LIC Terminology

Therefore, to help you understand the common terms in insurance, here is a list of some commonly used LIC terminologies.

Glossary of LIC Terminologies

Here is a list of some commonly used LIC terminologies.

• Accident Benefit
  An additional benefit is the amount paid if the policyholder suffers death or permanent disability due to an accident during the policy term. This benefit is received by policyholders who opt for the Accidental Death and Disability Rider. There is another rider called Accident Benefit rider which provides an accident benefit if the policyholder dies due to an accident (death within 180 days of the accident). Riders enhance the death benefit of the base policy and may also provide a waiver of future premiums in case of disability.

• Age Limit
  The minimum and maximum age at which a person is eligible to buy a specific LIC policy. Different plans have different entry and maturity age limits.

• Agent
  An LIC agent is a certified representative appointed by LIC of India to assist customers choose suitable insurance plans, policy services and filing claims. Agents are a primary link between LIC and its policyholders.

• Annuity Plans
  Annuity plans are pension-based insurance policies that provide regular income to the policyholder after retirement. LIC’s annuity plans are those insurance policies where you pay a lump sum to LIC and in return it gives you monthly payouts like a pension for your whole life. LIC Annuity Plans give you financial security in the post-retirement phase of your life.

• Assignment
  Assignment is the legal transfer of rights under a policy from the policyholder to another person or institution. It is commonly done for loans or as a gift.

• Application Form
  The application form is the document filled and signed by the proposer to apply for an LIC policy. It includes personal, health, and financial details required to underwrite the policy.

• Beneficiary
  The person designated to get the policy proceeds when the life assured dies. The nominee or legal heir or family member can be the beneficiary.

• Coinsurance
  Coinsurance is a split cost contract that requires both the insured person and the insurer to contribute to the cost of benefits. More frequently used in health insurance related products.

• Convertible Whole Life Policy
  This is a policy which can turn into an endowment policy after a time, from a whole life policy. It provides flexibility in that it can be modified to meet changing financial objectives.

• Coverage
  Coverage is the protection offered by the policy with regard to particular risks, such as death, disability or illness. The coverage is dependent on the plan and assurance selected.

• Claim Amount
  The claim amount is the benefit payout the policyholder or their beneficiaries are entitled to receive. There are primarily two types of claims - one is the death benefit claim given to the nominee if a policyholder dies during the policy term and the other is maturity benefit claim given to the policyholder if they survive the policy term.

• Death Benefit
  Also known as the life cover amount, the death benefit is the sum payable upon the policyholder’s death during the policy term. This amount may include the sum assured, rider benefits, and applicable bonuses.

• Deferment Period
  The deferment period is a term for annuity plans offered by LIC. It is the time interval between the commencement of the policy and the date when the annuity payments begin. These are single premium policies, so the deferment period starts when you pay this single premium and ends when you receive your first payout as a pension.

• Endowment Policy
  An endowment policy is a life insurance plan that pays a lump sum on maturity or death, whichever occurs first. It combines insurance protection with savings.

• Exclusions
  Exclusions refer to conditions not covered under the terms and conditions of life insurance policy. For example, the most common exclusion among LIC policies is suicide where the policy does not cover deaths due to suicide within the first year.

• Family Insurance
  Family insurance plans cover multiple members under a single policy. They may include term or health riders for spouse and children.

• Free Look Period
  The time immediately after a policy has been issued, when the policyholder can look at the details of the policy. The policyholder may return the policy within the above time (generally 15 days for offline policies and 30 days for online policies) and receive a premium refund (minus any nominal charges).

• Grace Period
  The grace period is the extra time to pay premiums after the due date. Typically, LIC offers a 15-day grace period for monthly premiums and 30 days for other payment modes, allowing policyholders to avoid policy lapse.

• Group Life Insurance
  A group life insurance policy provides life cover to a group of individuals under a single master policy. It is often offered by employers to their employees as part of a benefits package.

• Indemnity
  Indemnity is the principle of restoring the insured to the financial position they were in before a loss occurred. It applies more to health and general insurance than to life insurance.

• Insurable Interest
  Insurable interest refers to the legal right to insure someone’s life or property based on a financial or emotional relationship. It must exist at the time of policy purchase.

• Insurability
  Insurability is the assessment of a person’s eligibility to be insured based on their health, age, and lifestyle. LIC evaluates this through underwriting before issuing a policy.

• Lapsed Policy
  As per the terms and conditions of life insurance policy, LIC policy lapsed means if premiums are not paid even after the grace period, it will no longer provide insurance coverage.

• Life Assured
  The life assured is the individual covered under the policy. For example, the policies purchased for oneself, the policyholder and life assured are the same person but for child plans, the policyholder is the parent, while the child is the life assured.

• Limited Payment Policy
  This is a policy where premiums are paid for a limited number of years but the coverage continues for the full policy term or for life.

• Loyalty Additions
  Loyalty Additions are non-guaranteed bonuses declared by LIC on certain plans after the policy has been in force for a minimum number of years. They enhance the total payout on maturity or death.

• Maturity Benefit
  Maturity benefit in a life insurance policy is the amount payable to the life assured if they survive the policy term. This amount shall either be a fixed sum assured or a variable amount based on the type of policy. In LIC policy, it refers to the return of the basic sum assured along with any applicable bonuses or additions, at maturity.

• Maturity Claim
  A maturity claim is the request made by the policyholder to receive the policy benefits at the end of the policy term. It requires submission of the policy document and identity proof.

• Money Back Policy
  A money-back policy is a type of endowment plan that pays periodic survival benefits during the policy term and the remaining sum assured at maturity or on death.

• Nomination
  Nomination is the act of naming a person to receive the policy benefits in case of the policyholder’s death. It ensures smooth claim settlement without legal complications.

• Nominee
  The nominee is the person designated by the policyholder to receive the death benefit in case of the policyholder's death during the policy term.

• Paid-up Benefit
  According to the LIC paid up policy, if premiums are not paid after a certain period, the policy does not lapse, it rather continues with a reduced sum assured. This reduced amount of sum assured is calculated using premiums that have already been paid. However, LIC paid up benefit applies to only some life insurance policies at LIC.

• Premium
  The premium is the amount you must pay to obtain LIC insurance coverage. While premiums shall vary depending on the type of policy, they generally remain consistent throughout the policy term.

• Premium Payment Mode
  LIC offers premium payment modes, including monthly, quarter, semi-annual, and annual options, allowing policyholders to choose the one that best suits their financial planning.

• Premium Payment Term
  This term refers to the period during which the policyholder must pay premiums. Depending on the policy, payment options include single, limited, or regular premium terms.

• Policy Term
  Policy term is the duration for which an insurance company offers insurance coverage and benefits. Most policies allow you to select the term, which can often be extended with whole-life policies up to 99 or 100 years.

• Premium Back Term Insurance Plans
  These are term insurance plans where the premiums paid are returned to the policyholder if they survive the policy term. It offers protection along with a refund feature.

• Reinstatement
  Reinstatement is a process to revive a lapsed policy to get back the insurance coverage. One shall do so by paying overdue premiums and fulfilling relevant health requirements. However, LIC allows reinstatement only within a specific period from the date of lapse.

• Revival Period
  After a policy lapse, the revival period allows the policyholder to reinstate it by paying the outstanding premiums and any applicable interest. This often requires a new medical assessment.

• Riders
  Riders are optional extra covers added to the basic policy to provide extra protection. One shall add a rider by paying a little extra premium. These are typically critical illness riders, accidental death benefit riders and waiver of premium riders.

• Sum Assured
  The sum assured is the amount the insurer guarantees to pay in case of the policyholder’s death or other specified events. For instance, if a policy has a sum assured of ₹50 lakhs, that amount will be paid to the nominee upon the policyholder’s death.

• Surrender Benefit
  If the policyholder decides to terminate the policy before its maturity, they shall receive the cash value accumulated up to that point, known as the surrender benefit. The policy will terminate after this payment. As per the terms and conditions of the life insurance policy in LIC, you can surrender a policy after 1 year of premium payment. Calculating the LIC surrender value can be tedious as it requires complicated mathematics. To avoid this complexity, you shall use the LIC Surrender Value Calculator.

• Survival Benefit
  Some policies offer periodic survival benefits for outliving specific policy years. This benefit may include any applicable bonuses.

• Tax Benefits
  The sections 80C, 80D, and 10 (10D) of the Income Tax Act 1961 have provisions that provide tax benefits on life insurance policies in India. All benefits are subject to changes in tax laws.

• Vesting Age
  Vesting age is the age at which a pension or annuity plan begins to pay out benefits. LIC’s retirement plans often have a minimum vesting age of 40 or 50 years.

• Whole Life Policy
  A whole life policy provides life cover for the entire lifetime of the life assured rather than a fixed term.

Summing It Up

Understanding the above mentioned LIC terms shall help you navigate LIC policies more effectively, so that you make the most of your insurance coverage. Whether you’re a new policyholder or looking to review your existing policies, familiarity with these terms helps you be aware of the complexities of LIC products and terms and conditions of life insurance policy so you can manage your insurance needs more effectively.

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