Some Key Terms in the Insurance Sector

- Insurance, Insurance Platforms, Insurance Sector
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  • Act of God: This term denotes events beyond human control, such as earthquakes, floods, and tsunamis. An ‘act of god’ hazard is usually not covered by insurance. You must buy additional insurance policies to cover ‘act of god’ events.
  • Add-on: These are plans that offer extra protection in addition to the protection offered by the policy bought by the customer.
  • Broker or Agent: These are the links with the insurance companies for many insurance holders. A broker or agent is a person selling various types of insurance for a specific company. They are either company employees or independent contractors.
  • Claim: This is a claim filed by an insurance holder or the person’s heirs to claim the sum following a policy event like death or fulfilment of policy period.
  • Coverage: Coverage is the sum a person is covered for in an insurance policy. The amount of risk involved, such as health insurance for a person having a history of serious ailments, will result in higher premiums, and vice versa.
  • Death Benefit: Death benefit is the lumpsum amount the beneficiaries of a life insurance policy holders gain in case of the holder’s death. The beneficiaries can also decide whether they want the amount lumpsum or in instalments. The beneficiaries are guaranteed to be paid the sum only if the premiums have been paid. The beneficiaries may also be taxed on the received sum as per the regulations of the country the beneficiaries reside in.
  • Deductible/s: Deductible amount is the sum the policy holder must pay before the insurance company activates your policy and pays its share. The cost of deductibles will differ as per the policy plan.
  • Exclusions: These are the conditions laid out in an insurance policy. The company is not liable to pay if the policy holder breaches these conditions. For instance, suicide is not covered in a life insurance policy. Beneficiaries will not get anything in case of a death by suicide.
  • Float: This type of insurance covers movable individual property. It usually covers immensely valuable individual items like fine art or jewelry. This policy offers cover beyond the coverage offered by a ‘normal’ insurance policy.
  • Free-look Period: Free-look period is the time within which a customer is free to cancel their policy without incurring any penalty. Different companies offer different timeframes for cancellation. This term is usually associated with life insurance policies.
  • Grace Period: Although there is a date by which the insurance premium should be ideally paid, grace period is the extra time allotted to help the insurer pay the premium without lapse of coverage. If the insurer fails to pay the premium during this period, they will have to go through the application process once again to gain necessary cover.
  • Liability: This type of insurance is also known as third-party insurance. It protects the insurer against claims arising out of damage to other people’s properties and injuries. Here, the payout from companies is to this injured party, and not the insurer.
  • Life Assured: This term defines the insurer, or the person who is signing the contact with the insurance agency. The difference between insured and assured is that assured means coverage against a certain event like death, while insured means coverage against uncertain events like fire and natural disasters.
  • Maturity and Maturity Benefits: This term defines the conditions for fulfilment of the insurance contract. These conditions include death, fulfilment of a fixed time frame, and such others. The total sum the company is liable to pay out after this time is called maturity benefit.
  • Nominee: Nominee is the person who will receive the benefit in case of the insurer’s death. This person is usually the spouse or the heirs of the insurer.
  • Paid-up Value: This is the sum the insurer is certain to get even if they fail to pay premiums after a certain period.
  • Policyholder: This word is self-explanatory. Policyholder is the person or group in whose name the insurance policy is held.
  • Premium Frequency: This is the time frequency for the insurance premium payments. The frequency depends upon various factors, such as mode of premium payment and the sum insured.
  • Revival Period: The policy lapses if the insurer does not pay the premiums. However, the companies offer the option of reviving the policy within a certain period after the policy lapses. This period is known as revival period.
  • Risk: In insurance sector, risk is the threat the insurance company will insure the insurer against. These are conditions that can cause physical and/or financial loss and even death. The company must pay the sum total if the event takes place.
  • Riders: An insurance policy may not cover the insurer’s needs. In that case, the companies offer the insurer endorsements which will add to the core policy or will amend the original policy terms. The insurer must pay more to purchase riders.
  • Surrender Value: This is the sum the insurance company must pay if the insurer voluntarily terminates the policy before maturity.
  • Tenure: Tenure means the period the policy will provide cover to the insurer. It can range from a few months to whole life, depending upon the type of insurance.
  • Usual, Reasonable, and Customary Fees: These are the fees the policyholder must pay from his own expenses to avail of the insurance services.
  • Underwrite: Underwriting is the process in which the insurance company evaluates and analyzes the risk involved in insuring a person and/or their assets. In simpler terms, underwriting decides the amount of benefits. These tasks are performed by trained professionals also named underwriters.

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