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Read an Insurance Policy Document how...???

Insurance Policy

Insurance Policy is a well defined contract document which clearly illustrates the
terms and conditions, premium, extent of coverage, deductions under different
heads, etc. of an insurance contract. It is completely a legal paperwork in which
all possible details are mentioned. The policies are the basic framework of an
insurance contract, the entire contract between the client and the insurance
company is based on this policy. It is the backbone of the whole contract. In case
of default by any one of the party, he would be subjected to legal consequences.

Insurance Policy can be of various types such as Life insurance, Medical

Insurance or General insurance. The fact is that more than 80% of the people/
policy holders are not able to understand the technical terms/ terminologies
used in the offer document and in the policy document. People blindly believe
the words of insurance agents, this helps them to misguide the people and to sell
them wrong products so that they can earn more commission.

Major aspects covered under Insurance Policy

Following are the major aspects covered under an Insurance Policy;

Type of Insurance (Life, Medical or General)

Purpose of the Insurance
Premium Amount
Assured amount of money to be reimbursed by the insurance company at the
time of maturity or in case of certain loss.
Parameters issued by the specific applications
Coverage limit of the plan/scheme
Requirements to be fulfilled for initiation of the plan/scheme, etc.

In this article we will give you a brief about the important terminologies used in
insurance policy. This will help you in analyzing the scheme by reading the offer
document. If you are able to understand the concepts then no one can cheat you
by misinterpreting the terms and conditions of the scheme. Primary objective of
kgandhi.anindia.com is to make all Indians financially literate so that no one will
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be cheated by others in financial matters. We are always happy to clear your

queries on Financial Products such as Insurance, Mutual Funds, Demat a/c, Bank
a/c, Bank loans, etc.

Terminologies

Following are the important Terminologies used in Insurance.

Age limits: Predetermined minimum and maximum ages below and above which
the company will not accept applications or may not renew policies.

Annuity: It is a scheme under which certain amount is paid at yearly/ half yearly/
quarterly/ monthly intervals.

Annuity Plans: These plans contribute for a "pension" to be paid to the

policyholder or his spouse. In the event of death of both of them during the
policy period, a lump sum amount is provided for the next of kin.

Beneficiary: The person or entity (e.g. corporation, trust, etc.) named in the
policy as the recipient of insurance proceeds on the event of death of the
insured.
Bonus: Bonus is the amount added to the basic sum assured under a with-profit
life insurance policy.

Claim Amount: It is the amount payable by the insurer under a policy during the
time of a claim

Days of Grace: Policyholders are expected to pay premium on due dates. A

period is 15-30 days is allowed as grace to make payment of premium; such
period is known as days of grace.

Death Benefit: A payment made to the beneficiary on the death of the insured
person.

Deferment date: It is the date on which the deferment period ends.

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10. Deferment period: Period between the date of subscription to an insurance-

cum-pension policy and the time at which the first installment of pension is
received.

11. Grace Period: A specified period after a premium payment is due, in which the
policyholder may make such payment, and during which the protection of the
policy continues.

12. Gross Premium:it is the premium paid by the policyholder.

13. Guaranteed Addition: Guaranteed additions are calculated at a rate per every
thousand of sum assured. They are added to the basic sum assured and are
payable on admittance of claim. This benefit is allowed only for the year for
which premiums are paid.

14. Insured: The person whose life is covered by an insurance policy.

15. Loyalty Additions: The loyalty addition is given upon the maturity of the policy.
It is a small percentage of the sum assured. In other words, loyalty addition is the
difference between the performance of the insurance scheme and the
guaranteed additions.

16. Maturity: The date upon which the face amount of a life insurance policy is paid
to the policyholder.

17. Nomination: An act by which the policyholders authorizes another person to

receive the policy money. The person so authorized is called Nominee.

18. Life Assured: Life Assured refers to the person whose life is being insured.

19. Nominee: Nominee is the person who is authorized by the policy holder to
receive the policy money on settlement of claim.

20. Premium: It is the regular periodic payments that a policy holder makes to an
insurer in exchange for the insurer's obligation to pay benefits on the occurrence
of a contingency.
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21. Policy: Is the legal document that has the terms and conditions of the insurance
contract.

22. Policy Period: The period during which a Policy contract covers contingency.

23. Premium Waiver Benefit (PWB): Premium waiver benefits are the benefits,
which can be availed under children's policies, wherein the future premiums
payable up to vesting date are waived in the event of death of the proposer
before the vesting date.

24. Paid-up Value: Paid-up value is the reduced amount of sum assured paid by the
insurer in case of discontinuation of the payment of premiums after paying the
full premiums for the first three years.

25. Premium: Premium is the amount paid to secure an insurance policy.

26. Proposal Form: It is a form, which is to be completed for securing an insurance

policy.

27. Proposer: Proposer is a person who proposes the insurance policy.

28. Risk: The obligation assumed by the insurer when it issues a policy is known as
risk.

29. Rider: A provision attached to a policy that adds benefits not found in the
original policy or that changes the original policy.

30. Sum Assured: Sum assured is the amount that an insurer agrees to pay on the
occurrence of an uncertain event.

31. Surrender Value: Surrender value is the amount payable to the policyholder on
termination of insurance contract before maturity.

32. Survival benefit: The payment of sum assured to the insured person, which has
become due by installments under a money back policy.

33. Underwriting: The process of selecting risks for insurance and determining in
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what amounts and on what terms the insurance company will accept the risk. In
simple terms the process of evaluating and selecting risk is known as
underwriting.

34. Vesting Bonus: It is the Bonus, which the insurer announces after evaluating its
assets and liabilities, and that is added to the sum assured under a policy.

35. Vesting Date: This is the date from which the life assured i.e., child (in child
plan) becomes the absolute owner of the policy.

If you are able to understand all these concepts, you don’t need the help of an
Insurance advisor/agent to understand the features of a Policy and you yourself
can be your advisor. Use this article as a reference material to analyze the offer
document or Insurance Policy.

Advice on:

Inter Corporate Deposits, Special Economic Zone ( S.E.Z.)_Solution

Insurance: Corporate Group Insurance, Children Future Planning, Term

Plan,Home Loan Insurance,Health, Whole life, Pension Plan,Money Back,
Maternity,Tax Planning, Personal Accident, critical Care, Travel,Burglary & Theft,
House hold insurance, office insurance, Shopkeepars insurance, utensil
insurance, Carinsurance, Commercial vehicle, etc….

Investment: ULIP Plans, Systematic Investment Plan, Mutual Funds. Post

OfficeScheme, Govt. of India Bonds, Fixed Deposits etc……
For Further Details kindly Contact :

Thanks and Regards,

Kirang Gandhi
Corporate Financial Planner
www.kgandhi.anindia.com
M-9271267305