Glossary
Glossary of key life insurance terms
Get quick, easy to understand explanations of finance and life insurance related terms that you might come across during interactions with accountants, financial institutions or while running your business.
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Accelerated payment of basic cover
This occurs when the basic cover amount is paid earlier than death or maturity. For example the policy may provide for the full payment of the death benefit in the event of total and permanent disability.
Accident
The term accident is sometimes defined in the policy document as follows - the accident must be caused by violent, external and visible means and cause of the injury or injuries solely and independently of any other means.
Accidental death benefit
Benefit, which provides for the payment of an additional sum (usually equal to the sum insured of the basic policy) in the event of death by an accident.
Balanced fund
A fund that maintains a balanced portfolio, generally 60% bonds or preferred stocks and 40% common stocks.
Capital Gains Taxes
Taxes that are imposed at the redemption of all capital gains.
Capitalisation
The value of a fund derived by the multiplication of the fund's share price by the number of outstanding shares. Most often, this is applied in to determine the value of the specific companies.
Date of commencement
The date on which the cover begins, following acceptance of the risk by the insurer.
Endowment
A type of insurance policy which provides for the face amount stated in the contract to be payable on fixed date or on the life insured's earlier death.
Family history
The medical history affecting the applicant's immediate family. It is to look for a hereditary illness. The focus should be on illness where the onset is before the age of 50.
Government Bonds
These are effectively financial instruments used by the government to borrow money from the public. The rates of interest and the term period of government bonds are fixed.
Hazardous avocation
A hobby that has a high risk for insurance purposes. Example: A deep-sea diver or a free-fall skydiver.
Immediate annuity
An annuity where income benefits begin one annuity period after the annuity is issued. If it is specified that benefits are paid annually, then the benefit payments begin one year after the issuance.
Joint and survivor option
An option on an annuity that provides that the annuity payout will continue through the lives of two people. If one of the payees dies, payments continue to the second payee throughout that payee's lifetime.
Keyman Insurance
An insurance policy that a company purchases on a key employee whose knowledge, network and experience is so essential that the untimely death of the employee will have a severe impact on the profitability of the company.
Lapse
Termination of a life insurance contract because of non-payment of premiums. If there are non-forfeiture values, the policy lapses but may remain effective with reduced paid-up insurance.
M & A
Mergers and acquisitions
Net Asset Value (NAV)
The value of a fund share. It is determined by dividing the total value of the fund's assets by the number of outstanding shares. This value is calculated daily by the fund.
Offer-price
The price to buy one share of a specific kind.
Participating Policy
A participating policy is also known as a with-profits or par policy. A participating policy charges a higher premium than a non-participating policy. In return, the policy owner shares in the life insurance company's divisible surplus, in the form of the bonus allotted to the policy. The bonus is allotted in addition to the guaranteed sum assured. This bonus is paid along with the basic sum assured.
Quality
The creditworthiness of a bond issuer, which indicates the likelihood that it will be able to repay its debt.
Redemption fee
The fee levied for selling shares of your index fund. It is usually a fixed percentage of the total value of your fund.
SEBI
Securities and Exchange Board of India
TDS
An endorsement or attachment to a life insurance policy that provides additional term coverage for the amount specified. If the insured dies during this time, the designated beneficiary(ies) can receive the death benefit proceeds.
UTI
Unit Trust of India
Vesting age
This is the age when the rights under the policy vests with the name individual.
Waiting Period
This applies when the benefit is payable after a specified period. For certain benefits, the cover may only commence after a specified period. For example, if a diagnosis of cancer or heart attack is made within 180 days of the commencement of the policy the critical illness benefit is not payable.
Yield
Yeild is the income or dividends received from a security or fund
