Insurance terms explained in a simplified manner

Annuity : Cash Payments made by the Insurance Company to help you meet your living expenses after retirement

Assets : Anything that you own and has a cash value

Beneficiary : Person who is entitled to receive the benefits specified in the Insurance Policy

Broker : The go-between you and the Insurance Company to represent your needs and interests.

Calamity : A mishap resulting in unexpected heavy loss

Cashless Settlement : This is a service in Health and Motor insurances, Insurance Company will directly pay to the hospital or garage up to your coverage limit.

Claim : Money you can get from your Insurance Company for the losses you suffered.

Claim settlement : Process of settling the Claims from Intimation to payment

Claim Settlement Ratio : The proportion of settled claims to intimated ones

Constructive Total Loss : Cost of repair of the damaged asset is more than its replacement value

Co-pay : Your share of the claim, you agreed to pay from your pocket

Cover/Coverage : Maximum amount payable in the event of loss. Same as Sum Assured or Sum Insured.

Death Claim : Insurance money payable only in case of death of the Insured

Deductible : The amount Insurance Company deducts from the Claim amount payable in case of loss

Depreciation : Decrease in cash value of the property due to wear and tear or age

Discount : Amount reduced from the estimated Premium payable on your Policy

Domiciliary Hospitalization : Treatment carried at home for any reason which otherwise requires hospitalization

Empaneled Hospital /Networked Hospital : Hospitals where cashless settlement is available

Equity : A part of share capital of a Company

Exit charges : Charges you incur if you like to take out the policy amount before its due date

Frequency : The number of times, you pay your premium instalments in a year

Guarantee : Money the insurance company assures to pay on certain events of death, surrender, withdrawal or maturity of Policy

Hazard : Danger that might lead to a financial loss

Hidden charges : Charges that you have not realized you need to pay as they are concealed in small print or in a language difficult to understand

IDV / Insured Declared Value : The amount you insure your vehicle for. It usually decreases every year due to depreciation.

Inflation : General increase in prices or decrease of value of money

Insurance : Financial security to pay you in the event of loss to property, health or life.

Insured : The person whose life, health or property is insured

Insurer : The Company which provides the Insurance

Investment : Money put into any other financial assets that gives you a return or gain.

IRDAI : The Regulatory Agency responsible for protection of your rights under the Insurance Policy

Lapse : When your insurance terminates due to non payment of premium in time.

Liability : Any financial burden you have that needs payment of cash

Liquidity : Money that you can readily spend

Livestock : Farm animals that help you get revenue

Lock in period : Time period when you cannot take money out from your policy except in case of a claim.

Long term Investments : Investments made usually for above 5 years.

Loss : Unexpected damage to property, health or property that causes financial distress

Market value : Money you get if you sell the assets in the market

Material Fact : Important information about you, Insurance Company needs to decide on your Policy acceptance, premium and terms. If you hide any material facts, your claims may be rejected later.

Maturity Benefits : Amount you’d get at the end of the Policy period

Maturity Claim : Claim for Maturity benefit (the amount you’d get at the end of the Policy Period)

Mortality Charge : Its part of your premium, Insurance companies would charge for covering risk of death of the Insured.

Mortality Rate : The number of deaths in a particular segment at a particular time

Mutilation : Serious damage to a body part leading to dysfunction of the same.

Net Asset Value : It’s the value of your unit holdings in an Insurance Policy determined by dividing the Market Value of the investments by the number of units in the fund invested.

Network Providers : Network of hospitals or garages where you can get Cashless Service in Health or motor insurance respectively

No Claim Bonus : The discount you’d get on your next year’s premium if you don’t have any Claims before

Nominee : The person specified to receive the Insurance amount in case of a Claim

Octroy Charges : State or Local Government taxes payable on goods at the entry point of a City/State

Optional Deductible : Money that you agree to be deducted from your insurance claim to get discount on future premiums

Partial insurance : In Partial Insurance, your premium would get reduced because part of the risk is on you and in case of claim, only partial amount is paid

Partial loss : An asset that’s not completely damaged but is also not fully useful

Partial withdrawal : Money that you can withdraw from your Policy benefits after some years

Peril : The cause of an injury or accident that leads to financial loss

Policy : Also called Plan. This is the key document that lists out the features, benefits, terms and conditions of Insurance.

Policyholder : A person or entity who is the owner of an Insurance Policy

Preauthorization : Written permission from insurance company for cashless claims before getting hospitalized. Usually, 4 days before for pre-planned or within 24 hours of urgent hospitalization

Pre-Existing Condition (PED) : Any health problem you are suffering from before taking the insurance.Claims caused due to PEDs are not payable during a wait period of 2-4 years from taking Insurance

Premium : The amount you need to pay to get an Insurance Policy and enjoy its benefits.

Premium waiver : A condition where further Premium need not be paid after an event such as the death of a parent of an Insured Child, though Policy benefits continue till the full term of the Policy.

Profit : Gains you make from your financial investment

Property : Assets with a commercial value that you own

Pro-rated basis : Amount charged or paid proportionately over a particular time period.

Reimbursement Health Claim : Where you don’t have cashless facility, you need to first pay to hospital and claim later from your Insurance company.

Reinstatement value : It is the amount that’s needed to bring back your damaged property to its condition before the accident.

Renewal : It’s a process to continue with the Policy for which you need to pay premiums every year

Returns : Gains you get from your investment

Rider : An additional benefit that can be added to your Policy for an extra cost

Risk : Danger that might lead to financial loss

Risk profile : It’s an estimated view of how much risk you can take without seriously impacting your financial condition

Room Rent Limit : Maximum amount, your Insurance Company would pay for a hospital room in case of a health claim.

Savings : Money you keep aside for future needs

Sum Insured : Maximum amount payable in the event of loss. Same as Cover/Coverage.

Super Top up : Extra amount, a Plan will pay for your hospital bills after you have used the full insurance cover on any single hospital bill.

Surrender value : Money that is paid to you if you exit the policy before its full term

Surrender : Cancelling the Policy before its full term

TAT (Turn Around Time) : Time taken by Insurance Company to issue your policy, pay claims or any service request.

Term : Duration or time period of an Insurance policy

Third party : Anyone other than the Policyholder or the Insurance company

Top-up : Extra amount, a Plan will pay for your hospital bills after you have crossed the full insurance cover on your annual hospital bills.

TPA : The Third Party Administrator who helps you process all your Insurance claims by coordinating with Hospitals and Insurance Companies.

Underwriting : The process of assessing the insurability of a risk for specified premium, terms and conditions.

Units : A numerical part of your holdings in your Insurance Policy. If you multiply your Units with NAV,you’d get the present value of your Insurance holdings.

Valued Policy : A Policy where a pre-determined amount is paid irrespective of the extent of loss or the actual value of the property that’s damaged.

Wear and Tear : Decrease in the value of an asset due to its usage or age. Wear and Tear losses are considered normal and not paid by Insurance.

Zero Depreciation : It’s an Add-on benefit that helps you get full Property value without considering the depreciation of the asset.