Glossary

Glossary

Confused about all the jargons being used, let us help you know more about various terms being used in Insurance.
Here's an easy guide to the various technical terms to help you understand better !
Categorise by alphabets


GENERAL INSURANCE COMPANIES: Insurance companies which offer risk (insurance) cover on non-life entities, such as Crop insurance, Fire Insurance, etc are known as General Insurance Companies. They cover human life only for Mediclaim Policies.

GRACE PERIOD: is the period during which the policyholder can renew his policy. The policy remains in force, i.e. the risk continues to be covered during this period and claims will be serviced in case of death during this period.
For yearly, half yearly and quarterly premium payments the grace period is 30 days.
For monthly mode of payment- 15 days.

GROUP GRATUITY SCHEME: The Payment of Gratuity Act 1972 makes it compulsory for employers, who have 10 or more employees, to set up a Gratuity Scheme. The Group Gratuity Scheme operates as follows:

Employer sets up Gratuity fund as an irrevocable trust fund

Trustees enter into a contract with an insurance company to manage funds

Insurance company manages fund by diversifying risk

The MAIN BENEFIT is to the families of employees who die at an early age since the gratuity is paid on the basis of completed service.

GROUP INSURANCE provides cover for a group of people who satisfy the following conditions:
The group must be formed for reasons other than to take a policy
Members enter and exit a group for reasons other than to take a policy
Should consist of more than 25 members

The Master policy covers all group members and there is no mandatory requirement for all members have to apply for equal cover. At inception of the policy, all members have an option to join, but members who join later cannot be covered immediately. Members appoint a specified authority to represent the group and premiums vary depending on performance of the group. The surplus if any may be shared among members in case of good performance (PROFIT SHARING SYSTEM).


GROUP INSURANCE SCHEME: This is a term insurance type of contract, simple and cheap. The specified amount is payable by the insurer on death of a member.

GROUP SAVINGS LINKED INSURANCE SCHEME: this provides both death and savings benefit. It normally requires the group to consist of at least 50 members. The scheme is administered through the employer, with the first charge on salary for life insurance cover. The balance in this account is utilized for earning interest. The premium for providing risk cover is based on the age distribution of members of the group and balance amount of the premium after deducting for risk cover is used for savings (endowment).

GROUP SUPERANNUATION SCHEME: This operates like a Pension scheme where the payments made at the end of each period
Employers set up trust fund.
Trustees enter into a Superannuating scheme.
Fund managed by insurer.
Insurer provides actuarial, legal and tax assistance to trustees.


GUARANTEED SURRENDER VALUE: You can obtain this minimum amount in case you decide to foreclose the policy, after payment of premium for a stipulated minimum period.

GUARANTEED ADDITION: In case of certain policies, the insurance company adds a certain sum every year to the sum assured of a policy (guaranteed additions). This sum is calculated at a rate per every thousand of sum assured. It is payable upon the maturity of the policy or when the claim is made. The guaranteed addition take place only for every year the premium is paid.

IMMEDIATE ANNUITY/STRAIGHT LIFE ANNUITY: are single-premium policies. The life assured pays a lump sum and the insurer pays him/her a specified amount throughout his/her lifetime. The word immediate denotes that the annuities start from the day on which the single premium is paid, providing immediate income to the insured.

INCREASING (SUM ASSURED) TERM POLICY: In some money-back plans, a fixed percentage of the Sum Assured is paid to the insured at the end of specified periods during the term of the policy. However, notwithstanding the periodical payouts, the sum assured at risk (payable on death) continues to be same during the term of the policy; that is if the life assured dies during the policy term the entire sum assured will be paid to him. These policies are called increasing term policies.

INCREASING TERM INSURANCE: Under certain policies, you death benefit increases periodically over the term of the policy.

INDEMNITY: is a reimbursement or compensation for the actual monetary loss suffered and is made by the insurer to the insured. It has to match the extent of the loss. Indemnity policies make good the monetary loss due to the occurrence of an insured risk due to operation of an insured peril to the extent of such monetary loss.

INSTALMENT REVIVAL SCHEME: is a facility for defaulting policyholders, who cannot to settle their arrears in one lump sum and avail the Special Revival Scheme. The Policyholder can revive his lapsed policy by paying the arrears in installments.

INSURABLE INTEREST: The person who is buying the insurance must have an insurable interest in the thing being insured. If the purchaser will lose monetarily if the object being insured is lost or damaged then he is said to have insurable interest. The main insurable interest is ownership in the case of property insurance. Someone who has lent against that property also has an insurable interest in that property to the extent of his loan. In the case of life insurance, any person is said to have an insurable interest over his or her own life to in indefinite extent. A wife has insurable interest over the life of her husband and a husband over that of his wife.
Insurable interest also exists in some business arrangements like between creditor and debtor or between business partners.
A parent has NO insurable interest in the life of his child in the capacity of a child and vice versa, and similarly neither do siblings have insurable interest in each other's lives.


INSURANCE: A method of managing risk by spreading it. Specifically it is done by transferring the responsibility for bearing the monetary loss due to the risk to another entity (an insurance company) for a consideration. This transfer is called subrogation and includes the transfer of allied rights to the insurer.

INSURABILITY: All conditions pertaining to individuals that affect their health, life expectancy, susceptibility to injuries and diseases.

INSURER: The company that provides insurance cover by issuing contract (policy) of insurance.

JOINT LIFE ANNUITY PLANS: are Annuity plans available for 2 or more persons, normally couples and the annuity is payable till the death of the both.

JOINT LIFE INURANCE PLANS: As the name suggests these policies provide insurance on two lives under one contract. The Sum Assured is payable at the end of the term or on death of either life whichever is earlier. These policies are recommended for working.

LAST BIRTH DAY: The age as on the last birthday of the Policyholder (used for calculating premium).

LIFE ASSURED: is the individual on whose life the policy is taken.

LIFE INSURANCE: is the risk cover an individual can take to mitigate the financial problems that may arise if he/she dies too young or lives too long.

LIMITED PAYMENT WHOLE LIFE PLAN: provide for a fixed premium paying term. The benefit, however, is payable only on death of the life assured. The policy remains in force during the entire lifetime of the life assured.

LOAN-CUM-REVIVAL SCHEME: can be used by policyholders to pay off premium arrears by taking a loan against the policy.

LOAN: against insurance policies gives liquidity to the policyholder. Generally, insurance policies offer the facility of loan being availed against the premium payments made. It may happen that some products may not offer loan facility.

LOYALTY ADDITIONS: In case of some life policies, the Policyholder will be eligible for Additional Bonus alongwith the Sum assured at the time of Maturity of the policy, for having continued the policy till the end successfully.

Source: http://www.sbilife.co.in/sbilife/application?pageid=CorporateGroup&CorporateId1=glossary2