Glossary Of Insurance Terms
AcceptanceThe act of assuming risks by the insurer when the proposer has compiled with all requirements.
Accident BenefitsPayment by the insurer an additional benefit equal to the sum assured in case of death by accident.
Advance DepositThe amount paid with the proposal equal to the first premium is called an advance deposit till the acceptance of risk by the insurer.
Absolute LiabilityLiability for damages but fault or negligence cannot be proven.
Accumulation periodTime between the first premium payment and the first benefit payout under a deferred annuity.
Actual Cash Value (ACV)Cost of replacing or restoring property at prices prevailing at the time and place of the loss less depreciation.
ActuaryProfessionally trained person to deal with technical aspects of pensions, insurance and related fields.
Adjustable Life InsuranceType of insurance allowing policyholder to change the plan of insurance, change the face amount of policy, premium and he protection period.
AdjusterPerson who investigates and settles losses/claims for an insurance carrier.
Age LimitsStipulated age frame below and above which the company may not accept applications or may not renew policies.
AgentThe authorised representative of the insurer, licensed by the Government of India to canvass insurance.
Age ProofThe document which the proposer produces to prove his date of birth.
All-risks PolicyContract of insurance coverage that promises to cover all losses except those specifically excluded in the policy.
AmendmentFormal document changing the provisions of an insurance policy signed together by insurance company officer and the policy holder.
Annuitant The person to receive the annuity or the person during whose life an annuity is payable.
AnnuityThe contract that provides an income for a specified period of time, such as a number of years or for life.
AssetsAll property, goods, securities, funds or resources of any kind owned by an insurance company.
AssignmentThe transfer of interests in a life insurance policy to a person or an institution.
AssuranceThe act of assuring a certain sum in the event of survival or death of a human life during a specified period.
Automatic Premium LoanThe cash borrowed from a life insurance policy's cash value to pay an overdue premium after the grace period for paying the premium has expired.
Accelerated Death Benefits Life insurance policies with a special feature that allows payment of the death benefit when the insured person is still alive. Such payment is usually limited to situations in which the policy holder is terminally ill.
BenefitsAmount payable by the insurance company to a claimant, beneficiary or assignee under each coverage.
BonusThe yearly share of a policy holder's profit declared by L.I.C. based on its profit which gets added to the policy amount and is payable upon its maturity.
BrokerA kind of marketing specialist representing buyers of property and liability insurance and deals with either agents or companies in arranging for the coverage required by the customer.
Burglary InsuranceThe insurance against loss of property by the depredations of burglars and thieves.
Collision insurance- It pays for damage to the insured car if it collides with another vehicle or object.
Comprehensive insurance- It pays for damage to the insured car resulting from fire or theft and also from many other causes.
Consumer Affairs CommitteeConstituted at the Board level with many eminent consumer activists and members of public joining as members along with the Chairman and the Managing Directors of the Corporation. This Committee looks into various areas of consumer interests and advises the Corporation.
Citizens' Charter- LIC has
adopted a Citizens Charter through which it reiterates its commitments to the customers
and the standards for general procedures and policy servicing.
CancellationThe discontinuance of an insurance policy before its normal expiration date, either by the insured or the company for any reason.
CapacityAmount of capital available to an insurance company or to the industry as a whole for underwriting general insurance coverage or coverage for specific terms.
Capital Retention ApproachThe method used to estimate the amount of life insurance to own. The insurance proceeds are retained and are not liquidated Under this method.
Certificate of InsuranceThe statement of coverage issued to an individual insured under a group insurance contract, including the insurance benefits and principal provisions applicable to the member.
ClaimA request for payment of a loss that may come under the terms of an insurance contract.
ConditionsList of provisions declared in an insurance contract that qualify or place limitations on the insurer's promise to perform.
Contingent Annuity OptionThe option under which an employee may elect to receive, under certain conditions, a reduced amount of annuity with the same income or a specified fraction to be paid after his death to another person designated as his contingent annuitant for that person's lifetime.
Conversion PrivilegeThe privilege given in an insurance policy to convert to a different plan of insurance without providing evidence of insurability.
CoverageScope of protection provided under a contract of insurance or any of several risks covered by a policy.
Covered ExpensesThe type and amount of expense which will be considered in the calculation of benefits.
Credit InsuranceThe guarantee to manufacturers, wholesalers, and service organizations to pay for goods shipped or services rendered.
Dating Back of a PolicyTo commence a policy on an earlier date to avail of the younger age benefit.
Death BenefitThe payment made to a designated beneficiary upon the death of the employee annuitant.
DeclarationsThe statements in an insurance contract that provide information about the property or life to be insured and used for underwriting and rating purposes and identification of the property or life to be insured.
Deferment PeriodThe period from the date of commencement of the policy to the vesting date.
Deferred AnnuityThe annuity providing for the income payments to begin at a particular future date.
DisabilityPhysical or a mental impairment that substantially limits(Partial or Total) one or more major life activities of an individual.
Disability BenefitFree waiver of payment of future premiums in case of total and permanent disablement due to an accident.
DividendThe amount returned to a policyholder by an insurance company out of its earnings.
Double IndemnityPolicy provision usually associated with death, which doubles payment of a designated benefit when certain kinds of accidents occur.
Double Accident Benefit(DBA)The benefits provide for the payment for an additional amount equal to the sum assured in the case of death of a policy holder as a result of accident.
Due DateThe date on which the installment premium is due to be paid by the insured.
Exclusion Any condition or any expense for which the policy will not pay.
Endowment InsuranceThe type of life insurance that is payable to the insured if he/she is still living on the policy's maturity date, or to a beneficiary .
Early RetirementRetirement of a participant prior to the normal retirement date, usually with a reduced amount of annuity.
Earned PremiumThe part of the total premium which applied to the portion of the policy period which has already expired.
Effective DateThe particular date on which the insurance under a policy begins.
Eligibility DateThe date on which an individual member of a specified group becomes eligible to apply for insurance under the insurance plan.
Eligibility PeriodSpecified time frame following the eligibility date during which an individual member of a particular group will remain eligible to apply for insurance.
EndorsementsAn additional piece of paper which includes certain terms and which, when attached to the original contract, becomes a legal part of that contract.
EndowmentThe life insurance payable to the policyholder if living, on the maturity date declared in the policy, or to a beneficiary if the insured dies prior to that date.
EstoppelLegal doctrine preventing a person from hiding the truth of a previous representation of fact,
Exclusive AgentThe agent who is employed by one and only one insurance company and who does business exclusively for that company.
Exclusion ratioThe portion of an annuity payment, considered by the tax law to be a return of an initial investment and will not come under income tax when received.
Expense RatioThe ratio of operating expenses to premiums of a company.
ExtortionThe surrender of property away from the premises as a result of a threat to do bodily harm to the named insured, its relatives, or invitee who is being held captive.
Extra PremiumAdditional premium charged on hazardous occupations and impaired lives.
Endowment Assurance PlanA plan where the Sum Assured is payable on the date of maturity or on death of the life assured, whichever is earlier.
Face AmountThe amount stated on the face of the policy that will be paid in case of death or at the maturity of the policy.
FiduciaryA person who holds something in trust for another.
Final average formulaThe kind of pension plan formula that bases retirement benefits on earnings during recent years of employment.
Fire InsuranceCoverage for losses caused by fire and lightning with resultant damage caused by smoke and water.
First Party CoverageThe insurance coverage under which the policyholder collects compensation for losses from the policyholder's own insurer rather than from the insurer of the person who caused the accident.
Fixed Amount Option/Fixed Period OptionThe life insurance settlement option in which the policy proceeds are paid out in fixed amounts.
Free Disability BenefitUnlike the Double Accident Benefit, The Free Disability Benefit is, as the name suggests, a benefit automatically available to every policy holder without any extra charge.
Guaranteed Renewable As per policy provision, the insurance company can not cancel a policy unless the individual fail to pay due premiums.
Group Insurance- Insurance provided to members of a formal group such as employees of a firm or members of an association.
General DamagesThe kind of damages awarded to an injured person for intangible loss that cannot be measured directly in terms of money.
Grace PeriodThe specified period after a premium payment is due, in which the policyholder may make such payment and during which the protection of the policy continues.
Health InsuranceThe system for the advance financing of medical expenses by means of contributions or taxes paid into a common fund to pay for all or part of health services specified in an insurance policy or law.
Indemnity Benefit Flat payment made directly to the policyholder instead to nursing facility or any facility care agency for services rendered.
Immediate AnnuityThe annuity providing for payment to begin immediately.
Incurred ClaimsIt equals the claims paid during the policy year plus the claim reserves as of the end of the policy year, less the corresponding reserves as of the beginning of the policy year.
IndemnityLegal provisions that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position as existed before the loss.
Individual InsurancePolicies which provide protection to the policyholder and/or his/her family mamber.
InsurabilityThe acceptability to the company of an applicant for insurance.
Insurable RiskThe conditions that make a risk insurable.
InsuranceThe system under which individuals, businesses, and other organizations or entities, in exchange for payment of a sum of money (a premium) are guaranteed compensation for losses resulting from certain perils under specified conditions.
InsurerThe party to the insurance contract, promises to pay losses or benefits.
InsuredAn individual or organization covered by an insurance policy, including the "named insured" and any other parties for whom protection is provided under the policy terms and conditions.
Insurable InterestEvidence suggesting financial loss due to the occurrence of the event insured against.
Impaired LifeA proposer whose life cannot be accepted for insurance on the normal rates of premium due to health reasons.
Keyman Insurance This is taken by a business firm on the life of key employee(s) to project the firm against the finance loss which may occur due to the premature demise of the Keyman.
LicenseA type of surety guaranteeing that the person licensed will comply with all laws and regulations that govern his or her activities.
Life Insurance- A contract for payment of a sum of money to the person assured (or failing him/her, to the person entitled to receive the same) on the happening of the event insured against. Usually the contract provides for the payment of an amount on the date of maturity or at specified dates at periodic intervals or at unfortunate death, if it occurs earlier.
Life ExpectancyAverage number of years of life remaining for a group of persons of a given age according to a specific table of mortality.
LiabilityAny kind of legally enforceable obligation.
LapseThe termination or discontinuance of an insurance policy due to non-payment of a premium.
Life AnnuitySeries of payments under which payments, once begun, continue throughout the remaining lifetime of the annuitant but not beyond.
Life AssuredThe individual whose risks are covered by an insurance policy.
LoanThe facility to raise loan on the mortgage of the policy based on its surrender value.
Loss RatioThe ratio calculated by dividing claims into premiums. It may be calculated in other ways, using paid premiums or earned premiums, and using paid claims with or without changes in claim reserves and with or without changes in active reserves.
Liability InsuranceThe insurance against claims of loss or damage for which a policyholder might have to compensate another party. The policy covers losses resulting from acts or omissions which are legally deemed to be negligent and which result in damage to the person, property, or legitimate interests of others.
Motor vehicle insurance- A contract by which the insurer assumes the risk of any loss the owner or operator of a motor vehicle may incur through damage to property or persons as the result of an accident.
Material DamageThe insurance against damage to a vehicle itself. It includes automobile comprehensive, collision, fire and theft.
MaturityThe policy amount becoming due for payment upon the completion of the term of a policy.
Mode of PaymentThe frequency of which the premiums are being paid, i.e yearly, half-yearly, quarterly or monthly.
Moral HazardThe danger faced by the insurer in some cases due to certain hidden factors when there is no genuine need for insurance for a proposer or the object of taking out the insurance would be speculative in a proportion of cases.
Marine InsuranceA contract of Marine Insurance is an agreement whereby the insurer undertakes to indemnify the assured, in the manner and to the extent thereby agreed, against marine losses, that is to say, the losses incidental to marine adventure.
Mutual Insurance CompanyThe insurance company in which the ownership and control is vested in the policyholders and a portion of surplus earnings may return to policyholders in the form of dividends.
Mortgage InsuranceThe insurance protecting a lender against loss from a mortgagor's default.
NegligenceThe kind of failure to use the care that a reasonable individual would have used under the same or similar circumstances.
Net PremiumPortion of the premium rate which is designed to cover benefits of the policy, but not expenses, contingencies, or profit.
Non-forfeiture regulationsThe provisions by which the policy benefits are not forfeited but are granted to the insured on a reduced scale in the event of discontinuance of a policy after a minimum period of three years.
NominationThe act of naming a person to receive the policy monies from the insurer in case of death of the life assured.
Non-MedicalCases where policies can be issued waiving a medical examination.
Occurrence policyThe liability insurance policy which covers claims arising out of occurrences that take place during the policy period, regardless of when the claim is filed.
Operating RatioSum of expenses and losses expressed as a percent of earned premium.
Outline Of Coverage Description of policy benefits, exclusions, specifications and provisions to facilitate the understanding of a particular policy and compare it with others.
Paid-up InsuranceThe insurance on which all required premiums have been paid.
Paid-up PolicyA policy discontinued after payment of premium for a minimum period of three years.
Pakistan SecuritiesUnder the 'Insurance Rules, 1939', securities guaranteed fully as regards principal and interest by a Provincial Government in or charged on the revenues of any part of that Dominion and Debentures, or other securities for money issued by or on behalf of the trustees of the port of Karachi shall be recognized, in the case of insurers incorporated or domiciled in India as approved securities.
Pension BenefitsThe series of payments to be provided in accordance with the plan of benefits.
Pension PlanThe plan established and maintained by an employer or a group of employers, union or any combination, primarily to provide for the payment of definitely determinable benefits to participants after retirement.
PerilThe cause of any loss insured against in a policy.
Physical DamageDamage to the loss of the auto resulting from collision, fire, theft or other perils.
PolicyThe evidence of contract between the insurer and the insured. A stamped, sealed and signed document issued by the insurer to the insured in proof of insuring his life.
Policy DividendThe refund of part of the premium on a participating life insurance policy reflecting the difference between the premium charged and actual experience.
Policy LoanThe loan made by a life insurance company from its general funds to a policyholder on the security of the cash value of a policy.
Policy TermThat period for which an insurance policy provides coverage.
PolicyholderThe individual who owns a life insurance policy.
PremiumThe sum paid by a policyholder to keep an insurance policy in force.
Principal SumAn amount payable in one sum in the event of accidental death and in, some cases, accidental dismemberment.
Proof of LossThe documentation presented to the insurance company by the insured in support of a claim so that the insurer can determine its liability under the policy.
Property InsuranceIt provides financial protection against loss or damage to the policyholder's property caused by such perils as fire, windstorm, hail, etc.
ProposalAn application for a life insurance policy.
ProvisionThe part (clause, sentence, paragraph, etc.) of an insurance contract that describes or explains a feature, benefit, condition, requirement, etc. of the insurance protection afforded by the contract.
RatePricing factor upon which the insurance buyer's premium is based.
RebateOffering any valuable consideration, usually all or part of the commission, to the prospect or insured as an inducement to buy or renew.
ReimbursementPayment of the expenses actually incurred as a result of an accident but not to exceed any amount specified in the policy.
Re-insuranceThe assumption by one insurance company of all or part of a risk undertaken by another insurance company.
Replacement ratioPercentage of income before retirement that is required to be replaced to maintain the same standard of living after retirement.
Retrospective DateFirst date for which claims will be paid under a claims-made policy of liability insurance.
RevivalThe act of bringing back to life a discontinued policy.
RiskThe chance of loss. But also used to refer to the insured or to property covered by a policy.
Risk ClassificationThe process to decide the premium rates for life insurance according to the risk characteristics of individuals insured (e.g., age, occupation, sex, state of health etc.) and then applies the resulting rules to individual applications.
Risk TransferThe Shifting of risk from one party to another.
SalvageThe recovery made by an insurance company by the sale of property which has been taken over from the insured as a part of loss settlement.
Senior Citizen PoliciesThe contracts insuring individuals 65 years of age or more.
Settlement OptionThe act of drawing the claim amount in instalments.
S.S.S. Salary/Savings SchemeWhere an employer is willing to deduct premiums of his employees on monthly basis and remit it to the L.I.C. in one lump sum.
Standard RiskThe individual who, according to a company's underwriting standards, is entitled to purchase insurance protection without extra rating or special restrictions.
Sum AssuredThe basic amount payable as per the contract of insurance.
SubrogationDoctrine in insurance law by which the insurer holds the insured for enforcement of all rights against strangers or third persons who may primarily be liable for the loss incurred when the former indemnifies the latter in respect of the latter's loss.
Surrender ValueThe cash value payable by the insurer in full settlement of the account of a policy on any date before the maturity date.
TableDifferent plans of insurance marketed by L.I.C. - each plan is called a table.
Term InsuranceThe life insurance payable to a beneficiary only when an insured dies within a specified period.
Third PartyA claimant under a liability policy.
Third party claimThe demand made by an individual against a policyholder of another company and any payment that will be made by that company.
Travel Accident PolicyThe limited contract covering only accidents while an insured person is traveling.
TermThe period of insurance.
Umbrella LiabilityThis insures losses in excess of amounts covered by other liability insurance policies.
Unallocated BenefitThe policy provision providing reimbursement up to a maximum unspecified amount for the cost of all extra miscellaneous hospital services.
UnderwritingProcess of selecting risks for insurance and determining in what amounts and on what conditions the insurance company will accept the risk.
Unearned PremiumThe portion of the premium that a company has collected but has not yet earn because the policy still has unexpired time to run.
Uninsurable RiskThe offer/term not acceptable for insurance due to excessive risk.
Vesting Date The policy anniversary on which the age nearer birthday of the life assured is 21 years.
Waiver The kind of agreement attached to a policy which exempts from coverage certain disabilities or injuries that otherwise would be covered by the policy.