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Frequently Asked Questions
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Car Insurance
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1.
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What is Car Insurance?
Car Insurance is basically a contract between you and the insurance company wherein
you pay a premium for a policy that will provide protection against financial losses
if the insured car is damaged or stolen. Car insurance covers theft of and damage
to your car or damage that your car causes, plus liability protection in case you
are sued pursuant to an accident.
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2.
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Is Car Insurance mandatory in India?
Under provisions of the India Motor Vehicles Act 1988, it is mandatory that every
vehicle has a valid Insurance to drive on the road. Any vehicle used for any purpose,
including personal, commercial or business purpose should be insured.
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3.
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What are the types of Car Insurance policy?
Generally there are two types of car insurance; Liability Only Insurance Policy
(Third Party Insurance) and Comprehensive Insurance Policy.
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4.
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What is Liability only Policy?
Liability only Policy protects a policy holder against losses, which arise due to
bodily injury/death to a third party or any damage to its property.
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5.
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What is Comprehensive policy?
Comprehensive policy also called package policy covers both loss/ damage to insured
vehicle and Third Party Liability. It entitles you to claim compensation in case
your vehicle is stolen or damaged. In addition, it also covers additional liabilities
as provided by the India Motor Tariff.
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6.
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Can I cover my vehicle only for Liability;
Fire and / or Theft Risks? Yes, you can. In this case, you can cover your vehicle
for the risks listed below. Liability Only Policy with Fire only cover. Liability
Only Policy and Theft. Liability Only Policy and Fire & Theft.
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7.
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What factors determine the premium amount?
Make and Model of the Vehicle Year of Manufacture Place of Registration Showroom
price of the vehicle Whether Client is Individual or Corporate What is not included
in car insurance? Car Insurance does not cover drunken driving, depreciation, consequential
loss, wears and tears, mechanical/ electrical breakdown, war perils, or vehicle
driven by someone else other than the driver stated in driver's clause. The insurance
also does not cover failure or breakage when the vehicle is used outside the geographical
area.
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8.
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What are the different risks covered under the Own Damage Cover?
It covers loss or damage to the vehicle and accessories/fittings (if insured) arising
out of the following risks: Fire, explosion, self-ignition or lightning Flood, Typhoon,
Hurricane, Storm, Tempest, Inundation, Cyclone, Hailstorm Burglary, housebreaking
or theft Riot and strike Earthquake (fire and shock damage) Accidental external
means Malicious Act Terrorist Activity Whilst in transit by road, rail, inland waterway,
lift, elevator or air Landslide, Rockslide.
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9.
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What is No Claim Bonus?
No Claim Bonus (NCB) is a discount on the premium of the “Own Damage Cover” part
of your vehicle when you renew your policy, provided you have not made any claim
during the last policy period of one year. The NCB can be accumulated up to a maximum
limit of 50% on OD premium. No Claim Bonus will only be allowed provided the Policy
is renewed within 90 days of the expiry date of the previous policy. You can transfer
the full benefits of NCB, even if you switch your insurance company.
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10.
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Can the accessories be insured?
Additional accessories can be insured under the comprehensive policy for an additional
amount. Factory fitted accessories are automatically insured under the policy.
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11.
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What is Anti-theft Discount?
Vehicles fitted with ARAI approved anti-theft devices and whose installation is
duly certified by any of the Automobile Associations of India, are eligible for
a discount of 2.5% on the OD (own damage) component of premium subject to a maximum
of Rs. 500/-.
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12.
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What is Automobile Association Membership Discount?
If you have a valid membership of recognized Automobile Associations such as Automobile
Association of Eastern India, the Western India Automobile Association, etc., a
discount @ 5% of the Own Damage premium, subject to a maximum of Rs. 200/- for a
Private Car is allowed.
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13.
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What is the IDV?
The Insured’s Declared Value (IDV) of the vehicle will be deemed to be the ‘SUM
INSURED’ for insurance, and it will be fixed at the commencement of each policy
period for each insured vehicle. The IDV of the vehicle is to be fixed based on
manufacturer’s listed selling price of the brand and model as the vehicle proposed
for insurance at the commencement of insurance. The IDV of the side car(s) and /
or accessories, if any, fitted to the vehicle but not included in the manufacturer’s
listed selling price of the vehicle is also, likewise, to be fixed.
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Health Insurance
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1.
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What is health Insurance?
Health Insurance is a type of insurance in which the insuring company pays the medical
costs of the insured person if the insured becomes sick or due to an accident. It
offers a protection cover for you and your family for any injury or disease related
emergency like hospitalization, medical expenses, surgical expenses, etc.
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2.
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What does health insurance cover?
Health Insurance covers all hospitalization expenses such as treatment expenses,
nursing expenses, doctor fees, room rent and expenses on diagnostic material, incurred
at any hospital/nursing home by the insured person due to any disease or any bodily
injury through accident.
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3.
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Why does a person need health insurance?
With the rising cost of treatment in case of any illness or accident, it can mean
substantial financial expenditure for you and your family. Health insurance permits
you to plan for such emergencies without feeling the financial burden of treatment.
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4.
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What is the eligibility criterion for taking Health insurance policy?
Generally, anyone between the age of 3 months and 65 years can take a health insurance
policy.
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5.
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What are the minimum and maximum policy durations?
Health insurance policies are generally issued for a period of 1 year only. However,
some insurance companies also issue a two year policy. At the end of your insurance
period you must renew your policy.
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6.
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What is a Third Party Administrator?
A Third Party Administrator (TPA) is an intermediary company that facilitates transactions
between insurance companies, policyholders and health care providers. The main aim
of a TPA is to guarantee better services to policyholders. A TPA provides a variety
of services like networking with hospitals, arranging for cash less hospitalization
as well as claims processing & timely settlement.
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7.
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What are Network Hospitals?
Network Hospitals are the hospitals that have tied up with the TPA (Third Party
Administrator) of the particular insurer OR directly with the insurer, in case they
don’t have a TPA in between for cash less settlement for expenses incurred.
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8.
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If there are no network hospitals at my place of residence, what are my options?
If there are no network hospitals at the place of your residence, you could opt
for reimbursement mode of settlement.
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9.
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What do you mean by Cash less Hospitalization?
In the event of hospitalization, the patient will have to pay the hospital bills
himself. Under Cash less Hospitalization, the patient does not settle the hospitalization
expenses at the time of discharge from the hospital. The settlement is done directly
by the Third-Party Administrator (TPA) on behalf of the health insurer.
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10.
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My wife and children are residing in a different city (Agra) while I am here in a
different city (Gurgaon). Can I cover my family in my policy?
Yes, you can cover your family in one health policy and can be used by you and your
family all across India.
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11.
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Do I get tax exemption on my health insurance premium?
All medical insurance policies are eligible for the Income Tax Exemption under section
80D. The general exemption available to each taxpayer is Rs.15,000 for self, spouse
and children. An additional exemption for parents is Rs. 15,000. In case of a senior
citizen, one can claim an additional exemption of Rs.5,000 on top of it.
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12.
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Do I have to undergo any medical examination for taking health insurance policy?
In some cases, medical examination may be required; it depends on the sum assured
and the age of the person. Most of the insurance companies demands medical examination
for persons above the age of 45 yrs.
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13.
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What is a Family Floater plan? How it works?
A Family Floater policy is a single policy that takes care of the hospitalization
expenses of your entire family. This plan gives you combined cover at a low cost.
For example, a family of husband-wife and two children take a policy of Rs. 5 Lacs,
now each member of the family is covered up to Rs. 5 Lacs . Any member of the family
can claim up to Rs. 5 Lacs in medical expenses or in case if more than one member
of the family if hospitalized during the year than their combined billing of up
to Rs. 5 Lacs is covered.
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14.
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Does health insurance policy provide cover outside India?
The health insurance policy covers hospitalization only in India. To cover hospitalization
abroad, you need to take a travel insurance policy.
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Life Insurance
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1.
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What is Life Insurance?
Life Insurance is a contract between an insured person and a life insurance company,
which provides him a pre-determined amount at the end of a specified term or to
his beneficiary (nominated person) with a pre-determined amount in case of his death
during the contract term.
Life insurance is must if you are the main earning member of your family. In case
of your unfortunate premature demise, your family can remain financially secure
because of the life insurance policy that you have purchased.
Today, life insurance also helps you to plan effectively for your future years,
your retirement, and your family’s future needs.
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2.
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What are the various types of Life insurances?
There are numerous companies offering life insurance policies. Though the bottom
line of the policies is to ensure a safe future to policy holder's survivors yet
different companies have different classifications. The most basic classification
is:
a. Endowment Policy
An endowment policy covers risk for a specified period, at the end of which the
sum assured is paid back to the policyholder, along with the bonus accumulated during
the term of the policy.
b. Whole Life Policy
A whole life policy runs as long as the policyholder is alive. The risk is covered
for the entire life of the policyholder.
c. Term Life Policy
Term life policy covers risk only during the selected term period. If the policyholder
survives the term, the risk cover comes to an end.
d. Money back Policy
In money back policies, the policy holder gets periodic "survivance payments" during
the term of the policy and a lump-sum amount on surviving the term. In the event
of death during the term of the policy, the beneficiary gets the full
sum assured.
e. Joint Life Policy
Joint life insurance policies are similar to endowment policies as they too offer
maturity benefits to the policy holders, apart from covering risks like all life
insurance policies.
f. Group Insurance Policy
Group insurance policy offers life insurance protection under group policies to
various groups such as employers-employees, professionals, co-operatives, etc.
g. Loan Cover Term Assurance Policy
Loan cover term assurance policy is an insurance policy which covers a home loan.
Such a policy covers the individual's home loan amount in case of an eventuality.
h. Pension Plan or Annuities
A pension plan or an annuity is an investment that is made either in a single lump
sum payment or through installments paid over a certain number of years.
i. Unit Linked Insurance Plan
Unit linked insurance plan (ULIP) is a life insurance solution that provides for
the benefits of risk protection and flexibility in investment.
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3.
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How do I choose length of coverage?
Your coverage length will depend on case-by-case circumstances. Factors you should
consider include your age, your spouse's age, your children's ages, the duration
of your financial obligations (e.g. mortgage and student loans) and the number of
years until retirement. You will want to choose a term period that covers all the
above factors.
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4.
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What happens if I fail to make the required premium payments?
If you miss a premium payment, you typically have a 30 day grace period during which
you can pay the premium with no interest charged.
If you own a term policy and fail to pay your premium within the grace period, your
insurance company will typically terminate the policy.
If you own a permanent policy and fail to pay your premium within the grace period,
your insurance company, with your authorization, can draw from your policy's cash
value to keep the policy in force.
In some flexible-premium policies, premiums may be reduced or skipped as long as
sufficient cash values remain in the policy. However, this will result in lower
cash values and a shortened coverage period.
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5.
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Is the sum assured of a policy the same as the maturity value?
No, the sum assured of the policy is not necessarily the same as the maturity value.
The sum assured refers to the minimum benefit payable under an insurance policy
under circumstances defined within the policy (usually it represents the amount
payable on death) whereas the maturity value of a policy (paid at the time of maturation
of your policy) depends totally on the type of policy purchased.
In the case of money back and endowment polices, the maturity value will include
the sum assured plus bonuses/profits/guaranteed additions.
In case of Unit linked plans, the maturity value will be the fund value at the time
of maturity (plus any additional benefit as per the terms of the policy) and in
case of pure term plans, there are no maturity benefits attached.
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6.
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What are riders? How do they work?
Riders are the low cost add-ons available to enhance your life insurance policies.
These riders provide additional protection against risk and can be added on to a
policy just by paying a minimal amount along with your regular premium. These riders
work along with the main policy; they cannot be taken alone. The sum assured for
these riders can be the same or less than the main protection component.
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7.
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Will my policy's premiums ever be increased?
It depends upon the type of policy you have. Many policies have fixed premiums that
can never be increased, while other policies have fixed premium increases.
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8.
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What are the different premium paying options?
You can pay yearly, half yearly or quarterly.
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9.
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What happens if I get a loan from my life insurance policy and never pay back the
interest?
Unpaid interest is added to the loan balance. If the loan balance ever grows to
exceed the amount of policy cash value, the contract will terminate without value.
Furthermore, if you die before paying back any loans made against the cash value
of your policy, the outstanding loan balance will be subtracted from the death proceeds.
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10.
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Is it true that anyone can insure your life?
No. In order to purchase a life insurance policy on anyone, there must be an insurable
interest. A relative who might suffer financial loss if you die, a debtor who may
be at risk of repayment, a business partner, a spouse, son, daughter, or parents
are examples of those who may have an insurable interest.
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11.
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Can an insured increase his life insurance coverage?
Generally, an insured person can increase his coverage with a new policy or by adding
a rider to the existing policy. However, a universal life policy can be increased
without a rider or new policy. All coverage increases demand evidence of insurability
to your insurer.
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12.
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By using medical tests, are insurers trying to eliminate any applicant likely to
develop a serious health condition?
Medical tests provide accurate and current information about an applicant's health,
thus enabling insurers to charge premiums that reflect the level of risk an applicant
represents. Because some health conditions are easily managed through proper medication,
therapy or lifestyle changes, medical information makes it possible for insurers
to cover applicants with certain health conditions. More serious or incurable conditions
present a very significant risk that some insurers simply may not want to assume.
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13.
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How safe is it to purchase insurance from a foreign insurance company?
It is safe to purchase insurance from foreign insurance companies. Since 1999-2000,
many foreign insurance companies have established their offices in India. All these
companies are required to strictly follow the guidelines released by the Insurance
Regulatory and Development Authority of India (IRDA). Moreover, all these companies
have a minimum paid up capital of Rs 100 crore. This paid up capital ensures that
all your investments through these companies are safe.
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14.
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Will my final premium rates be the same as the rates you quoted on the Web site?
It is certainly possible, but not guaranteed. Your final rates will be determined
by the insurance company through a process called underwriting. Underwriting includes
a review of your current health status, medical history, family history and driving
record among other things. Underwriting will determine your final rating class,
which will establish your final premium rates. Your rating class may or may not
be the same as that quoted on our Web site. With your assistance, we provide the
most accurate quote possible up front.
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Travel Insurance
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1.
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What is Travel Insurance?
When you are travelling abroad, there may be a chance of some unforeseen occurrence
no matter how perfect the planning is. Unfortunate events such as passport loss,
baggage loss, medical emergency or an accident can affect you. Having Travel Insurance
protects you from all such risks. It makes sure that you are not left in any kind
of an emergency, when travelling abroad.
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2.
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Why do I need travel insurance?
Travel insurance provides additional assurance that all unexpected expenses will
be covered in case of any medical care including hospital admission, emergency dental
care, and emergency medical evacuation. Emergency cash advances, and help with retrieval
of luggage or other services may also be available.
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3.
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What are the Benefits of Travel Insurance?
Personal Liability
Personal Accident
Personal Belongings/Baggage
Missed Departure
Cancellation, Curtailment & Trip Interruption
Hospital Benefit
Emergency Medical Treatment & Assistance
Repatriation
Medical Evacuation
Lost or stolen luggage and travel documents
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4.
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Is it necessary to buy travel insurance policy when travelling abroad?
Yes, absolutely must.
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5.
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When does the cover begin?
The Insurance Cover begins on the day specified in the Policy Schedule or at the
time you board the conveyance to leave for overseas journey or the Contracted Departure
Date as per the policy, whichever is later.
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6.
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Till when is the policy valid?
Insurance Cover shall end at the end of Insurance Period (the period for which the
premium has been paid) or when the insured person first disembarks on return to
India.
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7.
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Should I always carry the policy along with me?
Yes, you are strictly advised to carry the policy along with you when traveling
abroad. You should know the policy details such as policy number, policy provider
and emergency contact numbers.
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8.
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Do I have to get medical exam done before buying travel insurance policy?
No, there is no such requirement to getting medical test for travel insurance for
traveller up to the age of 45 years. Some companies might ask for medical tests
for travellers after 45 years for higher coverage.
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9.
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If I decide to stay abroad for longer than I planned, can I extend my policy?
No. In order to purchase a life insurance policy on anyone, there must be an insurable
interest. A relative who might suffer financial loss if you die, a debtor who may
be at risk of repayment, a business partner, a spouse, son, daughter, or parents
are examples of those who may have an insurable interest.
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10.
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Which policy would best suit me?
There are two main types of travel policies;
a. Single Trip
Single Trip insurance policy gives cover for one sole journey for specified number
of days.
b. Multi-Trip
If you are travelling abroad more than twice a year, you may find Annual Multi Trip
policy more cost-effective. It offers you unlimited trips per year with options
for 30, 45, 60, or 90 days per trip for one annual premium. You travel as and when
you please and you don't need to let insurer know each time you travel.
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11.
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What should I do if I fall sick or have an accident when I am abroad?
You should contact the emergency service provider immediately - details can be found
on your Policy Certificate and Policy Schedule booklet.
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12.
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Does Travel Insurance cover sports and other similar activities?
No, currently Travel Insurance does not cover sports and similar activities as detailed
in the Policy Wording (Terms and Conditions apply).
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13.
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Can I get my policy cancelled If I don't want it anymore?
Before departure, you can get the policy cancelled only by giving a sound reason
for the cancellation of trip. Cancellation charges would be deducted from the refundable
premium.
After departure, you can get the policy cancelled only in case you have not undertaken
the journey. You have to produce your original passport as a proof that the journey
has not been undertaken. Cancellation charges would be deducted from the refundable
premium.
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14.
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If l loose my baggage, how do I claim?
You have to contact your TPA within 48 hours to register the claim. You will have
to submit the loss baggage claim form along with the supporting documents from the
airline.
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15.
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What is TPA?
A Third Party Administrator (TPA) is an intermediary company that facilitates transactions
between insurance companies, policyholders and health care providers. The main aim
of a TPA is to guarantee better services to policyholders. A TPA provides a variety
of services like networking with hospitals, arranging for cash less hospitalization
as well as claims processing & timely settlement.
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Tips for Buying Medical Insurance
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Health Insurance
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Be honest about your medical history at the time of buying a policy.
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Start buying medical cover before you turn 40, as insurers generally don’t insist on a medical check-up for individuals below that age.
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Don’t buy a very high cover in your early years, especially if you are in good medical shape. You can increase your cover with age.
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If you plan to buy medical cover for other family members, taking it along with your policy will entitle you to a family discount.
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If your employer is providing a good deal as compared to your personal one, go for it.
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Always declare your existing ailments, never hide.
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Before Buying, always check your household's current and projected health care needs.
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Once you have determined what type of coverage you need, search for the best price and terms.
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Always read the fine print, check for hidden costs.
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Check the network hospitals. Try for nearest included hospital located.
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Be familiar with the limitations on pre-existing conditions of each plan.
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Always pay by cheque when buying a policy so that you have a record of your purchase.
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| 13. |
Never make any payments to the agent, always to the insurance company.
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| 14. |
Try to buy your policy online as there are chances that you will find it less expensive than the premium you pay to agent.
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While choosing a medical insurance plan, always look at the benefits before the price. Take policies that allow maximum coverage for most serious medical conditions.
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While going for health insurance policies, always buy policies that go with guaranteed renewable coverage, guaranteed to renew each year.
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Always read the exclusion section of the policy carefully.
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| 18. |
Always go to a licensed agent for buying.
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| 19. |
Always select a reputable insurance company.
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| 20. |
Three Fundamental principles of Insurance……flexibility in choosing insurance, cost of premiums, coverage offered and the benefits excluded.
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Tips for buying Travel Insurance
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Travel Insurance
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| 1. |
Since the premium on a travel insurance policy increases with the duration of
stay, take the policy only for the travel period. Buy cover for the minimal travel
duration planned, and keep covering it along your journey.
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| 2. |
Make sure you have the international helpline number for your travel insurance
company, along with a copy of your policy, with you all the time.
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| 3. |
Always consider medical coverage when travelling to another country.
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| 4. |
If you are getting a policy for your family, make sure all members are included,
as some policies have limit on the number of people.
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| 5. |
Always tell your insurer of any pre-existing medical conditions that you have,
or you may not be covered by the policy.
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| 6. |
Always read the fine print of your medical coverage. Be sure it covers repatriation
to your home country.
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| 7. |
Always check whether the insurance requires you to pay for medical bills directly
and then reimburse you, or insurance company will deal directly.
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| 8. |
Your insurer needs to know if you will be driving abroad, so to give you the most
adequate policy.
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| 9. |
Never buy duplicate coverage as it does not double your benefit.
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| 10. |
Before re-arranging flights in case you need to cut a trip short, always get
your insurer's approval.
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| 11. |
Purchase joint cover if you are travelling as a family, as it will be cheaper.
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| 12. |
Understand the different policies for different travellers like a single-trip,
worldwide, backpacker and annual.
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| 13. |
When you decide to buy a policy, make sure you know what it doesn't cover.
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| 14. |
Furthermore, you should check insurance coverage of your credit card. Your credit
card might allow for some coverage if you purchase your airline ticket with it.
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| 15. |
Make sure you know the reimbursement amount. Furthermore, check if all expensive
items, you plan to take with you are covered.
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| 16. |
Use the Internet to help you find a good deal on a policy, generally buying online
is always cheaper.
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| 17. |
Check prices, compare coverage and get the best quote.
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| 18. |
Always buy policy from a travel insurance company.
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| 19. |
Check to see if cancellation due to terrorist acts is covered.
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| 20. |
Read carefully small print on your policy.
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Tips for Buying Baggage Insurance
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Baggage Insurance
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| 1. |
Consider taking baggage insurance as part of your householders’ package policy, instead of as a standalone option as you will be eligible for a discount.
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| 2. |
Always check which items are actually covered and how much you'll receive if you have to file a claim.
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| 3. |
Figure out how much the policy will really pay if you need to file a claim.
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| 4. |
Check the types of damage not covered. Usually, normal wear and tear and breaking of delicate articles are not covered.
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| 5. |
Don’t over insure. Buy insurance in proportion to the expected value of your belongings, as your insurer will pay you on the basis of the estimated value of your lost baggage.
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| 6. |
If you have taken insurance policy on your rental car, it may include some coverage for theft of or damage to items in the car, check it.
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| 7. |
Airlines and other public transport companies usually have a limited liability for lost or damaged luggage, check it out.
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| 8. |
Check your trip cancellation insurance as it often covers lost or damaged luggage.
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| 9. |
Always read the fine print, check for hidden costs.
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| 10. |
Never make any payments to the agent, always to the insurance company.
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| 11. |
Try to buy your policy online as there are chances that you will find it less expensive than the premium you pay to agent.
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| 12. |
Always read the exclusion section of the policy carefully.
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| 13. |
Always go to a licensed agent for buying.
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| 14. |
Always pay by cheque when buying a policy so that you have a record of your purchase.
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| 15. |
Always select a reputable insurance company.
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Disclaimer: The glossary of terms below is listed for information purpose only. We accept no liability for the content or for the consequences of any actions taken on the basis of the information provided.
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Glossary
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1.
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Accidental Death and Dismemberment (AD & D) Benefit
A supplementary life insurance policy benefit that provides for an amount of money in addition to the policy's basic death benefit. This additional amount is payable if the insured dies as the result of an accident or if the insured loses any two limbs or the sight in both eyes as the result of an accident.
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2.
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Annuitant
This is the person who receives the annuity amount.
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3.
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Arbitration
An alternative way of settling insurance disputes that would otherwise be settled in a court of law. The insurer and the aggrieved party agree upon a third person to look into the case and decide on the claim.
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4.
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Assignee
The person or entity to whom the benefits under a life policy are transferred to.
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5.
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Assignment
This refers to the legal transference of the title, rights and benefits of a policy by the policyholder to another person or entity. This typically happens when a policy is pledged as collateral towards a loan.
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6.
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Bancassurance
Distribution of insurance plans by banks.
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7.
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Beneficiary
See ‘nominee’.
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8.
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Bonus
The amount paid as returns in a ‘with profit’ policy (also see with profit). The bonus, expressed as a percentage of the sum assured, is generally declared every year. The amount is linked to the profits earned by the insurer. Depending on the time of withdrawal, there are two kinds of bonus: reversionary and cash. A reversionary bonus can be encashed only on maturity of the policy; a cash bonus can be withdrawn when declared
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9.
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Cash Bonus
See ‘bonus’.
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10.
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Cashless Settlement
A mode of claim settlement in which you are not required to make prior payments to claim compensation. Aided by a licensed intermediary known as third-party administrators, your service provider (say, garage or hospital) and the insurer settle the claim between themselves.
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11.
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Claim
This is a written request, by the insured, to the insurance company, to cover an incurred loss, usually submitted on the company’s standard form. According to IRDA guidelines, insurers have to set - the claims within 90 days; generally, though, for valid claims, they do it in less.
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12.
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Contingent Beneficiary
See ‘secondary beneficiary’.
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13.
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Convertible Term Policy
A term policy that gives the policyholder a one-time option to switch to an investment-based insurance plan without undergoing a medical check-up (this gets them the benefit of a lower entry age). For example, a 30-year-old having a 20-year term policy can decide to shift to an endowment plan five years into the term, but pay premium rates on the endowment plan applicable to a 30-year-old, not a 35-year-old. Although insurers don’t charge extra for this feature, they impose some conditions, i.e. the option to convert can be exercised only in the fifth year of the term policy, and the sum assured in the new plan can’t be less than that in the old term plan.
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14.
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Cover
Used interchangeably for insurance , this also refers to the amount of insurance.
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15.
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Cover Note
The document issued by insurers in non-life insurance, giving temporary cover till the issue of a formal policy.
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16.
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Critical Illness Rider
A rider (also see ‘Rider’)that provides a policyholder financial protection in the event of a critical illness.
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17.
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Cubic Capacity (Cc)
The volumetric capacity of a vehicle. It is one of the variables that determines the premium payable to insure a vehicle. As the cubic capacity increases, so does the premium rate.
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18.
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Death Benefit
The amount payable to the nominee on death of the policyholder. The amount paid is the sum assured plus benefits applicable (if any) less outstanding loans.
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19.
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Deductible
An arrangement in several non-life insurance categories where a portion of the insured loss is borne by the policyholder, and only the remainder by the insurer (sometimes also referred to as ‘excess’).
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20.
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Deferred Annuity
An annuity plan where the first annuity payment becomes payable after a chosen period that exceeds one year.
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21.
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Depreciation
A decrease in the value of any object or property over a period of time due to age, wear and tear, or obsolescence. Depreciable items are insured on the basis of their depreciated value, not their original cost or replacement value.
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22.
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Disability / Dismemberment Benefit Rider
A rider that provides for additional cover in the event of a disability or dismemberment due to an accident.
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23.
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Double/Triple Cover Plans
Investment - based plans that offer the beneficiaries double/triple the base sum assured on death of the policyholder during the policy term. If the policyholder survives the term, he gets only the base sum assured, plus other benefits, as applicable.
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24.
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Endowment Plans
An insurance plan that provides a policyholder risk cover and some return on investment.
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25.
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Excess
See ‘deductible’.
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26.
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Exclusions
This is referred to the risks and circumstances not covered by a policy. No claim will be entertained in case of losses arising out of such situations.
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27.
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Grace Period
Period of time, after the due date of a premium, during which the premium can be paid, and the policy prevented from lapsing. There’s a grace period of one month on the yearly, half-yearly and quarterly modes of premium payments, and 15 days on the monthly mode.
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28.
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Group Insurance
A term insurance policy taken out by employers to provide life cover to their employees.
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29.
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Guaranteed Additions
The amount paid as returns in assured-return insurance plans. Guaranteed additions are expressed as a percentage of the sum assured, with the amount payable being stated by the insurer at the outset.
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30.
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Guaranteed Insurability Option Rider
A rider that gives the policyholder the right to purchase additional cover at different stages of his life, at the original premium rate, without having to undergo fresh medical examination.
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31.
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Hospital Cash Benefit Rider
A rider that provides cover for hospitalization.
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32.
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Immediate Annuity
An annuity that starts payments immediately after, or soon after, the first premium is paid.
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33.
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Inherent Vice
A property characteristic of an article that leads to its self-destruction—for example,fruits and vegetables, by nature, are perishable. Insurance contracts usually don’t cover such risks.
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34.
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Insurable Interest
Any financial interest a person might have in a possible subject of insurance. A person can buy cover for only those subjects in which he has an insurable interest. For instance, you cannot buy cover for your neighbor’s house, as you don’t have any insurable interest in it.
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35.
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Insured
The policyholder.
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36.
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Insurer
The insurance company.
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37.
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Insured’s Declared Value (IDV)
The amount for which a vehicle is insured. It is the depreciated value of the vehicle, based on the manufacturer’s selling price and model, and its accessories.
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38.
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I R D A (Insurance Regulatory and Development Authority)
This is name of the insurance regulator in the country - it regulates the insurance sector, oversees policy matters and issues licenses.
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39.
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Joint Life Insurance
An insurance policy taken out on two names. On the death of one of the insured, the death benefit is paid to the surviving insured, and the policy stands terminated. The surviving insured, though, has the option to purchase a new policy of the same amount without providing fresh evidence of insurability.
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40.
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Level Term Cover Rider
A rider that increases the life cover in non-term plans, up to a maximum of the sum assured on the base policy. The rider offers death benefit alone, and serves the need for extra protection for a specified time period.
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41.
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Life Annuity
An annuity that makes regular income payments till the policyholder is alive. On the policyholder’s death, all income payments cease and there are no beneficiary benefits.
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42.
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Loading
A penalty for making a claim, it is the mark-up in premium rate to be paid by a policyholder in the year subsequent to that in which a claim is made.
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43.
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Loyalty Additions
Additional benefits (other than guaranteed additions/bonus) paid to policyholders on maturity of certain investment-based insurance plans for staying on through its term. Loyalty additions are paid as a percentage of the sum assured, with the amount depending on the insurer’s financial performance.
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44.
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Major Surgical Assistance Rider
A rider that provides financial support to a policyholder in the event of surgery.
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45.
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Market Value
The monetary value an object or property will fetch if sold in the market today.
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46.
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Material Fact
Any fact, the disclosure of which, may affect the decision of an insurance company, either with respect to writing a cover, settling a loss, or determining a premium. Usually, the misrepresentation of a material fact will annul a policy.
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47.
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Maturity Date
The date on which a policy term comes to an end or when the policyholder dies.
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48.
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Money-Back Plans
A variant of endowment plans in which survival benefits are disbursed through the policy term, rather than in a lumpsum at the end.
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49.
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Net asset value (NAV)
NAV represents a fund's per share market value. This is the price at which investors buy ('bid price') fund shares from a fund company and sell them ('redemption price') to a fund company. An NAV computation is undertaken once at the end of each trading day based on the closing market prices of the portfolio's securities.
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50.
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No-Claim Bonus
A discount given on renewal of cover in select non-life insurance categories(usually, vehicle, health and house)to policyholders for not making a claim in the preceding year.
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51.
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Nominee
The person(s) nominated by the policyholder to receive the policy benefits in the event of his death.
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52.
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Non-Participative Policy
See ‘without-profit’ policy.
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53.
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Over insurance
When an article or property is covered for more than its fair value.
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54.
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Owner
The person or entity who controls the rights and benefits of a life insurance policy, either as a result of buying the policy or by way of having it assigned.
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55.
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Participative Plans
See ‘with-profit’ policy.
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56.
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Permanent Partial Disability
Permanent loss of any body part, one eye, one limb or one finger or a toe, or injuries that render the insured incapable of earning an income from the date of the accident onwards from any work, occupation or profession. While the loss of the body part may be permanent, its effects on the insured’s life is partial.
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57.
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Permanent Total Disability
Permanent loss of use of any two limbs, or permanent and complete loss of sight in both eyes, or injuries that render the insured incapable of earning an income.
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58.
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Policy
The legal document issued by an insurance company to a policyholder that states the terms and conditions of an insurance contract.
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59.
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Policyholder
The person who buys an insurance policy. Also referred to as the ‘insured’.
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60.
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Policy Term
The period for which an insurance policy provides cover.
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61.
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Premium
The amount paid by the insured to the insurer to buy cover.
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62.
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Premium Rate
The premium expressed as a percentage of the sum insured. For example, building cover costs Rs 0.65 per Rs 1,000 sum insured. So, the premium rate is 0.0065 per cent (0.65/1,000). For a cover of Rs 1 lakh, a premium of Rs 65 will have to be paid.
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63.
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Primary Beneficiary
The person or entity who is designated by the insured as the first to receive policy benefits in case of his death. Also called the ‘first nominee’.
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64.
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Re-Entry Option
An option in a term plan under which the policyholder is guaranteed at the end of the term a renewal of his cover without having to provide evidence of insurability. In effect, a policyholder won’t have to pay a mark-up in premium on account of any adverse medical condition.
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65.
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Reinstatement/Revival
The process by which an insurer puts back into force a life insurance policy that has been terminated for non-payment of premiums.
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66.
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Replacement Clause
A provision in some non-life insurance policies that gives the insurer the option to make good a loss rather than pay compensation for it. For instance, if a building is damaged by fire, the insurer can repair it to the extent of restoring it to its original condition.
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67.
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Reversionary Bonus
See ‘bonus’.
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68.
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Riders
Additional covers that can be added to a life policy, for a cost.
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69.
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Secondary Beneficiary
Person(s) named by the policyholder to receive death claim proceeds in case the original nominee is not alive. Also referred to as the ‘second nominee’.
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70.
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Suicide Clause
A stipulation in life policies according to which no death benefits will be paid if the policyholder commits suicide during a specified initial period, usually the first year of the policy.
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71.
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Single-Premium Plans
A life insurance policy that entails paying a one-time premium, and provides cover through its term.
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72.
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Sum Assured
The amount of cover taken under a life insurance policy, it is the minimum amount that will be paid on death of the policyholder during the policy term.
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73.
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Surrender Value
The amount payable by the insurer to the owner of an investment-based plan in case he opts to terminate the policy after three years (the mandatory lock-in period), but before its maturity date. The surrender value will be the premiums paid till date minus surrender charges and any other outstanding loans due.
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74.
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Survival Benefits
The amount payable to a policyholder under an investment-based plan if he survives the policy term. Typically, it is the sum assured plus returns (guaranteed additions/bonus) accrued.
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75.
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Temporary Total Disability
An injury that results from an accident and renders a person immobile or affects his earning capacity temporarily. For instance, a fracture in the arm or leg that keeps you from work: you may be mobile but the injury may prevent you from working.
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76.
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Term Plans
A plan that provides life cover for a specified period of time, but no return on the premiums paid.
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77.
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Terminal Bonus
A one-time bonus paid on maturity of a with-profit plan.
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78.
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Third Party
In an insurance contract, you, the insured, are the first party, the insurer the second party, and every other person the third party.
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79.
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Third - Party Administrators (TPA)
Licensed intermediaries who process claims on your behalf in the cashless mode of settlement.
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80.
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Total Loss
A loss of such magnitude that it can be said there is nothing left of value—for example, the complete destruction of a house or building.
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81.
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Triple Cover Plans
See ‘double cover plans’.
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82.
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Underinsurance
When an object or property is covered for less than its fair value.
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83.
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Vesting Date
Generally used in the context of pension plans and children plans, it is a date that signifies a milestone in a policy. In pension plans, it is the date from which the policyholder starts receiving pension. In children plans, it is the date from which a child becomes the owner of a policy taken out in his name (generally, around her/his 18th birthday).
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84.
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Waiting Period
The period from the date a life policy is bought (that is, cheque given to the insurer) till the date of commencement of cover (as stated in the policy; generally, the date on which the cheque is cleared). No benefits will be paid in case of death during the waiting period. It is also used in the context of medical insurance. Here, it refers to the specified initial period of the policy term when sickness claims (not accidents) are not covered. This protects the insurer against claims where the disease or ailment might have set in prior to the commencement of the policy.
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85.
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Waiver Of Premium Rider
A rider that waives the premiums payable on the base policy and other riders in certain circumstances, mostly related to death, disability or injury.
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86.
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With-Profit Policy
An insurance plan in which the policyholder gets a share of the insurer’s profits (in the form of guaranteed additions/bonus), along with the sum assured.
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87.
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Without-Profit Policy
An insurance plan in which the policyholder does not get any share of the insurer’s profits.
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88.
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Whole-Life Plans
The only class of life insurance policies that provide cover for through your lifetime.
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