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In this chapter, we have collected a list of terminologies associated with Insurance that will be beneficial for upcoming Insurance Exams.
Insurance-related Terminologies
S.No
Term
Meaning
1
Policy Holder
A person or company that buys an insurance plan to protect itself from risk. The policyholder is said to be insured.
2
Insurer
The Insurance company that sells the insurance product is known as the insurer
3
Premium
It is the payment that a policyholder makes to an insurer in exchange for the insurer’s obligation to pay benefits upon the occurrence of a specific event.
4
Sum assured/ Coverage
It is the amount that the insurer agrees to pay on an occurrence of an insured event like death.
5
Policy Tenure
The duration for which the insurance policy is valid.
6
Life assured
It is the person for whom the Life Insurance plan is bought. Suppose a husband buys a life insurance product for his wife, then the wife here is the Life Assured
7
Maturity Age
it is the age of the life assured at which the policy ends or terminates.
8
Nominee
He/she is the person (legal heir) nominated by the policyholder to whom the sum assured under the insurance plan will be paid by the life insurance company in case of an unfortunate eventuality.
9
Proposal Form
A proposal form is the form completed by the policyholder when applying for insurance.
The insurer has a duty to furnish free of charge a copy of the proposal form within 30 days of the acceptance of the proposal.
10
Free-look Period
Free-look period is a time frame during which one may choose to return the purchased policy.
Free-look period for normal policy- 15 days;
Free-look period for Policy bought from distance mode- 30 days
11
Grace Period
If you couldn’t pay the renewal premium for your policy on time, the life insurance company gives you an extension in the number of days after the premium payment due date.
Grace Period for annual premium- 30 days; For other duration- 15 days
12
Mortality Charge
It is the actual cost of insurance in a life policy for the insurer. It is a part of the premium.
13
Lapse in insurance
It is the termination of an insurance policy due to non-payment of premium by insured to the insurer.
14
Policy not in Force
If an insurance policy has lapsed due to non-payment of premium then it is termed as Policy not in force.
15
Surrender Value
The value payable to the policyholder in the event of his deciding to terminate the policy before the maturity of the policy. In this case, the policyholder stops paying the premium and gets the money at that time.
16
Paid-up Value
If the policyholder stops paying the premium but does not withdraws the money from his policy, the policy is said to be paid up. In this case, he will get at the end, the paid-up value.
17
Underwriter
professionals who evaluate and analyze the risks involved in insuring people and assets. They decide whether or not a person should be provided insurance.
18
Agent
Licensed representatives of an insurance company
19
AD&D
Accidental Death & Dismemberment – It is a type of insurance policy that pays benefits to the beneficiary if the cause of death is an accident.
20
Annuity
It is a type of insurance plan that pays out regular income to the policyholder at a specific interval usually after retirement.
21
Coinsurance
the sharing of risks between two or more title insurance companies.
22
Solicitation
approaching a client by an insurer or an intermediary with a view to convince the client to purchase an insurance policy.
23
Deferment Period
The period between the date of subscription to an insurance-cum-pension policy and the time at which the first installment of pension is received.
24
Exclusions
Specific conditions or circumstances for which the policy will not provide benefits.
25
Keyman Insurance Policy
Keyman insurance can be defined as an insurance policy where the proposer, as well as the premium payer, is the employer, the life to be insured is that of the same employer’s key employee (Keyman) and the benefit, in case of a claim, goes to the employer.
26
Reinstatement
The restoration of a lapsed policy to in-force status. Reinstatement can only occur after the expiration of the grace period.
27
Vesting Age
The age at which the receipt of pension starts in an insurance-cum-pension plan.
28
Burning Ratio
The ratio of losses suffered to the amount of insurance in effect.
29
Lapse Ratio
The ratio of the number of policies that lapse during a period to the total number of policies in force at the beginning of that period.
30
Loss Ratio
The ratio between incurred losses to earned premiums expressed as a percentage.
31
Reinsurance
it is a form of insurance purchased by insurance companies in order to mitigate risk. Companies providing reinsurance facility is known as Reinsurer.
32
Cession
refers to the portions of the obligations in an insurance company’s policy portfolio that are transferred to a reinsurer.
33
Commission
It is the fee paid by the insurer to agents and brokers for the sale of insurance policies.
34
Waiting Period
A concept in health insurance. It is the minimum time which must pass before some or all of your health care coverage can begin.
35
Indemnity Insurance
This is a type of insurance to protect the working professionals like architects, engineers, doctors, lawyers and medical practitioners, and services such as medical establishments against legal claims for error, omissions, professional neglect for both the principles and their employees.
36
Double insurance
It is a type of insurance where the same thing is insured more than once but with different insurers.
37
Penetration Rate
It indicates the level of success of insurance in a country. It is measured as the ratio of premium underwritten in a particular year to the GDP.
38
Compulsory Insurance
Type of insurance that is compulsory under the law. Example: Motor third-party insurance is compulsory in India
39
Under-insurance
It refers to inadequate insurance coverage held by a policyholder i.e when something is insured for less than its true value
40
Self-insurance
It is a risk management technique in which a company or individual sets aside a pool of money to be used to remedy an unexpected loss in place of buying an insurance policy from a third party.
41
Bancassurance
Selling of the insurance products by the banks.
42
Proposer
The one who buys the insurance policy.
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