Term Insurance Terminology

Annualized premium equals to total regular premium paid in one policy year, considering premium factors for different premium payments. While calculating annualized premium, taxes, extra premiums, or rider premiums are not included.

The basic definition of an 'accident' is an unforeseen events caused by any external means.

Accidental Total Permanent Disability, as the name suggests, is a lifetime disability which has occurred by an accident (as per definition of accident) to the policyholder. It is excluded in some of the policies as per their policy document.

Accidental Total Permanent Disability, also commonly called ATPD

In an insurance policy, the amount received is subject to terms and conditions of the policy

A beneficiary, in common language, is a person who receives all the benefits of the policy. For instance, in a life insurance policy, a beneficiary is the nominee who receives the policy benefits after the demise of the policyholder.

As per the terms and conditions of any policy, only the insured or the nominee of the policy can ask for payments from the insurance company.

"Critical illness is the illness condition specified under the particular plan. In general, critical illness includes either The First diagnosis of illness (listed under critical illness) or, The First performance of any surgery (covered under critical illness) Critical illness offers exclusions if specified under the document of the policy"

Critical illness benefit or CI benefit is the benefit payable to the insured after the First diagnosis of illness (listed under critical illness) as per the policy document.

The deferment period is basically an extended-term period from maturity period to agreed time period. Deferment payment is applicable under insurance pension annuity plan

The period between the start date of policy and the time at which the first instalment of annuity is received, in an m-pension policy.

Surrender or discontinuance charges are the charges deducted from the account of the policyholder if they withdraw the policy before the maturity period.

Date of commencement is the date from which any policy comes into force

Financial surrogates are the non-standard income proofs, which are used to fill the gap in the financial eligibility of a term insurance aspirant. Here is a list of acceptable documents that can work as financial surrogates:

• Certificates of fixed deposits
• Statements of Mutual Funds
• Papers of property
• Documents proving land ownership
• Bank statement for past six months
• Other investment proofs e.g. PPF, bonds, statement of Demat account, Kisan Vikas Patra, NSC certificates, etc.

Note: The aforementioned list may change as per the insurer. 

Free look is the period in which, if the policyholder is not completely satisfied with the terms and conditions of the policy, then they can return the policy to the insurance company. In general, there is a 15-day free look period from the date of commencement of the policy and a 30-days free look period if the policy is purchased online or through a distance. If the policyholder withdraws the policy in the free look period, then they are entitled to a refund of premium (after deducting risk premium or any other charges mentioned in the policy document).

Grace period is an extension provided after the due date to the policyholder in case they are not able to pay the premium amount on time

In force policy means a normal active policy for which all premiums are duly paid

Insured is a person whose life is covered under the insurance policy

A lapsed policy is the policy that is not active anymore due to the non-payment of premiums

Lapse means terminated insurance policy due to non-payment of premiums

The claimant is the individual whose life is insured or the nominee who is entitled to receive policy benefits after the policy tenure

Maturity is the completion of the policy tenure at which the policyholder or the nominee receives the policy claims as per the terms and conditions

Maturity date is the date mentioned on the policy of the document at which the benefits are payable to the policyholder or the nominee

A nominee is a person who is nominated by the policyholder in writing. The nominee is entitled to receive death benefits and other benefits under the policy after the demise of the policyholder as per the terms and conditions of the policy

Non-participating plans are the plans in which the policyholder is not entitled to any kind of profit or surplus sharing with the insurance company

A nomination is an act in which the policyholder gives written authority to a person making them entitled to receive all the benefits and policy proceeds in case of the demise of the insured. The authorized person is called the nominee

Premium is the pre-decided amount to be payable by the insured to the insurer for keeping the policy active and ongoing as per the terms and conditions

Paid-up sum assured on death is the reduced amount of sum assured on death. The calculation formula of paid-up sum assured on death is [(Sum Assured on Death X Number of premiums paid) / Total number of regular premiums payable]

If the policyholder pays regular premiums for the first 3 years of the commencement of the policy and is not able to pay the regular premium for the subsequent years, then the policy is automatically converted into a paid-up policy. The amount is then paid as a paid-up sum assured on maturity after the expiration of the grace period as per the terms and conditions of the policy.

Paid-up sum assured is the reduced value of sum assured. The calculation formula of paid-up sum assured is [(Sum Assured X Number of premiums paid) / Total number of regular premiums payable]

Participating plans are the plans in which the policyholder is entitled to any kind of profit-sharing or bonus with the life insurance company

The duration of the policy from the commencement till the date of maturity is called policy term

A time period for which the premium amount is to be paid for a particular policy is called the premium paying term

A policyholder is an individual in whose name the policy documents are processed. Only a policyholder has the right to make changes of any kind in the policy insurance contract.

A rider is an add-on benefit option in addition to basic benefits offered under a policy that is purchased separately by a policyholder.

Regular premium is the normal pre-decided premium to be paid by the policyholder to the insurance company at regular intervals during the policy premium tenure.

The regular premium fund value is calculated by multiplying the total number of regular or limited premium units in each fund by the relevant unit price.

Restoration of the life insurance policy after the policy lapse is called reinstatement

Generally, a policy lapses in case of unpaid premiums even after the completion of the grace period. After the termination of the policy, the insurance company still provides an option to the policyholder to revive their policy. This revival option is offered for a specific period of time after the completion of the grace period and this period is called the revival period.

Rider Life Assured is the extra benefit that adds up to the base policy when you opt for the rider option while buying an insurance plan. Each rider benefit has its own payout rules as per the policy documents.

Rider Sum Assured is an additional cover the adds up to your base policy when you select the rider option while purchasing your term insurance plan. Each rider benefit has its own rules as per the policy document.

Rider Premium Charge is the extra charge deducted from the policy to provide the additional rider benefits. Each rider benefit has its own payout rules as per the policy documents.

Rider term means the period from the commencement of the rider benefit till the period of its Maturity as pre-defined in the policy documents. Every policy has its own rider term period rules as mentioned in the policy.

Rider benefit is the additional benefits cover option under the insurance policy. Various additional options are offered under rider benefit as per the rules under the specific policy document.

Rider premium is the amount payable by the policyholder to the insurance company during the rider premium paying term. the amount is exclusive of taxes, if any. Rider premium is paid along with regular premium at a regular premium paying frequency pre-decided while buying the policy.

Rider premium paying term is the specified tenure of premium payment decided at the start of the policy tenure. Rider premium is paid along with regular premium at a regular premium paying frequency pre-decided while buying the policy.

Sum assured is the amount that is payable during the death of the life assured to its nominee. The sum assured amount is payable as per the terms and conditions under the policy documents to the family of the life assured.

Suicide Exclusion means that no benefit as such will be payable if the life insured commits suicide within one year of commencement of policy or revival of the policy.

Survival benefit is the benefit amount payable to the policyholder if they outlive the policy period as mentioned in the policy document.

Generally, the survival period is the period of 30 days from date of diagnosis of critical illness as per the policy document.

Surrender value id the amount to be paid to the policyholder in case of surrendering the life insurance policy during the policy tenure.

Surrender benefit is the benefit amount payable during the surrender of the policy. Surrendering benefit depends upon policy to policy. It is not generally offered under every policy and the individual needs to go through the policy documents carefully before buying the policy.

Policy term is the duration from the commencement of the policy to the maturity of the policy. Term duration varies from one policy to another.

Underwriting is the process in which the individual or the company takes financial risk and also ensures that the risk covered is proportionate to the risk faced.

WOP or Waiver of Premium Benefit is the benefit in which the future premium payments by the policyholder are waived off under certain conditions as per the policy document provided during the commencement of the policy.