Insurance Jargon

1. Premium
This is the amount you pay to the insurance company every year for a fixed period of time. Where as, A single premium policy will need you to pay just one lump-sum amount.

2. Insurer

The insurer is the insurance company that offers the policy. 

3. Insured or Policy holder

The person in whose name the insurance policy is made is referred to as the policy holder or the insured. 

4. Nominee or Beneficiary

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.


5. Sum Assured

Sum assured is the amount of money an insurance policy guarantees to pay to the nominee in case of untimely death of the policy holder during the policy duration. This is also known as your life risk coverage and is the total amount you are insured for.

6. Maturity Value

Maturity value is the amount the insurance company will pay you when the policy matures. This would include the sum assured and the bonuses.

Let's take an example

Age of policy holder	30 years
Cover	Rs 1,00,000
Term	20 years
Annual premium	Rs 6,000

If the policy holder dies during policy term, the beneficiary gets Rs 1,00,000 along with the bonuses, if any.

If the policy holder is alive when the policy matures, he/she will get Rs 1,00,000 as well as any bonuses declared during the tenure of the policy.

Let's say the bonuses amounted to Rs 1,00,000. His/her maturity value would be Rs 2,00,000 (sum assured + bonuses) 

7. 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 to the policyholder either at the end of the policy, or, if death occurs before that, to the nominee.

The 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.

As opposed to a with-profit bonus, there is a guaranteed bonus.This is part of the sum assured. It will be paid  irrespective of the profits of the company




8. Term


The term is the number of years your Life risk is covered. So, if your policy lasts for 20 years, it is referred as Policy with a 20 year term.

9. Term Insurance

It provides policyholder with protection only. If the policyholder dies before the policy term, his nominee will get the sum insured. If the policyholder lives beyond the specified period, the policyholder gets nothing.  This is the cheapest and most basic type of life insurance

10. Endowment Insurance

This is similar to Term Insurance except that, if you live beyond the policy term, an amount will be paid to you on maturity of the plan including bonuses if any. This kind of policy combines saving (because money is given to you on maturity) with some protection (your nominee gets an amount if you die).

11. Rider

It is an optional feature that can be added to a policy. For instance, you may take a life insurance policy and  add on accident insurance as a rider. You will have to pay an additional premium to avail this benefit

12. Annuity

Annuities refer to the regular payments the insurance company will guarantee at some future date. Say, after you cross 55, the insurance company will start giving you a monthly or quarterly return. This is known as an annuity (premium is what you pay them). This is often done to supplement income after retirement.

13. Surrender Value 

Halfway through the policy, you might want to discontinue it and take whatever money is due to you. The amount the insurance company then pays is known as the surrender value. The policy ceases to exist after this payment has been made. You will lose out on returns if you withdraw your policy before time.

14.  Paid-up value

If you stop paying the premiums, but do not withdraw the money from your policy, the policy is referred to as paid up. The sum assured is reduced proportionately, depending on when you stopped. You then get the amount at the end of the term

15. Survival Benefit

This is the amount payable at the end of policy term. 

Let's take an example.

Age of policy holder	30 years
Cover	Rs 2,00,000
Term	15 years
Annual premium	Rs 18,000

Now the policy promised to give back a portion of the sum assured (10%, 15%, 20%, 25%) every three years as survival benefit.

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 + Bonuses, if any

If the policyholder dies during the term, the beneficiary will get the entire Rs 2,00,000. Irrespective of whether or not the survival benefit has been paid.