Insurance Terms Glossary: Insurance is now a part of every individual's life. With more and more insurance schemes coming up, it is advised to learn the meanings and definition of terms used in insurance and Insurance Quote. Here I explain Glossary of Terms Used in Insurance that will help you select the best Insurance Policy and understand Insurance Quote in a much better way.

Some of the most common insurance are: Term Insurance, Term life Insurance, Commercial Insurance, Liability Insurance, Marine Insurance, Car Insurance, Business Insurance, Medical Insurance, Health Insurance, Small Business Insurance, Dental Insurance, Disability Insurance, Whole Life Insurance, Office Insurance, and Automobile Insurance etc.

Here I explain Glossary of Terms Used in Insurance that will help you select the best Insurance Policy and understand Insurance Quote in a much better way.

Accident Benefit: It provides for payment of an additional benefit that is equal to the sum assured. This amount is payable in installments on permanent total disability of the life assured and subsequent premiums payable under the policy are waived. It also provides for payment of an additional amount that is equal to the sum assured in the case of death of the life assured due to accident.

Actuarial Science: A branch of statistics. It deals with determining of insurance rates, which are the fundamental aspects of the industry.

Actuarial: An actuary is a professional with expertise in technical aspects of insurance rates, rating mechanisms, rating plans and schedules of insurance companies. They calculate the probabilities of uncertain outcomes that can occur in the future and draw a financial conclusion. Thus they access risks and determine premium rates. They help the insurance companies in investment activities. They conduct periodic valuation of life insurance companies, determine the surplus and declare the bonus

Admission of Age: Acceptance of age of an insured person by an insurer on the basis of documentary evidence such as birth certificate, school certificate, etc

Admission of Claims: Acceptance of a death claim by a life insurance company for settlement

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.

Agency License: A license issued to an insurance agent under the IRDA, the (Licensing of Insurance Agents) Regulations 2000.

Agency Year: A period of 12 months starting from the first day of the month following the month in which the agency was granted.

Annuitant: Annuitant is the person who purchases the annuity policy and in return receives the annuity amount periodically at yearly/half yearly/quarterly/monthly or stipulated intervals.

Annuity: Annuity is an insurance scheme under which an insurance company promises to make a series of fixed periodic payments to a person in exchange for a premium or a series of premiums called the purchase price.

Approved Institutions: Institutions engaged in education and/or training in the area of sales, service and marketing, approved and notified by IRDA.

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

Assignment: Assignment means legal transference of the rights and benefits of a life insurance policy from one person to another under Sec. 38 of the Insurance Act 1938. An assignment can be made by an endorsement on the policy document or as a separate deed.

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

Bank Assurance: Insurance sold by banks as an intermediary.

Beneficiary: A person who may become eligible to receive or is receiving benefits under an insurance policy other than a participant.

Binding Receipt: A receipt given for a premium payment accompanying the application for insurance. If the policy is approved, this binds the company to make the policy effective from the date of the receipt.

Bonus: The additional sum that the policyholder will get during the term of the insurance plan or at maturity of the plan, provided he has paid all premium amounts due for a specified minimum number of years. Bonus is the amount added to the basic sum assured under a with-profit life insurance policy. Bonus is based on the declared surplus of the insurance company. Bonus is declared per thousand sum assured.

Branch Office System: Type of life insurance marketing system under which branch offices are established in various areas. Salaried branch managers, who are employees of the company, are responsible for hiring and training new agents.

Broker: A new insurance intermediary under the IRDA Act. A broker can sell products of any insurance company.

Claim: The request for payment of the contractual benefits by the insurer; that is made by the insured or the beneficiary.

Claim Amount: The amount payable on the maturity of a policy or when a claim is raised.

Code of Conduct: A set of DOs' and DON'Ts regarding behavior.

Cold Canvassing: This is when you approach a person you don't know. For example, if you are traveling by bus, you can begin a conversation with your fellow passengers and explain the benefits of insurance to them.

Commission: Commission is the percentage of premium paid to insurance agents for the insurance business procured by them.

Complainant: The person who makes a complaint.

Composite Insurance Agent: A person who holds a license to act as an insurance agent for both a Life Insurance and a General Insurance company.

Contingency: An event that may or may not happen.

Credit Rating: A Credit Rating is an assessment by a third party (Rating Agency) of the credit - worthiness of an issuer of financial securities. The higher the rating, the lower the likelihood of default or non - payment. Thus for the investor, a credit rating is a way of evaluating how sound is the company in which it is about to invest in. Rating Services are offered by Rating Agencies like CRISIL, ICRA and CARE.

Credit Ratings: The numeric or alphanumeric ratings given by rating organizations after evaluating the assets and liabilities of a company.

Critical Illness Rider: A rider added to a life insurance policy to protect the insured against financial loss in the event of a terminal illness. A critical illness rider makes living benefits payable to the insured for medical expenses prior to death. Generally, the extra cover is equal to the sum assured on the base policy and is paid upon diagnosis of the illness. While the illnesses covered and the premiums vary among insurers, most insurers cover cancer, coronary artery bypass, heart attack, kidney/renal failure, major organ transplant and paralytic stroke.

Days of Grace: Policyholders are expected to pay premium on or before due dates. A period of 15-30 days is allowed as grace to make payment of premium; such period is Days of Grace

Death Benefit: The amount payable, as stated in a life insurance policy, to the designated beneficiary upon the death of the insured.

Deferment Date: The date on which the deferment period ends.

Deferment Period: The period from the date of commencement of the policy to the vesting date.

Deferred Annuity: An annuity policy in which the payment of annuity installments commence after a certain agreed term called deferment period.

Discharge Form: An advance receipt acknowledging the payment of claim amount containing particulars of the policy and details of payment and recoveries.

Double Accident Benefit: Payment of double the sum assured in case death due to an accident, against payment of a small additional premium.

Double Cover: An additional sum that is equal to the sum assured that is payable when the claim is raised.

Economic Development: Growth connected with commerce, industry and other resources generating money.

Endowment Plan: Life insurance cover with a savings component. Apart from death benefit, a predetermined sum is paid at the end of a specified term. A plan in which the amount is paid to a policyholder if he outlives the tenure of the contract or to the beneficiary if the insured person dies before the date on which the policy matures.

Equity: Interest of the shareholder in a company.

Evidence of Insurability: Any statement or proof of a person's physical condition, occupation, etc affecting acceptance of the applicant for insurance

Examination Body: An institution that conducts pre - recruitment tests for insurance agents and which is duly recognized by IRDA.

Expense Ratios: The ratio of a company's operating expenses to premiums.

Face Amount: The amount of insurance provided as per the terms of an insurance contract, usually in a life insurance policy, the death benefit. Face Amount is the amount that an insurer agrees to pay on the occurrence of an event.

Family History: The family and health history of family members of the proposer.

Female Lives: a) Virtue of their employment in any reputed organization or institution eligible for Non Medical Special Schemes. b) Professions such as Medicine, Law, Charted Accountancy etc. Category 2: Women with unearned income attracting payment on income tax or women holding sizeable personal properties/investments yielding income attracting assessment for income tax.

Financial Value of Asset: The worth of an asset in terms of money.

First Class Life: A life that can be insured on standard tabular rates of premium applicable to normal healthy lives.

Forfeit: To give up all the premiums paid till date, for not paying the further premiums.

Further Leads: Prospects referred to the insurance agent by satisfied customers.

Grace Period: This provision offers the policyholder additional period of time from the due date of premium, during which the premium can be paid without late fee to keep the policy in force.

Group Life Insurance: Covering of a homogeneous group of persons under a single master policy, usually under a one-year renewable term assurance. This does not involve medical examination.

Health Insurance: The coverage offered as a Rider benefit or as inbuilt benefit of traditional life insurance policy. It usually covers critical illnesses and major surgical procedures.

Immediate Annuity: An annuity that begins to make income payments immediately (or soon after) after the first premium is paid, as opposed to a Deferred Annuity.

Insurance Intermediary: Individuals or firms appointed to sell insurance policies. For example, Insurance Agent, Institutional Agent, Broker, etc.

Insurer: The insurance company that provides insurance cover to a customer.

Intangible: An intangible item or service is not physically present. Therefore, it cannot be seen and felt.

Investment: Putting money for use to earn a yield or return thereon.

IRDA: The acronym for the Insurance Regulatory and Development Authority of India, it is the apex body overseeing the insurance business in India. It protects the interest of the policyholders, regulates, promotes and ensures orderly growth of the insurance in India.

Lapsed Policy: When premium for a policy is not paid within the days of grace the policy is said to lapse. Last Birth Day (l.b.d) Age at last birthday.

Legal Title: An order from a court of law entitling the rightful person to receive the policy amount.

Level Premium: A premium that remains unchanged throughout the life of a policy.

License: Permission granted for insurance.

Life Annuity: An annuity that makes regular (e.g. monthly, quarterly, etc.) income payments for the life of a person (the annuitant). The annuitant cannot outlive the payments. Upon his/her death, however, all income payments cease and there are no beneficiary benefits.

Life Assured: The person whose life is being insured.

Life Insurance: An agreement that guarantees the payment of a stated amount of monetary benefits upon the death of the insured. A contract provided for the payment of a sum of money to the person assured or failing him, to the person entitled to receive the same, on the happening of certain event for the consideration.

Material Facts: Facts relating to the subject matter of insurance that have the effect of influencing the decision of a prudent underwriter.

Maturity Amount: The amount payable to the term deposit account holder after the expiry of the term

Maturity Claim: The payment to the policyholder at the end of the stipulated term of the policy is called maturity claim.

Maturity Date: The date designated as the date when the policy matures or the date when the policyholder dies.

Minor: A person who has not attained the age of majority.

Misrepresentation: The Act of making, issuing, circulating or causing to be issued or circulated an estimate, an illustration, a circular or a statement of any kind that does not represent the correct policy terms, dividends or share of surplus or the name or title for any policy.

Money Back Plan: A plan in which part of the sum assured is paid back to the policyholder at regular intervals.

Moral Hazard Report: An assessment by authorized person of the insurer highlighting the special hazards that may be present in a proposal for insurance. In life insurance the need for such a report arises where the sum assured is very high, or there is a suspicion the proposer is concealing information relating to income, health, occupation etc.

Morality: The ratio of the number of persons dying during a year to the number of persons living at the beginning of the year.

Morality Report: The number of deaths in a group of people usually expressed as deaths per thousand.

Morality Table: A table showing the incidence of death at specified ages.

Nomination: A provision by which a policyholder can designate any person to receive the policy money in the event of his death.

Nominee: Nominee is the person named in the policy by the policyholder to receive the insurance benefits in case of death of the life insured during the term of the policy

Occupational Hazard: A condition in an occupation that increases the peril of accident, sickness, or death. This usually will mean higher premiums.

Original Age: The age you were when you bought the policy.

Participating Policy: A Participating Policy is also known as a With-Profits policy. A participating policy charges a higher premium than a Non-Participating Policy.

Peril: The cause of a possible loss, such as fire, windstorms, thefts, explosions, or riots

Permanent Total Disability Benefit: This implies waiver of future premiums up to a certain sum assured and payment of specified installments for a certain period in the event of total permanent disability of the insured person arising out of an accident.

Personal Statement: The signed declaration of the proposer, which along with the proposal forms the basis of an insurance contract. It discloses the personal health history of the proposer and his family members.

Policy: An insurance plan purchased by a customer.

Policy Anniversary Date: The date every year that coincides with the date of commencement of the policy.

Policy Term: The period of coverage provided by an insurance policy.

Policy Holder: The person who owns a life insurance policy, this is usually the insured person, but it may also be a relative of the insured, a partnership or a corporation.

Premium: The payment made by the insured to the insurance company to buy a policy and to keep it in force.

Premium Frequency factor: The basic premium will be derived for annual premium payment mode. The premium for frequencies other than annual is then given by the annual premium multiplied by the frequency factor. 1. Monthly - 0.09 2. Quarterly - 0.26 3. Half - Yearly - 0.51

Premium Holiday: is a temporary period during which the policyholder can keep his policy enforce without payment of regular premiums. This holiday can be availed by the policyholder after payment of three year's full regular premiums.

Premium Beneficiary: In life insurance the beneficiary designated by the insured as the first to receive policy benefits.

Probability: The chance of happening or not happening of an event.

Proposal Form: The form, which is to be completed for securing an insurance policy. This form is used by insurers, which a proposer is required to fill and sign. The Proposal Form forms the basis of an insurance contract.

Proposer: Proposer is a person who proposes the insurance policy i.e. a person who applies to the insurance company for an insurance cover.

Prospect: A potential new customer who can be approached for buying an insurance policy.

Pure Risk: A risk that results only in loss such as death.

Rating Organizations: Rating Organizations rate the credit worthiness of companies after calculating their assets and liabilities.

Rebate: Reduction in tabular premium allowed for specific modes of payment (e.g. yearly, half yearly) and for large sum assured cases.

Redressal Agencies: Bodies created by the Govt. of India, which are entrusted with the job of looking into the Rights of Consumers.

Referred Leads: The person who has been referred to the insurance agent as a prospect by someone.

Renewal Premiums: Premiums that are payable after the initial premium and that are a condition for the continuation of the policy.

Repudiation: Rejection of a claim by the insurer, which usually happens for suppression of material facts.

Revival of Policy: A lapsed policy may be revived by paying the unpaid premium with interest. Revival may need fresh medical examination.

Rider: An add-on benefit available at the option of the policyholders against payment of additional premium that may alter certain features of a policy.

Risk: The uncertainty associated with any event, such as the death of a person due to accident or illness.

Secondary Beneficiary: An alternate beneficiary designed to receive payment usually in the event; the original beneficiary predeceases the insured

Social Sector: This includes unorganized sector, informal sector, economically vulnerable or backward classes and other categories of persons, both in rural and urban areas.

Social Security: Responsibility of the society to provide basic necessities and a minimum standard of living to all its members.

Standard Plan: A plan without any rider.

Standard Risk: Person who according to a company's underwriting standards is entitled to insurance protection without extra rating or special restrictions.

Suicide Cause: Limitation in life insurance policies to the effect that no death benefits will be paid if the insured commits suicide during a specified initial period, usually the first one year of the policy.

Superannuation: The completion of the entire service period of an employee.

Surplus: The amount by which an insurance company's assets exceed its liabilities.

Surrender Charge: Fee charged to a policyholder when a life insurance policy or annuity is surrendered for its cash value.

Surrender or Cash Value: If a policy is surrendered before the maturity date of a policy, the sum that is payable at that point is called the Surrender Value. The Surrender or Cash Value is the amount payable to the policyholder should the policyholder decide to discontinue the policy and terminating the contract of insurance. However, the insurance protection provided under the policy will also cease.

Surrendered Policy: A policy is surrendered when a policyholder decides to terminate the policy contract before the maturity date.

Survival Benefit: The payment of sum assured to the insured person, which has become due by instalments under a money back policy.

Tangible: A tangible asset is physically present. It can be seen and felt. For example, cars, houses and books are tangible items.

Tenure of Investment: The duration for which an investment is made.

Term: Term is the period for which an insurance coverage is given.

Term Insurance: A type of life insurance where the sum assured is payable only in the event of death of the life insured during the specified term. In the case of survival, the contract expires and the premium is not paid back to the insured.

Terminal Bonus: On death after 15 policy years or on maturity, the company may pay terminal bonus for in force policies as per recommendation of the actuary in the valuation report.

Tertiary Beneficiary: In life insurance, a beneficiary designated as third in line to receive the proceeds or benefits if the primary and secondary beneficiaries do not survive the insured.

Title: Transfer of ownership from the assignor to the assignee.

Uberrima Fides: "Utmost Good Faith". This is required in insurance contracts and demands full disclosure of all material facts.

Underwriter: The official who examines the risk and determines whether or not to accept the risk, on the behalf of the insurer.

Underwriting: The process of assessing risks for insurance and determining in what amounts and on what terms the insurance company will accept the risk. It is the process of examining an insurance proposal to determine whether to accept the risk or not.

Valuation Reports: Valuation Reports are created after periodic valuation of the financial condition of an insurer. These reports show whether a company is in profit or loss.

Vesting Age: The age at which the child assumes absolute ownership of the policy.

Vesting Date: The date from which the life assured i.e., child becomes the absolute owner of the policy.

Whole Life Insurance: Life insurance that is kept in force for a person's whole life as long as the scheduled premiums are maintained and where benefits are payable to a beneficiary on death of the insured, whenever that occurs. The premiums must generally be paid as long as the policyholder is alive.