Insurance Basics
Insurance glossary
Every insurance word you will see on this website, explained in one or two simple lines. Tap a term's guide link to learn more.
A
- Age nearer birthday
- Your age counted to the nearest birthday, whether past or coming. LIC uses this method to decide premium and eligibility.
- Annuity
- A regular income paid to you for life or a set period in return for a lump sum (the purchase price). It can start at once (immediate) or after some years (deferred). Read the guide
B
- Basic sum assured
- The base amount of cover chosen when buying a life policy. Premium, bonus and many benefits are calculated on this amount. Read the guide
C
- Cashless claim
- A claim where the insurer pays the network hospital or garage directly, so you pay only items that are not covered. Read the guide
- Child plan
- A life insurance plan meant to build money for a child's education or marriage, often with payouts timed to the child's age. Read the guide
- Co-payment
- A fixed share of every admissible health claim that you pay yourself, with the insurer paying the rest. Read the guide
D
- Death claim
- A claim made by the nominee or legal heir after the death of the life assured, to receive the death benefit. Read the guide
E
- Endowment plan
- A life insurance plan that pays the sum assured plus any bonus on maturity, or a death benefit if the life assured dies during the term. Read the guide
F
- Family floater
- A health policy where the whole family shares one sum insured, which any member can use in a policy year. Read the guide
- Final additional bonus
- A one-time extra bonus that may be paid with a death or maturity claim on eligible participating policies, if declared. Read the guide
- Free-look period
- A short period after receiving a new policy when you can return it if you disagree with its terms and get a refund, after allowed deductions. Read the guide
G
- Grace period
- Extra time allowed after the premium due date to pay without losing cover. The number of days is stated in the policy. Read the guide
- Guaranteed additions
- Fixed amounts added to some non-participating plans each year as promised in the policy, not linked to company profits. Read the guide
H
- High sum assured rebate
- A premium discount given when you choose a larger basic sum assured, as per the plan's rebate table. Read the guide
I
- IDV
- Insured Declared Value: roughly the current market value of your vehicle and the most the insurer pays for theft or total loss. Read the guide
L
- Lapse
- When a premium is not paid even by the end of the grace period, the policy lapses and full cover stops. Read the guide
- Life assured
- The person whose life is insured. The benefit becomes payable on this person's death or on survival as per the policy. Read the guide
- Loyalty additions
- Extra amounts that some plans add for staying in force for a long time, paid as per the policy terms if declared. Read the guide
M
- Maturity claim
- The claim for the amount payable when a policy completes its term and the life assured is alive. Read the guide
- Money back plan
- A life insurance plan that returns part of the sum assured at set intervals during the term, with the balance and bonus paid at maturity. Read the guide
N
- Network hospital
- A hospital that has an agreement with your health insurer to provide cashless treatment to policyholders. Read the guide
- No Claim Bonus
- A reward for a claim-free year: a discount on motor own damage premium, or extra sum insured in health insurance. Read the guide
- Nominee
- The person named in the policy to receive the claim amount if the life assured dies. It can be changed during the policy term. Read the guide
- Non-participating (Non-par)
- A policy that does not share in the insurer's profits, so it gets no bonus. Its benefits are fixed or guaranteed in the policy. Read the guide
O
- Own damage cover
- Motor insurance that pays for damage to or theft of your own vehicle from events listed in the policy. Read the guide
P
- Paid-up value
- A reduced sum assured that continues after you stop paying premiums, once the policy has run long enough to qualify. Read the guide
- Participating (Par)
- A policy that shares in the insurer's profits through bonuses, which are declared from time to time and not guaranteed in advance. Read the guide
- Pension plan
- A plan that helps you build a retirement fund and convert it into a regular income (annuity) later in life. Read the guide
- Policy loan
- A loan from the insurer against your policy's surrender value, available on eligible policies, with interest charged as per terms. Read the guide
- Policy term
- The total number of years for which the policy remains in force and gives cover. Read the guide
- Pre-existing disease
- An illness or condition you had before buying a health policy. It is usually covered only after a waiting period stated in the policy. Read the guide
- Proposer
- The person who applies for the policy and pays the premium. The proposer may be the life assured or, for example, a parent. Read the guide
R
- Restoration benefit
- A health policy feature that refills the sum insured, fully or partly, after it is used up in a policy year, as per policy conditions. Read the guide
- Revival
- Restarting a lapsed policy by paying overdue premiums with interest, within the period allowed. Proof of good health may be needed. Read the guide
- Rider
- An optional add-on cover, such as accident or critical illness benefit, bought with a base policy for extra premium. Read the guide
- Room rent limit
- A cap on daily hospital room charges in a health policy. Choosing a costlier room can reduce payment for other related charges too. Read the guide
S
- Settlement option
- A choice to receive the maturity or death benefit in instalments over some years instead of one lump sum, where the plan allows. Read the guide
- Simple reversionary bonus
- A bonus declared yearly on participating policies per thousand sum assured. It is added to the policy and paid on death or maturity. Read the guide
- Sum assured on death
- The amount payable on death of the life assured during the term, as defined in the policy. It may be higher than the basic sum assured. Read the guide
- Sum assured on maturity
- The amount payable when the policy matures, as defined in the policy, before adding any bonus or additions. Read the guide
- Sum insured
- The maximum amount a health policy will pay for covered expenses in a policy year. Read the guide
- Super top-up
- A health plan that pays once your total covered bills in a policy year cross a chosen deductible, adding low-cost extra cover. Read the guide
- Surrender value
- The amount paid if you close a policy before maturity. The insurer pays the higher of the guaranteed and special surrender value. Read the guide
- Survival benefit
- An amount paid at set times during the policy term while the life assured is alive, as in money back plans. Read the guide
T
- Term insurance
- Pure life cover for a fixed term. It pays the sum assured only on death during the term, so premiums are low for high cover. Read the guide
- Third-party cover
- Motor insurance that pays for injury or property damage you cause to others. It is compulsory by law for vehicles on public roads. Read the guide
U
- UIN
- Unique Identification Number given by the insurance regulator to each approved insurance product. It appears on the brochure.
- ULIP
- Unit Linked Insurance Plan: a plan that combines life cover with investment in market-linked funds, so returns are not guaranteed. Read the guide
- Underwriting
- The insurer's process of assessing your age, health, income and habits to decide whether to accept a proposal and on what terms.
V
- Vested bonus
- Bonus that has already been declared and added to your participating policy. Once vested, it is part of the policy's value. Read the guide
W
- Waiting period
- A period after a health policy starts during which some or all claims are not paid, as stated in the policy. Read the guide
- Whole life plan
- A life insurance plan that gives cover for the whole of life or up to a high age, such as 100 years, as stated in the policy. Read the guide
Z
- Zero depreciation
- A motor add-on that pays claims without deducting depreciation on replaced parts, subject to policy terms. Read the guide