three insurance needs, alongside income replacement and income protection.
BancassuranceThe arrangement under which a bank acts as a corporate agent of an insurance company, selling its policies to the bank's own customers — capped at three insurers in each of life, general and health.
Beneficial nomineeA life insurance nominee who is a parent, spouse or child of the policyholder — entitled to keep the claim money in their own right instead of holding it in trust for the legal heirs.
Cashless claim paymentAn arrangement where the insurer pays the hospital or garage directly once a claim is approved, so the insured does not have to pay first and claim reimbursement later.
Claim settlement ratioThe share of claims an insurer actually paid out of all the claims it received in a year, published by IRDAI — one yardstick for picking an insurer, though not the only one.
Composite brokerAn IRDAI-registered insurance broker licensed to act as both a direct broker, placing business for clients with insurers, and a reinsurance broker, placing risk with reinsurers.
Composite insurance agentAn individual appointed as an agent by two or more insurers, but capped at one life insurer, one general insurer, one health insurer, and one of each mono-line insurer.
Co-payA fixed percentage of every admitted claim that the insured pays out of pocket — a proportional share of the loss, applied after any deductible, in exchange for a lower premium.
Corporate agentA corporate entity, often already in a related business like travel or car sales, that sells an insurer's policies to its own customers; a composite corporate agent can work with up to three insurers per line.
Critical illness insuranceA defined benefit policy that pays a lump sum when the insured is diagnosed with a specified disease such as cancer, heart attack or stroke and survives a minimum period — no payment on death.
Day care treatmentHospital treatment covered under a health policy even though the patient is discharged the same day — allowed because modern technology now lets certain procedures skip the overnight stay a policy once required.
Death coverThe life insurance benefit paid only if the insured dies within the policy's specified period — nothing is paid if the insured survives it, the defining feature of a pure term plan.
DeductibleThe portion of a claim the insured bears before the insurer pays anything — a fixed rupee threshold that lowers the premium and keeps small claims out of the system.
Defined benefit insuranceA policy that pays a pre-fixed sum on the covered event, without trying to measure the actual loss — the opposite of an indemnity policy, and how life insurance itself is structured.
Direct brokerAn IRDAI-registered broker who represents the client, can charge a fee or earn commission, and places business with multiple insurers, unlike an agent, who represents the insurer.
Directors and Officers liability insuranceA liability policy covering board members, management and supervisory staff for personal liability and defence costs from claims alleging a wrongful act committed in the course of their duties for the company.
Discontinuation policy fundThe fund a lapsed or surrendered ULIP's balance value moves into during the 5-year lock-in, once the capped discontinuation charge is deducted — insurance cover stops, but the money stays locked until the lock-in ends.
Discounting rate for HLVThe single rate used in the PV formula for Human Life Value — built from the return an investor expects, adjusted for inflation, not either rate on its own.
Employee Deposit-Linked Insurance SchemeA mandatory, employer-funded life insurance benefit for EPF members, paying an assurance benefit to the nominee on top of the provident fund balance if the member dies while in service.
Endowment policyA life insurance policy that pays the sum assured plus accrued bonus on survival to the end of the term as well as on death — an investment-cum-insurance contract with a level premium.
Family floater policyA single health insurance policy covering several named family members under one shared sum insured, instead of separate policies for each — cheaper, but the pool can run out for later claims.
Fidelity insuranceA policy that reimburses an employer for money or goods lost through an employee's forgery, fraud or dishonesty — taken wherever staff routinely handle significant cash or valuables.
General insuranceNon-life insurance — cover for property, motor, health, travel and personal accident risks — as against life insurance, which covers loss of life or income.
Group insuranceOne insurance policy that covers a defined group of people together, such as the members of a society or professional association, or the employees of a particular employer.
Guaranteed insurability option riderA life insurance rider that lets the policyholder increase their sum assured at pre-agreed future dates without a fresh medical examination, useful for someone whose income, but not health, is likely to improve.
Health insuranceInsurance that covers an insured person's medical and surgical expenses, regulated in India by the Insurance Regulatory and Development Authority of India (IRDAI).
Health insurance moratoriumAfter 5 continuous years of unbroken premium payment, a health insurance claim cannot be contested except for proven fraud or a permanent exclusion named in the policy.
Human Life ValueThe present value of the income a person is expected to earn over their remaining working life that is available for dependents — the upper bound on how much life cover is justified.
Income benefit riderA life insurance rider that pays the nominee a fixed periodic income after the policyholder's death, instead of the usual lump sum.
Income protection needThe insurance need that arises when a sudden, unplanned bill would otherwise be met out of income — the category the workbook fills with health insurance and motor insurance.
Income replacement needThe insurance need that arises from a risk to the earning ability of an asset, including a person and their life, met by life, critical illness, accidental disability and annuity products.
Indemnity insuranceA policy that pays the actual loss the insured is shown to have suffered, so a claim cannot be settled until that loss has been determined — the opposite structure to a defined benefit policy.
Insurable interestThe requirement that the person seeking insurance would suffer a monetary loss if the subject matter were lost or destroyed — the test that separates insurance from a wager.
Insurance agentAn individual appointed by an insurer to solicit or procure insurance business, including the continuance, renewal or revival of policies — and who represents the insurer, not the client.
Insurance as risk transferThe mechanism by which a household hands its risk of an unexpected loss to an insurance company, in return for a small, certain premium — the basic idea underlying every insurance product.
Insurance policyThe written contract an insurer gives a policy holder. It states the premium, the sum assured, and the conditions under which the insurer will pay a claim.
Insurance web aggregatorAn insurance intermediary that maintains a website providing online price comparison and information on the products of different insurers, and other related matters.
Insured / policy holderThe person who buys an insurance policy, pays the premium, and receives the insurer's promise of compensation for a specified future loss.
InsurerThe company that provides insurance and promises to pay compensation for a specified future loss, in exchange for the premium the insured pays.
Keyman insuranceA life insurance policy a company buys on the life of a key executive, paying the premiums and taking the benefit itself — and the one life policy whose proceeds are not exempt under section 10(10D).
Large number of exposure unitsThe first requirement of an insurable risk: large groups of similar though not identical units must face the same peril, so that only a few of a large pool suffer loss in any one year.
Level premiumA term insurance premium that stays the same every year for the whole of the policy term, as distinct from one that increases as the insured gets older.
Liability insuranceIndemnity against damages payable under law for personal injury to third parties or damage to their property, whether the liability arises from negligence at common law or on a no-fault basis under statute.
Life insuranceThe product family that covers loss of income: temporary loss from disability and permanent loss from death — the first of the three covers in a household insurance plan.
Lifelong renewabilityThe regulatory requirement that a health insurer must keep renewing a policy for the insured's lifetime once it has been issued, with premiums allowed to rise but not because claims were made.
Maintaining a foreign life policyA person who becomes resident in India need not buy fresh life cover here and may keep an existing overseas policy alive, paying the premiums from foreign income or remitting them from India.
Minimum sum assured ruleThe IRDAI requirement that a life policy provide a minimum sum assured of 10 times the annual premium below age 45, 7 times above 45, and 5 times where the term is under 10 years.
Mortgage insuranceA life cover written to reduce alongside an outstanding home loan, so the payout roughly matches what is still owed, though the workbook says it is rarely cheaper than a level term plan.
Motor insuranceInsurance for cars, trucks, motorcycles and other road vehicles — also called vehicle insurance, car insurance or auto insurance.
MWP Act insurance trustA life policy taken by a married man for the benefit of his wife or children under the Married Women's Property Act, 1874, which turns the payout into a trust immune from his creditors and estate.
Needs analysis for life insuranceA worked application of the needs-based approach: adding up income replacement, debts and goal corpora, then subtracting existing cover, to find how much more life insurance a client needs.
Needs-based approachA method of sizing life cover from what a family will actually need, expenses to replace, debts to clear, goals to fund, rather than from a multiple of the client's income.
No claim bonusThe benefit of a lower premium in later years for each claim-free year — in motor insurance a discount of up to 50% on the own-damage premium after five claim-free years.
Non-life insuranceInsurance covering the loss or destruction of assets and unexpected large expenses, health, motor, home and travel cover, as distinct from life insurance, which covers the loss of a life.
Over-insuranceBuying more insurance cover than is actually needed, the workbook's counterpart to under-insurance, imposing unnecessary premium cost rather than leaving risk retained.
Overseas travel insuranceAn indemnity policy providing medical, financial and other assistance during international travel, reimbursing up to a stated maximum, and sometimes compulsory for entry to certain countries.
Paid-up policyAn investment-cum-insurance policy that continues without further premiums after the policyholder stops paying, with the sum assured cut in proportion to premiums paid versus premiums due.
Personal accidental cover policyInsurance that pays monetary compensation for bodily injury, disability or death caused solely by an accident.
Personal accident insuranceA policy paying a defined sum where the insured sustains bodily injury solely and directly from an accident caused by external, violent and visible means — covering three grades of disablement.
Policy assignmentThe transfer of a policyholder's interest in a life insurance policy to another person, most often as security for a loan, which cancels an existing nomination unless the assignee is the insurer itself.
Policy lapseThe state of a life insurance policy on which the premium was not paid even within the grace period, so no claim is payable — though a traditional policy may still carry a surrender or paid-up value.
Portability of health policiesThe IRDAI facility that lets a health insurance policyholder switch insurer without losing accumulated no-claim benefits and waiting-period credit, provided the previous policy was maintained without a break.
Pradhan Mantri Fasal Bima YojanaA crop insurance scheme that pays farmers based on the gap between a threshold yield and the actual yield, compulsory for farmers who have taken institutional loans.
Pradhan Mantri Jan Aarogya YojanaA government healthcare scheme, also called Ayushman Bharat, giving free hospital treatment to families identified in the 2011 SECC database, with no restriction on family size, age or gender.
Pradhan Mantri Jeevan Jyoti Bima YojanaA government life insurance scheme for bank account holders aged 18 to 50, with a fixed annual premium auto-debited from one savings account.
Pradhan Mantri Suraksha Bima YojanaA government accidental insurance scheme for bank account holders aged 18 to 70, with a fixed annual premium auto-debited from one savings account.
Principle of IndemnityThe principle that insurance should restore the insured to the financial position they were in before the loss — no better — so that insurance can never be a source of profit.
Professional indemnity planLiability insurance covering the legal expenses and damages a professional such as a doctor, lawyer or Investment Adviser may owe a third party for negligence in the course of their professional service.
Property insuranceInsurance that pays the owner or renter of a building back for damage to, or theft of, the building and its contents. Includes homeowner's, renters, flood and earthquake insurance.
ProposerThe person who buys a life insurance policy, when the life being insured is someone other than themselves — the proposer must have insurable interest in the person covered.
Pure riskA risk that carries only the chance of loss or no loss, never a chance of gain — the requirement that separates an insurable risk from a speculative bet such as a stock market investment.
Recharge benefitA health insurance feature that restores the sum insured to 100% once it has been reduced by a claim in the policy year — the counterpart to a restoration benefit, which restores on any exhaustion.
ReinsuranceThe practice of an insurer transferring part of its own risk to another insurer or reinsurance firm, so that no single insurer is left exposed to the whole of a large claim.
Risk retentionBearing the financial consequences of a risk oneself, instead of paying an insurer to take it on — the alternative to risk transfer, and the default position for anyone without insurance.
SubrogationThe insurer's right to step into the shoes of the insured after paying a claim, and to pursue and recover the loss from whoever was actually at fault.
Suitability analysis in insuranceThe IRDAI requirement that an agent establish and justify a policy fits the client before it is sold - no investment cum insurance policy may be issued until the analysis is done.
Sum assuredThe amount a policyholder chooses when buying a life insurance policy, paid to the nominee if the insured dies during the policy term — the figure a term insurance plan promises in full.
Sum insuredThe amount specified in a non-life policy that represents the insurer's maximum liability for claims made during the policy period - the ceiling on what the policy can ever pay.
Surrender valueThe amount an insurer returns when a policyholder discontinues an investment-cum-insurance policy early — at least 30% of premiums paid under the workbook's rules, rising to 90% near maturity.
Survival benefitThe life insurance benefit paid when the insured survives a specified period - the half of a policy that a pure term plan does not have, and the reason an investment cum insurance policy costs more.
Telescopic premiumsLife insurance premiums that do not rise in the same proportion as the sum assured - a larger cover costs a lower rate of premium per thousand of sum assured, up to a limit set by each insurer.
Term insuranceLife cover for a fixed period: if you die during the term your nominee receives the sum assured, and if you survive it nothing is paid back. It is the cheapest way to buy protection.
Term insurance with return of premiumA term insurance variant that pays back the premiums at the end of the term if the insured survives - the workbook computes the implied return on the extra premium at 4.61%.
Third party motor insuranceThe compulsory part of motor insurance: cover for what the insured becomes legally liable to pay others for death, bodily injury or property damage — no motor vehicle may be used in a public place without it.
Top up policyA health policy that pays hospitalisation expenses above a pre-agreed threshold (deductible) — applied to each claim separately, unlike a super top-up, which applies it to the year's total.
Travel insuranceInsurance covering travel risks — lost or stolen luggage, cancellation, and medical costs abroad — with a comprehensive policy adding death, disability and personal liability cover.
ULIP charge deductionHow a ULIP takes its costs: mortality and administration charges are met by cancelling units rather than sitting inside the NAV, which is what makes a post-expense return hard to compute.
ULIP liquidity rulesWhen money can leave a ULIP: a 5-year lock-in with no redemption, surrender possible but paid only at the end of the lock-in, partial withdrawal allowed after it, and revival of a lapsed policy within 3 years.
ULIP Type IIThe ULIP structure in which death before maturity pays the sum assured plus the fund value, while maturity pays the fund value alone — the most generous of the death-benefit wordings the workbook lists.
Unit Linked Insurance PlanA life insurance policy in which the premium, after the cost of risk cover and expenses, is invested in equity or debt funds chosen by the policyholder, so the maturity value is the fund value.
Variable Insurance ProductA life insurance policy that credits the investment part of the premium to a policy account earning a defined minimum floor rate plus any index-linked or bonus additions; minimum term 5 years, lock-in 3.
Waiting periodThe interval, typically 2 to 4 years, during which a new health insurance policy does not cover certain named or pre-existing diseases.
Waiver of premium riderA life insurance rider, bought for an extra premium, that is triggered where a disability or a loss of income makes it difficult for the policyholder to pay the premium.
Whole life insuranceA type of life insurance policy that stays active for as long as you keep paying the premiums, rather than for a fixed term like term insurance.