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Insurance Terms You Must Know
Insurance Terms You Must Know
It's easy to get confused when opting for an insurance policy. The jargon can be quite
overwhelming and you may end up getting baffled and going for whatever the agent
recommends.
Here we explain the basic insurance lingo that you must get a grasp on.
1. Premium
This is the amount you pay to the insurance company to buy a policy.
A single premium policy will need you to pay just one lump-sum amount.
The annual premium policy will require you to pay every year. This will go on for a fixed period of
time. The exact number of years will depend on the scheme in question.
2. Insurer and Insured
The person in whose name the insurance policy is made is referred to as the policy holder or the
insured. So, if you have taken an insurance policy, you are the policy holder, the one who is
insured.
The person whom you name as the nominee is the one who will get the insured amount if you
die. The nominee is referred to as the beneficiary.
The insurer is the insurance company that offers the policy.
In India, there are 13 life insurance players. We have listed them in alphabetical order:
Aviva Life Insurance
Bajaj Allianz
Birla Sun Life Insurance
HDFC Standard Life Insurance
Kotak Life Insurance
Life Insurance Corporation of India
Max New York Life
MetLife
Reliance Life Insurance
Sahara India Life Insurance
SBI Life Insurance
Shriram Life Insurance Co Ltd.
Tata AIG Life
30 years
Rs 2,00,000
20 years
Rs 9,000
If the policy holder passes away before the policy matures, the beneficiary gets Rs 2,00,000
along with the bonus too (if any).
If he is alive when the policy matures, he will get Rs 2,00,000 as well as any bonuses declared
during the tenure of the policy.
Let's say the bonuses amounted to Rs 1,00,000. His maturity value would be Rs 3,00,000 (sum
assured + bonuses).
4. Bonus
This is the amount given in addition to the sum assured.
Reversionary bonus is a bonus that is added to policies throughout the term of the policy. It may
or may not be declared every year. When it is declared, it will not be given to you immediately.
It will be payable as a guaranteed sum to the policyholder either at the end of the policy, or, if
death occurs before that, to the nominee.
This bonus can either be a with-profit bonus or a guaranteed bonus.
A with-profit bonus is linked to the profit of the company. If the company makes a profit, it
declares a bonus in accordance with the profits. The profits are added to your insurance policy
and given to you either on maturity of the policy or to your nominee if death occurs before that.
This bonus will be flexible as it is dependent on the performance of the company. However, once
it is declared, it becomes part of your sum assured.
This is offered purely at the discretion of the insurer and depends on the profits made that year.
As opposed to a with-profit bonus, there is a guaranteed bonus.
This is part of the sum assured. It will be paid to you irrespective of the profits of the company.
30 years
Rs 2,00,000
15 years
Rs 18,000
Now the policy promised to give back a portion of the sum assured (10%, 15%, 20%, 25%) every
three years.
After 3 years: Rs 20,000
After 6 years: Rs 30,000
After 9 years: Rs 40,000
After 12 years: Rs 50,000
On maturity: Rs 60,000
Should you die during this tenure, your beneficiary will get the entire Rs 2,00,000. Irrespective of
whether or not you have been paid any amount till date.