Basic Terms in Insurance

INSURANCE – The contract or agreement between two parties i.e. insurer (company) and insured (customer).

PREMIUM- The amount that customer pays to the insurance company as an instalment.

PREMIUM PAYMENT TERM (PPT) - Number of year’s customer will pay the premium to the company. (PPT)

POLICY TERM (PT) - Number of years the policy will continue.

MATURITY SUM ASSURED (MSA) - Guaranteed amount that the customer gets on maturity.

DEATH SUM ASSURED (DSA) - Guaranteed amount that customer gets in case of uncertainty or miss happening.

PREMIUM PAYMENT MODE - The mode through which customer is paying the premium (Cheque/Demand Draft/Cash/Debit card/Credit Card).

PREMIUM PAYMENT FREQUENCY- Annually, half-yearly, quarterly or monthly. (ONLY ANNUAL MODE IS AVAILABLE)

POLICY BOND- The document in written form in which terms and conditions of the policy is mentioned.

ENFORCE MODE – (ACTIVE MODE) – When the policy is in active mode and enforced.

GRACE PERIOD – A grace period of additional one month is given to the customer for making the payment of subsequent year premium. No additional penalty is charged for this.

LAPSE MODE – (INACTIVE MODE) If the premium for a particular year is not paid even in the grace period, the policy goes in lapse mode which means the policy is not valid any longer.

REVIVE MODE – When the policy is in Inactive Mode, it can be revived back within 1 year by making due payments.

SURRENDER – Customer exiting the contract is called surrender. The surrender value that the customer gets is 30 to 90 percent of premium paid depending on the year of surrender.

PAID UP VALUE - In case the policyholder discontinues to pay the premium after a specified period of time, Insurance companies will offer the policyholder an option to convert his policy into a reduced paid-up policy. Under this option the sum insured is reduced in proportion to the number of premiums paid. If other benefits related to the sum insured are payable, these benefits will now be related to the reduced sum insured, which is the paid-up value.

EXCLUSIONS - Before you buy any life insurance, read ‘Exclusions’ carefully. These are things that are not covered under a life insurance policy, and against which if claimed, insurance company wouldn’t pay any benefit. For instance, Suicide, is an exclusion in any life insurance plan.

NACH FACILITY - National Automated Clearing House (AUTO - DEBIT)

NACH System is used for making bulk transactions towards collection of payments pertaining to telephone, electricity, water, loans, investments in mutual funds, insurance premium etc.

It is an automated auto debit payment system in which the premium for subsequent years will be automatically deducted from customers account.

In NACH, customer is informed one month in advance before deducting premium to maintain sufficient balance in the account through SMS and phone.

Last modified: Tuesday, 5 Mar 2019, 18:40